The Duty of Corporate Counsel to Preserve Evidence

By Jeffrey L. O'Hara and Matthew I. Gennaro

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While several remedies for spoliation exist (the most common being the spoliation inference and court sanctions for failure to make discovery), none is more controversial or far-reaching than the recognition of spoliation as an independent claim for destruction of evidence. This is not surprising, considering that spoliation can encompass not one, but four separate torts: (1) intentional spoliation by a party to underlying litigation; (2) negligent spoliation by a party to underlying litigation; (3) intentional spoliation by a third party not a party to underlying litigation; and (4) negligent spoliation by a third party not a party to underlying litigation. See Bart S. Wilhoit, "Spoliation of Evidence: The Viability of Four Emerging Torts," 46 UCLA L.Rev. 631 (1998).

Regardless, the vast majority of courts have held that intentional and/or negligent spoliation by a party to underlying litigation ("first party spoliation") is not actionable separately in tort, reasoning that since "obligations not to destroy evidence arise in the context of particular lawsuits . . . spoliation is best remedied within the lawsuit itself, not as a separate tort." Trevino v. Ortega, 969 S.W.2d 950, 953 (Tex. 1998). As such, the number of states that currently recognize first party spoliation in some form is limited: four states/districts recognize only first party intentional spoliation of evidence as an actionable tort (Louisiana, Indiana, Ohio, and West Virginia), while three (the District of Columbia, Illinois, and Pennsylvania) only recognize negligent first party spoliation as a distinct cause of action. Florida recognizes both.

Since an adverse inference against a third party may not be used to determine liability in an underlying case, traditional remedies for spoliation are wholly ineffective in dealing with both intentional and negligent third party spoliation. This perspective is critically important to corporate counsel, as it may create a situation where the corporation (or even its in-house lawyer) may not be conscious of its negative effect upon future litigation, yet find itself dragged into court defending a civil claim for spoliation of evidence.

For example: Jill is corporate counsel for Big Trucking Company ("BTC"). Pam is injured in a car accident when she loses control of her car and hits a BTC truck driven by Greg. Greg does not appear to be liable in any way, and both vehicles are totaled. The truck is placed in storage for several months before BTC has it scrapped and recovers its insurance. Months later, Jill receives a call from counsel for the manufacturer of Pam's car. Pam has filed a product liability suit against the car's manufacturer - key to the manufacturer's defense is an accident reconstruction that will require an expert inspection of the truck. Thankfully, leading courts, including the New York Court of Appeals, have been increasingly hesitant to permit independent spoliation theories against third parties like BTC in this setting.

The principles enunciated in two recent cases set forth this majority view. In Temple Community Hosp. v. Superior Court, 976 P.2d 223 (Cal. 1999), the California Supreme Court (which had, in fact, been the first court to recognize both intentional and negligent spoliation as independent torts) held that intentional third party spoliation was not actionable. In Temple, a former patient sued a hospital for intentional spoliation after it destroyed medical equipment that had allegedly caused her injuries and was needed as evidence to substantiate a product liability claim against its manufacturer. While sympathetic to victims of spoliation, the Temple court held, in the final analysis, "the benefits of recognizing a tort cause of action, in order to deter third party spoliation of evidence and compensate victims of such misconduct, are outweighed by the burden to litigants, witnesses, and the judicial system that would be imposed by potentially endless litigation over a speculative loss, and by the cost to society of promoting onerous records and evidence retention policies." 976 P.2d at 233. The court was not concerned that the majority of sanctions for spoliation were ineffective in deterring third parties, reasoning that this "may well be because third party spoliation has not appeared to be a significant problem in our courts." Id. at 232. In addition, the court was hesitant to "provide disappointed litigants a second opportunity to seek the compensation they sought in the original lawsuit, even if they [sought] it against a party not involved in the original lawsuit." Id. at 229. The court believed that the spoliation tort would, in effect, require a retrial to permit the plaintiff to demonstrate "in what respect the alleged spoliation altered the outcome of the first trial." Id.

In MetLife Auto & Home v. Joe Basil Chevrolet, Inc., 303 A.D.2d 30 (N.Y. App. Div. 2002), aff'd 2004 1 N.Y.3d 478, 775 N.Y.S.2d 754 (2004), Metlife sued an automobile insurer for negligent and reckless spoliation of evidence - - a truck - - which it claimed irrevocably impaired its ability to successfully pursue a claim against the installer of the truck's remote starter system that allegedly was the source of a fire in a home insured by Metlife. The New York Supreme Court, relying heavily on Temple, concluded that it would not recognize a cause of action against negligent third party spoliators because the potential burdens on third parties to be too great - - noting that "many vehicles regulated to a salvage yard would ordinarily constitute relevant evidence of at least a potential property damage claim." Further, "[e]ven if the fact of harm can be ascertained or assumed, it would be virtually impossible to measure the degree of harm and the precise extent of damages, and any attempt to do so would involve inherent and irreducible speculation." Metlife, 303 A.D.2d at 39, 42. In affirming this decision, the New York Court of Appeals concluded that the potential burdens on third parties weighed against recognizing an independent claim for negligent third party spoliation, but appeared to leave the door open in other instances: "The burden of forcing a party to preserve [evidence] when it has no notice of an impending lawsuit, and the difficulty of assessing damages militate against establishing a cause of action for spoliation in this case, where there was no duty, court order, contract or special relationship." Metlife, 1 N.Y.3d at 484, 775 N.Y.S.2d at 757.

But not all courts have followed the reasoning in Temple. In Hannah v. Heeter, 584 S.E.2d 560 (W. Va. 2003) David Heeter, defendant in a sexual harassment suit brought by his employee Patricia Hannah, brought a counterclaim against Hannah's mother (a non-party to the harassment case) for negligent and intentional spoliation for destroying tape recordings purportedly documenting the harassment. The West Virginia Supreme Court considered the questions of whether to recognize an independent tort for negligent first party spoliation, negligent third party spoliation, and intentional spoliation (by either a first or a third party). In answering the latter two questions in the affirmative, the court stated that to do otherwise would be inconsistent "with our policy of providing a remedy for every wrong and compensating victims of tortious conduct." Id. at 568. Further, the Hannah court held that a duty to preserve evidence does in fact exist in circumstances similar to those noted in Metlife: "a duty to preserve evidence for a pending or potential civil litigation may arise in a third party to a civil action through a contract, agreement, statute, administrative rule, voluntary assumption of duty by the third party, or special circumstance." Id. at 569. Most important, the court held that a party capable of establishing negligent or intentional spoliation is entitled to a rebuttable presumption that, but for the spoliation, the victim would have succeeded in their underlying lawsuit. Thus, the potential for damages in these cases is enormous, potentially encompassing every conceivable type of civil case. Hannah followed other cases that contained similar reasoning. See, e.g., Smith v. Atkinson, 771 So.2d 429 (Ala. 2000); Holmes v. Amerex Rent-A-Car, 710 A.2d 846 (D.C. 1998); Boyd v. Travelers Ins. Co., 652 N.E.2d 267 (Ill. 1995).

Although courts have been loathe to recognize spoliation as an independent cause of action, case law in this area is hardly consistent and the concept is replete with danger. While courts rarely permit third party spoliation claims, the fact-sensitive nature of any spoliation claim should make corporate counsel wary of opening the door with a scenario that may be the newest arrow in a plaintiff's quiver. Thus, the safest course, in the face of this uncertainty, is to presume the law does or will recognize spoliation as an independent claim and take precautions accordingly. First, if a client has the unfortunate opportunity to possess potential evidence, it should be safeguarded until it can be confirmed that the potential claimant does not require it. If one is uncertain, a telephone call and confirming letter advising of the existence of the item and, most importantly, the intention to discard it should provide some future protection. If the potential claimant expresses the desire to utilize the item, depending on its value, give it to the claimant or store it with the expressed understanding that the claimant will be responsible for the storage costs. While this suggestion may be easy to articulate but difficult to implement, the alternative is to absorb the value of the item or storage costs. Simply stated, from a business and future litigation perspective, it may be better to pay now than to pay later.