Case dismissed for negligent spoliation of evidence.

Where plaintiffs sued for $500,000 in flood damages to a bus and trailer, but disposed of the bus and trailer shortly after the flood before defendant could examine the alleged damages, the Court of Appeals affirmed dismissal of the gross negligence claim based on spoliation of evidence.

In Legacy Five Leasing, LLC v., LLC, No. M2019-01615-COA-R3-CV (Tenn. Ct. App. May 27, 2020), plaintiffs leased a parking space for their bus and trailer from defendant. When leasing the space, plaintiffs signed an agreement that stated that defendant “assumed no liability or responsibility for damages to [the bus and/or trailer] due to theft, vandalism, fire, flood or other acts of God or man,” and the agreement stated that plaintiffs’ equipment would be “parked in a floodway or floodplain.”

Less than a year after the agreement was signed, the parking lot flooded, and plaintiffs claimed their bus and trailer were extensively damaged. Plaintiffs “confronted” defendant just four days after the flood regarding defendant’s actions with respect to the flood. The following day, plaintiffs gave control of the bus and trailer to their insurance company, and the property was disposed of before defendant could examine any of the alleged damage.

Plaintiffs filed a complaint against defendants for negligence, gross negligence, and breach of contract, but the trial court granted a motion to dismiss the negligence and breach of contract claims, which plaintiffs did not appeal. Defendant filed a motion for summary judgment as to the gross negligence claim, or asked in the alternative for discovery sanctions to be imposed based on plaintiffs’ spoliation of evidence. The trial court dismissed the gross negligence claim as a discovery sanction for the spoliation, and the Court of Appeals affirmed.

“Trial courts have broad discretion to impose sanctions for the purpose of preserving the integrity of the discovery process.” (internal citations omitted). A trial court’s decision to impose a discovery sanction is subject to an abuse of discretion standard of review, which “envisions a less rigorous review of the lower court’s decision and a decreased likelihood that the decision will be reversed on appeal.” (internal citation omitted). When considering whether to impose sanctions for the spoliation of evidence, a trial court should consider four factors: “(1) the culpability of the spoliating party…; (2) the degree of prejudice suffered by the non-spoliating party…; (3) whether, at the time the evidence was destroyed, the spoliating party knew or should have known that the evidence was relevant to pending or reasonably foreseeable litigation; and (4) the least severe remedy available…” (internal citation omitted).

In this case, when defendant submitted its motion for summary judgment or, in the alternative, for discovery sanctions, it submitted a statement of material facts. Because plaintiff failed to dispute these facts, they were taken as true for the purpose of the motions. These facts established that plaintiffs confronted defendant about the flood damage and defendant’s alleged culpability four days after the flood, and that plaintiffs thus knew “four days after the event that it would be involved in a legal dispute with defendant.” Almost immediately thereafter, plaintiff relinquished the bus and trailer to its insurance company.

Using these facts, the trial court applied the above-quoted factors. The trial court determined that when plaintiffs transferred the equipment at issue, they had “knowledge that a legal dispute was imminent” and they did so “without affording the defendant the opportunity to evaluate the plaintiffs’ claim for damages.” The trial court ruled that defendant was prejudiced because without the ability to inspect the damage, defendant could not “adequately assess the validity of the plaintiffs’ repair estimates and expert valuations…” Further, the trial court ruled that plaintiffs knew a legal dispute would occur as of September 5, 2017 (four days after the flood), yet “the very next day the plaintiffs’ relinquished the bus to their insurance carrier…” Based on these findings, the trial court determined that dismissing the gross negligence claim was necessary because “no less severe remedy would sufficiently redress the prejudice [defendant] suffered as a result of the loss of the bus, trailer, and equipment that formed the basis of [plaintiffs’] claims.”

In affirming the trial court’s decision, the Court of Appeals noted that “intentional misconduct by the spoliating party is not required for a court to dismiss an action when evidence material to a claim is not available for a party to examine and use as the basis for a defense.” (internal citation omitted). Because the trial court’s decision here “was within the range of acceptable alternative dispositions,” the Court of Appeals affirmed dismissal. (internal citation omitted).

This is an interesting case because plaintiffs relinquished control of the equipment to their insurance company very soon after the flooding incident, yet due to the confrontation between plaintiffs and defendant the day before, the trial court found that plaintiffs already knew that legal action was imminent. This case shows that a party’s actions prior to retaining counsel can have grave consequences during litigation, and it also illustrates the importance of responding to statements of undisputed facts filed by an opposing party.


NOTE:  this opinion was released three weeks after oral argument.

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