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Stop regular e-mail purges if a legal complaint flares up

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Issue: Your policy of periodically deleting business e-mail.

Risk: Courts could penalize your organization if it deletes e-mail messages that relate to a potential lawsuit.

Action: Alert IT to put a "litigation hold" on data destruction as soon as litigation appears likely.

Smart organizations educate their employees about acceptable e-mail use and follow a regular policy of computer-file purging to keep the organization's network free of unnecessary data.

But what if your organization thinks it may be a lawsuit target? Should it keep purging e-mail messages in accordance with your regular policy? The answer, many are surprised to find out, is "No."

E-mail messages are official records that can be summoned in a lawsuit. So, you may have to put a "litigation hold" on e-mail deletion if you think those messages could be important to the case. The same goes for instant messages. Courts will get tough with companies that treat electronic retention and discovery lightly.

Most employers aren't aware of this legal danger. In an American Bar Associ-ation survey, two-thirds of trial lawyers said that when their clients are notified of a lawsuit, the clients "rarely or never" take steps to preserve electronic data.

Case study: Philip Morris. A federal court recently slapped Philip Morris USA Inc. with a hefty $2.75 million fine for failing to prevent 11 of its top-level employees from deleting key e-mails. The company kept up its practice of automatically deleting e-mails even after litigation began, despite a court order to preserve evidence. (USA v. Philip Morris USA Inc., No. 99-2496, D.D.C., 2004)

4 ways to stay out of trouble

1. Suspend regular data destruction if litigation is likely. This duty to preserve comes into play, at a minimum, when you receive notice that an administrative or judicial claim has been filed against the organization and, even sooner, if your organization has reason to believe that a lawsuit looms on the horizon.

Your duty to preserve doesn't extend to every document. You have to save data only if it's been prepared by or for employees who will be "key players" in the litigation. Rule of thumb: When in doubt, don't throw it out.

Before purging e-mail or other files, sort through them to determine which could have legal significance. Print them out and file the hard copies. Consult with your IT experts about procedures to protect data from being arbitrarily deleted or overwritten.

2. Train managers and employees on your electronic communication policy. Make sure they understand that e-mail messages are official correspondence that can be called into evidence during a lawsuit.

3. Enforce your policy consistently. Inconsistency, say, for example, letting high-level employees destroy data more frequently than your policy states, could put you at risk of a charge of bad-faith evidence destruction.

4. Establish document-retention periods. You must retain certain documents even without the threat of litigation. For example, all employers must retain federal payroll tax records for at least four years. Trucking companies must hold employee alcohol test results for five years.

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