Never far from the spotlight, U.S. District Judge Shira Scheindlin (S.D.N.Y.), author of the landmark Zubulake and Pension Committee opinions, dramatically overturned a U.S. Magistrate’s previous opinion in Sekisui American Corp. v. Hart, No. 12 Civ. 3479 (SAS) (FM), 2013 WL 4116322 (S.D.N.Y. Aug. 15, 2013). In doing so, she has asserted that the plaintiffs in this action were deserving of an adverse inference and monetary sanctions for gross negligence for willfully destroying evidence and failing to issue an adequate litigation hold.

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The 32-page ruling by the influential jurist presents a forceful rejection of trends from some courts that required prejudice to be demonstrated in order to impose severe sanctions. In reversing U.S. Magistrate Frank Maas’s June opinion in Sekisui, Judge Scheindlin deemed the facts in this case neither required bad faith nor prejudice for an adverse inference.

Judge Scheindlin references Residential Funding as the controlling law in the Second Circuit on adverse inference instructions (Footnote 47) which requires a three-part test including: 1) an obligation to preserve, 2) culpable state of mind, and 3) relevance of the spoliated evidence. To the first point, the facts of the case show that the plaintiff Sekisui failed to preserve information by failing to issue a litigation hold for 15 months and further failing to instruct a third-party vendor to preserve key custodian emails a further 6 months after that which “constitutes gross negligence in these circumstances.” (p.23) Moreover, the court found that evidence was “willfully destroyed.” (p.20)

Regarding a culpable state of mind, the court found that gross negligence “satisfies the culpability requirement (p.15 citing Chin v. Port Authority). On the topic of relevance, the court states that “[w]hen evidence is destroyed willfully, the destruction alone ‘is sufficient circumstantial evidence from which a reasonable fact finder could conclude that the missing evidence was unfavorable to that party.’” (p.16 citing Residential Funding) Judge Scheindlin went on to say that “when evidence is destroyed willfully or through gross negligence” that “prejudice is presumed.” (p.18)

Judge Scheindlin’s reversal sums up the court’s findings:

“Because I find it clearly erroneous and contrary to law, the Memorandum Decision is reversed insofar as it refused to impose sanctions on Sekisui for the destruction of ESI. As discussed, Sekisui (1) willfully and permanently destroyed the ESI of at least two key players in this litigation; (2) failed to impose a litigation hold for more than a year after the duty to preserve arose, despite the fact that Sekisui is the Plaintiff in this action and, as such, irrefutably knew that litigation could arise; and (3) failed to advise its IT vendor of such litigation hold for nearly six months after (belatedly) imposing such hold. Accordingly, the Harts’ request for an adverse inference jury instruction is granted.” (p.28)

Now, let’s turn to Footnote 51 in Judge Scheindlin’s Sekisui opinion. It’s more than a mere citation but rather a definitive statement of her opposition to the proposed amendment to Rule 37(e) which would limit sanctions in cases of spoliation. Here is what she had to say:

I do not agree that the burden to prove prejudice from missing evidence lost as a result of willful or intentional misconduct should fall on the innocent party. Furthermore, imposing sanctions only where evidence is destroyed willfully or in bad faith creates perverse incentives and encourages sloppy behavior. Under the proposed rule, parties who destroy evidence cannot be sanctioned (although they can be subject to “remedial curative measures”) even if they were negligent, grossly negligent, or reckless in doing so. In any event, the proposed rule has not been adopted.

Judge Scheindlin once again has asserted her authority as one of the most influential voices from the bench in Sekisui by reversing the magistrate’s previous order and citing the Second Circuit’s current controlling law in supporting her third adverse inference sanction for spoliation. It will be interesting to see how this latest salvo from the Southern District of New York influences the courts there and in other parts of the country.

Further Reading