A federal magistrate judge in Brooklyn, N.Y., Joan M. Azrack, has apparently held that a transactional lawyer may be sanctioned for spoliation for failing to preserve documents, including emails, relating to the lawyer’s negotiation and documentation of a loan agreement. This would be a new duty, independent of the “litigation hold” that most attorneys are familiar with, and could represent a significant change in the way transactional lawyers practice as well as presenting a significant new burden. The case is FDIC v. Malik , No. 09–CV–4805 (KAM)(JMA), 2012 WL 1019978 (E.D.N.Y., Mar. 26, 2012) (Azrack, U.S.M.J.).

Malik was a suit by the FDIC, as receiver for a mortgage company, against the mortgage company’s attorneys, and others, concerning a series of 26 loan transactions. Most of the electronic documents and emails relating to these transactions had been deleted, without having been printed or backed up, prior to litigation. The court determined that the transactional lawyers had had an obligation to preserve these records and that the deletion was prejudicial; it therefore scheduled a hearing to determine whether the lawyers had a “culpable state of mind,” a requirement for a spoliation sanction.

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