American Family Mutual Insurance v. Golke

SHIRLEY S. ABRAHAMSON, C.J.

¶ 60. (concurring). The majority opinion concludes that American Family's actions in razing the fire-damaged house "were reasonable as a matter of law and so discharged [American Family's] duty to preserve evidence,"1 such that no sanction is appropriate. Not so!

¶ 61. The record supports the circuit court's findings of fact and discretionary determination that American Family violated its duty to preserve evidence and may be sanctioned. Because American Family's conduct was not egregious, that is, because the conduct was not a conscious attempt to affect the outcome of the litigation or a flagrant knowing disregard of the judicial process, the circuit court erred in imposing the sanction of dismissing American Family's claim. But on its findings of fact and this record the circuit court could have imposed another sanction. I would remand to determine whether any sanction other than the sanction of dismissal is appropriate.2

*430¶ 62. American Family's theory in the circuit court was that the Golkes, when doing work on the house's roof, negligently moved the chimney too close to combustible materials on the roof, which eventually caught fire. American Family, however, did not save any of the physical evidence relevant to its theory about the cause and origin of the fire and to its theory that the Golkes (as opposed to the original home builder) were responsible for creating a dangerous condition on the roof.

¶ 63. The circuit court found as a matter of fact that important parts of the fire scene "could [have] been easily preserved, could have been removed and could [have] been available for inspection and testing." The circuit court accepted the defense expert's testimony that American Family should have saved the chimney assembly, the fireplace, the "doghouse" (a part of the roof), roof decking and joists, and part of the interior chase, all of which would have fit easily in a garage stall. The circuit court also accepted the testimony of American Family's fire scene investigator, who testified that he could have preserved critical parts of the roof in a 10x10 foot area,3 that he felt photographs were sufficient to document his findings about the cause and origin of the fire, and that he more than likely would handle the fire scene investigation differently if he were to conduct it today.

¶ 64. The circuit court found American Family's photographs inadequate. It accepted the defense *431expert's testimony that the photographs did not permit an inference as to where the fire originated because the photographs were all of very small areas on or in the house, with no "medium view or overall view photographs of those same areas to place them in relation to the fire scene in general."

¶ 65. The circuit court also determined, after conducting a bench hearing with all evidence presented, that American Family's failure to preserve evidence caused significant prejudice to the Golkes. The circuit court concluded that American Family had "destroyed what is the crucial evidence that is important for the defendants to be able to evaluate the claim and to prepare and present a defense." The circuit court accepted the defense expert's testimony that due to the complete destruction of physical evidence, he could not form opinions about either the cause or the origin of the fire.

¶ 66. Having reviewed the evidence and made its findings, the circuit court ultimately determined that American Family's failure to preserve crucial evidence from the fire scene "is a clear case of spoliation every bit as bad" as the conduct that has warranted sanctions in other cases. The circuit court's determination that American Family violated its duty to preserve relevant evidence clearly was reasonable and is supported by the circuit court's findings of fact and evidence in the record.

¶ 67. The majority opinion properly acknowledges that "the ability of the party in possession of the evidence to bear the burden and expense of preserving it" is a relevant factor in the spoliation analysis.4 Nevertheless, the majority opinion ignores the circuit court's finding of fact that American Family could have *432preserved crucial evidence from the fire scene with minimal burden or expense.

¶ 68. The majority opinion also acknowledges that a party or potential litigant requires "a legitimate reason to destroy evidence."5 The majority opinion does not explain — because it cannot explain — what legitimate reason American Family had for destroying every piece of evidence from the fire scene in the present case.

¶ 69. In short, the majority opinion turns a blind eye to the circuit court's findings of fact and discretionary determination that American Family acted unreasonably in failing to preserve any part of the fire scene, including the parts of the house that American Family's expert knew or should have known to be highly relevant to American Family's claim against the Golkes and to the Golkes' defense.

¶ 70. This court should uphold the circuit court's discretionary decision to sanction American Family for failing to act reasonably in preserving evidence.

¶ 71. Although dismissal is not the appropriate sanction in the present case, the circuit court nevertheless may impose a lesser sanction for American Family's failure to preserve any part of the house. A circuit court has "a broad canvas upon which to paint in determining what sanctions are necessary" in a spoliation case.6 Courts have excluded evidence,7 imposed a monetary *433sanction,8 or allowed "the trier of fact... to draw an inference from the intentional spoliation of evidence that the destroyed evidence would have been unfavorable to the party that destroyed it."9

*434¶ 72. The majority opinion does a disservice to the parties and to the law by ignoring American Family's failure to retain any part of the house as evidence. This is the main defect in the decision. Other parts of the majority opinion, however, deserve closer attention as well.

¶ 73. First, contrary to the majority opinion's holding at ¶ 58, a reasonable judge could conclude that American Family did not give the Golkes a reasonable opportunity to inspect the evidence in the present case before it was destroyed. American Family's March 13, 2000, letter to the Golkes stated that the house would be demolished on April 1, 2000 — just 19 days after the letter was written.10 The letter did not suggest that the April 1 deadline was flexible, although American Family's claims adjustor testified after the fact that he would have granted an extension upon request. During the 19 days between March 13 and April 1, the Golkes needed to contact and work things out with their insurers, to find and retain a fire scene investigator, and to make arrangements for the investigation. A lot to expect from the owners of a local roofing outfit!11

*435¶ 74. Moreover, American Family ended up giving David Golke as few as nine days to retain a fire scene investigator and conduct the investigation. Upon receiving American Family's March 13 letter, David Golke did exactly what the letter told him to do: He promptly forwarded the letter to his insurance carrier.12 David Golke did not know that he, rather than his insurance carrier, would be responsible for dealing with American Family until he received a second letter from American Family, dated March 23, 2000, informing him that his insurance carrier had denied coverage. The March 23 letter reiterated that the house would be demolished on April 1, 2000.

¶ 75. The majority opinion apparently concludes that as a matter of law it is reasonable to give a small businessman nine days to locate and hire an expert witness before losing the opportunity to inspect evidence that is critically relevant to a potential lawsuit against him. See majority op., ¶ 56 (stating that the March 23 letter to David Golke "provided ample time... to inspect or schedule an inspection of the evidence before its destruction"). I do not find the majority opinion persuasive on this point.

¶ 76. Perhaps sensing that a reasonable judge could take issue with American Family's narrow timetable, the majority opinion hedges its bets by declaring that the Golkes had an extra 10 days to inspect the fire scene because demolition of the house "did not begin until sometime after April 11, 2000."13 The majority opinion, however, decides an issue of fact that the *436circuit court left undecided. The circuit court stated that it "never heard testimony or official evidence as to the razed date" and "[did not] know what date the home was actually razed."14

¶ 77. Even assuming that American Family waited an additional ten days to demolish the house, this delay would not show that American Family's conduct was reasonable as a matter of law. American Family never told the Golkes that they had an extended period of time during which to inspect the fire scene. A letter that American Family sent to the Golkes on April 6, 2000, requested insurance information and neither stated nor implied that the fire scene was still intact or that the Golkes might still have an opportunity to inspect it.15 American Family also failed to provide this information after Charles Golke called American Family on April 7 and left a message in reply to the April 6 letter. American Family's claims adjustor testified that he returned Charles Golke's call after business hours, *437got no answer, and then made no further attempt to contact any of the Golkes until October 2000.

¶ 78. Second, the majority opinion fails to make clear that the method of notifying interested persons of the impending destruction of evidence depends on the circumstances of the case. In some circumstances first-class mail might be fine. In others, not.

¶ 79. Although the majority opinion relies upon statutes permitting notice to be made via first-class mail to justify the use of first-class mail in the present case,16 the legislature does not always deem first-class mail an appropriate method of providing notice. Indeed, a computer search of the Wisconsin Statutes reveals that the phrase "certified mail" appears in 167 sections of the statutes, the phrase "registered mail" appears in 104 sections of the statutes, and the phrase "first-class mail" appears in only 18 sections.17

¶ 80. I am uncomfortable with any language in the majority opinion intimating that first-class mail is sufficient in all cases.

¶ 81. In any event I suggest it is wiser for a person who must give notice to use a method that provides written evidence that he or she actually did give the notice and that the recipient actually did receive the notice. Without such written proof a dispute may arise about notice, and the notifier, the recipient, and the courts will be faced with a set of presumptions that evolved in a different era and might not be realistic in the technologically-advanced 21st century.

*438¶ 82. In sum, I would remand the matter to the circuit court to exercise its discretion in determining whether a sanction lesser than the sanction of dismissal should be imposed for American Family's failure to retain any physical evidence from the fire scene in the present case.

¶ 83. For the reasons set forth, I write separately.

¶ 84. I am authorized to state that Justice ANN WALSH BRADLEY joins this opinion.

Majority op., ¶ 44. See also majority op., ¶¶ 5, 58-59.

The circuit court held a bench trial relating to the Golkes' insurance coverage and to American Family's destruction of evidence. It did not rule on the coverage issue. I assume the *430majority opinion's remand is for further proceedings related to coverage and to the merits of American Family's claim against the Golkes.

Another American Family expert testified through a deposition that removal and preservation of physical evidence was not feasible and that the only way to preserve evidence of the fire scene was through photography. The circuit court did not find this testimony persuasive.

Majority op., ¶ 29.

Majority op., ¶ 5.

Milwaukee Constructors II v. Milwaukee Metro. Sewerage Dist., 177 Wis. 2d 523, 538, 502 N.W.2d 881 (Ct. App. 1993).

See Estate of Neumann v. Neumann, 2001 WI App 61, ¶ 80, 242 Wis. 2d 205, 626 N.W.2d 821 (stating that the Wisconsin courts recognize the exclusion of evidence as a sanction in spoliation cases).

*433See also Howell v. Maytag, 168 F.R.D. 502, 505 (M.D. Pa. 1996) ('Where evidence is destroyed, sanctions may be appropriate, including... the exclusion of countervailing evidence ...."); N. Assurance Co. v. Ware, 145 F.R.D. 281, 284 (D. Me. 1993) (excluding evidence as a sanction for the spoliation of evidence); Hamilton Mut. Ins. Co. v. Ford Motor Co., 702 N.E.2d 491, 493 (Ohio Ct. App. 1997) ("In product liability cases where evidence is intentionally or negligently 'spoiled' or destroyed by a plaintiff or his expert before the defense has an opportunity to examine that evidence for alleged defects, a court may preclude any and all expert testimony as a sanction for the spoliation of evidence." (quotation marks and citation omitted)).

See, e.g., Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 77-78 (S.D.N.Y. 1991) (stating that "courts impose monetary sanctions for the destruction of evidence"; imposing a monetary sanction); Harkins Amusement Enters., Inc. v. Gen. Cinema Corp., 132 F.R.D. 523, 524 (D. Ariz. 1990) (imposing a monetary sanction for the destruction of evidence); Capellupo v. FMC Corp., 126 F.R.D. 545, 553 (D. Minn. 1989) (same).

Neumann, 242 Wis. 2d 205, ¶ 81 (citation omitted).

See also Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 78 (3d Cir. 1994) ("Since the early 17th century, courts have admitted evidence tending to show that a party destroyed evidence relevant to the dispute being litigated. Such evidence permitted an inference, the 'spoliation inference,' that the destroyed evidence would have been unfavorable to the position of the offending party." (citation omitted)).

In Nation-Wide Check Corp. v. Forest Hills Distributors, Inc., 692 F.2d 214, 218 (1st Cir. 1982), then-Judge Breyer (now Justice Breyer) explained the rationale underlying the "spoliation inference" as follows:

The adverse inference is based on two rationales, one evidentiary and one not. The evidentiary rationale is nothing more than the common sense observation that a party who has notice that a *434document is relevant to litigation and who proceeds to destroy the document is more likely to have been threatened by the document than is a party in the same position who does not destroy the document.... The other rationale for the inference has to do with its prophylactic and punitive effects. Allowing the trier of fact to draw the inference presumably deters parties from destroying relevant evidence before it can be introduced at trial. The inference also serves as a penally, placing the risk of an erroneous judgment on the party that wrongfully created the risk.

Majority op., ¶ 9.

The majority opinion identifies the "sophistication of the parties" as a relevant factor in the spoliation analysis. Majority op., ¶ 29.

The March 13 letter stated in relevant part: "If you have a liability insurance carrier, please forward this letter to them and we will handle these matters directly with them."

Majority op., ¶ 15.

*436See also majority op., ¶ 56 ("The April 1,2000, deadline was in fact extended by at least ten days before demolition and rebuilding commenced ....").

American Family's claims adjustor testified that although he could not recall when the fire scene was demolished, he could infer from two documents in the record that demolition began no earlier than April 11, 2000. American Family introduced two internal reports indicating that as of April 11, 2000, American Family still had not contracted for the rebuilding of its insured's home. The claims adjustor stated in his testimony that he thought "[American Family] would not have given the okay to start the demolition without knowledge of the — what we were going to be paying out for the rebuilding process."

The circuit court neither accepted nor rejected the claims adjustor's testimony about his inference from the internal reports.

See majority op., ¶ 12.

Majority op., ¶ 33.

The text of the Wisconsin Statutes is searchable at http://nxt.legis.state.wi.us/nxt/gateway.dll?f=templates&fn== stats.htm (last visited June 30, 2009).