Court Imposes Adverse Inference Sanctions After Finding Plaintiff Intentionally Spoliated Evidence After Fire

6 Apr 2018

In Arcelormittal Ind. Harbor LLC v. Amex Nooter, LLC,  No. 2:15-cv-195-PRC (N.D. Ind. 2018), the United States District Court for Indiana, Northern Division considered Defendant Amex Nooter LLC’s (“Defendant”) Motion for Sanctions Based on Plaintiff ArcelorMittal’s Intentional Spoliation of Evidence.

On April 3, 2013, a fire occurred at Blast Furnace No. 3, a part of Plaintiff’s Indiana Harbor facility, while Defendant employees were rebuilding the excess gas bleeder pilot burner cabinets pursuant to a contract between the parties. Plaintiff seeks from Defendant approximately $3.2 million in property damage and excess fuel costs as a result of the fire based on theories of negligence and breach of contract under Indiana state law. In the instant motion, Defendant seeks the sanction of dismissal of Plaintiff’s complaint on the basis that, within hours of the fire, Plaintiff discarded and then lost important physical evidence central to Defendant’s defense against Plaintiff’s claims.

Plaintiff’s duty to preserve pre-suit evidence is governed by Indiana state law, not federal law. Under Indiana law, spoliation is defined as the intentional destruction, mutilation, alteration, or concealment of evidence. Under Indiana law, a party may not lose, destroy or suppress material facts or evidence prior to the commencement of the lawsuit that the party knew or should have known was imminent.

Based on the totality of the circumstances relating to the foreseeability of a lawsuit, the Plaintiff is a large, sophisticated business operation that involves danger to its employees and others by the nature of its business, had to have known, and the Court finds that it knew, that a resulting lawsuit was already imminent immediately following the fire and before Plaintiff directed the clean-up of the scene.

The totality of the circumstances relating to the physical evidence rises to the state of mind level of intent. Plaintiff had to have known, at the time it was doing it, that it was not reasonably and appropriately securing and preserving critical physical evidence or the fire scene. The Court finds that Plaintiff intentionally destroyed, concealed, or lost critical physical evidence (the fire scene as a whole as well as the valve and piping), making it unavailable for litigation. This finding is based, in part, on the fact that critical physical evidence was destroyed, concealed, or lost while in the exclusive possession and control of Plaintiff, and Plaintiff failed to take reasonable steps to secure and preserve it, already knowing that litigation was imminent.

Plaintiff’s conduct prejudiced Defendant’s ability to adequately and sufficiently investigate the cause and origin of the fire. There are multiple factual scenarios for explanation of the cause and origin of the fire that Defendant could have investigated had the critical physical evidence not been destroyed, concealed, or lost.

In the instant motion, Defendant asks the Court to dismiss Plaintiff’s claims as a sanction for Plaintiff’s spoliation. The Court recognizes that the sanction of dismissal is an extreme, draconian, and ultimate sanction. There are less severe sanctions available to the Court in this case to afford full and adequate relief to cure the prejudice suffered by Defendant. As an alternative to dismissal, Defendant proposes a combination of sixteen sanctions to mitigate the prejudice.

The Court hereby grants in part and denies in part Defendant’s Motion for Sanctions Based on Plaintiff’s Intentional Spoliation of Evidence, imposing the sanction of an adverse inference and corresponding jury instructions.