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Breaking Legal Developments


Published by:
Peter A. Lynch, Esq.
of Cozen O'Connor


EXECUTIVE SUMMARY:      This weekly newsletter covers:

  1. New York Court Reverses Dismissal for Alleged Spoliation


In Madison Avenue Caviarteria v. Hartford Steam Boiler, et al., No. 2001-06760, (Dec. 29, 2003), the Supreme Court of New York, Appellate Division, Second Department, , the court reviewed dismissals granted to several defendants.

In an action, inter alia, to recover damages for breach of contract and negligence, the plaintiff appealed. The plaintiff was a retailer of caviar and other specialty foods. On July 24, 1997, it was discovered that approximately 4,400 pounds of caviar had spoiled in one of its walk-in refrigerator-freezer units (hereinafter the unit). That same day, Eric Sobol, a principal of the plaintiff, contacted the defendant Justin Time Refrigeration, Inc. (hereinafter Justin Time), the company responsible for service and repair of the unit, and the defendant Hartford Steam Boiler Inspection & Insurance Company (hereinafter Hartford), the plaintiff's insurer. According to Sobol, inspection and testing performed that day by Justin Time revealed that the temperature inside the unit was 38 degrees, although the internal thermostat was set to maintain the temperature between 26 and 28 degrees, and an external thermometer provided a false reading of 26 degrees. In an attempt to compensate, the thermostat was reset to maintain a lower temperature, but was raised again the following day after caviar was observed to be freezing.

On July 30, 1997, a claims examiner for Hartford inspected the unit in the presence of representatives of the plaintiff and Justin Time, and a claims adjuster hired by the plaintiff. On July 31, 1997, Hartford asserted that its investigation did not reveal an insured event under the policy issued to the plaintiff. On August 11, 1997, the plaintiff informed Hartford that it believed that the thermostat had failed, thereby causing the caviar inside the unit to spoil. On August 14, 1997, an independent laboratory hired by Hartford performed tests on the unit and prepared a report. By letter dated September 18, 1997, counsel for the plaintiff notified the defendant Emerson Electric Company/White-Rodgers Division (hereinafter Emerson), the manufacturer of the thermostat, of the loss. Counsel stated that the plaintiff considered Emerson a potential defendant in any future litigation and invited Emerson to participate in the inspection and testing of the thermostat. On November 5, 1997, Kevin Kyle, a representative of Emerson, examined the unit and conducted tests. Also present were representatives of the plaintiff, Hartford, and Justin Time, and a representative from an outside laboratory hired by Hartford. Kyle concluded that the thermostat was operating within an acceptable range. The thermostat was not removed from the unit. That same day, a service person from Justin Time handed Sobol a thermostat. Sobol, led to believe that the thermostat was the one at issue, marked the thermostat "Caviarteria Broken Thermostat 97 Loss."

On September 11, 1998, the plaintiff sued to recover damages for breach of contract and negligence. The plaintiff alleged that the thermostat malfunctioned, as it did not maintain the temperature in the unit at the required level to maintain the plaintiff's product, and that it was unaware of the malfunction because the external thermometer also malfunctioned. In addition to naming Hartford, Justin Time, and Emerson as defendants, the plaintiff named TMP Acquisitions Co., Inc. (hereinafter TMP), the manufacturer of the unit, ABCO Refrigeration Supply Corp. (hereinafter ABCO), the wholesaler of the unit, and Miljoco Corporation (hereinafter Miljoco), the alleged supplier or manufacturer of the external thermometer.

On April 16, 2000, after issue was joined as to all parties, the plaintiff, pursuant to a disclosure order, produced the thermostat it received on November 5, 1997, for testing by an independent laboratory. Through no fault of the plaintiff, testing did not occur at that time. Prior to any additional testing, it was determined that the thermostat produced by the plaintiff was in fact manufactured after the date of the loss and was not the thermostat at issue. Each defendant sought dismissal of the complaint insofar as asserted against it based on the plaintiff's failure to preserve the thermostat, asserting that additional testing was necessary to establish defenses and/or counterclaims. In opposition, Sobol asserted that the thermostat at issue was still in the unit and in use. Sobol stated that the confusion arose because he had been led to believe that the thermostat handed to him on November 5, 1997, which he had preserved during the pendency of the litigation, was the thermostat at issue. In further support of their respective motions, the defendants Hartford, Justin Time, Emerson, ABCO, and Miljoco argued that dismissal of the complaint was nonetheless warranted because the continued use of the thermostat constituted spoliation. The Supreme Court granted the motions based on spoliation. The Appellate Court reversed.

"Where a party destroys essential physical evidence and the party seeking that physical evidence is 'prejudicially bereft of appropriate means to confront a claim with incisive evidence,' the spoliator may be sanctioned by the striking of its pleading" (Foncette v LA Express, 295 A.D.2d 471, 472, 744 N.Y.S.2d 429, quoting New York Cent. Mut. Fire Ins. Co. v Turnerson's Elec., 280 A.D.2d 652, 653, 721 N.Y.S.2d 92. Spoliation sanctions are not limited to cases where the evidence was destroyed willfully or in bad faith, "since a party's negligent loss of evidence can be just as fatal to another party's ability to present [a case or] a defense" (DiDomenico v C & S Aeromatik Supplies, 252 A.D.2d 41, 53, 682 N.Y.S.2d 452). Thus, while courts are reluctant to dismiss a pleading absent willful or contumacious conduct, it may be warranted as a "matter of elementary fairness" (Puccia v Farley, 261 A.D.2d 83, 85, 699 N.Y.S.2d 576). Here, the thermostat was not destroyed, and no defendant otherwise demonstrated that the continued use of the thermostat resulted in an alteration or change to the thermostat such that it may no longer be subjected to relevant and necessary inspections and testing. The sole affidavit from an expert regarding this issue was merely conclusory. Further, the defendants Hartford, Justin Time, and Emerson either inspected and performed certain tests on the thermostat near the time of the loss, or had representatives present at such inspections and testing (see e.g. Favish v Tepler, supra; Chiu Ping Chung v Caravan Coach Co., 285 A.D.2d 621, 728 N.Y.S.2d 767). Accordingly, the Supreme Court improperly granted those branches of the motions which were to dismiss the complaint based upon spoliation.

Mr. Lynch can be reached at Cozen and O'Connor, 501 West Broadway, Suite 1610, San Diego, California 92101, 800-782-3366 (voice), 619-234-7831 (fax), (e-mail), Follow us on Twitter at @firesandrain.

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