Second Circuit Clarifies Standards for Spoliation Sanctions

New York litigators should note the Second Circuit’s decision in Chin v. Port Authority of New York & New Jersey, — F.3d —, 2012 WL 2760776, Nos. 10-1904-cv(L), 10-2031-cv(XAP) (2d Cir. July 10, 2012).  Chin rejected the reasoning expressed in the Pension Committee case, in which Judge Scheindlin held that the failure to issue a written litigation hold constituted per se gross negligence.  The Second Circuit rejected Pension Committee’s absolute rule and found that the level of culpability depended on all the facts and circumstances.  Even if there had been gross negligence, the Second Circuit held that a trial court has the discretion whether to award any spoliation sanctions.  Thus, the Second Circuit affirmed the trial court’s decision to deny any sanction when the spoliated evidence – promotion records – did not matter because there was ample other evidence about who got promoted and why.

The Second Circuit’s holding is welcome because the Pension Committee rule was too harsh and inflexible. For small companies and individual plaintiffs, a written litigation hold may not necessarily be more effective than oral ones.  Furthermore, an automatic finding of gross negligence encourages parties to seek sanctions even if there had been no real prejudice.  This was particularly so because Pension Committee stated that courts presume that the spoliated evidence was relevant and its destruction was prejudicial if there was gross negligence.  This rule had made it too easy for a party to play “gotcha” and obtain an adverse inference instruction that may have been unwarranted.  Finally, by adopting an abuse of discretion standard of review, the Second Circuit empowers trial courts to be more decisive to address discovery abuses.

As a practical matter, written litigation holds remain important and a best practice.   And this decision does not give any reason for counsel and parties to relax their diligence.   To be sure, courts can issue sanctions even when parties act in good faith but negligently.


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