Duty to Preserve and Preservation Orders Under N.Y. Law
By Mark A. Berman and Hal N. Beerman

Spoliation of evidence applications are becoming increasingly common and, when granted, sanctions can range from directing a monetary payment to the preclusion of evidence or even to the drastic result of striking a pleading.¹ For a claim of spoliation to be asserted, however, it must be established that the party which allegedly "spoiled" the materials had a duty to preserve them.

The general rule is that a person or entity has no duty to preserve and can use and dispose of its property as it sees fit.² Only under certain circumstances does a duty to preserve arise. An attorney should not simply rely upon an adverse party to preserve evidence, most importantly inculpatory materials, but needs to take precautions -- actively and affirmatively -- to ensure that such materials are not destroyed or lost.

MetLife Auto & Home

The New York State Court of Appeals in Metlife Auto & Home v. Joe Basil Chevrolet, Inc.³ held:

. . . MetLife made no effort to preserve the evidence by court order or written agreement. Although MetLife verbally requested the preservation of the vehicle [from the entity that had the vehicle at one point], it never placed that request in writing or volunteered to cover the costs associated with preservation. The burden of forcing a party to preserve when it has no notice of an impending lawsuit, and the difficulty of assessing damages militate against establishing a cause of action for spoliation in this case, where there was no duty, court order, contract or special relationship.⁴

The Court further noted that:

As MetLife acknowledges, it could have sought pre-action disclosure or a temporary restraining order. It also could have bought the car from Royal, offered to pay the costs associated with preservation or commenced suit and issued a subpoena duces tecum to Royal. MetLife did none of these things.⁵

The Appellate Division in MetLife stated that the duty to preserve evidence imposed upon the employer "is rather limited" and it is "impossible" to formulate a duty to preserve evidence running from Royal, the owner of the "spoiled" car, to MetLife (or to MetLife's subrogor) by virtue of an insurance contract and rejected a "duty to preserve evidence based upon Royal's voluntary promise and undertaking to do so."⁶

Developments In The Duty To Preserve

Seeking to summarize the current state of the law in New York, a recent trial court decision in Brown v. Parfums Jacques Bogart S.A⁷ stated:

In the absence of pending litigation or notice of a specific claim, a defendant should not be sanctioned for discarding items in good faith and pursuant to its normal business practices, but sanctions should be imposed where party destroys evidence, once litigation is pending. Sanctions for spoliation may be imposed if a party destroys evidence prior to a notice or order to produce it, or prior to becoming a party, so long as the party is on notice that the evidence might be needed for the future.

Addressing the duty to preserve electronically stored information, the trial court in McCarthy v. Philips Electronics N.A.⁸ stated:

Defendants' response provides little information concerning their policies regarding maintenance and deletion of electronic communications, aside from the routine overwriting of back-up tapes. The existence or nonexistence of procedures to preserve evidence relevant to anticipated litigation may be of special concern in this case, since documents produced by defendants provide a basis for finding that defendants anticipated litigation well before plaintiff brought suit . . . and even before [plaintiff] was notified of his job elimination . . . . It may be urged that, from that time on, defendants had a duty to preserve relevant evidence, which encompasses electronic data. The obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation. Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a 'litigation hold' to ensure the preservation of relevant documents, and retain back up tapes storing the documents of key players' to the existing or threatened litigation.

Recently, in Clifford v. Toys "R" Us-Delaware, Inc.,⁹ in connection with the production of an alleged videotape of an accident, a trial court stated:

A party has a duty to preserve evidence when it has notice of pending litigation; notice of an accident can sometimes serve as notice of pending litigation, but in the absence of pending litigation or notice of a specific claim, a defendant should not be sanctioned for discarding items in good faith and pursuant to its normal business practices.

The Burden Is On The Person Who Seeks Preservation

The Court of Appeals has made it clear that the burden is on the person or entity which wants to preserve a specific item or information in the possession of another to act affirmatively.¹⁰ The more aggressively counsel puts an adversary and/or the court on notice of the need to preserve certain information, the greater the likelihood of later obtaining a ruling of spoliation if the information is not preserved.¹¹ Courts are loathe to impose a duty of preservation absent counsel affirmatively seeking preservation by: (i) notifying the party from whom preservation is sought of anticipated litigation,¹² (ii) requesting in writing that the relevant materials be preserved, (iii) offering to pay for the preservation of the materials,¹³ and/or (iv) obtaining a court order requiring the preservation of materials.¹⁴

However, even without a court order or specific notice, courts have found that the allegations in a pleading have sufficiently put a party on notice that it has a duty to preserve certain information. As the trial court stated in Brown v. Parfums Jacques Bogart:¹⁵

Plaintiffs will never know what was in the records, or whether TFG was deliberately denuded of assets, which is why [defendant] should have preserved the records. In an action to pierce the corporate veil, records of transactions between the related corporate entities is perhaps the only evidence, other than self-serving statements of the principals seeking to disprove domination and control. The French record retention laws did not relieve [defendant] of the obligation to preserve evidence relating to this case, which was in active litigation when records were destroyed. [Defendant] was on notice that the records of transactions between [defendant] and TFG would be needed since the complaint was filed in late December of 1998.¹⁶

In addition, a party seeking on its own to preserve information that it believes may be relevant may by doing so create a duty to preserve such item for the benefit of others. See Heller v. Home Depot USA, Inc.¹⁷ (duty to preserve found; "Petitioners allege that respondent was aware soon after the alleged accident on October 23, 2004 and upon this Court's Order dated September 9, 2005 that the video tape of the incident was paramount to resolving liability herein and had to be preserved and a copy sent to petitioners . . . The respondent was on notice early on that the tape was crucial and made arrangements to have it preserved and a copy burned into a CD. The respondent was also on notice to preserve said tape by this Court's Order dated September 9, 2005.").¹⁸

Preservation Orders

New York law is not well developed as it relates to the standard for obtaining a court-ordered preservation order. Recently, in BFS Realty LLC v. National Medical Health Card Systems, Inc.,¹⁹ a trial court, although denying expedited discovery and plaintiff priority in discovery that sought immediate access to defendant's chief legal officer's computer files, issued a preservation order²⁰ citing to and essentially quoting verbatim from the preservation rule contained in the Private Securities Litigation Reform Act, 15 U.S.C.A. §78u-4(b)(3)(C)(I), which order required such legal officer, to:

[t]reat all documents, data compilations (including, but not limited to, electronically recorded or stored dates), and tangible objects that are in his custody or control that is relevant to this litigation as if such were the subject of a continuing request for documentation.²¹

In addition, in Weiller v. New York Life Ins. Co.,²² a trial court held that a preservation order application is, "in substance, a motion for a preliminary injunction, in that it seeks to restrain defendants, pendente lite; specifically, from discarding material asserted to be of possible probative value," relying upon an almost forty year old decision, Schwartz v. Lubin,²³ for the proposition that the standards for a preservation order is equivalent to those for preliminary injunction.²⁴ Similarly, requiring a heightened burden, a trial court in McNeil v. State,²⁵ in the context of a request to record or videotape an independent medical examination ("IME"), held that, as the request was "outside the bounds of what is permitted during an IME," the movant in order to preserve the examination would have to make a showing of "special circumstances." (emphasis added).²⁶

A court-issued preservation order is the best means to ensure that a party will preserve evidence.²⁷ Courts have even found that a preservation order can be made applicable to an entity that was not a party to an action at the time such order was issued.²⁸

Conclusion

New York courts make it clear that to ensure information, documents or physical items are preserved and not "spoiled," the person or entity in possession has to be affirmatively put on notice as early as possible that preservation is sought. Initially, this may be done through detailed letters, noting the potential for litigation and the need for preservation, although this may be found to be legally insufficient.

The more prudent approach is to act formally through pre-action discovery or upon the commencement of an action, wherein a specific request is made to preserve the item at issue and, where appropriate, an offer is made to pay for such preservation. If one believes that a critical piece of evidence or information exists in a case or even a potential case, merely waiting until service of document demands and notices of inspection may also not be sufficient to ensure preservation.

Thus, in connection with an extant litigation, as early as possible, formal notice should be provided to relevant parties and non-parties through subpoenas, demands for inspection or production and/or through court orders, for the preservation of materials. In sum, unless counsel affirmatively and appropriately seeks to put relevant parties and non-parties on detailed notice of the need to preserve evidence, a party risks the destruction, accidental or otherwise, of critical evidence and concomitant prejudice to its case with no legal recourse.

1. See Spoliation of Electronically Stored Information, New York Law Journal, March 20, 2007 authored by Mark A. Berman.

2. See, e.g., Blake v. McClung, 172 U.S. 239, 248-9, 19 S. Ct. 165, 169 (1898) (right to own and alienate property is a "fundamental right.").

3. 1 N.Y.3d 478, 775 N.Y.S.2d 754 (2004).

4. Id. at 484, 775 N.Y.S.2d at 757.

5. Id. at 483, 775 N.Y.S.2d at 757.

6. Metlife Auto & Home v. Joe Basil Chevrolet, Inc., 303 A.D.2d 30, 38-9, 753 N.Y.S.2d 272, 278-9 (4th Dept. 2002), aff'd, 1 N.Y.3d 478, 775 N.Y.S.2d 754 (2004).

7. 12 Misc. 3d 1187(A), 824 N.Y.S.2d 761, 2006 WL 2085478, at *4 (N.Y. Co. Sup. Ct. May 31, 2006) (citations omitted) (emphasis added).

8. Index No. 112522/03, at *2-3 (N.Y. Sup. Co. June 17, 2005) (quotations and citations omitted) (emphasis added).

9. Index No. 113475/05 at *4 (N.Y. Sup. Co. Feb. 2, 2007).

10. See Metlife, at 483, 775 N.Y.S.2d at 757.

11. See DiBella v. Long Island Jewish Hosp., Index No.18591/02 at *2 (Nassau Co. Sup. Ct. Sept. 24, 2004) (duty to preserve foreign body found in patient; "the fact that evidence is destroyed prior to the commencement of an action, and hence prior to being requested by an adverse party, is not a cognizable excuse to a spoliation claim when the spoiler of evidence had notice that the evidence may be needed for future litigation.").

12. See Arnez v. Duane Reade, Inc., 12 Misc. 3d 1195(A), 824 N.Y.S.2d 767, 2006 WL 2353209 at *2 (Rich. Co. Sup. Ct. May 3, 2006) ("[p]laintiff has failed to establish that defendant . . . was on notice of the impending lawsuit at the time that the surveillance tape was destroyed or that it was otherwise duty-bound to preserve same") (citations omitted).

13. Brown v. Deputy Acromed, Inc., 21 A.D.3d 1431, 1433, 801 N.Y.S.2d 681, 683 (4th Dept. 2005) ("plaintiff asked hospital personnel to preserve certain screw fragments as evidence and [ ] they failed to do so . . . Plaintiff did not, inter alia, offer to pay the costs associated with preservation of the purported evidence, nor did she issue a subpoena duces tecum to the hospital or seek or obtain a court order to compel the preservation of the evidence at issue") (quotation omitted).

14. See Hennessey v. Restaurant Asscs., Inc., 25 A.D.3d 340, 341, 807 N.Y.S.2d 349, 350 (1st Dept. 2006) ("NYMEX was never notified of the impending lawsuit and was not asked for the stove by Restaurant Associates until four years after the accident. Restaurant Associates made no effort to preserve the stove or seek a court order in a timely manner. NYMEX was not a party to the underlying lawsuit, was not alleged to have committed or contributed to any wrongdoing causing the accident, and had no relationship with Restaurant Associates requiring it to preserve the stove; therefore, NYMEX can have no potential liability.").

15. 2006 WL 2085478, at *5.

16. Gentle v. State, 4 Misc. 3d 453, 455, 778 N.Y.S.2d 660, 662 (Ct. Cl. 2004) (written claim of injury "should have prompted defendant to preserve" maintenance records.).

17. 11 Misc. 3d 1086(A), 819 N.Y.S.2d 848, 2006 WL 1094594 at *1-2 (Sull. Co. Sup. Ct. Apr. 26, 2006).

18. Carella v. Reilly & Assoc., Index No. 18199/99 (Nassau Co. Sup. Ct. Sept. 30, 2004) (duty found to preserve scaffold; third party defendant aware of accident the day it occurred, allegedly examined scaffold immediately after accident, stored it, re-examined it, and was advised of first party suit).

19. Index No. 013431/06 (Nassau Co. Sup. Ct. February 22, 2007).

20. See Sullivan & Cromwell LLP v. Charney, Index No. 600333/07, at *2-3 (N.Y. Sup. Ct. Mar. 8, 2007) (defendant "to retain and not subject to destruction any information relating to his employment . . . this lawsuit or any related issues" and "shall take all steps requires to preserve all such information maintained by Hotmail, RCN, Yahoo or other providers, including but not limited to ensuring that such information is not most through the passage of time or application of account size limitations").

21. Id. at *7.

22. 6 Misc. 3d 1038(A), 800 N.Y.S.2d 359, 2004 WL 3245345 at *3 (N.Y. Co. Sup. Ct. Mar. 16, 2005).

23. 6 A.D.2d 108, 175 N.Y.S.2d 652 (1st Dept. 1958).

24. Id. at *3 (preservation order granted; "A little over a month after the commencement of the action, plaintiff's counsel asked defendants' counsel to stipulate to a document preservation order . . . Defendants' counsel agreed to preserve documents, while declining to stipulate to an order. Specifically, they acknowledged defendants' ongoing duty to preserve documents and data pursuant to the preservation orders in the Keir action and the [Multi-District Litigation action], and argued that a formal order herein would be redundant and unnecessary") (emphasis added).

25. 8 Misc. 3d 1028(A), 806 N.Y.S.2d 446, 2005 WL 2008491 at *1 (Ct. Cl. Aug. 9, 2005).

26. See also Baron v. The Great Atlantic & Pacific Tea Co., Index No. 5975/04 (Nassau Co. Sup. Ct Oct. 11, 2006) (after letter to defendant requesting it to preserve potential evidence, including video surveillance tapes, went unresponded to, court granted preservation order prior to service of document request on defendant).

27. See Application of Gomez, 11 Misc. 3d 1078(A), 819 N.Y.S.2d 848, 2006 WL 964564 at *2 (Nassau Co. Sup. Ct. Feb. 10, 2006) (in connection with an order granting pre-action disclosure, court ordered defendant to preserve and maintain certain records, including "all relevant computer hardware, software and, e-mails which may have relevance.")

28. See Miller v. County of Orange, 120 A.D.2d 713, 714, 502 N.Y.S.2d 510, 511 (2nd Dept. 1986) (willful destruction found where there was a preservation order; court rejected argument that "CPLR 3126 is inapplicable since he was not bound by the order of preservation and was not a party to the action at the time the evidence was destroyed is without merit."). But see Ortega v. City of New York, 11 Misc. 3d 848, 855, 809 N.Y.S.2d 884, 892 (Kings Co. Sup. Ct. Feb. 16, 2006) (court orders had issued directing, among others, the New York City Police Department to preserve a vehicle and permitting plaintiff's representatives to inspect, photograph and videotape the vehicle for a 60 day period and City was on notice of orders a "sufficient time prior to the destruction of the vehicle that it would not be unreasonable to require it to comply with the mandate of these orders"); aff'd, Ortega v. City of New York, 35 A.D.3d 422, 824 N.Y.S.2d 714 (2nd Dept. 2006).

This article is reprinted with permission from the June 14, 2007 edition of the New York Law Journal. © 2007 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited. For information contact, American Lawyer Media, Reprint Department at 800-888-8300 x 6111.