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Project Owner’s Claims, Damages, Evidence Limited After It Demolished Baghouse at Center of Lawsuit
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April 5, 2010
By Andrew M. Argyris
Barton Brands, Ltd. owns and operates a distillery and bottling plant in Bardstown, Kentucky. Barton Brands contracted with O’Brien & Gere Engineers, Inc. / O’Brien & Gere, Inc. of North America to design, fabricate and install a baghouse system to control pollution from the coal-fired boiler at the distillery. O’Brien & Gere subcontracted with Astec, Inc. for part of the work.
After completion of the project, there were four small fires in the baghouse. Then, on December 5, 2006, a large fire rendered the baghouse system inoperable. Barton Brands switched to natural gas to operate the distillery, shutting down its coal-fired boiler.
After the December 2006 fire, Barton Brands retained an expert from Amerex Environmental Systems to conduct an operational review and field inspection audit of the baghouse. After completion of the expert’s report, Barton Brands filed suit against O’Brien & Gere in U.S. District Court. Ultimately, Barton Brands asserted claims for breach of contract, declaratory relief, negligence, negligent misrepresentation, and breach of express and implied warranties. O’Brien & Gere counterclaimed against Barton Brands for the outstanding contract balance. Barton Brands also asserted claims against Astec.
In June 2007, in the midst of the litigation, Barton Brands demolished the baghouse and replaced it with an Amerex-designed baghouse. Barton Brands failed to notify O’Brien & Gere, Astec or their lawyers of its “specific plan” to demolish and replace the burned baghouse even though discovery was pending in the litigation.
In response, O’Brien & Gere moved to dismiss all of Barton Brands’ claims on grounds of spoliation of evidence – demolition of the baghouse. O’Brien & Gere also moved for summary judgment against Barton Brands. Both O’Brien & Gere and Astec moved to exclude Barton Brands’ expert testimony on the cause of the fire.
The court framed its legal analysis by noting: “The court has the power to impose an appropriate sanction when a party destroys evidence in a case.”
The court wrote that a “proper spoliation sanction should serve both fairness and punitive functions.… [T]he severity of the sanction may, depending on the circumstances of the case, correspond to the party’s fault,” citing Adkins v. Wolever, 554 F.3d 650, 652-653 (6th Cir. 2009).
In determining the appropriate sanction, the court wrote, it must consider: “(1) the degree of fault of the spoliating party; (2) the degree of prejudice suffered by the non-spoliating party; and (3) the effectiveness of lesser sanctions.” Prejudice occurs, the court wrote, when the spoliating party’s actions impair the non-spoliating party’s ability to go to trial or when rightful decision-making in the case is affected. The court noted that it had broad discretion to impose a variety of sanctions, including dismissal of plaintiff’s case, summary judgment and imposing negative evidentiary inferences on the spoliating party.
In evaluating the factual context, the court found that “[n]o one disputes that the baghouse fire is a potential focal point of the evidence in this case.” The court held that demolition of the baghouse prejudiced O’Brien & Gere and Astec because they were unable to conduct their own investigations of the cause of the fire and because “[k]nowing the cause of the fire could be important evidence in a majority of Barton Brands’ claims.” The court wrote:
The Court finds no reason to conclude that Barton Brands destroyed the baghouse to intentionally undermine O'Brien & Gere's defense ability. Barton Brands had a legitimate need to rebuild or replace the baghouse. Destruction of the fire site was inevitable and ultimately necessary.
However, the manner of its actions within the context of this litigation raises serious concerns of unfairness to O'Brien & Gere. Barton Brands should have notified the other parties and given them a time certain within which to complete their own investigation.…
Counsel for Barton Brands declined to say whether they had knowledge of their client's actions. However, the absolute responsibility of a party in these circumstances is to notify opposing counsel in a timely fashion of the intended destruction. Failure of such notice created the potential for unfair prejudice to O'Brien & Gere as well as to Astec.
The court held that dismissal of all claims, the sanction sought by defendants, was too harsh. Instead, the court held that Barton Brands could not introduce expert testimony at trial regarding the cause and origin of the fire. Barton Brands, Ltd. v. O’Brien & Gere, Inc., 2009 WL 1767386 (W.D. Ky. 2009).
In reaching that decision, the court characterized letters sent by Barton Brands five months before demolition of the baghouse as “too ambiguous and non-specific” to provide proper notice of imminent demolition. It noted that Barton Brands had not even sued Astec until six months after demolition of the baghouse. The court characterized Barton Brands’ claim – disputed by defendants – that it offered defendants an opportunity to inspect the baghouse after each fire to be “irrelevant.” Consequently, the court held that “neither O’Brien & Gere nor Astec had a fair notice to examine the baghouse [before] its destruction.”
Although the District Court barred Barton Brands from presenting expert testimony about the cause and origin of the fire, it did hold that Barton Brand’s experts could testify on industry design standards for baghouses attached to coal-fired boilers because this testimony was not dependent on the cause of the fire or examination of the damaged baghouse.
As a result of these decisions, the court dismissed Barton Brands’ negligent misrepresentation claim; limited the bases upon which it could seek to prove its breach of contract, declaratory relief and warranty claims; and limited the damages that could be recovered. The court dismissed Barton Brand’s negligence claim against O’Brien & Gere on grounds that it was subsumed by the breach of contract claim.
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