L investigation of facts is integral to the party. parties - PDF document

G Construction Law Alert March 2001 Recent Construction Defect Case Highlights Importance of Handling Physical Evidence With Care By Steven E. Brawer, Esq. and Anne Raulerson, Esq. itigation is a dynamic process, and the full sanctions arising out of spoliation by the adverse L investigation of facts is integral to the party. parties’ understanding of past events and A Recent ‘Spoliation of Evidence’ Decision their evaluation of the legal consequences of those events. A key to this process is broad accessibility This principle came into play in a recent to documentary and physical evidence. Permitting decision by the Superior Court of New Jersey, the alteration or destruction of key physical Appellate Division, where the consequences of evidence may severely prejudice the ability of a spoliation of evidence arose in a construction party to present its claims or defenses through use defect case. In ManorCare Health Services, Inc. v. of competent proof. Osmose Wood Preserving, Inc. , 336 N.J. Super. 218, 764 A.2d 475, (App. Div. 2001) (“ ManorCare ”), The term used to describe the impairment of the owner of a health care facility (ManorCare) such evidence is spoliation, which is defined as the appealed the dismissal of its action against a destruction of evidence or failure to preserve manufacturer of FRT plywood roof sheathing property for another’s use as proof in pending or (Osmose) which degraded and had to be replaced, future litigation. Generally, spoliation occurs where based upon ManorCare’s failure to provide the best evidence of what may have caused the Osmose with timely notice of when roof repairs at damage claimed has been destroyed or discarded. the facility would take place. Although representatives of Osmose were invited to inspect There are many circumstances in construction- the roof and memorialized their pre-repair visit in related matters that could lead to spoliation of a multi-page report which referenced numerous evidence claims. For example, an owner might photographs, subsequent to that inspection destroy deficient work while correcting design or ManorCare undertook the roof repairs without construction defects, or a contractor may providing any notice to Osmose about when that negligently discard physical evidence during sample work would actually be done. As a result, the testing. In such situations, the resulting prejudice manufacturer was not in attendance when the to a party deprived of access to the physical proof corrective work occurred, and lost the opportunity needed to establish or defend its case may lead to to monitor the remedial activity and observe the This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. Roseland, New Jersey Telephone 973.597.2500 L 65 Livingston Avenue www.lowenstein.com 07068-1791 Fax 973.597.2400

G conditions revealed during the repair/ replacement roof renovations – including but not limited to process. reports, photographs, videos, and sample pieces of plywood – shall be inadmissible.” Id., 336 N.J. The Trial Court found that ManorCare’s Super. at 236; 764 A.2d at 485. actions in removing the plywood and undertaking repairs without adequate notice to Osmose Manorcare highlights the profound importance amounted to spoliation of evidence that was so of giving all parties to potential litigation -- owners, prejudicial to the manufacturer as to justify architects, engineers, contractors, subcontractors dismissal of the complaint. However, on appeal and their insurers -- the opportunity to observe the repair or replacement of defective work and the “Manorcare highlights the profound ability to safeguard potential evidence. In this importance of giving all parties to regard, the Supreme Court of New Jersey has potential litigation...the opportunity to found that a duty to preserve evidence arises, in observe the repair or replacement of the absence of a court order to do so, when there defective work and the option to preserve is potential evidence.” (1) pending or probable litigation the Appellate Division reversed, determining that involving defendants; although spoliation of evidence had occurred, a less draconian sanction than dismissal of (2) knowledge of the existence of the ManorCare’s claims would suffice in light of the likelihood of litigation by plaintiff; spoliation: exclusion of all proof obtained during and as a result of the roof repairs. (3) foreseeability of harm to the defendants, i.e., discarding evidence The Court rejected ManorCare’s argument would be prejudicial to defendants; that an adverse “spoliation instruction” to the and jury would be sufficient to neutralize the prejudice caused by that party’s conduct because (4) evidence relevant to the litigation. “(t)he action of ManorCare has most definitely Aetna Life and Cas. Co. v. Imet Mason tilted the playing field in its favor. No charge to Contractors, 309 N.J. Super. 358 (App. the jury about adverse inferences to be drawn Div. 1998); Hirsch v. General Motors from spoliated evidence could level the field or Corp., 266 N.J. Super. 222 (Law Div. cure the problem.” Id., 336 N.J. Super. at 234; 1993). 764 A.2d at 484. As a consequence, the Appellate Court instructed “that all evidence New Jersey courts have developed various taken during and after the commencement of the sanctions for spoliation, and a party’s culpability in

G other parties to a potential litigation (such as the losing or destroying the evidence at issue is a architect, engineer, contractors and significant factor in determining the appropriate manufacturers) on notice that it will be removing, remedy for that conduct. Traditionally, the replacing, or testing defective design or ultimate sanction of dismissal has been reserved construction elements, such evidence may not be for those circumstances where an intentional, available at trial. Similarly, all parties must secure flagrant destruction of evidence has so severely potential evidence at the outset of a claim, to prejudiced a defendant’s interests as to be preserve potentially important trial proof. To be irreparable. More common is an adverse or limiting instruction to the jury. As illustrated in “...all parties must secure potential ManorCare , another sanction is the limitation or evidence at the outset of a claim, to exclusion of certain specified proof regarding the preserve potentially important trial proof.” lost or destroyed item. Compensatory and punitive money penalties have also been levied safe, when initiating or defending a construction and, in rare cases of egregious intentional claim, parties should notify counsel of all potential destruction of evidence, spoliators have been physical evidence, either in their possession or in criminally prosecuted for their wrongful activity. the possession of other parties, and should observe the following guidelines to help avoid a spoliation Even if the underlying action survives such of evidence claim from arising: sanctions, considerable time, energy and money may be spent litigating spoliation issues. Indeed, • If tests need to be conducted that may such proceedings can overwhelm the original result in damage to the particular litigation itself and delay adjudication of the evidence, seek consent from the other merits of the case. In one matter, spoliation parties before destructive testing is allegations resulted in 52 depositions, including done. Provide written notice so that the company’s CEO, CFO and General Counsel. they may participate in the test, and In re Prudential Co. of America Sales Litigation, 169 document their response. F.R.D. 598 (D.N.J. 1997). • Photograph or videotape the condition of the item before, during and after Steps to Avoid a ‘Spoliation testing. Document the testing of Evidence’ Claim methodology and results. Given the strong sanctions for spoliation and the prospect of extended “satellite” proceedings, • If adverse parties request access to litigants have a real incentive to preserve evidence, ask them to agree, in writing, evidence in their possession and to quickly to preserve the evidence and refrain examine evidence in the possession of their from conducting destructive tests of adversaries. For example, if owners do not put their own without your consent.

G • Request other parties or potential preservation of the evidence. If another party objects to the cost of parties to share in the costs associated preserving evidence, consider offering with storing and safeguarding to pay part of the storage or particular items. preservation costs. • Do not allow experts to destroy the evidence and then substitute their description of it. If you have any questions regarding this or any other construction law issue, please call Steven E. Brawer, • If litigation has not already ensued, Chair of the Construction Law Practice Group, or put the other party on notice that you Anne Raulerson, an associate of the Construction Law may file a claim or raise a defense Practice Group, at 973.597.2500, or you may e-mail related to the evidence, and ask that them at sbrawer@ lowenstein.com and araulerson party, in writing, to preserve the @ lowenstein.com. evidence and permit you to inspect it. • Inspect, photograph and videotape the evidence as quickly as possible. Request a role in all decisions regarding the storage and