Court Concludes Rule 37(e) Does Not Apply to “situations where, as here, a party intentionally deleted the recording”

Hsueh v. N.Y. State Dep’t of Fin. Servs., No. 15 Civ. 3401 (PAC), 2017 WL 1194706 (S.D.N.Y. Mar. 31, 2017)

In this case arising from claims of sexual harassment at work, the court found that an adverse inference was the appropriate remedy for Plaintiff’s deletion of a recorded conversation with an HR representative. In the course of its analysis, the court agreed with Defendants that “Rule 37(e) applies only to situations where ‘a party failed to take reasonable steps to preserve’ ESI; not to situations where, as here, a party intentionally deleted the recording” and thus relied upon inherent authority to impose sanctions.

Summarizing broadly, Plaintiff was not initially forthcoming regarding whether she had recorded any relevant conversations but eventually admitted that she had recorded a conversation with an HR representative and later deleted it because it was not very clear and therefore not “worth keeping.” Defendants moved for spoliation sanctions. On the day Plaintiff’s response was due, Plaintiff’s counsel informed the court that Plaintiff had provided him with a recording of a conversation with the relevant HR representative and explained it was recovered with the help of her husband.  As a result, discovery was reopened and Plaintiff and her husband were deposed.  Thereafter, Defendants continued to pursue spoliation sanctions.

Taking up the motion the court rejected Defendants’ argument that the audio recording “might not be ESI,” but agreed that Rule 37(e) did not apply in the present instance:

The DFS also argues that Rule 37(e) applies only to situations where “a party failed to take reasonable steps to preserve” ESI; not to situations where, as here, a party intentionally deleted the recording. See DFS Br. at 8 n.2. This makes sense. The Committee Notes to the 2015 Amendment to Rule 37 explain that Rule 37(e) is meant to address “the serious problems resulting from the continued exponential growth in the volume of” ESI as well as “excessive effort and money” that litigants have had to expend to avoid potential sanctions for failure to preserve ESI. See also Cat3, LLC v. Black Lineage, Inc., 164 F. Supp. 3d 488, 495 (S.D.N.Y. 2016) (Rule 37(e) “was adopted to address concerns that parties were incurring burden and expense as a result of overpreserving data, which they did because they feared severe spoliation sanctions”). These considerations are not applicable here. It was not because Hsueh had improper systems in place to prevent the loss of the recording that the recording no longer existed on her computer; it was because she took specific action to delete it. The Court therefore concludes that Rule 37(e) does not apply.

The court further concluded that “[b]ecause Rule 37(e) does not apply, the Court may rely upon its inherent power.” The court then outlined the common law standard for the imposition of an adverse inference, which requires that the moving party “‘must establish (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a culpable state of mind; and (3) that the destroyed evidence was relevant to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.’” The court also considered and rejected Plaintiff’s argument that sanctions were inappropriate because the recording had been restored and produced, citing several facts in support of its conclusion that that the produced recording was incomplete (including the length of the recording, that it cut off in mid-sentence, and Plaintiff’s husband’s concession that he could not be sure the recording was complete).

Considering Plaintiff’s culpability, the court concluded that Plaintiff acted with the intent to deprive Defendants of the use of the recording, citing several problems with Plaintiff’s explanations surrounding the recording and its deletion.

Turning to its discussion of relief, the court noted that under both the court’s inherent authority and Rule 37(e), an adverse inference was appropriate. The court also determined that Defendants were entitled to attorneys’ fees and costs incurred in bringing the instant motion and in reopening discovery.

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



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