Structuring records management under the legal department

NOTICE: This article contains information related to sensitive and important legal issues. No section of this article should be construed as providing legal advice. All legal decisions related to records and information. management should be reviewed by competent legal counsel.

The placement of the records management program within an organization significantly impacts its effectiveness. When records management is viewed as an administrative or service function, organizations place it under Administration or Administrative Services. When records management is viewed as an information management function, organizations place it under Information Management. Recently, as records management has been viewed as impacting an organization's legal position, a few organizations have moved the program to the Legal Department. This article reviews the factors that help determine the success of the records management program and suggests the optimal placement of records management within an organization.

NEEDS OF THE RECORDS MANAGEMENT PROGRAM

The records management program should be placed within the organization structure to meet the following needs:

*Organization-wide orientation. Records management needs organization-wide orientation since records management is an organization-wide function. Without this orientation and authority, each division or department is free to implement its own records management program, resulting in inconsistency, duplication, and inefficiency. Organization-wide implementation can ensure legal compliance and protect the organization in case of litigation by averting potential adverse legal consequences.

*Sufficient authority. Through the organizational structure, the records management program must attain sufficient authority to accomplish its function. The highest ranking person within the program should possess apparent and sufficient authority to compel immediate compliance (clout) to enable records management to achieve its purpose without undue administrative haggling. It is impractical for the records manager to appeal constantly to the chief executive officer or other high official to implement policy.

*Interest in the subject matter. The organization overseeing the records management program should exhibit some specific interest in the subject matter. For example, Administrative Services has no subject matter interest in records management. Information Systems does have an interest in managing information, but it is al most exclusively interested in computer-based information, with little or no interest in paper-based information. When the goals of the organization overseeing the records management program correspond with the goals of the program itself, a synergistic relationship results that helps ensure success.

TYPICAL ORGANIZATION STRUCTURES

The placement of the records management function under Administration or Administrative Services reflects a traditional view that records managers manage records centers and provide microfilm services as a service to the client departments. This structure does not envision that a records manager will proactively develop, implement and manage new systems nor take an assertive or coercive role to establish consistency and control throughout the organization.

Administration or Administrative Services typically includes such functions as mail, facilities management, maintenance, telephones, and other support services. These internal services rarely are subject to legal requirements and rarely become involved in litigation.

The traditional placement of the records management function under Administrative Services explains the failure of records management programs to be effective in many organizations:

*Administrative Services has a limited orientation--limited to headquarters offices and rarely extending to other locations or divisions.

*Administrative Services does not have the authority and clout to encourage or coerce other entities to implement standard procedures.

*Administrative Services reflects a net cost to the organization (and certainly is not a profit center) and frequently experiences budgetary cuts during restructuring or downsizing. As a result, the budget for records management activities will fluctuate with the business cycle, creating potentially dangerous inconsistency and other adverse legal consequences.

*Administrative Services rarely cares about the informational aspect of records management. Administrative Services actually may not even know what records management is all about. It continues to be responsible for the function only for historical reasons.

Records management will rarely thrive under Administrative Services, even though this is the predominant structure found in the United States.

Some organizations place records management under Information Systems or Information Management. This reflects the philosophy that all an organization's information should be centrally managed. A consolidated Information Management Department could potentially provide optimal services regardless of the form of information or the record media.

Unfortunately, records management programs have generally failed in those organizations that have attempted this structure:

*Information Systems is typically concerned exclusively with computer-based information. Information Systems' managers may even believe that computer-based information is the most important form of information.

*Information Systems typically allocates significant resources to computer-based services and provides few resources for the management of other forms of information.

*Information Systems often believes that any intelligent information systems manager can manage the records management function. Information Systems personnel fail to understand even the basic principles of records management such as active filing systems, records retention, paper flow, inactive storage, and vital records.

*Information Services typically provides services as requested by the clients rather than proactively establishing organization-wide standards and requirements.

Under Information Management, records management is either neglected or the resources provided are often so inadequate as to make the function effectively nonexistent.

In still other organizations, records management has been structured under other available groups such as Property Management, Accounting and even Purchasing. These other structures also failed for reasons similar to those stated above.

RECORDS MANAGEMENT IN THE LEGAL DEPARTMENT

Over the last decade, changes have emerged regarding the placement of the records management function within an organization. Not so coincidentally, these changes have resulted due to problems in litigation and the previous neglect of the records management program.

Some major companies have now placed the records management program under the Corporate Legal Department. This structure resulted primarily from necessity: the Legal Department was concerned about future legal problems related to the organization's records because the records management function had not been adequately managed elsewhere.

Records continue to be a critical issue in litigation. During discovery, an organization may need to assemble thousands or millions of documents in order to comply with discovery requests. Similarly, many documents must be reviewed to determine what information exists and to defend the organization's position in litigation.

Corporate legal departments spend huge sums during litigation to research, organize, index and reproduce relevant records. Organizations often suffer adverse legal and economic consequences due to the lack of an effective records management program:

*Attorneys and their staffs spend significant time and money to research and categorize relevant records.

*Researchers determine that some relevant records are missing without explanation or that they have been deliberately destroyed without a records retention program.

*Adversaries raise claims during litigation that records were improperly destroyed, resulting in sanctions or additional costs to explain and defend the absence of records.

*Once litigation terminates, the organization continues its inappropriate recordkeeping practices and the huge investment in reviewing records is totally lost.

*Attorneys inadvertently turn over records that could have legally been withheld from opponents--by claiming the attorney-client privilege--due to the magnitude of the review task and the time limitations imposed by the courts for complying.

Concerns regarding records in litigation have grown since the U.S. Supreme Court adopted revised Rule 26 of the Federal Rules of Civil Procedure on December 1, 1993, and the states began adopting similar provisions. Prior to the Rule 26 revision, a party in litigation had to initiate depositions and interrogatories to identify relevant records in the possession of the other party, request the relevant records, and finally request a subpoena, if necessary, to compel the other party to turn over the records. If the requesting party failed to request specific records, the other party was under no obligation to produce or acknowledge the omission voluntarily.

Revised Rule 26 now eliminates the time-consuming and costly discovery process previously followed. Instead, near the beginning of the lawsuit (generally within 85 days of the filing of the answer), each party has an affirmative duty to identify relevant records and either make information about those records available to the other party or actually provide copies to the other party.

The revised rule establishes compliance as an affirmative duty of each party to be completed within a short period of time. Failure to comply could subject either party to sanctions, including default judgment, loss of the right to defend on a particular issue, or reimbursement of the other party for costs to reconstruct records. Due to the short time period associated with the revised rule, it is now imperative that records be organized in advance, therefore, the records management program must be implemented prior to litigation! It is no longer reasonable to allow each department or individual to establish their own records programs, designed to meet their own personalized needs.

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 v. ABC Sales & Service, Inc.,(1) the court ruled that "a business which generates millions of files cannot frustrate discovery by creating an inadequate filing system so that individual files cannot readily be located." A poor filing system therefore will not serve as an excuse for an organization's failure to respond to Rule 26.

Similarly, courts have also imposed sanctions for inappropriate destruction of records, including inconsistent destruction and destruction of records under suspicious circumstances. As part of Rule 26 compliance, an organization must fully be able to demonstrate that it has reviewed all records of the organization in existence and has provided the other party with information about any relevant records. The organization must also be able to confirm that all existing records were considered and that other records had been properly destroyed under the records retention program.

For these reasons, in order to comply with Rule 26, an organization must:

*Identify all records, including active and inactive records, within the organization in all locations.

*Identify records that have been destroyed by the organization.

*Demonstrate the accuracy and reliability of the records program.

A good records management program achieves these three objectives. However, without the requisite authority and clout, even the best-designed program will fail.

In response, some legal departments--often at the request of the Chief Legal Counsel--have elected to improve the recordkeeping nightmare before the next round of litigation. A few have placed the records management program directly under the Legal Department. Others have opted publicly to support the records management program even though it is placed under another department in the organization.

Placing the records management program under the Legal Department provides the following benefits:

*The Legal Department has organization-wide orientation and authority.

*The Legal Department has the clout to compel change.

*The Legal Department will ensure that the records management program receives sufficient funding to achieve its mission.

*The Legal Department has a genuine interest in the success of the records management program, since an effective records management program will reduce costs and legal exposure of the organization during future litigation.

*Paralegals in the Legal Department have experience and expertise, gained through litigation, with the location, structure and content of organization records.

*The Legal Department can cost-justify the records management program.

Most organizations recognize the economic impact of litigation. Once litigation begins, legal departments typically request and receive unlimited funding to defend the organization's position--since the cost of "losing" the case would be greater. In recent years, however, legal departments have been pressured by upper management also to control costs.

Records management is a vehicle to reduce litigation costs, especially in the area of discovery. By simply reducing the total volume of records in an organization through an effective records retention program, the organization can reduce the cost of future discovery by reducing the volume of records subject to review. These savings will be recognized again in all future litigation. The program will also eliminate costly sanctions and other adverse legal consequences by ensuring the systematic retention and destruction of records in a manner legally acceptable to the courts.

An investment in records management is more than just an investment in future litigation. Records management offers a proactive approach to utilize a small portion of future litigation expenses to improve records and information management in the organization. These benefits will be recognized during daily operations as well as during future litigation. As a result, a relatively small investment in the records management program will very likely avert a significant future expense for records in litigation, and provide on-going cost savings and efficiency.

SUMMARY

Previous attempts to place the records management function under Information Management, Administrative Services, Accounting or other departments have often failed and resulted in records management being an ineffective program in most organizations.

Recently, some organizations have placed the records management function under the Legal Department. This arrangement provides records managers with organization-wide authority and clout, reasonable budget resources, and a synergistic relationship with the parent entity. The organization also benefits from significantly reduced litigation costs and improved management of records.

REFERENCES

1. United States v. ABC Sales & Service, Inc., 95 F.R.D. 316 (1982), quoted in Skupsky and Montana. Law, Records and Information Management: The Court Cases 155 (1994).

Copyright Association of Records Managers and Administrators Inc. Jul 1995
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