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Spoliation of Evidence: Defense of Claim Hampered by Inability to Inspect Alleged Negligence



By Robert Crump

Hazard necessitates prompt repairs
A Texas oil company was engaged in the business of recycling spent catalyst generated by oil refineries. The oil company processed the catalyst by extracting metal from it and then sold that metal on the open market. Since the catalyst was a hazardous material, the oil company used a storage facility, which the company called “Containment Building 2” or “CB2.” CB2 normally had an oily liquid on the floor that drained from the spent catalyst.

In 2005, the oil company decided to expand CB2 and contracted with a structural engineering company for the design of the expansion. The engineering company’s plans and specifications called for a new concrete foundation, waterstops, and other features designed to prevent the hazardous materials from leaking out. Later that year, the oil company hired a commercial construction company to be the general contractor for the expansion of CB2. According to the oil company’s contract with the contractor, they agreed to construct the expansion according to the engineering company’s plans and specifications.

The contractor substantially completed the construction in 2006, and the oil company began storing its spent catalyst in the expansion. Later that year, the contractor gave the oil company a certificate of guaranty, providing for a one-year warranty for the materials and work performed. About six months after substantial completion, an adjacent property owner reported that an oily substance was discovered in a ditch on his property. The oil company investigated and discovered that CB2 was leaking from the expansion joint where the old and new foundations met.

At the oil company’s request, the engineering company drafted a design for the repair, which was passed along to the contractor. The oil company asked the contractor to repair the leaky expansion according to the engineering company’s plans. However, the contractor declared that that repair was not covered by the warranty because it was the product of a design flaw of the engineering firm. It went on to state that it would not do the repairs unless they were granted a new contract. The oil company then opened up the new project to bidding and awarded the job to another contractor.

The original contractor requested the opportunity to inspect the building to review their original work and ensure that it complied with the original specifications provided by the engineering firm. The oil company denied the request, responding, “Unfortunately, we are not in a position and cannot afford to slow down the repairs for any purpose.” Later, during the repair process, the oil company hired a forensic engineering firm to determine the source of the leak and determined that there were “holes” between the waterstop and the face of the original concrete foundation. As a result, the oil company sued the original contractors for breach of contract and breach of warranty.

No easy solution
At trial, the oil company presented evidence suggesting that the contractor’s work was defective. However, the contractor countered that it was unable to properly defend itself because it was denied the opportunity to inspect the work site. Furthermore, the contractor alleged he was also denied the opportunity to be present at the oil company’s testing of the site.

The court concluded that the contractor was hampered in its ability to defend against the oil company’s claims due to its spoliation of the evidence. The court noted that had the contractor been permitted to inspect the premises, it may have found some conclusive evidence negating an element of the claims against it. As a result, in the interest of fairness, the court reversed the jury verdict and ordered the trial court to fashion a spoliation remedy in favor of the contractor.

Practice points
The decision in this case highlights the importance of those in the construction industry to be aware of the duty to preserve evidence, the extent of which can vary by jurisdiction. Courts often address spoliation issues by incorporating a jury charge (i.e., instructions given to the jury) that states that an adverse inference should be made that the destroyed evidence would have been unfavorable to the party that destroyed the evidence. However, in some rather severe cases it can even result in the dismissal of a party’s lawsuit.


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