Toussie v. County of Suffolk, Case No. CV-01-6716 (E.D.N.Y. December 21, 2007)

This case centers on allegations that the County of Suffolk denied the plaintiffs the opportunity to purchase parcels of real estate at auction. The case began in 2001 and was consolidated with a second case filed in 2005. During the course of the litigation, it became clear that the County had failed to put a legal hold in place. The court went through several hearings with the parties in an effort to establish costs and procedures for restoring and searching backup tapes. Eventually, 417 backup tapes were restored and searched. Some, however, were not, including some tapes that were destroyed as a result of a flood in the County building’s basement. Plaintiffs argued that because of the failure to preserve, numerous emails had been deleted.

The court analyzed spoliation and sanctions under the Second Circuit standard, noting that:

[T]he sanction should be designed to: (1) deter parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore “the prejudicial party to the same position he would have been in absent the wrongful destruction of evidence by the opposing party.”

(quoting West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999)). The court went on:

A party seeking an adverse inference instruction (or other sanctions) 4 based on the spoliation of evidence must establish the following three elements: (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a 'culpable state of mind' and (3) that the destroyed evidence was 'relevant' to the party's claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.

(quoting Zubulake, 229 F.R.D. 422, 430 (S.D.N.Y. 2004)).

The court found there was no question but that the County had an obligation to preserve relevant evidence as of the day the lawsuit was filed, and that the County had breached that obligation, even after receiving document production requests. The second prong of the test, a culpable state of mind, can be "satisfied by showing that evidence was knowingly . . . or negligently" destroyed. (quoting Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 108 (2d Cir. 2002). Plaintiffs argued that counsel’s failure to inform key employees of the need to maintain relevant emails left “key employees … free to delete e-mails from the hard drives, back up procedures remained unchanged, and highly relevant e-mail exchanges were lost.” The court agreed, in “limited respects”:

The law is very clear that the failure to implement a litigation hold at the outset of litigation amounts to gross negligence. Heng Chan v. Triple 8 Palace, 2005 U.S. Dist Lexis 16520 * 19 (S.D.N.Y. Aug. 11, 2005) (Francis, M.J.); Zubulake, 220 F.R.D. at 221. In fact, once a litigation hold is implemented, counsel is then required to oversee compliance with the litigation hold and to monitor the party's efforts to retain and produce relevant documents. Zubulake, 229 F.R.D. at 432. Although the County may have, as they claim, mitigated, in part, the failure to preserve by restoring some of the tapes, there is no question that key employees were free to delete documents and e-mails were destroyed when the County's basement flooded.

The court went on, however, to note that emails were being preserved on backup tapes, and the law was unclear in 2001 regarding the obligation to maintain backup tapes.

Thus, while the County's failure to implement a litigation hold amounts to gross negligence, its failure to preserve all potentially relevant back up tapes was "merely negligent." In either case, the second requirement for the imposition of spoliation sanctions is met.

The key to the decision was in the third prong of the test:

To obtain an adverse inference, the destroyed evidence must “have been of the nature alleged by the party affected by the destruction.” In other words, the plaintiffs here must present extrinsic evidence tending to show that the destroyed e-mails would have been favorable to their case. Zubulake, 220 F.R.D. at 221 (citing Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 77 (S.D.N.Y. 1991) (“Where, as here, there is no extrinsic evidence whatever tending to show that the destroyed evidence would have been unfavorable to the spoliator, no adverse inference is appropriate.”)).

The court rejected plaintiffs’ argument that the County’s gross negligence in failing to implement a litigation hold is sufficient, standing alone, to establish relevance.

There is no question that the County 's early foot dragging delayed this litigation and that the County failed to implement a litigation hold. This conduct, however, does not rise to the egregious level seen in cases where relevance is determined as a matter of law.

Equally unavailing was plaintiffs’ attempts to establish improper motivations and retaliatory conduct through emails that actually had been produced. The court found that the emails favored the County, because they established that the County had refused to deal with the plaintiffs due to an ongoing federal criminal investigation of the plaintiffs’ company, that the County was concerned about the plaintiffs’ business practices, and that the County had barred plaintiffs from the land auctions because of past and present business practices. Simply put, there was no reason to believe that any of the deleted or lost emails would have provided additional support for plaintiffs’ claims.