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Arcelormittal Indiana Harbor LLC v. Amex Nooter LLC

United States District Court, N.D. Indiana, Hammond Division

January 23, 2018

AMEX NOOTER, LLC, Defendant.



         This matter is before the Court on Amex Nooter LLC's Motion for Sanctions Based on ArcelorMittal's Intentional Spoliation of Evidence [DE 175], filed by Defendant Amex Nooter, Inc. (“Amex Nooter”) on January 3, 2018. Plaintiffs ArcelorMittal Indiana Harbor LLC and ArcelorMittal USA LLC (collectively “ArcelorMittal”) filed a response on January 15, 2018, and Amex Nooter filed a reply on January 22, 2018.

         On April 3, 2013, a fire occurred at Blast Furnace No. 3, a part of ArcelorMittal's Indiana Harbor facility, while Amex Nooter employees Korrie Griffith and Robert Swimline were rebuilding the excess gas bleeder pilot burner cabinets pursuant to a contract between ArcelorMittal and Amex Nooter. As Griffith and Swimline were working, natural gas was released from the system and ignited. ArcelorMittal seeks from Amex Nooter 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, Amex Nooter seeks the sanction of dismissal of ArcelorMittal's complaint on the basis that, within hours of the fire, ArcelorMittal discarded and then lost important physical evidence central to Amex Nooter's defense against ArcelorMittal's claims.

         1. Legal Standard-Spoliation

         This case is brought under the Court's diversity jurisdiction. Thus, ArcelorMittal's duty to preserve pre-suit evidence is governed by Indiana state law, not federal law. See Allstate Ins. Co. v. Sunbeam, 53 F.3d 804, 806 (7th Cir. 1995) (noting the parties' agreement that Illinois law covered the pre-suit duty to preserve evidence and recognizing that in diversity cases, “state law governs issues that potentially alter the outcome of the case” (citing Guaranty Tr. Co. of New York v. York, 326 U.S. 99, 109 (1945))); see also Schuring v. Cottrell, Inc., No. 13 C 7152, 2015 WL 8970631, at *1 (N.D. Ill.Dec. 16, 2015) (holding that “Illinois law governs the question of whether a party had a duty to preserve evidence before the start of litigation” (citing Allstate Ins. Co., 53 F.3d at 806); MacNeil Auto. Prods., Ltd. v. Cannon Auto. Ltd., 715 F.Supp.2d 786, 799 n.2 (N.D. Ill. May 25, 2010)); Large v. Mobile Tool Int'l, Inc., No. 1:02-CV-177, 2008 WL 89897, *7 (N.D. Ind. Jan. 7, 2008) (holding that Indiana state law, not federal law, determined the pre-suit duty to preserve evidence in a case brought based on diversity jurisdiction (citing Allstate Ins. Co., 53 F.3d at 806)); Lawrence v. Harley-Davidson Motor Co., No. 99 C 2609, 1999 WL 637172, at *2 (N.D. Ill. Aug. 12, 1999) (conducting a choice of law analysis to find that, in that diversity action, state law applied because the pre-suit duty to preserve material evidence was a substantive issue given that “the outcome of the [diversity] litigation in federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a [s]tate court” (quoting Guaranty Tr. Co., 326 U.S. at 109)); Thomas v. Bombardier-Rotax Motorenfabrik, GmbH, 909 F.Supp. 585, 587 n. 4 (N.D. Ill. 1996) (conducting an Erie analysis to find that Illinois state law controls the standard for pre-litigation preservation of evidence in a diversity action).

         Under Indiana law, spoliation is defined as “‘the intentional destruction, mutilation, alteration, or concealment of evidence.'” Glotzbach v. Froman, 854 N.E.2d 337, 338 (Ind. 2006) (quoting Cahoon v. Cummings, 734 N.E.2d 535, 545 (Ind. 2000) (quoting Black's Law Dictionary 1409 (7th ed. 1999))); see also J.S. Sweet Co., Inc. v. Sika Chem. Corp., 400 F.3d 1028, 1032 (7th Cir. 2005) (citing Cahoon, 734 N.E.2d at 545); WESCO Distrib., Inc. v. ArcelorMittal Ind. Harbor LLC, 23 N.E.3d 682, 702 (Ind.Ct.App. 2014) (citing Glotzbach, 854 N.E.2d at 338). “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.'” Large, 2008 WL 89897, at *7 (quoting Porter v. Irvin's Interstate Brick & Block Co., 691 N.E.2d 1363, 1365 (Ind.Ct.App.1998) (finding that the trucking company was on notice of imminent litigation and preservation duties when its vehicle lost a drive shaft on the interstate)).

         In 2000, the Indiana Supreme Court held that “‘the exclusive possession of facts or evidence by a party, coupled with the suppression of the facts or evidence by that party, may result in an inference that the production of the evidence would be against the interest of the party which suppresses it.'” Cahoon, 734 N.E.2d at 545 (quoting Porter, 691 N.E.2d at 1364). This holding was reaffirmed in Glotzbach in 2006: “If spoliation by a party to a lawsuit is proved, rules of evidence permit the jury to infer that the missing evidence was unfavorable to that party.” Glotzbach, 854 N.E.2d at 338 (citing Cahoon, 734 N.E.2d at 545); see also Gribben v. Wal-Mart Stores, Inc., 824 N.E.2d 349, 351 (Ind. 2005) (declining to adopt a new tort of first-party spoliation but noting that “Indiana law [contains] important sanctions that not only provide remedy to persons aggrieved, but also deterrence to spoliation of evidence by litigants and their attorneys”); Dawson v. Thornton's Inc., 19 N.E.3d 337, 340-41 (Ind.Ct.App. 2014) (discussing this standard and finding that the trial court did not err or abuse its discretion in not giving a proposed instruction on spoliation of evidence); Miller v. Fed. Exp. Corp., 6 N.E.3d 1006, 1011 (Ind.Ct.App. 2014) (recognizing that intentional first-party spoliation of evidence may be used to establish an inference that the spoliated evidence was unfavorable to the party responsible) (citing Gribben).

         In its response brief, ArcelorMittal asserts that Indiana law “requires a showing of an improper purpose to prove spoliation.” (ECF 213, pp. 15, 17) (quoting WESCO, 23 N.E.3d at 702). However, the full quotation from WESCO provides:

In Gribben v. Wal-Mart Stores, Inc., our supreme court noted that “[c]ourts uniformly condemn spoliation. ‘[I]ntentional destruction of potential evidence in order to disrupt or defeat another person's right of recovery is highly improper and cannot be justified.'” 824 N.E.2d 349, 354 (Ind. 2005) (quoting Coleman v. Eddy Potash, Inc., 905 P.2d 185, 189 (N. Mex. 1995)) (emphasis added).

WESCO, 23 N.E.3d at 702. The quotation taken from Gribben, a case in which the Indiana Supreme Court ultimately decided not to recognize an independent tort of first-party spoliation, is not a statement by the court of the standard under Indiana law but rather a quotation from New Mexico case law as part of a survey of how other courts around the country treat spoliation. See Gribben, 824 N.E.2d at 354. Notably, the next sentence in Gribben quotes from an opinion from the Montana Supreme Court: “‘The intentional or negligent destruction or spoliation of evidence cannot be condoned and threatens the very integrity of our judicial system.” Gribben, 824 N.E.2d at 354 (emphasis added) (quoting Oliver v. Stimson Lumber Co., 993 P.2d 11, 17 (1999)).

         Likewise, although ArcelorMittal correctly notes that “bad faith” is required before imposing sanctions for spoliation under the law of the Seventh Circuit Court of Appeals, including for the sanction of an adverse inference, see (ECF 213, p. 17), that is a requirement for the federal standard for pre-suit spoliation in cases brought under federal question jurisdiction or for spoliation as a violation of Federal Rule of Civil Procedure 37 during the course of federal litigation, as set forth in several cases cited by both parties. See Norman-Nunnery v. Madison Area Tech. Coll., 625 F.3d 422, 428 (7th Cir. 2010) (Title VII); Faas v. Sears, Roebuck & Co., 532 F.3d 633, 644 (7th Cir. 2008) (ADEA claim); Maynard v. Nygren, 332 F.3d 462, 467 (7th Cir. 2003) (ADA); Haraburda v. ArcelorMittal USA, Inc., No. 2:11-CV-93, 2011 WL 2600756 (N.D. Ind. June 28, 2011) (addressing a motion for preservation of evidence filed after the lawsuit was filed (citing Northington v. H & M Int'l, No. 08-CV-6297, 2011 WL 663055, *6 (N.D. Ill. Jan.12, 2011) (Title VII); Jones v. Bremen High Sch. Dist. 228, No. 08 C 3548, 2010 WL 2106640, *6 (N.D. Ill. May 25, 2010) (§ 1983 race discrimination); Larson v. Bank One Corp., No. 00 C 2100, 2005 WL 4652509, *10-11 (N.D. Ill. Aug. 18, 2005) (illegal credit practices under federal law, applying Rule 37); Danis v. USN Comms., Inc., No. 98 C 7482, 2000 WL 1694325, *32 (N.D. Ill. Oct.20, 2000) (conduct during litigation under Rule 37 and Rule 11); In re Kmart, 371 B.R. 823, 842 (N.D. Ill. 2007) (applying the federal standard); Wells v. Berger, Newmark & Fenchel, P.C., 07 C 3061, 2008 WL 4365972, *7 (N.D. Ill. Mar.18, 2008) (Title VII))); see also Keller v. United States, 58 F.3d 1194, 1197 n. 6 (7th Cir. 1995) (noting, in a case brought under the Federal Tort Claims Act, the “bad faith” standard and citing federal question cases in support, noting that some courts hold that state spoliation law applies in a diversity case, and noting that the law of New Mexico, which provided the rule of decision in that case, did not recognize negligent or intentional spoliation of evidence as a tort (citing Allstate Ins. Co., 53 F.3d at 805 (diversity case applying state law); citing for the “bad faith” standard BASF Corp. v. Old World Trading Co., Inc., 41 F.3d 1081, 1098 (7th Cir. 1994) (Lanham Act, discussing inferences drawn from missing records); United States v. Esposito, 771 F.2d 283, 286 (7th Cir. 1985) (Hobbs Act and Travel Act); S.C. Johnson & Son, Inc. v. Louisville & Nashville R. Co., 695 F.2d 253, 258-59 (7th Cir. 1982) (Carmack Amendment); United States v. $94, 000.00 in U.S. Currency, 2 F.3d 778, 787 (7th Cir. 1993) (civil forfeiture); Coates v. Johnson & Johnson, 756 F.2d 524, 551 (7th Cir. 1985) (Title VII))).[1]

         However, the negligence and breach of contract claims in this case are state law claims brought under the Court's diversity jurisdiction, and the motion for sanctions is based on pre-suit spoliation. Thus, as set forth above, the Indiana state law standard, and not the federal standard, applies. See Chambers v. NASCO, Inc., 501 U.S. 32, 53-54 (1991) (discussing, in the context of a court's imposition of sanctions under its inherent power, that a court sitting in diversity must consider the concerns of Erie when there is a conflict between the state and federal substantive law); see also Ward v. Texas Steak Ltd., 7:03-CV-596, 2004 WL 1280776, at *2 (W.D. Va. May 27, 2004) (applying the Erie standard to find that state law applies to sanctions for prelitigation spoliation in a diversity case in which the rule of decision is supplied by state law).[2]

         2. Facts

         On March 12, 2013, ArcelorMittal issued Purchase Order No. N489392 to Amex Nooter to provide supervision, labor, and materials to rebuild the excess gas bleeder pilot burner cabinets at Blast Furnace No. 3 located at ArcelorMittal Indiana Harbor LLC's Indiana Harbor West Facility (“H3 Cabinets”). Under the Purchase Order, on April 3, 2013, Amex Nooter was to rebuild the H3 Cabinets according to drawings submitted by ArcelorMittal Indiana Harbor to Amex Nooter by demolishing existing pipes and valves in the cabinets and installing new pipes and valves. According to Frank Peters, ArcelorMittal's Senior Maintenance Planner responsible for Blast Furnace No. 3, ArcelorMittal had not repaired or replaced the H3 Cabinets' fittings, pipes, valves, gauges, and regulators during the eight-year period of 2005 to 2013. ArcelorMittal made the decision in February ...

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