In anticipation of litigation, there exists a legal duty to preserve potentially relevant evidence that a party has in its possession. Colorado has authorized its courts to impose sanctions against parties for “spoliation,” which is defined as a failure to preserve such evidence. Spoliation may prejudice an adverse party, and for that reason, a variety of sanctions are available to a judge in the event of a failure to preserve relevant evidence. In Warembourg v. Excel Electric, Inc., the Court of Appeals decided that a lower trial court had not abused its discretion by imposing the sanction of an adverse inference jury instruction containing an irrebuttable presumption of causation and liability, after finding that defendant disposed of a critical piece of evidence in bad faith.
In Warembourg, Claimant was a subcontractor providing flooring in a new home. Excel Electric, Inc. (“Excel”) had installed a temporary electrical box in the home as a power supply. In September 2015, Claimant tried to plug a tool into the box, but there was no power. Claimant then opened the box to toggle circuit breakers in an attempt to fix the issue. While doing so, the box “exploded” and shot electricity through Claimant. As a result, he suffered permanent and disabling injuries. The day of the incident, Excel took the box to its warehouse. In October 2015, Claimant’s workers’ compensation carrier called Excel to inquire about the injury. Excel explained to the carrier that the box had “probably” been thrown away. In April 2016, Claimant’s counsel formally put Excel on notice of its duty to preserve evidence in anticipation of litigation, specifically mentioning the box. Excel then claimed it disposed of the box six months after the incident. However, in 2018, an Excel employee disclosed that the box’s panel was still on display at Excel’s warehouse. Immediately following this disclosure, Excel actually disposed of the panel. As a result, the trial court found that Excel spoliated evidence in bad faith.
As a sanction for this bad faith spoliation, the trial court issued an adverse inference jury instruction. The inference stated that Excel failed to use reasonable care to protect against the danger of the box and this failure was a cause of Claimant’s injuries. Additionally, Excel was barred from presenting evidence that it acted with due care and no assumption of risk defense was presented to the jury. The jury found that Excel was 100% at fault for Claimant’s injuries. Excel appealed, claiming that the trial court erred in giving this instruction as a sanction for spoliation, abused its discretion by barring evidence that Excel acted with due care, and erred in declining to instruct jury on Excel’s assumption of risk defense.
In finding that spoliation has occurred, a fact finder must determine whether the duty to preserve evidence has attached to the evidence in question. The legal duty to preserve relevant evidence (pertains to issue at trial and would naturally be introduced) attaches when a party learns it is likely to be involved in litigation. The Court of Appeals further explained that a trial court has the right to exercise the discretion necessary in a spoliation inquiry to determine whether litigation was “reasonably foreseeable” to a party under a flexible, fact-specific standard. Here, the trial court found that when Excel disposed of the box, it knew or should have known that litigation was “pending, imminent or reasonably foreseeable” and that the box was relevant evidence. Excel had actual knowledge of the injury associated with the box and had been contacted by both Claimant’s attorney and the workers’ compensation carrier. For those reasons, litigation should have been reasonably foreseeable to Excel. Therefore, at the time of disposal, the duty to preserve the box had already attached and Excel committed spoliation.
If a court finds spoliation and chooses to impose a sanction, the fact finder has a wide variety of sanctions to choose from and may determine the severity in accordance with the state of mind of the spoliator. It is important to note that a finding of bad faith is not required for a finding of spoliation. However, in determining what sanction is appropriate, harsher sanctions are available to the court if spoliator is found to have disposed of evidence in bad faith. Here, the trial court found that Excel’s inconsistent accounts of disposal pointed to doing so in bad faith. The court’s rationale was that Excel provided “at least one” necessarily false statement regarding the evidence due to its inconsistent claims of the box’s disposal. This prevented an interested party from inspecting relevant evidence. Due to its finding of bad faith spoliation, the Court of Appeals found that the trial court had not erred in its sanctioning Excel nor had it abused its discretion.
Although this is not strictly a workers’ compensation case, the presenting judge in July’s case law update explained that issues regarding spoliation could be brought before either a Prehearing Administrative Law Judge (“PALJ”) or an Administrative Law Judge (“ALJ”). Due to the fact that spoliation is typically a discovery issue, such concerns should be raised with a PALJ. However, in establishing the severity of a sanction, it should be an ALJ who makes an inquiry into the state of mind of the spoliator and is the fact-finder in that determination.
Warembourg v. Excel Electric, Inc., No. 18CA2358 (Colo. App. July 9, 2020)
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