12/ 08/ 2006
by Beth Gaudio, NFIB Legal Foundation
Under new federal court rules that went into effect December 1, businesses should ensure that they have policies in place to manage and maintain electronic documents and information, including e-mail communications. The reason: Court rules now require that businesses provide plaintiffs access to electronic documents that might be used in litigation, even before a request for the documents has been made.
New rules recognize importance of electronic data
The new rules acknowledge that electronic files are distinct from paper files and present unique challenges to parties and courts.
To help ensure that relevant information relating to the pending lawsuit is preserved, businesses are now required to meet and confer with plaintiffs in litigation within 90 days after the appearance of a defendant, or 120 days after the complaint has been served on a defendant. At the initial meeting, the parties must disclose to each other "a copy of, or a description by category and location of, all documents, electronically stored information, and tangible things that are in the possession, custody, or control of the party and that the disclosing party may use to support its claims or defenses."
Electronically stored information includes all information stored in computers, including word-processed documents, e-mail, photographs and spreadsheets.
What the new rules mean for businesses
(1) Institute a document retention policy with a litigation suspension plan.
Businesses should institute a document retention policy that clearly applies to both physical and electronic documents. The policy should limit how long information is kept and set forth procedures for timely destruction of both paper and electronic documents.
Importantly, the policy must also advise employees that a company faced with the prospect of litigation "must not destroy documents relevant to pending litigation." This litigation suspension policy must apply to paper as well as electronically stored information.
Not having a document retention policy can mean the difference between winning and losing a lawsuit, since the failure to preserve electronic documents can result in significant legal and financial court sanctions. For example, a landmark decision in a New York federal court sanctioned a company for not preserving e-mail backup tapes related to the employment discrimination lawsuit filed by the plaintiff. The court granted the plaintiff an "adverse inference," meaning that jurors were told to assume that e-mails deleted by the defendant company would have negatively impacted its case. In 2005, the jury found the company had discriminated and awarded the plaintiff more than $29 million in damages.
In addition to implementing a document retention policy, businesses should also work with an IT professional to put into practice a system that maintains and manages e-mails and other electronic data.
(2) Establish an employee e-mail and Internet policy.
Regardless of the new federal rules, any company that makes electronic communications equipment available to employees should have an e-mail and Internet policy. Lawsuits stemming from inappropriate jokes and pictures in work e-mails are on the increase. Your company could be liable for damages if it fails to prohibit illegal behavior, such as pirating software or viewing pornographic images. A good e-mail and Internet policy will tell employees what the business considers to be appropriate use of the e-mail and Internet system and reserve the right to read employee e-mail and monitor Internet usage.
For more information on the new court rules, please call the NFIB Legal Foundation at (800) 552-6342. NFIB members can also download the Small-Business Guide to Document Retention, a publication that is available at no charge to active NFIB members.
