Novick v. AXA Network, LLC, Adverse Inference Sanction Granted For Spoliation of Audio Recordings

In in this case, the Plaintiff, a former AXA Network LLC broker suing the insurer and its brokerage affiliate for breach of contract and other claims, filed a motion for spoliation sanctions seeking the striking of Defendants’ answer and counterclaims, adverse inferences and monetary fines.

The Plaintiff alleged that the Defendants had failed to produce relevant audio recordings after five years of “vacillating” as to whether or not the recordings existed or were relevant. The Plaintiff contended that when Defendants located the recordings they represented that eight weeks of recordings from the critical time period had “likely been erased” and listening to them was not possible. The Plaintiff also contended that the Defendants produced only emails that favored them, produced a significant number of irrelevant emails and had failed to preserve emails from important custodians.

The Defendants argued that they did not withhold emails, and that emails that were missing due to “human error” were provided when the mistake was discovered. With respect to the audio recordings, the Defendants acknowledged that eight weeks of audio recordings from the relevant time period could not be located and that they could not explain the absence of the recordings. However, Defendants asserted that Plaintiff had already been granted appropriate spoliation sanctions when an October 3, 2013 order permitted Plaintiff to take depositions of individuals at the Defendants’ expense

In response, the Plaintiff contended that the Defendants took no proactive actions to ensure that the audio tapes were preserved and that contrary to Defendants’ assertion, the October 3, 2013 order only sanctioned the Defendants for their failure to provide information relating to the audio recordings.

After analyzing the legal standard surrounding the application of discovery sanctions, the Court noted that in the October 3, 2013 order, the Court found that the Defendants had a duty to preserve the audio recordings as potential evidence and had ordered their production at the Defendants’ expense. The Court observed that while the Defendants produced certain audio recordings, recordings from an eight week period were missing and the Defendants failed to provide any explanation as to how or why the recordings were missing. The Court therefore found that the Defendants spoliated evidence, and that the spoliated recordings coincided with the “critical time period, at the heart of this litigation.”

The Court further reasoned that the Defendants’ “repeated failure” to locate and produce the recordings together with their inability to explain why the recordings were missing “suggests nothing other than deliberate conduct and a culpable state of mind.” The Court also found that the Defendants acted in bad faith based upon the fact that they represented to the district judge during a June 2012 conference that the audio recordings existed but were not searchable and then subsequently told the Plaintiff that they could not locate the recordings. The Court observed that it was not until after Plaintiff’s motion for sanctions that the Defendants searched for and located the audio recordings and only after October 3, 2013 order directing the production of the tapes, that the Defendants admitted that eight weeks of recordings from the most critical time period were missing.

The Court found that the Defendants’ delay in looking for and producing the relevant recordings as well as their “conflicting representations” to the court and the Plaintiff regarding the audio recordings “prejudiced the plaintiff by: (i) preventing him from discovering facts material to the adjudication of his claims; (ii) causing him to incur unnecessary costs making his motion for sanctions; and prolonging the litigation.” The Court also found that Defendants’ “misconduct” with respect to the audio recordings was compounded by their “deliberate and unjustified failure to search for and locate e-mail messages, as directed by the September 25, 2013 order.” The Court held that “defendants delay tactics with respect to producing e-mail messages and audio recording, their lack of explanation for the ‘human error’ as well as their inability to account for the missing audio recordings, warrant a finding of bad faith conduct.”

The Court reasoned that spoliation sanctions were warranted pursuant to the Court’s “inherent power to control litigation” however, the Court observed that striking the Defendants pleading was an “extreme sanction” and acknowledged the circuit’s preference for “resolving disputes on the merits.” The Court therefore decided to consider a less drastic sanction, specifically the adverse inference jury instruction. The Court held that an adverse inference jury instruction for spoliation of the audio recording was appropriate as “(1) the defendants had an obligation to preserve the audio recordings at the time they vanished; (2) the audio recordings were spoliated with a culpable state of mind, namely bad faith and (3) the audio recordings were relevant to the plaintiff’s claims such that a reasonable trier of fact could find that they would support his claims.”

The Court determined that adverse inference jury instruction, monetary sanctions and entitling the Plaintiff to retake depositions at the Defendants expense “serve to deter the parties from engaging in spoliations, place the risk of erroneous judgment on the defendants and restore the Plaintiff to the positon he would have been in absent the defendants’ wrongful spoliation of the audio recordings.”


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