Second Circuit Rejects “the Notion that a Failure to Institute a ‘Litigation Hold’ Constitutes Gross Negligence Per Se”

Chin v. Port Authority of New York & New Jersey, — F.3d —, 2012 WL 2760776 (2d Cir. July 10, 2012)

On appeal, Plaintiff argued that Defendant’s failure to issue a litigation hold “amounted to gross, rather than simple, negligence” and that the District Court erred in denying a motion for sanctions in the form of an adverse inference.  Finding the District Court did not abuse its discretion, the Circuit Court rejected "the notion that a failure to institute a ‘litigation hold’ constitutes gross negligence per se.” 

Summarizing broadly, the plaintiffs’ motion for an adverse inference for Defendant’s spoliation was denied by the District Court.  On appeal, one plaintiff argued that the District Court erred in that decision and that Defendant’s failure to issue a litigation hold as to the at-issue evidence was gross negligence.  The Circuit Court disagreed and found no abuse of discretion.  In so deciding, the court addressed the question of whether failure to institute a litigation hold constitutes gross negligence per se, and determined that it does not:

We reject the notion that a failure to institute a “litigation hold” constitutes gross negligence per se.  Contra Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Secs., LLC, 685 F.Supp.2d 456, 464–65 (S.D.N.Y.2010).  Rather, we agree that “the better approach is to consider [the failure to adopt good preservation practices] as one factor” in the determination of whether discovery sanctions should issue.  Orbit Comm’ns, Inc. v. Numerex Corp., 271 F.R.D. 429, 441 (S.D.N.Y.2010).  Moreover, as the district court recognized, see Port Auth. I, 601 F.Supp.2d at 570, a finding of gross negligence merely permits, rather than requires, a district court to give an adverse inference instruction.  See Residential Funding Corp., 306 F.3d at 109; Byrnie, 243 F.3d at 108.