The New York Court of Appeals’ decision in Pegasus Aviation I v. Varig Logistica S.A.,1 appears to endorse the concept that an adverse inference jury charge may be premised on the failure to preserve electronically stored information (ESI). The decision raises interesting questions about the source, purpose and scope of a negligent adverse inference charge, and whether New York law is now at odds with recent amendments to the Federal Rules of Civil Procedure (FRCP).
Motion Court Decision
Upon an alleged default by Varig Logistica S.A. (VarigLog), Pegasus commenced litigation in Florida in February 2008. That suit was discontinued in October 2008 when Pegasus commenced suit in New York against both VarigLog and the “MP defendants.” The MP defendants were a group of commonly-controlled private equity firms and the sole shareholders of VarigLog. Pegasus sought to hold the MP defendants responsible for the loss of relevant ESI by VarigLog due to its failure to implement a “litigation hold.” The motion court struck VarigLog’s answer and ruled that the jury would be instructed that “it may infer that the lost ESI would have supported the veil-piercing claim against the MP defendants.” It imposed sanctions against the MP defendants because:
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