Creating A Y2K Paper Trail

We have already examined some of the reasons why responsible management will include contingency planning as an essential and integral part of their overall Y2K effort. One aspect of our contingency planning will involve preparing for the risk of Y2K-related disputes and litigation. This means doing the right things. But it also means being able to prove that we have done so by reference to contemporary documents.

Fortunately, most commercial disputes are resolved by negotiation and do not engage the attention of the courts. However, negotiations are conducted against the backdrop of the legal system, insofar as a party’s negotiating strength or weakness is influenced by the likely outcome of court proceedings. Whether or not a particular issue proceeds to litigation, therefore, it is commercially important to plan to be in the strongest possible position.

Your objective will be to ensure a paper trail that provides clear evidence of compliance with all legal obligations arising out of Y2K. In particular, you will want to record all facts which support the view that you acted in accordance with practices that are considered to be acceptable within your own industry. These would include records that would provide evidence of the fact that:

• You followed one of the generally accepted Y2K plans (all of which basically involve such phases as awareness, inventory, re-mediation, testing, implementation and contingency planning) and tracked your actual progress against the plan;
• Senior management supported the Y2K effort and were kept up-to-date on progress;
• Sufficient financial and human resources were allocated; and
• Judgements were made about Y2K priorities in order to focus scarce resources.

The creation of a paper trail that provides clear evidence of compliance with your legal obligations is one of the most cost-effective steps that you can take to mitigate Y2K litigation risks. Its existence may allow you to head off the threat of litigation by demonstrating how strong your position would be if the issue were to be taken to court. It will certainly strengthen your hand in resolving any commercial disputes that arise from Y2K whether by negotiation or the use of alternative dispute processes. And if litigation should unfortunately be unavoidable, it will maximise your chances of success.

On the other hand, do not forget that your documentation is a two-edged sword. In the event of litigation, your documents will have to be disclosed to the adverse party. They can contain statements, including inadvertent admissions and contradictory statements, which may become damaging evidence against you. Nevertheless, on balance, it is clear that the benefits of systematically documenting your Y2K efforts considerably outweigh the disadvantages. Some of the advantages of creating a paper trail are that:

• Unlike your memory, documents do not fade;
• Documents do not become bitter or develop an axe to grind as may happen to an employee who leaves the company after the relevant events;
• Documents are often perceived by a judge as more credible than a live witness, both because they are written nearer to the time of the events and because they may be seen as less prone to reflect bias, not having been prepared in the face of litigation;
• Even without a managed approach to documenting your Y2K efforts, employees will necessarily be preparing such documents anyway and they may include very unfavourable statements; and
• While the risks associated with creating contemporary documentation cannot be eliminated, they can be managed and mitigated.

Aditionally, there are a number of tools and techniques that may be employed to achieve your objective while minimising the risks posed by your own documents. These include:

• Centralising responsibility for creating, vetting and maintaining all Y2K documentation;
• Developing standard forms for tracking and reporting on Y2K plans and activities;
• Training employees in the appropriate use and maintenance of the Y2K documentation system;
• Implementing policies and procedures to ensure that all documents which may relate to liability issues are marked as confidential and that access is properly restricted; and
• Taking advantage of legal professional privilege to protect documents and information from having to be disclosed to the adverse party in subsequent litigation.

Senior management certainly needs to be aware of the usefulness of the concept of legal professional privilege as a legal risk management technique of considerable value in many difficult situations and therefore in many aspects of Y2K contingency planning. Essentially, this privilege protects your oral and written communications with your attorney from disclosure to the adverse party in any subsequent litigation. This protection also extends to reports and other documents prepared by employees and third parties provided that they were prepared for the purpose of legal advice relating to anticipated or actual litigation.

This allows you to "put all of your cards on the table" to your legal adviser, without the risk of any admissions or disclosures you make for this purpose being used against you in subsequent litigation. In appropriate circumstances, legal professional privilege can be an invaluable tool when you have to engage in planning your strategy and tactics on Y2K issues that may become the subject of hot dispute or even litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.