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Dataflow, Inc. v. Peerless Insurance Co.

United States District Court, Second Circuit

January 13, 2014

DATAFLOW, INC.; DATAFLOW, LLC; and DATAFLOW REPROGRAPHICS, LLC, Plaintiffs,
v.
PEERLESS INSURANCE CO., Defendant.

MEMORANDUM-DECISION and ORDER

LAWRENCE E. KAHN, District Judge.

I. INTRODUCTION

This matter comes before the Court following a Report-Recommendation filed on June 6, 2013, by the Honorable David E. Peebles, U.S. Magistrate Judge, pursuant to 28 U.S.C. § 636(b) and Local Rule 72.3. Dkt. No. 46 ("Report-Recommendation"). Judge Peebles recommended that Plaintiffs Dataflow, Inc.; Dataflow, LLC; and Dataflow Reprographics, LLC's (collectively, "Plaintiffs") Motion for sanctions be granted, that the Court administer an adverse-inference instruction, and that the Court award Plaintiffs attorney's fees and costs associated with their Motion. See generally Report-Rec; Dkt. No. 30 ("Motion").

II. STANDARD OF REVIEW

A district court must review de novo any objected-to portions of a magistrate judge's report-recommendation or specific proposed findings or recommendations therein and "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b); accord FED. R. CIV. P. 72(b); see also Morris v. Local 804, Int'l Bhd. of Teamsters , 167 F.Appx. 230, 232 (2d Cir. 2006); Barnes v. Prack, No. 11-CV-0857 , 2013 WL 1121353, at *1 (N.D.N.Y. Mar. 18, 2013). If no objections are made, or if an objection is general, conclusory, perfunctory, or a mere reiteration of an argument made to the magistrate judge, a district court need review that aspect of a report-recommendation only for clear error. Chylinski v. Bank of Am., N.A. , 434 F.Appx. 47, 48 (2d Cir. 2011); Barnes , 2013 WL 1121353, at *1; Farid v. Bouey , 554 F.Supp.2d 301, 306-07 & n.2 (N.D.N.Y. 2008); see also Machicote v. Ercole, No. 06 Civ. 13320 , 2011 WL 3809920, at *2 (S.D.N.Y. Aug. 25, 2011) ("[E]ven a pro se party's objections to a Report and Recommendation must be specific and clearly aimed at particular findings in the magistrate's proposal, such that no party be allowed a second bite at the apple by simply relitigating a prior argument.").

Defendant Peerless Insurance Company ("Defendant") has filed Objections to the Report-Recommendation. Dkt No. 47 ("Objections"). The Objections challenge the Report-Recommendation on the following grounds: (1) Magistrate Judge Peebles wrongfully considered Plaintiffs' Reply papers, which were filed without leave of Court in contravention of the Local Rules; (2) Plaintiffs have not demonstrated prejudice; (3) Defendant was not grossly negligent in destroying the putative emails; (4) Plaintiffs have not demonstrated that the destroyed emails are relevant; and (5) the proposed jury instruction is overly vague.

The Court will consider objection (1) de novo, as this objection addresses specific findings and recommendations of the Magistrate Judge. As to objections (2), (3), and (4), Defendant's argument are mostly recitations of facts and theories already briefed and argued at oral argument. The only factual finding that Defendant specifically challenges is that Defendant should have reasonably anticipated litigation at the time that the emails were destroyed, and that Defendant had a policy in place to prevent destruction of relevant emails. Objs. at 14-16. Upon review, the Court adopts the Magistrate Judge's recommendation that Plaintiffs' Motion be granted. Accordingly, because Defendant has not disputed Plaintiffs' entitlement to legal fees, the Court adopts the recommendation to award Plaintiffs legal fees and costs associated with this Motion.

As to objection (5), although the Court adopts Magistrate Judge Peebles' recommendation that the Court include an adverse inference instruction, the Court will defer ruling on the language of jury instructions until the filing of pretrial memoranda so as to consider proposed jury instructions as a whole.

III. LEGAL STANDARD FOR SPOLIATION

On a motion for sanctions due to spoliation, the moving party must show that: (1) the party having control of the evidence had an obligation to preserve it at the time it was destroyed; (2) that party had a culpable state of mind; and (3) the destroyed evidence was of a nature that a reasonable trier of fact could find that it would support the moving party's claim or defense. Residential Funding Corp. v. DeGeorge Fin. Corp. , 306 F.3d 99, 107 (2d Cir. 2002). A duty to preserve arises "once a party reasonably anticipates litigation." Zubulake v. UBS Warburg LLC , 220 F.R.D. 212, 218 (S.D.N.Y. 2003). The party "must suspend its routine document... retention/destruction policy and put in place a litigation hold' to ensure the preservation of relevant [evidence]." Id . If a party's conduct is found to be grossly negligent, reckless, or intentional, the Court can grant spoliation sanctions without a finding of relevance. Chin v. Port Authority of N.Y. and N.J. , 685 F.3d 135, 162 (2d Cir. 2012). If there is a finding of mere negligence, spoliation sanctions are appropriate if there is any likelihood that the destroyed evidence "would have been of the nature alleged by the party affected by its destruction, " such that it is relevant to that party's claim. Residential Funding Corp. , 306 F.3d at 108; Kronisch v. United States , 150 F.3d 112, 127 (2d Cir. 1998). Even in the case of negligence, courts have discretion to impose an adverse inference jury instruction "because each party should bear the risk of its own negligence." Residential Funding Corp. , 306 F.3d at 108.

IV. DISCUSSION

A. Plaintiffs' Reply Memorandum and Declaration

Defendant first argues that the Magistrate Judge's consideration of Plaintiff's Reply and Declaration violated Local Rule 7.1(b)(2). See Dkt. Nos. 42 ("Reply"); 42-1 ("Reply Declaration"). That provision states that "Reply papers... are not permitted without the Court's prior permission." L.R. 7.1(b)(2). However, the Magistrate Judge Peebles scheduled both Response and Reply papers to ...


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