Records retention schedules in court: The pitfalls

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.

Records retention schedules are often promoted as a device which protects an organization during litigation. According to this theory, records can be disposed of in accordance with the schedule, and should they later be sought by a litigant, they are simply unavailable. The fact that this unavailability is due to the preexisting records retention policy and schedule presumably excuses the organization from producing them.

This proposition has support in the decided cases. In such cases as Vick v. Texas Employment Commission1 and Moore v. General Motors,2 the destruction of records under a legitimate preexisting policy did indeed excuse parties from production of records.

It would be rash, however, to assume from this that mere adoption of something which purports to be a legitimate records retention policy will automatically provide the insulation contemplated by this scenario. In the past, this might have been true. Courts were less inclined to inquire into the specifics of a retention policy, and plaintiffs were either less willing or unable to inquire into the purported retention policies they faced. Times have changed, however. Two recent cases serve to illustrate specific factors which have enabled plaintiffs to discredit claims that a records retention program precluded production of documents.

THE CHANGING ATTITUDES OF COURTS AND ATTORNEYS

As dockets have clogged and courts have tired of prolonged discovery, they have become more inclined to make judgments about the propriety of records retention and destruction practices. This trend has been propelled by plaintiffs' attorneys who are now sufficiently knowledgeable about records management to dispute claims made concerning records retention programs. Where once, many were unable to challenge a statement that records had been legitimately destroyed, they are now effectively contesting the legitimacy of the records policies asserted as justification for nonproduction.

The increasing sophistication of plaintiffs' attorneys is illustrated in Chrysler Corp. v. Blackmon,3 a products liability suit arising out of an automobile crash. In this case, the existence of certain crash test reports was hotly disputed. Chrysler repeatedly claimed that material created prior to a certain date was destroyed pursuant to a records retention policy and that everything else had been produced. These claims were vigorously contested by the plaintiff, who pointed to inconsistencies between Chrysler's claimed policies and what could actually be found. Chrysler's attorney attempted to explain away the discrepancies with the following statement made in court:

What we are finding here and what I'm afraid will continue to happen throughout this entire case is that in some engineer's file somewhere at Chrysler Corporation or somewhere else, somebody back then may have copied a piece of a crash test, maybe a page, may have made some notes about a crash test, may have actually-may have written a preliminary memo about a crash test that was ongoing that has the same number as one of those crash tests that is on our list of being shredded.4

As will be seen, the plaintiff effectively refuted the relatively benign scenario posited by this statement.

In disputing Chrysler's contentions, the plaintiffs attorney did not simply rely on inferences arising out of inconsistent document production. Instead, he took at least the following actions:

He made repeated, strenuous demands for production of reports, indexes and electronic databases, demanded explanations for nonproduction, and repeatedly sought sanctions for failure to produce specific items;

He flatly alleged that Chrysler was making false statements through its counsel;

He demanded production of Chrysler's document retention policies, and sought sanctions when their production was objected to;

He sought from Chrysler information about similar lawsuits, and sought sanctions for alleged concealment of some of those suits;

He contacted other law firms which had been involved in litigation against Chrysler in order to determine whether Chrysler had produced any of the allegedly unavailable material in those cases;

He produced affidavits from employees of those firms, wherein they claimed that Chrysler had produced documents to them which it was now claiming were unavailable.

These efforts yielded the following series of orders by the court:

An order for production of all crash test files;

An order for production of an unedited copy of its entire computerized crash test index for the body type in question;

An order for Chrysler to produce affidavits explaining the absence of all documents it claimed were destroyed pursuant to the retention policy;

A monetary sanction of $7,500 per day for each day of noncompliance after a deadline;

Ultimately, an order of default judgment entered against Chrysler on the issue of liability.

The default judgment was overturned on appeal as being excessively harsh. Nonetheless, it is highly instructive that the plaintiff persuaded the court to take such an extreme step. The trial court was initially reluctant to conclude that Chrysler was engaging in abusive conduct-the plaintiff overcame this reluctance only by virtue of aggressive and persistent tactics throughout a series of motions and hearings. It is also worth bearing in mind that in many jurisdictions, the trial court's action would have been upheld on appeal.

Other organizations would do well to assume that the attorneys they face are equally diligent and to prepare accordingly. This means thorough and accurate implementation of retention policies, and policies which themselves can withstand the attack of a knowledgeable and aggressive opponent.

FACTORS LEADING TO PROBLEMS

Baker v. General Motors Corp.5 is illustrative of some of the specific breakdowns that can result in serious problems. The plaintiff sought production of engine fire reports in a products liability lawsuit. General Motors first unilaterally restricted its production to a single model line (the plaintiff sought information about all model lines), then claimed that production was unduly burdensome due to the necessity of a hand search of voluminous files. Later, GM conceded to the court that a computer index of the requested material was available, but claimed that relevant material created prior to a certain date was unavailable, having been disposed of under a records retention schedule. Still later, GM admitted that some of the allegedly unavailable material was, in fact, available, because copies had been placed in other files for the purpose of facilitating National Transportation Safety Board (NTSB) investigations. Eventually, the court concluded that GM was willfully obstructing discovery and entered a default judgment against GM.

Each of the missteps that led to the default judgment is traceable to organizational and administrative weaknesses in the records management program, and each contributed in turn to the final, disastrous outcome.

The decision to unilaterally restrict document production in the face of a clear and specific demand should not have been made. It was bound to invite a vigorous response from the plaintiff and censure from the court when, inevitably, it was discovered. If restriction was appropriate, GM should have sought such a restriction through negotiation with the opposing party or motion to the court. Taking the matter into GM's own hands was predictably viewed as highhanded and less than forthright, thus predisposing the court to react strongly to later problems.

Although GM apparently had a records management and retention program and had made some attempt to integrate their paper and electronic records systems, these facts do not appear to have been widely known-at least not to the personnel conducting discoverywith the result that they were forced to go back into court and concede that their first statements concerning the necessity of a hand search were not true. A similar lack of knowledge concerning the contents of the NTSB files was equally problematic, again forcing repudiation of a position taken in court.

Both of these repudiated positions purported to justify failure to give the plaintiff relevant information. When such claims are made and then turn out to be untrue-particularly when, as here, there are more than one and they are repudiated one at a time, and with seeming reluctance-opponents will assert, and courts will often believe, that the party doing so is lying in an attempt to hide information which ought to be produced.

This is a fatal posture to find oneself in. Once the court is persuaded a party has lied, every statement thereafter is suspect. Even if the court does not assume that the misstatements were intentional, one's credibility and perceived reliability are still damaged, and further claims of any kind are likely to be viewed skeptically.

Worse still, the damage could have been avoided in this case. Why go to the trouble to create an electronic index if it is not available and utilized? In particular, why was a highly useful index unknown to personnel engaging in as sensitive an activity as products liability discovery? One might reasonably assume that these would be among the organization's most capable and knowledgeable records and information personnel, yet they were apparently unaware of the existence of one of their most useful and basic tools.

The solutions to this problem are both straightforward and easy to implement. Personnel should be aware of indexes, databases and other search tools, and should be trained in their use-actions which ought to be undertaken for business purposes in any event, if the tools are to be of value. The personnel conducting discovery should be those who have received such training for the area or topic being searched.

With respect to the NTSB files, the retention program had a fundamental weakness-failure to account for all copies of a document, and a document highly relevant in foreseeable litigation, at that. This is not to say that it is necessarily inappropriate or undesirable to destroy one copy of a document and retain another. Rather, if this is the case, the organization must do so cognizant of the fact that this is occurring. It is when the system is blind to the existence of that second copy that problems arise.

The reported opinion in Baker does not reveal the cause of GM's difficulties, so possible problems and solutions are necessarily speculative. Nonetheless, for a number of possible causes, solutions were undoubtedly available:

The records retention schedule listed the NTSB investigation files in a manner which did not adequately disclose their nature. This is a common problem. Files containing large numbers of independent documents are often listed under very general names, with no clue as to their precise nature or contents, no indication that they may contain other documents and no terminology distinguishing them from dozens of other "management reports" or "investigations." The solution in this case is to structure the records listing in a manner which reveals more about the contents of files which contain large numbers of other documents, or whose names reveal little about their contents.

This may seem burdensome, but it need not be so. Often, it may entail no more than changing the title of a record from "reports," "investigation files" or the like, to something more descriptive of the actual topic and contents. In cases where documents are transferred into other files, a cross-reference of some kind may be appropriate, or at least a written statement somewhere that such transfer or copying is occurring. A descriptive listing of the entire contents of a file may be justified for selected files.

Whatever the solution, the organization must somehow be aware of the transfer of documents into other files in other locations and of the contents of files containing large amounts of material. This is particularly true where, as here, the documents are sensitive, and problems give rise to an inference of misconduct.

The records listing was adequate, but no one consulted it to find out where things might actually be. Too often, policies, procedures and retention schedules end their lives on shelves unused. The most carefully indexed and cross-referenced records listing and retention schedule is of little value if not consulted.

Here, there appear to be at least two times when referring to it could have been productive: when the original copies of the engine fire reports were disposed of, and when the material was sought in discovery. If the retention schedules properly accounted for the NTSB copies of the engine fire reports, consulting them at either time would have gone a long way toward saving the day.

If consulted at the time of disposal of the other incident reports, the schedules would perhaps have authorized disposal of the NTSB copies as well. If so, they really would have been gone when GM claimed they were.

Similarly, had the schedules been consulted early on during discovery, GM would have been aware of the existence of the NTSB copies, and thus would not have asserted that they were gone.

The personnel conducting discovery had no background in the complaint investigation process, and therefore had no way of knowing what kinds of things to look for, or where they might be found. Discovery of technical or highly specialized records may entail assigning technically competent personnel to do the searching. A clerk from the typing pool can hardly be expected to find and organize sophisticated and voluminous engineering drawings or laboratory research data, particularly if the records are listed by acronyms or insider terminology that is uninformative to outsiders. Problems can be expected if such demands are made. The solution is training and proper personnel selection to ensure that the people doing the searching have some knowledge about the nature, structure and location of the material they are expected to find, and some understanding of how it is likely to be listed on schedules and records listings.

In GM's case, assignment of the complaint file search to the right personnel would almost certainly have avoided problems. NTSB investigations are a well-known fact of life for auto manufacturers. There is undoubtedly a class of personnel at GM who are aware of NTSB files, of the documents that comprise them, and of the process by which other documents are transferred to them. They could have quickly revealed the existence of the complaint documents within the NTSB files.

SHOULD WE TRY AND CONCEAL THINGS UNDER THE GUISE OF RETENTION ACTIVITIES?

It is possible, if unlikely, that both Chrysler and GM really were playing hide-the-ball with the courts and the plaintiffs. Abusive tactics, including concealment and destruction of evidence, are by no means unheard of. If this occurred in these cases (and this article assumes no such thing), the outcomes demonstrate the dangers of doing so. Notwithstanding Chrysler's and GM's assertions in court, the plaintiffs' attorneys were knowledgeable and persistent enough to keep digging. Ultimately both attorneys were able to extract the truth and characterize it in a manner which proved fatal to the defendants.

Even ignoring the ethics (or lack thereof) of such a course of action, the fact is that other plaintiffs' attorneys are likely to prove equally capable. Organizations contemplating playing games would be well advised to consider how likely it is that such secrets could be kept if a skillful opposing attorney thoroughly deposed several dozen key employees, or perhaps sent a computer expert to search the system. Equally worth consideration is the question of how many employees would be willing to commit perjury, a felony, in a lawsuit to which they are not even personally a party.

The cost of exposure of such a scheme is likely to be high, both in absolute monetary terms, and in lost goodwill, morale and other valuable intangibles. These are a high price to pay for what is at best a dubious advantage.

CONCLUSION

Organizations should not assume that the simple assertion that they have a records retention program, or its mere existence, will insulate them from liability in court. Rather, they must assume that both the program and its implementation will be vigorously challenged, and that opposing parties will be both aggressive and creative in attempting to refute claims made about the program. Acknowledging and anticipating this will enable an organization to identify and correct many of the specific weaknesses likely to provide ammunition to an opponent.

REFERENCES

1. Vick v. Texas Employment Commission, 514 F.2d 734 (5th Cir.1975) 2. Moore v. General Motors, 558 S.W.2d 720 (Mo. Ct. App.1977) 3. Chrysler Corp. v. Blackmon, 841 S.W.2d 844 (Tex.1992) 4. Id., 841 S.W.2d at 848. 5. Baker by Cress v. General Motors Corp., 519 F.R.D.519 (W.D.Mo.1994).

Copyright Association of Records Managers and Administrators Inc. Oct 1996
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