Overview
Today, Judge Baer adopted and upheld Magistrate Judge Maas’ decision not to assess a spoliation sanction in a declaratory judgment action relating to a construction contract. In an opinion issued on April 20, Judge Maas found that plaintiffs GenOn Mid-Atlantic, LLC and GenOn Chalk Point, LLC had acted at least negligently in failing to instruct FTI Consulting Inc. – a third-party that had assisted them in performing audits related to the relevant contract – to preserve relevant electronic documents. He concluded that the GenOn plaintiffs were “responsible for spoliation” but that no sanction was warranted because defendant “was not prejudiced by the spoliation.” (Our previous post on that decision is here)
In its objections to Judge Maas’ decision, defendant Shaw noted a tension between Judge Scheindlin’s 2010 Pension Committee decision and Magistrate Judge Francis’ 2010 Orbit One Communications decision and argued that Judge Maas’ decision was contrary to Pension Committee, which held that a finding of prejudice is not a necessary predicate to imposing a sanction for spoliation.
In declining to assess sanctions against GenOn, Magistrate Judge Maas relied upon Orbit One Commc’ns, Inc. v. Numerex, Corp., 271 F.R.D. 429 (S.D.N.Y. 2010) which held that prejudice to the innocent party was required in order for sanctions to be assessed. Order, pp. 15, 27. Shaw acknowledges the statements in the Orbit decision referenced by Magistrate Judge Maas. However Magistrate Judge Maas does not address the body of law prevalent throughout the United State and specifically, the contrary decision by Judge Scheindlin in Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., 685 F. Supp. 2d 456 (S.D.N.Y. 2010). Judge Scheindlin expressly concluded that the prejudice element is only controlling when determining whether to assess the most severe sanctions, such as dismissal or preclusion. Judge Scheindlin reasoned:Some commentators have likewise perceived a potential tension between the Orbit One and Pension Committee decisions. In affirming Judge Maas’ order, Judge Baer rejected that argument, but did not provide any gloss on how the two 2010 decisions should be reconciled.The burden of proof question differs depending on the severity of the sanction. For less severe sanctions -- such as fines and cost-shifting -- the inquiry focuses more on the conduct of the spoliating party than on whether documents were lost, and, if so, whether those documents were relevant and resulted in prejudice to the innocent party. As explained more thoroughly below, for more severe sanctions -- such as dismissal, preclusion, or the imposition of an adverse inference -- the court must consider, in addition to the conduct of the spoliating party, whether any missing evidence was relevant and whether the innocent party has suffered prejudice as a result of the loss of evidence. [Emphasis supplied]. 685 F. Supp. 2d 456, 467.
Shaw argues that Judge Maas erroneously relied on the decision in Orbit One, which required prejudice to the innocent party, 271 F.R.D. 429 at 431, and ignored the contrary conclusion of the Pension Committee court. I disagree. Shaw comes nowhere near shouldering the burden required in order to reverse following a decision by a magistrate Judge. Here, Judge Maas' ruling was neither clearly erroneous nor contrary to law.