Thursday, July 14, 2011

Drilling Down: Spoliation of Evidence

On June 20, 2011, the South Carolina Supreme Court filed its opinion in Cole Vision Corp. v. Hobbs, No. 26988, 2011 WL 2447090 (S.C. June 20, 2011) (you can find it online at this link, page 30).  This case is a medical malpractice case, not a products liability case.  Therefore, I am not going to do a "Case Brief" of the opinion.  However, it is significant because the court deals with whether South Carolina recognizes a claim for negligent spoliation of evidence.  After reading the case, and after reflecting on my own experience in products cases with spoliation, it seemed like a good topic for a blog post.  So hear we go. 

What is South Carolina's general law with regard to spoliation of evidence between parties?

A party has a duty to preserve evidence for inspection in litigation.  See Gathers v. South Carolina Elec. & Gas, 311 S.C. 81, 427 S.E.2d 687 (Ct. App. 1993) (where the court sanctioned a party for removing the service line and meter at issue in an electrocution death case so that it was unavailable for inspection).  The well‑established law is that courts have the power to sanction parties for mishandling evidence, and they have exercised this authority where the mishandling rises to the level of destruction or loss of evidence. 

Generally, “spoliation” is a rule of evidence to be applied at the court’s discretion.  Cole v. Keller Indus., Inc., 132 F.3d 1044, 1046 (4th Cir. 1998).  Courts have statutory authority to impose sanctions for spoliation of evidence pursuant to Federal Rule of Civil Procedure 37(b) (or its state counterpart, South Carolina Rule of Civil Procedure 37(b)) when a party fails to comply with a discovery order.  Kershaw County Bd. of Educ. v. United States Gypsum Co., 302 S.C. 390, 396 S.E.2d 369 (1990).  However, courts also have inherent authority to sanction parties, which goes beyond any extrinsic statutory authority.  This inherent power is based on the court’s commonly recognized authority to control the judicial process and litigation.  Silvestri v. General Motors Corp., 271 F.3d 583 (4th Cir. 2001).  Despite these different sources of authority, the range of remedies for spoliation of evidence remains the same.  The three primary sanctions allowed by Rule 37(b) —adverse inference, exclusion of evidence and dismissal — have also been applied by courts pursuant to their inherent authority. 

South Carolina courts have long recognized the court’s power to sanction parties for mishandling evidence.  See Welch v. Gibbons, 211 S.C. 516, 46 S.E.2d 147 (1948) (affirming the imposition of an adverse inference against a plaintiff who withheld evidence from the defendant); Wisconsin Motor Corp. v. Green, 224 S.C. 460, 79 S.E.2d 718 (1954) (allowing an adverse inference for failure to produce records).  (Though neither of these cases dealt specifically with destruction of evidence, they illustrate the availability of sanctions in South Carolina for mishandling of evidence.  They also closely resemble the situation that arises in a spoliation case.  Whether a defendant is unable to inspect evidence because it is withheld or because it is destroyed, the effect is the same.  Thus, the logic of Welch and Wisconsin Motor Corp. can be applied in the spoliation context.). 

Courts permit an inference that withheld or destroyed evidence would be adverse to the party failing to produce such evidence.  Kershaw County Bd. of Educ., 302 S.C. at 371-72, 396 S.E.2d at 394-95; Gathers, 311 S.C. at 83, 427 S.E.2d at 689.  This inference can be imposed regardless of the motives or circumstances surrounding the non-producing party.  Gathers, 311 S.C. at 83, 427 S.E.2d at 689.  In Gathers, the court imposed this inference in spite of the fact that the defendant in the case removed evidence out of safety considerations.  Id.  (emphasis added).  Therefore, it is inconsequential that the loss of evidence may have been accidental.  Where the court determines that an adverse inference might apply in lieu of a more severe court-imposed penalty, it is for the jury to decide whether the negative inference is justified.  Stokes v. Spartanburg Reg’l Med. Ctr., 368 S.C. 515, 629 S.E.2d 675 (Ct. App. 2006) (holding that although hospital provided explanation for why evidence was missing, jury was entitled to hear adverse inference instruction and apply it if the jury determined application was justified).   However, the party advocating for the adverse inference must be prepare to show that the evidence might reasonably have supported whatever presumption is being requested of the fact finder.  Pringle v. SLR, Inc. of Summerton, 382 S.C. 397, 405-06, 675 S.E.2d 783, 787-88 (Ct. App. 2009) (citing Kevin Eberle, Spoliation in South Carolina, South Carolina Lawyer, Sept. 2007, 26, 32).

Under South Carolina law, dismissal is only appropriate in cases where there is intentional misconduct on the part of the plaintiff or his counsel.  Kershaw County Bd. of Educ., 302 S.C. at 372, 396 S.E.2d at 395.  Fourth Circuit law provides supporting authority for this principle.  Cole, 132 F.3d at 1047. 

What about when evidence is spoliated by a third party?

This is where Cole Vision Corp. v. Hobbs comes in.  Existing evidentiary rules and discretionary sanction powers granted to courts are not as effective when dealing with third-party spoliators.  The dilemma is that under traditional remedies, a court can only hold a party before it accountable for spoliation of evidence.  Sanctions may not be imposed upon an independent, disinterested third party because these individuals do not have a duty to preserve evidence at common law.  See Koplin v. Rosel Well Perforators, Inc., 734 P.2d 1177, 1180 (Kan. 1987) (“[A]bsent some special relationship or circumstance there is no duty to preserve evidence for the benefit of another.”); see also Joseph J. Ortego & Glenn M. Vogel, Spoliation of Evidence in Products Liability Cases, Practical Litigator, Sept. 2001, at 23 (citing Stefan Rubin, Tort Reform: A Call for Florida to Scale Back its Independent Tort for the Spoliation of Evidence, 51 Fla. L. Rev. 345, 359 (1999)).  Therefore, recognized sanctions such as an adverse inference jury instruction, prohibition on expert testimony, and dismissal serve no real purpose in the case of a third-party spoliator.  To remedy this dilemma, some states have adopted a separate independent tort for negligent spoliation or intentional spoliation so as to allow recovery from a third party. 

This was the precise issue addressed by the court in Cole Vision Corp.  The case generally involved an optometrist who failed to properly treat and diagnose a patient.  The case with the patient eventually settled, and the case on appeal involved an action by the entities who sublet space to the optometrist (Cole Vision Corp. and Sears) against the optometrist himself, Steven Hobbs, and his insurance company, for indemnification.  Hobbs filed a defense and counterclaim against Cole Vision and Sears stemming from the loss of the patient’s profile sheet.  Cole Vision filed a motion to dismiss on grounds that South Carolina does not recognize a cause of action for spoliation of evidence.  The circuit court agreed and granted the motion to dismiss.  The court of appeals reversed the circuit court based on its characterization of Hobb’s claim as sounding in general negligence.  See Cole Vision Corp. v. Hobbs, 384 S.C. 283, 680 S.E.3d 923 (Ct. App. 2009).  The South Carolina Supreme Court granted Cole Vision’s petition for certiorari.

After dispensing with arguments concerning whether Hobbs’ attempt to characterize his counterclaim as one for general negligence was properly preserved, the court addressed spoliation of evidence.  The court reviewed a prior case, Austin v. Beaufort County Sheriff’s Office, 377 S.C. 31, 659 S.E.2d 122 (2008).  In that case, the South Carolina Supreme Court determined that even if it recognized the tort of third-party spoliation of evidence, the plaintiff’s claims (Austin) did not rise to the level of stating a claim.  However, in that case, the court declined to address whether it would adopt the tort of third party spoliation of evidence.  Id. at 36, 659 S.E.2d at 124. 

The court in Cole Vision Corp. found Austin to be distinguishable.  However, this did not resolve the issue presented in the case: whether South Carolina should recognize a stand-alone tort for spoliation of evidence.  To dispense with this question, the court held that although the optometrist could assert Cole Visions’ failure to maintain the patient’s profile sheet as a defense to the indemnification claim, “the circuit court properly held that South Carolina does not recognize an independent tort for the negligent spoliation of evidence, third-party or otherwise.”  (Emphasis added). 

The court reviewed case law in other states where an independent action for spoliation of evidence has been adopted, or where the state(s) permitted recovery for spoliation under traditional negligence principles.  However, it found that “[m]ost states . . . have refused to recognize an independent spoliation tort and continue to rely on traditional non-tort remedies such as sanctions and adverse jury instructions for redress.”  The court also cited to public policy considerations (e.g., other remedies are already available with respect to first-party claims) and the speculative nature of the damages calculation for negligent spoliation claims.  Finally, the court noted that there is a potential for duplicative and inconsistent litigation with the adoption of a negligent spoliation claim. 

For all of these reasons, the court in Cole Vision Corp. definitively declined to adopt an independent tort for negligent spoliation of evidence, either directly or against a third party.  The court also noted that characterizing spoliation as “negligence” does not make it a viable claim because the substance of the claim is the same as an independent tort for spoliation.  However, the court maintained that Hobbs could use spoliation as a defense to the indemnity claim.  Therefore, the court found that the circuit court was correct and reversed the decision of the South Carolina Court of Appeals.

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