Articles Posted in Discovery

A New York Supreme Court judge has reminded parties to be extremely careful in discarding computer system components during the pendency of litigation.  In a March 30, 2016 opinion in Ferrara Bros. Building Materials Corp., et ano v. FMC Construction LLC, et ano, Sup. Ct., Queens Co., Index No. 16452/2007, the Court sanctioned a defendant for allegedly swapping out an older computer system for a newer one while discovery was still pending, even though a request for metadata on the computer had not been made at the time of the replacement.

In Ferrara, plaintiff sought damages for breach of its contract with defendant FMC Construction LLC (“FMC”) to provide concrete for a construction project (the “Ferrara Contract”) based, inter alia, on the alleged interference of defendant Casa Redimix Concrete Corp. (“Casa”).  In its defense, Casa alleged that it had entered into its own contract with FMC to provide the same concrete (the “Casa Contract”) on a date earlier than that set forth in the Ferrara Contract.  Later in the case, while discovery was still pending, plaintiff requested metadata related to the creation of the subject documents constituting the Casa Contract.  Casa responded by providing some document metadata, but stating that the computers and servers on which the document had been created had been replaced as part of an alleged company-wide technical upgrade.  This replacement had resulted in the loss of valuable and relevant “system metadata” capable of showing the author, date and time of creation, as well as the dates of any revisions of the contested documents.  Plaintiff then moved for sanctions regarding the spoliation of such evidence.  Casa opposed the motion by arguing that there was no bad faith intent to destroy the evidence, that it should not be penalized because the request had not been made by Ferrara until years after the case had begun, and that, in any event, the evidence was not relevant.

In its thoroughly researched opinion, the Court first went through the legal precedent reviewing metadata as discoverable evidence and then noted that there was no issue that the metadata at issue had been destroyed. Thus, the only questions to be determined were whether Casa knew or should have known the destroyed material was relevant, whether any delay by plaintiff to request the metadata waived plaintiff’s right to the request, and what sanction, if any, was appropriate.  The Court ruled that, given the question of alleged back-dating of the Casa Contract, the “system metadata” was clearly relevant to the case.

New York’s highest court recently issued a decision (after remaining silent for years) concerning sanctions for spoliation of destroyed ESI.  See Pegasus Aviation I, Inc. v. Varig Logistica S.A., 2015 WL 8676955, 2015 N.Y. Slip Op. 09187 (Dec. 15, 2015).  The trial court originally found that a company’s corporate parent had sufficient control over a subsidiary’s operations to be liable for spoliation of evidence when the subsidiary company failed to issue a litigation hold notice.  That failure to institute a litigation hold notice, combined with several computer crashes resulting in the loss of much of the ESI, rose to the level of gross negligence, according to the Supreme Court.  Where the destruction of evidence is merely negligence, the relevance of the lost material must be proven by the party seeking spoliation sanctions – otherwise, relevance is presumed.  Thus, based on the Supreme Court’s finding of gross negligence in the Pegasus case, the relevance of the missing ESI was presumed.  Based on this finding, the trial court struck the answer of the subsidiary and imposed a trial adverse inference sanction against the parent company with regard to that ESI.

The First Department reversed the sanctions imposed against the parent company, rejecting the lower court’s holding that the failure to institute a litigation hold amounted to gross negligence per se.  The Appellate Division reasoned that this failure supported, at most, a finding of simple negligence.  Because there was only a showing of simple negligence, the plaintiff had failed to prove that the missing ESI was relevant per se and the adverse inference was therefore improper.

Continue reading