Chrysler Realty Company, LLC v. Design Forum Architects, Inc.
2008 U.S. Dist. LEXIS 42721, No. 06-CV-11785 (E.D. Mich. May 30, 2008)
The United States District Court for the Eastern District of Michigan was asked to consider whether a plaintiff’s claim for professional liability against a design professional should be dismissed where plaintiffs allowed evidence to be destroyed. Finding that the plaintiff’s intentional removal and destruction of the allegedly defective HVAC system without notice to the defendant deprived the defendant of an opportunity to develop defenses to the claims, the Court dismissed the plaintiff’s claims.
Defendant Design Forum Architects, Inc. (“DFA”) filed a motion for summary judgment seeking dismissal of plaintiff, Chrysler Realty Company, LLC’s (“Chrysler”) claims of breach of contract, unjust enrichment and professional negligence. The Eastern District granted summary judgment on the breach of contract and unjust enrichment claims in DFA’s favor. In its ruling, the Court indicated that it did not need to address DFA’s spoliation claim against Chrysler because summary judgment was warranted on other grounds. On a motion for reconsideration, DFA asked the Court to address the spoliation issue as it related to the professional malpractice claim and sought dismissal of that remaining claim.
With regard to the spoliation claim, DFA claimed that Chrysler intentionally removed and discarded of the allegedly defective HVAC system designed by DFA without notice to DFA. Chrysler had an inspection of the HVAC system performed, dismantled the HVAC system, and destroyed the HVAC system all without notice to DFA. Chrysler later utilized the findings from the original inspection as the basis of its demand to DFA for damages. DFA claimed that destruction of the HVAC system deprived DFA the ability to properly investigate and raise all applicable defenses to Chrysler’s claims.
Utilizing Michigan law, the Court examined the nature of a professional malpractice claim and the law of spoliation. First, the Court acknowledged that Mich. Comp. Laws § 600.2912 applied to architects. Second, the Court turned to Michigan state law principles governing spoliation of evidence. Relying on Detroit Edison Co. v. City of Detroit, 2006 Mich. App. LEXIS 462, No. 257667 (Mich. Ct. App., Feb. 21, 2006), the Court explained that sanctions may be permitted where there is a showing of intentional or unintentional destruction of material evidence. The Court also noted that sanctions should be issued if there is a necessity to create a “fair playing field” and if there is a finding that the lost evidence was material to the claims and defenses. The Eastern District further indicated that a presumption that the lost or destroyed evidence would have been adverse to the party charged with the loss or destruction is only permitted where there is evidence of intentional fraudulent conduct and destruction of evidence. Should there be an absence of intent, an adverse inference may be permitted, but there is no presumption.
Applying the law of spoliation to the facts at hand, the Court concluded that sanctions against Chrysler were appropriate. Citing cases in other jurisdictions where plaintiffs deprived a defendant of the opportunity to inspect an allegedly defective building component before such component was removed and destroyed, the Court found that Chrysler had a duty to preserve all relevant evidence.
Having concluded that sanctions were appropriate, the Court next had to weigh the various options for sanctions. The Court rejected Chrysler’s proposal that its expert, who performed the inspection of the HVAC system before it was destroyed, be barred from testifying as a fact witness. The Court further rejected Chrysler’s alternate proposal that DFA be permitted additional time for third-party discovery. Instead, in order to level the playing field, the Court held that dismissal of Chrysler’s claims was the only reasonable sanction to address the fact that spoliation of the evidence resulted in DFA’s substantially impaired ability to maintain defenses.