6 Statutory Recordkeeping Obligations

• Library: Spoliation of Evidence: Sanctions & Remedies for Destruction of Evidence in Civil Litigation (ABA) (2013 Ed.)

There is no good reason to destroy documents during the period when the statutes or regulations require employers to maintain them.¹

The existence of pending, threatened, or reasonably foreseeable litigation is not the only basis for a duty to preserve evidence. Federal and state laws also can require a party to preserve documents or other types of potential evidence. A failure to retain such records may result in the imposition of an adverse inference or, alternatively, may shift the burden of proof under the applicable law. The rationale for imposing such sanctions is that "[t]here is no good reason to destroy documents during the period when the statutes or regulations require employers to maintain them."²

A comprehensive listing of federal and state statutes that impose recordkeeping requirements is beyond the scope of this book.³ For a more detailed treatment of record retention requirements, the reader may wish to consult publications focusing on this topic.⁴

By way of illustration, however, such statutes and accompanying regulations include Title VII of the Civil Rights Act of 1964,⁵ the Family and Medical Leave Act,⁶ the Fair Labor Standards Act,⁷ the Employee Retirement Income Security Act of 1974,⁸ and the Occupational Safety and Health Act (OSHA).⁹ These laws can require companies to retain documents for periods of time that can range up to 30 or 40 years, in the case of OSHA. Although the duty to preserve documents is "more narrow in scope than under the federal discovery rules,"¹⁰ these provisions often contain explicit requirements delineating what must be preserved and for how long.

The Private Securities Litigation Reform Act of 1995 (Reform Act),¹¹ for example, prohibits parties with actual notice of litigation from destroying or altering evidence. The Reform Act provides for a stay of discovery during the pendency of a motion to dismiss the complaint. Under 15 U.S.C. Section 78u-4(b)(3)(C), during a stay in discovery pending ruling on a motion, "any party to the action with actual notice of the allegations contained in the complaint shall treat all documents . . . and tangible objects that are in the custody or control of such person and that are relevant to the allegations, as if they were the subject of a continuing request for production of documents. . . ."¹² The purpose of this provision is to ensure that evidence is retained pending a ruling on a motion to dismiss.¹³

In In re Tyco International, Limited Securities Litigation,¹⁴ the plaintiff sought an order requiring the defendants to preserve documents pending discovery as required by 15 U.S.C. Section 78u-4(b)(3)(C). Refusing to issue a preservation order, the court held that "[a]bsent a showing that defendants are not acting in accordance with their statutory duty, the preservation provisions of [the Act are] sufficient to ensure preservation of the documents in the defendants' custody or control."¹⁵ The court noted that the statute provided sanctions for "willful failure" to comply with this statutory obligation.¹⁶

Similarly, employment discrimination statutes, such as Title VII, impose on employers the duty to preserve documents that are relevant to discrimination claims.¹⁷ The failure to do so can result in a "[rebut-table] presumption that the destroyed documents would have bolstered [the plaintiff's] case."¹⁸ However, this rule may be inapplicable when the destruction of records does not manifest bad faith.¹⁹

For instance, in Favors v. Fisher,²⁰ an employer destroyed test records in violation of 29 C.F.R. Section 1602.14. The employer's representative testified he had not destroyed the test records because they showed something contrary to its position. Rather, he was unaware that federal regulations required retention of the records and he discarded them because he planned to use similar test questions in future promotion decisions. The Favors court held that "the destruction of the ten-question test and answers entitled [the employee] to a presumption of pretext, which imposed upon [the employer] the burden of showing the documents were destroyed in good faith." Finding sufficient evidence to show that the employer met its burden, the court affirmed the employer's favorable judgment.²¹

In contrast, in Byrnie v. Town of Cromwell,²² the court considered whether the trial court should have imposed an adverse inference as a sanction for the destruction of records an employer had a statutory duty to retain and whether an adverse inference would have allowed a finding of unlawful discrimination. The court held it did not matter that the school board usually destroyed such records at the conclusion of the interview process, because a federal regulation required it to "retain all records pertaining to employment decisions for a period of two years."²³

Culpability is not the only consideration for purposes of spoliation sanctions when a statutory recordkeeping requirement exists. For example, in Johnson v. Metropolitan Government of Nashville,²⁴ the Sixth Circuit affirmed the denial of spoliation sanctions for the police department's failure to preserve individual supervisor surveys. Initially, the court noted that the party seeking an adverse inference must establish the following: 1) the party having control over the evidence had an obligation to preserve it at the time it was destroyed; 2) the records were destroyed with a culpable state of mind; and 3) the destroyed records were relevant to the party's claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.²⁵

Applying this analysis, the Johnson court found that the police department should have retained the surveys pursuant to its statutory obligations to preserve certain employment records.²⁶ The court...