Judicial Review of Record Retention Programs
Skupsky, Donald S., ARMA Records Management Quarterly
NOTICE: This article contains information related to sensitive and important legal issues. No section of this article should be construed as providing legal advice. All legal decisions related to records and information management should be reviewed by competent legal counsel.
Organizations establish records retention periods based upon their operational, legal, historical or other retention requirements. Records will then be destroyed under the retention schedule after internal approval by the organization.
Some have expressed concern that courts or regulatory agencies might "second-guess" the records retention decision of the organization. Since records will have already been destroyed, they comment, the organization may be subject to adverse consequences including fines, penalties and loss of rights if the retention period is later determined to be inappropriate or just plain wrong.
Certainly, state and federal regulatory agencies can impose severe fines and penalties for not maintaining appropriate records for the minimum period established by law. However, this problem can be overcome through reasonable legal research and proper application of legal conclusions to records retention decisions.
But will courts attempt to question a records retention program established by an organization? Will the courts review individual records retention periods? Have any courts rejected specific retention periods adopted by an organization? What should an organization do to prevent courts from "second-guessing" the records retention periods?
RECORDS RETENTION PROGRAMS UPHELD
Court decisions confirm that records may be destroyed under a records retention program. An organization that demonstrates destruction of records for legitimate business purposes, as evidenced by a records retention program, will likely prevail.
In Vick v. Texas Employment Commission,(1) Vick (plaintiff) filed suit against the Texas Employment Commission (defendant) for discrimination and requested certain records related to the proceeding. When the defendant responded that the records had been destroyed "pursuant to Commission regulations governing disposal of inactive records," the plaintiff claimed that records had been destroyed improperly and requested the court to apply the adverse inference rule(2) against the defendant. In denying the claim, the court said:
TEC [Texas Employment Commission] records on Vick were destroyed before trial, apparently pursuant to Commission regulations governing disposal of inactive records....The adverse inference to be drawn from destruction of records is predicated on bad conduct of the defendant....There was indication here that the records were destroyed under routine procedures without bad faith and well in advance of Vick's service of interrogatories. Certainly, there were sufficient grounds for the trial court to so conclude.
In Telectron v. Overhead Door Corp.,(3) Telectron (plaintiff) filed suit claiming that the defendant violated anti-trust laws by encouraging distributors to purchase garage door electronic controllers for its own subsidiary. The appellate court heard substantial evidence that Overhead Door Corporation (defendant) had engaged in outrageous conduct by improperly destroying records and confirmed the default judgment and sanctions previously imposed by the trial court.
At trial, the defendant filed a motion for sanctions against the plaintiff, claiming that the plaintiff also destroyed relevant records. This time, the court declined to impose sanctions against the plaintiff, noting that the plaintiff had destroyed the records pursuant to a preexisting records retention policy, after reviewing the records prior to destruction to make sure that relevant documents were not destroyed:
It is also clear from the evidence that Mr. Foster, in discarding certain records, adhered to Telectron's preexisting document retention policy, which called for the preservation of corporate records for a minimum of seven years, in conformity with the presumed mandates of the Internal Revenue Service. …