An individual purchases a plane. He flies said plane across the country. It arrives at its destination and makes a faulty landing. Miraculously, no one is injured but it is discovered the wheels are broken. The individual decides to sue the seller for selling him a faulty plane.
Lawyers arrive in the destination city to inspect the plane. They find the wheels are missing. Why would the wheels be missing? They are part of evidence needed to prepare a case against the seller. The judge assigned to the case is then forced to tell the jury if the individual removed the wheels, they must have a “weak case.”
This fictional anecdote serves to illustrate the importance of company’s retaining documents when there is a threat of litigation, Timothy McCormack and Doug Peters told attendees of the GBC Speaker Series: Protect your Company’s Reputation event Feb. 13.
Not having sufficient records available can lead to what McCormack calls “the death penalty for your case” should your company be sued.
But before a company can learn how to suspend recordkeeping disposal procedures during threats of litigation, they need to establish those procedures.
Peters, owner of Metropolitan Archives, counsels companies on how to organize and retain records. Metropolitan, which houses many paper records for companies, disposes of those records according to an established retention schedule they and the company have established.
The best place to start and the most important part of record-keeping is the retention schedule, Peters said. Whether the company is large or small, establishing a schedule for when records can and should be destroyed, in accordance with the law, forces companies to label and organize their records so they can be easily recalled and disposed of in accordance with the retention schedule.
Peters suggested carefully labeling files based on subject and permanently keeping any records that were originated by the company itself. He said to ask yourself, ‘What do you look at a lot?’ and keep those records you refer to often.
Just as important as establishing a schedule is implementing it. Peters said it is important for the company managers to make records retention and destruction a priority before it becomes a problem, say in litigation.
As a partner with the law firm Ballard Spahr LLP, McCormack has seen many incidences when poor record retention and scheduling negatively impacted a company during a lawsuit. He agreed a retention schedule is key and also stressed the importance of suspending records-disposal procedures when a lawsuit becomes foreseeable.
If a company does not suspend destruction of records under threat of litigation, a judge can be forced to tell a jury they should assume it is because the company has a weak.
“You have a duty to preserve your documents once you know there is a dispute,” McCormack said, “just like you need to keep the wheel of the plane.”
McCormack has seen companies who never dispose of records and ones who keep emails for just seven days before they are gone forever. The importance of establishing the records retention schedule and sticking to it is important to save your company money and trouble if you face legal disputes.
“There is value in not keeping things forever,” McCormack said. “We just have to figure out somewhere between seven days and forever.”
There is a fine line between wanting to protect your company in a dispute and maintaining the letter of the law. But keeping documents organized, getting your company’s general counsel to approve your schedule and making it a top priority in your business are ways to make sure your company is protected.