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One of the most important functions computers perform for modern day business is the storage of information, and virtually every organization or company regardless of its size uses computers to conduct business on a daily basis. Computers are essentially large capacity file cabinets. Studies have shown that 93% of all business records originate in electronic form, with only 30% of those records ever being printed in hard copy. This means that 70% of all business records that originate in electronic form remain in electronic form only.

Because of the increasing volume of business records that exist only in electronic form and the possible consequences of spoliation (a legal term meaning the destruction, or failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation), records management is now a serious concern for many companies. To address the issue, businesses have adopted and implemented document retention policies by which they destroy, at certain specified intervals, documents for which they do not anticipate a future need and which they are not legally obligated to preserve. Such policies involve the systematic review, retention, and destruction of documents received or created during the course of business.

The benefits of a written document retention policy are four-fold: (1) compliance with the law; (2) timely destruction of documents that no longer serve an ongoing business purpose; (3) economic efficiency; and (4) avoidance of adverse consequences in litigation.

Compliance with the Law

State and federal laws subject businesses to an "affirmative legal requirement" to keep certain records for specific time periods. The federal regulations have over 1,500 references to record keeping requirements, including Congress's recent adoption of the Sarbanes-Oxley Act, which imposes new requirements on public companies and their accounting and auditing teams to retain certain financial records. In addition to these federal mandates, each of the fifty states and the District of Columbia has statutes and regulations imposing identical and sometimes additional record-keeping requirements on businesses. While not all of these regulations apply to any one specific type of business, any company doing business in the United States will be subject to some of these regulations. To ensure compliance, businesses are encouraged, if not required, to adopt and implement at least minimal document retention periods that incorporate the mandates of the law.

Timely Destruction of Documents

A formal written document retention policy can prevent unnecessary disclosure of information. Maintaining records for longer than necessary from either a legal or business standpoint can preserve damaging evidence or potential violations of the law that may otherwise go unnoticed. This is particularly true with respect to email messages. Email messages are the most common form of electronic data and also the most dangerous. Because emails are often perceived as casual in nature, their content can sometimes be detrimental to the company. These emails are often unintentionally preserved on a computer hard drive or a company's network server, or both, resulting in the retention of potentially damaging information. An effective document retention policy that provides for the timely destruction of emails can reduce legal risk for a company.

Economic Efficiency

Storage of massive quantities of information can be expensive. Depending on the size and the resources available to a business, one report estimates that storage costs can consume as much as 30% or more of the total budget for a typical information technology department. An effective document retention policy offers the cost saving advantage of eliminating the expense of storage of unnecessary and perhaps obsolete documents. Such a policy will also reduce the burden and costs associated with searching and retrieving documents in response to business requests, government investigations, and/or litigation. Apart from the economic benefits, a well-planned document retention program affords a business improved access to information necessary for operation. This is most beneficial for those businesses such as health care providers and financial institutions that respond to document subpoenas on a regular basis.

Avoidance of Adverse Consequences in Litigation

A document retention policy helps a company avoid the accusation of improper destruction of evidence and reduces the potential for spoliation sanctions. Generally, if a party destroys evidence in good faith pursuant to a reasonable records retention policy, courts do not impose sanctions. Absent a formal document retention policy, however, any destruction may be viewed as "selective." The selective reduction or elimination of electronic data that affects an opposing party in litigation will always be viewed as suspicious and may result in sanctions. Where a litigant is able to demonstrate that certain relevant evidence does not exist because the opposing party either intentionally destroyed it or was reckless and/or careless in its retention, courts have imposed a variety of economic and non-economic sanctions. These sanctions include the assessment of monetary fines, the award of attorneys' fees, the exclusion of evidence or of witness testimony, instructions to the jury on permissible adverse inferences to be drawn from the missing evidence, and even the dismissal of the case or the entry of default judgment.

In today's business, an appropriate written records retention policy is essential to corporate success. The proliferation of computers to store business records, and the legal developments arising from the Arthur Anderson/Enron cases, indicate that companies must adopt and implement formal, written document retention policies or review existing policies to ensure that they are current, practical, comprehensive, and compliant with the applicable federal and state law. A thoughtful records retention program will minimize a company's exposure to multiple risks, including sanctions, considerable costs, and adverse inferences.