Appellate Court Reviews Indiana’s Rules Governing Spoliation of Evidence

By: David L. Simmons

The Indiana Court of Appeals considered the principles governing the spoliation of evidence in the recent case of Wesco Distribution, Inc. v. ArcelorMittal Indiana Harbor, LLC, —N.E. 3rd—, 2014 WL 5819375 (Ind. App.), which was issued on November 10, 2014. In Wesco, ArcelorMittal sued Wesco for breach of implied warranties and breach of contract resulting from the failure of the braking system on an overhead crane. The failure of the crane caused molten iron to be spilled across the floor of the plant, igniting a fire that caused extensive damage to the facility. A jury found in favor of ArcelorMittal and awarded damages in the amount of $36,134,477. Wesco appealed the verdict on several grounds, including the failure of the trial court to impose sanctions on ArcelorMittal for destruction of evidence that was critical to its defense.

After the accident, ArcelorMittal removed fractured blowout coils from the crane and subsequently determined that the blowout coils likely caused the failure. Wesco was able to inspect the blowout coils during its investigation and preparation for trial. However, ArcelorMittal did not photograph or otherwise document the blowout coils in place within the contactors before removing them. The controller was disassembled after the incident, and several internal components were replaced and discarded. In addition, Wesco failed to document the condition of the controller, contactors, and mechanical brakes at the time of the incident. While the crane was down due to the incident, ArcelorMittal employees performed routine periodic maintenance on the brakes.

ArcelorMittal filed a motion for sanctions against Wesco pursuant to Trial Rule 37, claiming that it was prejudiced by virtue of not being able to examine the discarded parts. The trial court declined to impose sanctions on Wesco and further declined to instruct the jury regarding inferences that could be drawn.

On the issue of spoliation, the Indiana Court of Appeals upheld the decision of the trial court, finding that sanctions against ArcelorMittal were not appropriate under the circumstances. In reviewing the appeal, the court noted that Trial Rule 37 provides a trial court with all the necessary tools to enforce compliance with the discovery process. This rule provides that a trial court may impose a range of sanctions, including dismissal, if a party fails to comply with an order to compel discovery. The determination of the appropriate sanction is left to the trial court’s discretion, and an appellate court reviews the decision only for an abuse of that discretion. Although there was no apparent order that Wesco was seeking to enforce, it is undisputed that the evidence at issue had been altered and disposed of by ArcelorMittal.

The Court stated that there must first be a determination that spoliation of evidence occurred before reaching the issue of possible sanctions. Spoliation of evidence is the intentional destruction, mutilation, alteration, or concealment of evidence. Relying on the opinion of the Indiana Supreme Court in Howard Reg’l Health Sys. v. Gordon, 952 N.E.2d 182 (Ind., 2011), the court described various principles that govern the spoliation of evidence and the sanctions that may be applied.

The courts uniformly condemn spoliation, and the intentional destruction of potential evidence in order to disrupt or defeat another person’s right of recovery is highly improper and cannot be justified. Once spoliation is found, potent responses exist under Indiana Trial Rule 37(B) authorizing trial courts to respond to discovery violations with such sanctions “as are just,” which may include dismissal of all or any part of an action. Determining whether sanctions are warranted and, if so, what they should include, requires a court to consider both the spoliating party’s culpability and the level of prejudice to the party seeking discovery.

Culpability can range along a continuum from destruction intended to make evidence unavailable in litigation to inadvertent loss of information for reasons unrelated to the litigation. Prejudice can range along a continuum from an inability to prove claims or defenses to little or no impact on the presentation of proof. A court’s response to the loss of evidence depends on both the degree of culpability and the extent of prejudice. Even if there is intentional destruction of potentially relevant evidence, the sanctions may be limited if there is no prejudice to the opposing party. In addition, even if there is an inadvertent loss of evidence but severe prejudice to the opposing party, that too will influence the appropriate response, recognizing that sanctions require some degree of culpability.

The Court concluded that ArcelorMittal did not destroy the evidence for an improper purpose. Both parties’ witnesses agreed it would have been better for their evaluation to have the additional evidence, but the Court of Appeals upheld the trial court’s finding that ArcelorMittal did not realize the importance of the evidence for some time after it was altered and discarded, and therefore did not act with intent to prejudice Wesco in this litigation. Moreover, because the evidence was destroyed before either side had a chance to inspect it, the prejudice to the parties was approximately equal: Wesco could not conclusively prove the screws on the controller were tight on the day of the incident, and ArcelorMittal could not prove they were loose. Both sides were required to prove their theory of causation by logical inference and deduction. Therefore, the trial court did not abuse its discretion in declining to sanction ArcelorMittal for the failure to preserve the evidence, especially with the extreme sanction of dismissal.

The legal doctrine of spoliation has become a significant threat to destroy or limit claims in litigation over the last 10 years. While Indiana has not yet recognized a first-party duty to preserve evidence, parties should make reasonable efforts to preserve evidence that relates to any litigation in which they may be involved, whether as a plaintiff or a defendant. The failure to do may result in having valuable claims and defenses limited or dismissed altogether.

This case is a good reminder that any party involved in a claim or lawsuit should consult with their attorneys regarding the protection of potential evidence. The party should meet with counsel early on to prepare a preservation plan for all relevant evidence and determine the length of time that may be required to allow inspection by third parties.