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March 20, 2018 Articles

Amended Rule 37(e): The "Independent" Obligation to Preserve

The ethical duty of physicians to retain patient records may rise to the level of a legal duty to preserve records.

By Thomas Y. Allman

In most cases cognizable in federal courts, the duty to preserve arises (or is “triggered”) because of the pendency of litigation or in anticipation of it, thereby providing notice to the party of the need to act. In fact, an empirical analysis found 106 decisions, as of 2012, where the reasonable anticipation of litigation had triggered a duty to preserve.

Amended Federal Rule of Civil Procedure 37(e) employs the common law duty; “it does not attempt to create a new duty to preserve.” However, according to the committee note to Rule 37(e), a duty to preserve may also arise when an “independent requirement” exists, stemming from “a wide variety of concerns unrelated to the current litigation.” The committee note to Rule 37(e) explains that the requirement can arise from many sources, including “statutes, administrative regulations, an order in another case, or a party’s own information-retention protocols.”

Federal Statutes
The Private Securities Litigation Act (PSLA) requires parties with actual knowledge of allegations of violations to treat all documents and electronically stored information (ESI) relevant to the allegations as if they were subject to a continuing request for production. 15 U.S.C. § 78u-4(b)(3)(C)(i). Given the overlap with actual notice, this requirement does not supply a meaningful additional basis for spoliation considerations.

Federal Regulations
Recording-keeping obligations imposed by various government agencies often trigger a duty to preserve that is enforceable in litigation whether or not the party had notice of the possibility or pendency of litigation.

The classic example is Byrnie v. Town of Cromwell, 243 F.3d 93, 109 (2d Cir. 2001), where 29 C.F.R. section 1602.40 (imposing a two-year obligation for personnel records) created an obligation to retain records “even if litigation involving the records is not reasonably foreseeable.” The party must be “a member of the general class of persons that the . . . agency sought to protect in promulgating the rule.” Under those circumstances, “a violation of that regulation can amount to a breach of duty necessary to justify a spoliation inference in an employment discrimination case.”

In E.E.O.C. v. Chipotle Mexican Grill, 98 F. Supp. 3d 198, 210 (D. Mass. 2015), the court found that the particular unpreserved evidence at issue did not fall under the category of material that must be preserved. However, the court acknowledged the argument that “the regulation [29 C.F.R. § 1602.14] essentially provides employers with constructive ‘notice that the evidence [specified within the regulation] might be relevant to potential litigation.’” The court quoted a Fourth Circuit opinion stating that the obligation was “clearly designed to protect . . . plaintiffs from an employer’s destruction of possibly damaging evidence.” EEOC v. Am. Nat’l Bank, 652 F.2d 1176, 1195 (4th Cir. 1981).

The breach of the duty to preserve leads to presumption issues. The result in Byrnie expands on a line of cases holding that the breach of the duty to preserve employment records raises an evidentiary presumption that the missing evidence was unfavorable to the employer, a presumption that can be rebutted at trial by introduction of evidence about the failure. For example, in Hicks v. Gates Rubber Co., 833 F.2d 1406, 1419 (10th Cir. 1987), the court of appeals held on remand that an employee was entitled to a “benefit of a presumption that the destroyed documents would have bolstered her case” because of the violation of section 1602.14, although the presumption could be rebutted. Favors v. Fisher, 13 F.3d 1235, 1239 (8th Cir. 1994), is a case in which the defendant successfully rebutted the presumption: the lower court, citing Hicks, found that the party that destroyed the personnel records had destroyed them as a matter of normal practice.

Presumption is also evident post-Byrnie. A lower court in the Eleventh Circuit found that where the regulation was violated, even if pursuant to a long-standing practice before notice of a claim of discrimination, a presumption that the missing document would support movant’s case applies, and it is the “jury’s job to determine whether [the party that failed to preserve] sufficiently rebutted the presumption.” Austrum v. Fed. Cleaning Contractors, 149 F. Supp. 3d 1343, n.4 (S.D. Fla. 2016).

Federal contractors are a particular group of employers subject to presumption. Under 41 C.F.R. section 60-741.80, federal contractors are required to maintain personnel records, and the regulation notes that if there is a failure to preserve as required, “there may be a presumption that the information destroyed or not preserved would have been unfavorable to the contractor.” However, the presumption is not applicable if the contractor shows that the failure resulted from “circumstances that are outside of the contractor’s control.”

Courts consider issues of bad faith in spoliation cases. A recent Tenth Circuit decision, EEOC v. JetStream Ground Services, ___ F.3d ___, 2017 WL 6614481, at *6 (10th Cir. Dec. 28, 2017), concluded that Hicks did not justify giving an adverse inference instruction to a jury where the violation of the regulation was not undertaken in bad faith, citing the “commonsense” observation from the Rule 37(e) committee note that such an instruction might tip the balance in ways that the lost information never would have.

In Austrum, the court acknowledged that, due to inconsistent interpretations of the term bad faith, there was confusion in the circuit regarding whether bad faith is required. 149 F. Supp. 3d at 1350. The court noted that Byrnie did not require “bad faith” but that Byrnie defined bad faith as “ill-intent”; thus, instead of requiring a “malicious motive” for an adverse inference sanction, Byrnie merely required culpability. Id. at n.8. This culpability aspect of Byrnie has been superseded by the “intent to deprive” requirement in Rule 37(e)(2) as to the loss of ESI. Mazzei v. Money Store, 656 F. App’x 558, 560 (2d Cir. 2016).

Courts consider litigation connections in spoliation cases. In Babayev v. Medtronic, 228 F. Supp. 3d 192, 208 (E.D.N.Y. 2017), the court refused to find a violation of a record-keeping requirement by the manufacturer of medical devices under 21 C.F.R. section 820.65 because there was no indication that the regulation was “designed to assist litigation, or that spoliation sanctions would be appropriate.”

On the other hand, in Harmon v. United States, 2017 WL 1115158, at *5 (D. Idaho Mar. 24, 2017), a failure to make electronic entries in a database management system and keep a logbook as required by the Department of Labor regulations was sanctioned “regardless” of whether the information was potentially relevant to litigation. Id. at *6. The court found that this was not inconsistent with the Federal Records Act and thus not prohibited: a “spoliation sanctions is a far cry from a direct suit to enforce FRA violations” because it “does not seek to enjoin [agency] activity or impose liability on a federal agency.” Id. at *5. But cf. True the Vote, Inc. v. Internal Revenue Serv., No. CV 13-734, 2014 WL 4347197, at *5 (D.D.C. 2014).

State Regulations
Many states have similar regulations requiring the preservation of employment records. Analogous to federal regulations, there exists under many state laws an “independent duty to retain” records whether or not litigation is foreseeable, but courts will weigh that duty against intention. Liu v. Win Woo Trading, 2016 WL 3280474 (N.D. Cal. 2016) (finding a duty to preserve but refusing to apply adverse inference in the absence of an explicit finding of bad faith, although the delayed awareness was “certainly suspect”).

Internal and Ethical Requirements
In the context of internal retention requirements, the balance seems to disfavor an assumption that the failure to preserve automatically gives rise to an inference of unfavorability.

Smith v. United States, 128 F. Supp. 2d 1227, 1234–35 (D. Ark. 2000), is one case in which the court construed a duty to preserve in the internal retention requirements. In this case, a court hearing a medical malpractice case found that the failure to dictate an operative note after surgery as required by the VA hospital allowed it to infer that the notes would have established a failure to act in accordance with the degree of skill and learning required.

In contrast, however, in DeBakker v. Hanger Prosthetics & Orthotics East, 2009 WL 5031319 (E.D. Tenn. 2009), a court held that, absent actual notice of pending litigation, the fact that a clinical documentation policy required patient progress notes to be kept did not demonstrate that there was a duty to preserve them before that time. The court, citing John B. v. Goetz, 531 F.3d 448, 459 (6th Cir. 2008), held that “the mere existence of a document retention policy does not give rise to a duty to preserve every document generated under that policy.”

And in Brigham Young v. Pfizer, the court noted that while there is a duty to preserve evidence when anticipating litigation, a violation of private corporate policy does not always equate to a violation of the law. The court found that the moving party in had failed to establish a connection between the duty to the plaintiff and the duty to provide discovery in the pending litigation. Furthermore, the court pointed out that the duty to preserve cannot prevent inadvertent destruction or misplacement that occurs before a duty arises. 282 F.R.D. 566, 572–73 (D. Utah 2012) (distinguishing Phillip M. Adams v. Dell, 621 F. Supp. 2d 1173, 1193, 1194 (D. Utah 2009), in which the court found that responsible document-retention policies should factor in “accountability to third parties” and the lack thereof was “responsible for the loss of significant data”).

In the context of ethical retention requirements, a Texas court has opined that the ethical duty of physicians to retain patient records may rise to the level of a legal duty to preserve records. 44 Texas Practice Medical Malpractice § 4:9 (3d ed.).

The traditional response to the issue of evidence spoliation in federal courts is to address the breach of the duty to preserve, not through a separate cause of action. Consistent with the treatment of spoliation allegations generally in the federal courts, the violation of a record-retention requirement does not typically create a private right of action seeking damages. Green v. Premier Telecommc’ns Servs., 2017 WL 4863239, at *18 (N.D. Ga. 2017) (no private right of action for record-keeping violations under the FLSA). The remedy at issue, if any, is one of evidentiary impact of spoliation in the case at hand.

In the case of losses that occur at a time when litigation is not reasonably anticipated, a violation of some independent obligation is often sufficient to justify evidentiary redress. The stated justifications for doing so vary, but all require some showing that the intent of the independent requirement took into account the possibility of the use of the contents in future litigation.

However, finding a breach of the duty to preserve does not end the analysis. The committee note to Rule 37(e) acknowledges that although courts may “sometimes consider whether there was an independent requirement” that ESI be preserved, this does not mean that the efforts to preserve “were not reasonable” in that case. A party that takes reasonable steps to preserve may escape measures under the rule.

Moreover, courts may find that the circumstance do not, in and of themselves, reflect either bad faith or an intent to deprive (depending on whether the form of the loss of information is documentary or ESI), sufficient to permit inferences about the missing contents. And, in any event, in some circuits, the court may (or must) deem the circumstances to have rebutted any adverse inference arising from the failure to preserve.

Thomas Y. Allman is chair emeritus of the Working Group One of the Sedona Conference and an adjunct professor at the University of Cincinnati College of Law.