Still Need to Demonstrate Spoliated Materials Were Relevant

June 24, 2015

In the latest of a string of decisions relating to ediscovery spoliation, the First Department, on Jun 11, 2015, reconfirmed a basic principal of a spoliation motion: the party seeking sanctions must demonstrate that the spoliated materials were relevant to their case.  This requirement must be satisfied even if the spoliation was caused by gross negligence.

In AJ Holdings Group LLC v IP Holdings LLC et al., (2015 NY Slip Op 04943 [1st Dept 2015]), which arose from a licensing dispute, the First Department reversed the Trial Court’s spoliation sanctions, which included an adverse inference and an award of the movant’s expert and attorneys’ fees in bringing the motion.  The plaintiff alleged that the defendant improperly terminated its license for “MUDD” branded products so that it could enter into a licensing arrangement with Kohl’s.  The defendant claimed that the plaintiff orally agreed to modify the termination provision in their licensing agreement.

The problem was that the plaintiff failed to properly implement a litigation hold after it was on notice of the potential litigation and destroyed its internal emails.  In the words of the First Department:

Plaintiff’s failure to ensure that its principals, who were all involved in the instant transactions, preserved their emails on various accounts used by them, and its failure to implement any uniform or centralized plan to preserve data or even the various devices used by the “key players” in the transaction, demonstrated gross negligence with regard to the deletion of the email.

The Court’s analysis did not end there.  The grossly negligent spoliation only gave rise to a rebuttal presumption that the spoliated materials were relevant.  The defendant in AJ Holdings, rebutted the presumption by demonstrating that the defendant’s claimed defense – the oral modification – necessarily turned on communications to or with defendant’s, not plaintiff’s internal communications.  Again, in the words of the First Department:

because defendants can have only relied on communications they received from plaintiff to establish this defense, there is no sense in which the deleted internal emails of plaintiff would be relevant.  As such, it was error to impose spoliation sanctions.

The lesson for the practitioner is that when bringing a spoliation motion one must not forget to demonstrate the relevancy of the spoliated materials, which cannot be taken for granted.