No Sanctions for Discovery Failures Resulting from Court-Ordered Seizure of Defendants’ Books and Records in a Separate Case

Perez v. Metro Dairy Corp., No. 13 CV 2109(RML), 2015 WL 1535296 (E.D.N.Y. Apr. 6, 2015)

Plaintiffs in this collective action sought spoliation sanctions for Defendants’ failure to produce certain relevant evidence, including payroll records, W-2s, cashier sheets, etc.  Defendants objected to the motion on the grounds that “all of their books, records and computers were seized” pursuant to the court’s order in a different case and that there was no opportunity to make any copies or back ups.  Accordingly, the court reasoned that Defendants had not destroyed their records and found that “[u]nder the specific circumstances of this case … defendants did not have an obligation to copy their books and records before complying with the court order.”  The court also reasoned that even if Defendants did have an obligation to preserve, there was no evidence of Defendants’ requisite culpable state of mind.  Plaintiffs’ motion for sanctions was denied.

Plaintiffs sought serious sanctions for Defendants’ failure to produce requested employment documents and records.  Defendants objected, asserting that their books, records and computers were seized pursuant to the court’s order in another case.  More specifically, Defendants asserted that the books and records were seized within twenty-four hours of the court’s order, and that “they did not have an opportunity to copy or electronically back up their files.”

Despite the non-party’s possession of Defendants’ computers and records (as the result of the seizure), some discovery was undertaken.  Three hundred pages of payroll records were provided to Plaintiffs as a result of Defendants’ counsel’s contact with counsel for the non-party.  Additionally, Plaintiffs subpoenaed the records from the non-party and conducted an inspection of the records prior to filing the motion for sanctions.  To the extent that some records were no longer available, Defendants argued that “they had no control over the records and were not complicit in their loss or destruction.”

Assessing Defendants’ duty to preserve and noting the failure of Plaintiffs or the court to identify case law addressing a comparable situation, the court found that “under the specific circumstances of this case,” Defendants had no obligation to copy their records before complying with the court’s order regarding seizure of their property.  Moreover, the court found that even if Defendants did have a duty to “copy or otherwise preserve” the records prior to seizure, there was “no suggestion that they acted with any intent or knowledge that the records would be unavailable to plaintiffs in discovery.”   Thus, the court found no evidence that Defendants had the “requisite culpable state of mind.”

A full copy of the court’s order is available here.

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