Spoliation of Evidence in Construction Cases

Presented to: 27th Annual Construction Law Conference February 27 & 28, 2014 Westin La Cantera Resort San Antonio, Texas

Presented by: Allison J. Snyder Porter Hedges, LLP 1000 Main Street, 36th Floor Houston, Texas 77002-6336 (713) 226-6622 [email protected] Co-Authored by: Ali Henderson 3587169V4

I.

INTRODUCTION The goal of any construction project is to ensure that the structure is properly designed,

built in accordance with its design, and habitable and operational upon completion. However, during the course of a project, things may not necessarily go as planned—the project may be plagued with flaws, defects in construction, or installation errors. In the event of such a problem, the owner or the party who has to incur the cost of correction may understandably seek to file a lawsuit against whomever is at fault. However, an equally logical and common reaction might be to remedy the problem immediately for fear that the failure to do so might cause the problem to worsen and even impair other parts of the structure.1 While at first blush these reactions may appear to be entirely independent of one another, in reality they are interdependent, as a party’s actions in correcting a problem that arises during construction may drastically impact any subsequent litigation and harm that party’s chances of recovery. This article analyzes these two correlative reactions and emphasizes that parties must be mindful of the impact of their actions during the course of construction projects. In the event of such problems, courts across the country have held in recent years that the premature repair, alteration, concealment, or destruction of any evidence of the problem violates the evidentiary doctrine of spoliation. Even if the party engaging in such behavior had good intentions, courts are nevertheless willing to punish them for their evidentiary transgressions, albeit in some cases more harshly than others. Thus, it is critical that all parties involved in construction projects realize the importance of preserving relevant evidence immediately when a problem arises and

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Robertet Flavors, Inc. v. Tri-Form Constr., Inc., 1 A.3d 658, 661 (N.J. 2010) (noting that a party might “view the time within which to remedy a defect in a building’s construction as being constrained” because of the “fear[] that existing, identified defects, if not cured promptly, will worsen or adversely affect other parts of the structure”).

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appreciate the consequences of not doing so. To do otherwise causes more harm than good, as it jeopardizes a party’s rights and prospective recoveries in any future legal dispute. THE SPOLIATION DOCTRINE, GENERALLY

II.

Spoliation is 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.”2 The rationale behind the spoliation doctrine is that “[a] party should not be able to subvert the discovery process and the fair administration of justice by simply destroying evidence before a claim is actually filed.”3 Regardless of whether a party acted in good faith or bad faith, “the affirmative destruction of evidence [is not] condoned,” and a court must therefore attempt to remedy any prejudice that occurs as a result.4 To date, the majority of states treat the spoliation of evidence as a rule of evidence rather than as a substantive claim or defense comprising an independent cause of action.5

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BLACK’S LAW DICTIONARY 1409 (7th ed. 1999); see also Buckeye Ret. Co. v. Bank of Am., N.A., 239 S.W.3d 394, 401 (Tex. App.—Dallas 2007, no pet.) (the doctrine of spoliation refers to the “improper destruction of evidence relevant to a case”); Cardoza v. Reliant Energy HL&P, No. 01-03-01126-CV, 2005 WL 1189649, at *5 (Tex App.— Houston [1st Dist.] May 20, 2005, no pet.) (same). Texas courts have recently exhibited a willingness to treat the definition of spoliation broadly—much like some other courts across the nation—to include within this definition the act of altering evidence. E.g., Miner Dederick Constr., LLP v. Gulf Chem. & Metallurgical Corp., 403 S.W.3d 451 (Tex. App.—Houston [1st Dist.] 2013, pet. filed). 3 Miner Dederick, 403 S.W.3d at 465 (quoting Trevino v. Ortega, 969 S.W.2d 950, 955 (Tex. 2008) (Baker, J., concurring)); see also Clements v. Conard, 21 S.W.3d 514, 522–23 (Tex. App.—Amarillo 2000, pet. denied) (noting that the intent of the spoliation doctrine is “to prevent the subversion of the discovery process and the fair administration of justice by destroying evidence before a claim is actually filed”). 4 Patton v. Newmar Corp., 538 N.W.2d 116, 118–19 (Minn. 1995); see also Trevino, 969 S.W.2d at 957 n.1 (Baker, J., concurring) (noting that “[t]he theory of deterrence [behind spoliation] is not merely limited to deterring intentional conduct,” but that it “applies equally to negligent conduct”). 5 See, e.g., Laurent v. St. Michael’s Cntry Day Sch., No. WC-2009-0545, 2013 R.I. Super. LEXIS 82 (Super. Ct. R.I. Wash., April 30, 2013). “As of December 1, 2008, [only] fifteen jurisdictions across the country had recognized spoliation of evidence as an independent cause of action,” and “nineteen other[s] . . . had expressly rejected an independent cause of action for spoliation of evidence, either in whole or in part.” Id. at *21 n.3, n.4 (citing 40 Causes of Action 2d, CAUSES OF ACTION FOR SPOLIATION OF EVIDENCE § 11 (2009)). Texas courts fall within the majority, treating spoliation as an evidentiary concept rather than a separate cause of action because, in reality, the spoliation of evidence causes no injury independent from the cause of action in which it arises. Trevino, 969 S.W.2d at 952.

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A. Step One: Determining Whether Spoliation Occurred In determining whether spoliation has occurred, both generally and in the specific context of construction cases, Texas courts undertake a negligence-like analysis, which involves the consideration of three elements: (1) whether there was a duty to preserve evidence; (2) whether the alleged spoliator breached that duty; and (3) whether the spoliation prejudiced the nonspoliator’s ability to present its case or defense.6 i. Duty to Preserve Evidence The threshold question upon a spoliation complaint is whether the alleged spoliator had a duty to preserve the evidence at issue.7 The duty to preserve evidence “includes an obligation to identify, locate, and maintain information that is relevant to specific, predictable, and identifiable litigation.”8 This duty “essentially places the burden of the prejudicial effects associated with the failure to preserve upon the culpable spoliating party rather than on the innocent non-spoliating party.”9 There is no bright-line rule as to whether such a duty exists—particularly before litigation has commenced—and so this element is treated as a fact issue for the trial court to decide based on a totality of the circumstances.10 In Texas, this duty is not raised unless: (1) a party knows or reasonably should know that there is a substantial chance a claim will be filed against it; and (2) the evidence is relevant and material to such a claim.11

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E.g., Trevino, 969 S.W.2d at 954–55 (Baker, J., concurring); Miner Dederick, 403 S.W.3d at 465; Clark v. Randall’s Food, 317 S.W.3d 351, 356 (Tex. App.—Houston [1st Dist.] 2010, pet. denied); Offshore Pipelines, 984 S.W.2d at 666; Adobe Land Corp. v. Griffin, 236 S.W.3d 351, 357 (Tex. App.—Fort Worth 2007, pet. denied). 7 Trevino, 969 S.W.2d at 955 (Baker, J., concurring). 8 Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 522 (D.C. Md. 2010). 9 Trevino, 969 S.W.2d at 957 (Baker, J., concurring). 10 Trevino, 969 S.W.2d at 955–56 (Baker, J., concurring). 11 E.g., Clark, 317 S.W.3d at 357; Wal-Mart Stores, Inc. v. Johnson, 106 S.W.3d 718, 722 (Tex. 2003). Outside of Texas, other courts across the nation have set forth different and/or additional elements giving rise to a finding that a party has a duty to preserve evidence. For example, the Supreme Court of New Jersey has found that a duty to preserve evidence arises when: (1) there is pending or probable litigation involving a defendant; (2) the defendant

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With respect to the first prong, “[a] party knows or reasonably should know that there is a substantial chance a claim will be filed if a reasonable person would conclude from the severity of the incident, and other circumstances surrounding it, that there was a substantial chance for litigation at the time of the alleged spoliation.”12 Often, common sense plays a significant role, as “[a] party can [commonly] anticipate litigation before it receives actual notice of potential litigation.”13 It must be noted that to satisfy this prong, the spoliator need not have foreseen or anticipated litigation against a specific party; rather, generally foreseeable litigation with any potential party may suffice.14 Regarding the second prong of this first element, the non-spoliating party must show that the spoliator knew or should have reasonably known that the evidence at issue was relevant and material to the action.15 Texas courts define relevancy broadly to include evidence that has “any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.”16 If a logical connection exists, whether directly or inferentially, between the evidence and a fact that must be proven, the evidence is relevant.17 Thus, its destruction or alteration may indeed constitute spoliation.

has knowledge of the existence of the likelihood of litigation brought by a plaintiff; (3) the plaintiff can foresee harm and/or prejudice to the defendant by the destruction or discarding of evidence; and (4) the evidence at issue is relevant to the litigation. Aetna Life and Cas. Co. v. Imet Mason Contrs., 707 A.2d 180 (N.J. Super. Ct. 1998); Hirsch v. Gen. Motors Corp., 628 A..2d 1108 (N.J. Super. Ct. 1993). 12 Miner Dederick, 403 S.W.3d at 465 (citing Tex. Elec. Coop. v. Dillard, 171 S.W.3d 201, 209 (Tex. App.—Tyler 2005, no pet.)); see also Adobe Land Corp., 236 S.W.3d at 357 (citing 1 WEINSTEIN & BERGER, WEINSTEIN'S FEDERAL EVIDENCE § 301.06[4] at 301-28.3 (2d ed. 2003)). 13 Clark, 317 S.W.3d at 357. 14 E.g., Rambus, Inc. v. Infineon Techs. AG, 222 F.R.D. 280, 295 n.31 (E.D. Va. 2004) (“Although the spoliation decisions tend to arise in the context of anticipated litigation with a potentially identified adversary, there is no decision that articles the rule [that before a court can find spoliation, it must find that the alleged spoliator reasonably anticipated litigation with the specific party who later alleges the spoliation.” (emphasis added)). 15 Id.; see also Miner Dederick, 403 S.W.3d at 465. 16 TEX. R. EVID. 401. 17 See Service Lloyds Ins. Co. v. Martin, 855 S.W.2d 816, 822 (Tex. App.—Dallas 1993, no writ).

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ii. Breach of the Duty to Preserve Evidence After determining that the spoliator had a duty to preserve evidence, a court must next determine whether the spoliator breached that duty.18 Parties generally have a duty to exercise reasonable care in preserving potentially relevant evidence.19 This duty is not limitless, however, as parties need not take extraordinary measures to preserve evidence.20 Generally, the inquiry as to whether a spoliator has breached his duty to preserve evidence turns on the mental state of the spoliator; his degree of fault will impact the prejudice caused to the opposing party and thus, the severity of the sanction to be imposed.21 Courts across the country differ as to the state of mind that is necessary to impose penalties against a spoliator for a breach of the duty to preserve relevant evidence. Some courts require intentional (i.e., bad faith) spoliation, while others have held parties accountable for either intentional or negligent spoliation.22 Texas courts apparently fall within the latter category; indeed, Judge Baker’s seminal opinion on spoliation notes that “[b]ecause parties have a duty to reasonably preserve evidence, it is only logical that they should be held accountable for either negligent or intentional spoliation.”23 Judge Baker rationalized this approach as follows: “While allowing a court to hold a party accountable for negligent as well as intentional spoliation may appear consistent with the punitive purpose of remedying spoliation, it is clearly consistent with the

18

E.g., Adobe Land Corp., 236 S.W.3d at 359. Id. 20 See id.; Trevino, 969 S.W.2d at 957 (Baker, J., concurring). 21 Scott R. Murphy, Spoliation of Evidence: An Overview of Factors to Consider on a Construction Project, BARNES & THORNBURG LLP (July 2013) (citing Silvestri v. Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001)). 22 Trevino, 969 S.W.2d at 957 (Baker, J., concurring) (citations omitted). In this vein, federal courts across the country are currently split as to whether bad faith by the spoliator is required. See Ronald E. Hood, The Status of Spoliation, FOR THE DEFENSE, at pp. 49–53 (June 2013). To date, the Fifth, Seventh, Eighth, Tenth, and District of Columbia Circuits have indicated that bad faith is required for an adverse inference jury instruction, such that “mere negligence in losing or destroying records” is not enough. See id. Conversely, the First, Fourth, and Ninth Circuits have stated that bad faith is a proper and important—but not essential—consideration in deciding whether and how to sanction conduct resulting in the destruction of evidence. See id. The remaining Circuits (i.e., Second, Third, Sixth, and Eleventh) fall somewhere in between these two ends of the spectrum. See id. 23 Trevino, 969 S.W.2d at 957 (Baker, J., concurring). 19

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evidentiary rationale supporting it because the remedies ameliorate the prejudicial effects resulting from the unavailability of evidence.”24 However, it must be noted that “once the duty to preserve attaches, any destruction of [evidence] is, at a minimum, negligent.”25 Despite the willingness by Texas courts and others to impose spoliation in broad circumstances, a finding of breach is not infallible. Rather, even if a spoliator does have a duty to preserve evidence, it may be shielded from punishment by justifying its breach.26

For

instance, a spoliator may be found not to have breached its duty if the destruction of evidence was beyond the spoliator’s control.27 A spoliator may also claim that evidence was destroyed in the ordinary course of business, albeit only when its duty to preserve evidence arose after the spoliation28; if the spoliator’s duty to preserve evidence arose before the spoliation, however, this safeguard is inapplicable.29 iii. Resulting Prejudice to the Non-Spoliating Party Finally, to justify a spoliation penalty, the non-spoliating party must have suffered prejudice as a result of the spoliator’s breach of its duty to preserve relevant evidence.30 “Prejudice” generally arises when a party’s ability to present its case or to defend itself is compromised.31 In rendering this determination, courts must consider a variety of factors,32 including the relevancy of the missing evidence (i.e., whether it supports key issues in the case,

24

Id. Murphy, supra note 21 (quoting Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 220 (S.D.N.Y. 2003). 26 Miner Dederick, 403 S.W.3d at 466 (citing Trevino, 969 S.W.2d at 957 (Baker, J., concurring)). 27 Trevino, 969 S.W.2d at 957 (Baker, J., concurring). 28 See Aguirre v. S. Tex. Blood & Tissue Ctr., 2 S.W.3d 454, 457 (Tex. App.—San Antonio 1999, pet. denied) (holding that destruction of records in the regular course of business and without notice of their relevance to future litigation did not raise spoliation presumption); Cf. Miner Dederick, 403 S.W.3d at 466. 29 See, e.g., Miner Dederick, 403 S.W.3d at 466 (appellee’s attempted justification that its repair of the construction defect at issue was performed in the ordinary course of business was unpersuasive because the appellee’s duty to preserve the evidence arose before it conducted the repair, and therefore the appellee did breach that duty). 30 Trevino, 969 S.W.2d at 957–58 (Baker, J., concurring); Adobe Land Corp., 236 S.W.3d at 360. 31 See, e.g., Silvestri, 271 F.3d at 593–94. 32 Trevino, 969 S.W.2d at 958 (Baker, J., concurring); Miner Dederick, 403 S.W.3d at 469. 25

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or instead merely ancillary ones33), the harmful effect of the missing evidence, and the availability of other evidence to take its place.34 In sum, “[t]he more relevant the destroyed evidence, the more harm [or prejudice] the non-spoliating party will suffer from its destruction.”35 In other words, if the evidence pertains to or constitutes the very subject of the spoliator’s lawsuit, then the spoliator’s destruction of that evidence so as to preclude the non-spoliating party from examining it is unquestionably prejudicial, as it hinders the latter from adequately presenting its claims or defenses.36 Lost or destroyed evidence is “relevant” if “a reasonable trier of fact could conclude that the lost evidence would have supported the claims or defenses of the party that sought it.”37 However, it is foreseeable that courts may have difficulty determining the relevancy of the evidence at issue, due in large part to the fact that the evidence is no longer available for review.38 In such instances, courts must defer to the nonspoliating party’s assertions about relevancy.39 As with the second aforementioned element of spoliation, however, spoliators may avoid penalty even if they are found to have breached their duty to preserve relevant evidence. 33

Trevino, 969 S.W.2d at 958 (Baker, J., concurring). Miner Dederick, 403 S.W.3d at 469 (citing Adobe Land Corp., 236 S.W.3d at 360; Trevino, 969 S.W.2d at 958 (Baker, J., concurring)). 35 Trevino, 969 S.W.2d at 958 (Baker, J., concurring)). 36 See, e.g., Cire v. Cummings, 134 S.W.3d 835, 837 (Tex. 2004) (approving death penalty sanctions against a plaintiff who destroyed audio tapes that related to the “heart of the proof needed by Defendants to show Plaintiff’s claims [were] without merit”); Plorin v. v. Bedrock Found. and House Leveling Co., 755 S.W.2d 490 (Tex. App.— Dallas 1988, writ denied) (dismissing the plaintiff’s claim on the grounds that his repair of the alleged construction problem before the contractor could inspect and analyze it was impermissible). See also Flury v. Daimler Chrysler Corp., 427 F.3d 939, 945–47 (11th Cir. 2005) (dismissing manufacturing defect case as a sanction for plaintiff’s failure to preserve the vehicle); Silvestri v. Gen. Motors Corp., 271 F.3d 583, 594–95 (4th Cir. 2001) (affirming case determinative sanctions where defendant was severely prejudiced by not being able to test the allegedly faulty device); Story v. RAJ Props., Inc., 909 So.2d 797, 805 (Ala. 2005) (granting summary judgment for the contractordefendants where the plaintiffs replaced the stucco on the exterior of his home without allowing the defendants to inspect the work during the course of the repairs); Robertet Flavors, 1 A.3d at 678 (dismissing case where defendants were deprived of any opportunity to inspect the alleged construction defect before it was repaired). 37 Victor Stanley, 269 F.R.D. at 531. 38 Trevino, 969 S.W.2d at 958 (Baker, J., concurring). 39 Id. 34

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Notably, a spoliator may avoid punishment by sufficiently demonstrating that the non-spoliating party did not suffer any prejudice as a result of the destruction or alteration of the evidence at issue.40 In such instances, the second step of the application of the spoliation doctrine—the imposition of the appropriate penalty41—is unnecessary. B. Step Two: Imposing the Appropriate Penalty for Spoliation If a court concludes that the foregoing elements have been satisfied and thus that spoliation has occurred, the next step is to determine the appropriate penalty to impose against the spoliator. Because “[e]vidence spoliation is a serious problem that can have a devastating effect on the administration of justice,”42 these penalties are essential. Trial courts have broad discretion in imposing penalties for the spoliation of evidence,43 ranging from jury instructions on the spoliation presumption to various forms of sanctions.44 With respect to Texas courts, specifically, this discretion stems from Rule 215 of the Texas Rules of Civil Procedure, which

40

E.g., State v. Gonzalez, 82 S.W.3d 322, 330 (Tex. 2002) (because appellant produced no evidence that the missing logbook would have contained any information regarding an essential element of her claim, the Court reversed the holding in favor of the appellant which resulted from an adverse inference jury instruction); Clark, 317 S.W.3d at 359–60 (finding that no prejudice resulted from the appellee’s failure to preserve the video footage of events preceding the appellant’s slip and fall in the appellee’s store); Capital One Bank v. Rollins, 106 S.W.3d 286, 297 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (destruction of envelopes could not give rise to a spoliation claim in the context of a suit to recover late fees because the envelopes would not have demonstrated the date on which the defendant received customers’ payments); Cresthaven Nursing Residence v. Freeman, 134 S.W.3d 214, 227 (Tex. App.—Amarillo 2003, no pet.) (no spoliation finding because verbatim copy of missing nurse’s notes were available by other means to plaintiffs); see also Miller v. Lankow, 801 N.W.2d 120, 131 (Minn. 2011) (holding that the duty of a custodial party to preserve evidence is not boundless, such that spoliation will not be found when the custodial party has afforded other potential parties notice of the existence of the defect, the foreseeability of litigation, and the availability of the property for inspection). But see Adobe Land Corp., 236 S.W.3d at 360–61 (spoliation presumption was appropriate where appellants did not have access to any other evidence that would provide them with the information sought). 41 See Section II., B., infra pp. 8–12. 42 Trevino, 969 S.W.2d at 954 (Baker, J., concurring). 43 See id. (citing TransAmerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991)) (noting that a trial court’s determination of the appropriate penalty to impose against the spoliator is a question of law for the court). 44 Id. at 953 (Baker, J., concurring); see also Cresthaven Nursing Residence v. Freeman, 134 S.W.3d 214, 225 (Tex. App.—Amarillo 2003, no pet.); Offshore Pipelines, Inc. v. Schooley, 984 S.W.2d 654, 666 (Tex. App.—Houston [1st Dist.] 1998, no pet.) (favorably citing and following Justice Baker’s concurring opinion in Trevino regarding spoliation).

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authorizes sanctions that limit or even preclude altogether a party’s presentation of evidence in support of its claims.45 Spoliation penalties serve three purposes: (1) to make whole, at least as nearly as possible, the non-spoliating party whose claim or defense has been impaired by the destruction or alteration of crucial evidence; (2) to punish the spoliator; and (3) to deter others from engaging in such conduct in the future.46 The ultimate goal, however, is to ensure a level playing field for all parties so as to “place[] the parties in equipoise.”47 In fashioning the appropriate penalty, courts must consider four factors: (1) the sanction must bear a direct relationship to the offensive conduct; (2) the sanction must not be excessive; (3) the trial court must first impose a less stringent sanction; and (4) the trial court should not deny a trial on the merits, unless it finds that the sanctioned party’s conduct “justifies a presumption that its claims or defenses lack merit” and therefore that “it would be unjust to permit the party to present the substance of that position . . . before the court.”48 In so doing, courts must also consider the identity of the spoliator,49 the timing of when the act of spoliation is discovered,50 the degree of the spoliator’s culpability,51 and the prejudice suffered by the nonspoliating party as a result.52

45

See TEX. R. CIV. P. 215. Robertet Flavors, 1 A.3d at 671; see also Trevino, 969 S.W.2d at 954 (Baker, J., concurring). 47 Robertet Flavors, 1 A.3d at 671 (quoting Hirsch v. Gen. Motors Corp., 628 A.2d 1108, 1130 (N.J. Super. Ct. 1993)). 48 Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 849–50 (Tex. 1992) (orig. proceeding); TransAmerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 918 (Tex. 1991). In other words, “the trial court’s sanction must be directed against the wrongdoer and properly tailored to remedy the prejudice.” Trevino, 969 S.W.2d at 959 (Baker, J., concurring). 49 Robertet Flavors, 1 A.3d at 670. The identity of the spoliator, “in and of itself, will impact [] the available and appropriate remedies.” Id. For example, if the spoliator is the defendant, many courts permit the plaintiff to pursue a separate claim against it for fraudulent concealment of evidence or instead choose to impose discovery sanctions and adverse inference jury instructions. Id. Conversely, if the spoliator is the plaintiff, a separate cause of action achieves very little, and so many courts have instead opted to preclude the plaintiff’s evidence that was, or could have been, derived from the spoliator evidence. Id. 50 Robertet Flavors, 1 A.3d at 671 (“[T]he appropriate remedy for spoliation depends [at least] in part on the timing of when the act of spoliation is discovered.”). For instance, “spoliation that becomes apparent during discovery or 46

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Spoliation penalties imposed by Texas courts and others generally fall into two categories: spoliation presumption jury instructions, and sanctions.53 i. Spoliation Presumption Jury Instructions Texas courts have broad discretion in instructing juries,54 which includes the power to provide spoliation instructions. Spoliation instructions arose as part of the English common law and have been a part of Texas jurisprudence for over a century.55 Their purpose is captured in the Latin maxim omnia presumuntur contra spoliatorem—“all things presumed against a despoiler or wrongdoer.”56 In sum, a spoliation instruction is “an instruction given to the jury outlining permissible inferences they may make against a party who has lost, altered, or destroyed evidence.”57 Generally, these presumptions fall into two categories depending upon the severity of prejudice resulting to the non-spoliating party from the particular evidence that has been destroyed or altered (i.e., “spoliated”).

58

The first, more severe, instruction operates as a rebuttable presumption, and it arises when the spoliator has intentionally or deliberately destroyed evidence.59 This presumption is typically imposed when the non-spoliating party is unable to prove its prima facie case without the destroyed evidence.60 Such an instruction must first explicitly tell the jury that the spoliator has either intentionally or negligently destroyed the evidence and thus that the jury should trial often can be addressed effectively through the use of ordinary discovery sanctions, such as preclusion, or through adverse inference[] [jury instructions].” Id. However, spoliation that is not discovered until late in the trial or even after judgment has been rendered may be subject to more stringent consequences, such as a completely separate action for fraudulent concealment. Id. 51 Trevino, 969 S.W.2d at 959 (Baker, J., concurring) 52 Id. 53 Within the category of sanctions, the most common punishments imposed include dismissal, default judgment, and exclusion of evidence or testimony. Trevino, 969 S.W.2d at 959 (Baker, J., concurring). 54 Trevino, 969 S.W.2d at 960 (Baker, J., concurring) (citing TEX. R. CIV. P. 277). 55 Johnson, 106 S.W.3d at 721 (citing Curtis & Co. Mfg. Co. v. Douglass, 15 S.W. 154, 155 (Tex. 1890)). 56 Id. (quoting BLACK’S LAW DICTIONARY 980 (5th ed. 1979); Trevino, 969 S.W.2d at 952. 57 Brookshire Bros., 2010 WL 2982902, at *25. 58 See Trevino, 969 S.W.2d at 957 (Baker, J., concurring); see also Johnson, 106 S.W.3d at 721. 59 See Trevino, 969 S.W.2d at 960 (Baker, J., concurring). 60 Id.

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presume that the destroyed evidence was unfavorable to the spoliator.61 Second, the court must then instruct the jury that the spoliator bears the burden of disproving the presumed fact or issue that the spoliated evidence may have supported.62 In other words, even if the spoliator offers evidence rebutting the presumed fact or issue, the presumption does not disappear unless and until the fact finder believes that the presumed fact has, in fact, been overcome.63 For example, a model instruction reflecting this first type of presumption might read as follows: 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.64 The second type of presumption constitutes a less severe adverse presumption that does not shift the burden to the spoliator.65 It usually arises when the party who controls the evidence at issue is unable to produce it and does not offer testimony explaining its non-production.66 Texas courts have declined to impose a specific mental state or level of culpability for this second type of instruction.67 This presumption provides that if the evidence at issue were to be produced, it would operate against the spoliator, “and every intendment will be in favor of the opposing party.”68 In essence, this presumption merely functions as factor to be considered by the fact finder in weighing all of the evidence and deciding the case.69 Based on the foregoing discussion, a model jury instruction with respect to this second type may read as follows: 61

Id. Id. 63 Id. 64 Justice Rebecca Simmons & Michael J. Ritter, Texas’s Spoliation “Presumption”, 43 St. Mary’s L. J. 691, 782 (2012). 65 See id. 66 Wal-Mart Stores, Inc. v. Middleton, 982 S.W.2d 468, 470 (Tex. App.—San Antonio 1998, pet. denied); Watson v. Brazos Elec. Power Co-op., Inc., 918 S.W.2d 639, 643 (Tex. App.—Waco 1996, writ denied). 67 Johnson, 106 S.W.3d at 721. 68 Brewer v. Dowling, 862 S.W.2d 156, 159 (Tex. App.—Fort Worth 1993, writ denied). 69 Trevino, 969 S.W.2d at 961 (Baker, J., concurring). 62

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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].70 In other words, the jury should be instructed that it is entitled to presume that the missing (i.e., “spoliated”) evidence, if produced, would be unfavorable to the spoliating party.71 A similar instruction was upheld in Brookshire Bros., Ltd. v. Aldridge on the grounds that Brookshire Brothers failed to produce the evidence at issue and failed to offer any testimony as to its whereabouts. In that case, the jury was instructed as follows: 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 nonpreservation has not been satisfactorily explained, then you are instructed that you may consider such evidence would have been unfavorable to Brookshire Brothers.72 In other words, the jury in Brookshire Bros. was entitled to presume that the missing evidence operated against the spoliator in reaching a determination of the case.73 ii. Sanctions A court may instead choose to award sanctions in favor of the non-spoliating party upon finding that the other party has engaged in spoliation.

Depending upon the facts and

circumstances of a specific case, as well as the particular jurisdiction in which the case is pending, a range of sanctions may be appropriate; common examples include monetary penalties,74 the exclusion of certain evidence or testimony,75 permitting the aggrieved, non-

70

Simmons & Ritter, supra note 64. Id. 72 No. 12-08-00368-CV, 2010 WL 2982902, at *9 (Tex. App.—Tyler July 30, 2010, pet. granted). 73 See One Beacon, 147 Fed. App’x at 539; Brookshire Bros., 2010 WL 2982902, at *9. 74 E.g., Robertet Flavors, 1 A.3d at 677. 71

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spoliating party the opportunity to present evidence about the pre-incident condition of the lost evidence and the circumstances surrounding the spoliation,76 the limitation of claims to those that can be tried fairly,77 the rendering of summary judgment78 or default judgment79 against the spoliator, the dismissal of the spoliator’s action altogether (i.e., death penalty sanctions),80 or even, in some jurisdictions, independent tort liability.81 While some courts in other jurisdictions have delineated specific lists of factors to consider in formulating the appropriate sanctions for spoliation,82 Texas courts have not yet done so. Nevertheless, Texas courts have readily imposed sanctions—and drastic ones, at that—in some cases involving the spoliation of evidence in the construction context.83 III.

SPOLIATION OF PHYSICAL EVIDENCE IN CONSTRUCTION CASES In a perfect world, the parties involved in a construction project would have “an orderly

procedure for identifying a defect, alerting the allegedly culpable party, conducting an investigation and testing that is observed and documented by representatives for all potentially 75

E.g., Trevino, 969 S.W.2d at 959 (Baker, J., concurring); Robertet Flavors, 1 A.3d at 285; see also 333 Mass. Ave., Ltd. P’ship v. Architectural Team, Inc., No. 06-4630-BLS2, 2010 Mass. Super. LEXIS 313, at *2 (Super. Ct. Mass. Dec. 9, 2010); ManorCare Health Servs., Inc. v. Osmose Wood Preserving, Inc., 764 A.2d 465 (N.J. Super. 2001). 76 333 Mass. Ave., 2010 Mass. Super. LEXIS 313, at *3. 77 E.g., Robertet Flavors, 1 A.3d at 677 (discussing generally the various types of sanctions that may be imposed in the event of spoliation). 78 E.g., Story, 909 So.2d 797. 79 Trevino, 969 S.W.2d at 959 (Baker, J., concurring). 80 E.g., Trevino, 969 S.W.2d at 959 (Baker, J., concurring); Plorin, 755 S.W.2d 490; see also Harborview Office Ctr., L.L.C. v. Camosy, Inc. (“Harborview I”), 712 N.W.2d 87 (WI App. 2006). 81 See note 6, supra (noting that only fifteen jurisdictions across the country recognize an independent cause of action for spoliation). Texas, along with many other states, has rejected the idea of a tort cause of action for spoliation. Hood, supra note 22, at 53; see also Trevino, 969 S.W.2d at 952–53. Indeed, the Texas Supreme Court has expressly stated that it “treads cautiously when deciding to recognize a new tort.” Trevino, 969 S.W.2d at 951. 82 See, e.g., Schmid v. Milwaukee Elec. Tool Corp.¸13 F.3d 76, 79 (3d Cir. 1994) (calling for an inquiry into the spoliator’s degree of fault, the prejudice caused to the other party, and the availability of lesser sanctions that will both avoid unfairness to the non-spoliator and also deter future acts of spoliation); Robertet Flavors, 1 A.3d at 675– 76 (calling for the expansion of the three Schmid factors to include numerous other considerations and the balancing by courts of all of those factors); Story, 909 So.2d 797, 802–03 (setting forth a five-factor test: (1) the importance of the evidence destroyed; (2) the culpability of the spoliator; (3) fundamental fairness; (4) alternative sources obtainable from the evidence destroyed; and (5) the possible effectiveness of other sanctions less severe than dismissal). 83 See Section III.B., infra p. 15–19.

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responsible parties, identifying a cause, and achieving a solution.”84 In the real world, however, this is rarely the case: “the parties do not always behave that way and may proceed to develop a solution without preserving all of the evidence that is needed to determine liability or prove damages.”85

As such, when a problem arising from a construction project is prematurely

remediated before any other parties have the opportunity to inspect and analyze it (i.e., when the evidence concerning that problem has been “spoliated”) or, worse yet, before any other parties even know about the problem itself, courts face unique challenges in fashioning the appropriate remedy to level the playing field. A. Overview: Real-World Spoliation Scenarios Imagine that, during the course of a commercial construction project, the expansion joint connecting the old foundation to the new foundation has a gap in it,86 or that the window system or the exterior of a newly-constructed office building allows rainwater to penetrate.87 What if the guy wire holding base sections of a tower is not properly anchored overnight and causes the entire structure to collapse?88 Perhaps panes of glass are scratched and damaged during exterior construction after a brick façade was laid and the focus of the dispute is on whether the waterproofer or mason caused the damage or whether the glass arrived at the site scratched. Likewise, imagine that during a residential construction project, a foundation is not level after repairs are made to it.89 What if the exterior insulation finish system allows moisture to damage other building components?90 Perhaps a homeowner and a contractor disagree as to the

84

Robertet Flavors, 1 A.3d at 662. Id. 86 See Miner Dederick, 403 S.W.3d 451. 87 See Robertet Flavors, 1 A.3d 658; see also Harborview Office Ctr, L.L.C. v. Camosy, Inc. (“Harborview I”), 712 N.W.2d 87 (Wis. App. 2006) (unpublished slip op.). 88 See One Beacon Ins. Co. v. Broadcast Dev. Group, Inc., 147 Fed. App’x 535 (6th Cir. 2005). 89 Plorin v. Bedrock Found. and House Leveling Co., 755 S.W.2d 490 (Tex. App.—Dallas 1988, writ denied). 90 See Story, 909 So.2d 797. 85

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quality, completion date, and payments for a renovation project after it is already well under way.91 These scenarios have all occurred in real-world construction projects and have been the subject of litigation across the country in recent years. In each of those scenarios, the party who suffered harm as a result of the problem made the wrong decision—it immediately repaired, destroyed, or covered up the evidence of the problem without first notifying other parties involved in the project and/or giving them time to inspect it. As a result, the courts in each of those scenarios faced the difficult task of imposing the appropriate penalty in order to level the playing field for the benefit of the non-spoliating party. B. Texas Courts and Others Demonstrate a Willingness to Impose Harsh Penalties To date, Texas courts have only addressed the issue of spoliation in the specific context of construction cases on a handful of occasions.92

The issue arises in many construction

arbitrations, but the privacy of those proceedings precludes the precedential value of the rulings. Despite the limited number of court cases, however, Texas courts have indicated a willingness to impose stringent penalties against spoliators. For instance, in the aforementioned scenario regarding the uneven foundation on the residential dwelling,93 the homeowners engaged in egregious conduct with respect to essential evidence—they repaired the work before allowing the contractor to inspect it, even after expressly agreeing to permit the contractor to do so.94

In Plorin, the parties reached an

agreement to permit the contractor to inspect the allegedly problematic work after the

91

See Aktas v. JMC Dev. Co., 877 F. Supp. 2d 1 (N.D.N.Y. 2012). See Miner Dederick, 403 S.W.3d; Plorin, 755 S.W.2d 490; Kirby Tower, L.P. v. MDA Builders, Ltd., Case No. 2011-13475, Harris County 295th Judicial District (subsequently settled). 93 See Section III., A., supra p. 12 (citing Plorin, 755 S.W.2d 490). 94 Plorin, 755 S.W.2d at 491. 92

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homeowners had already filed suit.95

However, the day before the contractor’s scheduled

inspection date, the homeowners hired another firm to repair the defects.96 “Thus, all evidence of the claimed defects in [the contractor’s] work was destroyed while [his] request to inspect the home was pending, indeed, after the first inspection date had been rescheduled at the [homeowners’] request.”97 The contractor sought sanctions against the homeowners, and the court dismissed the homeowners’ claims with prejudice (i.e., “death penalty sanctions”98) for their destruction of essential evidence, which constituted a “flagrant abuse of discovery.”99 In sum, while the homeowners may have had the right to repair the alleged defects at some point, their decision to do so before affording the contractor the opportunity to inspect the work—and, moreover, after expressly agreeing to permit him that opportunity and previously rescheduling it for their own benefit—was impermissible.100 Other courts outside of Texas have likewise resorted to the harsh penalty of dismissal when faced with the spoliation of evidence in construction cases.101 For instance, recall the aforementioned scenario regarding the window system on a newly-constructed commercial office building that allegedly allowed rainwater to penetrate.102 In Harborview I, the property owner timely notified the contractor and properly involved it in the testing and subsequent remediation of the window system.103

However, the property owner never informed the

contractor that it reasonably suspected an alternative source of the water infiltration—cracks in

95

Id. Id. 97 Id. 98 E.g., Trevino, 969 S.W.2d at 953. 99 Plorin, 755 S.W.2d at 491–92. 100 Id. 101 See, e.g., Harborview I, 712 N.W.2d 87; Story, 909 So.2d 797. 102 See Section III., A., supra p. 12 (citing Harborview I, 712 N.W.2d 87). 103 712 N.W.2d at *2–3. 96

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the Exterior Insulation and Finishing System (EIFS) of the building.104 Thus, when the owner ordered repairs to the “V-grooves” in the EIFS, the contractor was not given any notice.105 The contractor therefore did not have the opportunity to inspect the V-grooves before the repairs or to supervise the repairs while they were performed.106 Accordingly, when the water leakage ceased following the remedial work on the V-grooves, it was not reasonably clear whether the window system or the EIFS system were the root cause of the problem.107 The court granted the contractor’s spoliation claim and, as a penalty, dismissed the property owner’s suit altogether, holding that the property owner had engaged in “egregious[]” conduct constituting a “flagrant, knowing disregard of the judicial process” that caused significant prejudice to the contractor, who could no longer test or analyze the EIFS system in its original state.108 The court imposed this harsh remedy even though the property owner had spent over $1.7 million in remediation that it would no longer be able to recover from any other party.109 Finally, in the aforementioned residential scenario involving alleged defects in the exterior insulation finishing system of a home, the property owner engaged in spoliation by prematurely undertaking remediation efforts.110 In Story, the homeowner sued the residential builder after discovering that moisture had seeped into the home as a result of the improper installation of the EIFS.111 However, after filing suit but without notifying the builder, the homeowner undertook extensive repairs to the home, including removal of the EIFS, repair of

104

Id. at *4. See id. 106 See id. 107 See id. at *3–4, 7–8. 108 Id. at *7, 10. 109 Id. at *11. 110 See Section III., A., supra p. 12 (citing Story, 909 So.2d 797). 111 909 So.2d at 799. 105

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the alleged damage, and replacement of the EIFS with a brick exterior.112 While the builder was on notice of the alleged problem, it was not made aware of these repairs until after they had already been completed, when it no longer had the opportunity to inspect the allegedly defective EIFS or the alleged damage to the home.113 The court granted summary judgment in favor of the builder, holding that the premature remediation work performed by the homeowner constituted the spoliation of important evidence that prejudiced the builder.114

Simply because the

homeowner had taken photographs of the alleged damage before undertaking remediation did not persuade the court to impose lesser penalties for his spoliation.115 Each of these real-world scenarios—exemplified by Plorin, Harborview I, and Story— demonstrates the willingness of Texas courts and others across the country to impose the harshest remedy of them all—the dismissal of a plaintiff’s claim altogether. Efforts by the spoliating party to document the alleged problem (i.e., by photographs) may be insufficient to prevent this outcome, as the non-spoliating party and/or its expert witness may not be able to conclusively determine the source of the alleged problem from merely looking at the photographs.116 Additionally, courts may not find persuasive the fact that the spoliating party has already incurred significant remediation costs and will likely not be able to recover them from any other party.117 These cases exemplify the importance of preserving evidence of an alleged problem or defect and the potentially-significant consequences of not doing so.

112

Id. Id. at 800. 114 See id. at 800–06. 115 See id. at 805 (noting that the trial court was “in the best position to determine whether the photographs, as alternative sources of the information that would have been conveyed by the evidence destroyed, could substitute for the destroyed evidence” and finding that it did not exceed its discretion in entering summary judgment on the grounds of spoliation). 116 See Story, 909 So.2d at 800–06. 117 See Harborview I, 712 N.W.2d at *11. 113

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C. Courts May Opt for Less Stringent Penalties in Certain Scenarios Contrary to the harsh penalty of dismissal, some courts have instead opted to impose less stringent penalties, such as spoliation presumption jury instructions and other lesser forms of sanctions.118 For example, in the scenario involving the guy wire holding the base sections of a tower that was not properly anchored overnight and therefore caused the entire structure to collapse, the base sections at issue were constructed by Ryan Construction, the sister company of the project’s designer, and the tower was being constructed on top of those base sections by a company known as BDG.119 Following the incident, BDG was permitted a brief inspection of the site before being ordered off the job site permanently.120 Subsequently, some portions of the collapsed tower were buried in the ground, while others were taken to a scrap yard.121 However, after the removal and concealment of this evidence, it came to light that the collapse may have actually been caused, at least in part, by defective welds holding the flanges to the legs of the tower rather than purely by BDG’s failure to properly anchor the guy wires.122 When suit was brought against BDG for its alleged conduct giving rise to the damage, BDG filed a counterclaim and also sought a spoliation jury instruction.123 The court agreed with BDG and held that the spoliation presumption jury instruction was proper in light of the other parties’ negligent spoliation of relevant evidence.124 The district court had instructed the jury on the spoliation of evidence and the permissible inferences therefrom, as follows: The legs, flanges, plates and bolts for sections 35 and 36 for 26 and 27 for the Morehead Tower, manufactured and supplied by Central Tower and 118

See, e.g., One Beacon Ins. Co., 147 Fed. App’x 535; Robertet Flavors, 1 A.3d 658. One Beacon Ins., 147 Fed. App’x at 537. 120 Id. at 537–38. 121 Id. at 538. 122 Id. 123 See id. at 538–39. 124 Id. at 539–43. 119

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supplied by Ryan Construction were destroyed during the clean up of the tower collapse. If you believe the destruction of these legs, flanges, plates and bolts was caused by the unjustified or careless actions or inactions of Central Tower and/or Ryan Construction, then you may infer, but are not required to infer, that such evidence, if available now, would have been favorable to [BDG] and adverse to Central Tower and/or Ryan Construction.125 The court upheld this instruction on the grounds that the concealment and destruction of the base structures of the tower by Ryan Construction and the project’s designer undermined BDG’s efforts to prove its case.126 This conduct was particularly egregious in light of the fact that those other parties were aware of problems with the welds at the time of the concealment and disposal, such that they knew or reasonably should have known that the welds constituted relevant evidence.127

Simply because the other parties permitted BDG brief access to the job site

immediately after the incident to conduct a brief, cursory inspection was insufficient to absolve them of this spoliation penalty.128 Additionally, recall the aforementioned scenario involving the strip window system that allegedly permitted rainwater to penetrate the newly-constructed commercial building.129 In Robertet Flavors, the building owner likewise engaged in evidentiary spoliation—it hired another company to replace the windows before the glass company that initially installed the system was ever put on notice of the claim, much less given the opportunity to inspect the system.130 The property owner filed suit against both the glass company and the construction manager after completing its remediation efforts (i.e., replacing the windows, removing the 125

Id.at 539. Id.at 542. 127 See id. at 540–42. 128 Id. at 542–43. “The fact that BDG had some limited opportunity to inspect the wreckage is not dispositive, therefore, but must be viewed in the context of what the parties knew or should have known about the potential relevance of that wreckage in subsequent litigation.” Id. at 543. “[I]f, as the jury could have found, Ryan knew that the welds might become an issue, the destruction of the wreckage before BDG realized this fact could be deemed prejudicial even though BDG was able for a brief period to visit the site.” Id. 129 See Section III., A., supra p. 12 (citing Robertet Flavors, 1 A.3d 658). 130 1 A.3d at 662–66. 126

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damaged walls and insulation, remediating the mold, and providing security and heat).131 In response, and in light of the owner’s premature remediation measures, the glass company filed a spoliation motion seeking to preclude the property owner from offering any testimony regarding the installation of the strip window system.132 The court agreed that the building owner had engaged in spoliation because the glass company’s ability to adequately defend itself was limited, as its expert was prevented from observing the condition of the work and the validity of the building owner’s allegations before the remedial work was undertaken.133 In other words, the owner was precluded from offering and relying on evidence to which the glass company was not personally privy.134 The court sought to tailor the appropriate remedy in light of the true impacts of the spoliation upon the respective defendants. With respect to the defendant construction manager, who was never afforded the opportunity to inspect the system before remediation at all nor could he rely on alternative evidence regarding the window system at issue, the court held that dismissal of the building owner’s claim against it was warranted.135 Conversely, with respect to the defendant glass company, the court imposed a less severe penalty in light of the fact that the glass company had access to independent sources of evidence or testimony to defend itself.136 Despite this egregious evidentiary violation, the court declined to adopt a “one size fits all” remedy for both defendants.137 Instead, the building owner was permitted to proceed against the glass company, albeit only on limited claims regarding the conditions that were observable prior 131

Id.at 664–65. Id. at 666. 133 Id. at 678. 134 See id. 135 Id. 136 Id. It may also be inferred that the court opted for this more lenient penalty with respect to the glass company in light of the evidence that the glass company was, in fact, contacted by the property owner in advance of the remedial work. See id. at 663 (discussing the property owner’s efforts to contact the glass company throughout the years 1999 and 2000). 137 See id. at 678. 132

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to its remediation efforts.138 This outcome (i.e., the imposition of two different spoliation penalties for two different defendants as a result of the same conduct by the plaintiffs) exemplifies the case-by-case basis on which courts conduct spoliation analyses and effectively demonstrates that a penalty that might “level the playing field” for one party might not necessarily achieve the same result for another.139 Finally, in the scenario in which the relationship between homeowners and a contractor began to deteriorate after renovations of the home were under way, the homeowners improperly precluded the contractor from inspecting its work almost immediately and undertook remedial measures before even notifying the contractor.140 In Atkas, months after signing a contract for renovations, the homeowners and contractor disagreed as to the quality, completion date, and payment of the project.141 The contractor immediately involved its attorney in future dealings with the homeowners.142 In the meantime, the homeowners contracted with another contractor and other parties to assess the work performed on their home.143

At their direction, the

homeowners halted the construction process and changed the locks on the house so as to preclude the contractor from entering.144 Before formally terminating their relationship with the contractor, however, the homeowners commenced remediation measures on the home.145 Thus, after the homeowners filed suit, the contractor was precluded from inspecting the property to determine whether their work truly was defective.146

138

Id. at 678. See id. at 677–78. 140 Atkas v. JMC Dev. Co., 877 F. Supp. 2d 1, 5–12 (N.D.N.Y. 2012). 141 Id. at 7. 142 Id. 143 Id. at 8–9. 144 Id. at 9. 145 Id. 146 See id. at 9–11, 12–16. 139

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Finding that the homeowners had a duty to preserve the evidence and that they were “grossly negligent and knowingly altered and destroyed” it without any pressing need, and further that the contractor was severely prejudiced as a result, the court held that the plaintiffs had engaged in spoliation.147 However, because the contractor did not rush to inspect the site, the court declined to impose the harsh remedy of dismissal of the homeowners’ claim.148 Instead, the court opted for the less stringent penalty of an adverse inference jury charge at trial.149 One Beacon Ins. Co., Robertet Flavors, and Atkas highlight the fact-intensive analysis that courts must conduct in the event of spoliation and the case-by-case basis on which spoliation penalties are imposed.

Although the courts in these cases opted to impose less stringent

alternatives than the harsh penalty of dismissal, parties should not treat the evidentiary issue of spoliation lightly. Instead, while the penalties imposed in those cases may seem lenient, we must realize that spoliation is nevertheless harmful, and the spoliator’s likelihood of success in litigation is nevertheless notably hindered by penalties calling for the limitation of the evidence and testimony upon which they may introduce and rely. D. Texas Courts Have Recently Addressed the Authority Given to Trial Courts and Appellate Courts in the Event of Spoliation Just last year, the Houston First District Court of Appeals held that while appellate courts need not—and, arguably, should not—defer to trial court holdings regarding whether a party has engaged in spoliation, appellate courts should defer to the discretion of trial courts to fashion the appropriate penalty for spoliation.150

147

Id. at 12–16. Id. at 19. 149 Id. at 21. The court held that the exact language of the jury charge would be fashioned at trial. Id. 150 See Miner Dederick, 403 S.W.3d 451. For an additional in-depth analysis of Miner Dederick in connection with tips and warnings to parties involved in the construction industry, see Michael A. Logan, Zach T. Mayer & Roland 148

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In Miner Dederick, the appellate court considered whether a property owner who hired a substitute contractor to perform repairs thereby spoliated evidence that was vital to a general contractor’s defense to the owner’s subsequent lawsuit.151 In Miner Dederick, the property owner—Gulf—was engaged in the business of processing and recycling spent catalyst generated by oil refineries, and it contracted with Miner Dederick to construct an expansion of its containment building in which it stored the catalyst.152 Miner Dederick was to construct the expansion in accordance with the design and specifications created by Ashkar Engineering, which, among other things, required Miner Dederick to pour a new concrete foundation and attach it to the preexisting foundation with an expansion joint, which was to include “waterstops.”153 After completing the construction in early 2006, Miner Dederick gave Gulf a one-year warranty for the materials and workmanship on the project.154 Shortly thereafter, Gulf discovered a leak in the expansion joint connecting the old foundation and the new foundation.155 Gulf invoked its warranty and requested that Miner Dederick repair the expansion joint, using new designs and specifications from Ashkar Engineering.156 However, Miner Dederick refused, asserting that the repairs requested were not covered by the warranty and that it had properly constructed the expansion joint in accordance with the original design, which it contended was faulty.157 Miner Dederick instead quoted Gulf a price for which it would perform the additional work.158

Gulf declined Miner Dederick’s

G. Hamilton, Spoliation of Evidence in Construction Litigation in Texas, KANE RUSSELL COLEMAN & LOGAN (August 2013), http://www.krcl.com/index.php?src=news&srctype=detail&category=LITIGATION%20ALERT&refno=444. 151 Id.at 454–55, 464–71. 152 Id. at 455. 153 Id. at 455–56. 154 Id.at 456. 155 Id. 156 Id. 157 Id. 158 Id.

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proposal and instead hired another construction company—Cajun Contractors—to do the work.159 After learning that Gulf hired Cajun Contractors, Miner Dederick sent Gulf three written requests to inspect its work and to assess the validity of Gulf’s allegations.160 However, Gulf ignored these requests and later denied them.161

In the meantime, Gulf hired a forensic

engineering firm—Engineering Systems Inc. (“ESI”)—to inspect the expansion joint and locate the source of the leak.162 To aid in this investigation, Cajun Contractors removed part of the sealant covering one of the waterstops and power washed the area.163

ESI subsequently

performed a “water test” to assess the waterstops and then drilled three holes in the expansion joint.164 Cajun Contractors subsequently covered the expansion joint with a new sealant system, poured concrete over it, and built a retaining wall over it to prevent future leakage.165 Thus, Miner Dederick’s work was completely concealed, such that it would be virtually impossible to differentiate it from the repairs performed by Cajun Contractors.166 Miner Dederick was not notified of ESI’s testing or Cajun Contractors’ repair work until months later.167 Gulf subsequently filed suit against Miner Dederick alleging, inter alia, breach of contract for Miner Dederick’s alleged failure to construct the expansion joint in conformity with the project’s design and specifications.168 In response, Miner Dederick asserted spoliation claims against Gulf for refusing to permit Miner Dederick to inspect the expansion joint, failing to notify Miner Dederick of the testing, and essentially destroying all evidence of Miner Dederick’s 159

Id. Id. at 456–57. 161 Id. 162 Id. 163 Id. 164 Id. 165 Id. 166 See id. 167 Id. at 458–59. 168 Id. at 458. 160

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work.169 Miner Dederick requested that the trial court sanction Gulf by either striking its pleadings, precluding it from introducing evidence of the joint’s construction, or including a rebuttable presumption jury instruction that the evidence was unfavorable to Gulf.170 The trial court granted Gulf’s motion for partial summary judgment, thereby implicitly denying Miner Dederick’s request for spoliation sanctions or a spoliation presumption.171 The trial court thereafter denied Miner Dederick’s renewed efforts for such relief both before trial and at trial.172 At the conclusion of trial, the jury ultimately held in favor of Gulf, awarding it $727,464.00 in actual damages.173 On appeal, Miner Dederick contended that the trial court abused its discretion by failing to assess spoliation sanctions against Gulf for its failure to preserve the expansion joint for Miner Dederick’s inspection and analysis, despite Miner Dederick’s requests therefor.174 The appellate court agreed, finding that Gulf did, in fact, engage in improper spoliation.175 In reaching this holding, the appellate court first considered whether Gulf had a duty to preserve evidence.176 The court held that this first element was satisfied and that Gulf had a duty to preserve the expansion joint, which constituted material and relevant evidence.177 Gulf knew or reasonably should have known of the substantial chance it would file a claim against Miner Dederick for several reasons.178 First, before Gulf undertook repairs to the expansion joint, it was on notice that Miner Dederick disputed whether Gulf’s requested repairs were covered by

169

Id. Id. at 460. 171 Id. 172 Id. 173 Id. at 461. 174 Id.at 464. 175 Id.at 464–70. 176 Id. at 465–66. 177 Id. at 466. 178 Id. at 465–66. 170

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the one-year warranty.179

Second, Gulf’s hiring of ESI to investigate the expansion joint

suggests its awareness of a substantial chance that it would later file a claim against Miner Dederick.180 And third, Gulf acted on the advice of its counsel in denying Miner Dederick’s repeated requests to inspect the expansion joint; Gulf’s involvement of counsel clearly indicates its awareness of a substantial chance of litigation.181 The court next confirmed that Gulf breached its duty to preserve this relevant evidence.182 The court found Gulf’s argument that it repaired the expansion joint—and thus destroyed the relevant evidence—in the “ordinary course of business” to be unpersuasive.183 This is because Gulf’s duty to preserve the evidence arose before it conducted the repairs.184 Clearly, Gulf failed to exercise reasonable care to preserve this critical evidence, as it intentionally authorized various tests and the repair work that covered it up even after being aware of the substantial chance of litigation.185 Finally, the court determined that Miner Dederick was prejudiced by Gulf’s actions.186 In sum, Miner Dederick was completely denied the opportunity to inspect and analyze for itself the key piece of evidence on which Gulf relied in its motion for summary judgment.187 The court noted that there was no available substitute for the evidence, and therefore Miner Dederick was unable to fully develop its defense.188 Thus, the appellate court concluded that the trial court had abused its discretion in granting summary judgment in favor of Gulf and overruling Miner Dederick’s spoliation 179

Id. Id. 181 Id. 182 Id. at 466–69. 183 Id. 184 Id. 185 See id. 186 Id. at 469–70. 187 Id. 188 Id. at 470. 180

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arguments. However, the appellate court declined to impose a spoliation penalty against Gulf because it held that power rests solely within the discretion of the trial court.189 The case was therefore remanded for the imposition of the appropriate penalty.190 As demonstrated by Miner Dederick, Texas courts defer to the broad authority vested in trial courts to impose the appropriate penalty for spoliation. This broad authority does not, however, require appellate courts to defer completely in all matters pertaining to spoliation; indeed, if a trial court record clearly demonstrates that spoliation has occurred, appellate courts will reverse decisions that decline to reach such holdings.191 Thus, a spoliator who narrowly escapes penalty at the trial court level cannot breathe easy, as an appeal by the opposing party could result in the subsequent imposition of spoliation penalties.192 IV.

SPOLIATION OF DIGITAL EVIDENCE IN GENERAL COMMERCIAL CASES The spoliation of evidence may arise not only with respect to physical evidence, but also

digital or documentary evidence (i.e., e-mails, letters, written reports, photographs, and video or audio recordings). The technological era has fueled the usage of computers and other forms of technology to store evidence that may become relevant in subsequent proceedings. Spoliation of this type of evidence may occur quite simply, as it may be undetectably modified, altered, or even deleted electronically without even a trace. Thus, while the increasing use of computers and other forms of technology in the modern era have, in fact, led to numerous efficiencies, it simultaneously creates unique issues and challenges for courts.

189

Id. at 470. Id. “As recognized by the Supreme Court of Texas, trial courts ‘have broad discretion to take measures ranging from a jury instruction on the spoliation presumption to, in the most egregious case, death penalty sanctions.’” Id. (quoting Trevino, 969 S.W.2d at 969 (Baker, J., concurring)). As of the publication date of this paper, the trial court has yet to issue its decision imposing the appropriate spoliation penalty against Gulf because the Texas Supreme Court has not yet issued its determination with respect to Gulf’s petition for review which was filed on June 27, 2013. 191 See id. 192 See id. 190

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To date, Texas courts have not yet considered the spoliation of digital evidence in the specific context of construction cases. Nevertheless, the frequency with which spoliation of documentary evidence has occurred in the general context of commercial cases, coupled with parties’ increasing usage of technology, suggests the sincere likelihood of such an occurrence in the construction context. For instance, imagine that a grocery store tapes over a previous video surveillance recording of an event that caused a patron injury and subsequently gave rise to a lawsuit. What if a party who files suit completely fabricates an audio recording in a devious effort to support his or her claims? Perhaps a party exaggerates statistics of its business in order to induce another party to enter into a transaction to purchase the business. Or, perhaps most commonly in this modern digital era, maybe a party deletes e-mails and attachments that are relevant to an anticipated or already-pending lawsuit. Each of these hypothetical scenarios has, in fact, been the subject of real-world lawsuits that Texas courts have faced in recent years.193 As with the spoliation of physical evidence, Texas courts hesitate to impose the harsh remedy of “death penalty sanctions” when faced with the spoliation of tangible evidence. Instead, Texas courts generally first consider whether lesser sanctions would be adequate to achieve the same purposes of punishing the spoliator and leveling the playing field for the nonspoliating party.194 However, “case determinative” death penalty sanctions are permitted in

193

See Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598 (S.D. Tex. 2010); Matlock Place Apartments, L.P. v. Druce, 369 S.W.3d 355 (Tex. App.—Fort Worth 2012, pet. granted); Brookshire Bros., 2012 WL 2982902; Daniel v. Kelley Oil Corp., 981 S.W.2d 230 (Tex. App.—Houston [1st Dist.] 1998, pet. denied) (en banc); Vaughn v. Tex. Employment Comm’n, 792 S.W.2d 139 (Tex. App.—Houston [1st Dist.] 1990, no writ). 194 See, e.g., TransAmerican, 811 S.W.2d at 918; In re Barnes, 956 S.W.2d 746, 749 (Tex. App.—Corpus Christi 1997) (death penalty sanction of dismissal was not appropriate because court did not first implement lesser sanctions).

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exceptional cases when they are “clearly justified” and it is “fully apparent that no lesser sanctions would promote compliance with the rules.”195 In Daniel, for example, the parties discovered that the plaintiff-appellant had fabricated the audio cassette tape recording of a conversation with her employer on which she based her claims of sexual harassment, discrimination, and retaliation against appellees.196 Finding that such fabrication had indeed occurred, the court struck the plaintiff-appellant’s pleadings, assessed fees and costs against her, and entered a take-nothing judgment against her.197 The majority upheld the imposition of these harsh sanctions, noting that the plaintiff-appellant’s egregious conduct—which constituted a felony—severely disrupted the integrity of the judicial process and therefore warranted punishment that placed her in a worse position than that from which she began.198 Any lesser sanction would not have achieved a just result, as the mere exclusion of the fabricated tape from evidence would not have put the plaintiff in any worse position than she would have been had she not fabricated it.199 Similarly, in Vaughn, the plaintiff-appellant fabricated three handwritten transcriptions of telephone conversations between prospective employers and her former supervisor.200 The court held that the plaintiff-appellant had engaged in perjury and fabrication and therefore upheld the trial court’s dismissal of her causes of action and levying the opposing party’s attorneys’ fees against her.201 Conversely, Texas courts have exhibited a far greater willingness to impose lesser sanctions when faced with spoliation and other forms of discovery abuse with respect to digital 195

GTE Comms. Sys. Corp. v. Tanner, 856 S.W.2d 725 (Tex. 1993) (orig. proceeding). Daniel, 981 S.W.2d at 231. 197 Id. 198 Id.at 235. 199 Id. 200 Vaughn, 792 S.W.2d at 140–42. 201 Id. at 144. 196

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evidence.202 For instance, in the aforementioned scenario involving the grocery store’s video surveillance recording of a patron’s injury, the court upheld the finding of intentional spoliation and the spoliation jury instruction.203 In Brookshire Bros., the grocery store patron brought suit after he sustained injuries while grocery shopping.204 The grocery store’s surveillance system, which was on a 24-hour feed, had recorded the day in question and specifically recorded the area of the store in which the patron had fallen.205 However, even after the grocery store was notified of the patron’s claims and injuries and had begun paying his medical bills, the grocery store only preserved a total of eight minutes of the video recording from the day in question and allowed the remainder to be taped over.206

The court held that the grocery store had engaged in

intentional spoliation, as it had a duty to preserve the remaining portions of the video recording which it knew were relevant—based on the severity of the accident and other circumstances— and the patron was prejudiced from seeing those relevant portions.207 Indeed, the missing portions of the video may have supported key elements of the patron’s case, such as when the spill occurred, the length of time that it remained on the floor, any cleanup efforts and/or immediate investigation of the spill, and any actions by the manager.208 Additionally, in the scenario regarding a party’s exaggeration of business statistics, the court likewise upheld the provision of a spoliation jury instruction.209 In Druce, the owner of an

202

Druce, 369 S.W.3d 355; Brookshire Bros., 2010 WL 2982902; see also Rimkus, 688 F. Supp. 2d 598. Brookshire Bros., 2010 WL 2982902, at *4–10. For reference to the precise language contained in the jury instruction, see Section II.B.i., supra p. 12. 204 Id. at *1. 205 Id. at *1, 7. 206 Id. at *1, 6–8. 207 Id.at *7. The court surmised that the missing portions of the video may have shown some evidence of when the spill occurred, the length of time that it remained on the floor, any cleanup efforts and/or immediate investigation of the spill, and any actions by the manager. Id. 208 Id.; but see Clark, 317 S.W.3d at 354–60 (holding that the trial court did not abuse its discretion in refusing to grant a spoliation finding because it reasonably determined that the appellee was not negligent in its failure to preserve more of the videotaped footage, as it would likely not have shown whether liquid was on the floor, how long it was there, and details of the walk-through by the appellee’s employees). 209 Druce, 369 S.W.3d at 379–82. 203

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apartment complex misrepresented the complex’s occupancy rate and the status of its renovations and rehabilitation in an effort to induce potential buyers for the complex.210 The appellee subsequently purchased the apartment complex, after which he discovered thousands of dollars in delinquent rent and a significant crime problem at the complex due to the previous owner’s intentional decision not to conduct criminal or credit checks.211 After filing suit, the appellee requested documents and data relating to the occupancy, management, and improvement of the property.212 After a significant delay, however, the appellants responded that the documents requested were no longer in existence—one appellant had deleted many of the documents simply to “free up space” on its system and had effectively destroyed others by declining to renew its software license and thus giving up access to them, and the other appellant claimed that it had destroyed the documents in the ordinary course of its business.213 Because this missing evidence showing the appellants’ intentional alteration of income and occupancy rates of the property prejudiced the appellee’s case, the court affirmed the spoliation finding and the spoliation jury instruction.214 The spoliation jury instruction in Druce provided: Spoliation of evidence occurs in two circumstances when a party knew or should have known that certain evidence is relevant: (1) the deliberate destruction of the relevant evidence or (2) the failure of a party to produce the relevant evidence or to explain its non-production. In either situation, a presumption arises that the evidence was unfavorable to the party who committed spoliation.215 Texas federal courts likewise utilize similar spoliation analyses and impose similar penalties.216 In Rimkus, former employees destroyed e-mails, attachments, and other electronic

210

Id. at 361. Id. at 364. 212 Id.at 380. 213 Id. at 380–81. 214 Id. at 379–82. 215 Id. at 380. 216 See Rimkus, 688 F. Supp. 2d 598. 211

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information immediately before filing suit against their former employer.217 The court held that the former employees had, in fact, engaged in intentional spoliation by deleting relevant electronic data when they knew litigation was not only reasonably likely, but imminent.218 The court therefore awarded attorneys’ fees and costs in favor of the former employer and also authorized a spoliation jury instruction.219 However, because the employer had reasonable access to other evidence and was therefore not entirely precluded from presenting its prima facie case without the deleted e-mails and attachments, the court declined to impose the harsh penalty of dismissal.220 Texas precedent, which includes the imposition of both death penalty sanctions and lesser sanctions, makes abundantly clear that the preservation of any relevant evidence of a defect or problem that arises during the course of a construction project is essential. This evidence may include not only the actual physical evidence of the construction project, but also any electronic data, photographs, recordings, or other “digital” or “documentary” evidence recording, depicting, or analyzing the problem. V.

PRACTICAL TIPS TO AVOID SPOLIATION PENALTIES Due to the frequency with which spoliation may arise in various scenarios, the parties

involved in construction projects and their attorneys must be aware of the risks and must take steps to prevent the spoliation of evidence and avoid the imposition of spoliation penalties. Parties who must bear the cost of correction of damage or defect during the course of a construction project—usually the owner of the premises—must be abundantly cautious in taking action. First and foremost, owners should implement procedures for responding to damages or

217

Id. at 653. Id.at 646–48, 653. 219 Id. at 644–48. 220 Id. 218

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defects before they even occur.221 Then, in the event of such problems during construction, an owner should thoroughly document and photograph the evidence and the surrounding scene immediately after the incident has occurred.222 The owner should then notify all other potential parties (i.e., potential defendants in a subsequent lawsuit) of the incident and of any potential claims that may arise, and afford them the opportunity to review and analyze the alleged damage right away.223 Preferably, this review and analysis should occur before the evidence has been touched, removed, or tampered with in any way.224 Potential parties should also be permitted to be present for any testing and analysis of the evidence by the owner.225 However, it must be recognized that the evidence of damages or defects may not always be left in their original state; rather, an owner may need to undertake emergency repairs immediately for safety reasons or to ensure that the construction project remains on schedule. In such instances, even though the evidence of the incident may need to be moved or tampered with in some way, owners may nevertheless take certain steps to avoid spoliation. Owners must thoroughly document and photograph the evidence and the surrounding scene immediately after the incident, and they should ensure that their movement of the evidence does not disturb its original condition.226 The evidence must also be properly stored and preserved.227 Potential parties who may subsequently be brought into a lawsuit as defendants should also take steps to prevent spoliation by owners or other individuals. For example, after learning of damages or defects that have arisen during a construction project, potential parties should alert

221

Murphy, supra note 21. Hood, supra note 22, at 52. 223 Id. 224 Id. 225 Id. 226 Murphy, supra note 21. 227 Scott C. Ford, Avoiding the Spoliation Trap—Tips for the Litigator, LITIGATION NEWS (Fall 2007). 222

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the owner of the risks of spoliation.228 The potential parties must then advise the owner not to alter, destroy, or in any way change the conditions on the property, and demand that he retain all data—whether electronically stored or otherwise—and maintain computer hard drives and other sources of evidence in their current form.229 Additionally, if an owner provides one potential party with notice of damages or defects and with the opportunity to be present for any repairs, that potential party should provide this notice to any other potential parties to ensure that everyone is afforded the same rights and opportunities.230 For instance, if an owner only notifies a general contractor or construction manager, those parties should pass along this critical information to any subcontractors or other parties involved.231 Potential parties should also take every opportunity to inspect and analyze the evidence of the damages or defects and to be present for any testing or repairs performed by the owner. Finally, attorneys must also take steps to ensure that their clients are aware of the risks of spoliation and that they do not engage in behavior that could give rise to a spoliation finding and penalties. At the outset, attorneys should ensure that their clients adopt and adhere to procedures for responding to damages or defects that may arise and for preserving relevant evidence thereof. They should also advise their current and new clients to formulate document retention policies and procedures in the event of anticipated or pending litigation. When a damage or defect arises, attorneys should advise their clients of their duty to preserve relevant evidence, preferably both orally and in writing.232 Clients must also be advised to impose a document hold on both physical and electronic documents that may be relevant to an anticipated or pending lawsuit.233

228

Hood, supra note 22, at 52. Id.. 230 Id. 231 Id. 232 Ford, supra note 188. 233 Id. 229

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Further, because of the increasing use of electronic media to store documents and other evidence that may become relevant in a lawsuit, attorneys may even go so far as to advise their clients to image their computer hard drives so as to avoid subsequent claims by others that electronic evidence was altered or destroyed.234 When litigation has commenced, attorneys might also send a written letter to opposing counsel regarding his or her obligation, as well as that of his or her client, to preserve relevant evidence and avoid spoliation.235 And, in the unfortunate event of spoliation, attorneys must be prepared to file a motion for spoliation sanctions as soon as practicable after discovering that spoliation has occurred stating the specific facts behind it.236 VI.

CONCLUSION Courts in Texas and across the country have evidenced a willingness to sympathize with

non-spoliating parties and take any measures necessary to “level the playing field,” including tailoring the jury charge to include a presumption that permits a finding in favor of the nonspoliating party,237 limiting the evidence upon which a spoliator may rely upon,238 or even dismissing a lawsuit altogether.239 In the end, the spoliator truly suffers the most harm; not only must he live with the spoliation penalty imposed by the court, but he might also be stuck with bearing the full cost of the remedial work and with any other consequences that may arise. In sum, it is critical that all parties involved in construction projects realize the importance of preserving relevant evidence of any potential problem or defect. While the fact that there are myriad parties involved in various aspects of a construction project may render this

234

Id. Id. 236 Hood, supra note 22, at 53. 237 See, e.g., One Beacon Ins. Co., 147 Fed. App’x 535. 238 See, e.g., Robertet Flavors, 1 A.3d 658. 239 See, e.g., Plorin, 755 S.W.2d 490; Harborview Office Ctr., LLC v. Camosy Inc. (“Harborview I”), 712 N.W.2d 87 (Wis. App. 2006); Story, 909 So.2d 797. 235

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task difficult, it is nevertheless critical should an alleged claim or defect find its way to the courthouse or to an arbitration panel.

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