Plaintiff Awarded Adverse Inference Instruction for Spoliation of ESI in New York Commercial Litigation Case
In Oorah, Inc. d/b/a Cucumber Communications v. Covista Communications, Inc.et. al., Case No. 652316/2011 (Supreme Court of New York, New York County, Aug. 23, 2016), the parties asserted claims against each other for breach of contract for failure to make payments due under their agreements. Plaintiff also asserted breach of fiduciary duty claims against Defendant Covista. After discovery, the parties filed cross-motions for summary judgment, and Plaintiff filed a Motion for Sanctions against Covista, alleging that Covista destroyed ESI on several servers it sold to Defendant Birch during the case and alleging that the loss of the information deprived Plaintiff of its ability to prove its claims.
Plaintiff served document requests in 2012, and Covista did not submit its responses until nearly a year later in January 2013. In March 2013, Covista sold its assets to Birch, and in connection with the sale, Covista’s servers were “rendered non-operational”. Covista failed to disclose the asset sale and the destruction of ESI from its servers until after Plaintiff filed a Motion to Compel six months after the fact and Covista submitted an affidavit of its accountant that the servers had not been operational since March 2013. No testimony was offered about efforts to search the servers for documents; it later came out that Birch’s standard procedure was to erase any servers it acquired.
Under New York law, spoliation sanctions are warranted if the spoliating party had a duty to preserve evidence and destroyed the evidence with a culpable state of mind. The party seeking sanctions must show that the evidence was relevant to its claims or defenses. The court found that Covista could make no argument against the fact that it had a duty to preserve the evidence, did not preserve the evidence, and destroyed the evidence in a manner that was “grossly negligent, if not intentional,” and ordinary negligence is usually sufficient to find a culpable state of mind. The court found that relevance was presumed and granted the motion for sanctions and ordered an adverse inference instruction.