Commercial Litigation and Arbitration

Electronic Spoliation — Failure to Initiate Litigation Hold in 2003-04 Merely Negligent — Trigger Date for Preservation Duty Different for Individuals Than for Entity Defendant

From Field Day, LLC v. County of Suffolk, 2010 U.S. Dist. LEXIS 28476 (E.D.N.Y. Mar. 25, 2010):

Plaintiffs Field Day LLC f/k/a/ New York Music Festival and AEG Live LLC f/k/a/ AEG Concerts LLC *** commenced this action for money damages and injunctive relief against the County of Suffolk and the Suffolk County Department of Health Services *** and numerous County employees***, the New York State Health Commissioner, the Town of Riverhead *** and the Riverhead Police Chief. Plaintiffs allege that they were unlawfully denied the right to stage a weekend-long concert festival within the Town of Riverhead when the County refused to issue a mass gathering permit. Presently before the Court is Plaintiffs' motion for sanctions against the County Defendants due to the alleged spoliation of evidence. ***

On May 27, 2003 the mass gathering permit was denied. On June 3, 2003 the County moved in New York State Supreme Court for an injunction to preclude Field Day from holding the Festival. On August 21, 2003, the County received a notice of claim from Field Day. The instant action was commenced on May 26, 2004

The County does not dispute that a litigation hold was not implemented in this matter. (See Feb. 27, 2007 Tr. at 45.) Nor does it dispute that with the change in administration in January 2004, the hard drives of departing County personnel were wiped clean. County Defendants maintain that no spoliation has occurred and that there is no evidence that documents or e-mails relevant to Plaintiffs' claims are missing. According to the County Defendants, the County's document retention system is a paper based system which required that electronic documents such as e-mails be printed out and maintained in paper form. In that paper form, all e-mails and other documents relevant to the claim in this case have been produced. They further argue that no basis to add spoliation claims against new parties has been asserted, nor does any such basis exist. ***

[T]he Court must address the elements of spoliation not only as to the County acting through its employees but as to each Individual County Defendant.

The first issue to be addressed is when the duty to preserve arose. Plaintiffs argue that the duty arose, at the latest, on June 3, 2003 when the County commenced an action in New York State Supreme Court seeking to enjoin Field Day and the Town of Riverhead from holding the festival. Alternatively, they point to August 21, 2003 when Plaintiffs served the County with a notice of claim, as the date said duty arose. ***

Although the obligation to preserve evidence commonly arises when the suit has already been filed, it can arise earlier "when a party should have known that the evidence may be relevant to future litigation." *** In the present case, the County was put on notice of the potential for future litigation when it received Field Day's notice of claim and its duty to preserve arose on that date if not before. The Court is unpersuaded by the County's suggestion, at oral argument, that the date of receipt of the notice of claim is inappropriate because that it receives thousands of claims a year while the percentage of notices that result in actual lawsuits is small. *** That the County proceeded to examine, under oath pursuant to N.Y. Gen. Mun. Law § 50-h, representatives of Field Day and the Town of Riverhead upon receipt of the notice of claim warrants the conclusion that the County should have known at that time that documents relating to Field Day's application for a mass gathering permit may be relevant to future litigation. ***When the duty to preserve arose on behalf of the individual County Defendants is another matter. The notice of claim is required to be served only upon the County not individual employees thereof. *** The notice of claim is not before the Court; nor do Plaintiffs point to any evidence as to when, or even if, the Individual County Defendants learned of or were served with the notice of claim. The only evidence with respect to the Individual County Defendants is Gerdts' testimony that he understood shortly after the denial of the permit that there would be litigation, although it is not clear from the testimony submitted by Plaintiffs whether he is referencing the litigation brought by the County or litigation to be commenced by Plaintiffs. In any event, sanctions against Gerdts are not sought. *** Given the dearth of evidence in the record identified by the parties on this point, the Court concludes that the Individual County Defendants' duty to preserve did not arise until the instant action was commenced in May 2004. ***

[T]he Court finds that with respect to all of the Individual County Defendants Plaintiffs have failed to sustain their burden that they spoliated evidence. The Plaintiffs have demonstrated that the County did spoliate evidence. ***

B. Culpable State of Mind ***

In determining state of mind, it is important to note that while the duty to preserve evidence existed long before the events at issue, the law with respect to litigation holds and the preservation of electronically stored information was not in 2003 and 2004 developed to the extent that it is today. Indeed, it was not until Zubalake V was decided in mid - 2004 that the requirement to issue a litigation hold was established in the Southern District of New York. See Pension Committee of the Univ. of Montreal Pension Plan v. Banc of America Securities, LLC, F. Supp. 2d , 2010 WL 184312, *3 & *7 (S.D.N.Y. Jan. 15, 2010). Decisions in this District adopting the requirement of a litigation hold were not issued until after the instant motion was filed and after the December 2006 amendments to the Federal Rules of Civil Procedure covering electronic discovery issues, the advisory committee notes for which embrace the concept of a litigation hold. See, e.g., Valdez v. Town of Brookhaven, 2007 WL 1988792 (E.D.N.Y. July 5, 2007); M&T Morg. Corp. v. Miller, 2007 WL 2403565 (E.D.N.Y. Aug. 17, 2007); Great Northern Ins. Co. v. Power Cooling Inc., 2007 WL 2687666 (E.D.N.Y. Sept. 10, 2007); Toussie v. County of Suffolk, 2007 WL 4565160 (E.D.N.Y. Dec. 21, 2007). Finally, with respect to e-mails, it was unclear in 2004 that they had to be preserved in both their electronic and paper form when the party at issue had a paper based records retention policy. Accordingly, with respect to the preservation of electronic evidence, the County's conduct was merely negligent. Cf. Pension Committee, 2010 WL 184312, at *18 ("The failure to institute a written litigation hold in early 2004 in a case brought in federal court in Florida was on the borderline between a well established duty and one that was not yet generally required. Thus, the rule of lenity compels the conclusion that this conduct alone, under these circumstance, is not sufficient to find that a plaintiff acted in a grossly negligent manner." ) (emphasis in original). The County's failure to execute a comprehensive search for documents and its failure to sufficiently supervise or monitor document retention by its employees supports that the County acted in an indifferent fashion. None of the destruction, however, occurred as the result of willful misconduct or bad faith. Cf. De Espana, 2007 WL 1686327 *4 (failure to issue litigation hold did not rise to the level of intentional willful destruction of evidence); Treppel, 2008 WL 866584, *9 (failure to take adequate measures to preserve ESI of key executive and their support staff was at least negligent); Pastorello v. City of New York, 2003 WL 1740606, *11-12 (S.D.N.Y. 1, 2003) (loss of data was grossly negligent when due to unfamiliarity with record-keeping of employee responsible for preserving documents).***

C. Relevance and Prejudice

"[W]hen the destruction [of evidence] is negligent, relevance must be proven by the party seeking sanctions." Treppel, 2008 WL 866594, *9. A showing of gross negligence may, but need not necessarily, support a claim that missing evidence was relevant to the movant's case. [Citations omitted.] Even if the County's conduct could be deemed gross negligence, the circumstances of this case do not require a presumption of relevance and prejudice.

The County's conduct does not rise to the egregious level found in cases where relevance is determined as a matter of law. Here, the destruction occurred as a result of regular business practices at a time when the law with respect to the obligation to maintain evidence in both the electronic and paper format was not clear. The County's practice of wiping hard drives upon the departure of an employee may not have played a part in this case except for the fortuitous change in the County's governing party. Thus, whether the County's conduct is deemed negligent or grossly negligent, Plaintiffs must provide extrinsic evidence that any destroyed materials would have been favorable to their case. ***


*** Plaintiffs' spoliation motion is denied except to the extent that Plaintiffs are awarded reasonable attorneys' fees and costs incurred in connection with the motion.

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