Disposing of trash: one man's properly destroyed trash is another man's spoliated evidence
When I read Michael's post about the FTC Rule on disposing of consumer report information, with its reference to "burning or shredding papers or destroying electronic files or media," I immediately saw a whole different side of the story -- a scary one for employers and their attorneys.
We worry about allegations of spoliation of evidence.
For example, if an employer is using consumer report information to make hiring decisions, and a discrimination-in-hiring class action is brought, there will be a duty to preserve relevant evidence. Such evidence would likely include all the consumer report information on all applicants for a number of years. It could be valuable evidence for either side -- depending on the specific facts and issues.
Hence the FTC trash becomes the court's and litigants' treasure.
Under such circumstances, destruction of consumer report information, even if pursuant to the FTC Rule and for the sole purpose of protecting confidential information against improper disclosure, could have very serious consequences for the litigation.
How would you like to have a judge make an adverse inference -- a conclusion that destroyed evidence would have favored the position of employees suing your business -- when you know for a fact that the evidence would have favored your position, if only you hadn't destroyed it?
I haven't studied the FTC Rules in detail, but suspect there are ways to avoid improper disclosure of confidential information without destroying potential evidence. Application of the FTC Rules should play a part -- but only a part -- in the development of an appropriate document retention policy.
posted by George @ 6/02/2005 01:02:00 PM 
2 comments
2 Comments:
For a judge to make an adverse inference takes more than failing to keep records. A company should follow its document retention and destruction policy unless it receives notice of litigation.
At that point, a litigation hold
should be issued. See Zubulake v. UBS, where the court held that when one reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a “litigation hold” to ensure the preservation of relevant documents.
The court gave an adverse inference instruction against UBS.
Regarding the FTC rules, they do not require the destruction of documents. The rules (which describe how data should be destroyed) only apply if a company has a policy of destroying consumer information.
I agree that it seems the FTC rules are directed at HOW to destroy, rather than IF and WHEN to destroy.
As to document retention, I think there are at least four reasons for employers to be quite conservative.
First, it is true that only reasonable anticipation of litigation triggers the duty to preserve, but pray tell me when a company with thousands of employees that processes dozens of EEOC charges every year does NOT reasonably anticipate employment litigation?
Second, how can we be sure the left hand knows what the right is doing -- that as soon as SOMEONE in the company knows of likely litigation, the order to preserve is guaranteed to go out?
Third, how do we know we are not destroying information that would be as valuable to our own defense as to our opponents' claims?
Fourth, isn't the cost of electronic preservation minimal, unlike retention of paper documents, which occupy real estate?
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