The knowing destruction of evidence alone is sufficient to warrant an adverse inference instruction according to a decision issued in the United States District Court for the Southern District of New York yesterday, August 15th.  District Judge Shira A. Scheindlin’s opinion and order reversed a ruling by Magistrate Judge Frank Maas that declined to issue sanctions against a plaintiff that had destroyed emails relevant to ongoing litigation because the defendant had failed to show prejudice.  Judge Scheindlin reversed and held, “[p]rejudice is presumed for the purposes of determining whether to give an adverse inference instruction when, as here, evidence is willfully destroyed by the spoliating party.”

Sekisui Am. Corp. v. Hart, 12-cv-3479, 2013 U.S. Dist. LEXIS 115533 (S.D.N.Y. 2013), involves a breach of contract claim brought by the purchaser of a medical diagnostics products manufacturer against the former owners, one of whom was also the former president and CEO.  During the course of discovery, it was revealed that the plaintiff had destroyed certain electronically stored information (ESI) of the former president and CEO (now defendant) as well as that of another relevant fact witness.  As a consequence, the defendants sought an adverse inference jury instruction for the spoliation.  Magistrate Judge Maas issued a written decision on June 10 declining to issue sanctions.  Among other things, the Magistrate Judge noted that the defendants had failed to produce or describe any relevant email that the plaintiff had failed to produce.  This has often been a hurdle for parties seeking spoliation sanctions because the evidence is no longer available because of the spoliator’s conduct. 

In reversing the Magistrate’s decision, Judge Scheindlin applied the analysis set forth in  Residential Funding Corp. v. DeGeorge Financial Corp., 30 F.3d 99, 107 (2d Cir. 2002), in which the Second Circuit held:

[A] party seeking an adverse inference instruction based on the destruction of evidence must establish (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a culpable state of mind; and (3) that the destroyed evidence was relevant to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.

Finding that it was undisputed that the plaintiff had a preservation obligation, the Court addressed the culpability and prejudice factors.

With respect to “culpable state of mind,” the court rejected the plaintiff’s argument that the destruction was due to the actions of a single employee, who was alleged to have been acting for reasons unrelated to the litigation, without direction from the company.  The court explained that the evidence “was destroyed at the direct request of an [] employee after the duty to preserve had attached and the law does not require a finding of malevolence to constitute willfulness in the context of spoliation.” (emphasis added)  Further, the Court held that “[i]n the context of an adverse inference analysis, there is no analytical distinction between destroying evidence in bad faith, i.e., with a malevolent purpose, and destroying it willfully.”  This provides significant new guidance regarding the culpability required to award sanctions, at least in the S.D.N.Y., a court with significant influence in ediscovery law. 

The Court also held that the plaintiff was grossly negligent in failing to preserve relevant documents considering that no document hold was put into place until 15 months after notice of the claim was issued, and such action was inexcusable on the part of a plaintiff who necessarily has full knowledge of the possibility of future litigation.  This was compounded by the plaintiff’s failure to alert its IT vendor of the duty to preserve for another six months after the belated litigation hold.

As to relevance, the Court held that a finding of relevance can be made by simply looking to whose data was destroyed.  The Court had little trouble deciding that the emails of a named defendant (who was also unable to testify due to cognitive problems) were relevant, as were the emails of an employee who was directly responsible for the issues underlying the breach of contract claim.  The relevance of the lost email was proven by the role of the person whose email it was.  This is a significant new development and could serve to assist parties trying to prove the relevance of lost information in their spoliation claims.

Having found the evidence relevant and the destruction willful, the Court held that there was a presumption of prejudice on the aggrieved party.  “When evidence is destroyed intentionally, such destruction is sufficient evidence from which to conclude that the missing evidence was unfavorable to that party.  As such, once willfulness is established, no burden is imposed on the innocent party to point to now-destroyed evidence which is no longer available because the other party destroyed it.”  The court emphasized, however, that “prejudice is only presumed when determining whether an adverse inference instruction will be given” and “[t]he jury may still determine that [Defendants] were not prejudiced by [Plaintiff’s] willful destruction of ESI and decline to draw any adverse inference.”