SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
Robertet Flavors, Inc. v. Tri-Form Construction, Inc. (A-70/71-08)
Argued September 15, 2009 -- Decided August 3, 2010
HOENS, J., writing for a unanimous Court.
This case involves a commercial building constructed with an alleged, but now remediated, defective window system. The plaintiff-owner made repairs without waiting for a resolution by the defendant-contractor it believed was the cause. The issue is how to fashion a sanction appropriate to address a plaintiff's spoliation of evidence concerning a defect.
Plaintiff Robertet Flavors, Inc. manufactures food flavorings. Acting as its own general contractor for its new headquarters construction, plaintiff hired defendant Tri-Form Construction and its president, Robert Karabinchak, to serve as construction manager. Tri-Form made recommendations on contractors. Karabinchak supervised their work. Plaintiff chose defendant Academy Glass to install a strip-window system. Academy Glass finished work in 1998. Plaintiff moved in and, in early 1999, noticed water leaking in through the window system. Academy Glass made several visual inspections and undertook some repair efforts, mainly suggesting re-caulking. The leaks got worse. By 2001, water damage was visible. Plaintiff stopped trying to have Academy Glass fix the leaks and hired Joseph Frezza, an environmental consultant, to address the problem. He indicated that some windows had to be removed to determine the cause.
In January 2002, plaintiff, represented by attorney Milton Breitman, filed a complaint against Academy Glass, Tri-Form, and Karabinchak. Frezza and William Munro of Pioneer Glass removed a section of the windows and discovered mold. A consultant was hired to evaluate the mold and reported a significant problem in the building. Munro recommended removal of all the strip windows and replacement with a new window system. Plaintiff decided it had no choice but to replace everything contaminated with mold, including the inside walls, insulation, and carpeting. In March 2002, Tri-Form and Academy Glass served their answers to the complaint and discovery requests on Breitman, who did not advise plaintiff about their demands to inspect the building. Meanwhile, plaintiff hired Frezza to coordinate remediation work, Pioneer Glass to replace the windows, and others to remediate the mold. Breitman did not inform defendants' attorneys about the investigations, the mold discovery, or plaintiff's plans to replace the strip windows. In October 2002, Mark Epstein, plaintiff's president, learned Breitman had been hospitalized. According to Epstein, he called counsel for Academy Glass and told her about Breitman's illness, as well as the plans to begin repairing the strip windows. Counsel for Academy Glass testified that when Epstein called, she told him she could not talk to him and ended the call. In December 2002, plaintiff learned Breitman was no longer able to practice, and its case file was transferred to his former law firm.
The strip-window system remediation began on December 13, 2002, and was photographed by plaintiff as it progressed. One month later, plaintiff informed its new counsel that remediation was three weeks from completion. At a hearing on January 24, 2003, defendants' attorneys were alerted that remediation had begun, but they were not told about the mold. Counsel for Academy Glass requested that plaintiff refrain from further remediation until it evaluated plaintiff's claims. Plaintiff refused, believing it would be impractical to halt repairs already underway. In mid-February, counsel for Academy Glass and a consultant visited the building and found that the strip-window system had been replaced and all allegedly defective conditions in the building relating to work performed by Academy Glass had been remediated.
Academy Glass filed a motion to prevent plaintiff from offering any testimony relating to installation of the strip windows. At an evidentiary hearing, Academy Glass's expert, Herbert Cannon, explained that because the remediation was done, he could not independently evaluate the work of Academy Glass or the alleged window leaks or mold contamination. He testified that plaintiff's photographs were insufficient for him to form an opinion about the cause of any leaks; that there were many possible sources other than the windows; that there was insufficient information to confirm or deny the number and extent of deficiencies in the windows installed by Academy Glass; and that he therefore could not give an opinion about repair alternatives that might have been less costly. Munro, plaintiff's expert, testified that several defects in the installation work of Academy Glass were plainly visible and photographed before corrective work was done. Munro conceded that he did not photograph every defect in every window; that after remediation was completed, defects could not be independently verified; and that some components blamed for the leaks were removed and discarded during remediation.
The trial court granted defendants' motions to exclude evidence relating to the window installation, concluding that spoliation of evidence resulted in prejudice to defendants, whose experts had no opportunity to fully investigate the cause of the leaks. The court found that the appropriate remedy was to preclude plaintiff's expert from giving opinion testimony. The court later granted defendants' motions for summary judgment on all window-related claims, because plaintiff could not sustain its burden without expert proof on liability and damages. The Appellate Division reversed and remanded. It noted that Academy Glass had many opportunities to inspect the windows during the two years plaintiff complained about leaks, and had superior knowledge about the installation of the strip-window system. The panel found that the proper remedy is to limit plaintiff's expert proofs to those based only on evidence obtained prior to removal of the windows. The Court granted defendants' petitions limited to the remedy available on the spoliation claim. 197 N.J. 477 (2009).
HELD: Courts confronted with spoliation in commercial construction litigation should consider the identity of the spoliator; the manner in which the spoliation occurred; the prejudice to the non-spoliator and whether that party bears any responsibility for the loss of spoliated evidence; and the alternate sources of information available to the non-spoliator. Courts should balance all of those considerations in crafting an appropriate remedy consistent with fundamental fairness.
1. Under familiar spoliation principles, courts have turned to preclusion of evidence derived from the destroyed material as an appropriate sanction. The remedy also depends in part on when the spoliation is discovered. Selection of the appropriate remedy must be guided by the sanction's essential purpose: to even the playing field. (pp. 25-28)
2. The sanction of dismissal for spoliation is imposed sparingly, but it has been ordered when the natural result of a lesser remedy, precluding expert reports, was that plaintiff could not prove its case. The Appellate Division considered spoliation in the context of construction claims in a case that involved a commercial building owner who removed deteriorating, fire-retardant treated plywood. The defendants had inspected and documented the conditions of the wood, but were not given advance notice of the remediation. The panel found that dismissal was unnecessarily harsh. It concluded that a fair remedy was precluding use of evidence developed during the renovation because it was not available to defendants. (pp. 29-33)
3. Other jurisdictions addressing spoliation issues have been motivated by a concern about the need to find an appropriate remedy to balance the parties' rights. Some have taken a restrictive approach, limiting sanctions to cases where evidence was willfully destroyed and imposing sanctions short of dismissal. Others have devised tests for determining remedies in the construction litigation context, such as requiring courts to consider the culpability of the spoliator, the importance of the evidence destroyed, the prejudice to the other party, and the availability of sanctions less severe than dismissal. (pp. 33-37)
4. Other jurisdictions' tests are useful, but require expansion. Courts confronted with spoliation in commercial construction litigation should consider the identify of the spoliator; the manner in which the spoliation occurred, including the reason for and timing of its occurrence; prejudice to the non-spoliator and whether that party bears any responsibility; and the alternate sources of information available to the non-spoliator from its own records and other sources. Courts should balance those considerations in crafting an appropriate remedy consistent with fundamental fairness to the parties. Remedies may include adverse inferences, evidence preclusion, dismissal, and limitation of claims to only those that can be tried fairly. (pp. 38-42)
5. The case illustrates how courts can fairly and creatively address spoliation in commercial construction litigation. It is left to the sound discretion of trial courts to make those decisions as justice requires. There remains, however, one final step in this case. As to Academy Glass, plaintiff's strip-window claim may proceed, but it is limited to the conditions observable prior to remediation, and its experts are limited to a review of only those conditions. Tri-Form and Karabinchak had no opportunity to inspect the leaking windows before remediation. With no independent source of evidence with which to mount a defense, the claims against those defendants cannot proceed. The only fair remedy is dismissal. (pp. 43-46)
The judgment of the Appellate Division is AFFIRMED as it relates to Academy Glass and REVERSED as it relates to Tri-Form and Karabinchak, and the matter is REMANDED to the Law Division for further proceedings.
CHIEF JUSTICE RABNER and JUSTICES LONG, LaVECCHIA, ALBIN, WALLACE and RIVERA-SOTO join in JUSTICE HOENS's opinion.