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Articles in this Series Disclosure for litigation or regulator
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Disclosure, Litigation Readiness and Document RetentionThe Pyramid of PreparednessÅ This is one of a series of five linked articles on this subject Æ 2. Disclosure for litigation or a regulator In the pyramid analogy referred to above, the narrowing to the tip represents urgency and scope. The closer to the top – actual disclosure – the less time is available and the narrower the range of relevant documents. The requirement is very specific – however you define "relevant", you are interested only in documents which are relevant to the action in hand. The focus point may not be litigation but the knock on the door from your industry's regulator or some other body authorised to inquire closely into a specific occurrence or condition. You drop everything else, usually not at a time of your own choosing. If you are Enron, you head for the shredder room. Otherwise, the lawyers come in to define relevance and (if they are doing the job properly) to enquire closely into what documents you have, in what formats, places and devices, what backups you have and a host of other questions. If you do nothing else NOW, it is worth asking yourself if you could answer such questions tomorrow if your lawyers asked them in relation to any potential claim. They also may have to consider (in a hurry) whether jurisdictional conflicts arise and whether data protection or other statutory regulations conflict with the requirements of the litigation. The more disparate your sources and the less structured your systems, the more expense is incurred, not just with lawyers but with IT staff and consultants. The more ragged your disclosure, the more the potential for adverse inferences to be drawn about your case by opponents and the court. More positively, the better the state of your documentary evidence, the faster and more cost-effective will be the preliminary advice from your own lawyers and the more impressive your stature in the proceedings or investigation. The last points apart, this degree of disruption and expense may be seen as a fair trade for having spared the company the stages outlined below. It is like going out without the burden of an umbrella – if it does not rain, the decision to leave it at home was right; if it does rain, you took a gamble and lost. If the only consequence of going out in the rain was that you got wet (that is, incurred a large bill in the litigation), little harm is done. If (to stretch the analogy a little) you were struck by lightning as a result of being out in the rain, then that is rather more serious. UBS Warburg, the heavily-penalised defendant in the US Zubulake case, might be said to have been struck by lightning. All that matters, really, is that the Board (and this should be a
Board-level strategy decision) took the decision advisedly and with an
informed assessment of the possible consequences.
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