WILLIAM C. LEE, District Judge.
This matter is before the Court on the Motion for Sanctions Based on Defendant's Spoliation of Evidence filed by Plaintiff Aspen American Insurance Co. (ECF 64). Defendant Interstate Warehousing, Inc., filed a response in opposition (ECF 67) and Aspen American filed a reply (ECF 68). Also pending before the Court is a Motion to Strike Untimely Discovery Responses filed by Aspen (ECF 70), to which Interstate filed a response in opposition (ECF 72) and Aspen filed a reply (ECF 73). For the reasons explained below, the Motion for Sanctions is GRANTED in part (as to the issue of spoliation of evidence) and DENIED in part (as to the applicable sanction to be imposed), and the Motion to Strike is DENIED.
Interstate Warehousing owns and operates cold storage warehouses throughout the United States, including one in Hudsonville, Michigan. Eastern Fish Company sells and distributes frozen seafood and contracted to store some of its products-about $2.5 million worth-in Interstate's warehouse in Hudsonville. The frozen seafood was then distributed to grocery stores for sale to consumers. On March 8, 2014, part of the roof of Interstate's Hudsonville warehouse collapsed following a heavy snow, and Eastern Fish's inventory was either destroyed or rendered unfit for sale to consumers. Aspen American, as Eastern Fish's insurer, paid Eastern Fish for the loss of its products in return for subrogation rights to pursue Interstate Warehousing. Aspen brought this suit to recoup its money, contending that the loss of its insured's products was Interstate's fault. Aspen contends that Interstate knew or should have known that the warehouse in Hudsonville was structurally unable to handle the weight of excessive snow and therefore Interstate should be made to pay the loss incurred by Eastern Fish as a result of what Aspen alleges was a preventable incident. Interstate insists that its contract with Eastern Fish included a limitation of damages provision that limits Interstate's liability, assuming it is determined to be liable, to $128,400.00. Interstate also insists that the roof collapse was the result of an act of God, occurring without the fault of Interstate, and so the company cannot be held liable for the loss.
The parties previously filed cross-motions for partial summary judgment. Interstate moved for summary judgment on the issue of the limitation of liability provision and the spoliation issue. Defendant's Motion for Partial Summary Judgment (ECF 35). Aspen American moved for summary judgment on the issue of liability and the issue of spoliation of evidence. Plaintiff's Motion for Partial Summary Judgment (ECF 40). In an Opinion and Order entered on March 13, 2019, the Court denied Interstate's motion as to the issue of limitation of liability, granted the motion as to the issue of spoliation of evidence, and denied Aspen American's motion in its entirety. Opinion and Order (ECF 56). The Court concluded that the issues of whether Interstate Warehousing is liable for Aspen American's loss and, if so, whether that liability is capped by the damage limitation provision in Interstate's contract with Eastern Fish, could not be resolved on summary judgment since they require a weighing of the evidence as well as credibility determinations. The Court denied Aspen American's motion for summary judgment as to liability based on the same reasoning, i.e., that genuine issues of material fact require a trial on the issue of liability. The Court also denied Aspen American's motion as to the issue of spoliation, concluding (as Interstate had argued) that an allegation of spoliation of evidence cannot be the basis for an independent claim or cause of action. Instead, the spoliation issue had to be presented to the Court in a motion for sanctions. Accordingly, Aspen American filed the present motion, contending that Interstate committed spoliation of evidence by disposing of structural components (including support beams) of the warehouse at the site of the roof collapse. Aspen American moves the Court to impose sanctions against Interstate for the alleged spoliation.
The Court explained in its order on the motions for summary judgment that Indiana law governs the issue of spoliation in this diversity case and the parties agree. See Plaintiff's Memorandum in Support of Motion for Sanctions (ECF 65), p. 5 ("This matter is brought pursuant to the Court's diversity jurisdiction. Therefore, Interstate's duty to preserve evidence is governed by Indiana law."); Defendant's Response Brief in Opposition to Plaintiff's Motion for Sanctions (ECF 67), p. 6 ("Defendant agrees with Plaintiff and the Court that, because this matter is brought under this Court's diversity jurisdiction, the issue of spoliation of evidence in this matter is governed by Indiana law.").
"Spoliation is a particular discovery abuse that involves the intentional or negligent destruction, mutilation, alteration, or concealment of physical evidence." N. Indiana Pub. Serv. Co. v. Aqua Envtl. Container Corp., 102 N.E.3d 290, 300 (Ind.Ct.App. 2018) (quoting Popovich v. Ind. Dep't of State Revenue, 17 N.E.3d 405, 410 (Ind. Tax Ct. 2014)). "A party raising a claim of spoliation must prove that (1) there was a duty to preserve the evidence, and (2) the alleged spoliator either negligently or intentionally destroyed, mutilated, altered, or concealed the evidence." Id. (citing Popovich, 17 N.E.3d at 410; Glotzbach v. Froman, 854 N.E.2d 337, 338-39 (Ind. 2006) ("the duty to preserve evidence may be assumed voluntarily or imposed by statute, regulation, contract, or certain other circumstances.")). The Indiana Court of Appeals recently explained as follows:
Golden Corral Corp. v. Lenart, 127 N.E.3d 1205, 1217-18 (Ind.Ct.App. 2019). And as this Court has explained:
ArcelorMittal Indiana Harbor LLC v. Amex Nooter, LLC, 2018 WL 509890, at *2 (N.D. Ind. Jan. 23, 2018).
If a court concludes that a party committed spoliation of evidence, it must determine what sanction, if any, should be imposed. On that point the Indiana Court of Appeals has explained as follows:
WESCO Distribution, Inc. v. ArcelorMittal Indiana Harbor LLC, 23 N.E.3d 682, 702-03 (Ind.Ct.App. 2014). Finally, while "spoliation of evidence permits a jury to `infer that the missing evidence [is] unfavorable' to the party who intentionally destroyed evidence[,] . . . [t]he inference does not relieve [the movant] of proving their case." Flaherty & Collins, Inc. v. BBR-Vision I, L.P., 990 N.E.2d 958, 970-71 (Ind.Ct.App. 2013) (citations omitted).
As set forth above, a party can only be liable for spoliation of evidence if that party had a duty to preserve the evidence at issue. In the present case, the Court finds that Interstate had a duty to preserve the structural components of the warehouse at the point of the roof collapse. Interstate argues that Aspen American's letter addressing the preservation of evidence was "vague" and did not put Interstate on notice that parts of the warehouse structure itself had to be preserved. Interstate argues as follows:
Defendant's Brief in Opposition, pp. 7-8. Interstate then insists that because it afforded Aspen American's expert, James Goes, several opportunities to visit the site, it fully complied with Aspen American's preservation of evidence letter.
In its reply brief, Aspen American responds to Interstate's argument as follows:
Plaintiff's Reply Brief, p. 3 (citations to record omitted). Aspen American's preservation letter stated in relevant part as follows:
Plaintiff's Memorandum in Support (ECF 65), p. 3 (quoting Letter from Aspen American's counsel to Interstate Senior Vice President Brad Hastings).
The Court finds Interstate's arguments unavailing. Interstate had a duty to preserve evidence related to the roof collapse, including the structural components of the warehouse itself, and Aspen American's preservation letter was not vague or confusing on that point. Interstate is a sizeable and sophisticated business entity, which undermines its argument that it was unclear or unsure about its duty to preserve evidence in light of Aspen American's notice. As set forth above, the law requires a party to "not lose, destroy or suppress material facts or evidence prior to the commencement of the lawsuit that the party knew or should have known was imminent." ArcelorMittal Indiana Harbor LLC v. Amex Nooter, LLC, 2018 WL 509890, * 2 (N.D. Ind. Jan. 23, 2018). Interstate does not dispute that it received Aspen American's notice of claim dated March 13, 2014, and Aspen's preservation letter dated March 20. The notice and preservation letter were sufficient to put Interstate on notice that it had a legal duty to preserve evidence related to the roof collapse, including the structural components of the building itself. Interstate's attempt to argue that the notice was "vague" or somehow did not alert Interstate to its duty to preserve those components is unconvincing. The Court finds that Interstate had a legal duty to preserve evidence of the structural failure.
The Court now turns to the substantive issue, which is whether Interstate committed spoliation of evidence with regard to the structural components of the warehouse and, if so, what sanctions, if any, should be imposed. In its motion for sanctions, Aspen American "moves this Court to sanction defendant, Interstate Warehousing, Inc., for its spoliation of evidence, and grant the following relief:
Aspen American claims that "Mr. Goes first visited the Warehouse on March 20, 2014. During that visit, Interstate did not permit Mr. Goes to move anything that would allow an examination of the point of failure of the roof. . . . The evidence of the Roof Collapse was still intact as of March 20, 2014." Id., pp. 2-3 (including photograph of collapsed roof dated March 20, 2014). Also on March 20, 2014, Aspen American "provided written notice to Interstate by overnight mail. The notice advised Interstate to preserve evidence related to the roof collapse, and allow plaintiff to investigate, or Interstate would face consequences for spoliation of evidence." Id., p. 3. Aspen American states that "Mr. Goes spoke with Nate Tippmann, General Manager of the Warehouse, following the March 20, 2014[,] notice provided to Interstate." Id. In Goes' letter dated April 18, 2014, he states the following:
Goes Letter (ECF 41-23), pp. 1-2. Goes' letter includes several photographs that he states provide "[a] chronology in pictures" depicting the damage from the roof collapse and the condition of the warehouse as of March 20, 2014, (id., pp. 2-6), as well as showing what the warehouse looked like on April 24, 2014, after the debris had been cleared and structural repairs had begun (id., pp. 6-16). Describing Goes's efforts to examine the site of the collapse, Aspen American states as follows:
Brief in Support, p. 3 (quoting Goes Letter (ECF 41-23), p. 2). Aspen American alleges that "Goes made a final visit to determine if any evidence remained that could assist his investigation of the cause and origin of the Roof Collapse. However, as Mr. Goes reported:
Id., p. 4 (quoting Goes Letter, p. 4). Goes stated his findings and conclusions as follows:
Goes Letter, p. 17. Aspen American further asserts that:
Brief in support, p. 5 (internal citations to record omitted). Based on this factual premise, Aspen American argues that Interstate "had a duty to preserve evidence[,]" failed to do so and "destroyed evidence of the Roof Collapse[,]" and that this alleged "destruction of evidence severely prejudiced plaintiff's ability to prosecute its claims in this action." Id., pp. 9-13. Aspen American argues that Interstate should be subject to severe sanctions for its alleged destruction of evidence.
Interstate responds by contending that Aspen American "conveniently ignores a number of relevant facts and issues in this case which show that Plaintiff's motion for sanctions has no merit. Specifically, Plaintiff ignored the fact that, after the roof collapse, Interstate was issued a directive from the Ottawa County [Michigan] Department of Public Health to `[e]liminate the harborage conditions that may have been created due to roof collapse' by March 24, 2014. Additionally, Plaintiff wholly failed to inform the Court that Interstate offered to allow Plaintiff, or its agents, to inspect the collapsed facility pursuant to a Hold Harmless Agreement acknowledging the remaining `extremely hazardous conditions' created by the roof collapse. Finally, Plaintiff entirely overlooks Mr. Goes' additional opportunities to inspect the collapsed structure components prior to their disposal. All of the foregoing additional facts must be considered by this Court when determining whether it should impose sanctions on Defendant." Defendant's Response Brief in Opposition (ECF 67), p. 2. Interstate also argues that Aspen American "overestimates the amount of prejudice, if any, it suffered as a result [of] Interstate's disposal of the collapsed building materials pursuant to the directive issued by the Ottawa County Department of Public Health. Specifically, Plaintiff's argument that the collapsed building materials could have harbored evidence of Interstate's gross negligence is misguided and unsupported by basic logic. Therefore, . . . Interstate did not commit spoliation of evidence and Plaintiff's Motion for Sanctions should be denied in its entirety." Id., pp. 2-3.
Interstate's argument that it did not commit spoliation of any evidence is based largely on the premise that the actions it took after the collapse were necessary and even mandated by Michigan county and state agencies. Interstate explains as follows:
Id., p. 3 (internal citations to record omitted). Interstate also asserts that it notified Eastern Fish on March 13, 2014, "of the collapse and resulting loss of its product. On March 14, 2014, Plaintiff issued its notice of claim to Defendant. . . . On March 14, 2014, Defendant responded to Plaintiff's notice of claim and notified Plaintiff that the collapse and resulting loss was occasioned by an Act of God." Id., pp. 3-4.
Interstate also takes issue with Aspen American's argument that its investigating expert, Goes, was denied sufficient access to the site. According to Interstate, it endeavored to ensure that Goes had opportunities to inspect the site, and points out that he did so on several occasions, which it recounts in its brief:
Defendant's Brief in Opposition, pp. 4-5 (internal citations to record omitted).
In its reply brief, Aspen American takes issue with Interstate's contention that Goes was permitted to examine the warehouse on several occasions. Aspen American argues that "James Goes was never allowed to examine critical components involved in the failure of the structure, despite his diligence. . . . Based on his limited observations, Mr. Goes opined that a joist connection could have caused or contributed to the structural failure." Plaintiff's Reply (ECF 68), p. 4. Aspen American also insists that "Interstate cannot hide behind the local government to avoid the consequences for destruction of evidence. Interstate controlled every aspect of the postcollapse process. Interstate controlled access to the site [and] controlled the persons that it allowed to inspect the structural failure. . . . Interstate even controlled the date of the demolition of the structure, which occurred after the `deadline' provided in the notice from the local government. Interstate could have and should have provided Mr. Goes with access to the critical structural components that failed." Id., p. 7. Aspen American also takes issue with Interstate's argument that Aspen suffered no prejudice as a result of the destruction of the warehouse components. Aspen American argues as follows:
Id., p. 8 (quoting Interstate's response brief, p. 13).
So the battle lines are drawn. Aspen American argues that Interstate concluded immediately that the roof collapse was an Act of God, quickly sought to remove parts of the structure of the warehouse before Aspen American could examine them closely and thoroughly, and now waives around the notices from governmental entities to hide, or at least justify, their actions. Interstate, on other hand, argues that it afforded Goes several opportunities to inspect the site and that it was obligated to comply with the governmental notices regarding the clean-up of the damaged structure.
The Court concludes that Interstate committed spoliation of evidence in that parts of the structure of the warehouse were rendered unavailable to Aspen American's investigator, who states that he was unable to reach a conclusion about the cause of the collapse because he had insufficient opportunity to inspect those structural components. The Court also concludes, however, that the spoliation of evidence in this instance was not a deliberate attempt by Interstate to squirrel away evidence in an effort to prevent Aspen American from conducting an inspection and investigation into the cause of the roof collapse. On the contrary, the evidence shows that Interstate made efforts to notify Aspen American of the roof collapse and the imminent removal of the destroyed food products and structural parts of the warehouse, and allowed Aspen American's investigator to visit and inspect the site on several occasions before the removal took place. Mr. Goes states that he was unable to observe or inspect the structural components of the warehouse sufficiently to make a determination about the cause of the collapse and Aspen American contends that as a result of the unavailability of that evidence it is entitled to the severe sanctions it seeks. And, while Aspen American contends that Interstate is attempting to justify its actions by hiding behind the directives from the Ottawa County Department of Public Health and the Michigan Department of Agriculture, the Court is mindful of the fact that Interstate was obligated to comply with those directives by removing the affected food products and the collapsed portions of the warehouse structure itself. Interstate was placed, to an extent, between a proverbial "rock and a hard place," having to clean up the site while also endeavoring to comply with Aspen American's demand that it not remove or destroy any evidence that might be relevant to determining the cause of the collapse (meaning, of course, actual structural components of the warehouse). In short, the Court concludes that Interstate committed spoliation in that parts of the warehouse that were under Interstate's exclusive control were ultimately rendered unavailable for a complete and thorough inspection by Aspen American's expert, but that Interstate's degree of culpability does not rise to a level that would warrant imposition of the several severe sanctions Aspen American seeks. Therefore, the Court grants the motion for sanctions but declines to impose the sanctions Aspen American requests.
The Court has considered the parties' arguments and supporting evidence, and concludes that while Interstate committed spoliation of evidence, in that it rendered the structural components of the warehouse unavailable for adequate inspection by Aspen American, its degree of culpability is far less than Aspen American contends. As set forth above, a party's "degree of culpability" can range from intentional "destruction intended to make evidence unavailable" to "inadvertent loss of information." In this case, the totality of the circumstances indicate that Interstate's failure to preserve the structural components of the warehouse was not a deliberate attempt to suppress evidence. The Court concludes that Interstate's actions fall much closer to the negligent or inadvertent end of the "culpability continuum." Interstate provided Aspen American (through Mr. Goes) opportunities to inspect the site before any components were removed, but Goes maintains that he was unable to observe or inspect the parts closely enough to make a conclusive determination of the cause of the collapse. Interstate also informed Aspen American in advance that demolition crews were scheduled to remove the structural components from the site of the roof collapse in order to comply with the directive from Ottawa County.
The Court also finds that the "extent of prejudice" to Aspen American is less than it contends. While neither party knows what a thorough inspection of the structural components might have revealed with regard to the cause of the collapse, Aspen American's inability to conduct such an inspection does not result in "an inability to prove [its] claims." Aspen American alleges several claims against Interstate, including claims for negligence and gross negligence. See Amended Complaint (ECF 3). Aspen American might arguably have had an easier time proving its claims-especially its gross negligence claim-if it had a sufficient opportunity to inspect the structural components, but a jury instruction regarding spoliation is sufficient to remedy that prejudice. Accordingly, while the Court grants the motion for sanctions, it declines to impose the extreme sanctions requested by Aspen American. The sanctions Aspen American seeks-including "[t]hat Interstate is barred from pursuing a contractual limitation of liability defense at trial; [t]hat Interstate is barred from pursuing an Act of God defense at trial; . .. [t]hat Interstate is barred from cross-examination of plaintiff's expert witness, James Goes, at trial; . . . [and] [t]hat Interstate is barred from presenting any evidence of its inspection and maintenance of the warehouse roof prior to the roof collapse[]"-are not justified under the circumstances. The Court will, however, impose one of the sanctions requested by Aspen American, which is that "the jury be informed of Interstate's destruction of evidence and instructed that it can draw a negative inference from the destruction of evidence."
For the reasons set forth above, the Court hereby grants the following relief to Aspen American:
1. The Court will provide a preliminary and final jury instruction that the jury may, but is not required to, conclude that evidence that might have been obtained from an inspection of the warehouse components removed from the site would have been unfavorable to Interstate.
2. The jury will be permitted to hear and consider evidence from both parties about Interstate's failure to preserve the structural components (or make them available for inspection) and how and to what degree Aspen American was prejudiced by Interstate's actions in that regard.
3. The Court reserves the right to alter the wording to, and supplement, the preliminary and final jury instruction and to impose other sanctions for spoliation before or during trial, if appropriate.
The Court denies Aspen American's motion to strike. In that motion, Aspen American "moves this Court to strike untimely discovery responses served by . . . Interstate . . . on May 20, 2019." Plaintiff's Motion to Strike (ECF 70), p. 1. In support of the motion, Aspen American notes that the discovery phase in this case "closed on September 28, 2018." Id. Aspen argues that Interstate submitted supplemental discovery responses that should be stricken due to their untimely submission. Specifically, Aspen American argues as follows:
Id. (italics in original). The discovery responses that Aspen American challenges include 1) an email from structural engineer Ralph Den Hartigh, (ECF 67-1); 2) an affidavit of Nate Tippmann (ECF 67-3); Exhibit A attached to Tippmann's affidavit; and Exhibit B attached to Tippmann's affidavit. Aspen American contends that "the untimely discovery must have been available to Interstate for over five years, but Interstate chose not to disclose the information or seek discovery related to the information in the untimely responses." Plaintiff's Memorandum in Support of Motion to Strike (ECF 71), p. 4.
The discovery responses that Aspen American wants stricken include an email sent on March 10, 2014, from Ralph Den Hartigh, an engineer who inspected the site of the roof collapse on that date, in which he opines that the part of the warehouse where the roof collapsed was potentially dangerous and should be avoided "until a determination can be made as to the building's condition." Aspen American challenges Nate Tippmann's affidavit on the grounds that it, and the two exhibits attached to it, are untimely. Exhibit A of the Tippmann affidavit is a purported "visitor log" indicating that certain insurance adjustors and other individuals (including agents or representatives of Eastern Fish) visited the site of the damaged warehouse between March 14 and March 21 of 2014. Exhibit B of the Tippmann affidavit is a copy of a letter sent from Tippmann to Aspen American's counsel on April 18, 2014, in which Tippmann summarizes the dates and times that James Goes was present to observe or inspect the site of the roof collapse.
In response, Interstate argues that the challenged discovery material should not be stricken because Aspen American "was, in fact, in possession of various documents it claims were never previously disclosed, because Defendant objected to providing, or reserved its right to supplement or amend its responses to Plaintiff's [discovery requests], because the alleged untimeliness of Defendant's discovery responses and supplementations is harmless, and because the Court can re-open discovery to prevent any alleged harmful or prejudicial effect on Plaintiff[.] Defendant's Response in Opposition to Motion to Strike (ECF 72), p. 1. Interstate argues that some of these challenged items were previously disclosed to Aspen American during litigation between the parties in Illinois state court—litigation that preceded this case—and so Aspen American's contention that the items were not previously disclosed is disingenuous. Id., p. 2. Interstate also argues that the challenged discovery responses are timely because "Rule 26(e) requires a party to timely supplement its initial disclosures and discovery responses when it learns of new information or information that renders an earlier response inaccurate[]" and that such supplementation can be provided even after the close of formal discovery. Id., p. 4. Finally, Interstate argues that the recently disclosed discovery items contain nothing new, and merely reiterate or repeat information already in the record. (For example, Interstate notes that the Tippmann letter simply repeats the information already contained in "the report of Plaintiff's own expert, James Goes, which contains an outline of Mr. Goes's visits to the subject warehouse facility." Id., pp. 4-5.)
This skirmish is much ado about very little. The discovery materials that Aspen American challenges are, in the Court's assessment, rather innocuous. But more importantly, the Court did not consider or rely on any of the items in reaching its conclusions on the motion for sanctions. In that regard, the motion to strike is moot. If Aspen American believes that the challenged items should be deemed inadmissible at trial, it can renew its objections to them in a motion in limine at the appropriate time. At this juncture, however, the motion to strike is denied.
For the reasons set forth above, the Motion for Sanctions (ECF 64) is GRANTED in part (as to the issue of spoliation of evidence) and DENIED in part (as to the applicable sanction to be imposed), and the Motion to Strike (ECF 70) is DENIED.
