How will hiding bank account records during a proceeding come back to haunt you?

Hiding Bank Account Records Can Be Criminal—Not Just For the Mob!

During the course of discovery, plaintiff Luellen requested that defendant Hodge  produce bank account records.  Hodge failed to produce the bank account records, claiming that the bank, Capital One (and Charter One), had destroyed these records already. Luellen argues that Hodge was aware that the records were being sought for discovery and deliberately allowed the records to be destroyed.

Luellen argues that Hodge had two different ways of being aware that the records were relevant to litigation and thus had a duty to preserve the records. First, Hodge was served with Luellen’s interrogatories, requesting information relating to bank accounts in Hodge’s name. Second, Hodge filed a motion for a protective order requesting that the Court quash a subpoena directed to Charter One. The fact that Hodge sought a protective order regarding the bank indicates knowledge that the bank records were sought for discovery.

In addition, Luellen claims that in filings dated February 27, 2012, Hodge made statements indicating his awareness of Luellen’s pursuit of information regarding Hodge’s personal accounts.

The argument for spoliation of the bank records is based on the reasonable assumption that if Hodge had directed Charter One to preserve his records when he was served with the first set of interrogatories, then the relevant records would not have been destroyed in accordance with the bank’s record retention policy.

In a spoliation motion, the party must show that:   (1) the party charged with destroying the evidence had an obligation to preserve it; (2) the records were destroyed with a “culpable state of mind”; and, (3) the destroyed evidence was relevant to the party’s claim or defense.

In reference to the first element, the court found that “a common sense understanding of the relationship between an account holder and a financial institution leads to the conclusion that Hodge had sufficient control over the documents to be able to direct their preservation.” Hodge should have directed the bank to preserve the records.

In reference to the second factor, that the records were destroyed with a culpable state of mind, the court finds that Hodge’s failure to prevent the bank from destroying the records was negligent but not bad faith.

The court finally holds that severe sanctions are not warranted in this case because Luellen has not shown that Hodge’s failure to preserve the Charter One account records were done in bad faith or that Luellen had been severely disadvantaged by the destruction of the records.

Hodge was directed to reimburse Luellen’s costs and expenses in the amount of $18.00.

The takeaway message here is that while you are in control of bank records, if you can show that you did not act in bad faith when you failed to prevent the banks from destroying the records, you could avoid a spoliation charge. But beware, it is better to anticipate this and prevent it by telling your bank to keep all your records!

Rebecca Hsu, a Seton Hall University School of Law student (Class of 2015), focuses her studies in the area of Patent Law, with a concentration in Intellectual Property. She is also certified in Healthcare Compliance, and has worked in Compliance at Otsuka America Pharmaceuticals, Inc.  Prior to law school, she graduated cum laude from UCLA and completed graduate work in Biomedical Science. She has co-authored two medical science research articles, as well as completed fellowships through UCLA Medicine and the Medical College of Wisconsin. In addition to awards for her academic achievements, Rebecca has been honored by awards for her community service with disadvantaged communities. In her spare time, Rebecca regularly practices outdoor rock climbing, and can be found camping in the Adirondacks.

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