Lawyers that handle construction disputes understand the importance of project documentation and document management in prosecuting or defending a claim.  Although there is still project documentation that is maintained in hard copy, the way entities now do business and transmit documentation is electronically.  This includes sending e-mails including e-mails with attachments, uploading documentation on web-based sharing platforms, generating documentation electronically, and organizing and storing that documentation on a server in an organized paperless format.  This is how many entities, especially those on fairly sophisticated construction projects, conduct business because it increases the speed in which information is shared and the efficiency in generating, storing, and transmitting information.  Yet, although it increases the efficiency of that entity during construction, it becomes a source of consternation when a dispute arises and a party needs to preserve and produce that electronically stored documentation.

When a party learns of a potential dispute that party has a duty to preserve its documentation.   Not doing so can lead to the imposition of discovery sanctions associated with what is known as the “spoliation of  evidence.”   The types of sanctions can cumulatively range from monetary sanctions; the striking of a party’s claim or defenses; the prevention of that party from introducing certain evidence that was not produced; or, importantly, an adverse inference jury instruction.  This jury instruction basically allows the jury (for purposes of jury trials) to infer that the spoiled evidence would have been unfavorable to the spoiler which is why that party spoiled the evidence.  Spoliation sanctions are imposed by courts to prevent the spoiler from reaping an unfair advantage in the dispute and to deter this type of conduct from taking place.  See In re Electric Machinery Enterprises, Inc. v. Hunt Construction Group, Inc., 416 B.R. 801, 873 (M.D.Bkrtcy.Fla. 2009) (discussing spoliation of evidence under Florida law).

The Fourth District Court of Appeal in Florida explained spoliation as follows:

Spoliation is ‘[t]he intentional destruction, mutilation, alteration, or concealment of evidence [.]’ Black’s Law Dictionary 1437 (8th ed.2004). In cases involving negligent spoliation, courts prefer to utilize adverse evidentiary inferences and adverse presumptions during trial to address the lack of evidence. In cases involving intentional spoliation, courts more often strike pleadings or enter default judgments .   Golden Yachts, Inc. v. Hall, 920 So.2d 777, 780 (Fla. 4^th DCA 2006) (trial court could give adverse inference jury instruction due to spoliation of a boat cradle).  See also American Hospitality Management Co. of Minnesota v. Hettiger, 904 So.2d 547, 550-51 (Fla. 4^th DCA 2005) (“In circumstances where the lost evidence was under the sole control of the party against whom the evidence might have been used to effect, and where the lost evidence is in fact critical to prove the other party’s claim, an adverse inference instruction may be necessary to achieve justice in the jury’s determination of the case.”); Simon Property Group, Inc. v. Lauria, 2012 WL 6859404,*8 (M.D.Fla. 2012) (“Under Florida law, the remedy for a party failing to produce crucial but unfavorable evidence that it destroyed is an adverse inference or discovery sanctions up to and including entry of a default judgment.”)

Now, before a Florida court issues any sanction for spoliation of evidence, it needs to answer three fundamental questions: (1) whether the evidence ever existed, (2) whether there was a duty to preserve that evidence, and (3) whether the evidence was critical to the opposing party providing its affirmative claim or a defense.  Golden Yachts, 920 So.2d at 781.  While the first question is easy to establish and answer, the second and third questions are not.  An entity should have a duty to preserve evidence where that party could reasonably have foreseen a claim.  See American Hospitality Management Co., 904 So.2d 547; accord Osmulski v. Oldsmar Fine Wine, Inc., 93 So.3d  389 (Fla. 2d DCA 2012).  However, there is strong caselaw in Florida that supports that the lawsuit (and discovery request) triggers the duty to preserve evidence (unless that duty specifically arose prior to the lawsuit from a statute or a contract).  See Royal & Sunalliance v. Lauderdale Marine Center, 877 So.2d 843 (Fla. 4^th DCA 2004).

The Middle District’s opinion in In re Electric Machinery Enterprises contains an insightful discussion about spoliation of evidence in a construction dispute.  In this matter, it was undisputed that the general contractor destroyed relevant documentation prior to its electrical subcontractor filing suit and that the Court found this destruction intentional. The subcontractor argued that the general contractor had a duty to preserve evidence when it had notice of impending litigation. The subcontractor wanted an adverse inference jury instruction.  The Court, however, found that even though the destruction of relevant documentation was intentional, there was nothing to establish that the documentation was critical to the subcontractor’s claims considering the subcontractor produced substantial evidence to support its claim that general contractor breached the subcontract.  Hence, irrespective of whether there was any duty to preserve the documentation, the spoiled documentation was not critical or material to the subcontractor’s burden of proof to support its claim.  If this documentation was deemed critical, the Court likely would have treated the spoliation of evidence differently.

It is imperative that parties involved in a dispute, or are aware of impending litigation, take active efforts to preserve relevant documentation, specifically documentation stored electronically.  Not doing so could lead to cumulative discovery sanctions including the harsh sanctions of an adverse inference jury instruction or the striking of claims or defenses, especially if the documentation is destroyed or lost after litigation commenced.  Spoliation of evidence is still an evolving aspect of the law that is being more defined as electronic discovery and disputes involving electronic discovery become the norm.  Strong document management protocols are a vital aspect of construction to ensure not only projects are running efficiently, but also that claims and defenses to claims are likewise being handled efficiently.

For more information on document management, please see: https://floridaconstru.wpengine.com/consultants-corner-five-tips-for-better-construction-project-documentation/.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.