Failure To Issue Written Legal Hold Is Not Gross Negligence Per Se

Rejecting Judge Scheindlin's Pension Committee standard, the Second Circuit adopts a case-by-case approach to determining the degree of negligence and sanctions.

In a recent decision, the U.S. Court of Appeals for the Second Circuit rejected the strict liability standard set out by Southern District of New York Judge Shira A. Scheindlin in her key Pension Committee1 opinion. The Second Circuit held that the failure to issue a legal hold once the duty to preserve is triggered does not in itself automatically constitute gross negligence.

In Chin v. Port Authority of New York & New Jersey,2 the Second Circuit stated that, contrary to the holding in Pension Committee, "failure to institute a 'litigation hold'" does not constitute gross negligence per se. Rather, the court adopted language from Magistrate Judge James C. Francis's Orbit One opinion, finding that "'the better approach is to consider [the failure to adopt good preservation practices] as one factor' in the determination of whether discovery sanctions should issue."3

Background

In 2001, after being passed over for promotion, 11 Asian-Americans, all current or former police officers employed by the Port Authority of New York and New Jersey, filed a charge with the Equal Employment Opportunity Commission (EEOC). In 2003, the plaintiffs sued the Port Authority in the Southern District of New York under Title VII for employment discrimination based on race. During discovery, the plaintiffs learned that the Port Authority had failed to issue a legal hold and had destroyed at least 32 "promotions folders" assembled for employees recommended for promotion. Finding that there was ample other evidence available to the plaintiffs regarding their relative qualifications, the district court denied the plaintiffs' sanctions motion seeking an adverse inference for the spoliation and ruled that the Port Authority's actions were "negligent, but not grossly so." After a nine-day trial, the jury unanimously found in favor of seven of the plaintiffs in the discrimination case. The Port Authority appealed, and the nonprevailing plaintiffs cross-appealed; one of them, Howard Chin, also argued that he was entitled to a new trial due to the district court's improper denial of an adverse inference against the Port Authority for failing to issue a legal hold. Citing Pension Committee, Chin argued that, by its failure to issue a legal hold over the promotion folders, the Port Authority was grossly negligent...