Presenting a live 90‐minute webinar with interactive Q&A

Drafting Records Retention Policies for Construction ProjectsImplementing 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

TUESDAY, MARCH 29, 2011

Today’s faculty features:

Richard G. Erickson, Partner, Snell & Wilmer, Phoenix, Ariz.

Randy Nye, Senior Vice President & General Counsel, Sundt Construction, Tempe, Ariz.

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Ralph Ketchum, Southwest Regional Manager, Austin Commercial, Los Angeles

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DRAFTING RECORDS RETENTIONDRAFTING RECORDS RETENTIONDRAFTING RECORDS RETENTION DRAFTING RECORDS RETENTION POLICIES FOR POLICIES FOR 

CONSTRUCTION PROJECTSCONSTRUCTION PROJECTS

Rick EricksonLitigation Partner

Randy NyeGeneral Counsel

Ralph KetchumSW Regional MgrLitigation Partner

Snell & Wilmer, LLP(602) 382-6540

General CounselSundt Construction

(480) 293-3046

SW Regional MgrAustin Commercial

(310) 421-0269k t h @ tirerickson@swlaw.com rrnye@sundt.com rketchum@austin-

ind.com

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RECORDS RETENTION STATISTICSRECORDS RETENTION STATISTICS

• Average project manager or g p j gsuperintendent 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 STATISTICSRECORDS 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 withAbout 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 tdemand of electronic records management and paperless projects.

• Good records management is seen as good litigation managementlitigation 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 ggoes 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 yor project representative?‐ Do you hinder free speech on social 

k b l hnetworks 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, other design directives… 10

RECORDS MANAGEMENT TECHNOLOGYTECHNOLOGY

• 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 TECHNOLOGYTECHNOLOGY

• Some suites use document sync features ll i ll t t f j t dallowing 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 pdate organization of project records and may expedite the payment process.

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LEGAL CONSTRAINTS ON INDUSTRY RECORDSINDUSTRY 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 RECORDSCONSTRUCTION RECORDS

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

• Personnel payroll and employmentPersonnel, 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 or occupational injuries

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DESTRUCTION OF RECORDS

• After all retention requirements expireS bj bli h d li• Subject to an established policy 

• Best when based on confirmation of legal counselcounsel

• Personal information on former employees (like bank account informationemployees (like bank account information for direct deposit)

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

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RECORDS RETENTION FOR LITIGATIONLITIGATION

The $8 568 633 question in QualcommThe $8,568,633 question in Qualcomm, Inc. v. Broadcom Corp.: 

Did attorneys and their clients workDid 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 

of 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 ydiscovery of admissible evidence;

• reasonably likely to be requested during discovery; ordiscovery; or 

• subject to a pending discovery request.

S li i d h b i i lSpoliation does not have to be intentional or in bad faith to warrant sanctions.  Negligent or unintentional spoliation isNegligent or unintentional spoliation is sufficient.

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DUTY TO PRESERVE & SPOLIATION

CConsequences vary:

‐ Adverse inference chargeg

‐ Adverse jury instructions

‐ Monetary sanctions

‐ Exclusion of evidence

‐ Dismissal

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RECORDS MANAGEMENT & RETENTION POLICIESRETENTION POLICIES

• Ideally starts with legally required records 

• Identifies exact dates for destruction of records 

k d l• Takes into account any pending claims or other reasonably likely disputes

A i d d i i t t• Assigns managers and administrators

• Considers statutes of limitations barring claimsclaims

• 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 pthe 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 disclosedrecovered 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 counselAlso to opposing parties and counsel

• Best practice is to follow up with client to be sure they fullyclient to be sure they fully comprehend the urgency and scope of records to be preservedrecords to be preserved

• May be applied to third‐parties

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RESPONDING TO ESI DISCOVERY REQUESTSREQUESTS

• 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 deletedlink  to ESI discovery (typically deleted ESI withheld from disclosed records)

B 93% f ESI d• Best way to trace 93% of ESI created on 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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