new legal reason for a records management program, The

The reasons for a records management program reflect both business and legal concerns. From a purely business standpoint, a records management program provides the following benefits:

* Cost savings

* Space savings

* Improved access to information

* Improved operational efficiency

These reasons should compel management to provide sufficient resources for the management of company records.

However, some of these benefits may be difficult to quantify. During periods of down-sizing or right-sizing, management may feel that these business issues alone cannot justify the records management program. An awareness of the legal risks associated with a poor records management program might cause them to rethink their commitment.

The legal reasons for a records management and records retention program include the following:

* Legal compliance

* Litigation protection

* Information availability during

* legal audits

Regulatory agencies can impose significant fines for failure to maintain certain records for the required period of time. During litigation, an organization may be subject to sanctions or loss of rights when the court determines that records were improperly destroyed or the organization cannot find records to support its claims.

The price of a good records management program is minute compared to the legal risks faced by most organizations. For this reason, legal departments often support the implementation of a records management program, especially the records retention component.

LEGAL REQUIREMENTS FOR A RECORDS MANAGEMENT PROGRAM

In spite of all the business and legal reasons for a records management program, many will be surprised to learn that the law does not mandate a records management program per se. The law does mandate that certain records be kept and may also specify certain conditions. Typically, laws will state the following:

* The type of information that must be kept

* The type of information that must be submitted to a regulatory agency

* The form required for the records

* The location for maintaining records

* The availability of records during audits or government requests

While all these requirements might necessitate the implementation of a records management program for compliance, the law still does not specify that you establish a formal program.

Some organizations have focused on the Federal Corrupt Business Practices Act (15 USC 78dd-1) as the legal basis for a records management program. While this law does establish significant penalties for American corporations engaging in corrupt foreign practices (such as bribing foreign officials or businesses), the law merely requires an organization to confirm that it complies with the law.

The law does not require a records management program. However, a records management program would document company expenditures and help show that no money had been diverted to improper reasons.

The Nuclear Regulatory Commission comes close to mandating a records management program for nuclear facilities as a byproduct of its requirements for a quality assurance program. In order to be licensed, a nuclear facility must establish an extensive quality assurance program to ensure that each step of design, construction, implementation and management of the nuclear facility corresponds with appropriate regulations. Quality assurance records must be maintained and made available during agency audits. One component of quality assurance is the records and information management program used to organize and manage the quality assurance program.

Similar requirements exist in the health care industry. In order to qualify for Medicare reimbursements, the Health Care Financing Administration of the Department of Health and Human Services requires that the facility maintain a medical records program. It specifically requires that the facility maintain adequate records facilities, equipment, and space, maintain complete and accurate medical records, and select a qualified medical records supervisor for the facility. These regulations provide sufficient detail to form the legal basis for a records management program in that industry.

With perhaps a few minor exceptions, we do not find other areas of law that require the implementation of a records management program--merely, the retention or maintenance of appropriate records. Most other legal requirements for records can be met without a formal records management program...although the cost and legal risk would probably be great.

DISCOVERY AND LITIGATION UNDER THE OLD RULE 26

The Federal Rules of Civil Procedure govern the conduct of civil cases in the federal courts. They identify such details as to when certain matters must take place, procedures for discovery, preparing jury instructions, filing appeals and all other matters of a procedural nature related to civil cases. By contrast, the Federal Rules of Evidence establish only the procedures and guidelines for introducing evidence into court.

Rule 26 traditionally dealt with discovery issues. Discovery is the process by which one party to a court case can obtain information maintained by the other party. Relevant records will typically first be identified through written interrogatories or depositions and requested through informal procedures. If requests fail, the requester can then obtain a Subpoena Duces Tecum ("An Order to Appear and Produce Documents") to compel the other party to provide specified records to the requester.

In major civil cases, the discovery process may take several years and involve the production of thousands, and sometimes millions, of documents. All relevant documents addressed by the subpoena must be turned over to the requesting party. In some cases, the court will reimburse the producing party for some expenses--generally the cost of reproduction. Expenses for identifying records in the organization, determining which records are relevant, and excluding those records covered by a privilege (such as the attorney client privilege) generally will not be reimbursed.

Rule 37(b)(2) of the Federal Rules of Civil Procedure specifies the sanctions a court can impose on a party for failure to comply with discovery. Some of the types of sanctions enumerated including the following:

* Certain facts could be viewed by the court as proven without additional evidence

* The disobedient party may be prohibited from introducing evidence that supports or opposes certain claims or defenses

* The court can strike out part of the disobedient party's pleadings, dismiss certain actions, or render a default judgment against the disobedient party

* The court can hold the disobedient party in contempt of court and impose fines and imprisonment The court could charge the disobedient party for all reasonable expenses incurred by the party obtaining the subpoena to reconstruct the information or prove the facts by other methods

In Carlucci v. Per Aircraft Corporation, 102 F.R.D. 472 (1984), the defendants failed to adequately respond to numerous discovery orders during the first five years of the case. After the court appointed a special master to investigate, the court imposed sanctions under Rule 37 and issued a default judgment in the amount of $10 million. The court found that Piper obstructed justice by instituting delay tactics designed to thwart the discovery process. In addition, the court determined that Piper had selectively destroyed records prior to litigation so as to prevent them from being used in future lawsuits. Because of the abuse of discovery, the court never reviewed the merits of the case.

THE NEW RULE 26

On December 1, 1993, the Supreme Court of the United States approved implementation of revised Rule 26 of the Federal Rules of Civil Procedure. The new Rule 26 states the following:

RULE 26. GENERAL PROVISIONS GOVERNING DISCOVERY; DUTY OF DISCLOSURE.

(a) Required Disclosures to Discover Additional Matter.

(1) Initial Disclosures. Except to the extent otherwise stipulated or directed by order or local rule, a party shall, without awaiting a discovery request, provide to other parties:

(A) the name and, if known, the address and telephone number of each individual likely to have discoverable information relevant to disputed facts alleged with particularity in the pleadings, identifying the subjects of the information;

(B) a copy of, or a description by category and location of, all documents, data compilations, and tangible things in the possession, custody, or control of the party that are relevant to disputed facts alleged with particularity in the pleadings;

(C) a computation of any category of damages claimed by the disclosing party, making available for inspection and copying as under Rule 34 the documents or other evidentiary material, not privileged or protected from disclosure, on which such computation is based, including materials bearing on the nature and extent of injuries suffered;and

(D) for inspection and copying as under Rule 34 any insurance agreement under which any person carrying on an insurance business may be liable to satisfy part or all of a judgment which may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment.

Unless otherwise stipulated or directed by the court, these disclosures shall be made at or within 10 days after the meeting of the parties under subdivision (f). A party shall make its initial disclosures based on the information then reasonably available to it and is not excused from making its disclosures because it has not fully completed its investigation of the case or because it challenges the sufficiency of another party's disclosures or because another party has not made its disclosure.

(3) Pretrial Disclosures. In addition to the disclosures required in the preceding paragraphs, a party shall provide to other parties the following information regarding the evidence that it may present at trial other than solely for impeachment purposes:

(A) the name and, if not previously provided, the address and telephone number of each witness, separately identifying those whom the party expects to present and those whom the party may call if the need arises.

(B) the designation of those witnesses whose testimony is expected to be presented by means of a deposition and, if not taken steno graphically, a transcript of the pertinent portions of the deposition testimony; and

(C) an appropriate identification of each document or other exhibit, excluding summaries of other evidence, separately identifying those which the party expects to offer and those which the party may offer if the need arises.

Unless otherwise directed by the court, these disclosures shall be made at least 30 days before trial. Within 14 days thereafter, unless a different time is specified by the court, a party may serve and file a list disclosing (i) any objections to the use under Rule 32(a) of a deposition designated by another party under subparagraph (B) and (ii) any objection, together with the grounds therefor, that may be made to the admissibility of materials identified under subparagraph (C). Objections not so disclosed, other than objections under Rules 402 and 403 of the Federal Rules of Evidence, shall be deemed waived unless excused by the court for good cause shown.

(4) Form of Disclosures; Filing. Unless otherwise directed by order or local rule, all disclosures under paragraphs (1) through (3) shall be made in writing, signed, served, and promptly filed with the court.

(5) Methods to Discover Additional Matter. Parties may obtain discovery by one or more of the following methods: depositions upon oral examination or written questions; written interrogatories; production of documents or things or permission to enter upon land or other property under Rule 34 or 45 (a)(1)(C), for inspection and other purposes; physical and mental examinations; and requests for admission.

The new Rule specifies that each party shall provide to the other, without waiting for discovery requests, a copy of the description of all records that are relevant to disputed facts. The information must be provided, unless otherwise stipulated or directed by the court, within ten days after the meeting specified in subdivision (f)--a meeting which normally takes place 14 days before the scheduling conference. In cases where no scheduling conference is held, this means that the prescribed meeting must ordinarily be held within 75 days after the defendant first appears (and files an answer) in the case. In the worst case scenario, the initial disclosures related to records specified in the rule would generally be due no later than 85 days after the defendant's first appearance.

The rule states that the parties shall make their initial disclosure "based on the information then reasonably available to it." Each party must review the pleadings filed by the others and determine what records would reasonably be relevant. To facilitate this process, the pre-trial conferences would enable each party to clarify the issue further. In addition, each party will have an on-going responsibility to disclose subsequent information as it becomes clear that additional issues become relevant to the matter. Neither party is excused from their affirmative duty even if the other party fails to comply with the rule. The U.S. Supreme Court believes the new rule will accelerate the exchange of information about a case and eliminate the paperwork involved in requesting information from the other party. Experiments in federal district courts have already shown that similar procedures reduce the time and expense of litigation.

Some federal cases extend for several years due to the long and difficult discovery process. Defendants' attorneys, in particular, have often delayed cases by slowly or incompletely responding to discovery. The new rule indicates the court's dissatisfaction with these delays and costs.

Many states have previously adopted rules of civil procedures that are similar to the Federal Rules of Civil Procedure. We can expect that most of these jurisdictions will now modify their state rules of civil procedure to correspond to the changes that have been implemented on the federal level. For example, the State of Colorado has proposed changes to its Rule 26 to incorporate many of the federal changes.

IMPLICATIONS OF RULE 26 ON YOUR RECORDS MANAGEMENT PROGRAM

The new Rule 26 imposes fundamental new requirements on litigation in the federal courts. Previously, the requesting party had to request information, identify relevant records, request those records and, finally, in some cases, obtain a subpoena to compel the other party to turn over those records. If the discovery request did not specify certain records, the receiving party had no legal obligation to produce those records or identify the omission.

Rule 26 now eliminates the arduous procedures previously imposed on the requesting party. Instead, near the beginning of each federal lawsuit (generally within 85 days), each party now has an affirmative duty to identify relevant records and make information about those records available to the other party. Each party can then request actual copies of the records.

Although we still lack experience with the new rule, the courts will probably expect that each party make a full disclosure at the early stages of the case. Failure to provide information on relevant records will probably be the basis for court-imposed sanctions.

The courts have previously dealt with excuses for failure to comply with discovery requests, including the issue of "the inability to find records." In United States of America v. ACB Sales and Service Inc., 95 F.R.D. 316 (1982), the court ruled against the defendants for failure to respond to a discovery order. In particular, the court said "a business which generates millions of files cannot frustrate discovery by creating an inadequate filing system so that individual files cannot readily be located." In Kozlowshi v. Sears, Roebuck & Company, 73 F.R.D. 73 (1976), the court similarly stated "to allow a defendant whose business generates massive records to frustrate discovery by creating an inadequate filing system, and then claiming undue burden, would defeat the purpose of discovery rules." A poor records management program will therefore not serve as an excuse for an organization's failure to respond to Rule 26.

Prior to implementation of the rule, the Senate Judiciary Committee conducted hearings. Fierce opposition arose from groups representing larger corporations and defendant interests, complaining about the potential burden that this rule would place on their constituency. The rule still went into effect indicating that the Senate and the Supreme Court will not tolerate excuses for abuse of discovery, regardless of the burdens.

Since the disclosures related to records must take place within 85 days of the defendant's first appearance and subsequent disclosures completed within 90 days before trial, organizations subject to federal litigation must organize their records in advance to comply within the time period. A period of 90 days is not sufficient time to search adequately the records of a major organization. This is especially true if the organization has undertaken mergers and acquisitions, resulting in thousands of boxes of records that have yet to be examined.

In order to comply fully with Rule 26, the records program must meet the following criteria:

1. Identify all records, including active and inactive records, within the organization at all locations.

2. Identify records that have been destroyed by the organization.

3. Identify active, inactive, and destroyed records with sufficient accuracy to enable the organization to prove the reliability of the system.

A records management program achieves these three objectives. An appropriately designed active and inactive records program, including a file and box tracking system, enables the organization quickly to identify records throughout the organization. The records retention program enables the organization systematically to destroy records and to identify those records that have been destroyed under the program. Finally, when the records management program includes documentation, training and audit, the organization can confirm the accuracy of its procedures, including indexing and destruction.

CONCLUSION

The new Rule 26 of the Federal Rules of Civil Procedure has established a significant new burden on organizations subject to federal litigation. Within approximately 85 days from the time the defendant files an answer and again 90 days before trial, each party must identify the types and locations of records that might be relevant to the case. Failure to comply with this requirement could lead to the imposition of fines, penalties, sanctions and loss of rights in litigation.

The new rule imposes an affirmative duty on each party to identify records without being asked by the other party. Through the development of a records management program, an organization can readily identify active and inactive records, identify records that have been destroyed under the records retention program, and prove the accuracy of the information provided to the other party and the court.

Without a records management program, most organizations cannot identify all relevant records within the requisite time period. They will also not be able to confirm that their system is so accurate that it is improbable that they missed any relevant records.

While Rule 26 does not impose an affirmative duty for a records management program, it does impose a new burden on organizations involved in federal litigation that probably could not be achieved without a records management program. The risks and costs of sanctions is far too great to ignore records management any further. Records managers now have the ammunition necessary to gain management support for a comprehensive, organization-wide records management program!

Copyright Association of Records Managers Administrators Inc. Apr 1994
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