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Litigation: Chin v. Port Authority's impact on the duty to issue litigation holds

The 2nd Circuit contradicts Judge Scheindlin’s Zubulake decision, ruling that failure to issue a hold does not constitute gross negligence per se

Almost 10 years after Judge Scheindlin’s Zubulake opinions, does failure to issue a written litigation hold resulting in the destruction in relevant documents constitute gross negligence and warrant sanctions? No, answered the 2nd Circuit recently in Chin v. The Port Authority.

In Chin, 11 Asian-American police officers asserted employment discrimination claims against the Port Authority of New York and New Jersey, claiming that they were denied promotions on account of their race. During discovery, plaintiffs moved for an adverse inference against the Port Authority because it had destroyed 32 promotion folders prior to the lawsuit. There was no dispute that the Port Authority had notice of its obligation to preserve these documents, that the documents contained unique, highly relevant information, such as written evaluations from commanding officers, and that the Port Authority had failed to issue a written litigation hold. The plaintiff requested an inference that the destroyed documents would have shown that plaintiff received outstanding performance evaluations. The district court denied the motion. It reasoned that although the Port Authority was negligent in failing to preserve the performance folders, there was inefficient evidence that it intentionally destroyed the folders, and plaintiffs had the ability to present other evidence, such as test results, to prove their claims.

The jury ruled against four of the plaintiffs at trial. On appeal, one of those plaintiffs asserted that the district court’s failure to issue an adverse inference based on the Port Authority’s destruction of the promotion folders was erroneous. The plaintiff claimed that the failure to issue a written litigation hold constituted gross negligence per se, warranting the imposition of sanctions. In Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Secs., LLC, Judge Scheindlin held that in light of her almost decade-old Zubulake decisions “the failure to issue a written litigation hold constitutes gross negligence because that failure is likely to result in the destruction of relevant information.”

The 2nd Circuit disagreed. It held that a party’s failure to issue a litigation hold is not gross negligence per se, nor should it necessarily lead to sanctions such as an adverse inference. Rather, the 2nd Circuit said that such failure is just “one factor in the determination of whether discovery sanctions should issue.” The court of appeals re-emphasized that a case-by-case approach to the determination of sanctions for failure to preserve evidence—through the exercise of the district court’s discretion—is more appropriate than any bright line rules advocated in Judge Scheindlin’s Pension Committee decision. According to the 2nd Circuit, even if a party acted with gross negligence in destroying relevant documents, a trial court has the discretion to impose (or not impose) sanctions based on the totality of the circumstances.

The court of appeals’ reluctance to lay down strict rules on the imposition of sanctions is likely rooted in the fear, expressed by some courts, that litigation will become a “gotcha” game over whether a party made sufficient preservation efforts, rather than a substantive airing of the merits of the case. The 2nd Circuit’s Chin decision also recognizes that in certain circumstances, the failure to issue a written litigation hold may be unnecessary, such as in the case of a small company with few employees. For larger, more sophisticated institutions however, be wary. The 2nd Circuit’s ruling does not give litigants a free pass to ignore their obligation to impose meaningful preservation efforts. It simply reinforces the trial court’s discretion to fashion remedies for the destruction of relevant evidence in a manner best suited to the facts of each individual dispute.

Contributing Author

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Nicholas Panarella

Nicholas J. Panarella is a partner at Kelley Drye & Warren LLP in New York City. He focuses on commercial and business litigation. Mr. Panarella...

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