The majority of commentators regarding electronic discovery bemoan the high cost of dealing with all the electronic records. This usually misses the point. On a page-for-page basis, electronic records management and related electronic discovery costs a small fraction of what the same effort would be in paper.
Why is this such a problem?
The real culprits of high costs are the businesses and workers that, because electronic storage is so easy and inexpensive, keep records that would never be tolerated if one were working with paper. With paper, the time period for storage was based on real needs. Management analyzed ongoing storage based on the cost of storing the paper. Records needed immediately were retained close to the users, while other paper records were moved to less desirable (and less costly) long-term storage. However, regardless of the use of less costly remote storage, paper’s physical volume required regular purging of records that had outlived their usefulness.
We now face a new paradigm of records management. Completely different electronic storage attributes drives this new paradigm, as follows:
1. Storage costs (at least the obvious ones) are trivial. Adding additional electronic storage is no longer limited by meaningful cost considerations.
2. Location is no longer important. Internet connectivity means that storage location can be anywhere. Regardless of storage location, online connectivity allows nearly instantaneous retrieval.
3. Duplicates abound. Paper photocopies existed before, but nothing like the duplicate storage that is now common. Business records are now kept in personal email accounts, home computers, CDs/DVDs, and a plethora of USB drives and MP3 players that fit in employees’ pockets. Centralized storage and control of authorized records at solely designated business locations is exceptionally challenging.
The indirect costs of too much storage
Because of these challenges, most enterprises do a substandard job of managing electronic records. This substandard job has few direct costs, but has the following substantial indirect costs:
1. The volume of records makes it difficult and time-consuming to locate the latest and best version of what is actually desired. Mistakes occur when an employee uses an outdated record that should not have even been kept. Even when no mistakes occur, employees waste time attempting to figure out what version should be used.
2. Discovery costs skyrocket. The cost here is not the physical copying, but the enormous human cost of reviewing for privilege, and then cataloguing the production.
3. Assisting plaintiffs unnecessarily. Outdated records usually assist the plaintiff more than the company retaining the records. Nevertheless, once a dispute occurs, previously unneeded records must be retained.
4. Systems become slow. Although the physical storage is cheap, processing speeds and costs have not kept up. Storing unneeded records creates additional burden on data processing systems, causing users to wait. Although each individual wait may be only a few seconds, the accumulated lost time is large and adds no value.
Who’s in Charge?
Housing responsibility for records management within a facilities or similar administrative function reflects an outmoded focus on paper records, and ignores the significant indirect costs that occur when this process is handled incorrectly. Accordingly, records management should report to the company’s legal function. Reasons for this include:
1. Litigation and regulatory requirements often control whether a document can be discarded.
2. Litigation-related costs are the indirect but larger cost of too much storage. This hidden cost should be addressed by the group that is ultimately responsible for managing litigation.
Electronic records management frequently resides with the IT/data processing function. This occurs because IT personnel have the technical skills and data access necessary for implementation. This often creates a problem because (i) the training and focus of IT personnel involves data preservation over other cost factors, and (ii) when comparing the cost of additional storage to the labor necessary to implement and enforce appropriate policies, IT personnel will purchase more “cheap” storage. A better approach is to implement a team effort in which IT personnel are involved, but the ultimate responsibility, authority, and overall cost management resides with lawyers.
Creating a customized document management policy
Companies that can efficiently retrieve relevant records that meet business and legal requirements have a competitive advantage. The starting point for this is customized planning and documentation of your particular business needs. Of course, this is more work than photocopying someone else’s form and inserting your company’s name on it, but the extra effort is well worth it.
Paper’s storage cost enforced a life cycle of records management. In the electronic age, records still have a life cycle, but technological capabilities allow it to be managed (or not managed) by benign neglect. The life cycle concept means that all records have a birth, a fixed useful life, and then a death. The death is based on the later of the need to maintain institutional knowledge of transactions, and legal/regulatory requirements.
A document management policy is simply a record of what this life cycle is for each class of information. Records (whether paper or electronic) should be viewed in the same way as other assets. Assets of any type should be kept for only so long as necessary to meet business and legal requirements. For those assets that have ongoing value, they need to be organized so that they can be efficiently located and used. If the asset is not worth the cost of efficient storage and retrieval, then the “asset” may not be worth much and is a candidate for not being kept.
A data inventory is the centerpiece of a proper electronic storage policy. Study the records that are actually being kept in order to provide a baseline for adopting better policies and procedures. This involves actually locating and “seeing” the data that is available, not just reciting what some policy says is supposed to exist.
Write the inventory and related policy in a table form that identifies:
1. The type of data to be retained
2. The official location and format of such data
3. Who has responsibility for maintaining this centralized official copy
4. When the data can be discarded in the absence of a retention order arising as a result of foreseeable litigation or government investigation
All electronic records must be part of the inventory and related retention policy. Include email, instant messaging, document-specific files (i.e., word processing, spreadsheets and presentations), and databases supporting enterprise applications.
Storage of a single approved copy should occur centrally, with sharing the official copy among those that have a need for the information. Duplicate copies provide business and legal challenges because it is difficult to keep multiple copies of the same record current. For each type of record, establish what copy is the best or official copy, and then (unless specifically required for legal or regulatory purposes) discard the outdated versions that are likely to cause future confusion and misunderstandings.
Backup tapes are usually the single greatest, and yet easiest, area for improvement. When creating the storage inventory, pay particular attention to backup tapes. Specifically:
1. Evaluate how often an older backup copy is actually used. Tape storage is relatively inexpensive, but this is not sufficient reason for storing copies that have no business need.
2. Backup data should be segregated from archived data, and treated differently. As used here, backup data refers to information that is retained to restore systems in case of fires, natural disasters, or other unexpected mishaps. In contrast, archive data is retained as permanent or semi-permanent storage. With these definitions in mind, absent specific regulatory or litigation hold requirements, there should be no backup data that is not periodically rotated or eliminated.
Enforcing the Policy
A records retention policy is of no use unless it is followed. With primarily paper-based storage, active checking of document destruction policies was self-enforced. If paper was stored longer than the policy allowed, one quickly ran out of room. Requests for increased storage spending were met quickly and appropriately with questions as to why all this paper needed to be kept anyhow.
With electronic records, these self-enforcing mechanisms no longer exist. Consequently, it is easy for management to check compliance when time permits – in other words, never! The problems described above require more active enforcement.
To ensure that policies are actually followed, electronic records storage needs to be integrated into the organizations business processes, and supported by executive management. This is necessary because anyone with a computer has the ability to store records that are not compliant with the organizations policies. Users will consistently keep records longer than the policy allows “just in case”. Without recurring reminders, physical limitation on storage capabilities and executive management support, individual employees and groups will create their own chaos.
System administrators should monitor compliance with the retention policies by periodically looking at what is actually being retained on both server and client computers. Nothing is accomplished by having a boilerplate policy that is violated by having server, back-up, and end-user retention practices that violate the policy.
Backup tapes or other backup digital storage should be an explicit part of the document retention policy and related storage audits. Most backup tapes are kept much longer than needed. Sometimes this storage is in contravention to the stated policy, but data processing “pack rats” retain the tapes nevertheless. Caches of older backup tapes should be reviewed for compliance with existing policies, and eliminated pursuant to such policies. The single easiest way to reduce defense-side litigation costs is to eliminate long-term storage of backup tapes that have no ongoing business purpose, but which provide plaintiffs and regulators with fertile fishing grounds for embarrassing communications.
Managing Litigation Holds
Litigation holds occur when outside events (usually litigation or government investigations) require that otherwise-approved document deletions be suspended. How this process is managed is an integral part of a document retention policy.
Electronic hold policies and implementation must include electronic records. This would appear obvious, yet some policies and implementations fail to consider electronic records. Usually, this occurs because the other best practices described herein are not in place, so implementation of the electronic record portion of the litigation hold become too cumbersome to accomplish. The result is a dangerous “ostrich with his head in the sand” approach that has garnered national headlines for some unfortunate firms.
Litigation holds must be administered centrally. Because mistakes with litigation holds have expensive consequences, it is insufficient to provide instructions to employees and have them self-administer litigation holds.
Central administration of litigation holds provides a secondary advantage. Documents no longer necessary once a litigation hold is removed are more easily identified and eliminated. This is frequently a challenge without central administration.
Additional Best Practices
Electronic storage periods should be simplified by having fewer record classifications. Computers are good at identifying dates and file types (file extensions), but have challenges with understanding content. Left over from the days of paper, some organizations have exceeding complex record-storage rules that make compliance with electronic retention policies cumbersome. Policies are more likely to be followed if a fewer number of time periods or other rules are involved.
Outdated storage media should be converted to modern storage. Some data needs to be retained for much longer than the storage technology on which the data is stored (for example, 5¼ inch floppy disks, and soon, 3½ inch “floppy” disks). As hardware becomes outdated and retired, related older data needs to be move to other storage media while it is still cost-effective to do so.
The Opportunity for Legal Counsel
Most organizations have serious shortfalls in their management of digital records. Precious few companies are doing what has been recommended in this article. Legal counsel has a significant opportunity to demonstrate leadership and add value to their organizations and clients.
For defense counsel, this is a golden opportunity to provide valuable legal advice in an area that most of your clients are ignoring. When (not if) the next large electronic discovery request arrives, the proactive lawyer and client will have saved considerable money because unnecessary records will not burden the process.
For plaintiff counsel, business sloppiness in this area provides an excellent opportunity to get your opponent’s stray and reckless comments that will advance your case.