United States District Court, S.D. New York
August 11, 2005.
HENG CHAN, SHING TAO AU, YAN BIN CAO, AI YIN CHEN, WAN ZHEN JIANG, FONG LI, JIAN YUN LIN, WEI CHAO TAN, FENG QUIN ZHENG TANG, SUM KAY WONG and YONG CAI ZHANG, Plaintiffs,
TRIPLE 8 PALACE, INC., SUN YUE TUNG CORP. d/b/a 88 PALACE, KUNG TAK YEUNG, KWOK MING CHAN, a/k/a K.M. CHAN, GRACE CHAN, LUNG KONG, CHAN a/k/a MANDY CHAN, HANG LI, CHIU NG, WEI WONG a/k/a DAVID WONG, GUI YANG, ZEN QUAN ZHAO, GONG GUI GUAN, CHEUK HONG LAU, and YEUNG CHAO LO, Defendants.
The opinion of the court was delivered by: JAMES FRANCIS, Magistrate Judge
MEMORANDUM AND ORDER
This case illustrates how serious a risk a party runs when it
destroys documents relevant to ongoing litigation. The underlying
action was initiated by eleven waiters, busboys, and captains at
a Chinatown restaurant who allege that they have been denied
compensation to which they are entitled under the Fair Labor
Standards Act, 29 U.S.C. § 201 et seq. (the "FLSA"), and the
New York State Labor Law. The defendants are the current and
former owners of the restaurant. The plaintiffs now move pursuant
to Rule 37(b) of the Federal Rules of Civil Procedure and the
inherent power of the Court for sanctions against the current
owners Sun Yue Tung Corp. (d/b/a 88 Palace), Gui Yang, Gong Gui Guan, Cheuk
Hong Lau, and Yeung Chao Lo (collectively, the "88 Palace
defendants") in connection with the destruction of evidence.
Specifically, the plaintiffs request that the Court strike the
answer of the 88 Palace defendants and enter judgment against
them by default. In the alternative, they request that an order
be entered (1) precluding these defendants from offering evidence
of their compliance with state and federal labor laws, (2)
precluding them from contesting the plaintiffs' damage
calculations, (3) instructing the jury that an adverse inference
may be drawn against these defendants based on their destruction
of evidence, and (4) awarding the plaintiffs their attorneys'
fees and costs incurred in connection with the spoliation issue.
For the reasons that follow, the plaintiffs' motion is granted
in part and denied in part.
The complaint in this action was served on or about August 11,
2003. It sets forth five causes of action in which the plaintiffs
allege that the defendants: (1) failed to pay tips and minimum
wages in violation of the FLSA, (2) intentionally failed to pay
overtime in violation of the FLSA, (3) intentionally failed to
pay minimum wages, overtime, and spread of hours pay in violation
of the New York State Labor Law, (4) appropriated the plaintiffs'
tips in violation of state law, and (5) failed to reimburse the plaintiffs for uniform expenses in violation of state law.
(Complaint, ¶¶ 81-98). In connection with these claims, the
plaintiffs served discovery requests on the 88 Palace defendants
on about January 15, 2004. Among other things, these requests
sought production of "all documents concerning tips and tip
shares assigned, earned, and distributed to Plaintiffs,
including, but not limited to, pay records, tip records,
accounting and bookkeeping records" for the period from May 1989
to the present, "all documents concerning wages paid, and tips
received by each Defendant, each managerial employee, each
administrative employee, and cashier or counter-person," "all
documents concerning the tip and tip shares assigned and
distributed to" the defendants and managerial employees, and "all
documents concerning . . . 88 Palace Restaurant's earnings and
expenditures[.]" (Plaintiffs' First Request for Production of
Documents and First Set of Interrogatories, attached as Exh. 3 to
Declaration of Mark S. Cheffo dated April 21, 2005 ("Cheffo
Decl."), document request nos. 4, 9, 10, 15).
In response to these requests, the 88 Palace defendants
initially produced Sun Yue Tung Corp.'s employee rate chart,
payroll registers, time card sheets, W-2 wage and tax statements,
W-4 certificates, Form 1040 individual tax returns, check stubs,
and corporate tax returns. (88 Palace Defendants' Response to
Plaintiff's First Request for Production of Documents and First
Set of Interrogatories ("Def. Discovery Response"), attached as Exh.
4 to Cheffo Decl., responses to document requests nos. 4, 9, 15).
They also represented that they had no documents concerning any
tips or tip shares paid to "any managerial employee, bartender,
and cashier and/or counter-person." (Def. Disco very Response,
response to document request no. 10).
Subsequently, however, it was revealed that three other types
of records responsive to the requests had been maintained. First,
Yeung Chao Lo, one of the owners of 88 Palace Restaurant,
testified during his deposition about "banquet receipts," which
reflected monies collected from large parties. (Deposition of
Yeung Chao Lo ("Lo Dep."), attached as Exh. 6 to Cheffo Decl., at
72). He stated that such receipts were used internally and not
given to the customers. (Lo Dep. at 72). He then described how
the receipts were maintained:
Q. Are records like this kept for every banquet that
is held at the restaurant?
Q. And where are they kept, sir?
A. They were kept in, they are kept in our office.
Q. Do you know how far dating back you have records
A. We just keep it for one year.
Q. And then what happens to it?
A. Then we got rid of them, because what's the point
of keeping all this paper? Q. What do you mean you got rid of them?
A. Throw them away.
Q. These are thrown away after one year?
Q. Were you ever informed that you were no longer
supposed to destroy any documents that could be
related to this litigation?
Q. There was no document retention policy put into
place to preserve documents that could potentially be
related to this litigation?
A. Nobody told me about it.
Q. So the only records relating to banquets that are
maintained at the restaurant relate to 2004; is that
A. I don't know for sure.
* * *
Q. Well, as you sit here today, do you know one way
or the other if you have records like those dating
back beyond 2004?
A. I don't know. I don't think so.
Q. And why is that, sir?
A. How can we keep them all? The rent in Chinatown is
so expensive, how can we keep all this paper, it is
not like they are money.
Q. So, after one year, you throw them away; correct?
A. Yes, all the useless things we throw away.
(Lo Dep. at 76-79).
The second set of documents consists of the "money received book," which contained records of the amount of money taken in
each day at lunch. Min Ling He, 88 Palace's bookkeeper, described
the book as follows:
Q. What information is contained in the received
A. It is written down the daily amount of money that
was handed over to the boss.
Q. Besides the date and the amount of money turned
over to the boss, is there any other information in
the received money book?
* * *
Q. And the "money received book" has moneys received
(Deposition of Min Ling He ("He Dep."), attached as Exh. 9 to
Cheffo Decl., at 21-22). Ms. He explained that these records were
disposed of on a regular basis and that this practice persisted
after the litigation commenced:
Q. Okay. My question is, do you have a different
"money received book" for each month or for each
A. It is the same book but (pause) see, after I
did my part, the boss tear off that page.
Q. What does the boss do with that page?
A. I don't know.
* * *
Q. I believe earlier you said that somebody rips the
page out of the "money received book." A. Yes.
Q. Is it your testimony that you don't know who rips
that page out?
Q. How do you know that the page is ripped out?
A. Because it would be missing.
* * *
Q. As part of this lawsuit were you ever told that
documents, you know, including bills, other materials
may be required to be produced?
Q. Did you ever have any conversation with your
employer or your supervisors regarding the retention
of the lunch, dinner and banquet bills?
Q. Did you have any conversation with your employers
or your supervisor regarding the retention of the
"money received book"?
(He Dep. at 43-46). Yeung Chao Lo confirmed that he reviews the
page from the money received book each day and then discards it
if the amount appears to be correct. (Lo Dep. at 103-04). He
continued to destroy the pages from the book at least up until
the time of his deposition. (Lo Dep. at 104-05).
Finally, Mr. Lo testified that "tip distribution sheets" were
posted at the 88 Palace Restaurant indicating how tips were
shared among the employees on a daily basis. Some of these were
produced to the plaintiffs in discovery, but others went missing.
Mr. Lo stated:
Q. So those documents are maintained by the company;
is that correct?
A. I am not sure if it is kept because after one week
and one month, and there is no dispute, I don't know
if the paper will be kept.
Q. So for some period of time the restaurant keeps
the document; is that correct?
A. Yes. If there is no, nothing else, then it will be
(Lo Dep. at 162).
Q. Before you told me that you would keep them for a
week, if there is no dispute you get rid of it;
A. If there is no dispute, then why not throw it
(Lo Dep. at 165).
Upon learning that the 88 Palace defendants had maintained the
banquet receipts, money received book, and tip distribution
sheets for some time and then destroyed them, the plaintiffs
filed the instant motion.
Spoliation is "`the destruction or significant alteration of
evidence, or the failure to preserve property for another's use
as evidence in pending or reasonably foreseeable litigation.'"
Byrnie v. Town of Cromwell, Board of Education, 243 F.3d 93,
107 (2d Cir. 2001) (quoting West v. Goodyear Tire & Rubber Co.,
167 F.3d 776, 779 (2d Cir. 1999)). A court's authority to impose
sanctions in response to spoliation derives from at least two sources. Where a
party violates a court order either by destroying evidence when
specifically directed to preserve it or by failing to produce
information when directed to do so because the relevant data have
been destroyed Rule 37(b) of the Federal Rules of Civil
Procedure provides that the court may impose a range of
sanctions, including dismissal or judgment by default, preclusion
of evidence, imposition of an adverse inference, or assessment of
attorneys' fees and costs. Fed.R.Civ.P. 37(b); see
Residential Funding Corp. v. DeGeorge Financial Corp.,
306 F.3d 99, 106-07 (2d Cir. 2002); Metropolitan Opera Association, Inc.
v. Local 100, Hotel Employees and Restaurant Employees
International Union, 212 F.R.D. 178, 219-20 (S.D.N.Y. 2003).
Indeed, "[e]ven though a party may have destroyed evidence prior
to issuance of the discovery order and thus may be unable to
obey, sanctions are still appropriate under Rule 37(b) because
this inability was self-inflicted." Turner v. Hudson Transit
Lines, Inc., 142 F.R.D. 68, 72 (S.D.N.Y. 1991). Furthermore,
"[e]ven in the absence of a discovery order, a court may impose
sanctions on a party for misconduct in discovery under its
inherent power to manage its own affairs." Residential Funding,
306 F.3d at 106-07 (citations omitted); see also Metropolitan
Opera, 212 F.R.D. at 220.
A party seeking sanctions for the destruction of evidence 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.
Residential Funding, 306 F.3d at 107; see also Golia v.
Leslie Fay Co., No. 01 Civ. 1111, 2003 WL 21878788, at *9
(S.D.N.Y. Aug. 7, 2003). Each of those requirements is met here.
1. The Obligation to Preserve Evidence
The "obligation to preserve evidence arises when the party has
notice that the evidence is relevant to litigation most
commonly when suit has already been filed, providing the party
responsible for the destruction with express notice, but also on
occasion in other circumstances, as for example when a party
should have known that the evidence may be relevant to future
litigation." Kronisch v. United States, 150 F.3d 112, 126 (2d
Cir. 1998); see Fujitsu Ltd. v. Federal Express Corp.,
247 F.3d 423, 436 (2d Cir. 2001). "Identifying the boundaries of the
duty to preserve involves two related inquiries: when does the
duty to preserve attach, and what evidence must be preserved?"
Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y.
2003) ("Zubulake IV").
In this case, there is no controversy with respect to the
temporal component. The complaint, served and filed in August
2003, articulated claims with sufficient specificity to alert the
88 Palace defendants of the need to preserve from that point in time forward any evidence concerning the restaurant's revenues,
its payment of wages, and its treatment of tips.*fn1 The
three categories of documents at issue, then, appear on their
face to be encompassed by the preservation obligation, and the
defendants do not dispute this with respect to the banquet
receipts. They do, however, contend that they were not
responsible for retaining the money received book and the tip
According to the defendants, "[t]he money received book . . .
was never maintained as a permanent record." (88 Palace
Defendants' Memorandum in Opposition to Plaintiffs' Motion for
Spoliation Sanctions ("Def. Memo.") at 5). Rather, in the words
of Gui Yang, one of the restaurant's owners, "[i]t is simply a
notebook that the cashier uses to write down the total lunch
receipts each day. At the end of each day, either Yeung Chao Lo
or I usually remove the page bearing that day's total lunch
receipts." (Affidavit of Gui Yang dated May 13, 2005 ("Yang
Aff."), attached as Exh. 5 to Declaration of Daniel A. Hochheiser
dated May 23, 2005 ("Hochheiser Decl."), ¶ 2). The information on
that page is then compared to the bookkeeper's calculation of the
day's receipts, and, if there is no discrepancy, the page from
the money received book is discarded. (Yang Aff., ¶¶ 3, 4). Since the defendants had
no obligation to create evidence, they argue that "88 Palace
could have stopped maintaining the money received book entirely
without falling afoul of its disclosure obligations." (Def. Memo.
The defendants, however, fail to appreciate the distinction
between the creation of evidence and its preservation. They may
well have been entitled to cease using the money received book at
any time. But that is not what they did. Instead, they continued
to record information in it and then destroy those records. That
is the essence of spoliation. To be sure, a party may not have an
obligation to reduce to tangible form data that are normally
ephemeral. See Convolve, Inc. v. Compaq Computer Corp.,
223 F.R.D. 162, 177 (S.D.N.Y. 2004) (no obligation to preserve data
that appeared fleetingly on oscilloscope screen and were never
recorded in normal course of business). But here, it was the
normal practice of 88 Palace Restaurant to record in written form
the total of each day's lunch receipts in the money received
book. It was therefore the defendants' responsibility to preserve
those pages in connection with this litigation.
The defendants also argue that they had no obligation to
preserve the tip distribution sheets because these documents
"were prepared by the tipped employees [and] were not within the
exclusive possession or control of the 88 Palace ownership or
management." (Def. Memo. at 6). But the defendants acknowledge that they would consider it theft if one of the employees removed
a tip distribution sheet from the restaurant. (Lo Dep. at
160-61). More importantly, these documents were relied upon by
the managers to conduct the business of the restaurant. According
to Yeung Chao Lo, "when there is dispute from other employees as
to the distribution of the tips, . . . for example, some person
might say, why did that person get 500, I get 100, or I only get
one dollar, then I need to look at that paper to tell them who
gets what." (Lo Dep. at 161). Thus, the defendants' control over
the tip distribution sheets, if not exclusive, was sufficient to
give rise to a preservation obligation.
The preservation obligation runs first to counsel, who has "a
duty to advise his client of the type of information potentially
relevant to the lawsuit and of the necessity of preventing its
destruction." Turner, 142 F.R.D. at 73; see also Fayemi v.
Hambrecht and Quist, Inc., 174 F.R.D. 319, 326 (S.D.N.Y. 1997).
Where the client is a business, its managers, in turn, are
responsible for conveying to the employees the requirements for
preserving evidence. See Turner, 142 F.R.D. at 73. Thus,
"[o]nce a party reasonably anticipates litigation, it must
suspend its routine document retention/destruction policy and put
in place a `litigation hold' to ensure the preservation of
relevant documents." Zubulake IV, 220 F.R.D. at 218. When the
failure to meet these obligations results in the destruction of evidence,
sanctions are warranted. And, though the nature of the sanction
depends in part on the state of mind of the destroyer, some
remedy may be appropriate even where the destruction is merely
negligent. See Residential Funding, 306 F.3d at 108;
Zubulake v. UBS Warburg LLC, No. 02 Civ. 1243, 2004 WL 1620866,
at *6 (S.D.N.Y. July 20, 2004) ("Zubulake V"); Metropolitan
Opera, 212 F.R.D. at 219.
In this case, the 88 Palace defendants are responsible for the
destruction of each of the three categories of documents. Counsel
never informed the owners and managers of the restaurant of the
need to maintain relevant documents, and, consequently, routine
document destruction policies were never interrupted. The banquet
receipts continued to be discarded annually; the pages of the
money received book were torn out and disposed of on a daily
basis; and the tip distribution sheets were apparently thrown
away somewhat randomly, whenever it became apparent that no
dispute regarding the sharing of tips had arisen.
While there is no dispute that the 88 Palace defendants failed
to prevent the destruction of the banquet receipts and money
received book, they argue that they cannot be held responsible
for the tip distribution sheets, which were allegedly removed
from the restaurant by the employees themselves. (Def. Memo. at
5-6; Yang. Aff. ¶ 5). But the defendants had the obligation to
inform their employees of the requirements of preservation: It is no defense to suggest . . . that particular
employees were not on notice. To hold otherwise would
permit an agency, corporate officer, or legal
department to shield itself from discovery
obligations by keeping its employees ignorant. The
obligation to retain discoverable materials is an
affirmative one; it requires that the agency or
corporate officers having notice of discovery
obligations communicate those obligations to
employees in possession of discoverable materials.
National Association of Radiation Survivors v. Turnage,
115 F.R.D. 543, 557-58 (N.D. Cal. 1987) (footnote omitted). The
failure to take any affirmative steps to inform their employees
of the need to retain the tip distribution sheets renders the
defendants responsible for their loss as well.
The defendants' conduct demonstrates a sufficiently culpable
state of mind to warrant sanctions. "[S]pecific intent to thwart
the litigation process is not necessary." Golia, 2003 WL
21878788, at *9 (citing Byrnie, 243 F.3d at 109). A showing of
gross negligence is plainly enough to justify sanctions at least
as serious as an adverse inference. See Residential Funding,
306 F.3d at 108; Golia, 2003 WL 21878788, at *9-11; Barsoum v.
New York City Housing Authority, 202 F.R.D. 396, 400 (S.D.N.Y.
2001). And the utter failure to establish any form of litigation
hold at the outset of litigation is grossly negligent. See
Golia, 2003 WL 21878788, at *9 (failure to prevent employee
from destroying documents at time of termination); Pastorello v.
City of New York, No. 95 Civ. 470, 2003 WL 1740606, at *11-12
(S.D.N.Y April 1, 2003) (loss of data due to supervisor's
unfamiliarity with document retention policy); Barsoum, 202 F.R.D. at 400 (evidence lost
when party left it unattended on her desk). That is what occurred
here: the defendants systematically destroyed evidence because
they had never been informed of their obligation to suspend
normal document destruction policies. The second requirement for
imposition of sanctions is therefore met.
Finally, a party seeking sanctions for spoliation must
demonstrate that the evidence destroyed was "relevant" to its
claims or defenses. At least where more severe sanctions are at
issue, this means that the moving party must show that the lost
information would have been favorable to it.*fn2 As the
Second Circuit has held in connection with an application for an
"[R]elevant" in this context means something more
than sufficiently probative to satisfy Rule 401 of
the Federal Rules of Evidence. Rather, the party
seeking an adverse inference must adduce sufficient
evidence from which a reasonable trier of fact could
infer that the destroyed or unavailable evidence
would have been of the nature alleged by the party
affected by its destruction.
Residential Funding, 306 F.3d at 108-09 (quotation marks, citations, and alterations omitted); see Zubulake IV, 2004 WL
1620866, at *7 ("In the context of a request for an adverse
inference instruction, the concept of "relevance" encompasses not
only the ordinary meaning of the term, but also that the
destroyed evidence would have been favorable to the movant.");
Golia, 2003 WL 21878788, at *10 (in case where adverse
inference imposed, court found that "plaintiffs have established
that the [destroyed] documents were relevant, by proffering
sufficient evidence from which a jury could conclude that the
documents contained evidence that would have been favorable to
their claims"); Pastorello, 2003 WL 1740606, at *12 (evidence
that "the destroyed evidence would have been relevant and
favorable to the plaintiff's case" warranted adverse inference).
However, the burden placed on the moving party to show that the
lost evidence would have been favorable to it ought not be too
onerous, lest the spoliator be permitted to profit from its
destruction. See Residential Funding, 306 F.3d at 109;
Kronish, 150 F.3d at 128) ("holding the prejudiced party to a
strict standard of proof regarding the likely contents of the
destroyed evidence would subvert the prophylactic and punitive
purposes of the adverse inference, and would allow parties who
have intentionally destroyed evidence to profit from that
Relevance in this context may be established in two ways.
First, it may be inferred if the spoliator is shown to have a
sufficiently culpable state of mind. "Where a party destroys evidence in bad faith, that bad faith alone is sufficient
circumstantial evidence from which a reasonable fact finder could
conclude that the missing evidence was unfavorable to the party."
Residential Funding, 306 F.3d at 109 (citing Kronish,
150 F.3d at 126). Likewise, "a showing of gross negligence in the
destruction or untimely production of evidence will in some
circumstances suffice, standing alone, to support a finding that
the evidence was unfavorable to the grossly negligent party."
Id. Second, the moving party may submit extrinsic evidence
tending to demonstrate that the missing evidence would have been
favorable to it. See id. For example, in Byrnie,
243 F.3d at 109-10, the court found that it could be inferred from the
weakness of the defendant's purported reasons for failing to hire
the plaintiff that missing notes of interviews of the plaintiff
would have supported his claims of discrimination. Similarly, in
Zubulake IV, 2004 WL 1620866, at *13, the court relied in part
on e-mails that had been produced to conclude that others that
had been deleted would have been at least as favorable to the
party seeking sanctions. See also Golia, 2003 WL 21878788, at
*10 ("plaintiffs have established that the documents were
relevant, by proffering sufficient evidence from which a jury
could conclude that the documents contained evidence that would
have been favorable to their claims"); Barsoum,
202 F.R.D. at 400-01 (notes of meeting between employment discrimination
plaintiff and supervisor suggested non-discriminatory motive for adverse action, tending to show that audiotape of same
meeting that was destroyed by plaintiff would have been
unfavorable to her).
In this case, as discussed above, the conduct of the 88 Palace
defendants was grossly negligent. However, I need not decide
whether the circumstances here are such that that factor alone
should be sufficient to infer that the missing documents would
have been favorable to the plaintiffs, because there is ample
extrinsic evidence to that effect.
First, there is substantial evidence that the 88 Palace
Restaurant treated the additional charges imposed on banquet
customers as employee tips rather than as a service charge
belonging to the restaurant. For example, these monies were not
reported in 88 Palace's gross receipts nor were they included as
wages in the employees' W-2 tax forms. (Deposition of Gui Yang
("Yang Dep."), attached as Exh. 9 to Declaration of Mark S.
Cheffo in Support of Plaintiffs' Motion for Partial Summary
Judgment ("Cheffo Sum. Judg. Decl.") at 37, 94-95; Deposition of
Louis Miu ("Miu Dep."), attached as Exh. 18 to Cheffo Sum. Judg.
Decl., at 110, 112-13, 123, 125-26). Therefore, it can reasonably
be inferred that the banquet receipts would likewise show that
the additional charges were treated as tips.
Next, the income received by 88 Palace Restaurant is pertinent
to the plaintiffs' damages. Yet, there is proof that the restaurant has underreported its revenues. For example, in
reviewing the business records, its accountant testified that
sales were understated by at least fifty percent. (Miu Dep. at
178-79). It would be fair to deduce that the money received book
would have demonstrated similar discrepencies.
Finally, the plaintiffs contend that managerial employees
improperly took a share of the tips. That allegation is
corroborated by deposition testimony and by those tip
distribution sheets that were produced. (Deposition of Gong Gui
Guan, attached as Exh. 8 to Cheffo Sum. Judg. Aff., at 112-13;
Yang Dep. at 244). It can be presumed that the missing tip
distribution sheets would reveal similar information. Thus, each
of the requirements for assessing sanctions against the 88 Palace
defendants for spoliation has been met. The only remaining
question is what specific sanction or combination of sanctions is
B. Choice of Sanctions
The plaintiffs seek judgment by default as a remedy for the
defendants' destruction of evidence. Whether a default judgment
is warranted should be measured by the standard that applies to
its mirror-image: dismissal of the complaint as a sanction upon a
plaintiff. As a remedy for spoliation,
outright dismissal of a lawsuit . . . is within the
court's discretion. Dismissal is appropriate if there
is a showing of willfulness, bad faith, or fault on
the part of the sanctioned party. However, because
dismissal is a drastic remedy, it should be imposed
only in extreme circumstances, usually after consideration of alternative, less
West, 167 F.3d at 779 (quotation marks, citations, and
alterations omitted). Gross negligence qualifies as "fault" such
that the threshold requirement for the sanction of dismissal or
default is met. See Pastorello, 2003 WL 1740606, at *8;
Barsoum, 202 F.R.D. at 400. However, other factors counsel
against imposing such a draconian remedy. First, while the
defendants' actions were grossly negligent, they were not taken
in bad faith: there is no evidence that the defendants recognized
evidence as harmful to them and deliberately took steps to
destroy it. Second, the prejudice suffered by the plaintiffs as a
result of the spoliation in this case is not as severe as in
other cases where dismissal or default has been ordered. As
discussed above, the plaintiffs have been able to secure other
evidence that provides support for their claims. Third, there are
other, less drastic sanctions available that will serve as a
sufficient deterrent to spoliation and will also restore the
plaintiffs to a position in this litigation as advantageous as if
the missing evidence had not been destroyed.
An order precluding the 88 Palace defendants from presenting
evidence demonstrating compliance with federal and state labor
laws is also too drastic an alternative. As long as the
plaintiffs can be protected from undue prejudice, the defendants
should not be disabled from presenting contrary, truthful
The most appropriate sanction is to allow the finder-of-fact to consider the gravity of the defendants' conduct, the
materiality of the evidence that was lost, and the import of the
remaining proof, and to draw an adverse inference against the
defendants. "This sanction, although less drastic than the others
proposed by the plaintiff[s], is still a serious one, serving the
functions of placing the `risk of an erroneous judgment on the
party that wrongfully created the risk' and `restoring the
prejudiced party to the same position he would have been in
absent the wrongful destruction of evidence.'" Golia, 2003 WL
21878788, at *11 (quoting Kronisch, 150 F.3d at 126). The
precise contours of the inference are best reserved for
determination by the Court in crafting the jury charge for
The plaintiffs are also entitled to an award of the costs,
including attorneys' fees, that they incurred in connection with
this motion. Such a monetary award "may be appropriate to punish
the offending party for its actions or to deter [the] litigant's
conduct, sending the message that egregious conduct will not be
tolerated." Travelers Property Casualty of America ex rel.
Goldman v. Pavilion Dry Cleaners, No. Civ.A. 04-1446, 2005 WL
1366530, at *4 (D.N.J. June 7, 2005) (citing United States v.
Philip Morris USA, Inc., 327 F. Supp. 2d 21, 26 (D.D.C. 2004);
In re Prudential Insurance Co. of America Sales Practices
Litigation, 169 F.R.D. 598, 615-17 (D.N.J. 1997)); see also Advantacare Health
Partners, L.P. v. Access IV, No. C 03-04496, 2004 WL 1837997, at
*10-11 (N.D. Cal. Aug. 17, 2004). Furthermore, such an award
serves the remedial purpose of making the opposing party whole
for costs incurred as a result of the spoliator's wrongful
conduct. See Turner, 142 F.R.D. at 78-79. "[C]ompensable
costs may arise either from the discovery necessary to identify
alternative sources of information or from the investigation and
litigation of the document destruction itself." Id. (citations
omitted). In this case, the plaintiffs have not demonstrated that
they engaged in any discovery that they would not otherwise have
conducted merely to obtain the equivalent of the destroyed
evidence. They did, however, expend resources in the litigation
of the instant motion, and those costs are compensable. A precise
award need not be calculated at this time. If the plaintiffs
prevail on the merits of their claims, they are entitled to their
costs and fees, which would include those expenses now at issue.
29 U.S.C. § 216(b); N.Y. Labor Law § 198(1-a). Therefore, the
plaintiffs may incorporate the expenses incurred in connection
with this motion in any ultimate application for fees or, if they
do not prevail on the merits, they may nevertheless provide
documentation at the conclusion of the case supporting an award
of costs and fees on the current motion. Conclusion
As a result of their gross negligence, the 88 Palace defendants
permitted the ongoing destruction of material evidence after this
litigation had been initiated. Accordingly, the plaintiffs are
entitled to sanctions. Their application for judgment by default
or for an order precluding defendants from presenting evidence of
compliance with the labor laws is denied, however, as such relief
would be out of proportion to the prejudice caused to the
plaintiffs. The plaintiffs are entitled to an adverse inference,
allowing the finder-of-fact to conclude that the evidence
destroyed would have been favorable to them. They shall also be
awarded their costs, including attorneys' fees, incurred in
connection with this motion, and they may submit documentation
supporting such an award at the conclusion of the case.