## Facts

- Sekisui America Corporation and Sekisui Medical Co., Ltd. acquired American Diagnostica, Inc. (ADI) from Richard Hart and Marie Louise Trudel-Hart under a stock purchase agreement.
- Before closing, Sekisui asserted that ADI was not meeting contractual representations concerning FDA regulatory compliance and sent the Harts a notice of claim stating an intent to pursue breach-of-contract litigation.
- Sekisui did not implement a litigation hold until more than 15 months after the notice of claim and did not notify its outside IT vendor about the hold until about six months later.
- During the period without an effective preservation effort, electronically stored information was deleted, including email files associated with Richard Hart and Leigh Ayres (an ADI employee involved in FDA compliance matters central to the dispute).
- The Harts moved for spoliation sanctions, including an adverse-inference jury instruction.
- A magistrate judge denied sanctions, finding an insufficient showing that the Harts were prejudiced by the missing ESI.
- The district judge reviewed the magistrate judge’s order.

## Issues

1. When does the duty to preserve ESI arise in anticipation of litigation, including upon receipt of a notice of claim?
2. Whether negligent (or grossly negligent) failure to preserve ESI satisfies the “culpable state of mind” requirement for an adverse-inference instruction.
3. Whether, once a duty to preserve and culpable destruction of relevant evidence are shown, the moving party must prove prejudice or whether relevance and prejudice may be inferred with the burden shifting to the spoliator.

## Decision

- The court reversed the magistrate judge’s denial of sanctions.
- The court held Sekisui’s duty to preserve arose no later than the notice of claim and that Sekisui failed to timely implement and enforce a litigation hold.
- The court found Sekisui acted with at least negligence (and potentially gross negligence) resulting in deletion of emails likely relevant to disputed FDA-compliance representations.
- The court ordered an adverse-inference instruction (to be finalized at trial) and imposed monetary sanctions in the form of attorneys’ fees and costs related to the spoliation motion.

## Legal Principles

- A party seeking an adverse-inference instruction based on spoliation must show: (1) a duty to preserve at the time of destruction, (2) destruction with a culpable state of mind, and (3) relevance of the destroyed evidence to a claim or defense.
- The duty to preserve arises when litigation is reasonably anticipated; a formal notice of claim can trigger that duty.
- “Culpable state of mind” for spoliation includes negligence and gross negligence, not only bad faith.
- When relevant evidence is destroyed with a culpable state of mind, relevance and prejudice may be inferred; the burden may shift to the spoliating party to show lack of prejudice.
- An adverse-inference instruction may be an appropriate, proportionate sanction to remedy evidentiary imbalance and deter inadequate preservation practices.

## Conclusion

The court held that Sekisui’s delayed and ineffective preservation efforts after anticipating litigation led to negligent loss of key emails, justifying an adverse-inference instruction and fee-shifting sanctions without requiring the moving party to prove the specific contents of the destroyed ESI.


Sekisui Am. Corp. v. Hart, 945 F. Supp. 2d 494 (S.D.N.Y. 2013)