Lubet, Steven

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The Journal of Appellate Practice and Process Volume 4 Issue 2 Article 2 2002 Document Destruction after Arthur Andersen: Is It Still Housekeeping or Is It a Crime Steven Lubet Follow this and additional works at: https://lawrepository.ualr.edu/appellatepracticeprocess  Part of the Criminal Law Commons, and the Evidence Commons Recommended Citation Steven Lubet, Document Destruction after Arthur Andersen: Is It Still Housekeeping or Is It a Crime, 4 J. APP. PRAC. & PROCESS 323 (2002). Available at: https://lawrepository.ualr.edu/appellatepracticeprocess/vol4/iss2/2 This document is brought to you for free and open access by Bowen Law Repository: Scholarship & Archives. It has been accepted for inclusion in The Journal of Appellate Practice and Process by an authorized administrator of Bowen Law Repository: Scholarship & Archives. For more information, please contact mmserfass@ualr.edu. THE JOURNAL OFAPPELLATE PRACTICEAND PROCESSESSAYSDOCUMENT DESTRUCTION AFTER ARTHURANDERSEN: IS IT STILL HOUSEKEEPING OR IS IT ACRIME?Steven Lubet*The indictment and subsequent conviction of ArthurAndersen & Co.' has recently focused much attention on thepreviously little-known subject of document retention. Thegovernment charged that Andersen's auditors willfullyobstructed justice when they destroyed thousands of Enron workpapers as an SEC investigation loomed, but had not yetcommenced.2 In defense, the accounting firm's representativesclaimed that it was merely "good housekeeping" to informemployees of the need to eliminate reams of unnecessary paper.'Because the jury evidently based its ultimate decision on an* Professor of Law and Director, Program on Advocacy and Professionalism, NorthwesternUniversity; B.A. Northwestern University, J.D. University of California, Berkeley.1. United States v. Arthur Andersen, LLP, Crim. Action No. H-02-0121 (S.D. Tex.June 15, 2002).2. Kurt Eichenwald, Enron's Many Strands: The Investigation; Andersen ChargedWith Obstruction in Enron Inquiry, N.Y. Times AI (Mar. 15, 2002).3. Kristen Hays, Disposal Good Housekeeping: Andersen Official, Toronto Star C6(May 28, 2002); Kurt Eichenwald, Andersen Witnesses Defend Intent of Shredding, N.Y.Times CI (June 1, 2002).THE JOURNAL OF APPELLATE PRACTICE AND PROCESS Vol. 4, No. 2 (Fall 2002)324 THE JOURNAL OF APPELLATE PRACTICE AND PROCESSaltered memorandum rather than on the wholesale shredding,4important questions about the legality of Andersen's policy werenot fully resolved. The resulting uncertainty seems likely toyield confusion, as this short essay will demonstrate.It is surely impossible for a large firm, or even anindividual, to retain every piece of paper generated in aprofessional practice. But when must documents be saved andstored, and when may they be destroyed? And most importantly,what constitutes guilty knowledge when documents are in factbeing discarded? Every company in the United States isprobably reviewing its own policies, at one level or another, inview of Andersen partner David Duncan's statement that he didnot initially believe he had done anything wrong, but after much"soul searching" came to conclude that he had "committed acrime." 5 The courts, however, have provided little guidance onthis issue, which will likely remain unaddressed when the Fifth7Circuit reviews the Arthur Andersen case.4. Jonathan D. Glater, Jurors Say File Shredding Didn't Factor Into Verdict, N.Y.Times § 1, at 21 (June 16, 2002).5. E.A. Torriero, Duncan: Believed Order To Be Legal, Chicago Trib. Bus. I (May16, 2002); see also Carrie Johnson, "Soul-Searching" to Guilty Plea; Andersen AuditorSays He Didn't Think He Broke Law at First, Washington Post El (May 16, 2002).6. The appellate cases on spoliation, both state and federal, nearly all address the dutyto preserve evidence during active or clearly anticipated litigation. See e.g. Nation-WideCheck Corp. v. Forest Hills Distributors, Inc., 692 F.2d 214 (1st Cir. 1982) (indicating thatlitigation was pending); Caparotta v. Entergy Corp., 168 F.3d 754 (5th Cir. 1999) (same);Coates v. Johnson & Johnson, 756 F.2d 524 (7th Cir. 1985) (same); Sargent v. Armontrout,841 F.2d 220 (8th Cir. 1988) (same); Holmes v. Amerex Rent-A-Car, 180 F.3d 294 (D.C.Cir. 1999) (indicating that litigation was anticipated, but not yet pending, when theevidence was destroyed); Wuest v. McKennan Hosp., 619 N.W.2d 682 (S.D. 2000) (same,and indicating that the documents were destroyed in the ordinary course of defendanthospital's business); Campbell v. State Farm Mut. Auto. Ins. Co., 2001 UT 89, 432 UtahAdv. Rep. 44 (indicating that litigation was pending, and noting that insurer's practice ofroutinely destroying documents made work of policyholders' attorney more difficult, andtreating it as a reasonable factor to consider in awarding attorney fees), cert. granted, 122S. Ct. 2326 (June 3, 2002); Torgerson v. JournalSentinel Inc., 563 N.W.2d 472 (Wis.1997) (indicating that litigation was anticipated, but not yet pending, when the evidencewas destroyed).7. In response to special interrogatories, the jury indicated that its verdict was basedprimarily on an altered memorandum circulated by Andersen attorney Nancy Temple,rather than on the destruction of documents. Andersen's attorneys consequently premisedtheir post-trial motions on the claim that Temple's actions were not unlawful, rather thanon the legality or illegality of the document shredding. Lucas Wall, Judge UpholdsAndersen Guilty Verdict, Houston Chron. Bus. 3 (Sept. 13, 2002).DOCUMENT DESTRUCTION AFTER ARTHUR ANDERSENGiven the relative dearth of case law, the Ohio SupremeCourt's opinion in Ohio ex rel. Corn v. Russo' is potentiallyquite important, since it is one of the relatively few appellatecourt decisions to address the general question of documentretention outside the context of discovery abuse.9 Manycorporate executives, consultants, and especially expertwitnesses, will find much cause for alarm in this case, as itappears to set an exceptionally high standard for maintainingdocuments, even in the absence of an investigation or discoveryrequest. Moreover, the court evidently predicated its decision ona single line of transcript-a flaw not unknown elsewhere inappellate court review, but especially problematic in thiscontext.The significance of the decision is somewhat obscured bythe arcana of Ohio appellate practice. The case involves acontempt proceeding against an expert witness, but much of theopinion is devoted to such technicalities as the differencebetween a writ of prohibition and a writ of mandamus, thedistinction between civil and criminal contempt, and the trialcourt's jurisdiction over witnesses following dismissal of theunderlying case. These questions are procedurally meaningful,of course, but they do not have much extrinsic impact. Theultimate issue in the case, however, could end up havingtremendous consequences for record keeping, by businesses andexpert witnesses, in Ohio and elsewhere.In brief, these were the facts in Corn: Dr. Corn is anorthopedic surgeon frequently retained as an expert witness bydefense counsel in personal injury cases. He testified for thedefense in this case, and in an attempt to establish his pro-defense biases, the plaintiff's lawyers subpoenaed his tax andoffice records, hoping that they would reveal Dr. Corn's receiptof great amounts of money from insurance companies. Mostimportantly, the plaintiffs wanted all of Dr. Corn's appointmentcalendars for the previous eight years and all of his IndependentMedical Examination (IME) reports for the same period.'°8. 740 N.E.2d 265 (Ohio 2001).9. More typically, the issue arises when documents are destroyed or concealed oncelitigation has commenced. See e.g. Coates, 756 F.2d 524 (indicating that plant closingresulted in extensive destruction of documents while class action was pending).10. 740 N.E.2d at 267.THE JOURNAL OF APPELLATE PRACTICE AND PROCESSDr. Corn produced one appointment calendar and about onehundred IME reports, claiming that the balance of the requestedmaterial had been discarded according to his office policy."Faced with this response, most courts would either accept thewitness's excuse" or, at most, bar his testimony for failure tocomply with a valid discovery request. 3 In this case, however,the court went much further.The trial judge held that Dr. Corn's failure to comply withthe subpoena could be deemed contempt of court, and orderedhim to show cause why he should not be held in contempt. Dr.Corn then testified that he had routinely destroyed his oldappointment books and IME reports. On cross examination heconceded that one of his reasons for discarding these materialswas to prevent plaintiffs' attorneys from using them to establishbias. "4Before the trial court could rule on the contempt citation,Dr. Corn's attorneys sought relief in the Ohio Supreme Court,claiming that the entire proceeding was improper. The SupremeCourt held that the proceeding was proper and returned it to thetrial court to complete the hearing. Implicit in the court's rulingwas the idea that Dr. Corn could indeed be punished for theroutine destruction of his records, even though the destructionevidently occurred before the issuance, or even the notice, ofany subpoena. In fact, the Ohio Supreme Court made thestartling observation that it could constitute criminal contemptfor parties to "purposefully conduct[] their business[es] in sucha fashion as to circumvent civil discovery rules and orders of thecourt attempting to enforce them." 511. Id.12. See e.g. Coates, 756 F. 2d at 551 (imposing no sanction because plant employee"was unaware at the time he destroyed the disciplinary letters that there was any pendinglitigation regarding defendants' disciplinary policies, although [he] was aware that oneemployee had filed a suit regarding his discharge").13. See e.g. Trigon Ins. Co. v. United States, 204 F.R.D. 277 (E.D. Va. 2001)(recognizing that preclusion of testimony based on spoliated evidence is sometimesappropriate, but holding that the intentional destruction of expert witness materials in thiscase warranted an "adverse inference" jury instruction about the experts' work andpreclusion of their further participation in the case).14. 740 N.E.2d at 267.15. 740 N.E.2d at 269.DOCUMENT DESTRUCTION AFTER ARTHUR ANDERSENThere can be no doubt that it is contempt of court (orworse) to destroy documents that have been subpoenaed orrequested in discovery. And, as Arthur Andersen learned, it canconstitute obstruction of justice to destroy records known to bethe subject of a pending investigation. On the other hand, mostbusinesses and governmental agencies, including physicians andexpert witnesses, follow retention policies that call for theregular disposal of old documents on a defined schedule. Beforethe decision in the Corn case, it would have been widelybelieved that there was no general obligation to maintain oldappointment calendars and reports that were not the subject ofpending or impending proceedings. 6 Discarding old documentswas considered permissible, so long as it was not done for thespecific purpose of evading discovery. As I explained elsewherejust a few years ago,an expert should never destroy any items--document,object, photograph, record-for the purpose of concealingit from discovery or obstructing another party's access toevidence. Of course, papers and objects may be discardedin the ordinary course of "housekeeping," but any item thathas been requested in discovery must be preserved until therequest has been complied with by the expert or disallowedby a court."It appears that Dr. Corn made a practice of throwing awayhis old calendars and reports. He agreed, on cross examination,that one reason was to prevent their use by opposing counsel,but he did not say that this was the only reason, or even theprimary reason. Most important, he does not seem to havedestroyed anything directly related to a matter in litigation, or tohave undertaken any destruction at a time when the materialdestroyed was subject to a discovery request or subpoena.In other words, Dr. Corn faced a contempt citation becauseof his cagey practice of limiting the material he kept on hand,and concomitantly limiting the material he might someday beasked to supply in response to discovery. However one regards16. Retention of certain documents may, however, be governed by statute or regulation.See e.g 29 C.F.R. § 1602.14 (requiring employment records to be kept for at least oneyear).17. Steven Lubet, Expert Testimony: A Guide for Expert Witnesses and The LawyersWho Examine Them 183 (Natl. Inst. for Tr. Advoc. 1998).THE JOURNAL OF APPELLATE PRACTICE AND PROCESSsuch a scheme-is it astute or conniving?-it was not previouslythought to be grounds for contempt.Most disturbing was the Ohio court's manipulation of asingle snippet of Dr. Corn's testimony. According to the court'sparaphrase of the trial record, Dr. Corn "conceded that one ofthe reasons he destroys these records is to prevent plaintiffs andplaintiffs' attorneys from establishing his financial interest anddefense bias in personal injury litigation." 8 The absence of adirect quote from the transcript is troubling, since it seemsexceptionally unlikely that Dr. Corn actually testified that hewas seeking to conceal an alleged "defense bias."Anyone familiar with the techniques of cross examinationwould recognize the inherent ambiguity of Dr. Corn'sconcession. He testified on direct examination that he regularlyand routinely discarded old files that were no longer active.Then on cross examination, he candidly agreed-no doubt inresponse to a leading question-that the collateral benefits of hispolicy included the subsequent unavailability of the materials forpossible impeachment in later, as yet unfiled, proceedings. TheOhio Supreme Court opinion, however, gives us no way ofknowing the actual nature and scope of Dr. Corn's concession.Did he simply acknowledge that he was aware that a plaintiffmight someday ask for his old reports? Did he actually use thephrase "one of [my] reasons," or is that merely aninterpretation? Was he allowed to explain the relativeimportance of that "reason" in developing his office policy?Indeed, was there any redirect examination on the point,expanding on Dr. Corn's full position?The lack of specificity in the Ohio Supreme Court opinionis troubling for two reasons. First, it seems likely that the courtexaggerated the degree of Dr. Corn's intent, seizing upon asingle line of testimony to the exclusion of the rest. But evengranting the broadest implications of Dr. Corn's statement, thecourt nonetheless failed to explain the rationale for its ruling.How could it be contempt for Dr. Corn to destroydocuments before he had notice that anyone was seeking them?And what level of intent is necessary to base a contempt findingon the conduct of one's business "in such a fashion as to18. 740 N.E.2d at 267.DOCUMENT DESTRUCTION AFTER ARTHUR ANDERSENcircumvent civil discovery rules"? Do businesses have anobligation to maintain their records in a way that facilitatesfuture discovery? May anyone involved in frequent litigationever throw away any documents? Or must every paper (andprobably every email message) be preserved indefinitely, at leastby those who are regularly in court-a group that wouldpresumably include not only expert witnesses, but also insurancecompanies, taxicab operators, utilities, consumer lenders, publichousing authorities, and any number of other businesses andgovernmental agencies?Of course, the Ohio Supreme Court's ruling merelyremanded Dr. Corn for a hearing on the show-cause order, so itmight have seemed logical to wait for a final disposition beforeaddressing the many complex questions raised by the case. Butthat was surely a mistake. The trial court's eventual ruling (ifany) is unlikely to be published or widely publicized; it may ormay not be appealed. 9 Thus, all we may have in the way of aholding is the Ohio Supreme Court's rather chillingpronouncement that a finding of criminal contempt can be basedon business practices that had among their perceived benefitswhen adopted the advantage of avoiding hypothetical discoveryrequests in hypothetical cases, even if they served valid businesspurposes as well.Perhaps that is the law in Ohio. If so, it would have beenbetter by far to develop it on a more complete record. If not, itwould have been better to say so with some clarity, because thisdecision leaves lawyers and their clients with far too littleguidance. And if that is indeed the law in Ohio, and if it is likelyto become the law elsewhere, businesses, expert witnesses, andprofessionals of all kinds will be well advised to review theirdocument-retention polices, to consider whether those policiesmight expose them to Corn-style citations for contempt, and tokeep an eye on what the appellate courts do next.19. As of this writing, the case is still pending and Dr. Corn's fate is as yet undecided.

Document Destruction after Arthur Andersen: Is It Still Housekeeping or Is It a Crime

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Document Destruction after Arthur Andersen: Is It Still Housekeeping or Is It a Crime

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