'Pegasus' and ESI Audit Trails

It has been six months since the New York Court of Appeals issued its decision in Pegasus Aviation I v. Varig Logistica S.A.,¹ sustaining the concept that spoliation of electronically stored information (ESI) may be predicated upon negligence and, since then, very few cases have construed it. However, a recent Fourth Department decision, Sarach v. M&T Bank,² raised the issue of what constitutes “willful” or “negligent” spoliation when it comes to the normal company practice of overwriting ESI, and the appropriate sanction or penalty for such conduct. The dissent in Sarach cites Pegasus and it demonstrates that there is a lack of clarity in the law among judges and practitioners as to when an adverse inference or other sanction should be issued as a remedy for spoliation, and when an entity that becomes aware of an accident is on notice to preserve evidence. Two recent trial court cases, Platinum Equity Advisors v. SDI³ and Aydin v. Elwood Properties⁴ also rely upon Pegasus in analyzing whether the duty to preserve ESI also applies to entities “related” to a party in a litigation. Gilbert v. Highland Hosp.⁵ demonstrates that a narrow demand for ESI seeking the digital “audit trail” of electronic health records in order to try to establish a specific legal point may be granted.

Unclear Impact of ‘Pegasus’

In Sarach, plaintiff sought pre-action disclosure and the preservation of evidence in April 2010. Defendant opposed, but represented to the motion court that it had voluntarily undertaken preservation of surveillance videotapes, and ultimately “consent[ed] to an order of preservation.” In October 2010, the court granted plaintiff’s application and ordered defendant to preserve all “video tapes, including but not limited to security and surveillance video related to the subject accident.” After an action had been commenced, in 2014 plaintiff requested videos related to the accident, and defendant’s counsel advised that the video was no longer available due to the normal business practice of overwriting videos after 90 days, which overwriting had occurred 14 months before the October 2010 preservation order had been issued and one year after the accident had taken place in 2009. Nevertheless, the court granted plaintiff’s motion, pursuant to CPLR 3126, to strike the answer on the ground that defendant had violated the court’s order of preservation.