Diversified Concepts LLC v. Koford

• Citation: 495 P.3d 755
• Decision Date: 01 July 2021
• Docket Number: No. 20191071-CA,20191071-CA
• Parties: DIVERSIFIED CONCEPTS LLC ; Darin Dyell; and Landform Design Group PC, Appellants, v. Jill KOFORD and Rod Koford, Appellees.
• Court: Court of Appeals of Utah

495 P.3d 755

DIVERSIFIED CONCEPTS LLC ; Darin Dyell; and Landform Design Group PC, Appellants,

v.Jill KOFORD and Rod Koford, Appellees.

No. 20191071-CA

Court of Appeals of Utah.

Filed July 1, 2021

S. Spencer Brown and Jack D. Smart, Salt Lake City, Attorneys for Appellants Diversified Concepts LLC and Darin Dyell

Brad M. Liddell, Salt Lake City, Attorney for Appellant Landform Design Group PC

Matthew A. Bartlett, Riverdale, and Matthew G. Koyle, Attorneys for Appellees

Judge David N. Mortensen authored this Opinion, in which Judges Michele M. Christiansen Forster and Jill M. Pohlman concurred.

Opinion

MORTENSEN, Judge:

¶1 Jill and Rod Koford set about to improve the grounds surrounding their home. This project would include the design and construction of extensive rock retaining walls. These walls were so large, in fact, that the city required that the plans for their construction be engineered, and the walls be built following those engineered plans. The Kofords engaged Appellants Diversified Concepts LLC and Darin Dyell (collectively, Diversified) along with Landform Design Group PC (Landform), to design and construct the walls. The Kofords allege that they fired both Landform and Diversified after noticing the walls starting to fall apart before the project was even finished. Both sides hired counsel and letters were exchanged. But before filing a lawsuit, the Kofords hired other contractors to completely dismantle the walls and rebuild them. When the Kofords eventually filed suit, Landform and Diversified each moved to dismiss the lawsuit as a sanction for spoliation. They claimed that, without an opportunity to inspect and observe the demolition of the walls, their ability to defend the case had been irreparably compromised. The district court denied the motions. Landform and Diversified bring this interlocutory appeal of the district court's order declining to dismiss the Kofords’ case as a sanction for spoliation. Because we set forth a new and clarified framework that courts should apply when evaluating sanctions for spoliation under rule 37 of the Utah Rules of Civil Procedure, we vacate and remand to the district court to apply this framework in the first instance.

BACKGROUND¹

¶2 In 2012 the Kofords decided to comprehensively remodel the backyard of their home in Ogden, Utah, which was situated on a hill with a significant slope. The Kofords wanted to add various features for their enjoyment such as a pool, a playground, and planters. Significant landscaping was required to accommodate the remodel, including the addition of several large retaining walls. Because of the walls’ size, the city conditioned a building permit on the walls being engineered to ensure they would not collapse.

¶3 The Kofords hired Landform to act as the project manager of the remodel. To facilitate the hiring of the contractors, Landform was obligated to gather bids and recommend to the Kofords which contractors to select. Landform agreed to work directly with the contractors and consultants, supervise them, and steer the project by collaborating with the Kofords and contractors to determine which portions of the remodel should be worked on and when.

¶4 On Landform's recommendation, the Kofords hired Diversified as the contractor to construct the retaining walls. Diversified hired an engineering firm (Engineering Firm) to comply with the city's permit conditions. And to that end, Engineering Firm planned exactly how to engineer the retaining walls according to the proposed dimensions and placement of the walls. Diversified was provided with these plans and was to contact Engineering Firm when construction was underway so that the latter could undertake soil compaction and material testing, and otherwise ensure that the retaining walls were constructed according to plans.

¶5 Diversified started constructing the retaining walls in July 2013. As alleged by the Kofords, Diversified had trouble performing the work in a timely manner and was still working on the project into the spring of 2014. Jill Koford represented that it was around this time that the Kofords noticed that numerous retaining walls had started sinking, some had started to bow in the middle, and another was not straight. She further alleged that, "all over the property," gravel was leaking out of the seams of the walls and wall caps were coming off. Moreover, she asserted that Diversified had deviated from the landscape blueprint by constructing one large wall (in the place of two, with one designed to be recessed behind the other) in a different shape than was specified.

¶6 The Kofords claim they raised these concerns with both Landform and Diversified. In response, it appears the Kofords were essentially told that what they were observing was a "normal" part of the walls settling. As to the wall that deviated from the landscape blueprint, Landform apparently told the Kofords that the deviation was necessary because the wall as represented in the blueprint "couldn't be engineered," and Landform allowed the deviation because it "didn't really have options" and "thought aesthetically it tied in to everything else and looked great." Thereafter, the Kofords hired an attorney.

¶7 On June 27, 2014, the Kofords’ attorney sent a letter² to Diversified, which he copied to Landform, detailing the Kofords’ various concerns. One section of that letter read:

In addition to the sod, there remain numerous issues with the project that need to be resolved either by repair, completion or an offset to the Kofords. Those issues include ... two bowed retaining wall[s] ... [W]e ask that you contact us immediately to indicate how you intend to remedy the above referenced issue. If we do not hear from you within five (5) business days, we will assume that you have no intention of performing remedial work and will seek to have another contractor finish and/or repair your work.

¶8 On July 1, 2014, the Kofords’ attorney sent separate letters to Landform and Diversified, informing both that they had been terminated from the project. The letter to Landform explained that it had provided "very little if any oversight, observation or advice as is required by" its contract with the Kofords and that all communications should go through their attorney. The letter to Diversified explained that the Kofords had "hired another group to complete and/or repair the work done on their project," and it demanded receipts for purchases Diversified made in connection with the project, stating that if the receipts were not provided, the Kofords would "have no choice but to pursue the disclosure of that information through legal and/or administrative action."

¶9 Sometime later in July 2014, employees of the company that manufactured the materials used to construct the Kofords’ retaining walls visited the property. Based on the manufacturer's recommendation, the Kofords had a forensic engineer (Forensic Engineer) inspect the property in early August 2014. After visually inspecting the walls and taking various measurements, Forensic Engineer identified numerous issues with bowing and leaning walls. However, he determined that he could not offer a definitive opinion about the cause of the issues unless the walls were partially removed and the foundation was examined.

¶10 Around the same time, the Kofords contacted Engineering Firm—which should have been supervising the site the whole time to ensure that the ongoing construction matched its engineering plans. Engineering Firm informed the Kofords that it had never been in their backyard because, after handing their plans over to Diversified, it was never contacted by Diversified or Landform. Shortly thereafter, Engineering Firm inspected the walls, took numerous photographs, and agreed with the preliminary findings of Forensic Engineer. Seeming to reference the wall that deviated from the landscape blueprint, Engineering Firm specifically noted this wall was pulling away from the house, which indicated improper installation.

¶11 On August 22, 2014, the Kofords’ attorney sent another letter to Diversified, with a copy to Landform, informing Diversified of the recent developments. In relevant part, that letter stated:

Over the past several weeks, we have spent a considerable amount of time, effort and expense investigating the nature and cause of several problems with the [Kofords’] project (i.e. bulging walls, leaking fill, cracking and/or broken pavers, etc.).

After meeting with a number of industry experts and representatives from several product manufacturers and having those experts and representatives inspect the project, we now believe that the majority of the problems with the project are the result(s) of inferior workmanship and/or failure to follow the approved engineering plan obtained from [Engineering Firm] .... The problems with the project are so significant that they necessitate repairs and remedial work which will potentially cost hundreds of thousands of dollars.

The letter stated that the Kofords would "look to [Diversified] to pay for those repairs and to make them whole," and requested certain information "to assist the Kofords in mitigating their damages." The letter concluded by warning that if the information was not sent within five days, the Kofords would have "no choice but to initiate legal action against [Diversified]."

¶12 On October 1, 2014, the Kofords’ attorney sent a letter to Diversified's counsel.³ This letter stated that the Kofords had hired Forensic Engineer and explained:

[Forensic Engineer] has performed an initial walk through of the property and has indicated that the movement observed in the walls ... is likely due to faulty construction and in particular faulty mechanically stabilized earth. [Forensic Engineer] is currently in the process of taking measurements at the property to determine the amount to which the construction is outside the acceptable tolerances. ... [I]t is anticipated that [Forensic Engineer] will (at a cost of between

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