Retain, Maintain or Preserve – Correctly Identifying Obligations Can Streamline Records Management for Businesses | Nelson Mullins Riley & Scarborough LLP

Companies must regularly decide what information should be retained, what information should be maintainedand what information, if any, should be preserved. Many companies make these decisions without really understanding the distinction between the choices. For example, just last month, a company was disciplined for discarding documents as part of its official document retention policy because it failed to realize it had a legal duty to retain the documents and suspend its current document destruction and retention policies. Ad Astra Recovery Servs., Inc. vs. Heath18-1145-JWB-ADM, 2020 WL 969762, at *4-9 (D. Kan. February 28, 2020); see also Small c. Univ. Med. CT., No. 2: 13-CV-0298-APG-PAL, 2018 WL 3795238, at *24 (D. Nev. Aug. 9, 2018) (“One of the more astonishing claims made by UMC in its objection to the special master R&R is that UMC didn’t know what to keep. UMC and its attorney had a legal duty to understand that.”). Therefore, it is important to understand the obligations imposed by each standard and how a company’s records management procedures can streamline retention and disposal procedures, thereby reducing risk.

Retention is an internal obligation to retain documents or electronically stored information (“ESI”) that a company voluntarily creates or receives due to legal requirements, regulatory obligations, or business needs. Generally, a company should hold back business records that the business is legally required to keep or that have other legal compliance or business value. It is important to note that not all documents should be considered “records”. Instead, companies should categorize documents based on the content of a document. For example, an email should not constitute a “record” simply because it is a corporate document; however an e-mail may be considered a record because it contains information implied by the company’s records management policy or schedule. See In re Text Messaging Antitrust Litigation.782 F.3d 867, 873 (7th Cir. 2015) (refusing to compel an inference adverse to the defendant for the destruction of certain emails which, because of their content, did not fall within the retention policy of the business).

Maintenance is a company’s method of retaining documents and data that it has no existing obligation to retain, but which serve a purpose for the company itself. A company should maintain these types of data – for example, unofficial reference copies of documents, system backup files, or marketing materials – as long as they meet business needs. Maintaining these records is often driven by decisions made at the employee or department level and is outside of a company’s records management policy. Therefore, these documents should not be “retained” or retained for a full retention period. On the contrary, these documents must be kept for an appropriate period of time and eliminated when they no longer fulfill their function.

Retention is an obligation to retain documents and ESI imposed by legal proceedings. The scope of the retention obligation is based on the claims, defenses, and factual allegations at issue in the litigation or adversarial proceeding and prevails over a company’s document retention policy. In other words, a potentially relevant document must be retained by a company, whether or not it must be “retained” under the company’s document retention policy, until the dispute or adversarial proceeding is resolved. resolved. A company must preserve registers as soon as it is notified that a dispute or other adversarial proceeding is “reasonably foreseeable”. Goodman vs. Praxair Servs., Inc., 632 F. Supp. 2d 494, 505, 509–511 (D.Md. 2009). To determine when litigation is “reasonably foreseeable,” courts look at the extent to which the company was aware that litigation was likely and that the business records at issue would be relevant. Identifier. at 509-511. Such notice may not occur until legal action is taken or it may result sooner from something as simple as a letter from a disgruntled former employee alluding to the prospect of litigation. As the court of Ad Astra Recovery Servs., Inc. vs. Heath recently clarified, the retention obligation obliges a business to locate, maintain and preserve all the documents that may relate to the claims or defenses in this case, including documents that a company may have previously had before receiving notice of this litigation was reasonably foreseeable.

For this reason, it is important for companies to have appropriate document destruction policies in place alongside retention policies and schedules. Principle 1 of Sedona Conference Principles and Commentary on Defensible Disposition Emphasizes that organizations not only have the power to dispose of information that is no longer subject to a company’s retention policy or other legal obligations, but that they should do so as a good management practice information. Companies are under no obligation to defend or justify disposal of any information they are not required to retain and the processes and procedures for such disposal are generally not detectable. However, a process that selectively eliminates documents based on their content, i.e. retaining useful information while deleting data that could be harmful in the event of a dispute, can be considered “anticipation of a dispute” and trigger the retention obligation. Making ad hoc decisions about what documents to keep when a deal closes or a project ends can be a daunting, exhausting, and often impossible process; However, proper planning and implementation of records management principles can greatly automate and streamline this practice, and provide a myriad of benefits such as improved legal compliance and reduced discovery cost and risk. As evidenced in Ad Astra Recovery Servs., Inc. vs. Heath, how companies assess their ever-increasing data can have a huge impact on ongoing or future litigation. Taking proactive steps to identify and classify documents through retention policies and legal retention procedures will help businesses comply with their obligations.