Resnik et al v. Coulson
Filing
82
ORDER: For the reasons stated herein, the Court overrules Defendant's objections and adopts 62 the Report and Recommendation of the Honorable Steven M. Gold. Accordingly, Plaintiffs' 22 motion for sanctions is granted. Ordered by Judge Pamela K. Chen on 3/30/2019. (Knapp, Cody)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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ANNE RESNIK, SAMUEL
HERSCHKOWITZ, M.D., ELIZABETH
RESNIK, and MARY PALINSKY,
MEMORANDUM & ORDER
17-CV-676 (PKC) (SMG)
Plaintiffs,
- against CROCKER COULSON,
Defendant.
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PAMELA K. CHEN, United States District Judge:
Plaintiffs Anne Resnik, Samuel Herschkowitz, Elizabeth Resnik, and Mary Palinsky
(collectively, “Plaintiffs”) have brought this action against Defendant Crocker Coulson
(“Defendant”) asserting claims under the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. §
1030, the Electronic Communications Privacy Act (“Wiretap Act”), 18 U.S.C. § 2510 et seq., and
various analogous state statutory and common law causes of action. (See Complaint (“Compl.”),
Dkt. 1, ¶¶ 105–86.)
Before the Court are Defendant’s objections to the Report and
Recommendation (“R&R”) of the Honorable Steven M. Gold, United States Magistrate Judge,
recommending that Plaintiffs’ motion for spoliation sanctions be granted. For the reasons stated
herein, the Court overrules Defendant’s objections and adopts the recommendations of Judge
Gold’s thorough and well-reasoned R&R in full.
BACKGROUND
The Court assumes the parties’ familiarity with the facts of this action as thoroughly recited
in Judge Gold’s R&R (see R&R, Dkt. 62, 2–10), incorporates those facts herein, and summarizes
only the procedural history of the present motion.
Plaintiffs’ federal motion for spoliation sanctions was filed on October 13, 2017. (Dkt.
22.) On February 5, 2018, after the spoliation motion had been fully briefed, the Honorable Jeffrey
S. Sunshine issued the State Spoliation Order, finding, inter alia, that Defendant had engaged in
intentional spoliation of evidence by using data wiping applications to destroy much of the
spyware data on his electronic devices. (State Spoliation Order, Dkt. 37, at 50, 53.) On February
8, 2018, Judge Gold held a status conference with the parties, at which they discussed the effect
of Justice Sunshine’s order on the instant spoliation motion. (Feb. 8 Transcript, Dkt. 38.) Judge
Gold allowed the parties to submit supplemental briefing relating to the State Spoliation Order,
which was completed on March 23, 2018. (See Dkt. 41, 46.)
On January 4, 2019, Judge Gold issued the R&R, finding that Defendant had engaged in
the intentional spoliation of electronically stored information (ESI) for the purpose of depriving
Plaintiffs of its use in litigation, a violation of Federal Rule of Civil Procedure 37(e)(2). (See
generally R&R, Dkt. 62.) The R&R recommended that: (1) Defendant be deemed to have installed
and used spyware on Plaintiff Anne Resnik’s telephone between October 6, 2014 and October 31,
2014; (2) Plaintiffs be required to make a prima facie showing of the other elements necessary to
prevail on their claims under the CFAA, the Wiretap Act, and state and common law; (3) Plaintiffs
be permitted to present, without challenge from Defendant, a theory of statutory damages under
the Wiretap Act based on a reasonable extrapolation from what data remains; and (4) Plaintiffs be
required to prove any compensatory damages they seek. (Id. at 34.)
Defendant filed objections to the R&R on January 16, 2019. (Objections (“Objs.”), Dkt.
66.)
On February 11, 2019, Plaintiffs filed a memorandum in opposition to Defendant’s
objections. (Dkt. 70.) A joint proposed pretrial order was filed on March 28, 2019, reserving the
right to amend following the issuance of this Memorandum and Order. (Dkt. 81.)
2
DISCUSSION
I.
Standard of Review
A district court reviewing a magistrate judge’s recommended ruling “may accept, reject,
or modify, in whole or in part, the findings or recommendations made by the magistrate judge.”
28 U.S.C. § 636(b)(1). Generally, a magistrate judge’s recommendation on a non-dispositive pretrial matter will be reversed “only if the order is ‘clearly erroneous or contrary to law.’” Raimey
v. Wright Nat. Flood Ins. Co., 76 F. Supp. 3d 452, 468 (E.D.N.Y. 2014) (Bianco, J.) (citing, inter
alia, Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990)); see also Thomas
E. Hoar, 900 F.2d at 525 (“A magistrate . . . may issue orders regarding non[-]dispositive pre[]trial matters. The district court reviews such orders under the ‘clearly erroneous or contrary to
law’ standard.” (internal quotation omitted)). “[T]he imposition of certain sanctions under Rule
37, in some instances, may be considered ‘case dispositive,’” such as when a sanction “dispose[s]
of [a] claim or defense.” Royal Park Investments SA/NV v. U.S. Bank Nat. Ass’n, 349 F. Supp. 3d
298, 304 (S.D.N.Y. 2018) (citing Thomas E. Hoar, 900 F.2d at 525).
With respect to a magistrate judge’s recommendation on a dispositive matter, the Court
reviews de novo those determinations as to which a party has specifically objected. See 28 U.S.C.
§ 636(b)(1) (“A judge of the court shall make a de novo determination of those portions of the
report or specified proposed findings or recommendations to which objection is made.”); Fed. R.
Civ. P. 72(b)(3) (“The district judge must determine de novo any part of the magistrate judge’s
disposition that has been properly objected to.”).
However, “objections that are merely
perfunctory responses argued in an attempt to engage the district court in a rehashing of the same
arguments set forth in the original papers will not suffice to invoke de novo review.” Frankel v.
New York City, Nos. 06-CV-5450 (LTS) (DFE) & 07-CV-3436 (LTS) (DFE), 2009 WL 465645,
at *2 (S.D.N.Y. Feb. 25, 2009) (quotation and brackets omitted); accord Colvin v. Berryhill, 734
3
F. App’x 756, 758 (2d Cir. 2018) (“[M]erely referring the court to previously filed papers or
arguments does not constitute an adequate objection under . . . [Federal Rule of Civil Procedure]
72(b).” (quoting Mario v. P & C Food Mkts., Inc., 313 F.3d 758, 766 (2d Cir. 2002))).
II.
Analysis
Judge Gold’s R&R makes three principal recommendations:
(1) that Defendant should be collaterally estopped from contesting whether he
engaged in intentional spoliation of ESI;
(2) that irrespective of the State Spoliation Order’s preclusive effect, this Court
should find the elements required for the imposition of sanctions under Federal
Rule of Civil Procedure 37(e)(2) have been established; and
(3) that as sanctions for spoliation, Defendant should be precluded from:
(i) “denying that he ‘jail broke’ Plaintiff Anne Resnik’s telephone
and installed mSpy on it on or about October 6, 2014, that he
installed OwnSpy on it on or about October 10, 2014, and that
he made extensive use of these applications to, among other
things, monitor Anne Resnik’s whereabouts, intercept her text
messages and emails, and listen in on her telephonic and live
conversations until on or about October 31, 2014[;]”
(ii) challenging any showing by Plaintiffs that the spoliated ESI
would reasonably have corroborated a prima facie showing of
the other elements of their claims; and
(iii) contesting a showing of Plaintiffs’ statutory damages under the
Wiretap Act based on a reasonable extrapolation from what ESI
remains.
(R&R, at 15, 34.)
Defendant objects to each of Judge Gold’s recommendations and the underlying findings
that support them. (See generally Objs., Dkt. 66.) Applying the relevant standards of review, the
Court considers Defendant’s objections in turn.
A.
Collateral Estoppel
Judge Gold first recommends that this Court give preclusive effect to the State Spoliation
Order issued by Justice Sunshine in the divorce proceedings between Plaintiff Anne Resnik and
Defendant. (R&R, at 12–15.) In that order, Justice Sunshine found that Defendant “actively
4
downloaded three (3) data wiping software programs and repeatedly used them in a purposeful
attempt to destroy all evidence of his spyware usage.”1 (State Spoliation Order, Dkt. 37, at 53.)
Justice Sunshine found Defendant’s actions were “intentional and in bad faith.” (Id.) He further
found that Defendant’s actions were done with “intent to prevent [Plaintiff Anne Resnik] and [the
state court] from learning the extent” of his spyware usage. (Id. at 55.) On the basis of these
findings, Justice Sunshine exercised his common law authority, as a New York state court judge,
to impose spoliation sanctions, and struck Defendant’s pleadings seeking spousal support,
equitable distribution, and counsel fees from Anne Resnik. (Id. at 39–40, 69.)
In the R&R, Judge Gold recommended that this Court find that, based on the doctrine of
collateral estoppel, the State Spoliation Order conclusively determined that Defendant’s actions
satisfy the requirements for imposing sanctions under Rule 37(e)(2). (R&R, at 15.) Defendant
objects to that recommendation.
1.
Legal Standard
Collateral estoppel, otherwise known as issue preclusion, “prevents parties . . . from
relitigating in a subsequent action an issue of fact or law that was fully and fairly litigated in a
prior proceeding.” Zappin v. Cooper, No. 16-CV-5985 (KPF), 2018 WL 708369, at *15 (S.D.N.Y.
Feb. 2, 2018) (quoting Marvel Characters, Inc. v. Simon, 310 F.3d 280, 288 (2d Cir. 2002)). When
The Complaint alleges that mSpy was installed on Plaintiff Anne Resnik’s iPhone on
October 6, 2014 and that OwnSpy was installed on October 10, 2014, shortly before Defendant
filed an action for divorce. (Compl., Dkt. 1, ¶¶ 3–5, 7.) This allegation is supported by Justice
Sunshine’s State Spoliation Order, which found that Defendant installed spyware on the iPhone
“in early October 2014.” (State Spoliation Order, Dkt. 37, at 46.) However, there are discrepancies
in the evidence as to the exact dates on which Defendant first installed spyware on the iPhone.
Plaintiffs’ expert, who participated in creating the first joint expert report in the divorce case, has
submitted a declaration in this case indicating that he and Defendant’s expert found forensic
evidence of Defendant’s use of spyware from June 29, 2012 to October 31, 2014. (Declaration of
Yalkin Demirkaya, Dkt. 24, ¶ 22.)
1
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the issue that is allegedly subject to preclusion was first litigated and decided in state court
proceedings, federal courts are required to apply that state’s preclusion law. See Conopco, Inc. v.
Roll Int’l, 231 F.3d 82, 87 (2d Cir. 2000).
Because the Spoliation Order was issued in a New York state divorce action, New York
preclusion law determines the preclusive effect of Justice Sunshine’s findings in proceedings
before this Court. In New York, collateral estoppel bars re-litigation of an issue when:
(1) the issues in both proceedings are identical, (2) the issue in the prior proceeding
was actually litigated and decided, (3) there was a full and fair opportunity to
litigate in the prior proceeding, and (4) the issue previously litigated was necessary
to support a valid and final judgment on the merits.
Conason v. Megan Holding, LLC, 29 N.E.3d 215, 224 (N.Y. 2015) (citations omitted); accord
Evans v. Ottimo, 469 F.3d 278, 281 (2d Cir. 2006) (finding preclusion under New York law when
“(1) the identical issue necessarily was decided in the prior action and is decisive of the present
action, and (2) the party to be precluded from re[-]litigating the issue had a full and fair opportunity
to litigate the issue in the prior action”). Defendant argues that elements (1), (3), and (4) are not
satisfied in this case. (Objs., Dkt. 66, at 3–10.)
2.
Identity of Issues
Defendant first argues that the legal issues presented in the state case are not identical to
those raised by Plaintiffs’ motion for sanctions. (Objs., Dkt. 66, at 4–5.) Before Judge Gold,
Defendant raised this same argument (Defendant’s Supplemental Memorandum in Opposition
(“Def.’s Supp.”), Dkt. 41, at 5–6), but now presents two additional supporting cases (Objs., Dkt.
66, at 4–5).2 Accordingly, the Court considers this issue de novo.
2
Technically, because the two additional cases that Defendant cites in his objections
advance the same argument previously presented to Judge Gold, they could and should have been
presented in Defendant’s initial briefing. Thus, the Court need not conduct de novo review of
6
In New York state court, spoliation sanctions may be imposed where (1) the party with
control over the evidence was obligated to preserve it at the time of its destruction, (2) the evidence
was destroyed with a culpable state of mind, and (3) the destroyed evidence was relevant to a claim
or defense of the party seeking sanctions. (See State Spoliation Order, Dkt 37, at 41 (citing
Pegasus Aviation I, Inc. v Varig Logistica S.A., 46 N.E.3d 601, 602 (N.Y. 2015) (citing VOOM
HD Holdings LLC v. EchoStar Satellite LLC, 939 N.Y.S.2d 321, 330 (1st Dept. 2012))).) Though
the party that is accused of spoliation must act with a “culpable state of mind,” sanctions may be
imposed even if evidence is destroyed negligently rather than intentionally. Pegasus Aviation I,
46 N.E.3d at 607 (“[A]dverse inference charges have been found to be appropriate even in
situations where the evidence has been found to have been negligently destroyed.” (citations
omitted)). That is because under New York common law, “‘[a] culpable state of mind’ for
purposes of a spoliation sanction includes ordinary negligence.” VOOM HD Holdings LLC, 939
N.Y.S.2d at 330 (quoting Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 220 (S.D.N.Y.2003),
and citing Treppel v. Biovail Corp., 249 F.R.D. 111, 121 (S.D.N.Y.2008)).
By contrast, a federal court must find that a party acted “with the intent to deprive another
party” of the use of ESI in litigation before imposing sanctions under Federal Rule of Civil
Procedure 37(e)(2). Fed. R. Civ. P. 37(e)(2). Defendant argues that because the standard
governing Plaintiffs’ motion in this case is higher than the common law standard that governed
Justice Sunshine’s decision, Defendant is not precluded from re-litigating the spoliation issues in
this case. (Objs., Dkt. 66, at 4–5.) While Judge Gold acknowledged in the R&R that the standards
for imposing sanctions in New York state courts differ from those of Rule 37(e)(2), he determined
Defendant’s objection on the issue of identity. Frankel, 2009 WL 465645, at *2. The Court
nonetheless does so.
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that the findings made by Justice Sunshine in the State Spoliation Order were “clearly adequate to
satisfy the requirements of [that Rule].” (R&R, at 14.) This Court agrees.
The current version of Rule 37(e) went into effect on December 1, 2015. Citibank, N.A. v.
Super Sayin’ Pub., LLC, No. 14-CV-5841 (SHS) (KNF), 2017 WL 462601, at *2 (S.D.N.Y. 2017).
The 2015 Amendment to Rule 37(e) “forecloses reliance on inherent authority or state law to
determine when certain measures should be used.” Advisory Comm. Notes, 2015 Amendment.
Rather, the sanctions authorized by Rule 37(e)(2) are only available when a court finds that the
threshold requirements have been met. Id. Rule 37(e)(2)’s intent requirement specifically “rejects
cases such as Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir.
2002),” which authorized spoliation sanctions based on a finding of negligence or gross
negligence. Id. Thus, there can be no question that a state court spoliation sanction based on a
finding of negligence would not preclude Defendant from arguing that his conduct did not satisfy
Rule 37(e)(2). See CAT3, LLC v. Black Lineage, Inc., 164 F. Supp. 3d 488, 497 (S.D.N.Y. 2016)
(finding that “a court could not rely on one of those other sources of authority to dismiss a case as
a sanction for merely negligent destruction of evidence”).
Unfortunately for Defendant, the state court did not find that he destroyed ESI negligently.
Rather, Justice Sunshine found that Defendant “actively downloaded” data-wiping software and
used it “in a purposeful attempt to destroy all evidence of his spyware usage” because he “thought
the evidence [of spyware usage] would be [very] harmful to his case” if obtained by Anne Resnik
and presented to the state court. (State Spoliation Order, Dkt. 37, at 53, 55–56 (emphasis added).)
This finding clearly establishes the factual elements required by Rule 37(e)(2) even though the
state court’s analysis was not controlled by that Rule. Because Justice Sunshine made the factual
8
findings necessary to decide Plaintiffs’ Rule 37(e)(2) motion, the application of collateral estoppel
is appropriate in this case.
The cases cited to the contrary by Defendant are inapposite. In DeMeo v. Kean, the plaintiff
filed a cross-motion in his federal civil action seeking sanctions against the defendants based on
their destruction of video evidence. 754 F. Supp. 2d 435, 439–40 (N.D.N.Y. 2010). The
defendants responded that the cross-motion was barred by collateral estoppel because it addressed
the same issue previously decided by the New York state Supreme Court in Albany County. Id.
at 447. That court had denied a motion for contempt based on the defendants’ failure to comply
with an order to preserve all video evidence. Id. The applicable standard required a showing that
the defendants acted willfully. Id. In denying the contempt motion, the state court found that the
destruction of evidence was “not willful.” Id. at 441. The Northern District of New York declined
to give collateral estoppel effect to that determination because of the different standards applicable
to the state court contempt motion and the federal court sanctions motion. Id. at 448. Because the
sanctions motion in the Northern District case was sought pursuant to the court’s inherent
authority, and not pursuant to Federal Rule of Civil Procedure 37(e)(2)), the plaintiff was only
required to show negligent destruction of the evidence. Id. The Northern District found that
collateral estoppel would be inappropriate because the state court had only found that the
defendant’s conduct was not willful, but never resolved—because it did not have to—whether the
defendant’s conduct was negligent. Id. (“The two issues in question [were] not identical because
the state court proceeding required [the plaintiff] to establish that the defendants acted willfully
while the [claim in federal court] require[d] mere negligence.” (emphasis added)). Similarly, the
court in Sharpe v. Abate found collateral estoppel inapplicable because the state court’s dismissal
of an Article 78 petition “did not necessarily rest on a finding that [would be] inconsistent with a
9
finding that [the] defendants [were] liable under the ADA.” 887 F. Supp. 695, 700 (S.D.N.Y.
1995).
As even the cases cited by Defendant make clear, in deciding whether there is identity of
issues, the Court should focus on whether the state court’s determination of an issue resolves that
issue in a way that is relevant to, or consistent with, the federal standard, not whether the state
court’s determination was governed by the federal standard. Cf. Stichting Ter Behartiging Van de
Belangen Van Oudaandeelhouders In Het Kapitaal Van Saybolt International B.V. v. Schreiber,
327 F.3d 173, 180 (2d Cir. 2003) (approving a district court’s finding that a plaintiff would be
collaterally estopped in a diversity action from contesting a mens rea element previously
established in a criminal prosecution). Here, Justice Sunshine expressly found that Defendant
acted intentionally, which is the level of culpability required by Rule 37(e)(2). (See State
Spoliation Order, Dkt. 37, at 69 (opting to impose more extreme sanctions based on Defendant’s
“intentional and bad faith spoliation”).) Because the facts found in the state court proceeding
satisfy the standard that applies to the Rule 37(e)(2) spoliation proceedings in this case, allowing
Defendant to relitigate them would be a gross waste of judicial resources and invite inconsistent
determinations of the same legal and factual issues.
3.
Finality
Before Judge Gold, Defendant also argued against the application of collateral estoppel
based on the State Spoliation Order’s supposed lack of finality. (See Def.’s Supp., Dkt. 41, at 5.)
Judge Gold held that the State Spoliation Order was “final” for purposes of issue preclusion
because it had been “fully litigated,” with the result that Justice Sunshine took dispositive action
by striking Defendant’s state court pleadings seeking certain financial relief. (R&R, at 14 (citing
Weiss v. Nat’l Westminster Bank PLC, 278 F. Supp. 3d 636, 649 (E.D.N.Y. 2017).) Defendant
10
objects to Judge Gold’s reliance on federal case law to determine whether Justice Sunshine’s order
is “final” for the purposes of collateral estoppel. (Objs., Dkt. 66, at 5–7.)
Despite presenting this objection, Defendant acknowledges that it is “unclear whether there
is a discernible difference between” the New York and federal standards for finality, and presents
no case law that would helpfully distinguish them. (Id. at 6.) Because state case law confirms
Judge Gold’s application of the finality requirement, the Court finds Defendant’s objection on this
point without merit. See In re Capoccia, 709 N.Y.S.2d 640, 643 (3d Dep’t 2000) (applying
collateral estoppel to civil sanction findings in other courts); see also Bannon v. Bannon, 1 N.E.2d
975, 977 (N.Y. 1936) (“The scope of the words ‘final judgment’ . . . should not be confined to a
final judgment in an action. They may include any judicial decision upon a question of fact or law
which is not provisional and subject to change . . . .”) (cited by Wilk v. Genesee & Wyoming R.
Co., 846 N.Y.S.2d 511, 513 (4th Dep’t 2007)); Paar v. Bay Crest Ass’n, No. 2013-2406, 2014 WL
4977416, at *2 (N.Y. Sup. Ct. Oct. 6, 2014) (“Where the Court’s dispositive directive is in the
nature of an order rather than a judgment . . . that order will nonetheless be given preclusive effect
if the doctrinal pre-requisites . . . are satisfied . . . .” (citing Bannon)); Town v. Asadourian, 722
N.Y.S.2d 187, 188 (3d Dep’t 2000) (“[B]ecause no order or final judgment was ever entered . . .
the doctrine[] of collateral estoppel . . . [was] inapplicable to the instant matter.” (emphasis
added)); cf. In re Dunn, 27 N.E.3d 465, 467–68 (N.Y. 2015) (denying collateral estoppel effect to
a sanctions order because the proceedings were “cursory” in nature, not because a sanctions order
is non-final).
4.
Full and Fair Opportunity to Litigate
Defendant also objects to Judge Gold’s recommendation to apply collateral estoppel based
on the grounds that he did not have a full and fair opportunity to litigate the issue of spoliation in
the state court proceedings. (Objs., Dkt. 66, at 7–10.) Defendant argues that he represented
11
himself pro se for critical parts of the state court litigation relating to the spoliation, which placed
him at a disadvantage relative to Plaintiff Anne Resnik, who was consistently represented by
counsel. (Id. at 7.) Defendant further asserts that his invocation of the Fifth Amendment privilege
against self-incrimination “severely handicapped” him in the state court spoliation proceedings,
denying him the ability to fully participate. (Id. at 8.) Defendant also objects to the lack of an
evidentiary hearing on the spoliation issue in state court and his inability to question Anne Resnik’s
computer forensic expert. (Id. at 8–9.)
Large portions of Defendant’s objections on these points are lifted, nearly verbatim, from
Defendant’s submissions to Judge Gold. (Compare id., at 7–9, with Def.’s Supp., Dkt. 41, at 7–
9.) The most substantial difference from Defendant’s prior submissions appears to be his objection
to the R&R’s characterization of his choice to proceed pro se in the state proceedings as “in essence
elect[ive]” (see R&R, at 15), arguing that for an “average person, like [Defendant], living in New
York City with two children, earning an annual income in excess of $100,000 does not provide
him the ability to afford the services” associated with his litigation (Objs., Dkt. 66, at 9). Because
Defendant’s arguments on this point are recycled versions of those presented to Judge Gold, the
Court scrutinizes this portion of the R&R only for clear error. See Lilakos v. N.Y.C., No. 14-CV5288 (PKC) (LB), 2018 WL 6242227, at *2 (E.D.N.Y. Nov. 29, 2018) (applying clear error review
in light of the plaintiff’s “rehashed and previously rejected arguments”).
The Court finds no clear error in Judge Gold’s finding that Defendant enjoyed a full and
fair opportunity to litigate the issues in the state court spoliation proceedings. Defendant’s pro se
status for portions of those proceedings did not render the proceedings insufficient or unfair.
Shirley v. Danziger, 676 N.Y.S.2d 369, 370 (4th Dep’t 1998) (“We reject the contention of plaintiff
that she did not have a full and fair opportunity to litigate . . . because she was proceeding pro se
12
at the time.”). And formal hearings are not categorically required to provide a full and fair
opportunity to litigate, particularly where, as here, the final decision relies in part on the party’s
own expert’s analysis. (See State Spoliation Order, Dkt. 37, at 13–19.); see also Johnson v. County
of Nassau, 411 F. Supp. 2d 171, 182 (E.D.N.Y. 2006) (“[T]he absence of a hearing will not render
a [prior] determination inadequate where the plaintiff was otherwise given a full opportunity to
present his case . . . .” (citing Chirgotis v. Mobil Oil Corp., 512 N.Y.S.2d 686, 688 (1st Dep’t
1987))). Furthermore, in contrast to Defendant’s objections, the opportunity for a litigant to make
strategic choices, such as invoking Fifth Amendment privileges, is part and parcel of a full and fair
opportunity to litigate. Such choices do not necessarily come without a cost: while the Fifth
Amendment affords a litigant certain protections, it “does not forbid adverse inferences against
parties to civil actions when they refuse to testify in response to probative evidence offered against
them.” Baxter v. Palmigiano, 425 U.S. 308, 318 (1976). However, the fact that a litigant may
suffer adverse consequences from his strategic decisions does not deprive him of a “full and fair
opportunity for litigation in the prior proceeding.” Samirah v. Sabhnani, 772 F. Supp. 2d 437, 444
(E.D.N.Y. 2011) (quoting Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 44 (2d Cir. 1986)); see also
id. (finding that the invocation of the Fifth Amendment does not bar application of collateral
estoppel). Judge Gold’s finding that Defendant had a full and fair opportunity in the state court
proceedings to litigate the issues presented by Plaintiffs’ instant motion is not clearly erroneous.
*
*
*
For the reasons stated above, the Court adopts Judge Gold’s recommendation that
Defendant be collaterally estopped from contesting Justice Sunshine’s determination that
“[Defendant] engaged in the kind of intentional spoliation of ESI that triggers the severe sanctions
authorized by Rule 37(e)(2).” (R&R, at 15.) In light of that determination, the Court finds that it
may employ the sanctions listed in Rule 37(e)(2) as appropriate in the context of this case.
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B.
Rule 37(e)(2)
Because the Court concludes that Defendant is collaterally estopped from contesting the
elements of a violation of Rule 37(e)(2), it need not adopt Judge Gold’s alternative finding that,
independent of Justice Sunshine’s determinations in the state proceedings, Plaintiffs have
established the necessary elements for a Rule 37(e)(2) sanction in this case as well. Nevertheless,
the Court considers Defendant’s objections to those alternative findings.
1.
Legal Standard
As discussed, Plaintiffs seek spoliation sanctions pursuant to Federal Rule of Civil
Procedure 37 for Defendant’s destruction of ESI. Subsection (e) of Rule 37 sets forth the standard
for imposing such sanctions:
If electronically stored information that should have been preserved in the
anticipation or conduct of litigation is lost because a party failed to take reasonable
steps to preserve it, and it cannot be restored or replaced through additional
discovery, the court:
(1) upon finding prejudice to another party from loss of the information,
may order measures no greater than necessary to cure the prejudice;
or
(2) only upon finding that the party acted with the intent to deprive
another party of the information’s use in the litigation may:
(A) presume that the lost information was unfavorable to
the party;
(B) instruct the jury that it may or must presume the
information was unfavorable to the party; or
(C) dismiss the action or enter a default judgment.
Fed. R. Civ. P. 37(e).
This rule was enacted in 2015 and applies exclusively to the spoliation of ESI. The specific
measures detailed in Subsections (2)(A) through (2)(C) are only available if the Rule’s textual
requirements are established, and may not be imposed simply as a matter of the Court’s inherent
authority. See Advisory Comm. Notes, 2015 Amendment.
14
Though courts are divided with respect to the appropriate standard of proof to apply to a
claim of spoliation, see CAT3, LLC v. Black Lineage, Inc., 164 F. Supp. 3d 488, 498–99 (S.D.N.Y.
2016), Judge Gold’s R&R applied the clear and convincing evidence standard (R&R, at 12).
Because Defendant did not object, and the Court finds no clear error in the application of this
standard, the Court evaluates Defendant’s objections under the clear and convincing evidence
standard.
2.
Duty to Preserve ESI
Defendant objects to the R&R’s finding that Defendant had a duty to preserve the allegedly
spoliated spyware data at the time of its alleged spoliation. (Objs., Dkt. 66, at 11–17.) Judge Gold
found this duty was imposed by two separate state court orders stemming from the divorce
proceedings before Justice Sunshine: the State Preliminary Conference Order, issued on February
13, 2015 (Dkt. 66-3), and the State Show Cause Order, issued on May 15, 2015 (Dkt. 66-4), the
day before Defendant allegedly installed and executed wiping software on his electronic devices.
“The obligation to preserve evidence arises when [a] party has notice that the evidence is
relevant to litigation or when a party should have known that the evidence may be relevant to
future litigation.” Rabenstein v. Sealift, Inc., 18 F. Supp. 3d 343, 360 (E.D.N.Y. 2014) (quoting
Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423, 436 (2d Cir.2001)). The duty to preserve ESI
imposed by Rule 37(e) incorporates this longstanding common law duty. See Advisory Comm.
Notes, 2015 Amendment. In addition to the common law duty to preserve such evidence, the Rule
recognizes that such duties may be imposed by independent sources, such as statutes and court
orders in another case. Id.
Judge Gold first found that the State Preliminary Conference Order placed Defendant on
notice that he was under a duty to preserve evidence related to his use of spyware. (R&R, at 19.)
That Order contained a provision relating to the preservation of electronic evidence, providing:
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For the relevant periods relating to the issues in this litigation, each party shall
maintain and preserve all electronic files, other data generated by and/or stored on
the party’s computer system(s) and storage media (i.e.[,] hard disks, floppy disks,
backup tapes), or other electronic data. Such items include, but are not limited to,
e-mail and other electronic communications, word processing documents,
spreadsheets, data bases, calendars, telephone logs, contact manager information,
internet usage files, offline storage or information stored on removable media,
information contained on laptops or other portable devices and network access
information.
(Dkt. 66-3, at ECF 4.) Defendant argues that this Order cannot possibly have been meant to apply
to Defendant’s alleged use of surveillance software to spy on Plaintiff Anne Resnik, as the grounds
for divorce had already been resolved. (Objs., Dkt. 66, at 12–13.)
Judge Gold also found that the State Show Cause Order, which directed Defendant to turn
over all of his computing devices, placed him under a duty to preserve ESI. (Dkt. 66-4; R&R, at
20.) It is unclear when or whether Defendant was provided with the State Show Cause Order, as
the Order was obtained on an ex parte basis out of a concern that giving Defendant notice would
allow him an opportunity to destroy ESI. (State Spoliation Order, Dkt. 37, at 6–7.) Nevertheless,
it cannot be disputed that Defendant was on notice of his duty to preserve any evidence potentially
relevant to the ongoing litigation, as he acknowledged through counsel on the record, that he had
“accidental” advance notice that he was going to be served with the State Show Cause Order by
the Sheriff of the City of New York based on a call to “check” if he would be home. (Id. at 10.)
Defendant does not dispute this fact in his objections, save to point out that the concession was
made by his attorney, a distinction without a meaningful difference. (See Objs., Dkt. 66, at 14.)
This Court finds Defendant’s admission, even if only through counsel, of Defendant’s notice that
he would be served with the State Show Cause Order by the Sheriff is sufficient to establish that
he was under a duty to preserve ESI.
Defendant argues that, even if the state court orders imposed a duty to preserve ESI, that
duty does not extend to this case because the divorce action is distinct from the present litigation.
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(Objs., Dkt. 66, at 15–17.) Defendant cites no case law in support of this argument, and the Court
has identified none. Allowing Defendant to prevail on this objection would work an unreasonable
application of Rule 37, allowing the destruction of ESI even though it was entirely foreseeable that
the use of spyware during a divorce proceeding and ensuing custody dispute would result in related
litigation. In any case, courts have found an independent duty to preserve evidence may arise
simply because the defendant himself becomes aware of relevant facts that could likely lead to
litigation. See Steves & Sons, Inc. v. Jeld-Wen, Inc., 327 F.R.D. 96, 106–07 (E.D. Va. 2018)
(finding that “familiarity with the predicates for litigation” should have caused the defendant to
reasonably anticipate litigation, particularly in light of his previous involvement in litigation).
Thus, even if the duty to preserve ESI imposed by the state court orders would not support a finding
that a duty to preserve ESI existed for the purposes of Rule 37(e) in this case, Defendant’s prior
involvement in closely related litigation and his knowledge of the relevant facts that could lead to
litigation, i.e., his unlawful surveillance of Plaintiff Anne Resnik’s electronic communications, are
sufficient to find that an independent duty to preserve existed.
Accordingly, the Court finds Defendant’s objections on this point without merit and adopts
the R&R’s finding that both state court orders were sufficient to impose a duty on Defendant to
preserve the allegedly spoliated ESI.
3.
Sufficiency of the Evidence
Defendant also objects to Judge Gold’s recommendation that this Court find that Plaintiffs
have submitted clear and convincing evidence establishing that Defendant acted in bad faith, that
the allegedly spoliated ESI was relevant, that Defendant failed to take reasonable steps to preserve
that ESI, or that Defendant destroyed ESI with the requisite intent to deprive Plaintiffs of its use
in litigation. (Objs., Dkt. 66, at 17–25.) Defendant bases his objection on Plaintiffs’ supposed
failure to prove predicate facts, namely, the content and existence of the allegedly spoliated data.
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(Id. at 18.) As these arguments rehash those presented to Judge Gold, the Court reviews the R&R
for clear error. (Compare Def.’s Supp., Dkt. 41, at 9, with Objs., Dkt. 66, at 18.)
By its very nature, a spoliation finding is an acknowledgment that the evidence no longer
exists. A party seeking spoliation sanctions is not necessarily required to produce direct evidence
in order to prevail, particularly when it comes to ESI that leaves few traces upon deletion.
Kronisch v. United States, 150 F.3d 112, 129–30 (2d Cir. 1998) (“Although there [was] no direct
evidence[,] . . . the destruction of [evidence] . . . made it ‘impossible to reconstruct the operational
use of [that evidence]’ . . . . Under these circumstances, requiring more direct proof than [the]
plaintiff ha[d] provided before permitting an adverse inference to be drawn . . . would be at odds
with the purposes of the adverse inference rule.”) Here, however, the Court finds that the trace
digital fingerprints identified in the parties’ forensic expert report are sufficient to infer that the
allegedly spoliated data once existed and that it related to Defendant’s alleged surveillance of
Plaintiff Anne Resnik. Accordingly, the R&R did not err by relying on trace digital fingerprints
in its analysis.
Where no direct evidence remains of spoliated ESI, substantial circumstantial evidence of
the evidence’s destruction may suffice to support spoliation sanctions. Thus, in DVComm LLC v.
Hotwire Commc’ns., LLC, the Court credited a computer forensic expert’s finding that the plaintiff,
through its owner, used a “double deletion” technique to delete emails containing crucial
information. No. 14-CV-5543, 2016 WL 6246824, at *8 (E.D. Pa. Feb. 3, 2016). Similarly, in
Feist v. Paxfire, Inc., the plaintiff used software that cleared her internet browser history. No. 11CV-5436 (LGS) (RLE), 2016 WL 4540830, at *3–*5 (S.D.N.Y. Aug. 29, 2016). Though the
browser history was unrecoverable and no direct evidence of its contents remained, the Court
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found the plaintiff’s use of the cleaner software and failure to backup her files sufficient to support
the imposition of sanctions. Id.
As in the Feist and DVComm LLC cases, the R&R properly relied on substantial
circumstantial evidence to determine the existence and relevance of allegedly spoliated ESI. A
joint expert report filed in state court indicates that a forensic analysis shows that:
(3) separate data-wiping utilities (Free File Shredder, Disk Scrubber and Hard Disk
Scrubber) were installed and executed on [Defendant’s] Computing Device 010 on
May 16, 2015, starting at approximately 9:00 pm. . . . This device appears to have
been the most recent personal computer in use by [Defendant] at the time
[Defendant’s] Computing Devices were seized by the Sherriff.
(Dkt. 66-5, at 10.) Plaintiffs have submitted a sworn affidavit from Yalkin Demirkaya, one of the
experts retained by the parties, including Defendant, to conduct the forensic analysis. (Dkt. 70-3.)
Demirkaya’s affidavit confirms the expert report’s findings, stating:
[T]here is concrete evidence of spyware usage and acts of spoliation, apparently
committed by [Defendant]. Three separate data wiping utilities which had to be
intentionally downloaded and installed . . . . [were] executed at least once[.]
(Id. ¶ 23.)
Coupled with the fact that numerous emails to various spyware companies were found
among the little remaining data on Defendant’s computer (see Dkt. 30, at ¶ 11) and that the
evidence shows Defendant was using spyware programs between June 29, 2012 and October 31,
2014 (see Dkt. 70-3, ¶ 22), the unrefuted circumstantial evidence presented by Plaintiffs plainly
supports the R&R’s finding that Defendant destroyed relevant ESI, in such a manner that it cannot
be restored, in order to deprive Plaintiffs of its use in litigation.
Defendant’s objection is ironic, if only because it confirms just how thoroughly
incompatible Defendant’s actions were with Rule 37’s admonition that a party take “reasonable
steps to preserve” ESI. Irony notwithstanding, the Court does not believe that Rule 37 creates a
regime where the more effective a party is at irretrievably destroying evidence, the better they will
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fare in litigation. Plaintiffs have presented overwhelming evidence in this case that Defendant
destroyed ESI after he became aware that it was about to be seized by the Sheriff of New York.
The circumstances surrounding that action strongly suggest that the destroyed ESI included data
relating to the alleged surveillance of Plaintiff Anne Resnik by Defendant.
Accordingly, the Court finds no clear error in the R&R’s determination that Plaintiffs have
presented clear and convincing evidence, not credibly refuted by Defendant, that supports a finding
that Defendant’s destruction of ESI meets the standard for the imposition of sanctions under Rule
37(e)(2).
C.
Appropriate Sanctions
As a final backstop, Defendant asks that, even if the Court adopts the R&R’s
recommendations over Defendant’s objections, it modify the sanctions recommended by the R&R.
(Objs., Dkt. 66, at 25.) Specifically, Defendant seeks an order “allowing [him] to present any and
all non-frivolous defenses and challenges as to liability and damages based on evidence that does
exist and applications of the law.” (Id.)
1.
Legal Standard
Under Rule 37(e)(2), once a court finds that a party destroyed ESI with intent to deprive
another party of its use in litigation, the court has discretion to impose any or all of the remedies
allowed in Subsections (A) through (C). Fed. R. Civ. P. 37(e)(2)(A)–(C). The Court is not
required, however, to adopt any of these measures, and should ensure that the remedy fits the
wrong. See Advisory Comm. Notes, 2015 Amendment. Caution is particularly warranted when
considering case-dispositive sanctions, such as dismissal or default judgment. See World Wide
Polymers, Inc. v. Shinkong Synthetic Fibers Corp., 694 F.3d 155, 159 (2d Cir. 2012). Ultimately,
any sanction should be designed to: “(1) deter parties from engaging in spoliation; (2) place the
risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore ‘the
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prejudiced party to the same position he would have been in absent the wrongful destruction of
evidence by the opposing party.’” CAT3, LLC v. Black Lineage, Inc., 164 F. Supp. 3d 488, 50102 (S.D.N.Y. 2016) (quoting West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir.
1999)).
2.
Liability Sanction
The R&R’s primary recommended sanction on liability grants an adverse inference as to
Defendant’s use of spyware:
[D]efendant should be precluded from denying that he ‘jail broke’ Anne Resnik’s
telephone and installed mSpy on it on or about October 6, 2014 and that he installed
OwnSpy on it on or about October 10, 2014, and that he made extensive use of
these applications to, among other things, monitor Anne Resnik’s whereabouts,
intercept her text messages and emails, and listen in on her telephonic and live
conversations until on or about October 31, 2014.
(R&R, at 32.) Defendant appears to seek a modification of the sanction that would allow him to
show that his use of the various spyware devices was limited, rather than “extensive.” (Objs., Dkt.
66, at 27–28.) This modification, however, would vindicate Defendant’s spoliation of evidence
by allowing him to benefit from the destruction of any and all evidence that would establish its
extensiveness. Because Defendant’s proposed modification of the recommendation sanction
would undermine the public policy underlying spoliation sanctions, see CAT3, 164 F. Supp. 3d at
501–02, the Court rejects it and adopts Judge Gold’s recommended sanction regarding the use of
spyware in full.
Judge Gold’s R&R makes clear that the recommended liability sanction does not
completely establish Defendant’s liability for Plaintiffs’ claims. Thus, he further recommends
that:
[P]laintiffs should be required to make a prima facie showing of the other elements
of their claims. To the extent it is reasonable to believe that the data wiped from
defendant’s electronic device might have corroborated any prima facie showing
[P]laintiffs make, [D]efendant should be precluded from challenging that showing.
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(R&R, at 33.) Defendant seeks clarification on the scope of this recommendation. (Objs., Dkt.
66, at 29–30.) Notwithstanding the adverse inference granted to Plaintiffs regarding Defendant’s
“jail breaking” of Plaintiff Anne Resnik’s iPhone and surveillance of her activities, the Court will
require Plaintiffs to make a prima facie showing of the other elements of their claims. Defendant
may respond to that showing with any defenses as to liability and damages that could not
themselves be reasonably rebutted through the use of spoliated evidence. For example, Defendant
may argue that a particular plaintiff’s claim was filed outside of the applicable statute of
limitations, but he may not challenge a prima facie showing, for example that a call placed by
Plaintiff Elizabeth Resnik to Plaintiff Anne Resnik on October 30, 2014, if shown to have occurred,
would have been intercepted by Defendant’s spyware.
3.
Damages Sanction
The R&R also recommends an adverse inference as to damages:
[A]n order [should] be issued permitting [P]laintiffs to present a theory of their
statutory damages under the Wiretap Act based on extrapolation from what data
remains, to the extent this extrapolation is reasonable, and that [D]efendant be
precluded from challenging that theory of damages.
(R&R, at 34.) This adverse inference would allow Plaintiffs to make a reasonable extrapolation
as to statutory damages under the Wiretap Act, which provides for penalties of up to $100 per day,
18 U.S.C. § 2520(c)(2)(B), and to present a theory that Defendant intercepted Plaintiff Anne
Resnik’s communications before October 6, 2014 and after October 31, 2014. In essence, the
inference would allow Plaintiffs to present a theory of consistent, if not daily, spyware usage
without challenge. Defendant seeks the ability to challenge such a presentation through, inter alia,
expert testimony and emails between spyware companies and Defendant that would tend to show
that Defendant’s usage of spyware was sporadic and limited. (Objs., Dkt. 66, at 31–33.) However,
the Court cannot clarify the precise scope of the evidence that will be permitted on Defendant’s
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use of the spyware in the abstract. Rather, in advance of trial, Defendant will have to submit
motions in limine identifying the actual evidence it is seeking to introduce on this issue. For
example, to the extent Defendant wishes to introduce emails he sent to spyware companies to show
that his use of the spyware was sporadic, e.g., emails stating that the spyware was not functioning
properly, the emails themselves are inadmissible hearsay. While Defendant ordinarily might argue
that the emails should be admitted to corroborate his anticipated testimony that he was prevented
from using the spyware regularly because of alleged malfunctions, the Court is likely to preclude
such self-serving testimony, as Plaintiffs will not be able to refute that testimony because of
Defendant’s spoliation. Defendant also will not be permitted to challenge Plaintiffs’ theory of
statutory damages through arguments based on the existence or non-existence of the allegedly
spoliated data. For example, Defendant will not be allowed to present expert testimony, using the
remaining ESI from the spyware, to opine that Defendant’s use was sporadic or to opine that the
frequency of Defendant’s use for the entire period that the spyware was installed can be
extrapolated or inferred from the remaining ESI.
Finally, the Court clarifies that it will require Plaintiffs to prove any emotional damages or
other injury for which they seek compensatory damages. Defendant will not be precluded from
challenging Plaintiffs’ showing of compensatory damages.
CONCLUSION
For the reasons stated herein and in the Report and Recommendation of the Honorable
Steven M. Gold, the Court finds that Defendant destroyed relevant evidence that he had a duty to
preserve, and which is now irrecoverable, with the intent to deprive Plaintiffs of its use in litigation.
Based on that finding, the Court adopts Judge Gold’s Report and Recommendation in its entirety,
and imposes the following sanctions pursuant to Rule 37(e)(2):
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(1) Defendant may not deny that he “jail broke” Plaintiff Anne
Resnik’s telephone and installed mSpy on it on or about
October 6, 2014 and that he installed OwnSpy on it on or about
October 10, 2014, and that he made extensive use of these
applications to, among other things, monitor Anne Resnik’s
whereabouts, intercept her text messages and emails, and listen
in on her telephonic and live conversations until on or about
October 31, 2014.
(2) Defendant may only respond to a prima facie showing of
Plaintiffs’ claims by presenting defenses that could not be
reasonably challenged by the spoliated ESI.
(3) The Court will instruct the jury that it may presume that the
spoliated ESI would have tended to corroborate Plaintiffs’
theory of statutory damages.
SO ORDERED.
/s/ Pamela K. Chen
Pamela K. Chen
United States District Judge
Dated: March 30, 2019
Brooklyn, New York
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