April 2012 Spoliation Update

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The First Department makes a significant holding regarding spoliation of evidence by definitively finding that a party must take steps to preserve evidence and documents once it “reasonably anticipates litigation.”

In Voom HD Holdings, L.L.C. v EchoStar Satellite, L.L.C., 2012 NY Slip Op 00658 [1st Dept 2012], the Appellate Division, First Department, upheld sanctions against the defendant, EchoStar Satellite, for destroying relevant emails after the plaintiff filed a lawsuit against it.  For those unfamiliar, spoliation is the intentional or negligent withholding, hiding, altering, or destroying of evidence potentially relevant to a legal proceeding and is a sanctionable offense.  The sanctions can include striking of pleadings, adverse court orders as to the subject or issue the evidence would have had a bearing on or an adverse inference jury instruction.  The adverse inference instruction allows the jury to assume that the evidence which existed, but is now gone, would have been favorable to the party that did not lose or destroy it and unfavorable to the party that did lose or destroy it.

The standard for evidence retention has long been that the instant a party reasonably anticipates litigation it must immediately suspend any routine document destruction policy and put a “litigation hold” in place to ensure that any relevant evidence is preserved.  The court in Voom has now held that standard is applicable to electronic data as well as paper documents and other evidence.  In short, this standard applies to all evidence in all cases as every appellate department in the state is in agreement with this standard.

The defendant in Voom argued that a litigation hold should only be in place upon the filing of an actual lawsuit.  The First Department disagreed stating that such a rule “ignores the reality of business relationships” and the manner in which they break down.  This case arose from a contractual dispute when EchoStar sought to terminate an agreement to broadcast Voom channels without proper cause.  The court held that at the time the defendant anticipated that its attempt to void the contract with the plaintiff would result in litigation, all emails and other electronic data must be “held” pending any potential claim.  In this case, even though the defendant surely should have anticipated litigation over the contract, the defendant continued to destroy emails for months after the lawsuit was filed.

Interestingly, the First Department also noted that in an earlier lawsuit against EchoStar, the company was reprimanded for acting in bad faith when it also destroyed relevant documents.  Going forward the defendant’s negligent or intentional destruction of evidence will be a nightmare for them at trial because the jury will be permitted to form an opinion that if the evidence was helpful to EchoStar, that they would not have lost or destroyed it.  The fact that Echostar did destroy the evidence certainly infers that it did so because the evidence was particularly damming.

Based on this ruling, it is clear that regardless of what type of evidence may exist for a particular type of case – tires, work schedules, contracts, store surveillance videos, x-rays, emails or other electronic data – that the safest course of action is to preserve any evidence the instant it is possible that it would become relevant to litigation, even if harmful to a case, otherwise the courts in New York will come down very hard on a party for failing to foresee litigation and preserve evidence relevant thereto.  Indeed, the cover up is always worse than the crime.  To read the entire decision, please click here.