Commercial Litigation and Arbitration

Spoliation — Three Purposes Underlying Adverse Inference Sanction — Lesser Sanctions OK Where No Intent to Spoliate, Lost Info Was Tangential, and Movant Was Not Diligent in Exploring Alternate Sources

Mazzei v. Money Store, 2016 U.S. App. LEXIS 12973 (2d Cir. July 15, 2016):


Joseph Mazzei appeals from the judgment of the United States District Court for the Southern District of New York (Koeltl, J.) and two post-trial rulings. At trial, Mazzei sought to prove two breach-of-contract theories on behalf of himself and two nationwide classes. The jury found in favor of defendants and against Mazzei and the "Fee-Splitting Class" as to the "fee-splitting claim," and in favor of Mazzei and the "Late Fee Class" as to the "late fee claim." Subsequently, the district court (1) denied Mazzei's motion for a new trial on the fee-splitting claim and (2) granted defendants-appellees' post-trial motion [*2]  to decertify the Late Fee Class.

In the accompanying opinion, we affirm the grant of defendants' motion for decertification of the Late Fee Class. In this summary order, we affirm the denial of Mazzei's motion for a new trial, and the judgment of the district court. We assume the parties' familiarity with the underlying facts, the procedural history, and the issues presented for review.

Mazzei's principal argument in support of his motion for a new trial was that the district court had abused discretion in declining to grant an adverse inference instruction on the fee-splitting claim. The court did not abuse discretion in refusing to impose additional sanctions in the form of an adverse inference instruction, and it did not abuse discretion in denying the Rule 59 motion made on the same premise.

The New Invoice System was a web-based, electronic billing database owned by Fidelity National Foreclosure Solutions ("Fidelity"), a nonlawyer entity to which defendants outsourced certain legal services. Fidelity and vendors, including law firms, used the New Invoice System to submit invoices to defendants. The data in that system (records of the invoices from Fidelity and vendors) were not maintained [*3]  in their original, accessible form. Affirming the magistrate judge, the district court ruled that, although the database was in the possession of Fidelity (and its successor) rather than defendants, defendants had the legal and practical ability to obtain access, and should have caused the data to be preserved in the previously accessible form. The district court affirmed the limited sanctions awarded by the magistrate judge: the costs of determining the current accessibility of the data, and attorney's fees and costs for the sanctions motion.

The district court declined to grant additional relief in the form of an adverse inference charge because the court found that the New Invoice System contained only "tangential information" as to the fee-splitting claim: It did not record payment of invoices by defendants, it did not record fees that were charged to members of the class, and it did not contain bills by Fidelity to law firms or payments by law firms to Fidelity. Mazzei v. Money Store, 308 F.R.D. 92, 102 (S.D.N.Y. 2015). It also found that Mazzei failed to diligently seek discovery of fee-splitting evidence from other obvious sources--sources more likely to evidence what payments were exchanged between Fidelity and the law firms. These [*4]  findings were not clearly erroneous and supported denial of the motion for an adverse inference. See Chin v. Port Auth. of N.Y. & N.J., 685 F.3d 135, 162 (2d Cir. 2012) ("[A] district court may, at its discretion, grant an adverse inference jury instruction insofar as such a sanction would 'serve the threefold purpose of (1) deterring parties from destroying evidence; (2) placing the risk of an erroneous evaluation of the content of the destroyed evidence on the party responsible for its destruction; and (3) restoring the party harmed by the loss of evidence helpful to its case to where the party would have been in the absence of spoliation.'" (quoting Byrnie v. Town of Cromwell, 243 F.3d 93, 107 (2d Cir. 2001)) (brackets omitted)), superseded in part by Fed. R. Civ. P. 37(e) (2015).

Under the current Rule 37(e)(2), which took effect after the post-trial motions were decided, an adverse inference instruction may be given for failure to preserve electronically stored information "only upon finding that the party acted with the intent to deprive another party of the information's use in the litigation." Fed. R. Civ. P. 37(e)(2)(B). The district court specifically found that defendants did not act with such intent.

As the district court further explained: "[A]ny additional evidence from the New Invoice System would not have made any difference in this trial. The plaintiff obtained [*5]  the records from the New Invoice System relating to Mazzei and introduced them at trial. . . . Even with the evidence from the New Invoice System, Mazzei could not prove his individual claim. There is thus no basis to believe that evidence from the New Invoice System would have proved any claim with respect to the class." Mazzei, 308 F.R.D. at 100. "Absent a showing of prejudice [resulting from the missing evidence], the jury's verdict should not be disturbed." Chin, 685 F.3d at 162 (quoting Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 112 (2d Cir. 2002)) (brackets omitted).

Mazzei's remaining arguments are unpersuasive. Defendants' questions and argument at trial regarding the lack of evidence that Fidelity made payments to law firms or lawyers did not violate the district court's pretrial orders. The court's refusal to admit into evidence the Buechner Affidavit was not an abuse of discretion: Mazzei has never articulated the relevance of the information (aside from making spoliation arguments); and Mazzei still does not explain how the information contained in the affidavit likely would have affected the jury's verdict. Furthermore, Mazzei failed to articulate in the district court a hearsay exception or exclusion pursuant to which admission of the affidavit would have been proper. Finally, [*6]  denial of a motion for a new trial on weight-of-the-evidence grounds is not subject to appellate review. Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178, 1199 (2d Cir. 1995), modified on other grounds, 85 F.3d 49 (2d Cir. 1996).

We have considered Mazzei's remaining arguments and find them to be without merit. For the reasons stated herein and in the accompanying opinion, the judgment of the district court is AFFIRMED.

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