Picture yourself in this situation: A county sheriff arrives at your office and hands you a summons and complaint. You've been named a defendant in a lawsuit. Reading the complaint, you learn the plaintiff owns a commercial office building where you installed a built-up roof system five years ago.
Reading the complaint further, you learn the owner, increasingly frustrated with recurring leaks and fearing the roof might blow off in a storm, has reroofed the building and seeks to recover the reroofing costs from your company in the pending lawsuit.
Upon checking your company's records, you see your firm received intermittent leak calls from the owner's property manager. Your company's last communication in response to the leak calls was to notify the owner that your company's two-year warranty had long since expired.
You and your attorney delve further into the lawsuit to prepare your defense. You learn the owner, after receiving notice that your firm's two-year warranty had expired, retained a roof consultant who took test cuts and monitored the existing roof system's removal and replacement.
According to the roof consultant's report, which included photographs and test cut results, your company failed to apply enough asphalt to adequately secure the insulation to the poured concrete deck and allowed the asphalt to cool so adhesion of the roof was inadequate. The owner's consultant also reported there were numerous voids in the asphalt moppings and areas of wet roof insulation.
The owner's consultant advised the owner the roof was likely to blow off in a windstorm because of the alleged inadequate attachment and the leaks were a result of various workmanship deficiencies. The consultant recommended removing and replacing the existing roof system, and the owner heeded the consultant's advice.
As you consider how to defend yourself, you are feeling vulnerable because the owner already has reroofed the building and has a consultant who claims reroofing was necessary to avoid a potentially catastrophic blow-off and your workmanship was the cause. In short, you are woefully unprepared for the pending litigation.
What can you do?
A way out
Fortunately, there is a judicial remedy available to assist in situations such as this. In this case, the owner's removal and replacement of the existing roof system without notifying the roofing contractor is likely to be viewed by the court as spoliation of evidence and should result in a court-imposed sanction if raised in a timely manner by the roofing contractor's attorney.
A court-imposed sanction is intended to equalize the situation so, in this case, the owner will not have an enormous advantage having an expert witness testify regarding conditions allegedly observed during demolition while the contractor is unable to provide any potential countertestimony or evidence.
Although courts differ in their definitions of spoliation, spoliation is well-recognized as the destruction or alteration of evidence that should be preserved so all parties have access and a fair opportunity to examine the evidence.
Alabama courts define spoliation as "an attempt by a party to suppress or destroy material evidence favorable to the party's adversary." Arkansas and Colorado courts view intentional destruction of evidence as spoliation. Connecticut adds to the definition that the destroyed evidence must be relevant to the issue in dispute. Florida courts find spoliation when evidence is intentionally lost, misplaced or destroyed by one party. Illinois courts define spoliation as loss or destruction of relevant material evidence at the hands of the opponent. And according to New Jersey court decisions, spoliation of evidence in a prospective civil suit occurs when evidence pertinent to the suit is destroyed, thereby interfering with the suit's proper administration and disposition.
Duty to preserve evidence
Spoliation arises from the judiciary's inherent authority and commitment to providing a fair judicial process for all parties. The spoliation doctrine is based on an implied duty to preserve evidence to allow a fair trial so each party has access to pertinent evidence.
The judicial process imposes a duty on all litigants and potential litigants to preserve relevant evidence. Providing a report or sharing photographs or test data is insufficient to level the playing field. Both parties should have access to the same raw evidence. If one party destroys relevant evidence without the other party having the opportunity to examine it, a claim for spoliation is appropriate.
An existing lawsuit is not a prerequisite for spoliation to occur and a sanction to be imposed. If the party who destroys evidence is aware there may be a legal claim in the future pertaining to the destroyed evidence, the spoliation doctrine will apply. Indeed, spoliation of evidence occurs most often before a lawsuit is filed. The duty to preserve evidence occurs when litigation is pending or the plaintiff knows of the likelihood of litigation; destroying or discarding the evidence would be prejudicial to another party; and the evidence is relevant to the litigation.
Echoing the view of most courts, Arizona courts have stated litigants and potential litigants have a duty to preserve evidence they know or reasonably should know is relevant or reasonably calculated to lead to the discovery of admissible evidence and is reasonably likely to be requested during discovery.
For spoliation to occur, the spoliator need not be acting in bad faith or have the objective of deliberately depriving the other party access to relevant evidence. The destruction of relevant evidence by one party without giving the other party a reasonable opportunity to examine that evidence will give rise to a claim for spoliation.
To avoid a spoliation charge, notice should be given before extensive testing, particularly any destructive testing, repairs or replacement. The notice should indicate alteration, destruction or remediation is going to take place. Once notice is given, the party receiving the notice should be sure to undertake a thorough investigation. If no investigation is made after notice of intention to remediate is provided, the party receiving the notice will not be able to claim spoliation.
Sanctions
If a judge finds spoliation has occurred, the judge's next step is to determine the sanction that will be imposed. The judicial determination of what sanction to impose depends on the degree of fault attributable to the party who destroyed or lost the evidence, the importance of the evidence that was destroyed or lost, the amount of prejudice to the nonresponsible party and whether the prejudice can be cured.
Sanctions typically range from an instruction to the jury regarding the spoliation of evidence to dismissal of a claim or defense. The ultimate sanction is dismissal. Because dismissal is a drastic remedy, courts view dismissal as a last resort when no other sanction will suffice. A claim or defense is dismissed only in the most egregious situations, such as when there has been intentional destruction of evidence that has severely prejudiced the other party and there is no way to compensate for the custodial party's destruction of material evidence.
Next on the spectrum of sanctions for spoliation is preclusion of evidence or testimony so any evidence or testimony derived from the destroyed evidence would not be allowed to be presented to the jury. Disallowing expert witness testimony based on an examination of a construction site to which the other party's expert did not have access is a sanction imposed by judges in construction cases.
In the scenario provided earlier, the roof consultant might be prohibited from presenting expert testimony regarding the test cuts from the existing roof because the owner failed to notify the roofing contractor that test cuts were being taken and the roof system was being removed and replaced.
A common sanction is an "adverse inference" instruction to the jury. When imposing this sanction, the trial judge informs the jury evidence was destroyed and jurors can infer the evidence was unfavorable to the spoliator. The trial judge might give an instruction to the jury along these lines: "The Plaintiff allowed the destruction of evidence without allowing the Defendant an opportunity for a reasonable inspection of the evidence. The Court has already determined that the Plaintiff breached its duty to preserve evidence. You may infer that the evidence, if preserved, would be unfavorable to the Plaintiff."
Historically, spoliation claims arose most frequently in product liability and fire cases where the alleged defective product was lost, discarded or destroyed by the plaintiff before litigation began and without the defendant manufacturer having an opportunity to examine the product or investigate the fire scene.
In recent years, there have been more construction defect cases where spoliation claims have been made because the plaintiff remediated an alleged construction defect without first notifying potential defendants of the plan. Typically, in these cases courts have been called upon to determine what notice is to be provided to avoid a spoliation charge and, if there has been spoliation, the appropriate sanction.
Miller v. Lankow
In Miller v. Lankow, Minnesota courts faced the issue of whether a homeowner, to avoid sanctions for spoliation of evidence, need only give notice of a claim or breach by the contractor or must also give notice of the nature and timing of the homeowner's intention to take action that would lead to the destruction of evidence.
In this case, the homeowner, who suffered water intrusion and mold damage through exterior stucco walls, notified three contractors who had potential responsibility for the problem in September 2005. The contractors' representatives visited the home shortly thereafter.
In December 2005, an attorney retained by the homeowner sent letters to the contractors formally notifying them of potential construction defects and asking whether they wanted to inspect the property and discuss possible resolutions. One contractor inspected the home a second time in March 2006.
On March 15, 2007, a new attorney retained by the homeowner sent letters to the contractors stating the homeowner intended to begin remedial work and advised that if any recipient desired to inspect the home further, he or she should contact the homeowner's attorney immediately. On March 23, 2007, one contractor visited the home for a third time and found all the stucco already had been removed. The homeowner had hired another contractor in February 2007 to remove the stucco; the removal was well under way before the March 15, 2007, letter from the homeowner's attorney.
The homeowner filed suit April 27, 2007. The defendants filed motions for summary judgment, arguing the homeowner's expert reports relating to moisture intrusion and the extent of mold should be excluded on the grounds of spoliation of evidence. Their specific claim was the homeowner had spoliated evidence by removing the stucco wall without giving the defendants an opportunity to independently inspect the home.
In response to the defendants' motions for summary judgment, the trial court stated: " … The [d]efendants did not have sufficient notice that the evidence would be destroyed or that a claim was being sought against them. Further, the notice failed to give the [d]efendants sufficient time to correct the defects or do a detailed inspection to prepare for litigation."
Because they did not have an opportunity to independently inspect the evidence before its destruction, the trial court found the defendants had suffered "extremely significant" prejudice. The court then imposed sanctions against the homeowner by excluding all expert reports and testimony relating to moisture intrusion and the extent of mold. Because there was no other evidence as to the cause or origin of the moisture intrusion and the extent of mold, the trial court granted the defendants' motions for summary judgment and dismissed the homeowner's claim for lack of evidence.
The homeowner appealed to the Minnesota Court of Appeals. The issue before the appeals court was what notice was necessary to avoid sanctions for spoliation. Quoting from its decision in a 1996 automobile fire case, a majority of the court ruled "a party must provide actual notice of the nature and timing of any action that could lead to destruction of evidence and afford a reasonable amount of time from the date of the notice to inspect and preserve evidence."
Applying this standard, the appeals court affirmed the trial court's decision.
The homeowner next sought review by the Supreme Court of Minnesota, which agreed to hear the case and issued its decision Aug. 3, 2011. At the outset of its discussion of the legal principles to be applied, the court defined spoliation of evidence as "failure to preserve property for another's use as evidence in pending or future litigation" and affirmed the duty to preserve evidence exists not only after the formal commencement of litigation but whenever a party knows or should know that litigation is reasonably foreseeable." The court also recognized spoliation can occur regardless of whether a party acted in good or bad faith.
Pointing out a custodial party's duty to preserve evidence is not boundless, the Minnesota Supreme Court then addressed what a custodial party must do before destroying relevant evidence.
Upon reviewing court decisions in other states, the court said "a 'loose consensus' has developed that a custodial party may destroy relevant evidence after he discharges his duty to preserve evidence by 'giving the other side notice of a potential claim and a full and fair opportunity to inspect relevant evidence.'"
The court concluded "a custodial party with a legitimate need to destroy evidence may be absolved of a failure to preserve evidence by providing sufficient notice and a full and fair opportunity to inspect the evidence to a noncustodial party."
Applying the test of whether the noncustodial party was given sufficient notice and a full and fair opportunity to inspect rather than the appeals court's more stringent requirement of actual notice of the nature and timing of an action that leads to destruction of evidence, the Minnesota Supreme Court reversed the decisions of the trial and appeals courts.
The Minnesota Supreme Court ruled the homeowner's notice to contractors did not necessarily require the contractors be notified of the date when alleged defective stucco would be removed. The proper test, the court said, was whether the homeowner had given sufficient notice in the totality of the circumstances so the defendants had a full, fair opportunity to examine the evidence and protect themselves. Therefore, the court remanded the case to the trial court to determine whether the homeowner had provided sufficient notice. How the trial court ruled after the remand is unknown; trial court proceedings generally are not reported.
Documents and electronic files
Undertaking remediation that destroys evidence is one example of spoliation that can arise in a construction dispute. A more common form of spoliation occurs when one party discards documents or electronic files that are relevant to the matter in dispute.
In the 2009 Florida case Southeastern Mechanical Services Inc. v. Brody, Southeastern Mechanical Services Inc. (SMS), Albemarle, N.C., brought suit against three former employees alleging misappropriation of confidential and trade secret business information including customer lists the former employees had used to give themselves an unfair and unjust advantage in operating a competing business.
SMS sent a demand letter to the competing company alleging the former employees had gained unauthorized access and use of SMS' confidential information and trade secrets. SMS also obtained a temporary restraining order directing the former employees to return all SMS information and property and preserve all computer files, data, documents or similar information on their computers until further notice by the court.
The former employees failed to produce any e-mails or electronic records. The court determined the defendants had completely wiped clean their laptops and other electronic devices during a period after they left SMS and were working for the competing business. SMS sought spoliation sanctions, alleging the defendants acted in bad faith when they destroyed crucial evidence they had a duty to preserve. The court agreed with SMS and, as a sanction, issued an instruction that the jury should infer the defendants had destroyed evidence unfavorable to them.
A helpful doctrine
Spoliation can be enormously helpful to you if a building owner destroys or alters job-site conditions or other evidence without affording you a reasonable opportunity to inspect the job site and evaluate the evidence. To avoid a spoliation charge, an owner's notice does not necessarily need to state the owner intends to undertake remediation or replace your work on a certain date but should provide notice remediation is forthcoming and allow sufficient time for you to examine conditions before remediation begins.
Whenever you receive notice intimating a legal claim based on an alleged construction defect might be forthcoming, make a thorough inspection and include the participation of a qualified expert so you can be well-prepared in the event of litigation. Also, routinely make a specific request in writing to be notified well in advance if the owner intends to undertake replacement or other remediation. Similarly, if you are considering making a claim against a subcontractor, supplier or any other party who may be liable for an alleged defect, provide notice so you do not find yourself subject to a spoliation charge.
Stephen M. Phillips is a partner with Atlanta-based law firm Hendrick, Phillips, Salzman & Flatt.
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