Any business involved in litigation nowadays knows that the costs of litigating can be difficult to predict and are often greater than initially anticipated. In addition to legal fees, the cost to pursue or defend a claim typically includes costs in the form of lost productivity resulting from allocating workers to assist in gathering evidence that may be relevant to the claim, consulting with legal counsel, consulting with experts, participating in examinations for discovery, and appearing at trial.
In many instances, the largest costs associated with litigation (both in legal fees and lost productivity) are those relating to identifying and producing documents relevant to the dispute. Given the prevalence of emails, Word documents, pdf files, and other electronically stored information, the volume of electronic data maintained in a business's databases can be enormous. More importantly, the information maintained in these databases is often stored in an unorganized fashion, which makes the task of finding relevant information time-consuming and costly. To help reduce these costs, one of the hottest trends among businesses across North America in recent years has been the adoption of document retention policies, which define the parameters for when documents should be destroyed.
The driving principle behind the implementation of document retention policies has been the assumption that, if businesses have less data in their databases, it will be cheaper and less time-consuming to retrieve the information needed to defend against claims in the event the company is sued. In addition, reducing the company's stored data can reduce the company's capital costs. With less data to store, companies can eliminate servers and other storage devices, which can result in immediate savings.
However, merely reducing data will not necessarily help prepare the company for litigation. For instance, at the time data is being stored or deleted, it is impossible to know whether the company will be a plaintiff or a defendant in the event a dispute arises in the future. Without the benefit of the deleted information, the company may not have the evidence it needs to pursue a claim it otherwise could have pursued or defend a claim based on a defense the company otherwise could have raised.
Further, it is impossible to know whether the information stored will be helpful or damaging to the company's claims or defenses. Although one might expect it would be beneficial to eliminate from the company's databases detrimental information, in today's digital world, it is impossible to predict where that information will wind up. If the damaging information ends up in the hands of the company's opponent, the company will be at a tremendous disadvantage in understanding the merits of the company's claims or defenses. As a result, the company could take a position in the litigation that is contrary to the facts, which could be extremely damaging to the company. Accordingly, merely eliminating data is not as wise as it might seem.
Moreover, the volume of data stored is not really the root of the problem. In years past, it was not unheard of in large-scale litigation in the United States for corporate defendants to produce millions of pages of documents. For instance, companies with historical documents or that engaged in international operations sometimes maintained warehouses filled with documents. Although producing these documents was time-consuming, because they were maintained in properly labeled, well-organized files, the process of producing even millions of pages of documents was relatively simple and straight-forward. Conversely, the process of producing electronic documents – even relatively few electronic documents – is far more difficult and expensive.
The solution, then, is not to eliminate data, but rather to properly organize the company's electronic documents. As a result of being properly organized, as with traditional paper documents, locating and producing documents relevant to a dispute will be fairly straightforward. Because it will have a higher degree of confidence that all relevant documents are at its disposal (and have not been deleted from the company's databases), the company will also be in an optimal position to properly assess its claims and defenses. In addition, for most companies, as with paper records, implementing a rational system that stores and maintains all electronic documents in organized files will improve worker efficiency and increase profitability. Stated simply, being well organized is good business.
In conclusion, the determination of whether to implement a document retention policy – or what that policy should be – must take into account more than just the savings that can result from reducing the company's stored data. The decision to eliminate data can have far-reaching consequences. For many businesses, implementing organizational strategies can achieve greater efficiencies over the long term and help assure the company is as prepared as can be in the event the company is forced to engage in litigation in the future.
Stephen Maddex is an Associate at BrazeauSeller.LLP. Stephen practices in the area of litigation. Stephen can be reached at email@example.com or 613-237-4000 ext. 273.