Drafting Records Retention Policies for Construction Projects - - PowerPoint PPT Presentation

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Drafting Records Retention Policies for Construction Projects

Implementing Document Management Policies to Mitigate Risks, Reduce Costs and Minimize Discovery Challenges

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific TUES DAY, MARCH 29, 2011

Today’s faculty features: Richard G. Erickson, Partner, Snell & Wilmer, Phoenix, Ariz. Randy Nye, S enior Vice President & General Counsel, Sundt Construction, Tempe, Ariz.

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Ralph Ketchum, S

• uthwest Regional Manager, Austin Commercial, Los Angeles

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DRAFTING RECORDS RETENTION DRAFTING RECORDS RETENTION DRAFTING RECORDS RETENTION DRAFTING RECORDS RETENTION POLICIES FOR POLICIES FOR CONSTRUCTION PROJECTS CONSTRUCTION PROJECTS

Rick Erickson Litigation Partner Randy Nye General Counsel Ralph Ketchum SW Regional Mgr Litigation Partner Snell & Wilmer, LLP (602) 382-6540 General Counsel Sundt Construction (480) 293-3046 SW Regional Mgr Austin Commercial (310) 421-0269 k t h @ ti rerickson@swlaw.com rrnye@sundt.com rketchum@austin- ind.com

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RECORDS RETENTION STATISTICS RECORDS RETENTION STATISTICS

• Average project manager or

g p j g superintendent receives 20‐80 messages daily (emails, texts, calls).

• Over 90% of project records are

created or shared electronically (schedules, pay apps, change requests).

• Ability to deliver a paperless project

is the owner’s expectation.

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RECORDS RETENTION STATISTICS RECORDS RETENTION STATISTICS

• About half of the construction

industry does not include electronic records in their retention schedules.

• About half of the industry has no

retention policy for emails.

• About 40% are unfamiliar with

About 40% are unfamiliar with litigation hold requirements and have no formal policy. have no formal policy.

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TRENDS IN RECORDS MANAGEMENT

• Contractors are “training up” to meet the

d d f l t i d t demand of electronic records management and paperless projects.

• Good records management is seen as good

litigation management litigation management.

• The burden of preserving archival records is
• The burden of preserving archival records is

not infinite and is governed by a reasonableness standard. reasonableness standard.

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TRENDS IN RECORDS MANAGEMENT

• Owners, contractors and design

professionals are budgeting for independent consultants to manage their project records. Dilemma: Who is ultimately responsible for record keeping that p p g goes wrong or does not conform with set policies and legal requirements? p g q

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TRENDS IN RECORDS MANAGEMENT

• Social media (Facebook, Linked in, etc.)

presents a new minefield of problems: presents a new minefield of problems: ‐ What do you do with social network postings about the project by an employee p g p j y p y

• r project representative?

‐ Do you hinder free speech on social k b l h networks by claiming such postings as projects records? Can you bar employees from posting ‐ Can you bar employees from posting disparaging comments about the project on their Facebook page?

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CONSTRUCTION RECORDS

• Bids, contracts, addenda, submittals…
• Schedules, payment applications…

, p y pp

• Payroll, personnel files, labor agreements…
• Change requests, orders, contingencies…

Change requests, orders, contingencies…

• Plans, specifications, drawings…
• Emails, letters, text messages…

Emails, letters, text messages…

• Daily logs, reports, meeting minutes…
• Requests for instruction supplemental instructions
• Requests for instruction, supplemental instructions,
• ther design directives…

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RECORDS MANAGEMENT TECHNOLOGY TECHNOLOGY

• Online collaborative networks and

suites centralize records management (typically software driven and expensive).

• FTP (File Transfer Protocol) or other

data domains (temporary and limited to uploading periodic records to a password protected website via login)

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RECORDS MANAGEMENT TECHNOLOGY TECHNOLOGY

• Some suites use document sync features

ll i ll t t f j t d allowing all users to transfer project records with a click of the mouse. M i i d f i f

• Most suites recognize need for retention of

project records and provide an “electronic close out” feature allowing records to be stored in a searchable format.

• Suites are ideal for immediate and up to

p date organization of project records and may expedite the payment process.

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LEGAL CONSTRAINTS ON INDUSTRY RECORDS INDUSTRY RECORDS

• No regulations or statutes specifically govern the

construction industry. construction industry. – Unlike federal statutes (like Sarbanes Oxley) governing records in the accounting industry. governing records in the accounting industry. – Unlike NASD and NYSE Conduct Rules governing securities brokers and dealers. governing securities brokers and dealers. – Unlike federal regulations governing health care providers. care providers.

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LEGAL CONSTRAINTS ON CONSTRUCTION RECORDS CONSTRUCTION RECORDS

> Some construction records must be legally retained for specified times:

• Personnel payroll and employment

Personnel, payroll and employment records

• Employee benefit plans applicable
• Employee benefit plans applicable

during the project A t d f it id t

• Any reports or records of site accidents
• r occupational injuries

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DESTRUCTION OF RECORDS

• After all retention requirements expire

S bj bli h d li

• Subject to an established policy
• Best when based on confirmation of legal

counsel counsel

• Personal information on former

employees (like bank account information employees (like bank account information for direct deposit)

• When no litigation is anticipated (best to

When no litigation is anticipated (best to assume the records are relevant to a potential dispute)

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RECORDS RETENTION FOR LITIGATION LITIGATION The $8 568 633 question in Qualcomm The $8,568,633 question in Qualcomm,

• Inc. v. Broadcom Corp.:

Did attorneys and their clients work Did attorneys and their clients work together to ensure that both understood how and where electronic documents, records and emails were stored and maintained in order to decide how best to locate, review and produce responsive documents?

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WHAT IS SPOLIATION?

The intentional destruction, mutilation, alteration, or concealment

• f evidence, usually a document.

, y

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DUTY TO PRESERVE & SPOLIATION

> In most states, there is a duty to preserve records: records:

• known to be relevant in litigation;
• reasonably calculated to lead to the

y discovery of admissible evidence;

• reasonably likely to be requested during

discovery; or discovery; or

• subject to a pending discovery request.

S li i d h b i i l Spoliation does not have to be intentional

• r in bad faith to warrant sanctions.

Negligent or unintentional spoliation is Negligent or unintentional spoliation is sufficient.

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DUTY TO PRESERVE & SPOLIATION Consequences vary: ‐ Adverse inference charge g ‐ Adverse jury instructions ‐ Monetary sanctions ‐ Exclusion of evidence ‐ Dismissal

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RECORDS MANAGEMENT & RETENTION POLICIES RETENTION POLICIES

• Ideally starts with legally required records
• Identifies exact dates for destruction of

records k d l

• Takes into account any pending claims or
• ther reasonably likely disputes

A i d d i i t t

• Assigns managers and administrators
• Considers statutes of limitations barring

claims claims

• Directs and informs all staff and employees

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E‐DISCOVERY RULES

• In 2010, 323 judicial decisions on

Rules governing E‐Discovery

• Dictated by additions to the Federal

Rules of Civil Procedure (2006 & 2010)

• Influenced by think tank experts at

y p the Sedona Conference

• High stakes risk in cases where the
• High stakes risk in cases where the

Rules are “weaponized”

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E‐DISCOVERY RULES

• Electronically Stored Information (ESI)

is interpreted broadly.

• ESI exclusions should include the

blessing of the court.

• Metadata (data about data) is

( ) discoverable and must be produced with ESI.

• Deleted ESI can still be forensically

recovered and must be disclosed recovered and must be disclosed.

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LITIGATION HOLD

“The failure to issue a litigation hold constitutes gross negligence because it is likely to result in the destruction of relevant evidence.”

Pension Committee v. Banc of America Sec., 685 F.Supp.2d 456 (S.D.N.Y. 2010) pp ( )

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LITIGATION HOLD

• For preservation, not production
• To client’s key players
• Also to opposing parties and counsel

Also to opposing parties and counsel

• Best practice is to follow up with

client to be sure they fully client to be sure they fully comprehend the urgency and scope of records to be preserved records to be preserved

• May be applied to third‐parties

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RESPONDING TO ESI DISCOVERY REQUESTS REQUESTS

• Production through counsel with

detail concerning: ‐ Search terms ‐ Claw back protection (privilege)

• Paralegal support (earlier the better)
• Paralegal support (earlier the better)
• Vendor support (cost and logistics)
• Reasonable time constraints

(extensions may raise suspicion)

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ESI DISCOVERY ‐ FORENSICS

• Forensic experts can find the “missing

link” to ESI discovery (typically deleted link to ESI discovery (typically deleted ESI withheld from disclosed records) B 93% f ESI d

• Best way to trace 93% of ESI created
• n computer with internal and

l d i ( h b d i ) external devices (even thumb drives)

• Analysis of computer and digital data
• Forensic timelines can show when

data was created, accessed, deleted and by whom

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