Second Circuit Refuses to Find Failure to Issue Litigation Hold Gross Negligence Per Se

            Reviewing a motion for sanctions for spoliation of evidence, the United States Court of Appeal for the Second Circuit rejected the argument that failure to issue a litigation hold constitutes gross negligence per seChin v. Port Authority, Nos. 10-1904-cv(L), 10-2031-cv(XAP), 2012 U.S. App. LEXIS 14088, at *68 (2d Cir. July 10, 2012).  Instead, the Second Circuit held that failure to issue a litigation hold is just one factor in the spoliation analysis.

            In Chin, the plaintiffs brought an action under Title VII of the Civil Rights Act of 1964 for failure to promote seven police officers of Asian descent. The basis for the plaintiffs’ motion for sanctions was the destruction of promotion folders that had been used as part of the relevant promotion decisions.  The folders were destroyed at some point after the defendant received notice of the plaintiffs’ EEOC charge. In their motion, the plaintiffs sought an adverse inference instruction from the district court. The district court denied the motion finding that the plaintiffs had ample alternative sources of evidence and that the destruction of the promotion folders was negligent, but not grossly so.

            On appeal, the plaintiffs argued that failure to issue a litigation hold amounted to gross, rather than simple, negligence. The Second Circuit rejected this argument, and held that “the better approach is to consider the failure to adopt good preservation practices as one factor in the determination of whether discovery sanctions should issue.” Id. (internal quotations omitted).

            Furthermore, the Second Circuit also noted that even if the defendant’s actions were grossly negligent, the District Court was not required to give an adverse inference instruction. Instead, “a ‘case-by-case approach to the failure to produce relevant evidence,’ at the discretion of the district court, is appropriate.” Id. (quoting Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 108 (2d. Cir. 2002)).

            It is important to note the Chin decision does not indicate that parties should stop issuing litigation holds altogether. The absence or presence of a litigation hold is still a factor in determining whether a party’s preservation practices were so flawed as to justify sanctions. However, the decision should provide relief to any party that inadvertently fails to issue a litigation hold and faces a motion for sanctions. The Chin decision makes clear that a party’s failure to issue a litigation hold is not sufficient in and of itself to prove gross negligence and the applicability of sanctions.

            For more on Litigation Holds, including what should be in them and when they are necessary, please see these two previous posts by Rachel Fendell: Litigation Holds, Take 1 and Litigation Holds, Take 2.

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