Keeping the Records Straight - Document Retention Policy

Keeping the Records Straight - Document Retention Policy

Keeping the Records Straight

Document Retention Policy

  • Benefits of Knowing How to Find Your Records
  • Records to Maintain
  • Organizing Electronic Files
  • Keep Attorney-Client Privileged Files Separate from Others
  • Document Contract Negotiations
  • Web-Based Systems
  • E-mail

Benefits of Knowing How to Find Your Records

Being able to promptly locate records can instantly end potential claims. As previously described in Section 2.4, a building owner sued a design firm, alleging that the design firm failed to properly advise of the risk of accepting an “or equal” equipment substitution offered by the contractor. The design firm asserted it had given the owner a detailed memorandum explaining why the equipment should be rejected, and that the owner had ignored that advice at its own peril. In response, the owner claimed that it had never received such a memorandum. After months of document discovery and depositions, someone finally located in the design firm’s files a fax confirmation of the missing memorandum.

The fax confirmation showed a small copy of the first page of the fax, as well as the date it was sent, to whom it was sent, and the number of pages received. In light of this evidence, the matter was promptly dismissed. If a copy of the missing document had been made available to the project owner at the outset, it’s likely the suit never would have been filed. Giving the owner the benefit of presumed honesty, it seems likely that the warning memo was misplaced or misfiled so that the owner’s principals were not aware of its existence when the problems with the substitute equipment began to surface and demands and claims were made against the design firm.

If the design firm had filed its own copy of that memorandum in a logical place, clear and quick communication with the owner would have been possible and the misunderstanding that led to the litigation could have been avoided.

Maintain project documentation in a manner so that it can be easily retrieved. This makes good sense from a claims and litigation point of view. But more than that, it enhances communication and makes it possible to more efficiently manage the project during design and construction if the parties can quickly locate documents and use them in making their decisions.

Good document management enhances project quality control and provides a means to benchmark changes that are being made to original program requirements, drawings, and contract agreements.

Time spent in establishing and maintaining a logical document control system will prevent time from being wasted later in looking for information and documents that have been misplaced, misfiled, lost, or unintentionally destroyed.

Records that are maintained contemporaneously in the ordinary course of business can serve as invaluable evidence in proving what communications took place on a project.

Records to Maintain

Documents and information need to be managed. This is not the same thing as just keep everything forever. Nor is it sufficient to just throw everything into boxes and put them into a selfstorage facility to be forgotten.

Documents maintained in a logical, easily accessible manner can become vital tools in your day-to-day business not only on the project to which they pertain, but in performing services on other projects as well. If you have performed calculations and completed research on one project, the calculations and research may very well have applicability on your other projects.

Even without creating a subject matter index or filing system, you may be able to remember files that you personally worked on that can provide useful information to assist you in performing services on other projects. But others in your office who don’t know about your files won’t have access to this information unless it is maintained someplace other than your memory.

By creating (and maintaining) a basic indexing system (manual or electronic), a firm can make records more accessible to everyone in the firm. Computer software programs can facilitate the searching of words or tables of contents in certain electronic documents. Even without sophisticated software, much can be done to organize records for future reference.

With time and age, memories fade, but the recorded, filed, written word lives on. Establish a system to access records and you reduce the amount of time and work needed to perform the new services. It also provides some enhanced quality control particularly if the previous briefs had proved to be winners. This translates into more cost-effective services for the current client. When these notebooks are placed on the library shelves for others in the office to use, and when electronic files are put onto external hard drives, USB flash drives, or CDs, where they can be accessed by others, the benefits are multiplied. (Note that if you give up ownership and copyright of your work product to the project owner, you may deprive yourself of the ability to re-use your own work on other projects and defeat the benefits referenced above).

Organizing Electronic Files

For easy access and retrieval, your electronic data files including drawings, specifications, correspondence, memoranda, e-mails, and other types of documents should be carefully filed in electronic folders on either a computer network or hard drive, or external hard drive, USB flash drive, or CDs. Use of e-Rooms and cloud storage are also means of organizing and saving data for retrieval. If you are operating in an office environment, saving the files to a network is usually the safer course because networks are typically backed up more frequently than hard drives.

If your documents are co-mingled with electronic files from other projects or other general files, you may be required to give the requesting counsel access to your entire computer or e-mail system, unintentionally giving them access to sensitive information that is not even related to the case at hand. This could even be embarrassing if you have been keeping personal information and correspondence on your computer. Keep project specific files separate and apart from all other nonrelated files.

If you’re using your home computer to do work for your employer, understand that the electronic files that you are creating for your employer’s business become the responsibility of your employer for purposes of document control and document discovery. If you don’t want to risk sharing the contents of your entire computer with strangers (and attorneys opposing your firm), it is advisable that all data related to your employer’s business be kept in separate electronic folders while you are working on them, and then moved from your computer’s hard drive onto CDs, USB flash drives.

Keep Attorney-Client Privileged Files Separate From Others

If you’re receiving advice from legal counsel during your project, it’s important that correspondence between you and your counsel be maintained in a manner that will enable you to distinguish them from your general office files later. They should be marked as confidential, Attorney-client privileged, Attorney work product, or other such designations so that you and others in your office will recognize that these documents are not to be given to a requester during discovery before your attorney has an opportunity to review them. If these documents are copied and put into numerous files around the office or jobsite trailer, there is a significant chance that some of them will be inadvertently revealed during discovery.

It is not the purpose of this book to study the details of the attorney-client privilege, or the ethics of how to handle privileged documentation that may be inadvertently given to the requester. It is better to manage the documentation so that it does not become necessary to argue over it later. By keeping documents properly segregated, your attorney will be able to review them and make a decision concerning how they are to be handled during discovery.

Typically, your attorney will provide a letter to the requester identifying the documents for which the privilege is claimed. This permits the parties to argue over the matter before a judge, if necessary, but it at least prevents the documents from getting into the hands of the requester unless and until a judge orders them to be released.

Document Contract Negotiations

The “parol evidence” rule generally prevents evidence from outside the four corners of a signed contract from being used during litigation to attempt to change or alter the terms of the contract. Despite this rule, however, there may be times that documentation between the contract parties may be accepted by a court as evidence.

In one case, the architect and property owner exchanged multiple versions of contracts for designing and building a large house. While the architect started its design, the parties continued haggling over the contract terms. They never signed a contract. Ultimately, the owner terminated and replaced the architect. The second architect used the original architect’s design documents to complete the final design and construct the house.

In a suit alleging copyright infringement, the original architect was permitted by the court to present a series of letters and draft contracts that had been transmitted back and forth between the architect and owner. These persuaded the court that the architect did not intend to give up ownership and copyright to the drawings. This case demonstrates the importance of maintaining copies of documents that were generated prior to contract finalization. These can, in some cases, assist the parties and the court in determining the intent of the parties.

Web-Based Systems

Web-based project management systems are becoming widely used on large constructionprojects, and even for projects that are not so large. A survey by one provider of web-based systems found that the reasons customers used their system included: it plays a role in eliminating or reducing the barriers and delay points in communications, workflow, and processing informationand documentation; (b) it reduces claims and litigation; and (c) it increases productivity.

With respect to increasing productivity, web-based systems have been credited with: (a) making it quicker to submit and turnaround RFIs; (b) reducing barriers in communications; (c) automating document creation; and (d) reducing the time it takes to find files and documents. 99% of the survey respondents stated that the system has improved document management and thus improved the firm’s ability to manage risks and reduce claims and litigation.

Using electronic data and storage, it is possible to store all kinds of documents correspondence, RFIs, minutes, notes, and logs with relatively little effort for long periods of time.

Because electronic data tends to lose integrity over time, however, it may be advisable to duplicate the disks periodically over the years of storage. It is also generally advisable to maintain hard copies of the final instruments of service in order to have a standard against which to benchmark any electronic files that may have been given to the A/E’s client or others. In fact, retaining the hard copies may the best (or even only) way to protect against a client’s future suit that alleges the electronic data is defective.

E-mail

E-mail as a form of project documentation runs the gamut from being highly effective to extremely dangerous or even disastrous for the unwary. It is so fast and easy to use that it has become the principal mode of communication on many projects. Some firms swear by it and others swear at it. Why is there such a difference of opinion and why are the results so variable?

E-mail can be a good way to communicate. With oral communication, the speaker may not be certain that the listener really understood and received the message the speaker intended to send. With e-mail, you see, in writing, what someone is saying. You get to respond in writing. And the other party can fire back a quick note telling you that you misunderstood and got the meaning all wrong. With a quick series of written messages, the parties can easily figure out (and even document) what each is saying and come to an agreement on what they intend to do.

Participants in construction projects must understand that when they communicate by e-mail, they are creating a document that may very well become a project record. Such a document may be used as key evidence in proving or defending claims. E-mail may be entered into evidence in litigation. With that in mind, it must be handled with due care. Some simple rules for dealing with e-mail include:

(a) Be careful what you write. Think before you automatically type the first thoughts that go through your mind. Don’t write anything that you would not be proud to see published in the newspaper the next day.

(b) Don’t be too informal. Be careful, for example, about the use of politically incorrect language, jokes, and remarks that may seem funny to you but boorish to others.

O.J. Simpson was found not guilty by a jury that probably couldn’t help but be angry about prejudicial remarks made by the key investigating detective for Los Angeles.

Microsoft was found liable for monopolistic, anti-competitive practices by a trial court judge who later told the press that Bill Gate’s e-mail messages proved he had not been honest in his oral testimony. Ironically, the judge’s comments to the press proved to be imprudent, and an appellate court accepted an appeal from Microsoft based at least in part on its concern about the judge’s comments.

(c) Check your spelling and grammar including punctuation before you click send. Write with the thought that this may be the only document a judge or jury will ever see in support of some issue of vital importance to the case. Provide a subject matter line, an addressee line, a proper salutation, and a proper closing.

(d) Get approval first. If your document was a memorandum rather than an e-mail and the agreement of others would be necessary before you distributed it, get those individuals to concur with your e-mail before you send it.

(e) Don’t add additional services to your scope based on e-mails from people who do not have the contractual authority to assign additional services or approve change orders. E-mail messages are not deemed acceptable substitutes for properly executed approvals for additional services or properly executed change orders.

(f) If your contract calls for the use of specified procedures for requesting information and scope changes, use those procedures. Don’t use e-mail as a substitute.

(g) Organize your outgoing and incoming e-mail into electronic folders for easy access and retrieval. If you co-mingle personal and work-related e-mails, you may be required during litigation to provide all of your e-mail messages.

(h) Print e-mail messages and put them into appropriate files for future reference. Electronic folders may be accidentally destroyed or lost. If the message is evidence of some decision or matter of potential significance, it should be saved with other documents addressing that issue in a form that will not be accidentally or inadvertently lost.

(i) Delete e-mail from your system and erase it from any back-up tapes or other disks, computers, and servers in a manner consistent with your corporate records purging/retention policy.

Contrary to what some people think, e-mail is not just a temporary document that lives in the nether world of the electronic universe. Even after e-mail messages have been deleted from your computer, they may still be retrieved from a server in some other location.

Another confounding issue is that the e-mail you thought was a private communication between you and one other person may get forwarded either intentionally or accidentally to others. Before you know it, your little message is being read by half the world. You might recall that during the Senate hearings of Oliver North regarding the Iran-Contra scandal, senators demanded to see his email. He responded that it had all been deleted from his computer much earlier. To his surprise, the government was able to use some simple disk utility programs to resurrect his dead e-mails. It seems that e-mails have a life of their own.

To permanently destroy e-mail, consult with an experienced IT adviser. There are ways to delete it, erase it, and re-record over it to make its deletion more permanent. But be careful that you don’t erase e-mails that may be subject to discovery requests in pending claims. This is discussed in greater detail below.

Records Retention, Destruction & Litigation

  • How Long Must Records be Kept?
  • What Documents Must be Given in Response to Discovery Requests?
  • Records Retention and Negligent Spoliation of Evidence
  • E-Mail Confidentiality and Discovery During Litigation

How Long Must Records be Kept?

Time periods established by state statutes of limitations and statutes of repose can be useful guides in determining how long to maintain project records. State statutes of repose typically bar claims that are brought more than a specified number of years after substantial completion of construction.

Time periods vary from state to state, with each state statute being different with regard to the time limit, who is covered by it, and for what kinds of services or work. As a general rule, if a statute of repose applies to your services or work, you should maintain significant project records at least through the end of the time period established under that statute. It may be prudent, however, to maintain records for an even longer period. If you are working under a contract for a federal, state or local government or agency, for example, you may have statutory or regulatory obligations to maintain your records for a significant number of years beyond what you might normally expect.

What Documents Must be Given in Response to Discovery Requests?

When you receive a document production request in the course of a claim or litigation, you are required to provide copies or access to not only those documents that are part of your official file, but also to those copies that may be in working files, desk drawers, job-site trailers, workers’ homes, computers at the office and home, and any other documents that pertain to the request. As owner of these records, you have the responsibility to locate them and make them available to those who are requesting them through discovery.

There have been a number of cases where the documents most vital to the plaintiff’s case were found in the home of one of the defendant’s employees. If the plaintiff locates such a document after the defendant denied its existence or otherwise failed to produce it, the court could impose sanctions against the defendant.

In federal courts, as well as in many state jurisdictions, parties to litigation are required to provide the other party with all documents relevant to the case, even if not requested to do so by the opposing counsel. This creates an affirmative duty on each party and requires due diligence in reviewing your records and providing access to the other side. This duty makes it all the more important that you establish and follow a formal records retention policy so that you do not unnecessarily create an obligation to give someone records that should have long since been destroyed.

Records Retention and Negligent Spoliation of Evidence

There can be serious liability and potential sanctions for intentionally destroying evidence to avoid discovery of damaging information. The newspapers are full of reports about corporations and accounting firms that have allegedly destroyed records in order to prevent shareholders, courts, and even congressional committees from seeing those records that might contain embarrassing or damaging information. In some particularly egregious situations, it is argued that the destruction of records may even constitute a crime punishable with prison sentences.

Courts in some states recognize a tort of negligent spoliation of evidence. Foster v. Lawrence Memorial Hospital, 809 F.Supp.831 (D.Kan.). Some of the factors considered by the courts in deciding whether to impose liability for negligently destroying evidence include the following: (1) there was a duty to maintain the evidence imposed either by law or contract; (2) a potential claim or law suit existed; (3) evidence has been destroyed; (4) the ability of the plaintiff to prove its case has been significantly impaired by the destruction of documentation; and (5) the plaintiff has suffered damages as a result of the document destruction.

In Kirkland v. NYCHA, 236 A.D. 170, 666 NYS 2d 609, a New York court held that dismissal of a suit was an appropriate sanction against a litigant who disposed of evidence before its adversary had an opportunity to inspect it. This was held to be so regardless of whether the destruction was done intentionally or negligently.

Implementing a document retention policy and practices to consistently follow that policy are important risk management tools. Records might be routinely purged from your files and destroyed as part of your standard business practices. It might be deemed inappropriate to destroy the same records in the absence of an established procedure.

At some point, you may be in litigation where the plaintiff asserts that you destroyed records that once had been a part of your files. In such a situation, the court may consider not only whether you had a records retention/records destruction policy, but also whether the specific destruction of records at issue was done pursuant to that policy, and whether the records were destroyed before or after you knew of the dispute.

A records retention policy that is designed and caried out in good faith in the ordinary course of business may provide you an excellent defense to claims of spoliation of evidence. But remember that if you are in litigation or a dispute with either your client or a third party, or if there is an investigation or audit by a governmental agency, you must preserve the records rather than following the scheduled document destruction policy.

Once a “records retention” and purging policy has been established, it is important to consistently review your records on a periodic basis to make sure you comply with the policy. Purge and destroy those records that the policy states are to be purged, and faithfully file and maintain those records that are still to be maintained pursuant to that same policy.

Firms have gotten into trouble for destroying records on the eve of discovery by an opposing party even though they may have been able to destroy those same records years earlier pursuant to the firms’ formal records retention policy. A records retention policy is no good unless you use it contemporaneously and consistently. In fact, a records retention policy can be used against you if you destroy records in a manner inconsistent with that policy.  It is necessary to apply record retention policies consistently to each project and to all of the documents covered by the policy.

When purging records from your files in the ordinary course of business, pursuant to a proper records retention policy, care should be exercised in how the records are disposed. Copies of confidential client records should not be thrown into the trash or recycle bin where they might be improperly viewed and used by other individuals. They should be shredded or otherwise destroyed. There have been unfortunate situations where careless disposal has resulted in client-confidential information being released into the hands of the public.

We see then that records can protect you in the event of misunderstandings by others on the project, and can help you to prosecute or defend a case in the event of litigation. Some forms of documentation may also hurt you, especially if they have been imprudently written or maintained. Create clear and temperate communication through written and electronic documentation. This will help you proactively manage any future disputes and litigation and improve the communication and management within your firm and with your clients and others.

E-Mail Confidentiality and Discovery During Litigation

As a general rule, computerized data is discoverable. Thus, even if a party produces a hard copy of electronic evidence, he or she may still be required to produce the electronic version. Examples include Playboy Enterprises, Inc. v. Welles, 60 F.Supp.2d 1050 (S.D. Cal. 1999) and Murphy Oil USA, Inc. v. Fluor Daniel, Inc., 52 Red.R.Serv.3d 168 (2002 WL 246439 (E.D. La)).

Numerous confidentiality issues arise in connection with the use of e-mails. There are many stories about e-mail being accidentally sent to the wrong recipient. Correctly distributed e-mail is often easily forwarded with the click of a button to people never anticipated by the originator. A supervisor ends up with a forwarded copy of a disgruntled employee’s e-mail to other employees, for example. Or in the context of litigation between parties, someone inadvertently forwards a copy of an internal e-mail to counsel for the opposing party. At a minimum, when sending e-mail that you believe contains confidential or privileged information intended only for the eyes of the recipient, it is wise to include a confidentiality and privilege notice with the message, as well as a statement requesting that if someone other than the intended recipient receives it they are to advise you of the error and destroy the message. An example of such a notice is as follows:

This e-mail/telefax message and any documents accompanying this transmission contain ATTORNEY-CLIENT PRIVILEGED INFORMATION and ATTORNEY WORK PRODUCT. It is confidential information and is intended solely for the addressee(s) named above. If you are not the intended addressee/recipient, you are hereby notified that any use of, disclosure, copying, distribution, or reliance on the contents of this email/telefax is strictly prohibited and may result in legal action against you. Please reply to the sender advising of the error in transmission and immediately delete/destroy the message and any accompanying documents. Thank you.

When sending e-mail, we need to be mindful of who may gain access to the message and any attached documents. We also need to be aware that when the message is deleted from the e-mail folders of the sender and receiver, it may still exist on e-mail servers and computers elsewhere, as well as on backup disks or tapes.

We have learned from recent case law, such as the two cases cited above, that parties to litigation are required to provide their electronic documentation to counsel for the opposing party, and to maintain and preserve such documentation just as they would paper documentation. The electronic documentation must also be presented in a usable manner.

In the Fluor case, the court stated that computer back-up tapes containing e-mails would haveto be reformatted at the cost of the party that made them, so they could be read by the other party.

A number of courts have issued adverse sanctions against parties for deleting electronicdocuments that were subject to discovery in litigation. If you are creating a document retention policy, it should address maintenance and retention of electronic documentation (including e-mail) just as it does paper records.


Extraction from a/e ProNet Contract Guide for Design Professionals