Construction and the Law in Texas

The volume of documentation generated on many construction projects can be overwhelming at times. Depending on the role your company plays on a project and the level of interaction with other parties on the job, it’s not uncommon for project files to contain thousands of pages of documents. Managing, storing, and dealing with these documents requires forethought and oversight, especially in the event disputes arise during the project or post-completion.

Contractors should begin their policy considerations with the types of communications that are permitted for project-related correspondence. For ease of storage and reduction of costs, consider requirements that prohibit employees from using social media and text messages for official business. Unless your company uses cloud-based email providers, most email and hard-copy letter or facsimile correspondence is kept on company servers that are relatively easy to access. Text messages and web-based social media are subject to the control of others. This lack of control can present real problems for data compilation and record storage. In addition to access and control issues, data created using cloud-based or web-based programs, text messaging, and social media communication tools can be costly to compile, store, and ultimately produce.

An effective electronic document management policy should clearly define acceptable means and methods for project communication. This policy needs to include rules regarding the use of social media, company laptops, company mo-bile devices, and email. If a project generates disputes that end in litigation, the collection and production of documents has become extremely important. Your document management and retention policies can positively affect the volume and cost of this production.

In litigation, your document retention policy can be used to help narrow the scope of documents and electronically stored documents (ESI) that are subject to review and production. In this way, a good document retention policy can also reduce litigation costs. When employees communicate intermittently through emails, text messages, and social media, the costs to collect and review these var-ious types of communications rise. Best practices suggest that contractors should limit the forms of communications their employees and subcontractors use.

More importantly, an effective document retention policy will identify the requisite duration for preserving each type of electronic document upon project completion. Some documents, such as project finance records, must be saved for periods of time dictated by tax statutes.Other documents may be stored longer based on statutes of limitation or repose.(The statute of limitations for negligence claims is 2 years. The statute of limitations for contract claims – which most construction cases involve – is 4 years. The statute of repose terminates potential liability at 10 years.) Some generic documents may be stored for a period of time based solely on the costs for storing and retrieving those documents. If a law-suit arises, simply having an established policy is no longer sufficient to persuade courts that a party has complied with its document preservation and discovery ob-ligations. Parties must also be prepared to prove that they have consistently en-forced the terms of their existing policies. If no policy exists when litigation ensues, it’s too late to create one and benefit from its structure.

The established rules of evidence re-quire that once litigation is reasonably foreseeable to a party, that party is ob-ligated to ensure that all relevant documents in its possession or control are maintained and available for use by all parties during the lawsuit. In meeting this obligation, a party must show that a “litigation hold” or “document preservation notice” was distributed to all executive personnel to preserve the records. The litigation hold asks individuals to identify and help maintain specific documents that may be in their possession. Once a litigation hold is issued, contractors should consider meeting with key personnel to discuss those documents that project personnel may have and the location of those documents. Con-tractor’s counsel should also be present at such meetings, as courts are now requiring that attorneys have a personal working knowledge of the types and locations of documents maintained by their clients. In disputes involving the production of electronic documents, attorneys are no longer allowed to simply rely on their clients to preserve and produce potentially responsive documents.

Lastly, contractors need to follow up with their project personnel and their attorneys about the types and formats of documents being produced. Generally, a party is allowed to produce documents, including its electronic documents, in the manner in which they are typically stored. If a party cannot produce the documents in that manner, then the documents must be produced in a reasonably useable format. To save on costs, contractors need to know the different types of file formats available for data storage and collection, as well as how to retrieve and produce those documents in their native format. This knowledge may require the assistance of IT personnel. Using that information to reach early agreements with opposing counsel will reduce the number of post-production disputes and allows parties to avoid the significant costs of reproduction or reformatting the production at a later date.
– As seen in the August issue of Texas Contractor