It lingers on – that vaguely guilty feeling that there’s something sanctionable, even illegal, about routinely destroying business data. That’s nonsense. It is well-settled United States law that a company may indeed dispose of business data, if done in good faith, pursuant to a properly established, legally valid data retention schedule, and in the absence of an applicable litigation preservation duty.
Even the courts themselves dispose of their data. Federal courts are required by U.S. law to follow a retention schedule approved by NARA, and to ultimately destroy records or transfer them to the Federal Records Center, as directed by that retention schedule.
Here are but a few of the many case decisions on this point:
- In re Pradaxa, 2013 WL 5377164 (S.D. Ill. September 25, 2013). In this drug product liability case, plaintiff sought undisputedly relevant electronic documents and electronic data of defendant’s former employee. The court held that the preservation duty arose in February, 2012. But the former employee’s documents and data were destroyed by November 2011 pursuant to defendant’s policies (1) to delete departing employees’ e-mail, user share, and hard drive data 30 days after the departing employee’s termination date, and (2) if the documents and data are maintained exclusively under a litigation hold, to destroy such documents or data within 24 hours of the hold’s release. Defendant’s former employee separated on August 26, 2011, so his documents and data would have been routinely destroyed on September 25, 2011, or at the latest by November 22, 2011, the day after an unrelated legal hold expired. The court therefore refused to order spoliation sanctions, concluding that the documents and data were destroyed pursuant to defendant’s company policies before the preservation duty arose, and that no bad faith destruction was shown.
- United States v. Kitsap Physicians Service, 314 F.3d 995 (9th Cir. 2002). In this case the Ninth Circuit upheld a summary judgment dismissing claims that the defendant submitted false bills to Medicare. The relator in this qui tam action claimed that he should have received the benefit of an adverse inference due to defendant’s destruction of records. Defendant had destroyed the two years of billing records at issue pursuant to its records retention policies, consistent with federal and state regulations and storage considerations. Because the lawsuit was not filed until after this ordinary-course-of-business destruction, the court held that there was no spoliation under the circumstances.
- Park v. City of Chicago, 297 F.3d 606 (7th Cir. 2002). In this Title VII discrimination case, the Seventh Circuit Court of Appeals held that the trial judge properly refused to give an adverse inference jury instruction despite defendant’s destruction of numerous employment records: “An employer’s destruction of or inability to produce a document, standing alone, does not warrant an inference that the document, if produced, would have contained information adverse to the employer’s case …. Rather, to draw such an inference, the employer must have destroyed the documents in bad faith.”
- Miles v. Olin Corp., 922 F.2d 1221 (5th Cir. 1991). The court, in this products liability case against a gun company, concluded plaintiff failed to establish that the shotgun manufactured years before by the defendant was unreasonably dangerous. Pursuant to defendant’s records retention policy, defendant had disposed of virtually all records regarding the gun at issue, decades before plaintiff was injured. “Nevertheless, the burden of adducing some evidence that the shotgun posed a real danger-in-fact remained [plaintiff] Miles’s. He could not carry it simply by bemoaning the lack of evidence.”
The Eighth Circuit case Lewy v. Remington Arms Co., 836 F.2d 1104 (8th Cir. 1988), provides a framework for trial courts to use when deciding whether to give an adverse inference instruction on documents destroyed under a company’s records retention policy. When the Lewy court remanded the case on other grounds, it outlined required findings for such an instruction should it be requested upon retrial:
- Is the records retention policy reasonable considering the facts and circumstances surrounding the documents at issue?
- Was the records retention policy instituted in bad faith?
- Despite the reasonableness and good-faith nature of the policy, should the documents at issue nevertheless have been retained under the particular circumstances, such as due to a preservation duty arising from specific impending litigation?
But wait a minute – even without an applicable preservation duty, one can’t simply adopt a retention schedule as sham cover for the bad faith disposal of what is fully expected to be evidence in future lawsuits. Consistent with the second Lewy element, case law indicates that absent any specific litigation preservation duty it is nonetheless sanctionable for a company to destroy documents and electronic data pursuant to a records retention schedule that was created in bad faith, for the express purpose of destroying information that would be relevant to future litigation.
Thus, in Micron Technology v. Rambus Inc., 917 F.Supp.2d 300 (D. Del. 2013), a patent infringement case, the court found that defendant Rambus implemented a records retention schedule as an integral part of its patent licensing and litigation strategy, adopting the policy “specifically for the purpose of gaining an advantage in litigation.” Under its newly adopted retention policy, Rambus destroyed 1,269 e-mail backup tapes and 400 boxes of documents in advance of its subsequent patent litigation, to prevent them from being discovered in the “upcoming battle.” The court concluded that:
Although Rambus’ duty to preserve did not arise until after it first adopted its document retention policy, there was nevertheless bad faith insofar as the document retention policy was executed with the intention to impede the factfinding efforts of Micron or other potential defendants …. Rambus not only intended to destroy selective documents, it did so to impair the ability of potential defendants, such as Micron, to defend themselves. It is in light of this cumulative evidence that the court finds clear and convincing evidence that Rambus’ spoliation was carried out in bad faith.