When Disaster Strikes, is it Spoliation?

• Posted on: Nov 15 2023

By: Jeffrey M. Haber

Document discovery is an integral part of any litigation. Documents form the foundation of discovery plans and strategies, and, more significantly, proof at trial. Consequently, litigants must search for, collect, and preserve their documents, particularly electronically stored information (“ESI”), from the moment they are aware of their involvement, or potential involvement, in a lawsuit (i.e., when there is a reasonable anticipation that a lawsuit may be filed).

When a person or company withholds, alters, hides, loses, or destroys evidence relevant to the litigation, either intentionally or negligently, it is considered “spoliation” of evidence and can lead to sanctions against the party that is guilty of spoliation including, but not limited to, dismissal of the action, striking a pleading, assessing monetary penalties, or permitting the trier of fact to take a negative inference against the spoliating party. The negative inference at trial can be very damaging to a party because it permits the trier of fact to infer that there was something to hide and the missing evidence is unavailable because it negatively impacted that party’s affirmative case or defense.

A party that seeks sanctions for spoliation of evidence must show that the party having control over the evidence possessed an obligation to preserve it at the time of its destruction, that the evidence was destroyed with a “culpable state of mind,” and “that the destroyed evidence was relevant to the party’s claim or defense such that the trier of fact could find that the evidence would support that claim or defense.”¹ Where the evidence is determined to have been intentionally or wilfully destroyed, the relevancy of the destroyed documents is presumed.² On the other hand, if the evidence is determined to have been negligently destroyed, the party seeking spoliation sanctions must establish that the destroyed documents were relevant to the party’s claim or defense.

The party requesting sanctions for spoliation has the burden of demonstrating that a litigant intentionally or negligently disposed of critical evidence, and fatally compromised the movant’s ability to prove a claim or defense.³ 

Under certain circumstances, the failure of a party to institute a litigation hold⁴ or to implement any uniform or centralized plan to preserve data or even the various devices used by the key players in the transaction might demonstrate gross negligence, which would gave rise to a rebuttable presumption that the spoliated documents were relevant.⁵ Sanctions for discarding items in good faith and pursuant to a company’s normal business practices are inappropriate in the absence of pending litigation or notice of a specific claim.⁶ However, where the party failing to preserve evidence is placed on notice of litigation within or before the time period when the requested evidence is subject to automatic destruction, a sanction will be appropriate.⁷ 

In National Convention Servs., LLC v. FB Intl., Inc., 2023 N.Y. Slip Op. 05692 (1st Dept. Nov. 14, 2023) (here), the Appellate Division, First Department examined a spoilation motion in the context of the destruction of documents resulting from circumstances beyond one’s control – in that case, Superstorm Sandy and a flood in the room in which the documents were stored. 

The documents at issue were lost or damaged due to two separate floods occurring in NCS’ basement (due to Superstorm Sandy and burst pipes). Also at issue were former employee emails, some of which were lost due to an electrical outage on the server in which they were housed. Defendant sought sanctions due to spoliation. The motion court denied the motion. Defendant appealed.

The First Department affirmed. 

The Court held that defendant did not demonstrate a culpable state of mind with regard to the lost documents and emails. The Court noted that the documents in question were “wet, soiled, and unrecognizable” due to the effects of Superstorm Sandy, a fact that FB International readily acknowledged.⁸ The Court also noted that the emails had been damaged due to a power outage affecting the network server on which the emails were stored.⁹ The Court concluded that, based upon these circumstances, and the proof submitted, “defendant was unable to demonstrate a culpable state of mind and relevancy [of the documents and emails] to the claims or defenses at issue.”¹⁰

Footnotes

1. Voom HD Holdings LLC v. Echostar Satellite L.L.C., 93 A.D.3d 33, 45 (1st Dept. 2012) (quoting Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 220 (S.D.N.Y. 2003); Pegasus Aviation I, Inc. v. Varig Logistica S.A., 26 N.Y.3d 543, 547-48 (2015).
2. Zubulake, 220 F.R.D. at 220.
3. Utica Mut. Ins. Co. v. Berkoski Oil Co., 58 A.D.3d 717, 718 (2d Dept. 2009) (citation and quotation marks omitted); Mendez v. La Guacatala, Inc., 95 A.D.3d 1084, 1085 (2d Dept. 2012).
4. A litigation hold is a directive to maintain and preserve all documents relevant to a lawsuit or potential lawsuit. Essentially, parties and non-parties are instructed that nothing should be deleted, removed, hidden, modified, or discarded by anyone in anticipation, or during the pendency, of a litigation.
5. E.g., VOOM HD Holdings, 93 A.D.3d at 45; AJ Holdings Group, LLC v. IP Holdings, LLC, 129 A.D.3d 504, 505 (1st Dept. 2015).
6. See, e.g., Conderman v Rochester Gas & Elec. Corp., 262 A.D.2d 1068 (4th Dept. 1999); Gogos v. Modell’s Sporting Goods, Inc., 87 A.D.3d 248 (1st Dept. 2011)).
7. See Strong v. City of N.Y., 112 A.D.3d 15 (1st Dept. 2013).
8. Slip Op. at *1.
9. Id.
10. Id.

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.