Spoliation of Evidence: A Kinder, Gentler Sanction

In today’s technological world, video surveillance is becoming more and more common. However, many security systems delete footage after a preset interval like thirty-days.  After a deletion is discovered, a plaintiff will likely move for sanctions on the grounds that there was “spoliation” of evidence. Plaintiffs typically ask for the defendant’s answer to be stricken, but will be satisfied with the lesser sanction of excluding the damning footage at trial.

As theJennings v Orange Regional Med. Ctr  suggests, courts should find that, in most cases, preclusion is too harsh a sanction. Rather, the appropriate penalty may be an adverse inference jury charge at trial, which gives defense counsel the opportunity to offer an explanation for the destruction or argue that the “missing” footage is not relevant or necessary for the jury to decide plaintiff’s case.

In Jennings, the plaintiff was assaulted at the defendant’s medical facility. Despite having received an immediate written demand for the footage, the hospital did not preserve the videotape footage. The plaintiff then sued the hospital alleging inadequate supervision and requested the production of the video footage during discovery. The defendant admitted its mistake and the plaintiff moved to strike the defendant’s answer. The Supreme Court partially granted plaintiff’s motion and precluded the defendant from introducing evidence at trial that the alleged perpetrator was properly supervised at the time of the incident.

The Second Department reduced the sanction from outright preclusion to a adverse inference jury charge. The Appellate Division held that plaintiff did not demonstrate that she was left “prejudicially bereft” of the means of prosecuting her claim. Thus, the lesser sanction of an adverse inference/missing evidence jury charge was appropriate because plaintiff was not deprived of the ability to establish her case. The Appellate Division reasoned that plaintiff could still testify about how and where the incident occurred and subpoena other individuals who may have witnessed the incident.

Where a party fails to preserve video footage after an accident, Courts may impose sanctions based on the spoliation of evidence. To avoid the harsh penalty of preclusion or worse, an attorney must establish that the evidence is available through other means (i.e. eye witnesses are available). If so, the defense may avoid the striking of its defense or preclusion of the video footage and be forced to deal with the more manageable sanction of an adverse inference/missing evidence jury charge.

Thanks to Bill Kirrane for his contribution to this post. If you have any questions, please email Paul at pclark@wcmlaw.com.

Litigation Financing: A Trap For The Unwary?

Ever wonder how some plaintiff’s attorneys fund their cases or smooth out their cash flow?  In a recent case, it seems that one method is to obtain funding from outside sources secured on the estimated value of the firm’s cases, that is, on the settlement or verdict value of each case.  According to Kelly, Grossman & Flanagan, LLP v. Quick Cash, Inc., the prevailing rate of interest in these transactions is substantial ranging from 3.5% to 3.99% compounded monthly or an annual rate of nearly 40%!

Like many states, New York makes it a criminal offense to charge rates of interest on a loan beyond certain stated percentages.  In Kelly, the plaintiffs argued that the arrangement that resulted in funding of over $1,200,000 was, in fact, a loan subject to New York’s usury laws.  In contrast, the defendants argued that the usury laws only apply to “loans,” and not to transactions that involve interest to be paid based on a contingency not in the control of the debtor. In this case, the finance company contended that the contingency of whether a case settled or a jury returned a favorable verdict was not the  law firm’s control and therefore was not a “loan.”

In Kelly, it was bad news for the lawyers: the court held that the transaction was not a loan but an agreement that created an ownership interest in the proceeds of the lawsuits being prosecuted by the plaintiffs on behalf of their clients.

The Kelly case is a fascinating insider’s view of the recent trend of third party litigation financing where either law firms or their clients are advanced funds in exchange for a piece of the action on the tail end when the case settles or a favorable plaintiff’s verdict is obtained. Unfortunately, the price of admission is steep, with interest rates of near 40%.  These arrangements have ramifications for the defendants in these financed cases because the plaintiff’s settlement demands now must include not only the amount of outstanding medical bills or lost wages, but any sums owed to the third party financing companies.

If you have any questions or comments about this post, please contact Paul at pclark@wcmlaw.com