Court Erred by Striking Answer as a Discovery Sanction

On April 6, 2023, the First Department issued a decision in Harry Winston, Inc. v. Eclipse Jewelry, Corp., 2023 NY Slip Op. 01840, holding that a court erred by striking a defendant’s answer as a discovery sanction, explaining:

Supreme Court has broad discretion to determine a sanction for the spoliation of evidence. In order to obtain sanctions for spoliation, a party must establish that the nonmoving party had an obligation to preserve the item in question, that the item was destroyed with a culpable state of mind, and that the destroyed item was relevant to the party’s claim or defense. A culpable state of mind for purposes of a spoliation sanction includes ordinary negligence. Even when a party is entitled to sanctions for spoliation, striking a pleading is a drastic sanction in the absence of willful or contumacious conduct and, in order to impose such a sanction, the court should consider the prejudice that resulted from the spoliation to determine whether such drastic relief is necessary as a matter of fundamental fairness. Where the moving party has not been deprived of the ability to establish its case or defense, a less severe sanction is appropriate.

Preliminarily, Supreme Court should not have stricken the answer based on defendant’s failure to produce nonparties Keren Aghjayan and Derek Ruiz for depositions, since by the date set forth on the deposition notice and subpoena compelling their depositions, defendant was no longer in control of either witness. However, spoliation sanctions were warranted for evidence that was lost or destroyed.

Defendant should have reasonably anticipated litigation by June 23, 2017 at the latest. Therefore, when evidence was discarded or destroyed at the end of 2017 or the beginning of 2018, defendant already had an obligation to preserve it. Still, defendant failed to institute any litigation hold and failed to ensure that records on the cell phone belonging to Aghjayan, defendant’s principal and a key player in the events underlying the litigation, were preserved.

Nevertheless, the drastic remedy of striking the entire answer and all the counterclaims was not warranted. Striking a pleading is usually not warranted unless the evidence is crucial and the spoliator’s conduct evinces some higher degree of culpability. Here, plaintiff failed to establish that the unavailability of the lost and destroyed evidence prejudiced it and left it unable to prosecute its action. Indeed, plaintiff argued only that its ability to defend the counterclaims was compromised. Therefore, the appropriate sanction under the circumstances should have been directed solely to the counterclaims.

Plaintiff established that defendant’s spoliation compromised its ability to defend portions of two counterclaims, and they therefore are stricken. For the third counterclaim (breach of contract), plaintiff is prejudiced by the missing records regarding the jewelry allegedly in the process of being completed when defendant received plaintiff’s termination notice on May 19, 2017, as the absence of those records will render plaintiff unable to definitely disprove any evidence of defendant’s actual costs in performing the work. For the eighth counterclaim (unjust enrichment), the items for which defendant seeks to recover damages are missing and have purportedly been discarded or destroyed, and as a result, plaintiff’s expert can no longer give a proper estimate of their worth.

Finally, because Aghjayan’s selective preservation and concealment of a text from his old phone evinces a higher degree of culpability than mere negligence, defendant is precluded from introducing the text in evidence.

(Internal quotations and citations omitted).

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