eDiscovery Daily Blog

Court Orders Sanctions Against Defendant for Spoliation of Emails and Other Documents: eDiscovery Case Law

Now, that we’ve recapped last year’s cases, let’s start covering cases for this year…

In Ocwen Loan Servicing, LLC v. Ohio Public Employees Retirement System, No. 654586/2012 (Supreme Court of New York, New York County, December 7, 2015), the Court, determining that the defendant had spoliated data, found that the plaintiff had not demonstrated sufficient facts to warrant striking the defendant’s affirmative defenses, but opted to order an adverse inference instruction and also ordered the defendant to pay the plaintiff’s attorneys’ fees and costs in preparing the instant motion for sanctions.

Case Background

In this action to recover principal distributions from the defendant, the defendant, at the direction of in-house counsel, distributed a written litigation hold notice to certain employees who were deemed likely to possess documents relevant to the dispute.  In addition, the defendant’s IT department saved emails in an enterprise email archiving system.  Despite the preservation, the defendant objected to the plaintiff’s discovery requests and did not produce any responsive documents during a period where disputes over the plaintiff’s motion for summary judgment were happening, until sometime after the court instructed the parties to go forward with discovery.  The defendant ultimately produced documents responsive to the plaintiff’s discovery requests.

However, several months into discovery, the defendant revealed that due to a “synchronization error,” emails that were preserved in the email archiving system that were subject to the ligation hold were accidentally purged, resulting in the content of 101 responsive emails being lost (though the defendant was able to recover and produce metadata from the lost emails).  Due to that issue and other instances of supposed spoliation by the defendant (including one email that was ultimately produced by another party that had communicated with the defendant), the plaintiff filed an instant motion for sanctions, asking the Court to strike the defendant’s affirmative defense of detrimental reliance, or, in the alternative, order a preclusion sanction or adverse inference.

Court’s Ruling

Finding that the duty to preserve began as early as April 2011 and no later than May 2011, the Court found “that OPERS’ had control of – and access to” lost or destroyed ESI in May 2011” and that the defendant wiped the computer of a key retired employee after the plaintiff had rejected a settlement offer from the defendant.  The court also found that the plaintiff had shown that at least some of the deleted ESI was relevant to the case.

Despite this, the court opted for the lesser sanction sought by the plaintiff, noting:

“Here, Ocwen has demonstrated prejudice as a result of OPERS’ failure to preserve France’s ESI and Bloomberg messages. However, the “extreme sanction” of striking OPERS’ affirmative defense is not appropriate in this case because Ocwen was able to obtain some evidence to disprove detrimental reliance, namely the August 2009 message sent from Gleacher to France…Since the loss of potentially relevant ESI is not fatal to Ocwen’s rebuttal of OPERS’ sixth affirmative defense, the imposition of an adverse inference as to that charge is appropriate and ‘reflects an appropriate balancing under the circumstances.’”

As a result, the court ordered an adverse inference instruction against the defendant and also ordered the defendant to pay the plaintiff’s attorneys’ fees and costs in preparing the instant motion for sanctions.

So, what do you think?  Was that the appropriate sanction?  Or should the defendant have been sanctioned at all?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine. eDiscovery Daily is made available by CloudNine solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Daily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.