Hello and welcome to this JACPA Ethics Alert blog which will discuss the recent New York U.S. District Court Judge’s opinion which found that the former lawyers for a mortgage company (AmTrust) had an ethical obligation and legal duty to preserve client e-mails relating to their prior representation and the failure to preserve “with a culpable mind” could result in an adverse inference instruction that evidence was destroyed in the ongoing litigation. The case is: FDIC v. Malik, 2012 U.S. Dist. LEXIS 41178 (E.D.N.Y. Mar. 26, 2012).
The N.Y. District Judge found that the former lawyers had an ethical obligation and a legal duty to preserve e-mails relating to their prior representation and the failure to do this “with a culpable state of mind” could result in an adverse spoliation instruction since the law firm had control over the documents and the documents were relevant to the other party’s claim or defense. With regard to the “duty to preserve” the opinion stated that “(a) regulation requiring retention of certain documents can establish the preservation obligation necessary for an adverse inference instruction where the party seeking the instruction is ‘a member of the general class of persons that the regulatory agency sought to protect in promulgating the rule.'”
The opinion stated in a footnote that “(a) regulation requiring retention of certain documents can establish the preservation obligation necessary for an adverse inference instruction where the party seeking the instruction is “a member of the general class of persons that the regulatory agency sought to protect in promulgating the rule.” Byrnie, 243 F.3d at 109. Relying on Byrnie, plaintiff argues that the Malik defendants had a duty to preserve arising from professional responsibility rules and attorney ethics opinions. Pl.’s Mem. in Support of Mot. for Sanctions at 13 (citing Assoc. of Bar of City of N.Y. Comm. On Prof. and Judicial Ethics, Formal Opinion 2008-1, A Lawyer’s Ethical Obligations to Retain and Provide a Client with Electronic Documents (July 2008)).”
“The Malik defendants have not responded to that argument and have made no attempt to explain why those rules and ethics opinions, which require lawyers to preserve electronic documents relating to a representation and seek to protect clients such as AmTrust, do not trigger an actionable duty to preserve under Byrnie. Therefore, I conclude that the Malik defendants had a duty to preserve in 2008 when they represented AmTrust in the loan transactions at issue. I also note that the Malik defendants have not argued that this retention obligation excludes the types of emails at issue in the instant motion.”
The judge scheduled an evidentiary hearing to determine whether the e-mails were destroyed with a “culpable state of mind” which would result on the adverse spoliation inference and to rule on the request for sanctions.
Bottom line: This is an example of how the ethical duties and obligations of lawyers, in this case the judge’s finding that the New York ethics rules required that the lawyer preserve client confidential electronic documents and information, may intersect and have a significant impact in other forums, including this litigation. In addition, this case involves the preservation of electronic information, i.e. e-mails which are not always preserved in hard copy format and may be deleted or otherwise unintentionally lost.
As I have said many times in the past, Florida lawyers should preserve and maintain all client confidential documents and information, including those in electronic form, for at least 7 years, which is one year more than the period of time required by the Florida Bar rules to preserve client trust account documents and information.
Be careful out there!
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