Best Practices for Document Management Jason M. Pistacchio Partner [email protected] Michael C. Lewton...

Best Practices for Document Management

Jason M. PistacchioPartner

[email protected]

Michael C. LewtonPartner

[email protected]

Written Materials Prepared By:Stephanie K. Corey

Who Knew…

805 SW Broadway, 8th FloorPortland, Oregon 97205

(503) 323-9000www.cvk-law.com [email protected]

Summary of Presentation

What Is a Record? How Long Must Records Be Kept? When Must Records Be Produced? What Happens If There Is a Failure to Comply?



What Is a Record?



Paper Documents: Memos Contracts Applications Marketing materials

Reports Correspondence Claims records Policies

What Is a Record?

Electronically Stored Information Information on:

Desktop computers Network computers Voicemail systems Telephones Cell phones PDAs or Blackberries Home computers Laptops Electronic time clocks Portable storage devices Web sites / blogs

Electronic Data Information such as:

Documents Spreadsheets PDF files Emails Metadata Voice mail messages Text messages Telephone logs “Deleted” data Data fragments Vehicle black boxes



How Long Must Records Be Kept?

External Obligations Statutory Requirements Contractual Obligations Industry Standard or Custom

Internal Obligations Informal Records Retention Policies Formal Records Management Policy (aka

Document Retention and Destruction Policy) Litigation Hold




External Obligations Statutory Requirements

Federal Law (e.g., Sarbanes-Oxley; IRS Regs; EEOC) State Law pertaining to insurance brokers:

California: 5 years “[R]ecords shall be maintained by every agent or broker or surplus lines broker or

special lines’ surplus lines broker with respect to each and every insurance transaction for at least 5 years after expiration or cancellation date of the policy to which the records pertain.” 10 CCR § 2190.2.

Oregon: 3 years A resident insurance producer shall keep “records of insurance transacted by the

insurance producer under the license for three years following the expiration of the policy . . .”. Or. Rev. Stat. § 744.068(2).

The same rule applies to non-resident insurance producers. Or. Rev. Stat. § 744.068(3). Washington: 5 years

“All such records as to any transaction shall be kept available and open to the inspection of the commissioner at any business time during the five years immediately after the date of the completion of such transaction.” RCW § 48.17.470(2).

In Dempere v. Duane Weber Insurance, Inc., 2007 WL 2234566 (Wash.App. Div. 1 2007) (unpublished), the court held that RCW § 48.17.470 does not provide for a private right of action against an insurance agent who violates this statute. However, the court did not reject the idea that an insured may bring a negligence claim against an insurance agent who violates the statute.

Other External Obligations Contractual Obligations Industry Standard or Custom 805 SW Broadway, 8th Floor

Portland, Oregon 97205(503) 323-9000

www.cvk-law.com [email protected]


Internal Obligations Informal Policies

E.g., “We always keep those records for 10 years” or, “Just keep everything.”

Probably not sufficient in litigation Formal Records Management Policy

A formal written policy ensures that documents are created, maintained and eventually destroyed in a manner which is efficient, timely and cost-effective.

Typically, courts will require a formal written policy. In most cases, only a formal written policy will protect you in the event relevant records are destroyed prior to litigation.




Internal Obligations Formal Records Management Policy

Benefits of a Records Management Policy: Improved access to valuable information Consistency of records destruction Legal compliance Protection during litigation, government investigation, or

audit Reduced costs Safe harbor in the event of inadvertent destruction




Internal Obligations Formal Records Management Policy

Key attributes of an effective Records Management Policy:

Inventory of record types Accurate detailing of retention periods Action plan for suspending destruction Identification of key retention personnel Distributed to all employees Consistent follow-up and compliance measures Strategically advantageous Accounts for relevant business objectives




Litigation Hold Enforced when an organization has notice that

litigation is pending or reasonably foreseeable In practical terms, this is a low standard.

Litigation is considered “pending” when: A party receives a complaint; or A party receives a request for discovery and/or a

subpoena.




Litigation Hold Litigation is considered “reasonably

foreseeable” when a party knows or should have known that records may be relevant to future litigation.

Varies depending on jurisdiction

The Ninth Circuit has not expressly defined the term “potential litigation.”



How Long Must Records Be Kept? Litigation Hold

Examples of Federal Cases: Hynix Semiconductor, Inc. v. Rambus, 2006 WL 565893 (N.D. Cal.)

Defendant’s corporation had held two “Shred Days” in 1998 and 1999 where employees destroyed documents pursuant to a written retention policy. Plaintiff argued that since defendant had formulated a litigation strategy as part of its initial licensing plan back in 1998, it reasonably contemplated litigation at this point and should be charged with spoliation of evidence. The court held that the defendant did not contemplate litigation until late 1999 (after certain business negotiations failed) – after both “Shred Days” – and thus its destruction of records did not constitute unlawful spoliation.

In re Napster, Inc. Copyright Litigation, 462 F.Supp.2d 1060 (N.D.Cal. 2006) In light of already pending copyright infringement litigation against Internet music-

downloading service, company which had invested in the downloading service should reasonably have believed that litigation against it was probable if it continued its involvement with the service, and therefore its duty to preserve related e-mails attached as of time when an officer of investor received a clear indication, in the form of a warning from the CEO of a copyright holder, that recording industry would be targeting service’s investors.

Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003) In action by female employee for gender discrimination, failure to promote, and

retaliation, employer had duty to preserve backup tapes containing potentially relevant e-mails. Duty attached when relevant employees anticipated litigation - even though employee had not yet requested tapes or filed compliant - since almost all employees associated with former employee knew there was possibility she might sue.




Litigation Hold Industry Specific

Litigation is common in industries involving the following: Ultra-hazardous substances Products liability Securities

Identify frequently-litigated provisions in your insurance policies and maintain related records past the legally-mandated period.

What Must Be Done After the Duty to Retain Arises? Notify and periodically remind personnel of duty to preserve Suspend automated destruction of potentially relevant

records 805 SW Broadway, 8th Floor

Portland, Oregon 97205(503) 323-9000

www.cvk-law.com [email protected]


Litigation Hold The duty continues until either:

(1) The cause of action ends, or (2) The limitations period expires

Courts do not expect an organization to preserve every record indefinitely; they understand the economic issues related to records retention and destruction.



When Must Records Be Produced? Three situations in which you may be required to produce records:

1. You are a party to a lawsuit 2. You are the insurer of a party to a lawsuit 3. You are a third-party with records related to a lawsuit

1. Party to a lawsuit: Request for Production

At this point, assuming you have an attorney, he or she will be able to determine which records must be produced based on the scope of the discovery request.

2. Insurer of a party to a lawsuit: Request for Production Subpoena Informal Request



When Must Records Be Produced?

3. Third-party with records related to a lawsuit: Subpoena or informal request

Consult an attorney General guidelines if not consulting an attorney

Three-part inquiry: Is the material relevant? Is the material privileged? Is the material confidential?




1) Is the material relevant? In an action by or against an insured, an insurance

company’s file is likely relevant.

2) Is the material privileged? Regardless of relevancy, insurance files may be

privileged. Most likely privilege “work product” Privilege may attach to an insurance broker,

adjuster, investigator, etc.




3) Is the material confidential? Just because information is not “privileged” does not

mean that it is not “confidential” Communication between you and your client is important

to confirm client expectations. Examples:

Tax return documents for businesses List of corporate owners of an LLC Medical records (HIPPA)

Note: This determination of whether a record is relevant, privileged or confidential is made on a case-by-case basis, and a court will often consider whether a party had previous opportunity to discover the information and failed to do so.



What Happens If There Is a Failure to Comply?

Potential Consequences: Contempt of Court

Fines, incarceration Criminal Penalties

Obstruction of justice Adverse Inference

Spoliation of evidence germane to proof of an issue at trial can support an inference that the evidence would have been unfavorable to the party responsible for its destruction.

Striking of Pleadings Costs



What Happens If There Is a Failure to Comply?

Sanctions Examples: Coleman v. Morgan Stanley (Florida)

Morgan Stanley failed to produce emails pursuant to a motion to compel – court entered partial default judgment as to liability ($604M in compensatory, $850M in punitive damages)

Magana v. Hyundai, 123 Wn. App. 306 (2004) Plaintiff filed 2000 discovery requests, including all documents relating

to incidents of alleged seatback failure Court granted plaintiff’s motion for default where Hyundai failed to

properly and timely search its computers until just prior to second trial Court specifically noted Hyundai’s in-house and outside counsels’

failure to ensure compliance with discovery orders United States v. Phillip Morris, 327 F Supp.2d 21 (D DC 2004)

Defendant continued to delete e-mails despite its own document retention program

Court imposed monetary sanction of $2.75M and precluded all individuals who failed to comply with doc retention program from being called at trial as fact or expert witness



Supplementary Sources

Skupsky, Donald S. Recordkeeping Requirements. Denver, CO: Information Requirements Clearinghouse, 1988.

Skupsky, Donald S., JD, CRM and John Montana, JD Law, Records and Information Management – The Court Cases. Denver: CO: Information Requirements Clearinghouse, 1994.

ARMA, International: www.arma.org



Questions?

Cosgrave Vergeer Kester LLP805 SW Broadway, 8th Floor

Portland, Oregon 97205503.323.9000

Jason M. PistacchioPartner

[email protected]

Michael C. LewtonPartner

[email protected]

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