Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC - 685 F. Supp. 2d 456 (S.D.N.Y. 2010)

Rule:

Relevance and prejudice may be presumed when a spoliating party acted in bad faith or in a grossly negligent manner. Where a party destroys evidence in bad faith, that bad faith alone is sufficient circumstantial evidence from which a reasonable fact finder could conclude that the missing evidence was unfavorable to that party. Although many courts in the Southern District of New York presume relevance where there is a finding of gross negligence, application of the presumption is not required. However, when the spoliating party was merely negligent, the innocent party must prove both relevance and prejudice in order to justify the imposition of a severe sanction. The innocent party may do so by adducing sufficient evidence from which a reasonable trier of fact could infer that the destroyed or unavailable evidence would have been of the nature alleged by the party affected by its destruction. In other words, the innocent party must present extrinsic evidence tending to show that the destroyed e-mails would have been favorable to its case. Courts must take care not to hold the prejudiced party to too strict a standard of proof regarding the likely contents of the destroyed or unavailable evidence, because doing so would allow parties who have destroyed evidence to profit from that destruction. 

Facts:

The administrator had been retained by the funds to perform certain administrative duties and was named as a defendant in the securities litigation. The administrator alleged that there were substantial gaps in plaintiffs' document productions required during discovery, pursuant to Fed. R. Civ. P. 26. After additional depositions and declarations were submitted, the administrator moved for sanctions.

Issue:

Did the plaintiffs' conduct require the court to impose a sanction for the spoliation of evidence?

Answer:

Yes.

Conclusion:

The court concluded that seven plaintiffs were negligent and six plaintiffs were grossly negligent in meeting their discovery obligations and that as a result, sanctions were required. Plaintiffs had not purposefully destroyed evidence but failed to timely institute written litigation holds and engaged in careless and indifferent collection efforts after the duty to preserve arose. The conduct was not sufficiently egregious for dismissal of plaintiffs' claims. The appropriate sanction was a rebuttable adverse inference instruction that was intended to alleviate the harm suffered by the administrator, and the harshness of the instruction could be determined by the nature of each plaintiff's conduct. The administrator was also entitled to monetary sanctions.