Opinion
Index No. 603405/01
05-05-2018
CENTURY INDEMNITY COMPANY, Plaintiff, v. BROOKLYN UNION GAS COMPANY, Defendant. Brooklyn Union Gas Company, Plaintiff, v. Century Indemnity Company and Munich Reinsurance America, Inc., Defendants.
O'Melveny & Meyers, LLP, New York, NY (Jonathan Rosenberg, Tancred Schiavoni, and Leah Godesky of counsel and Daniel Petrocelli, Los Angeles, CA pro hac vice) and Boutin & Altieri, PLLC, Fairfield, CT (John Altieri, Jr. and Robert Firrilo of counsel and Kieran Altieri pro hac vice), for Century Indemnity Company. Covington & Burling, LLP, New York, NY and Washington, DC (William F. Greaney, Jay T. Smith, Eric C. Bosset, and Brian E. Foster of counsel), for Brooklyn Union Gas Company. Landman, Corsi, Ballaine, & Ford, P.C., New York, NY (Michael L. Gioia of counsel), for Munich Reinsurance America, Inc.
O'Melveny & Meyers, LLP, New York, NY (Jonathan Rosenberg, Tancred Schiavoni, and Leah Godesky of counsel and Daniel Petrocelli, Los Angeles, CA pro hac vice) and Boutin & Altieri, PLLC, Fairfield, CT (John Altieri, Jr. and Robert Firrilo of counsel and Kieran Altieri pro hac vice), for Century Indemnity Company.
Covington & Burling, LLP, New York, NY and Washington, DC (William F. Greaney, Jay T. Smith, Eric C. Bosset, and Brian E. Foster of counsel), for Brooklyn Union Gas Company.
Landman, Corsi, Ballaine, & Ford, P.C., New York, NY (Michael L. Gioia of counsel), for Munich Reinsurance America, Inc.
Munich Reinsurance America, Inc. did not submit papers for this motion.
Gerald Lebovits, J.
Because the parties rely on sealed exhibits and sealed moving and opposition papers, this decision shall also be sealed.
Century Indemnity Company (Century) moves for an order providing for (1) sanctions against Brooklyn Union Gas Company (Brooklyn Union) for its alleged spoliation of documents, and (2) an evidentiary hearing to determine whether the disappearance of evidence resulted from willful or reckless conduct. The sanctions sought are an adverse inference jury instruction regarding the missing documents and costs and fees relating to Century's investigation of the missing minutes and briefing this motion. , The motion is denied, for the reasons set forth in this decision.
This decision was unsealed pursuant to this court's order of March 22, 2022 (see 2022 NY Slip Op 50217[U] [Sup Ct, NY County 2022] ).
By stipulation and order of the parties dated December 17, 2013, and so-ordered by the court on January 2, 2014, all papers filed, served, or entered only in the action Century Indemnity Co. v Brooklyn Union Gas Co. (603405/2001) are deemed to have been filed, served, or entered in the action Brooklyn Union Gas Co. v Century Indemnity Co., et al. (403087/2002).
Background
This is an insurance-coverage dispute in which Brooklyn Union seeks to recover its environmental and remediation costs at 10 former manufactured gas plants (MGPs) and two adjacent waterways under liability policies it held with Century.
Brooklyn Union gave notice to Century by letter dated February 3, 1993, that "Brooklyn Union may face a claim that will involve either cleanup responsibility or litigation with respect to some or all of these sites which may trigger coverage under your polic[ies]." (Affirmation of Leah Godesky, Esq., in Support of Plaintiff Century Indemnity Company's Supplemental Memorandum of Law in Support of its Motion for Sanctions Based on Spoliation of Key Evidence ["Godesky Aff."], Exh. 38 [filed under seal].) Century replied by letter dated March 17, 1993, stating that it would investigate the matter "under a complete reservation of rights until all appropriate information can be obtained and reviewed." (Id. , Exh. 39.)
After an investigation, Century denied coverage for the MGP cleanup costs. On July 9, 2001, Century filed an action for declaratory judgment alleging that Brooklyn Union's MGP-related costs were not covered under its policies. On the same day, Brooklyn Union also commenced an action against Century and seven other insurance companies in Supreme Court, Kings County, seeking a judgment declaring that the costs incurred are covered under excess liability policies issued by Century and other insurers. By stipulation so-ordered March 4, 2002, the latter action was transferred to New York County, and the two actions were joined for trial. (See Century Indem. Co. v Brooklyn Union Gas Co. , 22 Misc 3d 1109 [A], *1, 2008 NY Slip Op 52621 [U], *1 [Sup Ct, NY County 2008].)
In 2001, during discovery, Century Indemnity requested production of "notes, minutes, or other documents that relate to Brooklyn Union's Board of Directors, or any committee thereof, and to any meeting in which Brooklyn Union participated" relating to MGP operations, environmental damage, and other issues. (Godesky Aff., Exh. 52, ¶¶ 46-48.) Brooklyn Union produced, among other documents, the minutes of its Executive Conference for 1924-1994, with the exception of those from 1951, 1952, 1969-71, 1973, 1988, and January-February 1989. (Plaintiff Century Indemnity Company's Supplemental Memorandum of Law in Support of its Motion for Sanctions Based on Spoliation of Key Evidence ["Supp. Memo"] at 12 [filed under seal].)
Brooklyn Union describes the Executive Conference as
"weekly meetings held by mid-level executives to exchange information about their departments. The minutes typically include a list of who was in attendance, and one- or two-sentence descriptions of activities during the prior week, such as sponsorship of community events; employee attendance at meetings and trips; and financial information including a treasurer's report, bills, and purchases. The minutes rarely if ever contain extended discussion or analysis of any issues." (Brooklyn Union Gas Company's Supplemental Memorandum of Law in Opposition to Century Indemnity Company's Motion for Sanctions ["Supp. Opp. Memo"] at 8 [filed under seal].)
Century notes that the minutes "reflect that Executive Conference meetings generally commenced with a report of key financial metrics, followed by updates from each Brooklyn Union executive and department head regarding company matters falling under his or her purview, and concluded with approvals for new expenditures, including contracts and purchase orders." (Supp. Memo at 7.) Century submits copies of minutes from various years as examples. (Godesky Aff., Exhs. 1, 4, 9, 13, and 18.)
In 2008, Century moved to compel the production of documents, including some of the missing minutes. (Affidavit of Brian E. Foster ["Foster Aff."], Exh. 26 [filed under seal].) Brooklyn Union searched for, and found, some of the missing minutes, but it still could not locate the minutes for 1951, 1952, or 1988-early 1989. Justice Michael Stallman denied Century's motion to compel, finding that "Brooklyn Union met its obligation to search for" the minutes. ( Century Indem. Co. v Brooklyn Union Gas Co. , 2008 WL 5511173, at *5.)
In 2010, Century filed this motion for sanctions for spoliation of evidence based on the missing Executive Conference minutes, and the motion was fully briefed. At that time, this case was before Justice Paul Wooten. Justice Wooten did not decide this motion, and the entire matter was reassigned to this court in 2016. By stipulation of the parties on March 30, 2016, and so ordered by this court on March 31, 2016, this motion was adjourned while Century awaited additional discovery. A Supplemental Memorandum of Law, a Supplemental Memorandum of Law in Opposition, and Supplemental Reply, along with exhibits, were filed in May and June of 2017. This court held oral argument on August 9, 2017.
Century contends that the missing 1951-52 and 1988-early 1989 minutes are central to Century's defenses of late notice and that the environmental contamination was "expected or intended," and, thus, not covered by the insurance policies issued by Century. (Supp. Memo at 18.) Century further contends that Brooklyn Union has conceded that it anticipated litigation with Century by 1993 and therefore had a duty to preserve documents that might be relevant to future litigation from that date forward. (Id. at 14.) Century claims that "Brooklyn Union's failure to provide the now-missing Executive Conference minutes was at least grossly negligent, and potentially volitional." (Id. at 16.)
Century does not seek sanctions with respect to the missing 1969-71 and 1973 minutes. (Supplemental Memorandum at 12, fn 56.)
Brooklyn Union argues that it produced over a million pages of documents dating back to the 1800s. (Supp. Opp. Memo at 3.) It produced 70 years of Executive Conference minutes. It could not locate the minutes from seven disparate years after "multiple diligent searches." (Id. at 3-4.) Brooklyn Union further argues that it had no duty to preserve these minutes and that "there is no evidence that Brooklyn Union discarded the minutes or had the requisite ‘culpable state of mind’ required for a spoliation claim." (Id. at 4.) Brooklyn Union also argues that Century was not prejudiced by Brooklyn Union's failure to produce the minutes. (Id. )
The last evidence of the existence of the 1988-early 1989 Executive Conference minutes is a "document retention form indicating that this volume was sent to Brooklyn Union's records retention center in 1990 and scheduled for destruction in 1993 — eight years before Century commenced this litigation." (Supp. Opp. Memo at 10; Godesky Aff., Exh. 22.) The minutes for 1951-52 were last documented in 1996, when an insurance archaeologist found them while carrying out an insurance reconstruction project. (Godesky Aff., Exh. 51 at 143-46, 151-56, 162-64.)
Analysis
Century's motion for sanctions for spoliation of evidence is denied. Century has not shown that Brooklyn Union was under an obligation to preserve the Executive Conference minutes when they were lost or destroyed.
"Spoliation is the destruction of evidence. Although originally defined as the intentional destruction of evidence arising out of a party's bad faith, the law concerning spoliation has been extended to the non-intentional destruction of evidence." ( Kirkland v N.Y.C. Hous. Auth. , 236 AD2d 170, 173 [1st Dept 1997].) A party is obligated to preserve evidence when the party is "on notice that the [evidence] would be needed for future litigation." ( Strong v City of NY , 112 AD3d 15, 22 [1st Dept 2013].) Some evidence is of obvious evidentiary value and the obligation to preserve it may arise even before a complaint is filed in a court when the party has a "reasonable anticipation" of litigation. ( VOOM HD Holdings L.L.C. v EchoStar Satellite L.L.C. , 93 AD3d 33, 42 [1st Dept 2012] ; accord In re New York City Asbestos Litig. , 157 AD3d 564, 565 [1st Dept 2018].)
In other cases, the evidentiary value may not be clear, and the party possessing that evidence may not realize its value until the opposing party requests it. A number of New York cases illustrate situations in which a party's duty to preserve certain evidence occurred sometime after the "reasonable anticipation" of litigation.
In Duluc v AC & L Food Corp. (119 AD3d 450, 450-451 [1st Dept 2014] ), the Appellate Division found no spoliation of evidence when the defendant erased surveillance tapes recorded before a slip-and-fall occurrence after preserving the footage of the accident itself. The plaintiff later requested surveillance footage from 32 cameras for the six hours leading to the accident. The Duluc Court held that the defendant did not improperly dispose of the tapes; their evidentiary value was not apparent when the tapes were destroyed. The Duluc Court ruled that the obligation to preserve evidence "does not translate into an obligation on a defendant to preserve hours of tapes indefinitely each time an incident occurs on its premises in anticipation of a plaintiff's request for them. That obligation would impose an unreasonable burden on property owners and lessees." ( Id. at 452.)
In Diaz v Rose (40 AD3d 429, 430 [1st Dept 2007] ), a medical-malpractice case, the court found no spoliation when the defendant disposed of a foreign body that the plaintiff later requested. The Diaz Court explained that "there was no indication that it was disposed of with knowledge of its potential evidentiary value or plaintiff's claimed need for it. Under such circumstances, it cannot be said that a spoliation sanction is ‘necessary as a matter of elementary fairness.’ " (Id. [citations omitted].)
In Boyle v City of New York (291 AD2d 315, 315 [1st Dept 2002] ), the court denied a motion for spoliation sanctions for the destruction of 15-year-old records two years before the plaintiff requested them.
In each of the foregoing cases, no duty to preserve the evidence existed at the time it was destroyed, even though there was already a reasonable anticipation of litigation.
This court assumes for the sake of argument that Brooklyn Union had a reasonable expectation of litigation when it gave notice to Century in 1993 of its potential liability for environmental damages. It also assumes for the sake of argument that all the missing minutes were still in Brooklyn Union's possession when the reasonable expectation of litigation arose. Century would still need to demonstrate that Brooklyn Union should have been aware of the evidentiary value of the Executive Conference minutes at the time of their loss or destruction.
The Executive Conference minutes were not the type of documents that Brooklyn Union "could reasonably anticipate might be relevant to insurance coverage litigation." (Supp. Opp. Memo at 20.) The minutes covered a wide range of topics in minimal detail. In contrast, Brooklyn Union argues, it could reasonably anticipate that "documents such as environmental reports and regulatory correspondence, insurance policies, and notice correspondence ... might be relevant to insurance coverage litigation." (Id. ) Brooklyn Union did in fact provide copious documentary evidence of this nature, including court documents relating to a 1951 environmental claim against Brooklyn Union. (Foster Aff., Exh. 5.)
The existence of the 1951-52 minutes was last confirmed in 1996; the 1988-89 minutes were last documented in 1990 and designated for destruction in 1993. Century requested them in 2001. Century has not shown that the documents were destroyed or lost since 2001, when Brooklyn Union was put on notice of their evidentiary value. Century has not shown that Brooklyn Union had an obligation to preserve the minutes at the time they were destroyed or lost. The duty to preserve did not require Brooklyn Union to retain indefinitely every document in its possession on the slight chance Century would one day request it. Brooklyn Union had the duty to preserve only those documents it knew had potential evidentiary value. Although the records might have contained some relevant or useful information, this is not a situation requiring sanctions as a matter of elementary fairness.
Accordingly, it is hereby
ORDERED that Century Indemnity Company's motion for sanctions based on spoliation of key evidence is denied; and it is further
ORDERED that this decision and order is to be filed under seal pursuant to the Protective Order of the Supreme Court dated February 1, 2002.