Cont'l Cas. Co. v. Cintas Corp. No. 2
| Decision Date | 28 November 2022 |
| Docket Number | Civil Action 20-cv-02128-MDB |
| Parties | CONTINENTAL CASUALTY COMPANY, ACE AMERICAN INSURANCE COMPANY, INTERSTATE FIRE & CASUALTY INSURANCE COMPANY, ENDURANCE AMERICAN SPECIALTY INSURANCE COMPANY, CHUBB CUSTOM INSURANCE COMPANY, and IHP COLORADO SPRINGS II (CO) OWNER, LLC, Plaintiffs, v. CINTAS CORPORATION NO. 2 d/b/a CINTAS FIRE PROTECTION, and ARAPAHOE FIRE PROTECTION, INC., Defendants. |
| Court | U.S. District Court — District of Colorado |
This matter is before the Court on two motions. Defendant Cintas Corporation No. 2 d/b/a Cintas Fire Protection (“Cintas”) has filed a Motion for Spoliation Sanctions. ([“Sanctions Motion”], Doc. No. 53.) Defendant Arapahoe Fire Protection, Inc. (“Arapahoe”) filed a joinder in support. (Doc No. 55.) Plaintiffs filed a response in opposition, and Cintas filed a reply. ([“Sanctions Response”] Doc. No. 56; [“Sanctions Reply”], Doc. No. 60.) Cintas has also filed a Motion for Summary Judgment. ([“SJ Motion”], Doc. No. 52.) Plaintiffs filed a response in opposition, and Cintas filed a reply. ([“SJ Response”], Doc. No. 58; [“SJ Reply”], Doc No. 61.)
The Court heard oral argument on these motions (hereinafter referred to as “Motions”) on October 3, 2022. (Doc. No. 77.) For the reasons described herein, both Motions are DENIED.
Plaintiff IHP Colorado Springs II (Co) Owner, LLC (“IHP”) was the owner of the Hilton Garden Inn, located at Briargate Parkway in Colorado Springs, Colorado (“Subject Property”). (Doc. No. 26 at ¶ 13.) The remaining named Plaintiffs are insurance companies that provided insurance to Colony Capital, Inc. (“Colony”), and its affiliated parent and subsidiary companies, for the benefit of IHP. (Id. at ¶¶ 11-12, 14.)
Plaintiffs allege that “[o]n December 30, 2018, a coupling on the dry pipe system in the Subject Property's attic fractured and flooded the areas below, causing extensive property damage and a loss of business income by IHP.” (Id. at ¶ 31.) They allege that Cintas installed, inspected, and serviced the dry pipe system that broke. (Id. at ¶¶ 22-24.) They also allege that “beginning in January 2018, Defendant Arapahoe began providing inspections, testing and maintenance on the dry pipe fire suppression system.” (Id. at ¶ 27.)
According to Plaintiffs, “Defendant Cintas had a duty pursuant to National Fire Protection Association (“NFPA”) Section 13 to install the piping with the proper pitch and slope so that any condensation or water within the system could be drained and not become trapped within the piping.” (Id. at ¶ 25.) However, Cintas allegedly installed the system improperly “such that it was not adequately sloped and pitched, allowing water to become trapped within the system, and Defendant Arapahoe failed to verify the system was adequately sloped prior to filling the system with water.” (Id. at ¶ 32.) According to Plaintiffs, the improper slope of the dry sprinkler pipes caused water to remain in the pipes and freeze. (Id.)
IHP filed a claim with the insurance company Plaintiffs, receiving coverage for the loss but incurring a deductible of $100,000. (Id. at ¶ 33.) In this lawsuit, IHP seeks to recover damages resulting from the incident, and the insurer Plaintiffs have stepped into the shoes of IHP and seek to recover in subrogation for the money they paid to IHP. (Id. at ¶ 33-34.) Plaintiffs have filed negligence and negligence per se claims against Cintas, as well as a negligence claim against Arapahoe. (Id. at ¶¶ 36-45.)
In its Sanctions Motion, Cintas argues that it has been prejudiced because it “was not allowed to inspect the sprinkler system before any repairs were made, because no photographs were taken or other records made showing the condition of the sprinkler system at the time of the incident, and because the system had clearly been modified since Cintas last worked on the system” in 2015. (Doc. No. 53 at 2.) Cintas explains that even though the incident occurred in December 2018, Cintas was not able to inspect the property and conduct testing until November 19, 2019. (Id. at 4-6.) Cintas also claims that for some of the damaged hotel rooms, there are no photographs to illustrate the alleged damage or to allow Cintas to determine what repairs were needed or whether the repairs that were done were reasonable. (Id. at 12.)
In its Sanctions Response, Plaintiffs first argue that there is no spoliation because no portion of the Dry Pipe System, other than the coupling, was altered. (Doc. No. 56 at 8.) Additionally, the coupling itself was retained for examination. (Id.) Plaintiffs also argue that Cintas has not demonstrated it suffered actual prejudice because every expert is in the same position as Cintas's experts with respect to the evidence. Specifically, Plaintiffs argue:
[E]very retained expert has had an opportunity to inspect the Dry Pipe System in the same condition. IHP and the third-party contractors have testified under oath that since the Incident, only the coupling was replaced on the Dry Pipe System; no other repairs were made. Every expert also had an opportunity to examine the retained fractured coupling.
(Id. at 10.) Plaintiffs also deny culpability for the delayed notice to Cintas because they initially believed the Dry Pipe System was original to the building, and it was only after they retained documents from the Colorado Springs Fire Department that IHP realized Cintas might be responsible for the damage.[1](Id. at 2, 5.) As to the damage to the hotel rooms, Plaintiffs argue that they have provided “testimony, photographs, estimates, invoices, and other business records in support of their claim for damages.” (Id. at 11.) Additionally, Plaintiffs argue that Cintas had an opportunity to depose the individuals involved with the adjustment of the claim, and that to the extent there is a lack of photos for some rooms it is because those rooms “only required cleaning.” (Id.) Plaintiffs also note that “[w]hether the documentation provided in support of Plaintiffs' damage claims is sufficient remains a question for the finder of fact and is not the proper subject of a motion for spoliation sanctions.” (Id. at 12.)
In its Sanctions Reply, and during oral argument, Cintas stressed that they do not have the necessary data “to try to disprove Plaintiffs' unsubstantiated theory that the pitch of the dry sprinkler system in November 2019 is the same as it was in March 2015 when Cintas installed the system and the same as it was at the time of this incident on December 20, 2018.” (Doc. No. 60 at 2.) According to Cintas, “Plaintiffs should not be allowed to benefit from their intentional and reckless spoliation of the key evidence.” (Id.) Cintas requests dismissal as a sanction, or in the alternative, “that no liability experts may offer any opinions about the condition of the sprinkler system before Cintas was allowed to inspect it in November of 2019, and that Plaintiffs be prohibited from seeking damages for which they failed to provide sufficient substantiation.” (Id. at 9.) During oral argument, Cintas also offered as a possible alternative the sanction of prohibiting experts from referring to, or relying on, the November 2019 pitch test. (Doc. No. 77.)
In its SJ Motion, Cintas argues that it is entitled to summary judgment because there is a binding and enforceable contract with terms and conditions that bar the insurance company Plaintiffs from asserting subrogation claims against Cintas, and that bar IHP from recovering incidental, consequential, and business interruption damages. (See generally Doc. No. 52.)
Plaintiffs argue there is a factual dispute as to whether IHP agreed to Cintas' proposed terms and conditions. (See generally Doc. No. 58.) They argue Cintas sent more than one proposal and only the first proposal included the terms and conditions at issue. (Id. at 8-9.) They also argue that IHP, through Chatham Lodging Trust (“CLT”), rejected Cintas's terms when CLT responded with its own terms and conditions. (Id. at 9.) Additionally, Plaintiffs argue that even if the terms and conditions were part of the agreement, they would be unenforceable under Colorado law because: (1) certain terms would be void as contrary to public policy; (2) the terms were unfairly entered into because Cintas made a “take it or leave it” demand at a time when IHP was in desperate for repairs; and (3) the terms did not clearly, legibly, and unambiguously communicate an intent to extinguish liability. (Id. at 11-17.)
On a motion for sanctions, courts can consider: “(1) the degree of actual prejudice to the defendant; (2) the amount of interference with the judicial process; (3) the culpability of the litigant; (4) whether the court warned the party in advance that a dismissal of the action would be a likely sanction for noncompliance; and (5) the efficacy of lesser sanctions.” Archibeque v. Atchison Topeka & Santa Fe Ry. Co., 70 F.3d 1172, 1174 (10th Cir. 1995). These factors are not a “rigid test;” rather, “determining the correct sanction is a fact specific inquiry that the district court is in the best position to make.” Id. Spoliation occurs when a party either destroys evidence or it fails to preserve it for use in foreseeable litigation. Blangsted v. Snowmass-Wildcat Fire Prot. Dist., 642 F.Supp.2d 1250, 1259-60 (D. Colo. 2009). The burden is on the moving party to establish “a reasonable possibility, based on concrete evidence rather than a fertile imagination, that access to the lost material would have produced evidence favorable to his cause.” Gates Rubber Co. v. Bando Chem. Indus., Ltd., 167 F.R.D. 90, 104 (D....
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