When a judge hears that documents no longer exist due to a company’s retention schedule, it feels like we’re transported back to grade school, with a sheepish pupil making lame excuses about “disappearing” homework. Courts can seem skeptical, even disdainful, about retention schedules. As the U.S. Supreme Court characterized them in Arthur Andersen LLP v. United States, “’Document retention policies,’ which are created in part to keep certain information from getting into the hands of others, including the Government, are common in business.” The tone is noblesse oblige, as if businesses follow an odd, quaint practice of having retention schedules, which should be grudgingly acknowledged before moving on to the court’s more important consideration of the preservation duty and discovery sanctions.
Ironically, the courts have retention schedules too. Yep, this notion of destroying records pursuant to a retention schedule is not unique to “business” – the trial judge at a spoliation hearing is governed by the court’s own records retention schedule, which classifies records by content type and prescribes records disposition, including destruction. And the court also has a records management program, with one of its purposes being the appropriate disposition of records when they have served their purposes.
Ample case law establishes that, in the absence of a litigation preservation duty, documents may be disposed of in good faith pursuant to a properly established retention schedule, and that if a preservation duty arises later due to pending or impending litigation, the earlier destruction is not sanctionable. Examples of the many cases in which courts have so held include United States v. Kitsap Physicians Service, 314 F.3d 995 (9th Cir. 2002); Miles v. Olin Corp., 922 F.2d 1221 (5th Cir. 1991); In re Pradaxa; and Park v. City of Chicago.
The Eighth Circuit case Lewy v. Remington Arms Co., 836 F.2d 1104 (8th Cir. 1988), provides a framework for trial courts deciding whether to give an adverse inference instruction about documents destroyed under a company’s records retention policy:
- 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 nevertheless have been kept under the particular circumstances, such as due to a preservation duty arising from specific impending litigation?
Of course, once a preservation duty arises in pending or impending litigation, it will generally trump whatever the retention schedule provides regarding documents, data, and things within the preservation duty’s scope. And a retention schedule can be implemented in bad faith, which not surprisingly leads to bad results. Courts have held that, without any specific litigation preservation duty, it is nevertheless sanctionable for a company to destroy documents and electronic data under a records retention schedule created for the specific purpose of destroying information relevant to future litigation.
In Micron Technology v. Rambus Inc., 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 email 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:
[a]lthough 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 fact-finding 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.
Moral of the story?
- There’s nothing wrong with disposing of documents and data under a retention schedule that’s established and applied in a reasonable, good faith, and litigation-neutral manner, unless a specific litigation preservation duty applies to the particular documents or data at issue.
- Don’t name your dog “Rambus” … and do not feed him your homework.