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

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.

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itigation is a dynamic process, and the full investigation of facts is integral to the parties’ understanding of past events and their evaluation of the legal consequences of those

• events. A key to this process is broad accessibility

to documentary and physical evidence. Permitting the alteration or destruction of key physical evidence may severely prejudice the ability of a party to present its claims or defenses through use

• f competent proof.

The term used to describe the impairment of such evidence is spoliation, which is defined as the destruction of evidence or failure to preserve property for another’s use as proof in pending or future litigation. Generally, spoliation occurs where the best evidence of what may have caused the damage claimed has been destroyed or discarded. There are many circumstances in construction- related matters that could lead to spoliation of evidence claims. For example, an owner might destroy deficient work while correcting design or construction defects, or a contractor may negligently discard physical evidence during sample

• testing. In such situations, the resulting prejudice

to a party deprived of access to the physical proof needed to establish or defend its case may lead to sanctions arising out of spoliation by the adverse party.

A Recent ‘Spoliation of Evidence’ Decision

This principle came into play in a recent decision by the Superior Court of New Jersey, Appellate Division, where the consequences of spoliation of evidence arose in a construction defect case. In ManorCare Health Services, Inc. v. Osmose Wood Preserving, Inc., 336 N.J. Super. 218, 764 A.2d 475, (App. Div. 2001) (“ManorCare”), the owner of a health care facility (ManorCare) appealed the dismissal of its action against a manufacturer of FRT plywood roof sheathing (Osmose) which degraded and had to be replaced, based upon ManorCare’s failure to provide Osmose with timely notice of when roof repairs at the facility would take place. Although representatives of Osmose were invited to inspect the roof and memorialized their pre-repair visit in a multi-page report which referenced numerous photographs, subsequent to that inspection ManorCare undertook the roof repairs without providing any notice to Osmose about when that work would actually be done. As a result, the manufacturer was not in attendance when the corrective work occurred, and lost the opportunity to monitor the remedial activity and observe the

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conditions revealed during the repair/ replacement process. The Trial Court found that ManorCare’s actions in removing the plywood and undertaking repairs without adequate notice to Osmose amounted to spoliation of evidence that was so prejudicial to the manufacturer as to justify dismissal of the complaint. However, on appeal

“Manorcare highlights the profound importance of giving all parties to potential litigation...the opportunity to

• bserve the repair or replacement of

defective work and the option to preserve potential evidence.”

the Appellate Division reversed, determining that although spoliation of evidence had occurred, a less draconian sanction than dismissal of ManorCare’s claims would suffice in light of the spoliation: exclusion of all proof obtained during and as a result of the roof repairs. The Court rejected ManorCare’s argument that an adverse “spoliation instruction” to the jury would be sufficient to neutralize the prejudice caused by that party’s conduct because “(t)he action of ManorCare has most definitely tilted the playing field in its favor. No charge to the jury about adverse inferences to be drawn from spoliated evidence could level the field or cure the problem.” Id., 336 N.J. Super. at 234; 764 A.2d at 484. As a consequence, the Appellate Court instructed “that all evidence taken during and after the commencement of the roof renovations – including but not limited to reports, photographs, videos, and sample pieces of plywood – shall be inadmissible.” Id., 336 N.J.

• Super. at 236; 764 A.2d at 485.

Manorcare highlights the profound importance

• f giving all parties to potential litigation -- owners,

architects, engineers, contractors, subcontractors and their insurers -- the opportunity to observe the repair or replacement of defective work and the ability to safeguard potential evidence. In this regard, the Supreme Court of New Jersey has found that a duty to preserve evidence arises, in the absence of a court order to do so, when there is (1) pending or probable litigation involving defendants; (2) knowledge of the existence of the likelihood of litigation by plaintiff; (3) foreseeability of harm to the defendants, i.e., discarding evidence would be prejudicial to defendants; and (4) evidence relevant to the litigation. Aetna Life and Cas. Co. v. Imet Mason Contractors, 309 N.J. Super. 358 (App.

• Div. 1998); Hirsch v. General Motors

Corp., 266 N.J. Super. 222 (Law Div. 1993). New Jersey courts have developed various sanctions for spoliation, and a party’s culpability in

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losing or destroying the evidence at issue is a significant factor in determining the appropriate remedy for that conduct. Traditionally, the ultimate sanction of dismissal has been reserved for those circumstances where an intentional, flagrant destruction of evidence has so severely prejudiced a defendant’s interests as to be

• irreparable. More common is an adverse or

limiting instruction to the jury. As illustrated in ManorCare, another sanction is the limitation or exclusion of certain specified proof regarding the lost or destroyed item. Compensatory and punitive money penalties have also been levied and, in rare cases of egregious intentional destruction of evidence, spoliators have been criminally prosecuted for their wrongful activity. Even if the underlying action survives such sanctions, considerable time, energy and money may be spent litigating spoliation issues. Indeed, such proceedings can overwhelm the original litigation itself and delay adjudication of the merits of the case. In one matter, spoliation allegations resulted in 52 depositions, including the company’s CEO, CFO and General Counsel. In re Prudential Co. of America Sales Litigation, 169 F.R.D. 598 (D.N.J. 1997).

Steps to Avoid a ‘Spoliation

• f Evidence’ Claim

Given the strong sanctions for spoliation and the prospect of extended “satellite” proceedings, litigants have a real incentive to preserve evidence in their possession and to quickly examine evidence in the possession of their

• adversaries. For example, if owners do not put
• ther parties to a potential litigation (such as the

architect, engineer, contractors and manufacturers) on notice that it will be removing, replacing,

• r

testing defective design

• r

construction elements, such evidence may not be available at trial. Similarly, all parties must secure potential evidence at the outset of a claim, to preserve potentially important trial proof. To be

“...all parties must secure potential evidence at the outset of a claim, to preserve potentially important trial proof.”

safe, when initiating or defending a construction claim, parties should notify counsel of all potential physical evidence, either in their possession or in the possession of other parties, and should observe the following guidelines to help avoid a spoliation

• f evidence claim from arising:
• If tests need to be conducted that may

result in damage to the particular evidence, seek consent from the other parties before destructive testing is

• done. Provide written notice so that

they may participate in the test, and document their response.

• Photograph or videotape the condition
• f the item before, during and after

testing. Document the testing methodology and results.

• If adverse parties request access to

evidence, ask them to agree, in writing, to preserve the evidence and refrain from conducting destructive tests of their own without your consent.

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• Request other parties or potential

parties to share in the costs associated with storing and safeguarding particular items.

• Do not allow experts to destroy the

evidence and then substitute their description of it.

• If litigation has not already ensued,

put the other party on notice that you may file a claim or raise a defense related to the evidence, and ask that party, in writing, to preserve the 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 preservation of the evidence. If another party objects to the cost of preserving evidence, consider offering to pay part of the storage or preservation costs. If you have any questions regarding this or any other construction law issue, please call Steven E. Brawer, Chair of the Construction Law Practice Group, or Anne Raulerson, an associate of the Construction Law Practice Group, at 973.597.2500, or you may e-mail them at sbrawer@ lowenstein.com and araulerson @ lowenstein.com.

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