Ellicott Mach. Corp. Intern. v. Jesco Const. Corp.

• Decision Date: 24 April 2002
• Docket Number: No. Civ. CCB-00-CV-3034.,Civ. CCB-00-CV-3034.
• Citation: 199 F.Supp.2d 290
• Parties: ELLICOTT MACHINE CORPORATION INTERNATIONAL v. JESCO CONSTRUCTION CORPORATION, et al.
• Court: U.S. District Court — District of Maryland

199 F.Supp.2d 290

ELLICOTT MACHINE CORPORATION INTERNATIONAL v. JESCO CONSTRUCTION CORPORATION, et al.

No. Civ. CCB-00-CV-3034.

United States District Court, D. Maryland.

April 24, 2002.

Matthew H. Azrael, Azrael Gann and Franz, Towson, MD, for Plaintiff.

Thomas Augustus Bowden, Kollman and Saucier PA, Baltimore, MD, Edward D. Markle, Law Office, New Orleans, LA, for Defendants.

MEMORANDUM

BLAKE, District Judge.

Now pending before the court are cross-motions for summary judgment by Plaintiff/Cross-Defendant, Ellicott Machine Corporation International ("Ellicott") and Defendants/Cross-Plaintiffs Jesco Construction Corporation of Mississippi and Jesco Construction Corporation (collectively referred to as "Jesco"). Ellicott seeks payments for money allegedly owed to it under invoices arising out of three lease agreements with Jesco for certain dredges and related equipment. Jesco alleges that one of the dredges was defective and that, due to spoliation of evidence, it cannot determine whether Ellicott breached one of the lease agreements or committed fraud. For the reasons that follow, the court will grant Ellicott's motion.

I.

Rule 56(c) of the Federal Rules of Civil Procedure provides that:

[Summary judgment] shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

A genuine issue of material fact exists if there is sufficient evidence for a reasonable finder of fact to return a verdict in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.1994). In making this determination, the evidence of the party opposing summary judgment is to be believed and all justifiable inferences drawn in her favor. Halperin v. Abacus Tech. Corp., 128 F.3d 191, 196 (4th Cir.1997) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505). The nonmoving party may not rest upon mere allegations or denials in her pleading, however, but must set forth specific facts showing that there is a genuine issue for trial. Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Allstate Fin. Corp. v. Financorp, Inc., 934 F.2d 55, 58 (4th Cir.1991). The "mere existence of a scintilla of evidence in support of the plaintiff's position" is not enough to defeat a defendant's summary judgment motion. Anderson, 477 U.S. at 252, 106 S.Ct. 2505.

II.

In 1999, Ellicott and Jesco entered into three lease agreements. Specifically, one lease agreement, signed on December 13, 1999 by the parties, called for Ellicott to deliver a Mud Cat 370 dredge to Jesco. The Mud Cat 370 dredge was to be used on a dredging project called Shallow Creek in Fort Howard, Maryland. The lease promised that Ellicott would deliver a new dredge. (See Def.Ex. 2 at 1.)

On the morning of January 11, 2000 at 10:30 a.m., the Mud Cat 370 dredge stopped working. The pump assembly was removed by Jesco and shipped back to Ellicott on January 12, 2000. Ellicott disassembled the pump and determined that the impeller had failed and broken loose from its drive shaft.¹ (See Def.Ex. 5.) Ellicott replaced the impeller with a new one and sent the pump assembly back to Jesco. The new pump assembly was installed by Jesco and became operable on January 13, 2000 at 2:30 p.m. According to Jesco, it would have finished the project on January 19, 2000 without this interruption in operation. Jesco further alleges that the "delay pushed Jesco into a period of severe winter weather that shut down the project, with high winds, snow, ice, and blizzard conditions combining to prevent completion until February 9, 2000." (Def.Mem. at 4.) Jesco allegedly suffered damages totaling $188,323.49 due to this delay.

On January 13, 2000, Ellicott contacted the manufacturer of the impeller, Thetford Foundry ("Thetford") and asked Thetford to transport the impeller back to Thetford for inspection because "the impeller's acme threads had failed and where [sic] completely separated from the impeller hub." (Def.Ex.5.) According to Ellicott, "the impeller blades [did] not show any damage consistent with the ingestion of a large object that could stop the impeller's rotation." (Id.)

Thetford received the impeller on January 26, 2000. (Def.Ex.7.) Thetford contacted Ellicott that day and informed Ellicott that Thetford had supplied a "defective casting." (Id.; see also Def. Ex. 9 (admitting that the impeller had a "manufacturing flaw")). Further, Thetford informed Ellicott that it had already created a new design for future impellers that would correct the defect. The new design called for manufacturing impellers with bigger grooves to give them stronger grips. (Def.Ex.7.)

On February 1, 2000², Thetford "scrapped"³ the defective impeller. (See Def.Ex. 15.) On February 2, 2000, Jesco faxed a letter to Ellicott stating: "By this writing we wish to put you on notice that we have suffered losses due to defective equipment, described above, furnished by your firm to perform time sensitive work ..." (Def.Ex.16.) On February 9, 2000, Jesco faxed a second letter to Ellicott specifically requesting "that [the defective impeller] not be altered or destroyed and that it would be available at a later date provided we need our metallurgist to inspect it." (Def.Ex.13.)

Ellicott has issued invoices to Jesco totaling $155,680.16. The invoices include various charges associated with the three leases. Jesco refuses to pay the invoices because it asserts that the invoices should be offset by the $188,323.49 loss it suffered due to downtime of the Mud Cat 370 dredge.

III.

The Mudcat 370 lease between Jesco and Ellicott provides that Ellicott is not liable "for any incidental or consequential costs or damages for any breach of warranty." (Def.Ex. 2 ¶ 7.) Jesco does not attack the validity of this lease provision. Instead, Jesco argues that it is entitled to compensation for downtime caused by the defective impeller because this lease provision should be ignored if the Mud Cat 370 dredge provided to it by Ellicott was not new, or alternatively, if Ellicott knew or should have known about the defective impeller. Jesco maintains that summary judgment should be granted in its favor based on spoliation of evidence because Jesco is unable to examine the impeller to determine if either of its theories is true. Since a favorable ruling for Jesco on the spoliation issue would be dispositive, that issue will be addressed first.

"Spoliation refers to the destruction or material alteration of evidence or to the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation." Silvestri v. General Motors Corp., 271 F.3d 583, 590 (4th Cir.2001) (citation omitted). Further,

[t]he evidentiary spoliation doctrine is a rule of evidence, administered at the discretion of the trial court to respond to circumstances in which a party fails to present, loses, or destroys evidence. The spoliation doctrine authorizes a court to order dismissal, to grant summary judgment, or permit an adverse inference to be drawn against a party, as a means to level the evidentiary playing field and for the purpose of sanctioning improper conduct. The application of this rule must take into account the blameworthiness of the offending party and the prejudice suffered by the opposing party. Additionally, whether or not a party has notice of the evidence's relevance to a lawsuit must be considered.

Hartford Ins. Co. of the Midwest v. American Automatic Sprinkler Sys., Inc., 23 F.Supp.2d 623, 626 (D.Md.1998), aff'd, 201 F.3d 538 (2000) (citations and quotations omitted).

Jesco seeks to have the Court grant summary judgment in its favor due to the alleged spoliation of evidence. Summary judgment is considered a drastic sanction. Hartford, 23 F.Supp.2d at 626. Thus, the Fourth Circuit has held that a showing that the evidence was destroyed intentionally and in bad faith is necessary. See Cole v. Keller Industries, Inc., 132 F.3d 1044, 1047 (4th Cir.1998) (holding it was error for a lower court to grant judgment against a spoliator where there was no showing that the evidence was destroyed intentionally and there was no bad faith); see also Silvestri, 271 F.3d at 590 ("In addition, a court must find some degree of fault to impose sanctions.... But dismissal should be avoided if a lesser sanction would perform the necessary sanction."). But cf. Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995) (holding a showing of bad faith is not necessary to justify a trial court's instruction to a jury that it could draw an adverse inference from a party's destruction of evidence). Since Jesco has provided no evidence of bad faith or intentional destruction by Ellicott, it is inappropriate for the court to grant summary judgment in favor of Jesco.⁴

Even a less drastic sanction, for example, an adverse inference against Ellicott, is inappropriate because Jesco has presented no evidence upon which a reasonable fact-finder could conclude that Ellicott provided Jesco with an old dredge machine or that Ellicott was aware of the defective impeller and made fraudulent misrepresentations to Jesco.⁵ Jesco may not rely upon the mere assertion that it may be able to establish that Ellicott violated the lease if it could inspect the impeller. See Silvestri, 271 F.3d at 590 ("[W]hile the spoliation of evidence may give rise to court imposed sanctions deriving from [the] inherent power [to control the judicial process and litigation], the acts of spoliation do not themselves give rise in civil cases to substantive claims or defenses."); Hartford, 23 F.Supp.2d at 627 ("[E]ven the allowance of this adverse inference would not alleviate Hartford of its burden to project evidence, as required by Fed. R.Civ.P. 56, which if believed...