The Blatant and Not so Blatant Destruction of Documents
By: STEVEN Z. KAPLAN
The consequences of a company's deliberate destruction of documents to frustrate an agency's criminal or civil enforcement investigation were apparent long before Arthur Andersen shredded its Enron documents. The Justice Department and the Minnesota Attorney General's Office have always treated such destruction as a criminal obstruction of justice.
If the destruction does not occur in connection with a government investigation but rather in the context of litigation between private parties, the likelihood of criminal prosecution is certainly diminished. The court can, however, impose painful civil sanctions against the wrongdoer, including:
- dismissing its claims or defenses;
- awarding attorney's fees, costs, and damages in favor of the other party, and
- instructing the jury that it may infer that the destroyed documents would have undermined the wrongdoer's case.
The destruction can so alter the landscape that the destroying party may have little choice other than paying a premium to terminate the litigation.
The focus on Andersen-type destruction should not obscure two essential truths: the consequences of document destruction are not reserved solely for the most flagrant acts and, a company's document retention policy is unlikely to protect it.
Assume that a company's policy requires that it hold product cost accounting records for three years, but five years pass without those documents being destroyed. At that point, certain customers notify the company of their belief that it has overcharged them. The company cannot then invoke its retention policy to destroy these records, as it is now on notice of a potential civil claim. The company must continue to hold the records at least until all potential claims are resolved.
Or, suppose that the company is sued for age discrimination and that it has, from time to time, destroyed hiring and promotion records-albeit never before the three-year retention period specified in its document policy. When the suit is brought, the plaintiffs demand records for the past 20 years. The company has no records older than five years. Is the company safe from claims of document destruction?
Probably not. The plaintiffs can argue that the company should have known that these records would be highly relevant to discrimination claims and would surely be sought someday because discrimination suits are always foreseeable. They will paint the retention policy as nothing but an attempted cover for the systematic destruction of potentially embarrassing documents. The company can respond that it had no reason to know that these plaintiffs were intending to sue, it has no duty to keep documents forever; and the most current employment records are still extant to support or refute the claims.
How does the court resolve this dispute? No one knows, and that is the problem. What is clear, however, is that the destruction has created an issue that the plaintiffs can use to damage the company before the court. Rather than relying on its retention policy, the company would have been far better off simply storing the documents in a warehouse, on fiche, or on disks.