Commercial Division Blog

Posted: December 22, 2015 / Categories Commercial, Discovery/Disclosure

Adverse Inference Charge Appropriate Even Where Evidence Negligently Destroyed

On December 15, 2015, the Court of Appeals issued a decision in Pegasus Aviation I, Inc. v. Varig Logistica S.A., 2015 NY Slip Op. 09187, reviewing the standard for imposing discovery sanctions and holding that adverse inference charges for spoliation of evidence can be imposed "even in situations where the evidence has been found to have been negligently destroyed."

The Court of Appeals' decision started with a description of the standard:

A party that seeks sanctions for spoliation of evidence must show that the party having control over the evidence possessed an obligation to preserve it at the time of its destruction, that the evidence was destroyed with a culpable state of mind, and that the destroyed evidence was relevant to the party's claim or defense such that the trier of fact could find that the evidence would support that claim or defense. Where the evidence is determined to have been intentionally or wilfully destroyed, the relevancy of the destroyed documents is presumed. On the other hand, if the evidence is determined to have been negligently destroyed, the party seeking spoliation sanctions must establish that the destroyed documents were relevant to the party's claim or defense.

(Internal quotations and citations omitted). It went on to discuss the discretion granted to trial courts to impose spoliation sanctions:

Our state trial courts possess broad discretion to provide proportionate relief to a party deprived of lost or destroyed evidence, including the preclusion of proof favorable to the spoliator to restore balance to the litigation, requiring the spoliator to pay costs to the injured party associated with the development of replacement evidence, or employing an adverse inference instruction at the trial of the action.

(Internal quotations and citations omitted). After reviewing the evidence and the lower courts' assessment of it, the Court of Appeals held:

On this record, we see no reason to disturb the unanimous finding of the lower courts that the MP defendants had sufficient control over VarigLog to trigger a duty on its part to preserve the ESI. Nor is there any basis to disturb the findings of fact by the Appellate Division that the MP defendants were negligent in failing to discharge that duty. The Appellate Division majority erred, however, to the extent that it determined that Pegasus had not attempted to make a showing of relevance and chose to conduct its own analysis of the relevance issue without taking into account Pegasus's arguments in that regard, which were contained in its appellate brief. Thus, although the Appellate Division possesses the authority to make findings of fact that are as broad as the trial court, in this instance, where it all but ignored Pegasus's arguments concerning the relevance of the documents, we conclude that the prudent course of action is to remit the matter to Supreme Court for a determination as to whether the negligently destroyed ESI was relevant to Pegasus's claims against the MP defendants and, if so, what sanction, if any, is warranted.

(Internal quotations and citations omitted). Finally, the Court of Appeals explained that "adverse inference charges have been found to be appropriate even in situations where the evidence has been found to have been negligently destroyed. . . . [A] trial adverse inference sanction would not be akin to granting summary judgment to Pegasus on its alter ego claim, since such a charge is permissive and can be appropriately tailored by the trial court." (Internal quotations and citations omitted).