One of the hottest trends among informed businesses across North America in recent years has been the adoption of "litigation preparedness" strategies, including policies concerning implementing "litigation holds" and the retention and destruction of electronic documents. As a result of expensive lessons learned through court proceedings, businesses have come to realize that instituting a formal litigation preparedness plan can help reduce the costs to produce electronic documents in the future and in turn render the discovery process immeasurably less painful.

However, in light of the current economic downturn, with limited resources, can businesses justify incurring the costs of implementing litigation preparedness policies, particularly for businesses that are rarely involved in litigation? The answer is an emphatic "yes." The following discussion contains some thoughts on why now is the time to begin implementing litigation preparedness strategies.

1. Reducing Data Means Lowering Capital Costs.

One important aspect of any document retention policy is that it focuses document custodians on eliminating information that has no legitimate business purpose. Estimates suggest that as much as 90% of all emails sent from company computers and hand-held devices is personal in nature and has no business purpose at all. Other information maintained on a company's servers may be out-of-date or otherwise may no longer serve a useful business purpose. By eliminating personal or unnecessary data, companies can reduce their data storage needs and eliminate servers and other storage devices. With fewer servers to buy, replace, and maintain, implementing a document retention policy can result in immediate savings in capital costs.

Depending on the number of servers a company maintains and how much personal/unnecessary data can be eliminated, the costs of implementing a document retention policy and other strategies could be off-set relatively quickly through the resulting savings in capital costs. As such, through these cost savings alone, the net effect of establishing these policies should be an increase in company profitability. Implementing intelligent measures that could result in permanent cost savings is important to consider in a down market.

2. Being Prepared For Litigation Is Merely A By-Product Of Being Well Organized.

Litigation preparedness has become an important topic because plaintiff's lawyers in the United States figured out that, although corporations maintained accurate and comprehensive filing systems when they relied on paper documents, in the electronic age, corporations normally have few controls governing how their electronic data is stored. As a result, whereas paper documents were maintained in an organized fashion, electronic documents usually are stored in a random mess. Consequently, when unprepared corporate defendants become embroiled in litigation, they quickly realize producing electronic documents from massive disorganized databases is complicated, risky, time-consuming, and extremely expensive.

Although the typical solution most recommended is to eliminate unnecessary data through a document retention policy, merely reducing data misses the point. In years past, it was not unheard of in large-scale litigation in the United States for corporate defendants to produce millions of pages of documents. Companies with historical documents or that engaged in international operations sometimes maintained warehouses filled with documents. Although producing these documents was time-consuming, because they were maintained in properly labeled, well-organized files, the process of producing even millions of pages of documents was relatively simple and straight-forward. Conversely, the process of producing electronic documents is more difficult and complicated because companies do not maintain their electronic records in a similarly well-organized fashion.

However, for most companies, as with paper records, implementing a rational system that stores and maintains all electronic documents in properly organized files will improve worker efficiency and increase profitability. Stated simply, being well organized is good business. A document retention policy and related measures should be merely a part of a company's overall organizational strategy. As a by-product of properly organizing their electronic data, businesses will be better prepared to deal with litigation in the event it should arise.

3. An Ounce Of Prevention Is Much Cheaper Than A Pound Of Cure.

  To effectively implement a litigation preparedness plan, a company's employees must be properly educated on their responsibilities with respect to the plan, as well as the importance of the measures taken for the efficient operation of the company. In addition to discussing litigation preparedness, employees should also be instructed on the company's best business practices, including ways to avoid engaging in conduct that could result in litigation. By explaining to employees the company's legal or regulatory obligations and reminding employees that they must always meet those obligations, the business can greatly diminish its chances of being sued. As such, in addition to gaining the economic benefits of a more efficient and better organized work environment, implementing a litigation preparedness plan that includes a strong educational component can help the company avoid costly litigation in the future.

In conclusion, rather than merely incurring costs to prepare for future litigation, businesses should be focused on properly organizing their electronic data, much the same way paper documents were organized, thereby improving employee efficiency and increasing the company's overall profitability. As a result of these policies, companies will operate more efficiently and, at the same time, be better prepared for future litigation. Accordingly, when properly considered, litigation preparedness measures can result in immediate cost savings – savings that will be enjoyed regardless of whether litigation ever occurs.