In Malouf v. Equinox Holdings, Inc., et al, 2014 N.Y. App. Div. LEXIS 163 (1st Dep't 2014), the Appellate Division, First Department, affirmed the decision of the motion court which granted plaintiff's motion for spoliation sanctions, and granted the third-party defendant's motion to strike the third-party complaint.
On September 17, 2008, the plaintiff Colette Malouf suffered personal injuries when she fell off of a treadmill at defendant Equinox Holdings, Inc.'s Soho location. Malouf immediately reported the accident, and a claims-defense form was prepared by Equinox and subsequently forwarded to its legal department.
Approximately eight months after the incident, Malouf commenced a lawsuit against Equinox on May 20, 2009. During the course of discovery, Equinox was unable to produce the treadmill for inspection, and claimed that all paperwork concerning the treadmill was missing. The only thing Equinox provided was an affidavit from a manager at the Soho location, who believed the treadmill was replaced as part of an equipment upgrade that occurred at some point prior to September 2010. It was unable, however, to provide any information as to how and when the subject treadmill was removed.
Thereafter, Equinox commenced a third-party action against the manufacturer of the treadmill, Life Fitness, Inc. ("Life Fitness"), seeking contribution and indemnification based on the design, manufacture, sale, maintenance, and servicing of the treadmill.
Malouf filed a motion for spoliation sanctions to preclude Equinox from arguing at trial that the treadmill she was using at the time of her accident was operating properly or was free from defects. Life Fitness also made a motion to strike the third-party complaint against it. The motion court granted both motions and the First Department affirmed the decision. In reaching its holding, the Court noted that both parties established that Equinox's "failure to take affirmative steps to preserve the treadmill constituted spoliation of evidence by demonstrating that defendant was on notice that the treadmill might be needed for future litigation." The Court went on to state that the motion court "did not abuse its broad discretion in remedying defendant's discovery failures by barring it from arguing at trial that the subject treadmill was operating properly or was free from defects."
With respect to the third-party complaint, the Court held that the motion court's harsh penalty of striking the third-party complaint was also warranted because the treadmill was a key piece of evidence that was unavailable for inspection by the parties.
The Court's decision demonstrates why it is imperative for practitioners to send a litigation hold letter to a client at the time a claim is suspected (and no later than at the onset of litigation), requesting the preservation of relevant evidence, including Electronically Stored Information. To avoid a spoliation of evidence claim, parties must maintain and preserve relevant evidence in their possession immediately after it is put on notice of an accident.
If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact Thomas B. Cronmiller, Chair of the Torts & Products Liability Defense Practice Area at (585) 295-4424 or tcronmiller@hblaw.com.