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New Case Highlights the Importance of an Effective Information Retention Program

Importance Of Effective Information Retention Policies

A consistent information governance lesson that courts have emphasized for decades is the need to develop an effective records retention program. Such a program should result in the retention of information based on its value to the enterprise, together with other information that may be required to satisfy legal or regulatory retention obligations. When coupled with a data map, information retention policies provide a transparent and logical organization of company data that can benefit the enterprise in any number of ways.

In the context of litigation, such a program should allow an enterprise to efficiently and cost-effectively respond to discovery requests. As we observed last year, companies that adopt such a program often find that courts will proportionally ease their discovery burdens. This is because courts credit the “business judgment” of companies that implement reasonable, good faith retention policies to advance legitimate business objectives.

In contrast, organizations that do not have a records retention program or that maintain an “unwieldy record keeping system” often find courts resistant to arguments of high production costs or other undue burdens. While courts acknowledge that retrieving electronic information or paper documents from such repositories may be expensive, they frequently reject such arguments.

This is particularly the case where the requested information is “important . . . [to] the issues at stake in the action.” From Kozlowski v. Sears[i] in 1976 to Fish v. Harbor Marine[ii] in 2018, courts have frequently ordered discovery of relevant information—without cost shifting—from responding parties whose ineffective retention practices seemingly make information retrieval disproportionately expensive. The Union Commercial Services v. FCA International case from this year is illustrative of this trend.[iii]

Union Commercial Services v. FCA International

The discovery dispute in Union Commercial centered on whether plaintiff had to produce documentary evidence to support its claim for damages arising from defendants’ alleged breach of contract. Plaintiff insisted it had already produced sufficient evidence regarding its damages in the form of a spreadsheet that summarized its costs that were at issue. Defendants countered by arguing that plaintiff’s damages claim was inflated and that they were entitled to examine the underlying documents to substantiate the costs in plaintiff’s spreadsheet.

In response, plaintiff defended the accuracy of the costs in its spreadsheet while asserting it would be “unduly burdensome and disproportionate” to produce the underlying documents. Plaintiff explained that the document were in paper format, were stored in Angola, and were organized in such a manner that retrieval of the requested information would be time-consuming and costly.

The court rejected plaintiff’s undue burden and disproportionality arguments, observing that plaintiff could not evade its obligation to produce information relating to its damages due to the “unwieldy record keeping system” that plaintiff chose to implement. The court held that the core relevance of the requested information prevailed over the high costs of retrieval from its substandard records management program:

When a burden is necessary to prove something as crucial to plaintiff’s case as damages, the burden, especially on the party bringing the suit, is neither undue nor disproportionate to the needs of the case.

To hold otherwise, reasoned the court, would improperly “shift the expense of proving [plaintiff’s] case onto defendant by claiming it would experience a great burden otherwise.” Despite the anticipated costs of compliance, the court ordered that plaintiff produce the requested information.

The Value of an Effective Information Retention Program

Having an information retention program in place could have addressed the cost and logistics difficulties that plaintiff faced in Union Commercial. Had the records at issue been digitized and organized more logically, plaintiff’s discovery burdens would have been significantly decreased.

The lessons from Union Commercial are not limited to paper documents. By mapping electronic data and then developing reasonable information retention policies, companies can provide organizational structure to facilitate responses to document requests in litigation and regulatory inquiries. Like so many other cases, Union Commercial ultimately teaches that an effective records retention program can reduce the costs of document retrieval in legal matters.

 

[i] Kozlowski v. Sears, Roebuck & Co., 73 F.R.D. 73 (D. Mass. 1976) (holding that defendant’s policy of indexing customer complaints was so byzantine and obstructionist that it precluded the retrieval of relevant documents).

[ii] Fish, LLC v. Harbor Marine Maintenance & Supply, Inc., 2018 WL 1121332 (W.D. Wash. Mar. 1, 2018) (reasoning that the “the limitations of [defendant’s] recordkeeping system” would not foreclose discovery of relevant information).

[iii] Union Comm’l Svcs. Ltd. v. FCA Int’l Opers. LLC, No. 16-cv-10925, 2018 WL 558760 (E.D. Mich. Jan. 25, 2018).

Philip Favro
Philip Favro
Philip Favro acts as a trusted advisor to organizations and law firms on issues surrounding discovery and information governance. Phil provides guidance on data preservation practices, litigation holds, data collection strategies, and ESI search methodologies. In addition, he offers direction to organizations on records retention policies and the need to manage dynamic sources of information found on smartphones, cloud applications, and social networks. Phil is available to serve as a special master on issues related to electronic discovery. Phil is a nationally recognized thought leader and legal scholar on issues relating to the discovery process. His articles have been published in leading industry publications and academic journals and he is frequently in demand as a speaker for eDiscovery education programs. Phil is a member of the Utah and California bars. He actively contributes to Working Group 1 of The Sedona Conference where he leads drafting teams and serves as the Steering Committee project manager. Prior to joining Driven, Phil practiced law in Northern California where he advised a variety of clients regarding business disputes and complex discovery issues. He also served as a Judge Pro Tempore for the Santa Clara County Superior Court based in Santa Clara, California.
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