No Sanctions for Deletion of Email Folder belonging to “Perhaps the Key Witness” Absent Evidence of Prejudice

Sekisui Am. Corp. v. Hart, No. 12 Civ. 3479(SAS)(FM), 2013 WL 2951924 (S.D.N.Y. June 10, 2013)

In this case, the court considered Plaintiff’s “at least” negligent deletion of “the entire active email folder of an important witness—perhaps the key witness—at a time when [it] obviously knew that it might commence a lawsuit,” but declined to impose the requested adverse inference—or any sanction—absent a sufficient showing that “relevant information potentially helpful to [the defendants] [wa]s no longer available.”

“This case arises out of a corporate marriage gone bad.”  In 2009, Plaintiff acquired a privately-held company (“ADI”) controlled by Defendants Richard Hart (“Hart”) and his wife and initially employed Hart as its chief executive officer.  In October 2010, however, Plaintiff terminated Hart’s employment and informed Defendants of its intent to seek damages for “various alleged wrongs.”  In May 2012, Plaintiff filed a complaint for damages.

Despite notifying Defendants of its intent to seek damages in October 2010, Plaintiff failed to implement a litigation hold until January 2012 and also failed to notify the outside vendor managing its computer operations that it needed to preserve relevant electronically stored information until nearly three months after the suit was filed.  In the interim, in 2011, Plaintiff’s human resources and office manager (“Taylor”) authorized the vendor to “erase the email folders of several ADI employees, including Hart, who obviously was a key player” in the acquisition.  “The ostensible reason for Taylor’s decision to delete Hart’s emails was that ADI’s servers ‘were regularly experiencing problems due to storage availability issues.’”  According to Plaintiff, the deletions were not intended to spoliate evidence, but rather were a “good faith effort to free up space” on the email server “which was continuing to receive junk mail in Hart’s account despite his departure from the firm.”  Before the deletion, Taylor printed any emails she deemed “pertinent to the company.”  Plaintiff conceded the deletion was a “serious mistake” but noted that its “counsel made full disclosure” after learning of Taylor’s actions.  Moreover, after its counsel “learned of the destruction,” Plaintiff “undertook a search of several alternative sources” and recovered at least 36,000 “Hart emails.”

Defendants did “not view Taylor’s actions quite as benevolently” and noted that an email between employees of the outside vendor, sent only days before the suit was filed, indicated that Taylor had asked for Hart’s mailbox to be deleted several months prior, that she was “very certain that she wanted it deleted,” despite being asked repeatedly if she was “sure,” and that the vendor’s employee “thought” she had heard that those emails had been “combed through” by the plaintiff’s lawyers before Taylor asked for the folder to be deleted.  In a later email, one of the same employees indicated that the vendor had recommended against deletion of the mailbox, but was instructed to delete it.

Addressing Defendants’ motion for an adverse inference, the court indicated that a moving party must establish that the party with control of the evidence had an obligation to preserve it, that the evidence was destroyed with a culpable state of mind and that the evidence was “‘relevant’ to the moving party’s claim or defense, ‘such that a reasonable trier of fact could find that it would support that claim or defense.'”  The court further stated that although negligence could warrant sanctions, a court should never impose spoliation sanctions absent evidence that the movant was prejudiced.  Notably, in footnote, the court briefly discussed a proposed amendment to Fed. R. Civ. P. 37(e) that would preclude sanctions for merely negligent destruction and would instead allow sanctions “only if the court finds that the party’s actions [a] caused substantial prejudice in the litigation and was willful or in bad faith; or [b] irreparably deprived a party of any meaningful opportunity to present or defend against the claims in the litigation.”

In the present case, the court concluded that the deletion of Hart’s email folder was “at least” negligent and that the failure to implement a litigation hold resulted in the vendor’s ability to “delete the entire active email folder of an important witness—perhaps the key witness—at a time when Sekisui obviously knew that it might commence a lawsuit seeking substantial monetary damages.”  The court indicated, however, that Defendants must also show that the emails were relevant and, “more fundamentally, that they suffered prejudice.”

Although the court acknowledged the potential relevance of the lost emails, it also concluded that they would have been of “limited utility.”  The court also noted Plaintiff’s efforts to “ameliorate any potential prejudice,” namely the search for responsive emails in other locations, and Defendants’ failure to identify “so much as a single relevant email” that Plaintiff failed to produce.  Thus, although the court acknowledged that Defendants had established a sufficiently culpable state of mind, they did not show, “as they must, that relevant information potentially helpful to them [wa]s no longer available.”  Accordingly, their request for an adverse inference was denied.