Also in this Issue:
-Retention of Estate Planning
Documents
-Real Estate Document Retention
-E-mail Retention
Welcome!
This issue of the Springboard is about the retention of records and documents, and is intended to give you some general guidance for a variety of contexts you routinely face. Jonathan Rivin’s article discusses what to do with real estate records, such as the deed to your home. Bill Wilka’s article covers emails, and suggest that your company adopt a policy for dealing with email usage and retention. Tom Stikker’s article covers estate planning documents. Andy Dudnick’s article looks at what to do with that mountain of draft documents sitting on your office floor after a transaction is completed. Your feedback is important to us; please let us know if you find this information useful and if there are other topics of general interest that you’d like to see covered in the Springboard.
What do you do with all those drafts?
By Andy Dudnick dudnick@ddrs.com
You know the drill. You have almost completed some type of big transaction:
buying or selling a business, a round of financing, getting the bank loan,
entering into the lease, or whatever. You’ve got piles of documents
drafts, emails, handwritten notes and other records relating to the transaction.
What do you do with the pile when the transaction is complete? And
we’re not talking here about the final, closing documents-the ones
that are signed and exchanged-of course you keep those (see the last paragraph
of this article). We’re talking about the reams of drafts, notes
and other records that preceded the closing. What do you do with that
dust-gathering pile? Keep all this stuff, toss it all, or pick and choose
what to keep? This article attempts to give you guidance on this question.
What are the good reasons to keep your drafts and other records? Well, for one thing, your drafts and records can help with the interpretation of the final agreement. If there is a hold in the document-say, some situation comes up after the closing that isn’t covered at all or isn’t property covered, or if there is room for interpretation of a phrase, then earlier drafts might provide some assistance in determining what the parties intended. This can facilitate a resolution of the issue short of litigation, or can be useful in litigation should it come to that.
What are the reasons not to retain drafts? Well, for one thing, the very same reason for keeping them, which was just mentioned! That’s right. If you keep drafts that provide an interpretation which is unfavorable to you, you won’t be such a happy camper! And remember, once litigation commences, you can not toss drafts or you risk criminal prosecution, not to mention losing your case.
So what should you think about in making the decision to keep or toss? Here are some ideas which might tip the balance one way or the other:
(a) If your lawyer prepared the first draft, it was probably more favorable to you that subsequent drafts. So a provision which was favorable to you in the first draft but then does not appear in the final agreement indicates that the provision was considered and intentionally not included. In this instance, keeping the draft is detrimental to your interests. Of course, it works the other way if the lawyer for the other party prepared the first draft-when that happens you would want to consider keeping those earlier drafts to show that the final agreement consciously excluded one or more of the terms favorable to the other party which had been included in those earlier drafts.
(b) If the other party is keeping drafts, you would want to consider keeping them, too, so that there is less of a risk of a gap in knowledge between you and the other party. Put another way, as long as someone has drafts, you might as well have them.
(c) Some documents are covered by the attorney-client privilege so that the risk of retaining them (and having them be discovered by the other side) is much less than other documents to which no privilege applies. So you get to have all the valuable information in the drafts, with little or none of the risk associated with keeping drafts generally.
(d) With respect to drafts that were internal to you and your lawyer and that the other side never saw, there is little reason to keep those. They are not going to be of much use in interpreting the agreement since they don’t really reveal what both sides were thinking.
(e) Retaining some, but not all, drafts can be dangerous. It arguably raises the issue of whether the discarded drafts contained information which you didn’t want revealed, thus explaining why you selectively tossed some but not all of the documents. For the same reason, once you decide whether to keep or toss, you should try your best to stick to that decision, since deviations from your normal document retention policies might pose the same risk.
The bottom line is that it is impossible to predict in advance whether saving or tossing makes more sense in the context of any particular transaction. Taking into consideration the factors listed above should provide some helpful guidance as to which way to go, but you never know whose ox is going to be gored until the post-closing issue comes up.
One more point to make about the final agreements themselves. You most definitely want to keep an original (or at least a copy) of all the closing documents, preferably in a bound volume for easy reference. You will want to keep them for as long as the relationship they govern is in effect, plus however long the statute of limitations takes to run on any action that might be brought under them (which can be many more additional years). Some original documents, like promissory notes, stock certificates, and the like, should be placed in safekeeping, such as a safe or bank safety deposit box.
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