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Nationwide Mutual Insurance Co. v. Total Property Care, Inc.

United States District Court, N.D. Indiana, Fort Wayne Division

May 24, 2018



          Susan Collins United States Magistrate Judge

         A. Background

         Dorado Enterprises and Scottsdale Insurance Company (as subrogee of Dorado Enterprises) (together “Plaintiffs”) bring the instant action, alleging that Defendant Total Property Care, Inc. (“TPC”), manufactured and sold defective lighting fixtures or rafts to Plaintiffs. (DE 21). Dorado acted as a general contractor for build-outs of three restaurants (one in Michigan, one in Illinois, and one in Pennsylvania). (DE 21 ¶ 2). Dorado purchased and installed lighting rafts from TPC for the three restaurants. (DE 21 ¶ 2). Shortly after installation, the lighting rafts failed and began to fall to the floor; Dorado settled with the restaurants in mediation, and then Dorado sued TPC. (DE 21 ¶¶ 3-9).

         In February 2015, Plaintiffs gave TPC an opportunity to inspect the allegedly defective lighting rafts; however, TPC declined to do so. (DE 56-1; DE 56-2). Selective Insurance, who insured TPC, then began communicating with Plaintiffs on TPC's behalf and a representative of TPC told Plaintiffs that TPC would “defer to [Selective] as to further proceedings.” (DE 56-3). In April 2016, Plaintiffs informed Selective that their expert retained the defective lighting rafts from Michigan and Illinois in anticipation of litigation, but that the Pennsylvania lighting rafts would be dismantled soon as part of the repairs to the Pennsylvania restaurant. (DE 56-4). Plaintiffs offered Selective the opportunity to inspect the Pennsylvania lighting rafts before they were destroyed. (DE 56-4).

         Plaintiffs filed this action against Defendants on June 22, 2016. (DE 1). A preliminary pretrial conference was conducted on September 13, 2016, setting a discovery deadline of May 30, 2017, which was later extended to December 31, 2017. (DE 15; DE 43). A representative for TPC, Mr. Canfield, was supposed to be deposed by Plaintiffs on December 11, 2017. (DE 45 at 3). However, Mr. Canfield became ill, and the parties filed a joint motion to extend the discovery deadline so that Mr. Canfield could be deposed later. (DE 49). The Court granted the motion, and the parties were given to and including January 11, 2018, to complete discovery. (DE 50).

         On December 21, 2017, TPC served Plaintiffs and Plaintiffs' expert with discovery requests, both of which included a request to produce each allegedly defective lighting raft. (DE 53-1; DE 53-2). Plaintiffs and their expert did not respond to the discovery requests.

         On March 16, 2018, TPC filed the instant motion for sanctions, alleging that Plaintiffs and their expert had not responded to its discovery requesting the production of the defective lighting rafts, and that counsel for Plaintiffs represented that these lighting rafts had not been preserved for litigation. (DE 53). As a consequence, TPC requests that the Court: (1) dismiss the case; (2) rule that nobody can testify as to the examination of the now missing lighting rafts; or (3) extend the time to file dispositive motions.

         On April 30, 2018, Plaintiffs responded that they were not obligated to respond to TPC's discovery requests because they were not timely served-the requests were served on December 21, 2017, less than 30 days before the close of discovery on January 11, 2018. (DE 56). Further, Plaintiffs represent that portions of the allegedly defective lighting rafts have been preserved and will be available for TPC's inspection at trial. (DE 56).

         On May 2, 2018, TPC filed a reply claiming that the parties had intended for the request for an extension of time to January 11, 2018, to complete discovery to also allow time for Plaintiffs to respond to TPC's discovery requests. (DE 57).

         On May 3, 2018, the Court held a telephonic hearing on TPC's motion for sanctions. (DE 58). At the hearing, Plaintiffs represented that they retained portions of the Pennsylvania lighting rafts and that their expert's report contains a description of the condition of the Pennsylvania lighting rafts before they were dismantled. TPC requested that the Court re-open discovery in this case to obtain responses to its discovery requests issued in December 2017.

         B. Legal Standard

         “A party has a duty to preserve evidence over which it has control and reasonably knows or could foresee would be material to a potential legal action.” Bryant v. Gardner, 587 F.Supp.2d 951, 967-68 (N.D. Ill. Nov. 21, 2008) (“The Court has discretion to sanction a party for spoliation of evidence.” (citation omitted)); see also ChampionsWorld, LLC v. U.S. Soccer Fed'n, 276 F.R.D 577, 582 (N.D. Ill. Aug. 17, 2011) (citation omitted). “Sanctions [for spoliation of evidence] include awarding reasonable expenses, attorney fees, barring evidence or arguments, permitting adverse inferences, and dismissing claims or entering default judgment.” Bryant, 587 F.Supp.2d at 968 (citations omitted); see Norman-Nunnery v. Madison Area Tech. Coll., 625 F.3d 422, 428 (7th Cir. 2010) (“In order to draw an inference that the missing documents contained information adverse to the defendants, [the plaintiff] must demonstrate that the defendants intentionally destroyed the documents in bad faith.” (citations omitted)).

         “Apart from the discovery rule, a court has the inherent authority to manage judicial proceedings and to regulate the conduct of those appearing before it, and pursuant to that authority may impose appropriate sanctions to penalize and discourage misconduct.” Ramirez v. T&H Lemat, Inc., 845 F.3d 772, 776 (7th Cir. 2006) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 46-50 (1991)). In finding that sanctions for spoilation are appropriate, a Court must be satisfied:

(1) that there was a duty to preserve the specific documents and/or evidence, (2) that the duty was breached, (3) the culpability for the breach rises to a level of willfulness, bad faith or fault, (4) the party seeking the evidence suffered prejudice as a result of the ...

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