Federated Mut. Ins. Co. v. Litchfield Precision Components, Inc., s. C6-89-2301

• Citation: 456 N.W.2d 434
• Decision Date: 25 May 1990
• Docket Number: Nos. C6-89-2301,C1-89-2254,s. C6-89-2301
• Court: Supreme Court of Minnesota (US)
• Parties: FEDERATED MUTUAL INSURANCE COMPANY, Respondent, v. LITCHFIELD PRECISION COMPONENTS, INC., Appellant (C6-89-2301), and Robins, Zelle, Larson & Kaplan, Appellant (C1-89-2254).

Page 434

456 N.W.2d 434

FEDERATED MUTUAL INSURANCE COMPANY, Respondent, v. LITCHFIELD PRECISION COMPONENTS, INC., Appellant (C6-89-2301), and Robins, Zelle, Larson & Kaplan, Appellant (C1-89-2254).

Nos. C6-89-2301, C1-89-2254.

Supreme Court of Minnesota.

May 25, 1990.

Rehearing Denied June 19, 1990.

Syllabus by the Court

Resolution of a plaintiff's underlying claim is necessary to demonstrate cognizable injury for purposes of a spoliation action, should such a tort be recognized.

Robert T. Stich, Stich, Angell, Kreidler & Muth, P.A., Minneapolis, for Litchfield Precision Components, Inc., appellant (C6-89-2301).

Bryan K. McKamey, Richard B. Allyn, Terrence R. Joy, Minneapolis, for Robins, Zelle, Larson & Kaplan, appellant (C1-89-2254).

Michael C. Lindberg, Johnson & Lindberg, P.A., Minneapolis, for respondent.

Heard, considered and decided by the court en banc.

POPOVICH, Chief Justice.

Respondent believed its subrogation action, arising out of a claim it paid for property destroyed in a fire, was nullified when certain evidence from the fire site was discarded. Without pursuing its subrogation claim, respondent brought this action alleging tort liability should be imposed on appellants for negligently or intentionally destroying this evidence under a new spoliation tort not yet recognized in Minnesota. In denying appellants' motions to dismiss for failure to state a claim and for summary judgment, the trial court held the negligent and intentional spoliation claims were actionable. The trial court subsequently certified the following three questions as important and doubtful pursuant to Minn.R.Civ.App.P. 103.03(h):

1. Whether this jurisdiction recognizes a cause of action in tort for intentional spoliation of evidence, and if so, what are the elements of such a tort?

2. Whether this jurisdiction recognizes a cause of action in tort for negligent spoliation of evidence, and if so, what are the elements of such a tort?

3. Whether Plaintiff established a sufficiently cognizable injury to proceed on any and all of its causes of action against the Defendants prior to a resolution of the underlying subrogation claim?

I.

The following facts are summarized from the trial court's memorandum and the parties' pleadings and affidavits. On January 25, 1986, a fire occurred at a facility owned by appellant Litchfield Precision Components ("LPC"), destroying property owned by Infinite Graphics, Inc. ("IG"). As IG's insurer, respondent Federated Mutual Insurance Company ("Federated") paid IG $48,685 for the value of the property destroyed. Federated retained investigator Robert Schroeder to determine the cause of the fire. Six days after the fire LPC employees refused entry to a technician assisting Schroeder, thus this technician examined the site from a distance of about 40 feet.

LPC's insurer, Sentry Insurance Company, retained the law firm of Robins, Zelle, Larson & Kaplan ("RZL & K") to evaluate potential liability. RZL & K assigned investigator Michael Herring and electrical engineer Mac Martin to investigate the cause of the fire. As part of the investigation, Martin removed an exhaust motor and fan from the fire site to Atlanta, Georgia; Herring relocated about half the remaining evidence to RZL & K's Minneapolis warehouse and the other half to a rented Stor-A-Lot warehouse in Litchfield, Minnesota.

After numerous requests to view the evidence removed from the site were denied by Herring and RZL & K, Schroeder, accompanied by Herring, made a visual inspection of the evidence in the Stor-A-Lot warehouse on April 15, 1986. On that day, Schroeder did not view the exhaust fan and motor nor the evidence in the RZL & K warehouse. RZL & K assured Schroeder he would have access to the remaining evidence once the fan and motor were returned from Atlanta. By letter dated June 12, 1986, Schroeder informed Federated of RZL & K's assurances. Federated notified LPC on October 1, 1986, of its intent to pursue subrogation claims against LPC on bailment or negligence theories. In response, LPC denied liability for IG's loss in the fire.

The items in the Stor-A-Lot warehouse were discarded, although the parties dispute the circumstances surrounding this event. Federated asserts this evidence was discarded sometime in mid-October 1986 by LPC employee Eugene Genin and that RZL & K did not notify Federated of this fact until February 5, 1987. RZL & K contends it was not aware the evidence was discarded until sometime after mid-October 1986. Genin maintains Herring told him he was finished with the items, which Herring denies, and that Herring did not tell him other parties would be examining the items, thus Genin inferred it was appropriate to discard the evidence.

After examining the evidence stored at RZL & K's warehouse, Schroeder determined none of those items caused the fire. RZL & K maintains Federated did not test these items. Schroeder concluded "the fire evolved from the area below the exhaust fan and motor. That space was occupied by two polypropylene tubs," which were part of the discarded evidence. He further opined "if the subject tubs had been retained by the Defendants, Federated would have had a reasonable probability of successfully achieving a subrogation recovery." Thus believing its subrogation claim was nullified, Federated filed a civil action against RZL & K and LPC on grounds of negligence; intentional or negligent spoliation of evidence; and intentional interference with a prospective business advantage (a successful subrogation recovery). Federated has not pursued its subrogation claim to date.

On May 25, 1989, the parties stipulated to stay further discovery pending the trial court's ruling on motions by RZL & K and LPC to dismiss for failure to state a claim upon which relief can be granted or for summary judgment. By order dated July 28, 1989, the trial court denied these motions. On December 6, 1989, upon motion by RZL & K, the trial court filed an amended order certifying three questions of law regarding the spoliation tort as important and doubtful. RZL & K and LPC subsequently filed notices of appeal, which were consolidated by the Minnesota Court of Appeals. We accepted jurisdiction on January 31, 1990, and briefing and oral argument were scheduled.

II.

Federated alleges its subrogation action against LPC was nullified when the evidence in the Stor-A-Lot warehouse was discarded and requests this court create tort liability for the spoliation. Spoliation generally is "[t]he destruction of evidence. It constitutes an obstruction of justice." Black's Law Dictionary 1257 (5th ed. 1979). One court defined spoliation for purposes of a new tort as the "failure to preserve property for another's use as evidence in pending or future litigation." County of Solano Owens v. Delancy, 264 Cal.Rptr. 721, 724 n. 4 (Cal.Ct.App.1989). Since tort liability has never been imposed in this jurisdiction for evidence destruction, this is a legal issue of first impression that we review de novo. A.J. Chromy Constr. Co. v. Commercial Mechanical Servs., Inc., 260 N.W.2d 579, 582 (Minn.1977). We also employ the following standards of review regarding the trial court's order denying appellants' motions: "whether the complaint sets forth a legally sufficient claim for relief," Elzie v. Commissioner of Public Safety, 298 N.W.2d 29, 32 (Minn.1980) (motion to dismiss), and "whether there are any genuine issues of material fact and whether the trial court erred in its application of the law," Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn.1989) (summary judgment).

Courts have long afforded redress for the destruction of evidence and arguably these remedies adequately address the problem. For example, an action for negligent spoliation could be stated under existing negligence law without creating a new tort. E.g., Pirocchi v. Liberty Mut. Ins. Co., 365 F.Supp. 277, 281-82 (E.D.Pa.1973); Bondu v. Gurvich, 473 So.2d 1307, 1312-13 (Fla.Dist.Ct.App.1984), cert. denied, 484 So.2d 7 (Fla.1986); Coley v. Arnot Ogden Memorial Hosp., 107 A.D.2d 67, 68-69, 485 N.Y.S.2d 876, 878 (N.Y.App.Div.1985). Federated, in fact, framed one of its causes of action as such. Indeed, California appears to be the only jurisdiction to recognize an independent tort "for negligent destruction of evidence needed for prospective civil litigation." Velasco v. Commercial Bldg. Maintenance Co., 169 Cal.App.3d 874, 877, 215 Cal.Rptr. 504, 506 (Cal.Ct.App.1985).

Minnesota, like most jurisdictions, permits "an unfavorable inference to be drawn from failure to produce evidence in the possession and under the control of a party to litigation." Kmetz v. Johnson, 261 Minn. 395, 401, 113 N.W.2d 96, 100 (1962); see also 2 J. Wigmore, Wigmore on Evidence Sec. 291 (Chadbourn rev. 1979). The jury then may infer "the evidence, if produced, would have been unfavorable to that party." 4 Minn.Dist. Judges Ass'n, Minnesota Practice, JIG 25 (3d ed. 1986). Discovery and criminal sanctions also may be applicable. See Minn.R.Civ.P. 37.01 and 37.02 (failure to comply with order compelling discovery); Minn.Stat. Sec. 609.63, subd. 1(7) (1988) (intentional destruction of evidence). Further, destroying or obstructing access to evidence could subject an attorney to professional discipline. See Minn.R.Prof.Conduct 3.4(a). The fact, however, that other remedies exist does not necessarily preclude us from creating a new tort for further redress. See Christianson v. Olson, 191 Minn. 166, 168, 253 N.W. 661, 662 (1934) (statutory remedy not exclusive).

To date, only Alaska and California have specifically recognized an independent spoliation tort, aside from ordinary negligence claims. E.g., Hazen v. Municipality of Anchorage, 718 P.2d 456, 463 (Alaska 1986) (intentional); Velasco, 169 Cal.App.3d at 877, 215 Cal.Rptr. at 506 (negligent); Smith v. Superior Court, 151 Cal.App.3d 491, 502, 198 Cal.Rptr. 829, 837 (Cal.Ct.App.1984) (intentional in products liability case...