        SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

380
CA 15-01490
PRESENT: CENTRA, J.P., CARNI, DEJOSEPH, CURRAN, AND SCUDDER, JJ.


STEPHEN SARACH, PLAINTIFF-RESPONDENT,

                    V                             MEMORANDUM AND ORDER

M&T BANK CORPORATION, DEFENDANT-APPELLANT.


LIPSITZ GREEN SCIME CAMBRIA LLP, BUFFALO (DIANE M. PERRI ROBERTS OF
COUNSEL), FOR DEFENDANT-APPELLANT.

PAUL WILLIAM BELTZ, P.C., BUFFALO (WILLIAM QUINLAN OF COUNSEL), FOR
PLAINTIFF-RESPONDENT.


     Appeal from an order of the Supreme Court, Erie County (Catherine
R. Nugent Panepinto, J.), entered May 28, 2015. The order granted
plaintiff’s motion to strike defendant’s answer and affirmative
defenses.

     It is hereby ORDERED that the order so appealed from is modified
on the law by vacating the sanctions imposed and reinstating the
answer and affirmative defenses, and plaintiff is granted an adverse
inference charge as a sanction under CPLR 3126, and as modified the
order is affirmed without costs in accordance with the following
memorandum: Plaintiff commenced this action on March 1, 2012, for
injuries he allegedly sustained when he slipped and fell on ice on
March 23, 2009, as he was walking into defendant’s bank in Buffalo,
New York. On August 10, 2010, prior to the commencement of the
action, plaintiff sought an order pursuant to CPLR 3102 (c) for pre-
action disclosure and preservation of evidence. Defendant opposed
plaintiff’s request for any pre-action disclosure, but represented to
Supreme Court that it had voluntarily undertaken preservation of
certain evidence, including accident reports, photographs, and
surveillance videotapes, and ultimately “consent[ed] to an order of
preservation.” On October 29, 2010, the court granted plaintiff’s
application and ordered defendant to preserve, inter alia, all
“photographs [and] video tapes, including but not limited to security
and surveillance video related to the subject accident.” During
discovery after the action was commenced, plaintiff requested, inter
alia, surveillance films related to the subject accident, and
defendant responded that those materials had not been preserved.
Thereafter, on July 30, 2014, plaintiff brought a motion pursuant to
CPLR 3126 to strike defendant’s answer on the ground that defendant
had violated the court’s 2010 order of preservation. The court
granted plaintiff’s motion and struck defendant’s answer and
affirmative defenses. Defendant appeals.
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     Initially, we agree with plaintiff that a sanction was warranted
inasmuch as defendant “wilfully fail[ed] to disclose information” that
the court had ordered to be preserved (CPLR 3126). Nevertheless, we
conclude that the court abused its discretion in striking defendant’s
answer and affirmative defenses. It is well established that “a less
drastic sanction than dismissal of the responsible party’s pleading
may be imposed where[, as here,] the loss does not deprive the
nonresponsible party of the means of establishing his or her claim or
defense” (Marro v St. Vincent’s Hosp. & Med. Ctr. of N.Y., 294 AD2d
341, 342). Indeed, we note that the record does not demonstrate that
the plaintiff has been “ ‘prejudicially bereft’ ” of the means of
prosecuting his action (Rodman v Ardsley Radiology, P.C., 80 AD3d 598,
599). Thus, we conclude that an appropriate sanction is that an
adverse inference charge be given at trial with respect to the
unavailable surveillance footage (see Mahiques v County of Niagara,
137 AD3d 1649, 1653; Jennings v Orange Regional Med. Ctr., 102 AD3d
654, 656; Gogos v Modell’s Sporting Goods, Inc., 87 AD3d 248, 254-
255), and we therefore modify the order accordingly.

     Our dissenting colleague agrees that a “remedy is necessary,” but
disagrees with the sanction we have imposed, our analysis in reaching
that sanction, and ultimately our directive to the court on how to
effectuate the sanction. In our view, our resolution of this case
requires us simply to determine whether defendant violated an order
and whether such violation requires a sanction pursuant to CPLR 3126.
The dissent refers to the “minimal prejudice suffered by plaintiff in
not having been able to inspect the surveillance video in question.”
That reference overlooks the undisputed fact that plaintiff sought an
order pursuant to CPLR 3102 (c) for pre-action disclosure, and counsel
for defendant not only volunteered to preserve certain items,
including surveillance video related to the subject accident, but
“consent[ed] to an order of preservation.” Naturally, the court then
granted the relief requested by plaintiff, and defendant never
challenged the resulting order. Under those circumstances, we are
unable to conclude that defendant’s failure to comply with the order
was anything but wilful. As for our dissenting colleague’s concern
with respect to the form of the adverse inference charge, we
anticipate that the court will follow the Pattern Jury Instructions.

     All concur except CURRAN, J., who dissents and votes to modify in
accordance with the following memorandum: I respectfully dissent from
the majority’s conclusion that “defendant ‘wilfully fail[ed] to
disclose information’ that the court had ordered to be preserved (CPLR
3126).” I also disagree with the sanction imposed. Nevertheless, I
agree that a remedy is necessary to cure the minimal prejudice
suffered by plaintiff in not having been able to inspect the
surveillance video in question. For the reasons set forth below, I
would modify Supreme Court’s order, vacate the sanction imposed,
reinstate the answer, and preclude defendant from introducing evidence
at trial in its direct case regarding the contents of the surveillance
video. I also would remit for a hearing pursuant to Part 130 of the
Rules of the Chief Administrator of the Courts (see 22 NYCRR 130 et
seq.) to determine whether defendant’s counsel engaged in “[f]rivolous
conduct” (22 NYCRR § 130-1.1 [c]) warranting an award of costs or
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                                                         CA 15-01490

sanctions based on his affidavit stating that defendant had “already
voluntarily taken steps to preserve (the surveillance video) without
any loss of evidence.”

     Plaintiff alleges that he slipped and fell on ice on March 23,
2009, as he was walking into defendant’s main branch in downtown
Buffalo, New York. Plaintiff asserts that the ice was created by
defendant because it was negligently operating its outside fountain in
freezing temperatures, and plaintiff slipped on an ice patch next to
the fountain.

     As noted by the majority, on October 29, 2010, the court granted
plaintiff’s application to preserve, inter alia, “video tapes” and
“security and surveillance video related to the subject accident”
(hereafter, preservation order). It was in response to this
application that defendant’s counsel made the representation assuring
that evidence had been voluntarily preserved.

     The action was commenced on March 1, 2012, and document discovery
began in 2012 and 2013. On June 4, 2014, defendant’s counsel sent a
letter to plaintiff’s counsel indicating that the only surveillance
videos and photographs that had been kept pursuant to defendant’s
normal retention policies were two photographs taken by the security
officer on the date of the accident, a still photograph from the
surveillance video on the date of the accident, and four still
photographs from the surveillance video on March 27, 2009, when
plaintiff returned to the bank seeking reimbursement for his medical
expenses. Defendant indicated that its normal policy is to overwrite
the surveillance video tapes after 90 days. Thus, defendant claims
that, within 90 days after the accident, the surveillance videos were
overwritten and reused.

     Plaintiff brought the subject motion to strike defendant’s answer
on July 30, 2014, based solely on the violation of the preservation
order. In opposition to the motion, defendant provided an affidavit
from an assistant vice-president whose duties include inspection of
records maintained by defendant relating to bodily injury claims and
litigation. The assistant vice-president averred that she conducted a
diligent search of defendant’s records and confirmed that all of the
videos and photographs in the possession of defendant at the time of
the preservation order had been produced for plaintiff. Additionally,
she averred that the surveillance video from the date of the accident
was overwritten pursuant to defendant’s normal business practice
approximately 14 months before the preservation order was issued.
Plaintiff did not contest any of these sworn statements from the
assistant vice-president.

     The majority’s conclusion that defendant “wilfully” failed to
disclose the surveillance video was not even argued in plaintiff’s
spoliation motion. Rather, the motion was premised on the other basis
for a penalty under CPLR 3126, i.e., the violation of a court order.
Irrespective of whether the majority’s sanction is based on a “willful
failure to disclose” or contumacious behavior in violating a court
order, the imposition of a penalty pursuant to CPLR 3126 is unfounded
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                                                         CA 15-01490

here because defendant, pursuant to its normal business policy,
recorded over the surveillance video more than a year before the
preservation order was entered.

     I respectfully submit that the majority has overlooked our
precedent applying CPLR 3126. The prerequisites for a penalty
pursuant to that statute are a party: (1) refusing to “obey an order
for disclosure”; or (2) “wilfully fail[ing] to disclose information”
(CPLR 3126). When faced with a motion alleging “willful, contumacious
or bad faith conduct,” our Court analyzes it according to a burden-
shifting structure: the movant must establish that such conduct
occurred, “thereby shifting the burden to [the adversary] to offer a
reasonable excuse” (Allen v Wal-Mart Stores, Inc., 121 AD3d 1512,
1513; see Cason v Smith, 120 AD3d 1554, 1555, lv dismissed 25 NY3d
1057; Hann v Black, 96 AD3d 1503, 1504-1505; Household Fin. Realty
Corp. of N.Y. v Robinson, 68 AD3d 1724, 1724; Hill v Oberoi, 13 AD3d
1095, 1096). When the movant seeks to strike the adversary’s
pleading, as occurred here, our Court requires that there be a “clear
showing” (Fox v Eastman Kodak Co., 275 AD2d 921, 921) of willful,
contumacious, or bad faith conduct, or that such conduct be
“conclusively shown” (McFadden v Oneida, Ltd., 93 AD3d 1309, 1311).

     The majority has overlooked our precedent here in two ways.
First, it has not considered whether defendant’s purported willful
failure to disclose information that the court ordered be preserved,
i.e., contumacious behavior, was “conclusively shown” or established
by a “clear showing,” or by “clear and convincing evidence,” as would
be necessary for contempt (El-Dehdan v El-Dehdan, 26 NY3d 19, 29), or
to exercise the court’s inherent power to preserve the integrity of
the judicial system (see CDR Créances S.A.S. v Cohen, 23 NY3d 307,
318). Second, the majority has failed to mention the excuse offered
by defendant, i.e., that the surveillance video from the date of the
accident was overwritten pursuant to normal business practices within
90 days after plaintiff’s alleged fall and that defendant was
therefore unable to comply with the preservation order or plaintiff’s
demand to produce.

     Our Court has excused the alleged spoliation of evidence when the
evidence was destroyed “in good faith before litigation was pending,
pursuant to . . . normal business practices” (Raymond v State of New
York, 294 AD2d 854, 855; see Conderman v Rochester Gas & Elec. Corp.,
262 AD2d 1068, 1070). Additionally, “a party cannot be compelled to
disclose that which is not in his or her possession” (Saferstein v
Stark, 171 AD2d 856, 857). Our Court also has accepted that an
“inability to comply” with a court order may be a “valid defense” to
an application for contempt (Matter of Andrew B., 128 AD3d 1513,
1515).

     The majority is rightfully concerned about the perceived
misrepresentation in the affidavit from defendant’s counsel seeming to
ensure that the surveillance video had been preserved. However, I
respectfully submit that these concerns should not cause us to
overlook our precedent and the fundamental facts, which should compel
us to conclude here that the evidence was destroyed pursuant to normal
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                                                         CA 15-01490

business practices and that the evidence was not contumaciously or
wilfully destroyed. Thus, a penalty under CPLR 3126 is not warranted.

     More fundamentally, the majority fails to address the three-prong
analysis for spoliation motions adopted by the Court of Appeals in
Pegasus Aviation I, Inc. v Varig Logistica S.A. (26 NY3d 543, 547).
The first prong is whether “the party having control over the evidence
possessed an obligation to preserve it at the time of its destruction”
(id.) (emphasis added). The majority’s analysis is devoid of this
required finding. Instead, the majority apparently assumes that the
surveillance video still existed as of the time the preservation order
was obtained and after litigation commenced. The record, however,
offers no support for this assumption and is quite clearly to the
contrary. Rather, the record demonstrates that the surveillance video
was overwritten within 90 days of plaintiff’s fall, and plaintiff has
not disputed this fact.

     While I disagree with the majority’s analysis under CPLR 3126,
and fault the majority for not adhering to Pegasus, I nevertheless
conclude that defendant had a duty to preserve the surveillance video
within 90 days of plaintiff’s fall. In my view, defendant was on
“notice of an impending lawsuit” at the time the surveillance video
was overwritten (MetLife Auto & Home v Joe Basil Chevrolet, 1 NY3d
478, 484). Moreover, the video is “matter material and necessary in
the prosecution or defense of an action” (CPLR 3101 [a]). Although
defendant indicates that the surveillance video from the date of the
accident was inspected and that it did not show plaintiff’s fall,
plaintiff should not be required to accept that representation without
an opportunity to inspect the video (see Gogos v Modell’s Sporting
Goods, Inc., 87 AD3d 248, 251). Thus, I agree with the majority that
a remedy for the missing evidence is appropriate. However, for the
reasons discussed below, an adverse inference charge should not be
given when, as here, the sole basis for the imposition of a penalty is
negligent conduct. Instead, in my view, the more appropriate remedy
is “to restore balance to the litigation” by precluding defendant from
introducing at trial evidence of the video’s content as part of its
direct case (Ortega v City of New York, 9 NY3d 69, 76).

     While the Court of Appeals has indicated that an adverse
inference charge, among other remedies, may be an appropriate sanction
or penalty for spoliation (see Pegasus, 26 NY3d at 554; Ortega, 9 NY3d
at 76), it has not held that all such remedies are suited to all forms
of spoliation, i.e., negligent, grossly negligent, and willful. Upon
a finding that the destruction of evidence was solely the result of
negligence—such as through normal business practices—thereby
fulfilling the second prong of the Pegasus analysis, i.e., a
“ ‘culpable state of mind’ ” (26 NY3d at 547), I submit that an
adverse inference charge is inappropriate because it would be
inconsistent with its traditional use as an evidentiary inference that
the missing evidence was unfavorable to the spoliator or that
destruction of the evidence showed consciousness of a weak case.

     New York law has long recognized that “[a] party’s failure to
produce evidence[,] which the party controls and would be naturally
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                                                         CA 15-01490

expected to introduce, raises the logical inference that the withheld
evidence would prove unfavorable. Armory v Delamirie, 1 Strange (KB)
505, 93 Eng Rep 644 (non-production of a chattel)” (Jerome Prince,
Richardson on Evidence § 3-139 [Farrell 11th ed 1995]). Further,
“[t]he intentional destruction or mutilation of relevant evidence may
give rise to the inference that the matter destroyed and mutilated is
unfavorable to the spoliator . . . The mutilation or destruction is
not alone sufficient to serve as a basis for this inference; the act
must have been intentional, and the matter mutilated or destroyed must
be shown to be relevant to the issues on the trial . . . Fabrication
or deliberate mutilation of evidence or other fraud on the part of a
party is a circumstance that may properly be considered by the jury as
indicating a weak case” (id. § 3-141).

     When evidence has been negligently destroyed, there is no factual
basis upon which to instruct the jury to infer weakness of the
spoliator’s case or that the evidence was unfavorable. The federal
courts recently grappled with this issue in connection with
“electronically stored information” (ESI) and, with respect to ESI,
they have rejected an adverse inference charge premised on negligent
conduct (see Federal Rules of Civil Procedure, rule 37 [e] [2]; see
also Federal Rules of Civil Procedure, Advisory Committee Notes, 2015
Amendment, Subdivision [e] [2] [“Adverse-inference instructions were
developed on the premise that a party’s intentional loss or
destruction of evidence to prevent its use in litigation gives rise to
a reasonable inference that the evidence was unfavorable to the party
responsible for loss or destruction of the evidence. Negligent or
even grossly negligent behavior does not logically support that
inference. Information lost through negligence may have been
favorable to either party, including the party that lost it, and
inferring that it was unfavorable to that party may tip the balance at
trial in ways the lost information never would have. The better rule
for the negligent or grossly negligent loss of electronically stored
information is to preserve a broad range of measures to cure prejudice
caused by its loss, but to limit the most severe measures to instances
of intentional loss or destruction”]).

     In reaching this conclusion, the federal courts resolved a
dispute among the Circuit Courts of Appeal electing to adopt the
reasoning of courts rejecting negligence as a basis for an adverse
inference charge (see e.g. Aramburu v The Boeing Company, 112 F3d
1398, 1407; Vick v Texas Empl. Commn., 514 F2d 734, 737), and to
reject the reasoning of those courts accepting it (see e.g.
Residential Funding Corp. v DeGeorge Fin. Corp., 306 F3d 99, 108).
This rejection of Residential Funding may have significant
ramifications for New York law because that case, as followed in
Zubulake v UBS Warburg LLC (220 FRD 212, 220), is the basis for our
appellate courts accepting negligence as a form of a “ ‘culpable state
of mind’ ” authorizing spoliation sanctions (Pegasus, 26 NY3d at 547;
see VOOM HD Holdings LLC v EchoStar Satellite L.L.C., 93 AD3d 33, 45;
Ahroner v Israel Discount Bank of N.Y., 79 AD3d 481, 482).
Nevertheless, Pegasus is controlling on this issue, and mere
negligence is apparently a culpable state of mind in New York for the
purpose of imposing spoliation sanctions.
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                                                         CA 15-01490

     One of the reasons the federal courts limited the availability of
an adverse inference charge in the recent amendments to the Federal
Rules of Civil Procedure, rule 37 (e), was to address business
concerns about over-preservation of ESI (see Alexander Nourse Gross,
Note, A Safe Harbor from Spoliation Sanctions: Can an Amended Federal
Rule of Civil Procedure 37 (E) Protect Producing Parties?, 2015 Colum
Bus L Rev 705, 723-724, 754, 763). The majority’s failure to
appreciate such concerns, not only in this case, but also in our
precedent seemingly employing an adverse inference charge as the
compromise remedy of choice (see Mahiques v County of Niagara, 137
AD3d 1649, 1653; Koehler v Midtown Athletic Club, LLP, 55 AD3d 1444,
1445; Tomasello v 64 Franklin, Inc., 45 AD3d 1287, 1288; Enstrom v
Garden Place Hotel, 27 AD3d 1084, 1087), is another reason for my
dissent.

     Additionally, even though the majority sua sponte imposes an
adverse inference charge as a sanction without a request by either
party, it blithely leaves it to the trial court to figure out what the
required charge should say and how it will impact the proof at trial.
The majority elects not to refer to either PJI 1:77 or PJI 1:77.1 (1A
NY PJI 1:77 at 130; 1A NY PJI 1:77.1, at 132-133 [2016]), or to some
other charge it considers to be more “tailored” to the facts here
(Pegasus, 26 NY3d at 554). However, even a casual citation to PJI
1:77 or PJI 1:77.1, without more, would be insufficient. PJI 1:77 is
a “failure to produce” charge and leaves it to the jury to determine
whether: (1) the evidence existed; (2) there was a reasonable
explanation for it not being produced in court; and (3) the evidence
would have been important or significant to the jury in its
deliberations. PJI 1:77 is the traditional evidentiary inference
permitting the jury to infer the unfavorability of the missing
evidence.

     PJI 1:77.1 pertains to the “destruction or spoliation of
evidence” and leaves it to the jury to determine whether: (1) the
alleged spoliator destroyed, altered, or caused the disappearance of
the evidence; and (2) there was a reasonable explanation for the
claimed destruction, alteration, or disappearance of the evidence. As
the comment states, the charges should be modified to remove from the
jury those issues that have been resolved by stipulation or by a
judicial finding (see 1A NY PJI3d 1:77 at 132 [2016]).

     PJI 1:77.1 is obviously the type of charge imposed as a sanction.
As the majority imposes the charge as a penalty under CPLR 3126, it
would appear that it is requiring the trial court to use PJI 1:77.1.

     By penalizing defendant with an adverse inference charge based on
“willful” conduct, the majority has necessarily determined that the
missing surveillance video was relevant, i.e., it would have been
important to the jury in its deliberations (see Pegasus, 26 NY3d at
547 [“(w)here the evidence is determined to have been intentionally or
wilfully destroyed, the relevancy of the destroyed documents is
presumed”]). However, as noted above, there is no support for this
conclusion in the record and, in fact, the record is to the contrary.
The only evidence in the record as to the importance of the video, or
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                                                         CA 15-01490

lack thereof, is the representation from defendant’s counsel that the
video was reviewed and that it did not capture plaintiff’s fall.
Thus, the majority speculates as to the actual content of the video
and imposes that speculation on the jury.

     The majority also fails to address whether defendant will be
permitted to present evidence as to the circumstances of the video’s
destruction and as to the video’s contents to the extent it supports
the reason for permitting its destruction pursuant to normal business
practices, i.e., a reasonable explanation. The majority thereby
overlooks the embedded best evidence rule objection this testimony may
evoke (see e.g. People v Cyrus, 48 AD3d 150, 159, lv denied 10 NY3d
763) and, if sustained, the prejudice to defendant in being unable to
support its alleged reasonable explanation for the video’s
destruction.

     Lastly, requiring the trial court to deliver an undefined
“adverse inference charge” will undoubtedly require the parties to
conduct a “trial within a trial” addressing the spoliation issue.
This will prolong the trial process and subject the jury to a
tangential issue.

     In the absence of clear direction from our Court, I foresee
confusion and randomness at the trial court level leading to further
grounds for appeal. For all of these reasons, I dissent from the
majority’s decision and would instead modify the order and remit the
matter as described above.




Entered:   June 17, 2016                        Frances E. Cafarell
                                                Clerk of the Court
