Legal Holds Impact Document Retention Policy

Gregg Mayer posted the following quick article on Legal Holds inthe CIOLaw.org Blog in the Litigation Hold Section on March 19th, 2008. It is a great addition to my previous post on Records Rentention Policy as it shows how Legal Holds impact Document Rentention Policy.

Companies implement document retention policies to determine how long information should be stored. These policies must include electronically stored information. For example, a company may decide it wants to purge emails after 21 days, like the Maryland company Echostar’s policy. Of course, simply executing the policy is not always enough.

A key caveat to normal retention policies is to make sure they are modified to accommodate “legal holds” – a duty placed on the company to preserve relevant information once litigation is reasonably anticipated. Echostar learned that lesson the hard way.
According the Maryland federal court in Broccoli v. Echostar Communications, Echostar’s email archiving system worked like this:

Under Echostar’s extraordinary email/document retention policy, the email system automatically sends all items in a user’s “sent items” folder over seven days old to the user’s “deleted items” folder, and all items in a user’s “deleted items” folder over 14 days old are then automatically purged from the user’s “deleted items” folder. The user’s purged emails are not recorded or stored in any back up files. Thus, when 21-day-old emails are purged, they are forever unretrievable.

In January 2001, the plaintiff in Broccoli v. Echostar Communications told Echostar about his potential sexual harassment and Title VII claims. More letters and emails additionally notified Echostar of the litigation.

The plaintiff was fired in November 2001. Another letter came in December 2001 threatening litigation, and a lawsuit was filed in February 2002. Echostar did not adjust its retention policy until December 2001. This, it turned out, was wrong.

The judge explained Echostar had actual notice of the claims as early as January 2001. Echostar should have started preserving emails nearly 11 months before it did. As a result, the judge sanctioned Echostar by offering an “adverse spoliation of evidence instruction” – whatever was destroyed may be considered in the worst possible light against Echostar.

Needless to say, Echostar lost the case.

Retention policies are a necessary part of business. Just as necessary is a company’s ability to modify a retention policy whenever litigation is reasonably anticipated.
Read more about the Echostar case in this news article.