Opinion
No. C6-01-969.
Filed January 15, 2002.
Appeal from the District Court, Hennepin County, File No. CT0010599.
William M. Hart, Katherine A. McBride, Leatha G. Wolter, Meagher Geer, P.L.L.P., (for respondent State Farm Ins. Co.)
James A. Lavoie, Lindell Lavoie, L.L.P., (for appellant)
Michael A. Zimmer, Tewksbury, Kerfeld Zimmer, P.A., (for respondent Chase)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellant Mitchell Alan Chase sued his fiancée Jayne M. Fox, contending that he was injured in a fall from a defective ladder belonging to Fox. Respondent State Farm Insurance Company, Fox's personal liability insurer, brought a declaratory action to determine coverage. The district court granted summary judgment in favor of State Farm as a sanction for Fox spoliating evidence by discarding the ladder before Chase filed suit. Chase now challenges the finding of spoliation and the sanction of summary judgment, which he claims is excessively harsh. Although the findings support the district court's conclusion that Fox spoliated evidence, spoliation does not mandate the sanction of summary judgment here. We affirm in part, reverse in part, and remand.
FACTS
By his account, on July 16, 1998, Chase fell from a ladder and injured his back while painting the home of Jayne Fox, his fiancée. When Fox purchased the ladder at a garage sale shortly before Chase's fall, it had already been broken and repaired. Fox disposed of the ladder in August or September 1998.
In March 2000, Chase sued Fox, alleging that she negligently allowed him to use a ladder she knew to be defective. Fox tendered the claim to her insurer, respondent State Farm Insurance Company (State Farm), under a provision of her homeowners' policy covering bodily injury for which she was legally liable. State Farm agreed to defend Fox in Chase's personal-injury action under a reservation of rights.
State Farm investigated the claim, and concluded that Fox and Chase had intentionally concealed and misrepresented the facts of the claimed loss in order to obtain insurance benefits. State Farm believed that Chase had in fact fallen from the roof, not from a ladder, as alleged, and that consequently neither Fox nor State Farm was liable. State Farm denied Fox coverage on the ground that Fox and Chase had violated a provision of Fox's policy prohibiting fraudulent claims. In July 2000, State Farm brought a declaratory judgment action to establish that it was not obligated to indemnify or defend Fox for her alleged liability to Chase.
Chase and Fox subsequently entered into a stipulated settlement agreement pursuant to the procedure described in Miller v. Shugart, 316 N.W.2d 729 (Minn. 1982). Under the agreement, Fox stipulated to entry of judgment against her for $848,200, the amount of the arbitrator's award of December 20, 2000, and Chase agreed to seek to satisfy the judgment solely from State Farm.
In January 2001, State Farm moved for spoliation sanctions, arguing that in disposing of the ladder, Fox prejudiced State Farm by destroying crucial evidence when litigation was foreseeable. The district court granted the motion and determined that summary judgment was the appropriate sanction. The court reasoned that the right to insurance benefits arose solely as a result of Fox's negligence, and the only negligence alleged in this case involved the ladder. The court concluded Fox so prejudiced State Farm by preventing it from collecting evidence of the existence or condition of the ladder that summary judgment was warranted. This appeal followed.
DECISION 1. Spoliation
Chase challenges the district court's imposition of a spoliation sanction, arguing that when Fox disposed of the ladder, she had no reason to know it would become relevant evidence in future litigation. The district court found spoliation, reasoning that litigation was foreseeable at the time Fox disposed of the ladder, in light of her conceded knowledge that her negligence caused Chase's injuries.
A finding of spoliation is a question of fact that will not be set aside unless clearly erroneous. Hoffman v. Ford Motor Co., 587 N.W.2d 66, 70 (Minn.App. 1998); Minn.R.Civ.P. 52.01. This court need not reconcile conflicting evidence, and will not disturb a district court's findings of fact if there is reasonable evidence to support those findings. Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999).
Spoliation is the destruction of evidence or the failure to preserve property for another's use in pending or future litigation. Federated Mut. Ins. Co. v. Litchfield Precision Components, Inc., 456 N.W.2d 434, 436 (Minn. 1990). Courts are authorized to sanction a party for the spoliation of evidence when one party gains an evidentiary advantage due to its failure to preserve evidence after that party has been given the opportunity to examine it. Himes v. Woodings-Verona Tool Works, Inc., 565 N.W.2d 469, 471 (Minn.App. 1997), review denied (Minn. Aug. 26, 1997).
Here, there is no evidence that Fox intended to dispose of critical evidence or that she acted in bad faith in throwing the ladder away. But spoliation encompasses both intentional and negligent destruction of evidence. Patton v. Newmar Corp., 538 N.W.2d 116, 118 (Minn. 1995); Himes, 565 N.W.2d at 471 (noting that spoliation sanction does not imply any wrongdoing on spoliator's behalf). Regardless of intent, disposal of evidence is spoliation when a party knows or should know that the evidence should be preserved for pending or future litigation. Patton, 538 N.W.2d at 118.
Chase argues that Fox disposed of the ladder in September 1998, long before the personal injury complaint was filed in March 2000. Chase contends that Fox had no duty to preserve evidence because no litigation was foreseeable and that the ladder was discarded before Fox knew her homeowner's insurance might cover the accident or that any litigation could arise from the accident.
The district court found that litigation was foreseeable at the time Fox disposed of the ladder, based on statements by both Fox and Chase attributing appellant's injuries to Fox's negligence. The district court also found that even if Fox did not intend to dispose of critical evidence, she was negligent in failing to recognize that the ladder might be relevant to future litigation, in light of her conceded responsibility for Chase's injuries. The court concluded that Fox had a duty to both Chase and to State Farm to preserve the ladder until it could be examined, and that Fox breached her duty when she negligently spoliated the evidence.
The record reasonably permits a finding that Fox spoliated evidence when she disposed of the ladder, making some sanction necessary. Because this finding does not leave this court "with the definite and firm conviction that a mistake has been made," Gjovik v. Strope, 401 N.W.2d 664, 667 (Minn. 1987) (citation omitted), we affirm on this issue.
2. Summary Judgment as Sanction
Chase next challenges the district court's choice of sanction, arguing summary judgment is excessively harsh in light of the degree of prejudice experienced by State Farm due to disposal of the ladder. There is merit in this argument. The facts and procedural posture of this case are unique, we believe, and lead us to conclude that summary judgment as a spoliation sanction is not warranted here.
To the extent that Chase suggests that we may review the district court's choice of sanction de novo, we disagree. Although we review a grant of summary judgment de novo, we review a choice of sanction for an abuse of discretion. Patton, 538 N.W.2d at 119 (holding that appellate court will reverse a district court's choice of sanction "only when it is clear that no reasonable person would agree [with] the district court's assessment of what sanctions are appropriate." (quoting Marrocco v. General Motors Corp., 966 F.2d 220, 223 (7th Cir. 1992)).
Our standard of review of a sanction for spoliation is narrow and deferential, and we recognize that it is a rare case in which we would reject the district court's choice of sanction as an abuse of discretion. Under the penumbra of discretion, Minnesota trial courts have enormous power to choose sanctions as they see fit. It is proper that they have such broad discretion, but this court exists to preclude abuses of that discretion in instances where, as here, the facts and procedural posture of a case are so particular as to render the trial court's designated sanction inappropriate. We hold, therefore, that this is the rare case that warrants reversal of the trial court's choice of sanction.
The leading Minnesota cases in which spoliation leads to summary judgment are procedurally and substantively distinct from this case. In each of those cases, Patton, Hoffman, and Himes, courts excluded evidence of allegedly faulty products to sanction product-liability plaintiffs for spoliation, then granted summary judgment to defendants because no genuine issues of material fact remained after the exclusion. See Patton, 538 N.W.2d at 119-20 (plaintiffs unable to make out prima facie case of defective motor home after exclusion of motor home as sanction for spoliation); Hoffman, 587 N.W.2d at 70-71 (plaintiffs unable to present prima facie case of defective automobile after court excludes automobile as a sanction for spoliation); Himes, 565 N.W.2d at 470-71 (entering summary judgment against plaintiff after excluding allegedly defective wrench spoliated by plaintiff).
When a party inadvertently or negligently destroys critical evidence, the appropriate sanction depends on the amount of prejudice the opposing party suffers by its inability to inspect the evidence. Patton, 538 N.W.2d at 119. Prejudice is determined by considering the nature of the item lost in the context of the claims asserted and the potential for correcting the prejudice. Id.
Unlike typical spoliation cases, exclusion of the evidence in this case did not prevent either the spoliator or the opposing party from making a prima facie case. State Farm is the plaintiff here, and seeks a declaration that it is under no obligation to defend or indemnify Fox for injuries and damages allegedly suffered by Chase. State Farm alleges in its complaint that Fox failed to cooperate in investigation of claims arising from the alleged accident, that she intentionally concealed or misrepresented material facts and circumstances regarding that alleged accident, and that the intentional concealment and misrepresentation are subject to sanctions under Minn. Stat. § 549.211 (2000) and Minn.R.Civ.P. 11.
We conclude that proof of the condition and existence of the ladder is not an element of any of State Farm's claims. In fact, an argument could be made that the inability of Fox to produce the allegedly defective ladder could even assist State Farm in its quest to show concealment and misrepresentation. State Farm, clearly, is not in a position analogous to that of a defendant-manufacturer in a product-liability case who is unable, due to the plaintiff's spoliation, to examine the critical piece of evidence in order to aid in its defense. See Patton, 538 N.W.2d at 119 (considering appropriate sanction when "critical item of evidence no longer exists to speak for the plaintiffs' claims or to the defendant's defense").
The power to sanction must be tempered by "`the duty to impose the least restrictive sanction available under the circumstances.'" Patton, 538 N.W.2d at 118 (quoting Bachmeier v. Wallwork Truck Ctrs., 507 N.W.2d 527, 533 (N.D. 1993)). Dismissal is obviously among the harshest sanctions available to the district court. Lesser sanctions are available: the court may exclude evidence of the ladder, as in Patton, Hoffman, and Himes. Again, arguably, exclusion of any evidence of the ladder would assist State Farm in establishing concealment or misrepresentation. Importantly, the court may also instruct the jury to infer from Fox's failure to produce evidence of the ladder that such evidence would have been harmful to her case. Federated, 456 N.W.2d at 436-37; Blumberg v. Palm, 238 Minn. 249, 254, 56 N.W.2d 412, 415 (1953). Here, the district court rejected that approach, reasoning that "such an instruction would tend to confuse the jury insofar as the ladder is central to [Fox and Chase's] claim for insurance benefits." We find the instruction as to unfavorable inferences, however, readily understood and appropriate to this situation.
It is evident here that the district court attempted to exercise its discretion with meticulous care and only after considering the propriety of its choice of sanctions. Although we are reluctant to disturb that exercise of discretion, we conclude that the unique facts and procedural posture of this case compel us to reverse the imposition of summary judgment as a sanction for Fox's spoliation, and to remand for further proceedings not inconsistent with this opinion. On remand, the district court may exclude evidence of the ladder, may instruct the jury that the ladder, if produced, would have been advantageous to State Farm's claim and harmful to Fox and Chase's defense, and may consider and impose any other appropriate sanctions in lieu of summary judgment as a sanction for spoliation.
Affirmed in part, reversed in part, and remanded.
I respectfully dissent from the majority's conclusion that summary judgment is a sanction that is disproportional to the spoliation.
After acknowledging that this court's standard of review of a spoliation sanction "is narrow and deferential," and after recognizing that "it is a rare case in which we would reject the district court's choice of sanction," the majority concludes that this is one of those rare cases. The majority bases its conclusion on an assessment of the likely prejudice to State Farm's case caused by the spoliation.
In particular, the majority suggests that the spoliation of the ladder does not prevent State Farm from making out a prima facie case and, in fact, State Farm might be better off without the ladder in evidence.
It seems to me that the majority is now encroaching onto, and perhaps even dictating, trial strategy. Appellant says he was injured when he fell from a defective ladder. State Farm should have the right to show that the ladder was not defective, or that, even if defective, the defect was such that it did not cause or contribute to appellant's injury. The nature, location, and extent of the defect, as well as the manner in which appellant used this precise ladder, are all important strategic components of State Farm's defense. Without the ladder, State Farm is deprived entirely of meaningfully presenting this defense.
Because State Farm has also posited the alternative theory that appellant fell from the roof and not from the ladder, the majority is satisfied that State Farm has not suffered sufficient prejudice to warrant the sanction of summary judgment. The majority thus has selected and confined State Farm to a litigation strategy. I believe this far exceeds the scope of proper appellate review, and I would affirm.