United States: Can Tests For Spoliation In NY State, Federal Courts Be Reconciled?

For many years the sanctions available for the spoliation of electronically stored information (ESI) were largely similar in both the New York federal and state courts. New York state court decisions frequently tracked the federal common law spoliation analysis, most notably set out in the Southern District of New York's Zubulake v. UBS Warburg and Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Secs. line of cases.1 This analysis allowed for severe— and sometimes case-terminating— sanctions, such as adverse inference instructions, dismissal of claims or counterclaims, or outright dismissal of actions, for both grossly negligent or intentional spoliation. However, in the past year, with the passage of the December 2015 amendments to the Federal Rules of Civil Procedure (the Rules), the measure for spoliation and accompanying sanctions in New York state and federal courts has diverged.

Under the Federal Rules

Among the December 2015 amendments to the Rules was a significant rewrite of Rule 37(e), which addresses sanctions available for the failure to preserve ESI. Under the revised rule, sanctions are only available if ESI "that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery[.]" The amendment's most notable departure from certain jurisprudence developed within the Second Circuit concerns remedies available for negligent spoliation, in contrast to the remedies available only for intentional spoliation. Neither set of remedies can be reached now unless the ESI is actually lost—entirely irretrievable from another source or party.

If the preservation obligation and loss requirements are satisfied, negligent spoliation requires a further finding of prejudice. If those criteria are satisfied, the court may deploy a host of sanctions, but none can be case-terminating. The committee notes list the sanctions appropriate for nonintentional spoliation, which include evidence preclusion to offset prejudice; presentation of evidence or argument to the jury regarding the loss of information; and/or jury instructions that would assist in evaluation of that evidence or argument (distinguishable from an adverse inference instruction). Monetary sanctions such as costs and legal fees are also available.

If, however, the court finds that a party "acted with the intent to deprive another party of the information's use in the litigation," prejudice is presumed and the court may choose among more severe sanctions, which include a presumption that lost information was unfavorable (in the context of a dispositive motion or bench trial); instruction to the jury that it may or must presume the information was unfavorable; or dismissal of the action or entering of a default judgment. The latter remedy has been utilized to dismiss or bar specific claims and counterclaims, as well. The committee notes emphasize that Rule 37(e) bars these sanctions where the requisite intent is lacking. This is a direct change from pre-amendment common law that allowed for adverse inference sanctions upon finding gross negligence.2 Moreover, the notes indicate that if the sanctions described in the Rule are too extreme for the situation, lesser sanctions may be awarded, noting that the "remedy should fit the wrong."

In the year following the amendment, the published decisions from the New York federal district courts addressing ESI spoliation under the revised Rule 37(e) were relatively few in number. Some courts continued to look to the common law instead, where the matter or motion was pending prior to the amendment.3 Others proceeded under the revised rule, even where the litigation pre-dated the amendment—in part because the amendment could be viewed as more lenient toward the spoliator.4 Those courts that proceeded under the revised Rule have hewn closely to its instructions concerning "loss" and the availability of sanctions for differing levels of culpability, at times even imposing more lenient sanctions in the face of intentional conduct.

The Second Circuit applied amended Rule 37(e) in Mazzei v. Money Store and affirmed the trial court's decision not to give an adverse inference instruction where the loss of relevant ESI was not intentional. 656 F. App'x 558 (2d Cir. 2016). And, in Best Payphones v. City of New York, the court closely analyzed whether the ESI was "lost," holding that since the movants "did not attempt to retrieve copies of the emails, or the information that was in the emails," from third parties, "which would have cured any violation under Rule 37(e)," there could be no finding of loss and therefore no sanctions, despite negligent failure to preserve ESI. Only reasonable attorney fees and costs were awarded because some responsive documents were later produced as a result of the spoliation motion. 2016 WL 792396, at *5 (S.D.N.Y. Feb. 26, 2016). In Cat3 v. Black Lineage, the first decision in the Southern District to interpret and apply Rule 37(e), the court closely applied each of the Rule's requirements and held that relevant ESI, subject to preservation obligations, had been altered intentionally in such a way as to render it "lost," making Rule 37(e)(2) sanctions available. But the court rejected the "drastic sanctions" of dismissal or adverse inference instruction, and instead precluded the spoliator from relying on altered versions of ESI and awarded costs and reasonable attorney fees.5 Finally, in Feist v. Paxfire, the court found that the plaintiff had not intentionally spoliated browser history because she routinely cleaned the hard-drive and the computer had crashed (although the court noted that routine cleaning should have been suspended as part of ongoing preservation obligations); without intent, the court refused to award the extreme sanction of dismissal. The court instead precluded plaintiff from arguing for an award of certain types of damages, for which ESI relevant to the damages analysis had been lost. 2016 WL 4540830 (S.D.N.Y. Aug. 29, 2016).

While the developing case law in the Second Circuit suggests that litigants who negligently or inadvertently spoliate relevant ESI may take comfort that the most severe sanctions will not be available to their adversaries, the same cannot necessarily be said in New York state courts.

Under New York Common Law

Just days after the federal Rule 37(e) amendment took effect, the New York Court of Appeals handed down a seminal decision on spoliation in Pegasus Aviation v. Varig Logistica S.A., 26 N.Y. 3d 543 (2015). The court held that the appellate division had erred in reversing a sanction order imposed by the trial court for the loss of ESI as a result of the failure to implement a litigation hold and multiple computer crashes. The trial court had held that the failure to issue a hold amounted to gross negligence, presumed relevance of the irretrievable ESI, and awarded sanctions in the form of an adverse inference instruction and striking of defendant's answer. In endorsing the trial court's order, the Court of Appeals reiterated the existing New York standard that "adverse inference charges have been found to be appropriate even in situations where the evidence has been found to have been negligently destroyed," implicitly rejecting any incorporation of or movement toward the delineation between sanctions options based on intentional and non-intentional spoliation in the then-two-week-old amendment to Rule 37(e).

The trial and appellate courts in the state accordingly have continued to award more severe sanctions than would be available in federal court in the absence of intentional spoliation. For example, in Arbor Realty Funding v. Herrick, Feinstein, the First Department modified the sanction of dismissal, replacing it with an adverse inference instruction and monetary sanctions instead, for the grossly negligent spoliation of ESI as a result of the failure to issue a timely litigation hold, preserve additional relevant custodians' ESI, and suspend routine data destruction, including back-up tape recycling. 140 A.D.3d 607 (1st Dep't 2016). Similarly, in Cioffi v. S.M. Foods, the Second Department affirmed the sanction of an adverse inference instruction for the spoliation of ESI even though plaintiffs had not demonstrated the spoliation was "willful rather than merely negligent." 142 A.D. 3d 520, 526 (2d Dep't 2016). In Ferrara Bros. Bldg. Materials v. FMC Constr., the trial court awarded an adverse inference instruction at trial for the loss of ESI as a result of the replacement of certain of defendants' computers during the pendency of litigation, holding that the sanction was "sufficient to strike a balance between the need to ameliorate any prejudice [arising] from the destruction" and "the absence of demonstrable willfulness on the defendants' part." 2016 WL 6583995, at *4 (Sup. Ct. Queens Cty. March 30, 2016). In modifying a trial court decision to provide for an adverse inference instruction in lieu of striking an answer, the Second Department noted in Peters v. Hernandez that "striking a pleading is a drastic sanction to impose in the absence of willful or contumacious conduct." 142 A.D. 3d 980, 981 (2d Dep't 2016). These decisions suggest that outright dismissal of a complaint or the striking of an answer for gross negligence alone is not a readily available remedy in New York state court; however, the severe sanction of an adverse inference instruction may be.

Conclusion

Intentional spoliators are likely to face similarly extreme and potentially case-terminating sanctions in both New York state and federal courts. However, litigants should be aware that negligent spoliators are subject to different standards, which may result in less certainty concerning what exposure a non-intentional spoliator may face if ESI is lost.

Footnotes

1. Zubulake v. UBS Warburg, 229 F.R.D. 422 (S.D.N.Y. 2004); Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Secs., 685 F. Supp. 2d 456, 469-70, 496-97 (S.D.N.Y. 2010).

2. See Pension Comm., 685 F. Supp. 2d 456; Residential Funding v. DeGeorge Fin., 306 F.3d 99 (2d Cir. 2002).

3. See, e.g., Stinson v. City of New York, 2016 WL 54684 (S.D.N.Y. Jan. 5, 2016) (applying common law, grossly negligent spoliation resulted in sanction of permissive adverse inference instruction).

4. See, e.g., Cat3 v. Black Lineage, 164 F. Supp. 3d 488 at 496 (S.D.N.Y. 2016) (amended rule "is much more comprehensive" and "in some respects more lenient as to the sanctions that can be imposed for violation of the preservation obligation"); Best Payphones, v. City of New York, 2016 WL 792396, at *3 n.2 (E.D.N.Y. Feb. 26, 2016) (since "the application of the new rule does not create issues of feasibility or injustice, the Court will apply the new rule with respect to the electronic evidence at issue here").

5. Cat3, 164 F. Supp. at 501-02. Evidence was subsequently submitted to the court demonstrating that there had been no intentional discovery misconduct, and the sanctions motion was withdrawn. See Cat3 v. Black Lineage, 2016 WL 1584011 (S.D.N.Y. April 6, 2016).

Previously published in New York Law Journal, Feb. 6, 2017.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.