A sanction for spoliation (destruction) of evidence must be carefully considered to impose only such relief as is reasonably necessary to level the playing field between the plaintiff and defendant.  Where a trial court barred a project owner from presenting expert testimony concerning window-related claims because the windows and been removed and discarded before the defendant could see them, the lack of expert testimony then led to a subsequent  motion for summary judgment for the defendant that was granted.  On appeal, the Supreme Court of New Jersey in the case of Robertet Flavors, Inc. v. Tami-Githens, Inc., 203 N.J. 252, 1 A.3d 658 (NJ 2010), did a comprehensive review of the appropriate remedies for spoliation of evidence in the context of complex commercial construction, and held that the action against the construction manager was properly dismissed because the CM was unable to evaluate the evidence.  But the action against the glass company that installed the curtain wall must be allowed to go forward to a jury – provided that the evidence to be used by the plaintiff against the contractor would be limited to conditions that were observable prior to removal and remediation of the curtain wall.    The court explained that when considering factors bearing on the appropriate remedy for the spoliation, courts  should consider (1) the identity of the spoliator, (2) manner in which spoliation occurred, (3) prejudice to the non-spoliating party, and (4) alternative sources of information that are available to the non-spoliator.

In this case, the building owner hired an architect to design a new corporate head quarters, and it acted as its own general contractor.  The Owner also retained the services of a construction manager (CM) to organize the bids and made recommendations to the Owner.   The Owner contracted directly with a glass company (Academy Glass) to install window and curtain wall systems manufactured by Kawneer Company.   After the building was completed, the Owner moved in and began experiencing leaking through the strip window system along the entire length of one side of the building.

Academy Glass was responded to warranty calls and attempted to correct the leaks – but eventually the Owner stopped trying to have Academy Glass solve the problem.  Owner decided to pursue litigation and hired a forensic architect, as well as an environmental consulting firm, to inspect the window to determine the cause of the problem.   The consultants recommended that a section of the strip windows be removed to inspect them.  Based on the findings, the Owner filed suit against Academy Glass and the CM.  Approximately a month after the suit was filed, the Owner removed a section of the strip windows and discovered moisture and mold.   Based on these findings, the Owner was advised by its consultants that it needed to replace the strip-window system and the Owner decided it  “had no choice but to remove and replace everything in the building that had been contaminated with mold, including interior walls, insulation, and carpeting.”

Before the Owner had taken the remediation action, however, the defendants filed their Answers to the Complaint, along with discovery demands.  The discovery demand of the CM included the following request:

“In lieu of a more formal notice to inspect, this party hereby demands that it be notified immediately of any intended, planned or ongoing remediation, replacements or other work that relates to the subject property. The property is evidence in this case and must be preserved in an unaltered condition so that this party may properly inspect the premises.”

It appears that the Owner’s attorney was advised by the Owner of its intent to tear out the window system and perform the corrective action work, but the attorney did not advise the defendants.   The Owner proceeded to tear out the window system and do the full remediation without advising the defendants.   Attorneys for the defendants spoke with the attorney for the Owner several months after the new window system had been ordered by the Owner (and before the remediation work was actually performed), but the Owner’s attorney did not advise them that the windows had been ordered and that the Owner intended to do the remediation once the windows arrived.

At some point the defendants moved to dismiss the complaint for failure to provided discovery.   It was not until counsel attended the court hearing on the discover motion that they learned that remediation had begun, and even then they were not told about the discovery of mold contamination.  Counsel for one of the defendants requested, in writing, that the Owner refrain from further remediation until defendant had an opportunity to evaluate the Owner’s claims of defective construction and related damage.   Owner advised the defense counsel that it would not suspend the partially completed remediation work because it would be impractical, if not impossible, to do so.   About a month later, the defendant, Academy Glass, and its attorney visited the premises and found that the strip-window system had been replaced and that all of the allegedly defective conditions related to the work had been remediated.   They were directed by the Owner to an off-site location where some of the components of the strip-window system had been removed and stored in a pile.

As the case proceeded to trial, there was expert testimony for the Owner stating that based on visual inspection, documented with photographs, the window system as originally installed was retaining water and it was possible that excessive moisture was also collecting on the inside of the mullions.   The expert acknowledged, however, that he did not photograph every window and did not document through photographs each and every one of the defects noted in his expert report.   As stated by the court:

“Munro [the expert] conceded that he did not photograph every window and therefore did not document through photographs each and every one of the defects noted in his expert report. He also acknowledged that after the remediation was completed one could not independently verify which of the defects he noted had caused the water infiltration, whether and to what extent the caulking had been deficient, and whether and to what extent expansion mullions or the sill extensions had contributed to the water infiltration. He further conceded that the particular components that he blamed for the water infiltration, including the gaskets, sill extensions, and caulking, were removed during the remediation and had not been preserved. He also conceded that a portion of the EIFS that abuts the windows was repaired, so that its effect, if any, on the leakage, could not be independently verified.”

The trial court granted motions by both defendants to exclude evidence relating to the window system installation.  In reaching that conclusion, the court found that:

“The plaintiff had never given notice to defendants about the proposed remediation prior to the commencement of the work; had failed to respond to defendants’ initial requests to conduct an inspection; had first notified defendants of the remediation work on January 24, 2003, when there was insufficient time to permit them to perform an independent investigation; and had completed the repairs when there was no real emergency.”

The court thus concluded that the Owner had engaged in spoliation of the evidence and that there was clear prejudice to defendants because their expert had not been given an opportunity to fully investigate the leaks and their cause.   Subsequently, the defendants moved for summary judgment on the basis that without expert evidence the Owner would be unable to have the merits of its claim presented for consideration by a jury.  The court agreed and granted the motions.   The owner appealed, and the state supreme court, after very thoroughly reviewing the facts and the law, concluded that the decision was correct as the dismissal of the claim against the CM but that as to the glass company, a different remedy for addressing the evidence spoliation must be applied, and that the claim would be permitted to go forward against the glass company – as limited by the court’s holding.

The court noted:

“Although most of the published decisions relating to spoliation focus on the available remedies, selecting the one that is appropriate under the circumstances must be guided by the essential purposes that all of the sanctions are designed to achieve. As we have observed, the spoliation sanction serves three goals: “to make whole, as nearly as possible, the litigant whose cause of action has been impaired by the absence of crucial evidence; to punish the wrongdoer; and to deter others from such conduct.” [citation omitted]. Put another way, the focus in selecting the proper sanction is “evening the playing field,” or rectifying the prejudice caused by the spoliation so as to “place[ ] the parties in equipoise,” [citation omitted].  Achieving those sometimes competing goals calls for careful evaluation of the particular facts and circumstances of the litigation, in order that the true impact of the spoliated items can be assessed and an appropriate sanction imposed.”

In its concluding analysis, the court explained the logic of its decision that, rather than paraphrasing, I will quote as follows:

“Our purpose is not to create a catalog of the many possibilities that may occur in commercial construction projects and the ways in which they may be pursued or may be lost due to spoliation, but to use this case as an illustration of how courts can address it both fairly and creatively. It will not always be possible to recreate the evidence that has been lost or to limit the claims so as to be fair to the non-spoliating party. In those circumstances, the severe sanction of dismissal may indeed be appropriate. Moreover, even after the claims are limited and the matter can fairly proceed, it will still be within the court’s power to utilize other sanctions against the spoliator through the use of an adverse inference or the imposition of monetary sanctions designed to shift costs to the spoliator.”

“We leave it to the sound discretion of the trial courts to make those decisions as justice requires. In the end, courts faced with spoliation claims should strive to impose a remedy that will serve the ends of justice by creating a level playing field, by ensuring that the consequence of the lost evidence falls on the spoliator rather than on an innocent party, and by using their considerable powers to deter future acts of spoliation.”

“In this dispute, plaintiff has already lost claims as a result of the spoliation and its claim relating to the strip-window system has been limited significantly. There remains, however, one further step in our analysis, because defendants are not similarly situated. As to defendant Academy Glass, we agree with the Appellate Division that there is a sufficient basis on which to permit plaintiff to proceed, limiting its claims to the conditions that were observable prior to remediation and its experts to a review of only those conditions.”

“However, we reach a different result as to defendants Tri-Form and Karabinchak. In spite of the fact that the wealth of evidence ordinarily generated during construction projects lends itself to leveling the playing field, in this case the opportunity to inspect the leaking windows before remediation was critical. Because plaintiff deprived defendants Tri-Form and Karabinchak of that opportunity, and because we therefore perceive them to have no independent source of evidence or testimony sufficient to permit them to mount a defense, the claims as to those defendants cannot proceed at all. As to defendants Tri-Form and Karabinchak, the only fair remedy for plaintiff’s spoliation is to impose the sanction of dismissal.”

Comment: This is decision should become a valuable resource and guide to litigants and their counsel when making decisions about remediation of construction defects – and advising other parties before tearing things apart and discarding the evidence of the defective work.  For attorneys, this is an important reminder of how important it is to advise the client that they can’t dispose of evidence.  This “litigation hold” of evidence and documents germane to a matter is of great importance.  Attorneys are expected to know this and to advise their clients who may not understand that repair and replacement (particularly discarding the replaced materials) constitutes spoliation of evidence.   Even if a complaint has not yet been filed, a project owner is well advised that if there might be a possibility of later filing a complaint, it should create documentation of the problems with independent experts, video, photographs and other evidence, and save hard evidence of the defects themselves – and preserve that evidence to be used both for making its case as well as for potential defendants to be able to later analyze and use in their defense.

About the newsletter and author: J. Kent Holland is a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners. He is also founder and president of ConstructionRisk, LLC, a consulting firm providing consulting services to owners, design professionals, contractors and attorneys on construction projects. He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932. This article is published in ConstructionRisk.com Report (2010) at www.ConstructionRisk.com.  This article is published in ConstructionRisk.com Report, Vol. 13, No. 4 (April 2011).