Practical Insights for Business Owners
Client Q&A: Can we throw out our old files?
Can we throw out our old files?
If you've been involved in a business-related lawsuit in the past fifteen years, you probably got the lecture about the importance of preserving evidence relating to the lawsuit and the negative consequences of failing to do so. It is not unheard of in big commercial litigations for the parties to spend as much time fighting over what evidence was preserved and disclosed as they spend on the merits of the their claims and defenses. At the same time, it can be both expensive and inconvenient to keep all your old files--whether in paper or electronic form. So what should you do?
The General Rule Regarding Preservation
Litigants must preserve evidence relevant to a pending or anticipated litigation. If they do not fulfill that obligation, and a court later finds that the lost evidence might have helped their adversary, they run the risk of being sanctioned by the court, including having their claims or defenses dismissed. It is, to put it mildly, a big deal.
The obligation to preserve evidence often arises before a lawsuit even starts. As soon as you should reasonably anticipate that a dispute will be litigated, you have to preserve evidence regarding it.
Your obligation to preserve evidence is a broad one, extending to information of every kind, including photographs, microfiche, charts, maps, drafts, records, memos, letters, handwritten notes, calendars, diaries, telephone messages (whether they exist in paper form or as electronically recorded or stored data), email, PowerPoint presentations, spreadsheets, data compilations, databases, voicemail or other materials stored on computers, and storage media such as CDs or flash drives.
If you run a business, it is important that you identify all individuals in your organization who might have potentially relevant evidence and make sure that they preserve that evidence as well. Because evidence preservation can become an issue in a lawsuit, it is better if you tell your employees to preserve evidence in writing, so you have proof you did so.
Your obligation to preserve evidence is a continuing one, including not just evidence created in the past but also newly-created evidence. It ends only when the dispute has been finally resolved.
The Importance of a Document Retention Policy
You get some measure of protection for having a document retention policy and following it, allowing you to show that documents were discarded or electronic files deleted as part of a routine, neutral and general file management policy rather than with the intention of destroying evidence. Still, regardless of your document retention policy, once you anticipate litigation, you must retain and preserve all documents relating to the dispute, even if it is not your normal business practice to do so. It is important that you suspend any automatic and routine destruction or alteration of electronically stored documents and related data, including any automatic deletion of emails, defragmentation programs or other software meant to clean up or otherwise modify hard drives or servers.
When in Doubt, Keep the File
One problem for litigants is that it is not always clear until too late that evidence is relevant to the lawsuit. So the best thing is to err on the side of preserving evidence. If you think something is in any way related to a legal dispute, save it. This can be a burden, but it is better than the consequences of a court deciding that you failed to preserve evidence and it hurt your opponent's ability to prove its case. So, when in doubt about whether to save something, do so. And, when in doubt, ask your lawyer.
There likely are things that you can delete, particularly if you have a good business reason for doing so, such as the cost of storage, so long as there is no reasonable relationship between the evidence and the dispute. Often, there are ways to preserve evidence in cost-effective ways. We can help you with this.
How you preserve the evidence also is important. If the evidence is paper, you can store files you do not otherwise need separately, but keep them in the same file structure as they were kept in the usual course of business. For example, if your office files have a folder called "Invoices," preserve your old files in a folder called "Invoices."
If the files you are preserving are electronic, keep them in the same format. You can move them to a different storage location, such as a USB hard-drive or a DVD, but do not change the files in any way. If you have to edit a file as part of your ongoing business, copy the old file and preserve it and make your edits in a new file.
Preserving evidence can feel like one of life's many thankless tasks. No one gives you credit if you do it and you can get in big trouble if you do not. But you need to do it. Failing to do so is not worth the risk. And it does have upsides. The obligation to preserve evidence exists so that you can meet your legal obligation to provide it to your opponent in discovery. But of course, it also means that the evidence is available to help you prove your case.
Navigating the ins-and-outs of the document preservation rules is part of what we do in every case. We can help you do so, too. One of the messages of this post is the importance of preserving evidence; a point we make strongly because of the potentially serious consequences of failing to do so. At the same time, preserving evidence usually is not that hard and does not take much effort, particularly with our help.