| Sarach v M&T Bank Corp. |
| 2016 NY Slip Op 04820 [140 AD3d 1721] |
| June 17, 2016 |
| Appellate Division, Fourth Department |
[*1]
| Stephen Sarach, Respondent, v M&TBank Corporation, Appellant. |
Lipsitz Green Scime Cambria LLP, Buffalo (Diane M. Perri Roberts of counsel), fordefendant-appellant.
Paul William Beltz, P.C., Buffalo (William Quinlan of counsel), forplaintiff-respondent.
Appeal from an order of the Supreme Court, Erie County (Catherine R. NugentPanepinto, J.), entered May 28, 2015. The order granted plaintiff's motion to strikedefendant's answer and affirmative defenses.
It is hereby ordered that the order so appealed from is modified on the law byvacating the sanctions imposed and reinstating the answer and affirmative defenses, andplaintiff is granted an adverse inference charge as a sanction under CPLR 3126, and asmodified the order is affirmed without costs in accordance with the followingmemorandum: Plaintiff commenced this action on March 1, 2012, for injuries heallegedly sustained when he slipped and fell on ice on March 23, 2009, as he waswalking into defendant's bank in Buffalo, New York. On August 10, 2010, prior to thecommencement of the action, plaintiff sought an order pursuant to CPLR 3102 (c) forpre-action disclosure and preservation of evidence. Defendant opposed plaintiff's requestfor any pre-action disclosure, but represented to Supreme Court that it had voluntarilyundertaken preservation of certain evidence, including accident reports, photographs, andsurveillance videotapes, and ultimately "consent[ed] to an order of preservation." OnOctober 29, 2010, the court granted plaintiff's application and ordered defendant topreserve, inter alia, all "photographs [and] video tapes, including but not limited tosecurity and surveillance video related to the subject accident." During discovery afterthe action was commenced, plaintiff requested, inter alia, surveillance films related to thesubject accident, and defendant responded that those materials had not been preserved.Thereafter, on July 30, 2014, plaintiff brought a motion pursuant to CPLR 3126 to strikedefendant's answer on the ground that defendant had violated the court's 2010 order ofpreservation. The court granted plaintiff's motion and struck defendant's answer andaffirmative defenses. Defendant appeals.
Initially, we agree with plaintiff that a sanction was warranted inasmuch as defendant"wilfully fail[ed] to disclose information" that the court had ordered to be preserved(CPLR 3126). Nevertheless, we conclude that the court abused its discretion in strikingdefendant's answer and affirmative defenses. It is well established that "a less drasticsanction than dismissal of the responsible party's pleading may be imposed where[,] [ashere,] the loss does not deprive the nonresponsible party of the means of establishing hisor her claim or defense" (Marro v St. Vincent's Hosp. & Med. Ctr. of N.Y.,294 AD2d 341, 342 [2002]). Indeed, we note that the record does not demonstrate thatthe plaintiff has been " 'prejudicially bereft' " of the means of prosecutinghis action (Rodman v ArdsleyRadiology, P.C., 80 AD3d 598, 599 [2011]). Thus, we conclude that anappropriate sanction is that an adverse inference charge be given at trial with respect tothe unavailable surveillance footage (see Mahiques v County of Niagara, 137 AD3d 1649, 1653[2016]; Jennings v OrangeRegional Med. Ctr., 102 AD3d 654, 656 [2013]; Gogos v Modell's Sporting Goods,Inc., 87 AD3d 248, 254-255 [2011]), and we therefore modify the orderaccordingly.
Our dissenting colleague agrees that a "remedy is necessary," but disagrees with the[*2]sanction we have imposed, our analysis in reachingthat sanction, and ultimately our directive to the court on how to effectuate the sanction.In our view, our resolution of this case requires us simply to determine whetherdefendant violated an order and whether such violation requires a sanction pursuant toCPLR 3126. The dissent refers to the "minimal prejudice suffered by plaintiff in nothaving been able to inspect the surveillance video in question." That reference overlooksthe undisputed fact that plaintiff sought an order pursuant to CPLR 3102 (c) forpre-action disclosure, and counsel for defendant not only volunteered to preserve certainitems, including surveillance video related to the subject accident, but "consent[ed] to anorder of preservation." Naturally, the court then granted the relief requested by plaintiff,and defendant never challenged the resulting order. Under those circumstances, we areunable to conclude that defendant's failure to comply with the order was anything butwilful. As for our dissenting colleague's concern with respect to the form of the adverseinference charge, we anticipate that the court will follow the Pattern JuryInstructions.
All concur except Curran, J., who dissents and votes to modify in accordance withthe following memorandum.
Curran, J. (dissenting). I respectfully dissent from the majority's conclusion that"defendant 'wilfully fail[ed] to disclose information' that the court had ordered to bepreserved (CPLR 3126)." I also disagree with the sanction imposed. Nevertheless, Iagree that a remedy is necessary to cure the minimal prejudice suffered by plaintiff in nothaving been able to inspect the surveillance video in question. For the reasons set forthbelow, I would modify Supreme Court's order, vacate the sanction imposed, reinstate theanswer, and preclude defendant from introducing evidence at trial in its direct caseregarding the contents of the surveillance video. I also would remit for a hearingpursuant to part 130 of the Rules of the Chief Administrator of the Courts (see 22NYCRR 130-1.1 et seq.) to determine whether defendant's counsel engaged in"[f]rivolous conduct" (22 NYCRR 130-1.1 [c]) warranting an award of costs or sanctionsbased on his affidavit stating that defendant had "already voluntarily taken steps topreserve (the surveillance video) without any loss of evidence."
Plaintiff alleges that he slipped and fell on ice on March 23, 2009, as he was walkinginto defendant's main branch in downtown Buffalo, New York. Plaintiff asserts that theice was created by defendant because it was negligently operating its outside fountain infreezing temperatures, and plaintiff slipped on an ice patch next to the fountain.
As noted by the majority, on October 29, 2010, the court granted plaintiff'sapplication to preserve, inter alia, "video tapes" and "security and surveillance videorelated to the subject accident" (hereafter, preservation order). It was in response to thisapplication that defendant's counsel made the representation assuring that evidence hadbeen voluntarily preserved.
The action was commenced on March 1, 2012, and document discovery began in2012 and 2013. On June 4, 2014, defendant's counsel sent a letter to plaintiff's counselindicating that the only surveillance videos and photographs that had been kept pursuantto defendant's normal retention policies were two photographs taken by the securityofficer on the date of the accident, a still photograph from the surveillance video on thedate of the accident, and four still photographs from the surveillance video on March 27,2009, when plaintiff returned to the bank seeking reimbursement for his medicalexpenses. Defendant indicated that its normal policy is to overwrite the surveillancevideo tapes after 90 days. Thus, defendant claims that, within 90 days after the accident,the surveillance videos were overwritten and reused.
Plaintiff brought the subject motion to strike defendant's answer on July 30, 2014,based solely on the violation of the preservation order. In opposition to the motion,defendant provided an affidavit from an assistant vice-president whose duties includeinspection of records maintained by defendant relating to bodily injury claims andlitigation. The assistant vice-president averred that she conducted a diligent search ofdefendant's records and confirmed that all of the videos and photographs in thepossession of defendant at the time of the preservation order had been produced forplaintiff. Additionally, she averred that the surveillance video from the date of theaccident was overwritten pursuant to defendant's normal business practice approximately14 months before the preservation order was issued. Plaintiff did not contest any of thesesworn statements from the assistant vice-president.
The majority's conclusion that defendant "wilfully" failed to disclose the surveillancevideo was not even argued in plaintiff's spoliation motion. Rather, the motion waspremised on [*3]the other basis for a penalty under CPLR3126, i.e., the violation of a court order. Irrespective of whether the majority's sanction isbased on a "willful failure to disclose" or contumacious behavior in violating a courtorder, the imposition of a penalty pursuant to CPLR 3126 is unfounded here becausedefendant, pursuant to its normal business policy, recorded over the surveillance videomore than a year before the preservation order was entered.
I respectfully submit that the majority has overlooked our precedent applying CPLR3126. The prerequisites for a penalty pursuant to that statute are a party: (1) refusing to"obey an order for disclosure"; or (2) "wilfully fail[ing] to disclose information" (CPLR3126). When faced with a motion alleging "willful, contumacious or bad faith conduct,"our Court analyzes it according to a burden-shifting structure: the movant must establishthat such conduct occurred, "thereby shifting the burden to [the adversary] to offer areasonable excuse" (Allen vWal-Mart Stores, Inc., 121 AD3d 1512, 1513 [2014]; see Cason v Smith, 120 AD3d1554, 1555 [2014], lv dismissed 25 NY3d 1057 [2015]; Hann v Black, 96 AD3d1503, 1504-1505 [2012]; Household Fin. Realty Corp. of N.Y. v Robinson, 68 AD3d1724, 1724 [2009]; Hill vOberoi, 13 AD3d 1095, 1096 [2004]). When the movant seeks to strike theadversary's pleading, as occurred here, our Court requires that there be a "clear showing"(Fox v Eastman Kodak Co., 275 AD2d 921, 921 [2000]) of willful,contumacious, or bad faith conduct, or that such conduct be "conclusively shown" (McFadden v Oneida, Ltd., 93AD3d 1309, 1311 [2012]).
The majority has overlooked our precedent here in two ways. First, it has notconsidered whether defendant's purported willful failure to disclose information that thecourt ordered be preserved, i.e., contumacious behavior, was "conclusively shown" orestablished by a "clear showing," or by "clear and convincing evidence," as would benecessary for contempt (El-Dehdan v El-Dehdan, 26 NY3d 19, 29 [2015]), or toexercise the court's inherent power to preserve the integrity of the judicial system (see CDR Créances S.A.S. vCohen, 23 NY3d 307, 318 [2014]). Second, the majority has failed to mentionthe excuse offered by defendant, i.e., that the surveillance video from the date of theaccident was overwritten pursuant to normal business practices within 90 days afterplaintiff's alleged fall and that defendant was therefore unable to comply with thepreservation order or plaintiff's demand to produce.
Our Court has excused the alleged spoliation of evidence when the evidence wasdestroyed "in good faith before litigation was pending, pursuant to . . .normal business practices" (Raymond v State of New York, 294 AD2d 854, 855[2002]; see Conderman v Rochester Gas & Elec. Corp., 262 AD2d 1068,1070 [1999]). Additionally, "a party cannot be compelled to disclose that which is not inhis or her possession" (Saferstein v Stark, 171 AD2d 856, 857 [1991]). OurCourt also has accepted that an "inability to comply" with a court order may be a "validdefense" to an application for contempt (Matter of Andrew B., 128 AD3d 1513, 1515 [2015]).
The majority is rightfully concerned about the perceived misrepresentation in theaffidavit from defendant's counsel seeming to ensure that the surveillance video had beenpreserved. However, I respectfully submit that these concerns should not cause us tooverlook our precedent and the fundamental facts, which should compel us to concludehere that the evidence was destroyed pursuant to normal business practices and that theevidence was not contumaciously or wilfully destroyed. Thus, a penalty under CPLR3126 is not warranted.
More fundamentally, the majority fails to address the three-prong analysis forspoliation motions adopted by the Court of Appeals in Pegasus Aviation I, Inc. v VarigLogistica S.A. (26 NY3d 543, 547 [2015]). The first prong is whether "the partyhaving control over the evidence possessed an obligation to preserve it at the time ofits destruction" (id. [emphasis added]). The majority's analysis is devoid ofthis required finding. Instead, the majority apparently assumes that the surveillance videostill existed as of the time the preservation order was obtained and after litigationcommenced. The record, however, offers no support for this assumption and is quiteclearly to the contrary. Rather, the record demonstrates that the surveillance video wasoverwritten within 90 days of plaintiff's fall, and plaintiff has not disputed this fact.
While I disagree with the majority's analysis under CPLR 3126, and fault themajority for not adhering to Pegasus, I nevertheless conclude that defendant hada duty to preserve the surveillance video within 90 days of plaintiff's fall. In my view,defendant was on "notice of an impending lawsuit" at the time the surveillance video wasoverwritten (MetLife Auto& Home v Joe Basil Chevrolet, 1 NY3d 478, 484 [2004]). Moreover, thevideo is "matter material and necessary [*4]in theprosecution or defense of an action" (CPLR 3101 [a]). Although defendant indicates thatthe surveillance video from the date of the accident was inspected and that it did notshow plaintiff's fall, plaintiff should not be required to accept that representation withoutan opportunity to inspect the video (see Gogos v Modell's Sporting Goods, Inc., 87 AD3d 248,251 [2011]). Thus, I agree with the majority that a remedy for the missing evidence isappropriate. However, for the reasons discussed below, an adverse inference chargeshould not be given when, as here, the sole basis for the imposition of a penalty isnegligent conduct. Instead, in my view, the more appropriate remedy is "to restorebalance to the litigation" by precluding defendant from introducing at trial evidence ofthe video's content as part of its direct case (Ortega v City of New York, 9 NY3d 69, 76 [2007]).
While the Court of Appeals has indicated that an adverse inference charge, amongother remedies, may be an appropriate sanction or penalty for spoliation (seePegasus, 26 NY3d at 554; Ortega, 9 NY3d at 76), it has not held that all suchremedies are suited to all forms of spoliation, i.e., negligent, grossly negligent, andwillful. Upon a finding that the destruction of evidence was solely the result ofnegligence—such as through normal business practices—thereby fulfillingthe second prong of the Pegasus analysis, i.e., a " 'culpable state ofmind' " (26 NY3d at 547), I submit that an adverse inference charge isinappropriate because it would be inconsistent with its traditional use as an evidentiaryinference that the missing evidence was unfavorable to the spoliator or that destruction ofthe evidence showed consciousness of a weak case.
New York law has long recognized that "[a] party's failure to produce evidence[,]which the party controls and would be naturally expected to introduce, raises the logicalinference that the withheld evidence would prove unfavorable. Armory vDelamirie, 1 Strange (KB) 505, 93 Eng Rep 644 (non-production of a chattel)"(Jerome Prince, Richardson on Evidence § 3-139 at 88 [Farrell 11th ed1995]). Further, "[t]he intentional destruction or mutilation of relevant evidence maygive rise to the inference that the matter destroyed and mutilated is unfavorable to thespoliator . . . The mutilation or destruction is not alone sufficient to serve asa basis for this inference; the act must have been intentional, and the matter mutilated ordestroyed must be shown to be relevant to the issues on the trial . . .Fabrication or deliberate mutilation of evidence or other fraud on the part of a party is acircumstance that may properly be considered by the jury as indicating a weak case"(id. § 3-141 at 94-95).
When evidence has been negligently destroyed, there is no factual basis upon whichto instruct the jury to infer weakness of the spoliator's case or that the evidence wasunfavorable. The federal courts recently grappled with this issue in connection with"electronically stored information" (ESI) and, with respect to ESI, they have rejected anadverse inference charge premised on negligent conduct (see Fed Rules Civ Prorule 37 [e] [2]; see also Steven S. Gensler, 2 Fed Rules of Civ Pro, Rules &Commentary, Appendix A, Rule 37, Advisory Comm Notes, 2015 Amendment, subd [e][2] ["Adverse-inference instructions were developed on the premise that a party'sintentional loss or destruction of evidence to prevent its use in litigation gives rise to areasonable inference that the evidence was unfavorable to the party responsible for lossor destruction of the evidence. Negligent or even grossly negligent behavior does notlogically support that inference. Information lost through negligence may have beenfavorable to either party, including the party that lost it, and inferring that it wasunfavorable to that party may tip the balance at trial in ways the lost information neverwould have. The better rule for the negligent or grossly negligent loss of electronicallystored information is to preserve a broad range of measures to cure prejudice caused byits loss, but to limit the most severe measures to instances of intentional loss ordestruction"]).
In reaching this conclusion, the federal courts resolved a dispute among the CircuitCourts of Appeal electing to adopt the reasoning of courts rejecting negligence as a basisfor an adverse inference charge (see e.g. Aramburu v Boeing Co., 112 F3d 1398,1407 [1997]; Vick v Texas Empl. Commn., 514 F2d 734, 737 [1975]), and toreject the reasoning of those courts accepting it (see e.g. Residential Funding Corp. vDeGeorge Fin. Corp., 306 F3d 99, 108 [2002]). This rejection of ResidentialFunding may have significant ramifications for New York law because that case, asfollowed in Zubulake v UBS Warburg LLC (220 FRD 212, 220 [2003]), is thebasis for our appellate courts accepting negligence as a form of a " 'culpable stateof mind' " authorizing spoliation sanctions (Pegasus, 26 NY3d at 547; see VOOM HD Holdings LLC vEchoStar Satellite L.L.C., 93 AD3d 33, 45 [2012]; Ahroner v Israel Discount Bank ofN.Y., 79 AD3d 481, 482 [2010]). Nevertheless, [*5]Pegasus is controlling on this issue, and merenegligence is apparently a culpable state of mind in New York for the purpose ofimposing spoliation sanctions.
One of the reasons the federal courts limited the availability of an adverse inferencecharge in the recent amendments to the Federal Rules of Civil Procedure rule 37 (e) wasto address business concerns about over-preservation of ESI (see AlexanderNourse Gross, Note, A Safe Harbor from Spoliation Sanctions: Can an AmendedFederal Rule of Civil Procedure 37(E) Protect Producing Parties?, 2015 Colum BusL Rev 705, 723-724, 754, 763 [2015]). The majority's failure to appreciate suchconcerns, not only in this case, but also in our precedent seemingly employing an adverseinference charge as the compromise remedy of choice (see Mahiques v County ofNiagara, 137 AD3d 1649, 1653 [2016]; Koehler v Midtown Athletic Club, LLP, 55 AD3d 1444,1445 [2008]; Tomasello v 64Franklin, Inc., 45 AD3d 1287, 1288 [2007]; Enstrom v Garden Place Hotel, 27 AD3d 1084, 1087[2006]), is another reason for my dissent.
Additionally, even though the majority sua sponte imposes an adverse inferencecharge as a sanction without a request by either party, it blithely leaves it to the trial courtto figure out what the required charge should say and how it will impact the proof at trial.The majority elects not to refer to either PJI 1:77 or PJI 1:77.1 (1A NY PJI3d 1:77 at 130[2016]; 1A NY PJI3d 1:77.1 at 132-133 [2016]), or to some other charge it considers tobe more "tailored" to the facts here (Pegasus, 26 NY3d at 554). However, even acasual citation to PJI 1:77 or PJI 1:77.1, without more, would be insufficient. PJI 1:77 isa "failure to produce" charge and leaves it to the jury to determine whether: (1) theevidence existed; (2) there was a reasonable explanation for it not being produced incourt; and (3) the evidence would have been important or significant to the jury in itsdeliberations. PJI 1:77 is the traditional evidentiary inference permitting the jury to inferthe unfavorability of the missing evidence.
PJI 1:77.1 pertains to the "destruction or spoliation of evidence" and leaves it to thejury to determine whether: (1) the alleged spoliator destroyed, altered, or caused thedisappearance of the evidence; and (2) there was a reasonable explanation for theclaimed destruction, alteration, or disappearance of the evidence. As the comment states,the charges should be modified to remove from the jury those issues that have beenresolved by stipulation or by a judicial finding (see 1A NY PJI3d 1:77 at 132[2016]).
PJI 1:77.1 is obviously the type of charge imposed as a sanction. As the majorityimposes the charge as a penalty under CPLR 3126, it would appear that it is requiring thetrial court to use PJI 1:77.1.
By penalizing defendant with an adverse inference charge based on "willful"conduct, the majority has necessarily determined that the missing surveillance video wasrelevant, i.e., it would have been important to the jury in its deliberations (seePegasus, 26 NY3d at 547 ["(w)here the evidence is determined to have beenintentionally or wilfully destroyed, the relevancy of the destroyed documents ispresumed"]). However, as noted above, there is no support for this conclusion in therecord and, in fact, the record is to the contrary. The only evidence in the record as to theimportance of the video, or lack thereof, is the representation from defendant's counselthat the video was reviewed and that it did not capture plaintiff's fall. Thus, the majorityspeculates as to the actual content of the video and imposes that speculation on thejury.
The majority also fails to address whether defendant will be permitted to presentevidence as to the circumstances of the video's destruction and as to the video's contentsto the extent it supports the reason for permitting its destruction pursuant to normalbusiness practices, i.e., a reasonable explanation. The majority thereby overlooks theembedded best evidence rule objection this testimony may evoke (see e.g. People v Cyrus, 48AD3d 150, 159 [2007], lv denied 10 NY3d 763 [2008]) and, if sustained, theprejudice to defendant in being unable to support its alleged reasonable explanation forthe video's destruction.
Lastly, requiring the trial court to deliver an undefined "adverse inference charge"will undoubtedly require the parties to conduct a "trial within a trial" addressing thespoliation issue. This will prolong the trial process and subject the jury to a tangentialissue.
In the absence of clear direction from our Court, I foresee confusion and randomnessat [*6]the trial court level leading to further grounds forappeal. For all of these reasons, I dissent from the majority's decision and would insteadmodify the order and remit the matter as described above. Present—Centra, J.P.,Carni, DeJoseph, Curran and Scudder, JJ.