Spoliation of Evidence: A New Defense in Products
Liability Cases
Parties to products liability cases need to be aware of the
spoliation of evidence defense, know when it should be raised, the risks
of raising the defense and how it can be defeated.
By Monte E. Weiss
Manufacturers in Wisconsin have a new defense in products liability
cases as a result of a recent Wisconsin Court of Appeals decision,
Sentry Insurance v. Royal Insurance Co. 1 The defense is spoliation of evidence. In products
liability cases, one of the more difficult positions for a manufacturer
or other distributor to defend is a claim that its product was defective
or malfunctioned when the product itself is unavailable for inspection
and testing. To complicate matters, these entities often are called to
defend such claims after the plaintiff's expert has examined the
product. In recent years, several courts have dismissed products
liability lawsuits where there was a failure to preserve essential
evidence. 2 Wisconsin now has joined those
other jurisdictions as a court of appeals affirmed a lower court's
dismissal of a subrogation action because that insurer failed to
preserve a refrigerator that was the suspected cause of a fire. Although
usually raised in the context of insurance subrogation cases, the
defense of spoliation of evidence may apply in any products liability
case where the product allegedly responsible for the loss has been lost
or destroyed. Parties on both sides of products liability cases need to
be aware of this defense, know when it should be raised, the risks of
raising the defense and how it can be defeated.
The Advent of the Spoliation Defense
Sentry arose from the ashes of a home owned by an insured of
Sentry Insurance, A Mutual Co. (Sentry). During its investigation into
the loss, Sentry hired a cause and origin expert. This expert examined a
refrigerator suspected of causing the fire, took numerous photographs,
removed a variety of component parts and concluded that the fire
resulted from the failure of certain electrical components of that
refrigerator. 3 At some point after this
investigation, the refrigerator was discarded in a local landfill.
Sentry contended that the disposal was without its authorization.
Thereafter, Sentry commenced a lawsuit seeking reimbursement of its
subrogated interest as a result of what it contended to be a
malfunctioning refrigerator.
The refrigerator manufacturer's insurer, Royal Insurance Co. (Royal),
moved the court for sanctions based upon the intentional removal of
various refrigerator components (as part of Sentry's expert's
destructive testing) and the improper disposal of the unit before Royal
had an opportunity to inspect and test the unit. In support of its
motion, Royal's expert testified that "the removal of the component
parts prevented him from checking the wiring and performing specific
tests on the electrical circuit, which are critical to a fire
investigation."4 The electrical system and
components were not in place, so testing could not be conducted. The
trial court concluded that Royal was deprived of its ability to defend
against the claim, and to sanction such conduct the trial court excluded
any evidence of the refrigerator's condition. Since Sentry's subrogation
action could not be maintained without evidence of the refrigerator's
condition, the trial court subsequently entered summary judgment,
dismissing Sentry's complaint. Sentry's failure to properly preserve
essential evidence resulted in the dismissal of its action.
Although the problem of spoliation of evidence is old, prior to
Sentry Wisconsin trial courts had very little law to guide them
in addressing the failure to preserve essential evidence in products
liability litigation. Now, Sentry provides authority to trial
courts to exclude evidence that proves the existence of a defect that
caused damage or loss, if that evidence has not been properly preserved.
Under Sentry , a defendant seeking an eventual dismissal based
upon the failure to properly preserve evidence relevant to the
litigation has to show that the facts of the case pass a two-part test:
1) the conduct responsible for causing the destruction must be, at
least, egregious, if not intentional; and 2) the destruction must
prejudice the ability to adequately defend against the claims
asserted.
The facts in Sentry passed the first step. Sentry was
attempting to build a subrogation case against the refrigerator
manufacturer. Moreover, Sentry's expert acknowledged the importance of
physically observing the refrigerator in forming his opinions. By
conducting the destructive testing, Sentry's expert denied Royal the
same opportunity to inspect and test the unit. The ex parte destructive
testing constituted conduct beyond mere negligence. The trial court
concluded that the removal of the component parts was intentional. The
Sentry trial court also found that the disposal of the
refrigerator was, "at a minimum," negligent. 5 These findings, along with Sentry's own expert's
admission of the importance of actual observation in forming opinions,
coupled with Sentry's implicit knowledge of the importance of evidence
in subrogation actions, supported the finding of conduct that warranted
sanctions.
Sentry contended that prior case law precluded imposing this sanction
which is "tantamount to dismissal for negligent destruction of
evidence." 6 The appellate court rejected
this assertion, noting that the trial court found both intentional
conduct (removal of component parts) and negligent conduct (disposal of
the refrigerator). The Sentry court did not hold that negligent
conduct alone was sufficient to warrant the exclusion sanction. Instead,
the presence of the intentional conduct along with the negligent conduct
was punishable by the exclusion sanction. In general, Wisconsin courts
that have sanctioned parties by dismissing their lawsuits have required
a finding of egregious conduct. 7 It is
unclear from the Sentry court's opinion whether intentional
conduct is needed to support a dismissal. However, it is unlikely that
the standard has now been raised to require intentional conduct because
the court noted that Sentry's negligent conduct of allowing the
refrigerator's disposal warranted some sanction. At a minimum, the
Sentry court's ruling appears to be consistent with prior Wisconsin law
requiring more flagrant conduct than mere negligence to warrant such a
severe sanction.
The second requirement needed to support the exclusion sanction is a
finding of sufficient prejudice. The prejudice must destroy the
defendant's ability to adequately defend against the claim.
Sentry illustrates the extent of the prejudice required.
Royal's expert testified that he was unable to check the unit's wiring
and conduct specific tests on the electrical circuit that were essential
to a fire investigation. The trial court found that removing the
component parts precluded Royal's expert from conducting tests to
determine whether the electrical components were properly wired and
examine the condition of various seals on the wires. Due to the conduct
of Sentry's expert, the trial court found that Royal was deprived "of
the opportunity to conduct tests essential to its adequate defense of
the claim made against it." The trial court found that the deprivation
was more than cosmetic. This deprivation prejudiced Royal such that the
trial court found that Royal could not adequately defend against the
claim. As both a punishment for the objectionable conduct and as a means
to alleviate the prejudice to Royal, the sanction of exclusion of any
evidence concerning the refrigerator's condition was deemed appropriate.
8
Lessons from Sentry
Motions for Sanctions Addressed Under Discretionary
Standard
Parties who present or defend against products liability claims
should take heed of the several lessons of Sentry . First, it
is important to note that the motions filed generally are not motions
for summary judgment or for dismissal but rather are for sanctions. A
summary judgment motion is not the vehicle for obtaining the dismissal
of the plaintiff's claim based upon spoliation of evidence because the
plaintiff usually will have sufficient evidence to present a prima facie
case of products liability. Instead, a defendant seeking such relief
first must move to exclude evidence of the product's condition pursuant
to a motion for sanctions. Once excluded, no evidence will remain upon
which a jury can find products liability. Summary dismissal of the claim
then is appropriate.
Since the necessary motion will be for sanctions, it will be up to
the trial court's discretion to determine what sanctions, if any, should
be imposed. More importantly, any appellate court reviewing a trial
court's dismissal will do so under an erroneous exercise of discretion
standard. Under this standard, if the trial court properly applied the
law to the facts and the trial court's decision was one that a
reasonable judge would make, then the sanction ruling will be upheld on
appeal. 9 This point is significant because
Wisconsin appellate courts will affirm a trial court's discretionary
ruling even though the reviewing court may not have made the same
decision as did the trial court. Therefore, if ample facts can be
mustered to demonstrate sanctionable conduct and sufficient prejudice,
then the presence of some countervailing facts normally will not be
enough to warrant reversing a trial court's decision. This standard
benefits those who face such claims and are not afforded the opportunity
for full investigation.
Duty to Preserve Essential Evidence
Sentry establishes a duty on parties seeking to recover for
allegedly defective products to preserve evidence essential to the claim
being litigated. For example, in Sentry the refrigerator and
many of its components were not preserved. After Sentry's expert
conducted his tests, the refrigerator was disposed of in a local
landfill. Royal could not discover the refrigerator's serial number or
model number. Royal also was prevented from examining the condition of
certain seals around the wires of the unit. Although the crux of the
Sentry decision focused upon the intentional conduct of the
destructive testing, the court acknowledged that the negligent disposal
of the refrigerator justified sanctions. Henceforth, parties seeking to
recover for damage caused by allegedly defective or malfunctioning
products have a duty to preserve such evidence, so that the target
defendant can fully investigate and defend against the claims
asserted.
Preserving the evidence can encompass more than merely retaining the
specific item in question. The duty can extend to maintaining the item's
structure intact for future evaluation and testing. Sentry
provides guidance as to the extent of this duty. In Sentry the
requirement to preserve the evidence extended to the components of the
refrigerator itself. In addition to inspecting and photographing the
refrigerator, Sentry's expert conducted ex parte destructive testing.
This testing included removing the burned timer motor, wire assembly,
wires attached to the compressor, the compressor thermostat, the upper
limit thermostat, the burned capacitor, the compressor motor on/off
switch and the frame supporting apparatus. 10 Some of these items were the very components
that Sentry's expert opined caused the fire. Sentry's expert had now
destroyed the refrigerator's integrity such that even if it never was
disposed of, Royal's expert never would have been able to examine the
unit in the condition it was at the time of the loss. Therefore,
conclusions that could be drawn from or supported by observations of the
unit at the time of the loss were lost forever.
Arguably, where the nature of the product alleged to have caused the
loss involves a series of components working in unison, it may be
necessary to maintain the entire product even though some of the
components are not relevant to the cause of the loss. For example, to
undertake a complete investigation into the cause of the loss, it also
may be necessary to verify that the product was properly assembled or
properly integrated into another product. Maintaining the entire product
also may be needed to determine if any modifications were made to the
product or if the product was misused. Recovery under a strict liability
claim is not permitted where a product undergoes substantial and
material changes after it leaves the manufacturer's possession, 11 or where the product was abused or misused.
12 Therefore, depending upon the product
and the nature of its alleged failure, preserving its integrity may be
essential to maintaining a products liability claim.
To successfully
invoke the defense, those faced with products liability claims without
the product should demonstrate that the product was under the control of
the plaintiff when it was lost or destroyed; that the loss of the
evidence was intentional or egregious; and the absence of the product
prevents an adequate defense against the claim. |
Inability to Defend Against Claim Is Essential
Sufficient prejudice of the ability to defend must be established. As
noted in Sentry , the plaintiff's conduct must prejudice the
defendant's ability to defend against the claims asserted in order for
this defense to be successful. Several important lessons flow from the
Sentry appellate court's recitation of the basis of the trial
court's finding of prejudice. First, expert testimony is likely
necessary to establish the requisite prejudice. Royal demonstrated, by
way of expert testimony, that certain examinations and tests were
critical to fire investigations and therefore necessary to defend the
case. Royal's expert testified that the destructive testing and disposal
of the unit precluded those examinations and tests. As a consequence,
the trial court concluded that Royal was denied the opportunity to
investigate the cause of the fire.
The need for expert testimony to prove the inability to defend makes
sense in light of the general requirement that expert testimony is
necessary to prove the existence of a defect when the proof of such
evidence requires testimony from those having specialized knowledge,
training and experience.13 It often is
necessary for an expert to demonstrate how and why physical inspection
and testing is needed to determine the true cause of the loss. Without
an opportunity to inspect and test, a defendant may be unable to
evaluate the theory of liability against it, much less discover other
potential explanations for the loss.
To establish this prejudice, it is important for the defendant to
demonstrate that its expert is unable to evaluate the mechanical,
electrical, structural or other substantive basis of the claims
asserted. The defendant also should attempt to establish that based upon
the absence of the evidence, its expert is unable to formulate a soundly
based opinion on the cause of the loss.14
By demonstrating that its expert is unable to evaluate the plaintiff's
theory of liability and unable to conduct its own investigation to
ascertain the cause of the loss, the defendant should be able to
demonstrate the requisite prejudice. Once demonstrated, the trial court
may be left with little choice but to bar any evidence regarding the
unit's condition. Prudence suggests that the defendant provide this
basis for the trial court's factual determinations. After all, the
plaintiff's own expert likely will opine that there is sufficient
evidence (by way of photographs, videotape and/or existing components)
to fully investigate the cause of the loss.
Second, depending upon the nature of the claims asserted, secondary
evidence may not be a sufficient alternative to primary investigation
and testing. For example, Sentry contended that the numerous
photographs, the retention of some of the component parts and the
detailed report of its expert were sufficient for Royal to defend the
case. The trial court made a finding of fact to the contrary. The trial
court found that the secondary evidence of photographs and even some of
the component parts were insufficient to alleviate the prejudice to
Royal. This factual finding supported the trial court's discretionary
ruling.
The significance of a trial court's factual findings is readily
apparent at the appellate level. A trial court will have wide latitude
in evaluating the information placed before it on motions for sanctions.
The factual findings made by a trial court that are essential to support
its decision, such as those made by the Sentry trial court, are
analyzed by a reviewing court under the clearly erroneous standard.
Under this standard, unless the factual determination is contrary to the
great weight and clear preponderance of the evidence, the facts will be
accepted as true. 15 Consequently, a party
on the losing side of the motion will face an uphill battle in seeking a
reversal of the trial court's decision.
Providing such expert testimony, however, is a double-edged sword.
While such evidence ought to be sufficient to warrant a dismissal, such
a result is not assured. As noted earlier, a decision to bar evidence
and dismiss a case is vested to the trial court's discretion.
Countervailing facts or factors may demonstrate that a dismissal is
inappropriate. For example, despite the spoliation of evidence,
plaintiffs in other jurisdictions have been allowed to proceed on
theories of liability where the allegedly defective item was retained
but other physical items that were possible explanations for the loss
were destroyed; 16where only certain
component parts were preserved and others were not; 17 where the plaintiff's expert was allowed to
testify about evidence that was lost while in the custody of the
plaintiff's counsel, even though the defense had not examined the
missing evidence; 18 and even where the
plaintiff's expert performed ex parte destructive testing to discern the
cause of the loss, before notice of the loss was provided to the
defendant. 19 Thus, even if a reviewing
court disagrees with the trial court's decision, provided that the trial
court's decision was not an erroneous exercise of its discretion, the
reviewing court will affirm the trial court. Furthermore, even if there
are sufficient facts upon which a trial court can ultimately dismiss a
case, there is an inherent reluctance of courts to grant such motions.
20 Hence, while a defendant may believe
that a sufficient factual predicate for the motion has been established,
a court may disagree and impose sanctions other than barring all
evidence concerning the product's condition.
If such a motion is denied, then the defendant either must locate a
different cause and origin expert or, if warranted, have its expert
reevaluate the case to determine if the true cause of the loss can be
discerned with additional information, testing and evaluation. In any
event, the initial expert and any subsequent expert will be subject to
attacks on their credibility and integrity during cross-examination. At
trial, the defendant will be accused of "expert shopping." Therefore,
assertion of this defense must not be made cavalierly. Only after
careful evaluation of the facts, investigation of alternative means of
uncovering similar or additional evidence and honest evaluation of the
likelihood of success of the merits of a motion, should a defendant file
the motion. Notwithstanding the foregoing, this defense should be
raised, at least upon information and belief, as an affirmative defense
to any products liability lawsuit where the product is missing, lost or
has been destroyed.
Claims of Prejudice Should Be Fully
Investigated
In responding to this defense, the plaintiff's expert should be
consulted to determine if it can be shown that there are other methods
of investigating and testing the theory of liability or theory of
nonliability other than directly testing the product itself. (After all,
allegedly defective or malfunctioning products often are destroyed in
the occurrence.) Perhaps it can be shown that different tests or other
investigation methods beyond those suggested by the defendant's expert
will yield the same information. For example, a defendant's claim of
prejudice due to spoliation of evidence may not be sufficient to warrant
a dismissal in the context of a design defect case. In such cases, the
physical inspection and testing of the specific product may not be as
important because the defect allegedly is common to all products of that
design. Testing of another unit of the same design may be an adequate
substitute. Also, by evaluating other evidence, such as the presence or
absence of damage to other components or structure of the entire unit,
it may be possible to show that the defendant still can adequately
investigate and defend against the claims asserted.
Efforts should be taken in discovery of the defendant's experts to
itemize all of the activities the expert would have done had the
evidence not been destroyed or lost. Inquiry then should be directed to
what the expert would have expected those activities to show.
Thereafter, the focus should be on eliciting from the expert that there
are other means to obtain the same or similar information, minimizing
any prejudice to the defendant. Finally, it should be determined if the
defendant's expert has an opinion, to a reasonable degree of
probability, in the expert's field of expertise, as to the cause of the
loss. If the expert does have such an opinion, then the defendant should
be precluded from demonstrating that the defendant is prejudiced such
that he or she is unable to adequately defend against the claims
asserted. The ability to formulate an opinion, to the requisite level of
expert probability, demonstrates the absence of prejudice sufficient to
warrant an exclusion sanction. The sanction of exclusion is designed to
remedy a situation where the defendant is so prejudiced by the
plaintiff's conduct that an adequate defense cannot be mounted. Hence,
if the defendant is able to adequately defend against the claim, then it
would be unfair to impose the exclusion sanction with its attendant
consequence of a dismissal.
However, the best method to defeat such a defense is to simply avoid
providing the basis for the defense. Whenever possible, parties claiming
that a product caused a loss ought to notify potential defendants of the
loss immediately. In addition, ex parte destructive testing should be
avoided if at all possible. Where such testing is necessary to discern
the existence of a defect or malfunction, then every effort should be
taken to notify all concerned and record the testing itself, not just
the test results. Finally, the evidence should be properly stored until
after the claim is settled or fully litigated. Guidance from experts and
counsel should ensure adequate preservation of evidence. Paying the
storage cost is better than losing out on the chance to recoup from the
responsible party.
![](/SiteCollectionImages/WisconsinLawyer/1997/05/monte.gif) |
Monte E. Weiss,Case Western Reserve Univ. 1991, is an associate with
Otjen, Van Ert, Stangle, Lieb & Weir S.C., Milwaukee. He
concentrates his practice on the defense of personal injury, products
and premises liability cases, and represents insurance carriers on
environmental coverage actions.
|
Conclusion
Wisconsin now recognizes the use of spoliation of evidence as a
defense to a products liability claim. To successfully invoke the
defense, those faced with products liability claims without the product
should demonstrate that the product was under the control of the
plaintiff when it was lost or destroyed; that the loss of the evidence
was intentional or egregious; and the absence of the product prevents an
adequate defense against the claim.
Those who face such defenses should fully investigate the validity of
the claims of prejudice and attempt to alleviate or minimize whatever
prejudice is present. Fairness dictates adequate preservation of the
evidence be undertaken before a valid products liability claim can go to
a jury. Correspondingly, if there is no real prejudice to the defendant
then the matter should be resolved by the jury.
Endnotes
1 Sentry Ins. v. Royal Ins.
Co., 196 Wis. 2d 907, 539 N.W.2d 911 (Wis. Ct. App. 1995).
2 See, for example, Bachmeier
v. Wallwork Truck Centers, 544 N.W.2d 122 (N.D. 1996); Capital
Chevrolet Inc. v. Smedley, 614 So. 2d 439 (Ala. 1993); American
Family v. Village Pontiac, 223 Ill. App. 3d 624, 585 N.E.2d 1115
(Ill. App. 1992). Also, for excellent summaries of the law regarding
spoliation of evidence in other jurisdictions, including the tort of
spoliation of evidence, see W. Russell Welsh & Andrew C. Marquardt,
"Spoliation of Evidence: Don't Sweep Your Ethics - Or The Law - Under
The Rug," 23 The Brief 8 (Winter 1994); Scott S. Katz &
Anne Marie Muscaro, "Spoilage of Evidence - Crimes, Sanctions,
Inferences and Torts," 29 Tort & Ins. L.J. 51 (Fall 1993); Sam
LaManna, "Spoliation of Evidence in Products Litigation," For The
Defense 8 (May 1993); Saverio LaManna, "Spoliation of Evidence in
Products Litigation," For The Defense 9 (October 1991).
3 Sentry, at 911-12, 539
N.W.2d at 913.
4 Id. at 917, 539 N.W.2d
at 915.
5 Id. at 913, 539 N.W.2d
at 914.
6 Id. at 918, 539 N.W.2d
at 915 (citing Jagmin v. Simonds Abrasive Co., 61 Wis. 2d 60,
211 N.W.2d 810 (Wis. 1973), Milwaukee Constructors II v. Milwaukee
Metro. Sewerage Dist., 177 Wis. 2d 523, 502 N.W.2d 881 (Ct. App.
1993), rev. denied, 508 N.W.2d 421 (Wis. 1993)).
7 For example, see
Johnson v. Allis Chalmers Corp., 162 Wis. 2d 261, 279-80, 470
N.W.2d 859, 864 (Wis. 1991), Milwaukee Constructors, 177 Wis.
2d at 532-33, 502 N.W.2d at 884 (Wis. Ct. App. 1993).
8 Sentry at 917-18, 539
N.W.2d at 915.
9 Milwaukee Constructors,
177 Wis. 2d 523, 529-30, 502 N.W.2d 881, 883.
10 Sentry at 911-12, 539
N.W.2d at 913.
11 Glassey v. Continental
Ins. Co., 176 Wis. 2d 587, 600, 500 N.W.2d 295, 301 (Wis. 1993),
reconsid. den'd, 508 N.W.2d 25 (Wis. 1993).
12 Dippel v. Sciano, 37
Wis. 2d 443, 460, 155 N.W.2d 55, 63-64 (Wis. 1967).
13 State v. Witaker, 167
Wis. 2d 247, 481 N.W.2d 649 (Wis. Ct. App. 1992), rev. denied, 490
N.W.2d 22 (Wis. 1992); Drexler v. All American Life and Casualty
Co., 72 Wis. 2d 420, 241 N.W.2d 401 (Wis. 1976); and Cramer v.
Theda Clark Mem'l Hosp., 45 Wis. 2d 147, 172 N.W.2d 427 (Wis.
1969).
14 See Cincinnati Ins. Co. v.
Synergy Gas Inc., 585 So. 2d 822, 824 (Ala. 1991), reh'g granted,
1993 WL 186746, opinion withdrawn, for similar analysis.
15 Sentry at 917, 539
N.W.2d at 915.
16 Mayes v. Black &
Decker Inc., 931 F. Supp. 80 (D.N.H. 1996).
17 Cincinnati Ins., 585
So. 2d 822 (Ala. 1991).
18 Hamann v. Ridge Tool
Co., 213 Mich. App. 252, 539 N.W.2d 753 (Mich. App. 1995).
19 Schmid v. Milwaukee Elec.
Tool Corp., 13 F.3d 76 (3rd Cir. 1994).
20 Trispel v. Haefer, 89
Wis. 2d 725, 732, 279 N.W.2d 242, 245 (Wis. 1979).
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