Saying "So Sue Me" Did Not Trigger Duty to Preserve Evidence

On September 28, 2018, Justice Masley of the New York County Commercial Division issued a decision in Siras Partners LLC v. Activity Kuafu Hudson Yards LLC, 2018 NY Slip Op. 32484(U), holding that a party saying "so sue me" did not trigger a duty to preserve evidence, explaining:

In the spoliation prong of this motion, Kuafu asks for an order awarding sanctions and/or an adverse inference against plaintiffs. Kuafu contends that the principals of plaintiff Siras Partners LLC (Siras), individual plaintiffs Saif Sumaida and Ashwin Verma, violated their duty to preserve evidence--including phone-based We-Chat messages by upgrading their phones prior to the commencement of this action or the dissolution proceeding. According to Sumaida and Verma, both stopped using We-Chat before tensions arose between the parties, and both upgraded his mobile phone in early 2015, in the ordinary course.

Kuafu contends that plaintiffs' duty to preserve evidence in anticipation of litigation arose in mid-2014, when, at a partners' meeting to discuss the development project, Sumaida allegedly told defendant Shang Dai: "if [Dai] did not like the way he was handling the Project's development, [Dai] had two choices: . . . deal with it, or . . . sue him." Plaintiffs deny that Sumaida told Dai or other principals of Kuafu "so sue me.".

A party seeking spoliation sanctions must show that: (1) the party having control over the evidence possess an obligation to preserve it at the time of its destruction; (2) the evidence was destroyed with a culpable state of mind; and (3) the destroyed evidence was relevant to the party's claim or defense such that the trier of fact could find that the evidence would support that claim or defense. An obligation to preserve relevant evidence arises when a party reasonably anticipates litigation; that is, when a party is on notice of a credible probability that it will become involved in litigation, seriously contemplates initiating litigation, or when it takes specific actions to commence litigation.

In Voom HD Holdings LLC, a duty to preserve arose when the defendant threatened to terminate the contract in emails and the evidence also established that the defendant was aware that terminating the contract would cause the plaintiff to commence litigation. A duty to preserve has also been found to have been triggered when evidence established that a party notified an adversary that the party would consult legal counsel to consider commencing litigation.

The court declines to find as a matter of law that the alleged remark, "so sue me," triggered plaintiff's duty to preserve relevant evidence under the circumstances presented here. In the absence of other evidence, the court is compelled to find that plaintiffs' duty to preserve relevant evidence arose on February 27, 2015 when the petition for dissolution was filed.

Though no adverse inference or sanctions are imposed as a matter of law, the issue whether plaintiffs' violated a duty to preserve relevant evidence when Suamida and/or Verna upgraded their mobile phones in early 2015 in the ordinary course may be submitted to the jury or the fact-finder to determine when a duty to preserve was triggered and whether plaintiffs' acted with negligence or gross negligence in not maintaining or backing up their mobile phones at that time, and whether the information on those phones would be relevant to the parties' claims or defenses.

(Internal quotations and citations omitted) (emphasis added).

A big part of complex commercial litigation is giving, receiving and evaluating evidence (this is called "discovery"). This decision discusses the problem of litigants not performing their discovery obligations and what can happen to them if they do not. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client has a question regarding discovery obligations (and what to do if a litigant is not honoring those obligations).