Failure to preserve evidence in a legal action can carry harsh consequences and is particularly challenging in the construction context.
Brian Flaherty was the chapter author of “Spoliation,” Arizona Construction Law Practice Manual, 3rd Ed., 2016
A developing issue in construction litigation is “spoliation,” the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.
In these situations, the loss, alteration or destruction of evidence can give rise to:
- a separate tort claim for spoliation of evidence;
- a discovery sanction that effectively terminates the offending party’s case;
- an evidentiary sanction prohibiting testimony; or
- an adverse inference jury instruction against the party that lost, altered or destroyed evidence.
The availability of these remedies underscores the importance of presenting physical evidence that may be relevant at trial. A client ignorant of its discovery obligations could ruin a strong case before a complaint is even filed, if proper evidence preservation guidelines are not instituted. In addition, an attorney ignorant of his obligation to protect against fraudulent conduct, such as unlawfully destroying or concealing documents, could violate his ethical responsibilities.
This article examines the current spoliation remedies available in Arizona and discusses preservation principles that can prevent the adverse effects of a spoliation allegation.
Spoliation as an Independent Tort Cause of Action. Arizona does not recognize a tort of first-party or third-party spoliation. When spoliation is committed by a party to a lawsuit, it is referred to as first-party spoliation; when committed by a non-party, it is called third-party spoliation.
First-Party Spoliation. First-party spoliation was first addressed in Arizona in La Raia v. Superior Court, a lawsuit involving claims for physical injuries resulting from pesticide poisoning. The defendant destroyed the pesticide can that had been used, delaying the plaintiff’s proper treatment. The plaintiff argued that she had a separate cause of action against the defendant for destruction of the can.
The Arizona Supreme Court rejected the claim because the defendant’s actions exacerbated the physical injuries already caused by its negligence, and a complete remedy could be obtained through a damages award in the underlying lawsuit. An additional cause of action was unnecessary. The Court further reasoned that there are a number of non-tort remedies that seek to punish and deter the intentional spoliation of evidence, chief among which is the evidentiary inference (discussed more fully below).
Third Party Spoliation. The Arizona Supreme Court addressed third-party spoliation claims in Lips v. Scottsdale Healthcare Corporation, a suit involving claims that a third-party hospital jeopardized a plaintiff’s product-liability claims against the manufacturer of her prosthesis after the hospital lost the prosthesis after its removal. The Supreme Court was unwilling to create a negligence cause of action for a third-party spoliation claim due to its reluctance to broadly recognize a duty to avoid causing purely economic loss.
Importantly, the Lips court did not decide the validity of a third-party claim for intentional spoliation. Instead, it simply found that the underlying complaint failed to allege that the defendant acted with the intent to disrupt the plaintiff’s litigation; a requisite element in every jurisdiction that recognizes a third-party intentional spoliation tort. Thus, under the proper circumstances, it is conceivable that a third-party intentional spoliation claim could be brought in Arizona.
Sanctions. In Arizona, it is a class six felony to conceal, mutilate, alter or remove physical evidence to intentionally impair its availability in an official proceeding. Under Arizona law, a trial court also has discretion to impose sanctions when a party destroys or fails to disclose potentially relevant evidence. The sanctions the court imposes can in certain circumstances be as harsh as dismissal. However, both state and federal courts have expressed a preference for a less drastic sanction than dismissal. Indeed, dismissal of a case based upon the destruction or loss of evidence should be used only in extreme situations; if less drastic sanctions are available, they should be utilized. As such, in its quiver of sanctions, the trial court may impose various discovery sanctions, including an adverse inference jury instruction.
Arizona Test. In a 1984 case, Austin v. City of Scottsdale, the Arizona Supreme Court ruled that “The sanction of dismissal, though within the sound discretion of the trial court, is harsh and not to be invoked except under extreme circumstances.”
The range of discretion for dismissal is narrow. Arizona courts have refused to adopt an inflexible, bright-line rule on the issue. Instead, issues concerning destruction of evidence and appropriate sanctions therefor should be decided on a case-by-case basis considering all relevant factors and based on the totality of the circumstances. In addition, the trial court must “thoroughly consider other less severe, sanctions before resorting to the most extreme sanction of dismissal.” The trial court must make a record that it determined the availability of lesser sanctions before entering a terminating sanction; otherwise the decision could be overturned.
Souza v. Fred Carries Contracts, Inc., was the first Arizona appellate decision dealing with the effect of the unintentional destruction of evidence in a negligence case. Plaintiff Donna Souza had purchased a 1982 Ford Mustang from the defendant, Fred Carries Contracts, Inc. Two weeks later, after she had experienced three tire blow-outs and after defendant had replaced the car’s rear axle assembly with a used unit, plaintiff was injured when she had another blow-out, lost control of her car, and collided head-on with an oncoming vehicle. The plaintiff’s car was totaled and towed to a storage yard, where it remained for two-and-a-half years. The plaintiff retained counsel and sued the defendant, alleging the defendant had negligently maintained or repaired the Mustang, resulting in its having a mechanically defective rear end which collapsed and caused the accident.
Unknown to the parties, and before either party had performed an inspection, the Mustang was destroyed. Concluding that the plaintiff’s failure to preserve crucial evidence precluded her from establishing a prima facie case and deprived the defendant of an opportunity to mount an effective defense, the trial court granted summary judgment for the defendant.
The appellate court reversed the trial court decision, reasoning that:
- the plaintiff did not willfully destroy the evidence or even know that it was going to be destroyed;
- there was no indication that the defendant had ever asked the plaintiff to preserve the vehicle or make it available for inspection;
- the defendant, a lien holder of the vehicle, had the right to preserve the vehicle if it had chosen;
- no evidence established that the destruction rendered the defendant incapable of mounting a defense; and
- there was no evidence that the trial court “thoroughly considered other, less severe sanctions.”
Federal Test. The federal district court has two sources of authority to sanction a party who has despoiled evidence: the inherent power of federal courts to levy sanctions in response to abusive litigation practices, and the availability of sanctions under Rule 37 against a party who fails to obey an order to provide or permit discovery. However, before imposing the “harsh sanction” of dismissal, the district court must at the very least find willfulness, fault or bad faith and must also consider less severe alternatives.
A party seeking sanctions for spoliation of evidence must prove the following elements:
- The party having control over the evidence had an obligation to preserve it when it was destroyed or altered.
- The destruction or loss was accompanied by a culpable state of mind.
- The evidence that was destroyed or altered was relevant to the claims or defenses of the party that sought discovery of the spoliated evidence.
In Anheuser-Busch, Inc. v. National Beverages Distributors, the Ninth Circuit also recommended that a district court consider the following five factors in determining whether terminating sanctions are appropriate:
- the public’s interest in expeditious resolution of litigation;
- the court’s need to manage its dockets;
- the risk of prejudice to the party seeking sanctions;
- the public policy favoring disposition of cases on their merits; and
- the availability of less drastic sanctions.
Other Available Discovery Sanctions. The most commonly imposed sanction is to exclude lay and expert testimony concerning the destroyed evidence. This has the practical effect of dismissal when a party needs the excluded evidence to survive a summary judgment or directed verdict motion.
Under its “inherent powers,” a district court may also award sanctions in the form of attorneys’ fees against a party or counsel who acts “in bad faith, vexatiously, wantonly, or for oppressive reasons. Before awarding such sanctions, the court must make an express finding that the sanctioned party’s behavior “constituted or was tantamount to bad faith.” A party “demonstrates bad faith by delaying or disrupting the litigation or hampering enforcement of a court order.” The bad faith requirement ensures that the district court’s exercise of its broad power is properly restrained, and “preserves a balance between protecting the court’s integrity and encouraging meritorious arguments.” Additionally, the amount of monetary sanctions must be “reasonable.”
Adverse Inference Jury Instruction. Under Arizona law, a trial court has discretion to impose an adverse inference instruction when a party destroys potentially relevant evidence. The trial court has substantial discretion in determining how to instruct the jury. The trial court need not give every requested instruction but should give an instruction if the evidence supports it, the instruction properly states the law, and the instruction relates to an important issue and is not duplicative or cumulative. An adverse inference instruction due to spoliation generally instructs the jury that it may infer that evidence made unavailable by a party was unfavorable to that party.
In Smyser v. City of Peoria, the Division One Appellate Court concluded that a spoliation instruction was not mandatory when there was no evidence of intentional or bad faith destruction of evidence, particularly when other means to establish the issue of fact existed. In Smyser, the plaintiff sought an adverse inference instruction due to the defendant’s failure to preserve data strips from the cardiac monitoring device used during an ambulance ride to the emergency room. The plaintiff contended that the strips were critical to prove her case. The defendant opposed the instruction, arguing that the loss of the data strips did not cause unfair prejudice because the plaintiff was able to reconstruct the information that the strips contained and that the instruction would lead the jury to think the defendant intentionally failed to maintain the strips when no evidence showed that to be true.
The trial court declined to give the instruction and the appellate court affirmed its decision, reasoning that the strips were not critical to determining whether the defendant paramedics fell below the standard of care. The Smyser court also relied on the holding in Souza v. Fred Carries Contracts, Inc. in which a rigid rule regarding evidence preservation was rejected for a case by case evaluation. Smyser also found support from various other jurisdictions.
Defenses: Evidentiary Preservation
If litigation is reasonably foreseeable, those in control of evidence should preserve it intact. Counsel must explain to clients their duty to preserve evidence and to never alter, remove or destroy the evidence without counsel’s involvement. Indeed, at least one court has concluded that, once the duty to preserve is triggered, the failure to issue a written litigation hold constitutes gross negligence per se and prejudice may be presumed because that failure is likely to result in the destruction of relevant information. Counsel must ensure that any inspections or destructive testing be done by mutual consent with the opposing party using an agreed-upon protocol. Counsel should also maintain a chain of custody log to document that the evidence has not been lost or otherwise damaged.
Marshalling and preserving evidence is especially cumbersome in the construction context where the litigation may pertain to a 50-story high-rise in the midst of construction. On a construction site, it may not be possible to “preserve” the job site in its current state for long. However, before altering or destroying evidence, other potential parties should be advised in writing that the documents or physical property will be altered or destroyed within a certain period of time. At the very least, the party should be given a reasonable opportunity to document and inspect the job site before any alteration is made. If a party requests preservation, sufficient precautions to preserve the evidence should be established. In some instances, it may be appropriate to ask that the party requesting preservation to pay the costs associated with the preservation.
Parties and counsel must preserve evidence and provide potential parties reasonable opportunities to examine the evidence, including the job site. If these duties are misunderstood or blatantly disregarded, sanctions are sure to follow.