Develop plan for lawful management of data

By Leila Narvid, JD, Attorney, Sideman & Bancroft, San Francisco

With increasing frequency, health care providers confront the prospect of being involved in litigation or investigations by a regulatory body. While courts have always imposed a duty to preserve and produce documents and information relevant to a lawsuit or government investigation, the increased reliance on electronic communications and documents has altered traditional preservation and production practices.

Today, it is especially important that risk managers, with the assistance of legal counsel and information technology staff, develop a cohesive organizationwide protocol to manage electronic documents in the event of litigation or investigation.

The new Federal Rules of Civil Procedure, which govern civil procedure in the United States district courts, recognize that electronic evidence is on the same footing as printed, physical documents. The most drastic change in the federal rules is the emphasis on electronic data production. Rule 34 defines a new category of discoverable information known as "electronically stored information" (ESI). ESI includes writings, drawings, graphs, charts, photographs, sound recordings, images, and other data stored in any medium from which information can be obtained or translated.

As with traditional physical documents, litigants are obligated to provide a copy, or description by category and location, of all ESI the litigants have in their possession, custody, or control that they may use to support their claims or defenses. The obligations are spelled out in Rule 26(a)(1)(B).

Failure to plan is major risk

Recent case law suggests that you can have disastrous consequence if you don't have a document retention policy or a plan for implementing a litigation hold, which is the process of notifying employees of their obligations to preserve all potentially relevant records while continuing the routine destruction of nonrelevant data. In Zubalake v. UBS Warburg (2004 U.S. Dist. LEXIS 13574), the plaintiff, Laura Zubalake, claimed that UBS Warburg fired her as an equities trader after she filed an Equal Employment Opportunity Commission charge alleging that she was denied promotion because of her gender. Early in the lawsuit, UBS's counsel instructed company employees to preserve ESI.

Despite these instructions, some employees deleted pertinent e-mails, and other employees did not turn over relevant e-mails. As a result, some discoverable e-mails were irretrievably lost, and others were not produced to the plaintiff for nearly two years.

Finding that UBS acted willfully in destroying potentially relevant information, the judge imposed sanctions against the company, including a negative jury instruction that would allow the jury to conclude that the destroyed e-mails contained information adverse to UBS. In determining whether UBS' conduct warranted sanctions, the court held that the employer has a duty to locate all relevant information and to ensure preservation of documents.

The Zubalake court advised that lawyers must start doing the following in order to make sure that their clients comply with discovery procedures:

  • issue a litigation hold at the commencement of litigation or whenever it is anticipated, regardless of the format or location of the documents;
  • communicate directly with the key players in the litigation;
  • instruct all employees to produce electronic copies of their relevant files. (See the article, below, for tips on preserving ESI.)

6 tips for ensuring lawful data retention

By Leila Narvid, JD, Attorney, Sideman & Bancroft, San Francisco

The following tips are aimed at providing risk managers with a practical approach to readiness for the new Federal Rules of Civil Procedure.

  • Develop a "litigation hold" plan.

A "litigation hold" plan is an important part of a general document retention policy, which lays out the types of documents that are routinely available and sets a schedule for destruction of such documents. Having such a plan in place and complying with it when litigation does arise evidences to the courts a company's good faith and reasonable efforts to comply with its discovery obligations. It is useful to prepare a generic litigation hold memorandum that can be quickly adapted to the particular needs of a litigation matter. [Editor's note: A copy of this policy is available with the online version of Healthcare Risk Management. If you're accessing your online account for the first time, go to Click on the "Activate Your Subscription" tab in the left-hand column. If you already have an online subscription, go to Select the tab labeled "Subscriber Direct Connect to Online Newsletters. Please select an archive." For assistance, call Customer Service at (800) 688-2421.] When a lawsuit or investigation is imminent, work with counsel to prepare a litigation hold memorandum that describes: 1) the claims, or potential claims, involved in the lawsuit; 2) the data requested (or likely to be requested) in discovery requests; and 3) the types of data that must be retained. Failure to timely implement a litigation hold can lead to sanctions.

  • Identify key witnesses.

Determine who within the company is a key witness in the litigation. Explain to these key players their obligations to preserve evidence.

  • Facilitate easy preservation of evidence.

Work with information technology (IT) professionals or vendors to help employees preserve evidence. Be prepared to gather information maintained on network servers, desktop hard drives, laptops, removable storage media, personal digital assistants (PDAs), flash drives, and voicemail. IT professionals can create shared electronic folders to preserve newly created, discoverable documents.

  • Work with counsel to make sure that attorney-client privileged documents are correctly marked.

The regular use of "privileged" banners on correspondence or in the subject line of e-mail messages will assist screening of privileged documents when key word searches are used to obtain relevant information once discovery begins. If practical, it may be helpful to store all potentially privileged documents on segregated or partitioned hard drives or servers.

  • Advise employees that they should be judicious in the information that they create, receive, retain, or send.

They also must be ready to preserve and protect electronically stored information once they learn that litigation against the institution is likely or has begun. Include electronically stored information (ESI) retention policies in employee handbooks, and consider providing training specifically to address ESI policies.

  • Remind employees that ESI is just as valid and important as hard copy documents.

Courts treat electronic documents no differently than any other documents. Advise employees to treat electronic materials as if they were printed, physical documents.

Retention policies are not just the province of litigation. Federal and state statutes mandate certain data be retained for certain period of time. Statutes such as the Health Insurance Portability and Accountability Act and the Sarbanes-Oxley Act of 2002, which has a seven-year time period, as well as state data breach prevention statutes, require record retention protocols.

Because the employer in Zubalake failed to meet its discovery obligations, the court instructed the jury to presume that withheld documents were harmful to the employer's interests. The jury returned a verdict of $9 million in general damages and $20 million in punitive damages.

As shown in the Zubalake case, the cost of failing to produce relevant ESI when an organization is on notice of a potential claim or lawsuit can be catastrophic. Implementing protocols to address e-discovery and train employees on such protocols now will give companies the upper hand when faced with litigation or investigations.