In Mazzei v. Money Store, 01cv5694 (JGK) (RLE) (S.D. N.Y. July 21, 2014), New York Magistrate Judge Ronald L. Ellis granted the plaintiff’s motion for spoliation sanctions against the defendant, ordering the defendant to bear the cost of obtaining all the relevant data in question from a third party as well as paying for plaintiff attorney fees in filing the motion.
In this class action fraud case, the plaintiff requested that the defendants be sanctioned for violating the duty to preserve information within an electronic database created by a third party, claiming that the information had been lost from the electronic database system and was now in the possession of another third party, making it more costly to retrieve. Accordingly, the plaintiff asked the court to direct the defendants to obtain the information from the third party, as a sanction for their failure to preserve the information in its original format.
On the other hand, the defendants claimed that the information was preserved, but it was “not readable,” and stated that it would cost a minimum of $10,000 to determine if the information was even searchable. The defendants also argued that the “not readable” documents were not their responsibility to preserve and produce because the information was controlled by a third party.
Judge Ellis stated that “[a] party is in control of any documents in the possession of a third party if that third party is contractually obligated to make them available…Defendants had both the legal right and practical ability to obtain the information relating to fees in the New Invoice System after the initiation of this action”. He noted that the defendants had a Master Services Agreement with the original third party provider of the database, which gave the defendants “a contractual right to demand the information specifically identifying the fees being charged”, so the defendants “were in control of that information”.
Regarding the defendant’s contention that there is no spoliation issue because the plaintiffs have not shown that the information in the system is less accessible now than prior to the transfer of the defendants’ access to the system, Judge Ellis declared “This argument has no merit. Mazzei asserts, and Defendants do not dispute, that the only remaining trace of the information in the New Invoice System is possessed by Lender Processing Services and is not presently in a readable format. Therefore, the information is less accessible than it was when Defendants had access to it.”
Finding that the information was relevant and that the defendants “acted with a culpable state of mind” when they failed to preserve the data in its original form, Judge Ellis ordered the defendants “to 1) bear the cost of determining whether the New Invoice System data currently in the possession of LPS is searchable; 2) pay Mazzei his attorneys’ fees for this application.” The plaintiff was ordered to “submit an affidavit detailing reasonable hours and rates associated with its motion by August 1”.