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.