STEVEN S. NOVICK, Plaintiff, v. AXA NETWORK, LLC and AXA ADVISORS, LLC, Defendants 07 Civ. 7767 (AKH)(KNF) United States District Court, S.D. New York Signed December 03, 2014 Filed January 05, 2015 Counsel Amianna Stovall, Constantine Cannon, LLP, New York, NY, Michael S. Finkelstein, Finkelsetin & Feil, LLP, Garden City, NY, for Plaintiff. Aime Gessler Dempsey, David John Clark, Epstein Becker & Green, P.C., New York, NY, for Defendants. Hellerstein, Alvin K., United States District Judge ORDER DENYING OBJECTIONS TO ORDERS ISSUED BY MAGISTRATE JUDGE USMJ Kevin N. Fox issued a Memorandum and Order on October 22, 2014 resolving certain discovery issues. Judge Fox held that defendants had failed to preserve certain relevant audio recordings, that defendants had a duty to preserve the recordings, that the recordings had been spoliated, that defendants had acted in bad faith, and that plaintiffs were denied access to evidence that would have tended to support their claims. Judge Fox held that because of the spoliation, plaintiff was entitled to an adverse inference against defendants. Judge Fox held also that because defendants were delinquent in producing emails, plaintiff could retake five specific depositions (those ordered on October 3, 2013) at defendants’ expense. And Judge Fox held that defendants would have to pay plaintiff the reasonable attorneys’ fees and costs incurred in connection with the motion. Defendants raised timely objections and appealed. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(a). Upon review of the submissions and briefs and the prior proceedings, I find that the Magistrate Judge’s rulings were not clearly erroneous or contrary to law. Because defendants argue that the appropriateness of sanctions requires de novo review, I also certify that I have given such review and I hold, upon such de novo review, that the sanctions are lawfully and appropriately applied. STANDARDS OF DISTRICT COURT REVIEW A Magistrate Judge’s orders are generally reviewed under a clearly erroneous standard for factual and discretionary rulings, and a contrary to law standard for legal rulings. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(a). However, defendants argue that a de novo standard is appropriate for rulings affecting the merits, such as adverse inference rulings. See Kiobel v. Millson, 592 F.3d 78, 105 (2d Cir. 2010) (concurring opinion). Since de novoreview would not change my rulings, I will adopt that higher standard for my review here. I find, upon such de novo review, that the evidence clearly and convincingly supports Judge Fox’s rulings. Rule 37, Fed. R. Civ. P., provides that sanctions are appropriate if a party fails to obey an order to provide discovery, and that sanctions can extend to the striking of a pleading, the paying of the reasonable expenses, including attorneys’ fees, incurred due to a party’s failure to obey a discovery order, and other related measures. See R. 37(b)(2). “Severe sanctions” may be appropriate, Daval Steel Prods. v. M/V Fakredine, 951 F.2d 1357, 1365 (2d Cir. 1991), as “a party who flouts [discovery] orders does so at his peril.” Update Art, Inc. v. Modiin Publ’g Ltd., 843 F.2d 67, 73 (2d Cir. 1988). If a “particularized showing of bad faith” is made showing spoliation - that 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” - the court has inherent power to impose sanctions even in the absence of a discovery order. West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999); United States v. Int’l Bhd. of Teamsters, 948 F.2d 1338, 1343 (2d Cir. 1991); Fujitsu v. Federal Express Corp., 247 F.3d 423, 436 (2d Cir. 2001). An appropriate sanction will deter parties from engaging in spoliation, place the risk of an erroneous judgment on the party who created the risk by causing the spoliation, and restore the prejudiced party “to the same position he would have been in absent the wrongful destruction of evidence ....” West, 167 F.3d at 779-80. A party’s spoliation supports giving an adverse inference instruction to the jury. Kronisch v. United States, 150 F.3d 112, 126 (2d Cir. 1998). The party that seeks the inference must show that the destroying party had a duty to preserve the evidence, destroyed the evidence with a culpable state of mind, and that the destroyed evidence would have been relevant to, and would have supported, the claim or defense in issue. Id.; Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2002). THE AUDIO RECORDINGS *2 On July 24, 2012, I re-confirmed my order of June 27, 2012, requiring defendants to identify the number of audio tapes in their possession that (a) reflected recordings of 10 identified individuals, and (b) had been recorded between June 1, 2006 and July 27, 2012. I ordered the parties then to agree to a procedure for reviewing and producing the audio tapes. SeeECF, Doc. No. 150. The same order covers emails, a second part of Judge Fox’s orders. Defendants could not have been surprised by this order. As plaintiff’s motion points out, plaintiff had demanded, as early as October 16, 2006 - four days after defendants had terminated him - “all trading desk voice recordings,” and all” recorded telephone conversations,” (and all emails) of five key employees and of him. Plaintiff again demanded an enlarged list of recordings and emails in his opening discovery demands, and repeated those demands in successive discovery rounds. Defendants’ responses were grudging, inadequate, and given only in response to motions for sanctions. The details are recounted in plaintiff’s memorandum and in motions and orders described in the docket sheet. It is shocking (and I use the term descriptively) that defendant could write a letter on October 5, 2012 professing not to know about audio recordings, and claiming that defendant was not in possession of any recordings. The balance of the story need not be repeated. Without doubt, defendants were under a legal duty to preserve and produce, and without doubt their failures to preserve and produce, spanning years, was in bad faith. Defendants’ attorneys used every trick in the book to delay and hinder discovery. The docket sheet in this nine-year old case fills 45 pages and reflects more motions for sanctions, rehearings, adjournments, and delays than any other case I remember in 16 years as a district judge. There simply is no excuse for not preserving these audio recordings; indeed, there is no excuse for not having produced them promptly when requested, before there was temptation to destroy them. Defendants’ bad faith is clear and convincing. As Judge Fox found, “defendants’ repeated failures to search for properly, locate and produce audio recordings to the plaintiff..., as well as their inability to account for the audio recordings’ disappearance, suggests nothing other than deliberate conduct and a culpable state of mind. The Court finds that defendants acted in bad faith.” Memorandum and Order of Oct. 22, 14, at 11, ECF Doc. No. 259. Clearly, the audio tapes have strong evidentiary value. They record conversations contemporarily with defendants’ termination of plaintiff, with people who worked with plaintiff’s customers’ trading accounts and who naturally would be expected to implement defendants’ intentions with respect to those accounts. The destruction of the tapes denies to the parties, the court, and the triers of fact the most important evidence of whatever defendants did, or did not do, with respect to those accounts. Their bad-faith destruction by defendant clearly calls for an adverse inference against defendants with regard to the substance of their contents. Chin v. Port Authority of NY and NJ, 685 F.3d 135, 162 (2d Cir. 2012). THE EMAILS Page 10 of Plaintiff’s memorandum describes the problem: representations by defendants that they produced all relevant and responsive emails, followed by discovery of more emails after plaintiff complained, followed by a dump of thousands of pages of emails, followed by more false or inadequate representations, followed by discovery of even more emails. This cycle repeated two or three times. Judge Fox’s order authorizing plaintiff to retake specific depositions at defendants’ expense constitutes a reasonable and proper remedy and was well within the discretion of the magistrate judge. However, since plaintiff has decided not to retake the depositions, a ruling on this issue is not required. The objection is denied as moot. THE COSTS OF THE MOTION *3 Pretrial proceedings are not intended to be a game to wear the patience and pocketbook of adversaries and opposing counsel or to burden the court. District judges and magistrate judges cannot administer justice in a busy court if parties and counsel multiply proceedings and evade responsibilities. Plaintiff, numerous times, had to resort to motions for sanctions to obtain discovery that should have been produced pursuant to notice, let alone court order. Defendants have abused the process of this court. Charging defendants the costs and expenses of the motion is a reasonable and proper remedy. CONCLUSION Defendants’ objections to the order of USMJ Kevin Fox, dated October 22, 2014, are denied. The Clerk of Court is instructed to mark Document No. 260 terminated. The case is returned to Judge Fox with instructions to recommend an adverse inference appropriate for the spoliation of evidence, to find the amounts of the costs and expenses to be awarded to plaintiff, to oversee the speedy completion of pre-trial discovery, and to return the case to me for trial.[1] SO ORDERED. Footnotes [1] If the parties wish, they may consent to trial before Judge Fox, with right of appeal directly to the court of appeals. See 28 U.S.C. § 636(c).