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Aspen American Insurance Co. v. Interstate Warehousing, Inc.

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

December 5, 2019

ASPEN AMERICAN INSURANCE CO. as subrogee of Eastern Fish Company, Plaintiff,
v.
INTERSTATE WAREHOUSING, INC., Defendant.

          OPINION AND ORDER

          William C. Lee, Judge U.S. District Court

         This matter is before the Court on the Motion for Sanctions Based on Defendant's Spoliation of Evidence filed by Plaintiff Aspen American Insurance Co. (ECF 64). Defendant Interstate Warehousing, Inc., filed a response in opposition (ECF 67) and Aspen American filed a reply (ECF 68). Also pending before the Court is a Motion to Strike Untimely Discovery Responses filed by Aspen (ECF 70), to which Interstate filed a response in opposition (ECF 72) and Aspen filed a reply (ECF 73). For the reasons explained below, the Motion for Sanctions is GRANTED in part (as to the issue of spoliation of evidence) and DENIED in part (as to the applicable sanction to be imposed), and the Motion to Strike is DENIED.

         I. Background

         Interstate Warehousing owns and operates cold storage warehouses throughout the United States, including one in Hudsonville, Michigan. Eastern Fish Company sells and distributes frozen seafood and contracted to store some of its products-about $2.5 million worth-in Interstate's warehouse in Hudsonville. The frozen seafood was then distributed to grocery stores for sale to consumers. On March 8, 2014, part of the roof of Interstate's Hudsonville warehouse collapsed following a heavy snow, and Eastern Fish's inventory was either destroyed or rendered unfit for sale to consumers. Aspen American, as Eastern Fish's insurer, paid Eastern Fish for the loss of its products in return for subrogation rights to pursue Interstate Warehousing. Aspen brought this suit to recoup its money, contending that the loss of its insured's products was Interstate's fault. Aspen contends that Interstate knew or should have known that the warehouse in Hudsonville was structurally unable to handle the weight of excessive snow and therefore Interstate should be made to pay the loss incurred by Eastern Fish as a result of what Aspen alleges was a preventable incident. Interstate insists that its contract with Eastern Fish included a limitation of damages provision that limits Interstate's liability, assuming it is determined to be liable, to $128, 400.00. Interstate also insists that the roof collapse was the result of an act of God, occurring without the fault of Interstate, and so the company cannot be held liable for the loss.

         The parties previously filed cross-motions for partial summary judgment. Interstate moved for summary judgment on the issue of the limitation of liability provision and the spoliation issue. Defendant's Motion for Partial Summary Judgment (ECF 35). Aspen American moved for summary judgment on the issue of liability and the issue of spoliation of evidence. Plaintiff's Motion for Partial Summary Judgment (ECF 40). In an Opinion and Order entered on March 13, 2019, the Court denied Interstate's motion as to the issue of limitation of liability, granted the motion as to the issue of spoliation of evidence, and denied Aspen American's motion in its entirety. Opinion and Order (ECF 56). The Court concluded that the issues of whether Interstate Warehousing is liable for Aspen American's loss and, if so, whether that liability is capped by the damage limitation provision in Interstate's contract with Eastern Fish, could not be resolved on summary judgment since they require a weighing of the evidence as well as credibility determinations. The Court denied Aspen American's motion for summary judgment as to liability based on the same reasoning, i.e., that genuine issues of material fact require a trial on the issue of liability. The Court also denied Aspen American's motion as to the issue of spoliation, concluding (as Interstate had argued) that an allegation of spoliation of evidence cannot be the basis for an independent claim or cause of action. Instead, the spoliation issue had to be presented to the Court in a motion for sanctions. Accordingly, Aspen American filed the present motion, contending that Interstate committed spoliation of evidence by disposing of structural components (including support beams) of the warehouse at the site of the roof collapse. Aspen American moves the Court to impose sanctions against Interstate for the alleged spoliation.

         II. Standard of Review

         The Court explained in its order on the motions for summary judgment that Indiana law governs the issue of spoliation in this diversity case and the parties agree. See Plaintiff's Memorandum in Support of Motion for Sanctions (ECF 65), p. 5 (“This matter is brought pursuant to the Court's diversity jurisdiction. Therefore, Interstate's duty to preserve evidence is governed by Indiana law.”); Defendant's Response Brief in Opposition to Plaintiff's Motion for Sanctions (ECF 67), p. 6 (“Defendant agrees with Plaintiff and the Court that, because this matter is brought under this Court's diversity jurisdiction, the issue of spoliation of evidence in this matter is governed by Indiana law.”).

         “Spoliation is a particular discovery abuse that involves the intentional or negligent destruction, mutilation, alteration, or concealment of physical evidence.” N. Indiana Pub. Serv. Co. v. Aqua Envtl. Container Corp., 102 N.E.3d 290, 300 (Ind. Ct.App. 2018) (quoting Popovich v. Ind. Dep't of State Revenue, 17 N.E.3d 405, 410 (Ind. Tax Ct. 2014)). “A party raising a claim of spoliation must prove that (1) there was a duty to preserve the evidence, and (2) the alleged spoliator either negligently or intentionally destroyed, mutilated, altered, or concealed the evidence.” Id. (citing Popovich, 17 N.E.3d at 410; Glotzbach v. Froman, 854 N.E.2d 337, 338-39 (Ind. 2006) (“the duty to preserve evidence may be assumed voluntarily or imposed by statute, regulation, contract, or certain other circumstances.”)). The Indiana Court of Appeals recently explained as follows:

The party raising a claim of spoliation has the burden of proving that there was a duty to preserve the evidence on the part of the alleged spoliator. Glotzbach v. Froman, 854 N.E.2d 337, 338-39 (Ind. 2006) (noting that duty to preserve evidence may be assumed voluntarily or imposed by statute, regulation, contract, or other circumstances). The duty to preserve evidence occurs when a first-party claimant “knew, or at the very least, should have known, that litigation was possible, if not probable.” N. Ind. Pub. Serv. Co. v. Aqua Envt'l. Container Corp., 102 N.E.3d 290, 301 (Ind.Ct.App. 2018).
“In Indiana, 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.” Porter v. Irvin's Interstate Brick & Block Co., Inc., 691 N.E.2d 1363, 1364-1365 (Ind.Ct.App. 1998) (citing Westervelt v. Nat'l Mfg. Co., 33 Ind.App. 18, 69 N.E. 169, 172 (1903)). This rule is typically applied “to a party which has suppressed evidence believed to be in its control at the time of the law suit.” Id. at 1365. Like we held in Porter, “we see no reason why [this rule] should not be applied where the party spoliates evidence prior to the commencement of a law suit that the party knew or should have known was imminent.” Id.

Golden Corral Corp. v. Lenart, 127 N.E.3d 1205, 1217-18 (Ind.Ct.App. 2019). And as this Court has explained:

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)[.]

ArcelorMittal Indiana Harbor LLC v. Amex Nooter, LLC, 2018 WL 509890, at *2 (N.D. Ind. Jan. 23, 2018).

         If a court concludes that a party committed spoliation of evidence, it must determine what sanction, if any, should be imposed. On that point the Indiana Court of Appeals has explained as follows:

         As for sanctions if spoliation is found, our supreme court has noted that

[p]otent responses ... exist under Indiana Trial Rule 37(B) authorizing trial courts to respond to discovery violations with such sanctions “as are just” which may include, among others . . . dismissal of all or any part of an action. . . .

Id. at 351. In Howard Reg'l Health Sys. v. Gordon, 952 N.E.2d 182 (Ind. 2011), our supreme court quoted from a “widely cited opinion” about the factors weighing on the appropriate sanction:

Determining whether sanctions are warranted and, if so, what they should include, requires a court to consider both the spoliating party's culpability and the level of prejudice to the party seeking discovery. Culpability can range along a continuum from destruction intended to make evidence unavailable in litigation to inadvertent loss of information for reasons unrelated to the litigation. Prejudice can range along a continuum from an inability to prove claims or defenses to little or no impact on the presentation of proof. A court's response to the loss of evidence depends on both the degree of culpability and the extent of prejudice. Even if there is intentional destruction of potentially relevant evidence, if there is no prejudice to the opposing party, that influences the sanctions consequence. And even if there is an inadvertent loss of evidence but severe prejudice to the opposing party, that too will influence the appropriate response, recognizing that sanctions (as opposed to other remedial steps) require some degree of culpability.
Id. at 189-90 (quoting Rimkus Consulting Grp., Inc. v. Cammarata, 688 F.Supp.2d 598, 613 (S.D.Tex. 2010)).

WESCO Distribution, Inc. v. ArcelorMittal Indiana Harbor LLC, 23 N.E.3d 682, 702-03 (Ind. Ct.App. 2014). Finally, while “spoliation of evidence permits a jury to ‘infer that the missing evidence [is] unfavorable' to the party who intentionally destroyed evidence[, ] . . . [t]he inference does not relieve [the movant] of proving their case.” Flaherty & Collins, Inc. v. BBR-Vision I, L.P., 990 N.E.2d 958, 970-71 (Ind.Ct.App. 2013) (citations omitted).

         III. Discussion

         As set forth above, a party can only be liable for spoliation of evidence if that party had a duty to preserve the evidence at issue. In the present case, the Court finds that Interstate had a duty to preserve the structural components of the warehouse at the point of the roof collapse. Interstate argues that Aspen American's letter addressing the preservation of evidence was “vague” and did not put Interstate on notice that parts of the warehouse structure itself had to be preserved. Interstate argues as follows:

Plaintiff's March 20, 2014[, ] preservation of evidence letter primarily concerned the preservation and retention of documents and electronic data, and noted specifically with regards to physical building structure, “[t]his includes allowing access to the cargo and structure by Eastern or its agents.” . . . Due to the vague nature of Plaintiff's preservation of evidence letter, which specifically requested access to the collapsed structure, Defendant was unaware that Plaintiff was demanding the preservation of the collapsed and damaged building structure itself.

         Defendant's Brief in Opposition, pp. 7-8. Interstate then insists that because it afforded Aspen American's expert, James Goes, several opportunities to visit the site, it fully ...


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