The Supreme Court in New York County recently dismissed a $20
million suit in a sanctioning order in response to the
Plaintiff's destruction of electronically stored information
("ESI"). In 915 Broadway Associates LLC v. Paul,
Hastings, Janofsky & Walker, LLP, 34 Misc. 3d 1229A (N.Y.
Sup. Ct. 2012), the court made clear that it would not tolerate
spoliation of evidence and that it was willing to impose even the
severest of sanctions.
The Plaintiff was initially a party to a separate action
involving a failed real estate deal, as a result of which a
litigation hold letter was issued in April, 2008. Broadway settled
the real estate action and brought this malpractice suit against
its former attorneys in August of 2008. The attorneys were
allegedly responsible for failing to advise Broadway that the
letter of credit provided to it in connection with the real estate
deal expired during negotiations, in spite of evidence that
Broadway was at least in partly responsible.
By 2008, it was well-established law, consistent with the
Zubulake decisions, that once a party reasonable
anticipates litigation, it must suspend its routine document
retention and destruction policy and put in place a litigation hold
to ensure the preservation of relevant documents. See Zubulake
v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D. N.Y. 2003).
However, even though the litigation hold letter from April 2008 was
sent to the primary custodians, at least one principal actively
deleted relevant emails. Further, the company made no effort to
suspend the automatic destruction policy of emails, which resulted
in the permanent destruction of every email intentionally deleted.
Additionally, the court found that nine of fourteen key custodians
had deleted relevant documents. Perhaps the worst violation,
however, occurred after the Defendant had raised its spoliation
concerns with the court, when Broadway decommissioned and discarded
an email served without preserving any of the relevant ESI.
The court reiterated that circulation of a litigation hold alone
is not sufficient to meet a party's discovery obligations.
Instead, a party must take affirmative steps to ensure potentially
relevant evidence is identified and preserved. This includes not
only avoiding affirmative acts of destruction, but also taking
active steps, if required, to stop automatic deletion features.
When evidence is destroyed, even mere negligence is sufficient to
warrant sanctions. And when documents are destroyed as the result
of, at a minimum, gross negligence, the court will presume the
destroyed documents were relevant.
In this instance, the court determined that dismissal was the
only remedy capable of addressing the prejudice caused by the
intentional and reckless destruction of ESI. In addition to
dismissing the Plaintiff's $20 million suit, the court also
awarded attorney's fees and costs.
This case reinforces the need to not only issue a litigation
hold, but to monitor compliance with it and take affirmative steps
to ensure that potentially relevant information is collected and
preserved. Even negligence in document preservation can result in
Six months after the U.S. Court of Appeals for the Fourth Circuit reversed the district court’s dismissal of Rosetta Stone’s trademark infringement lawsuit against Google, the parties issued a joint statement today announcing that they have settled their legal dispute.