In a fraudulent misrepresentation action against a realty group, plaintiffs sought an adverse inference against defendants for spoilation in relation to deleted emails.  Plaintiffs alleged that defendants actively concealed facts about a condominium they sold plaintiffs, and later deleted numerous emails related to the sale.  Defendants claimed that they simply followed a company-wide deletion process.  The court held that sanctions, including an adverse inference instruction, were warranted because defendants failed to take necessary steps to avoid the destruction of evidence.

Plaintiffs purchased a Brooklyn condominium for $1.3 million dollars from defendants, a group of architects, contractors, and realtors.  Soon after moving in the defendants discovered that the condominium seriously flooded each time it rained.  In response, plaintiffs instituted this suit and sought discovery of emails related to their claim.  When they noticed that defendants responses did not even include relevant emails exchanged between the parties, plaintiffs began to suspect that defendants were selectively editing their responses.  Defendants claimed they were simply following company deletion practices, which required employees to delete their emails in order to stay below an allotted amount of storage space.  The court disagreed with defendants and cited emails produced by both parties as evidence as proof of defendants’ selective deletion policies.  For instance, plaintiffs attempted to visit the condominium to take measurements on a Tuesday.  Their realtor, through an email, pushed back this appointment until Thursday under the guise of a scheduling conflict.  He then informed his partners in a separate email that he delayed the appointment because of heavy rain.  Defendants produced the first email but not the second, even though it was stored in at least four inboxes.

Relying on Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004), the court granted plaintiffs motion for an adverse inference instruction and awarded attorney’s fees and costs in bringing the motion.  The court held that, though companies may delete files in the ordinary course of business, they are under an obligation to preserve relevant information once an action is reasonably anticipated.  The court then held that defendants’ breach of their obligation to issue a litigation hold was so extreme that it constituted at least gross negligence and sanctions were warranted.