SPOLIATION OF EVIDENCE IN CONSTRUCTION CASES

Transcription

1 SPOLIATION OF EVIDENCE IN CONSTRUCTION CASES ALLISON J. SNYDER PORTER HEDGES LLP HOUSTON, TEXAS CONSTRUCTION LAW FOUNDATION OF TEXAS th Annual Construction Law Conference

2 What is Spoliation? Definition: The intentional destruction or alteration of evidence, or the knowing failure to preserve property for another s use as evidence in pending or reasonably foreseeable litigation. Rationale: A party should not be able to circumvent the discovery process and the fair administration of justice by destroying evidence before a claim is filed. 2

3 STEP ONE: DETERMINING WHETHER SPOLIATION HAS OCCURRED 3

4 Test: When Does Spoliation Occur? Texas: 3 Elements 1) Duty to Preserve Evidence 2) Breach of the Duty to Preserve Evidence 3) Resulting Prejudice to the Non-Breaching Party 4

5 Duty to Preserve Evidence 2 requirements: 1) The party knows or reasonably should know that there is a substantial chance a lawsuit will be filed. Factors to Consider: severity of the incident; informal claims previously made; involvement of legal counsel 2) The evidence is relevant and material to the anticipated or pending lawsuit. Beware! Relevance is defined broadly. 5

6 Breach of Duty to Preserve Evidence Focus: Spoliating Party s State of Mind Texas & Some States: Intentional or Negligent Conduct suffices. Other States: Only Intentional (i.e., Bad Faith) Conduct. Potential Exception: Justification for Breach Spoliation was beyond the spoliator s control. Duty to preserve only arose after evidence was already destroyed. 6

7 Resulting Prejudice to Non-Spoliating Party Factors to Consider: Relevancy of missing evidence. Importance of missing evidence. Harmful effects of missing evidence. Availability of other cumulative evidence. Potential Safeguard: Proof that non-spoliating party did not really suffer any prejudice. 7

8 STEP TWO: IMPOSING THE APPROPRIATE SPOLIATION PENALTY 8

9 Imposing Penalties for Spoliation 3 Overarching Goals: Make the non-spoliating party whole. Punish the spoliator. Deter others from engaging in spoliation in the future. 4 Factors to Consider: There must be a direct relationship between the sanction imposed and the offensive conduct. The sanction imposed may not be excessive. The court must attempt to first impose a less stringent sanction. The court should not impose harsh sanctions unless it would be unjust to impose less stringent sanctions because it would cause little or no harm to the spoliator. 9

10 Imposing Penalties for Spoliation (cont d.) 2 Broad Categories of Penalties: 1) Spoliation Presumption Jury Instructions 2) Spoliation Sanctions 10

11 Spoliation Presumption Jury Instructions Omnia presumuntur contra spoliatorem: All things presumed against the despoiler or wrongdoer. A spoliation instruction given to a jury outlines the permissible inferences the jury may make against a party who has lost, altered, or destroyed evidence. 2 Types of Spoliation Presumption Jury Instructions: Rebuttable Presumption Permissible Adverse Inference Which type to impose depends upon the severity of prejudice resulting to the non-spoliating party. 11

12 Spoliation Presumption Jury Instructions: Rebuttable Presumption Arises when the spoliator has intentionally or deliberately destroyed evidence. Usually imposed when non-spoliating party is unable to prove its prima facie case without the destroyed evidence. Contents of Instruction: The spoliator destroyed the evidence and thus the jury is to presume that the destroyed evidence was unfavorable to him. The spoliator bears the burden of disproving the presumed fact or issue that the spoliated evidence may have supported. Effect: Fact finder gets to determine whether the evidence offered by the spoliator is sufficient to overcome the presumption. 12

13 Spoliation Presumption Jury Instructions: Rebuttable Presumption (cont d.) Model Instruction: You are instructed that the burden of persuasion on [description of the issue(s) to which the evidence would have been relevant] has shifted to [spoliating party] and that [spoliating party] may disprove that fact by a preponderance of the evidence. 13

14 Spoliation Presumption Jury Instructions: Permissible Adverse Inference Less severe than rebuttable presumption because burden does not shift to the spoliator. Arises when the spoliator is unable to produce the evidence and does not offer testimony explaining its non-production. Contents of Instruction: If the evidence were produced, it would operate against the spoliator. This presumption is to operate merely as one factor in the jury s consideration of all of the evidence. Effect: The presumption is merely one factor to be considered by the jury in deciding the case. 14

15 Spoliation Presumption Jury Instructions: Permissible Adverse Inference (cont d.) Model Instruction: The [spoliating party] has [destroyed or failed to produce] [description of the evidence]. You may, but are not required to, consider that this evidence, if produced, would have been unfavorable to [spoliating party] on the issue of [description of the issue(s) to which the evidence would have been relevant]. Sample Instruction: (Brookshire Bros., Ltd. v. Aldridge, No CV, 2010 WL , at *9 (Tex. App. Tyler July 30, 2010, pet. granted) In this case, Brookshire Brothers permitted its video surveillance system to record over certain portions of the store surveillance video of the day of the occurrence in question. If you find that Brookshire Brothers knew or reasonably should have known that such portions of the store video not preserved contained relevant evidence to the issues in this case, and its non-preservation has not been satisfactorily explained, then you are instructed that you may consider such evidence would have been unfavorable to Brookshire Brothers. 15

16 Spoliation Sanctions Examples: Monetary Penalties Exclusion of Evidence or Testimony Limitation of Claims Summary Judgment Default Judgment Dismissal ( Death Penalty Sanctions ) Independent Tort Liability* * In 15 jurisdictions across the U.S. (not Texas) 16

17 THE CASE LAW 17

18 Miner Dederick Constr. LLP v. Gulf Chem. & Metallurgical Corp. 403 S.W.3d 451 (Tex. App. Houston [1st Dist.] 2013, pet. filed) In 2013, the Houston First District Court of Appeals issued a pivotal holding in a construction case involving the spoliation of evidence. V. 18

19 Facts: Miner Dederick Gulf (property owner) hired Miner Dederick to construct an expansion of its containment building where it stored spent catalyst generated by oil refineries. Miner Dederick was to pour a new concrete foundation and attach it to the old foundation with an expansion joint, which was to include waterstops. Miner Dederick completed the construction in early 2006 and gave Gulf a one-year warranty for the materials and workmanship. Gulf subsequently discovered an oil leak at the expansion joint where catalyst was still being stored. 19

20 Miner Dederick Facts (cont d.): Gulf asked Miner Dederick to repair it pursuant to the warranty. Miner Dederick disagreed that the repairs were covered by the warranty, alleged that it had followed the original plans and specifications and alleged that the original design was the source of the problem. Gulf declined Miner Dederick s quoted price for the repair work and instead hired a forensic engineering firm and another construction companytodotherepairwork. Miner Dederick sent Gulf three written requests to inspect its work and assess the validity of Gulf s allegations. 20

21 Miner Dederick Facts (cont d.): Gulf ignored all of these requests and proceeded with its investigation, testing, and remediation of the expansion joint. At Gulf s direction, the repair contractor covered the expansion joint with a new sealant system, poured concrete over it, installed waterstops and built a retaining wall to prevent the storage of catalyst on the expansion joint. Gulf then sued Miner Dederick asserting breach of contract and breach of warranty. 21

22 Miner Dederick Problem: Gulf refused to permit Miner Dederick to inspect the expansion joint, failed to notify Miner Dederick of the testing, and essentially destroyed all evidence of Miner Dederick s work despite Miner Dederick s written requests to inspect it. Trial Court Proceedings: Miner Dederick requested that the trial court sanction Gulf by either (1) striking its pleadings, (2) precluding it from introducing evidence of the joint s construction, or (3) including a rebuttable presumption jury instruction that the evidence was unfavorable to Gulf. Trial court denied Miner Dederick s request for spoliation sanctions or a spoliation presumption jury instruction and then granted Gulf s motion for partial summary judgment. Trial court awarded Gulf $727, in damages against Miner Dederick. 22

23 Miner Dederick Houston First District Court of Appeals: Held that Gulf engaged in the spoliation of evidence. Gulf had a duty to preserve the expansion joint because it knew or should have known that it would file a claim against Miner Dederick, particularly because it involved its legal counsel well before conducting the investigation, testing, and repairs to the expansion joint. Gulf breached this duty by intentionally authorizing testing and repair work that covered up Miner Dederick s work. Miner Dederick was prejudiced because it was not afforded the opportunity to inspect and analyze the key piece of evidence on which the case turned. Determined that the trial court abused its discretion in declining to find spoliation. Remanded to trial court for imposition of appropriate spoliation penalty. 23

24 Miner Dederick: Key Takeaways Just because the trial court did not find spoliation does not mean the issue is dead. If a trial court has improperly declined to find that spoliation has occurred, then the appellate court may well hold that the trial court abused its discretion. However, appellate courts should defer to the discretion of trial courts to fashion the appropriate penalty for spoliation. 24

25 LESSONS FROM OTHER COURTS 25

26 Texas Courts Will Not Hesitate to Impose Harsh Penalties for Spoliation Plorin v. Bedrock Found. and House Leveling Co., 755 S.W.2d 490 (Tex. App. Dallas 1988, writ denied) Factual Background: After a contractor completed repairs on a residence, the homeowners filed suit alleging that the foundation was uneven. After filing suit, the homeowners agreed to permit the contractor to inspect the alleged problems. However, the day before the contractor s scheduled inspection, the homeowners allowed another firm to repair the alleged defects. As a result, when the contractor arrived to inspect his work, the foundation was level. 26

27 Texas Courts Will Not Hesitate to Impose Plorin (cont d.) Harsh Penalties for Spoliation Holding: Court dismissed the homeowners claims with prejudice (i.e., imposed death penalty sanctions ). The homeowners premature repairs to the foundation constituted a flagrant abuse of discovery. Their decision to repair the alleged defects before affording the contractor the opportunity to inspect his work particularly after expressly agreeing to permit him to do so was sanctionable. 27

28 Other Courts Have Likewise Imposed Harsh Penalties for Spoliation Story v. RAJ Props., Inc., 909 So.2d 797, 805 (Ala. 2005) Facts: In a residential construction project, the exterior insulation finishing system ( EIFS ) allowed moisture to enter and damage other components of the structure. Problem: The homeowner removed the EIFS, repaired the damage, and replaced the EIFS with a brick exterior after filing suit but without notifying the builder first. Holding: Summary judgment was granted in favor of the builder. 28

29 Other Courts Have Likewise Imposed Harsh Penalties for Spoliation (cont d.) Harborview Office Ctr., L.L.C. v. Camosy, Inc. ( Harborview I ), 712 N.W.2d 87 (Wis. Ct. App. 2006) Facts: The window system of a newly-constructed office building leaked. Owner sued various entities. During the case, the Owner suspected cracks in the EIFS and authorized remedial work on the exterior finish. Problem: The owner failed to inform the contractor that it suspected an alternate source of the water infiltration cracks in the EIFS and did not notify the contractor before inspecting the EIFS and undertaking repairs. Holding: Court dismissed the owner s claim for its flagrant, knowing disregard of the judicial process, which caused the contractor significant prejudice. 29

30 Courts May Instead Opt for Less Stringent Spoliation Penalties One Beacon Ins. Co. v. Broadcast Dev. Group, Inc., 147 Fed. App x 535 (6th Cir. 2005) Facts: Contractor failed to properly anchor the guy wire holding the base sections of a tower, and as a result the entire structure collapsed overnight. Problem: After the owner buried some portions of the collapsed tower and took other portions to a scrap yard, it came to light that the collapse may have actually been caused by defective welds holding the flanges to the legs of the tower. Holding: The court upheld an adverse inference jury instruction because the owner was aware that the defective welds constituted relevant evidence, and therefore engaged in spoliation. 30

31 Courts May Instead Opt for Less Stringent Spoliation Penalties (cont d.) Robertet Flavors, Inc. v. Tri-Form Constr., Inc., 1 A.3d 658, 661 (N.J. 2010) Facts: The window system on newly-constructed commercial building allowed rainwater to penetrate. Problem: Before notifying the glass company or affording it the opportunity to inspect the system, the owner hired another company to replace the windows, remove the damaged walls and insulation, and remediate the mold. Holding: The court limited the claims that the owner could pursue against the glass company to only those claims regarding conditions that were observable prior to its remediation efforts. 31

32 Courts May Instead Opt for Less Stringent Spoliation Penalties (cont d.) Atkas v. JMC Dev. Co., 877 F. Supp. 2d 1 (N.D.N.Y. 2012) Facts: After entering into a contract and commencing renovations, the homeowners and the contractor disagreed as to the quality, completion date, and payment for the project. The contractor immediately involved its attorney in all future dealings with the homeowners. Problem: The homeowners halted the construction process by changing the locks on the doors. The homeowners thereafter hired another contractor to conduct remediation on the home without first formally terminating their relationship with the contractor. Holding: The court imposed an adverse inference jury instruction because the homeowners were grossly negligent and knowingly altered and destroyed evidence of the contractor s work without any pressing need to do so. 32

33 Practical Tips to Avoid Spoliation Penalties Owners: Implement procedures for responding to damage or defects. Thoroughly document and photograph the evidence and the surrounding scene after problems or defects arise. Notify all potential parties of the incident and of any potential claims that may arise. Afford other parties the opportunity to review and analyze the alleged damage right away, before the evidence has been touched, removed, or tampered with in any way. Permit other parties to be present for any testing or analysis of the evidence. If the evidence has to be moved, make sure not to disturb its original condition and preserve it properly. 33

34 Practical Tips to Avoid Spoliation Penalties Contractors: After learning of damage or defects during a project, alert the owner of the risks of spoliation. Demand that the owner retain all evidence in its original condition and advise him not to alter, destroy, or in any way change the conditions on the property. Ensure that all other potential parties are aware of the situation. Take every opportunity to inspect and analyze the evidence and to be present for any testing or repairs performed by the owner. 34

35 Practical Tips to Avoid Spoliation Penalties Attorneys: Ensure that clients are aware of the risks of spoliation. Encourage clients to adopt procedures for responding to defects that may arise, and for preserving relevant evidence of those defects. When a problem arises, notify client both orally and in writing of the duty to preserve relevant evidence, and impose a litigation hold. When litigation has commenced, send a written letter to opposing counsel and client regarding his/her obligation to avoid spoliation. Be prepared to file a motion for spoliation penalties as soon as practicable after discovering that spoliation has occurred. Advise clients to formulate document retention policies and procedures. 35

36 Concluding Thoughts Texas courts and others across the country have exhibited a willingness to sympathize with non-spoliating parties and to take measures necessary to level the playing field. Regardless whether courts impose harsh penalties or more lenient ones, the spoliating party suffers the most harm in the end. Thus, it is critical that all parties involved in construction projects realize the importance of preserving relevant evidence of any defect that may arise. 36

37 Allison J. Snyder Porter Hedges LLP 1000 Main Street, 36th Floor Houston, Texas (713)