Forensic Update

Reflections on information management within the legal and regulatory arena

Archive for June, 2012

Must Transactional Attorneys Preserve Evidence?

Posted by Johnny Lee on June 5, 2012

Shred-DocumentIt is almost axiomatic in American jurisprudence that the duty to preserve arises for a party when that party “knows or reasonably should know” that litigation is foreseeable.  That said, a recent matter out of the federal courts in New York has raised a very interesting question about evidence preservation duties, as well as when and how they extend to certain parties — including their counsel.

Corporate and litigation counsel alike recognize their (somewhat nebulous) triggering event as the “reasonable anticipation” of a dispute arising, and they respond by issuing data preservation instructions to custodians to ensure that all potentially relevant information is retained for possible review and use in such a matter.  However, federal magistrate judge Joan Azrack has indicated that counsel for a party that destroys evidence might be sanctioned for failing to preserve — independent of a litigation hold — certain documents (including emails) that relate to “the lawyer’s negotiation and documentation of a loan agreement.”

What’s novel in this matter is not that this duty arises for counsel, but when and why.  The case (FDIC v. Malik) involves a suit brought by the FDIC, in its role as the receiver for a mortgage company, against the mortgage company’s attorneys (et alia) relating to a series of loan transactions.

It is important to note that this case is still in process, so its implications (both for litigation- and for records-management) will be watched closely.  Of particular note here is the implication that document retention regulations (in this case, arising out of the attorney’s professional responsibility rules) can establish evidence-preservation obligations where the affected party is “a member of the general class of persons that the regulatory agency sought to protect in promulgating the rule.”  If we were to extrapolate this to organizations across the legal spectrum, this could represent a precedent of staggering influence to corporate America and the way it manages information.

 

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