Can Your Records Management Program Withstand Attack?

In litigation, records management can easily prove to be a company's greatest defense, or its greatest weakness. Many companies view records management as a facilities function. In reality it is a risk management concern - every record created by a company can be used against it as evidence.

Furthermore, if the evidence protects the company, opposing counsel will often attack the source of that evidence by discrediting a company's record keeping. As attorneys begin to attack the credibility of the records program to undermine evidence, a company's litigation risks increase.

The question is: do you know how your records management program can hurt you?

Traditionally, there have been two main records related risks facing companies. The first relates to documents that opposing counsel can use to suggest wrongdoing or liability. The second risk is not being able to find records that release the company from responsibility. Obviously, these concerns still exist.

But companies today face the added risks associated with inconsistencies in their records management. Any irregularity in the company's records program or, even worse, the absence of a credible records program, can damage the court's assumption of good faith on the part of the company. Companies must show that they are keeping the records that the law requires. Any destruction must be supported by citations proving that the destruction was lawful. Without this support, the company has little hope of proving good faith in its records management program.

The key is to be consistent. Records management policies must apply company wide. More importantly, records destructions must be performed consistently throughout the organization. For example, if Accounting is destroying invoices after 7 years, all departments should be destroying invoices after 7 years. If not, opposing counsel may portray the destruction as selective or designed to hide evidence. This puts a tremendous burden on a company to create and maintain a consistent records program. Without such a program, opposing counsel can easily portray delays in production of discovery documents or inconsistent records destructions as suspicious.

The lack of a legally credible retention schedule can result in significant expense to the company. The most obvious cost is that of settlements and financial judgements against the company. Beyond the obvious is the sometimes overwhelming cost of discovery itself. In recent years, the discovery obligation has been substantially expanded. Opposing counsel need only identify areas they are researching and the company must produce all related records in their possession. The risk is that the company will not be able to locate all related records and will unintentionally withhold required documents. Without a records management program, the effort of locating required documents may cost more than a negative judgement. In some cases, companies have paid exorbitant fines rather than undertake the cost of discovery.

In this climate, the best defense is a good offense. Companies must view records in the context of risk management, or they risk significant legal and financial liability. The best protection from records related risks is a legally credible, consistently implemented retention management program.