U.S. - Preservation of Evidence - Spoliators Beware!

December 2001

Ses Venture Volume 20

The importance of preserving evidence which may be relevant to pending or anticipated litigation cannot be overemphasized. Whether the claim involves collision or cargo damage, environmental casualty or product failure, personal injury or death, failing to take the affirmative steps necessary to ensure that evidence is properly preserved and made available for inspection and analysis can have devastating consequences for even the most meritorious claim or defense. Moreover, this duty to preserve evidence applies not only to documents, but to physical evidence which may be relevant to an issue of liability or damages. It is for this reason that those responsible for handling such a claim—whether a ship’s crew, in-house claims personnel, club correspondents or legal counsel - must be proactive from the very outset of a casualty or other incident to ensure that potentially relevant evidence be preserved and safeguarded.

A recent decision in the United States District Court for the Eastern District of New York¹ highlights the profound importance of preserving and timely producing evidence which is relevant to pending or anticipated litigation in the United States. The case involved claimed damage to a series of seven parallel electric transmission cables running across the Long Island Sound from Northport, New York to Norwalk, Connecticut. The damage allegedly occurred when Petitioner’s barge dragged its anchor across the cables after breaking away from an off-shore oil discharge platform during a severe winter storm. Claimants, the power companies that owned the electrical cables, sought damages of over $31 million, including the cost to repair the cables and certain consequential damages in the form of additional contractual costs allegedly incurred as a result of the cable outage.

Following the close of discovery, Petitioner moved for sanctions against Claimants, contending that they: (1) had ignored repeated requests by Petitioner for access to test and inspect the cables before they were moved or repaired; (2) had failed to give Petitioner adequate notice before commencing permanent repairs and had removed and destroyed the allegedly damaged cable without giving Petitioner adequate opportunity to test and inspect it; and (3) had secretly taken samples of the cable and had tested and thereafter destroyed them, all without notice to Petitioner and without disclosing the results of the testing.

Trial began on October 22, 2001, commencing with the Court’s ruling from the bench on Petitioner’s spoliation motion. Quoting extensively from the Second Circuit Court of Appeals’ seminal decision in West v. Goodyear Tire and Rubber Co² the Court noted:

Spoliation is 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. It has long been the rule that spoliators should not benefit from their wrongdoing …

The Court made clear that its power to impose sanctions for spoliation of evidence was broad and did not depend on the existence of a discovery order—the duty to preserve evidence existed irrespective of whether such an order was in place or, even, whether suit had yet been filed. It further explained that sanctions as severe as dismissal could be justified in appropriate circumstances; alternatively the Court may preclude the admission of evidence, take adverse inferences that the precluded evidence would have been unfavorable to the sanctioned party, give suitable jury instructions or award attorneys’ fees or other monetary sanctions. The Court instructed that the sanction imposed "should be molded to serve the prophylactic, punitive and remedial rationales underlying the spoliation doctrine" and "should be designed to: (1) deter parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore the prejudiced party to the same position he would have been in absent the wrongful destruction of evidence by the opposing party."

The Court ultimately granted Petitioner’s motion for sanctions, concluding: (1) Petitioner’s repeated requests for access to the cable in advance of the repairs "were either actually or constructively ignored by [Claimants] and their counsel,"; (2) "[Claimants] conduct in taking the secret samples and not revealing this was egregious,"; and (3) Petitioner’s repeated requests for access to the cable were "not unintelligible," as Claimants contended, but rather:

They were clear, and to an experienced lawyer indicate one thing. You show them the cable before its repaired, before it’s pulled, after it’s pulled, during the time it’s pulled, and every other time if you want to collect millions of dollars. And you make sure that it’s done and you follow it up with certified letters, faxes and e-mails, giving them the opportunity, full opportunity to inspect instead of this surreptitious or negligent—being kind—destruction of the key evidence in the case.

As sanction for Claimants’ spoliation of evidence, the Court precluded Claimants from introducing any evidence concerning the condition of the cable³ and took an adverse inference that the precluded evidence would have been unfavorable to Claimants. These sanctions, taken together, effectively prevented Claimants from being able to prove that the repairs were necessitated by the casualty and not due to some pre-existing damage or condition. In addition, the Court awarded Petitioner its attorneys’ fees and costs incurred in connection with the spoliation issue, including for all fact discovery related to the spoliation issue, the fees and costs of all expert witnesses retained in respect of the issue and all related motion practice.

The case subsequently settled very promptly on terms extremely favorable to Petitioner.

With thanks to John G. Ingram and Thomas H. Belknap, Jr Healy & Baillie, LLP, New York, for preparing this article.

1 Complaint of Moran Towing Corp., 96 Civ. 1647, 96 Civ. 2272 (Spatt, J.) (Opinion issued from the bench).
2 167 F.3d 776, 779 (2d Cir. 1999)
3 Except for evidence relating to two specific instances when Petitioner actually was permitted to inspect certain small portions of the cable.