Court Opinion

ID: 156022
Source: CourtListenerOpinion
Date Created: 2010-08-14 04:28:20+00
Date Added: 2024-06-11T15:01:39.472778
License: Public Domain

F I L E D
                                                      United States Court of Appeals
                                                              Tenth Circuit
                  UNITED STATES COURT OF APPEALS
                                                             FEB 20 1998
                         FOR THE TENTH CIRCUIT
                                                        PATRICK FISHER
                                                                  Clerk

JORDAN F. MILLER
CORPORATION, a California
corporation; JORDAN F. MILLER, an
individual,

            Plaintiffs-Appellants,

and

AMERICAN EAGLE INSURANCE
COMPANY, a foreign corporation,

            Plaintiff,                       No. 97-5089
v.                                       (D.C. No. 95-CV-469)
                                             (N.D. Okla.)
MID-CONTINENT AIRCRAFT
SERVICE, INC., an Oklahoma
corporation; JET CENTER TULSA,
INC., an Oklahoma corporation,

            Defendants-Third Party-
            Plaintiffs-Appellees,

v.

E.U. BAIN, Jr.,

            Third-Party-Defendant-
            Third-Party-Plaintiff,

v.

VICTOR MILLER,

            Third-Party-Defendant.
                           ORDER AND JUDGMENT *

Before BRORBY, BARRETT, and BRISCOE, Circuit Judges.

      After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral

argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1.9. The case is therefore

ordered submitted without oral argument.

      Plaintiffs Jordan F. Miller and Jordan F. Miller Corp. (collectively,

“Miller”), filed this interlocutory appeal of the district court’s order dismissing

certain of their claims due to the spoliation of crucial evidence. The court, acting

under its inherent power, concluded that the loss or destruction of the evidence so

prejudiced defendants that no lesser sanction would insure that they received a

fair trial. We exercise jurisdiction under 28 U.S.C. § 1292(b), and affirm.

*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

                                         -2-
                                I. Factual Background

      Miller’s claims arise out of his purchase of a Cessna twin-engine airplane

from defendants Mid-Continent Aircraft Service and Jet Center Tulsa, Inc.

(collectively, “MCAS”). Miller took delivery of the airplane in Oklahoma on

December 17, 1993, and flew it to San Diego, California. When Miller landed in

San Diego, sometime after midnight on December 18, the left landing gear

collapsed, causing major damage to the airplane, but no personal injuries to Miller

or his passengers. An FAA investigator inspected the airplane shortly after the

crash and reported that “[i]mmediately after touchdown, the left main landing

gear collapsed. . . . It appears that the landing gear failed due to a fatigue crack

in the trunion area. Further examination will be conducted when the damaged

components are removed.” Appellants’ App. at 36. Miller subsequently notified

his insurance carrier, American Eagle Insurance Co., of the incident and made a

claim against his policy. American Eagle retained the firm of Arnold & Arnold to

inspect the aircraft and adjust Miller’s claim.

      In January 1994, Ken Harris of Arnold & Arnold solicited bids from several

airplane repair businesses, which he forwarded to American Eagle and to Miller.

Both American Eagle and Miller approved the bid submitted by Southern Cal

Aircraft Repair (SCAR), which was then hired to make necessary repairs to

Miller’s airplane. Ken Harris monitored the repairs and made reports to American

                                          -3-
Eagle, which were forwarded to Miller. Based on Harris’ recommendations,

American Eagle made payments under Miller’s policy for repairs totaling

approximately $55,000. During the course of repairing the damage caused by the

crash, SCAR discovered various other defects in the plane, which it reported to

Miller.

      In May 1995, Miller filed suit against MACS, alleging breach of contract,

breach of warranty, negligence, and products liability, based on the collapse of

the left landing gear and various other alleged defects in the plane. Miller sought

damages in excess of $275,000 or, in the alternative, rescission of the purchase

contract. MACS was served with the complaint in August 1995, and in

September, MACS made its first request of Miller to inspect the landing gear that

had allegedly failed. Following a case management conference on January 11,

1996, at which American Eagle moved to intervene as a party-plaintiff in the

action, MACS sent a letter to both American Eagle’s attorney and Miller’s

attorney requesting that “the actual landing gear, component parts thereof or other

apparatus which you claim as relevant to your claims be produced for inspection

and possible testing by our experts.” Id. at 43.

      American Eagle entered the lawsuit on February 22, and on February 28,

MACS submitted a request for production of documents to American Eagle that

included a request for “[a]ny and all aircraft component parts taken into

                                         -4-
possession by American Eagle Insurance Company . . . for the purpose of

allowing defendants and/or defendants’ experts, the opportunity to inspect and

test the component parts.” Id. at 46. American Eagle responded to MACS’

request in late March by saying that it would make aircraft components in its

possession available for inspection at a mutually agreeable time. In May 1996,

Miller’s attorney wrote MACS and informed it that

      [t]he components and parts which were removed from the aircraft in
      the process of repairing it and making it airworthy are in the
      possession of various repair facilities which have worked on the
      aircraft or are currently working on it. At my request, a list of all
      such parts and components is being made. Once this has been done,
      it is my understanding that the parties will confer and agree to
      inspection and non-destructive testing of those parts and components.

Id. at 51. In July 1996, the parties’ attorneys corresponded about traveling to

California to inspect the parts, take depositions, and arrange to have the parts

shipped back to Oklahoma, where MACS’ experts would be able to test them.

      In mid-August, the attorneys went to California, where they deposed Ted

Hazelwood, the President of SCAR. During the deposition, counsel learned for

the first time that all but one of the component parts of the left landing gear had

been lost or destroyed. Hazelwood testified that the only part of the damaged

landing gear that remained was the upper main link. He said that he kept the

other parts for awhile, but he did not know what had happened to them.

Hazelwood explained: “I didn’t know about all this litigation, so I don’t like

                                          -5-
keeping old parts from damaged airplanes. I throw them out, because the FAA is

on this bogus parts deal, so I don’t keep them around. And I’m thinking they got

thrown out. That’s my guess.” Id. at 154. 1

                            II. Procedural Background

      In December 1996, MACS filed a motion seeking to dismiss plaintiffs’

damage claims relating to the left landing gear, based on the spoliation of

evidence. 2 MACS argued that Miller and American Eagle had a duty to preserve

the landing gear, which they knew would be relevant in the litigation, and that the

failure of their agent, SCAR, to preserve the evidence so prejudiced MACS’

ability to defend against plaintiffs’ claims as to make trial thereon fundamentally

unfair. Miller and American Eagle filed a joint reply to MACS’ motion, authored

1
       Hazelwood later filed an affidavit with the court in which he stated that “at
some time after the aircraft arrived at Southern Cal Aircraft, the exact date being
unknown, [he] was informed by the aircraft’s owner, Mr. Jordan Miller, and by
Mr. Miller’s attorney, Mr. Richard B. O’Connor, that all parts removed from the
aircraft were to be preserved as evidence in a possible law suit.” Appellants’
App. at 196. To the extent that Hazelwood’s affidavit contradicted his earlier
deposition testimony, the district court viewed the deposition testimony as the
more reliable. See id. at 187 n.6 (citing, inter alia, Franks v. Nimmo, 796 F.2d
1230, 1237 (10th Cir. 1986)). Miller does not challenge this evidentiary ruling on
appeal.
2
       MACS also sought sanctions under Rules 26 and 37 of the Federal Rules of
Civil Procedure, based on plaintiffs’ failure to comply with discovery requests
relating to evidence other than the landing gear component parts. The parties
eventually resolved most of these discovery disputes, and the district court’s order
did not address these matters. Nor do we.

                                        -6-
by counsel for American Eagle, in which they acknowledged the court’s inherent

power to impose a sanction for the spoliation of evidence, but argued that no

sanction should be imposed. Plaintiffs contended that they had no hand in the

loss or destruction of the evidence and, more importantly, that they suffered as

much prejudice as MACS, if not more, because their own experts had not had an

opportunity to inspect or test the landing gear components. The district court

conducted a hearing on the motion, after which it ordered the parties to submit

additional evidence, consisting of affidavits from their respective experts

“concerning whether or not actual physical examination and testing of the missing

left landing gear components is critical to or reasonably necessary for a

determination of the cause of the landing gear failure on December 18, 1993.” Id.

at 192.

      Thereafter, the court entered an order dismissing plaintiffs’ claims for

damages arising from the collapse of the left landing gear. The court concluded

that the “pivotal question” before it was “how critical in a due process-fair trial

analysis is it for Defendants and their expert to have the right to visually inspect

and appropriately test pertinent components of the aircraft left landing gear.” Id.

at 188. Based on the evidence before it, the court concluded that “hands-on

inspection and testing is critical to a fair trial and due process for the

Defendants.” Id. at 189. The court then considered and rejected plaintiffs’

                                           -7-
argument that only an intentional destruction of evidence warrants a sanction,

noting numerous cases where sanctions were imposed even when the destruction

or loss of evidence was neither intentional nor in bad faith. Finally, the court

considered what type of sanction would remedy the prejudice to MACS, and

concluded that only a dismissal of plaintiffs’ claims relating to the missing

landing gear would suffice.

      Miller subsequently filed a motion to amend the court’s order, in which he

asked the court to add language to the order that would permit him to take an

interlocutory appeal under 28 U.S.C. § 1292(b). In the alternative, Miller asked

that the court “reconsider Mr. Miller’s responsibility for the disappearance of the

landing gear.” Appellants’ App. at 171. The court granted Miller’s request to

amend the order to permit him to pursue an interlocutory appeal, but denied

Miller’s request to reconsider the dismissal.

      We granted Miller permission to appeal under § 1292(b), and this appeal

followed. Miller’s primary contentions on appeal are that the district court should

not have sanctioned him for the loss or destruction of the landing gear because (1)

only American Eagle, and not Miller, had the duty to preserve the evidence and,

therefore, only American Eagle was responsible for its loss or destruction; and (2)

Miller was as prejudiced by the spoliation of the evidence as was MACS.

                                         -8-
                                     III. Analysis

      Federal courts possess inherent powers necessary “to manage their own

affairs so as to achieve the orderly and expeditious disposition of cases.”

Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991) (quotation omitted). Among

those inherent powers is “the ability to fashion an appropriate sanction.” Id. at

44; see also Smith v. Northwest Fin. Acceptance, Inc., 129 F.3d 1408, 1419 (10th

Cir. 1997) (“[A] federal court possesses the authority to impose . . . sanctions on

its inherent power to control and supervise its own proceedings.”) (quotations

omitted) (alteration in original). “‘We review a court’s imposition of sanctions

under its inherent power for abuse of discretion.’” Martinez v. Roscoe, 100 F.3d

121, 123 (10th Cir. 1996) (quoting Chambers, 501 U.S. at 55). “[T]he issue is not

what we might have done if the situation had been presented to us originally, but

rather, whether the district court abused its discretion in imposing the sanction.”

Dillon v. Nissan Motor Co., 986 F.2d 263, 267 (8th Cir. 1993).

      We have not previously had occasion to consider when sanctions may be

appropriate to redress the spoliation of evidence, as a general matter. In

Aramburu v. Boeing Co., 112 F.3d 1398 (10th Cir. 1997), we considered “the

evidentiary doctrine of spoliation,” and stated, as a general rule, that the “bad

faith destruction of a document relevant to proof of an issue at trial gives rise to

an inference that production of the document would have been unfavorable to the

                                          -9-
party responsible for its destruction.” Id. at 1407 (citing Coates v. Johnson &

Johnson, 756 F.2d 524, 551 (7th Cir. 1985)). We also stated that, because only

the bad faith loss or destruction of a document will “support an inference of

consciousness of a weak case,” no adverse inference should arise from spoliation

that is merely negligent. Id. (citing Vick v. Texas Employment Comm’n, 514

F.2d 734, 737 (5th Cir. 1975)). But see Turner v. Hudson Transit Lines, Inc., 142

F.R.D. 68, 75 (S.D.N.Y. 1991) (concluding that, to restore the evidentiary

balance, an adverse inference should arise even when the spoliation was merely

negligent, because the prejudice to the other party is the same, regardless of the

despoiler’s intent).

      Courts have not generally imposed a similar requirement of bad faith when

considering other sanctions for the spoliation of evidence, however. See, e.g.,

Allstate Ins. Co. v. Sunbeam Corp., 53 F.3d 804, 806-07 (7th Cir. 1995)

(upholding dismissal of claims as sanction for spoliation, even in absence of bad

faith on part of despoiler); Dillon, 986 F.2d at 267-69 (upholding exclusion of

evidence as sanction for spoliation, even in absence of bad faith on part of

despoiler); Unigard Sec. Ins. Co. v. Lakewood Eng’g & Mfg. Corp., 982 F.2d

363, 368-69 (9th Cir. 1992) (same).

      When deciding whether to sanction a party for the spoliation of evidence,

courts have considered a variety of factors, two of which generally carry the most

                                         -10-
weight: 1) the degree of culpability of the party who lost or destroyed the

evidence, and (2) the degree of actual prejudice to the other party. See, e.g.,

Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994); Dillon,

986 F.2d at 267-68; Vazquez-Corales v. Sea-Land Serv., Inc., 172 F.R.D. 10,

13-14 (D. P.R. 1997) (collecting cases). The bulk of Miller’s arguments on

appeal concern the first factor: his culpability, or lack thereof.

      Miller’s argument that the district court erred in not distinguishing between

him and American Eagle is, at best, disingenuous. Miller and American Eagle

filed a joint response to MACS’ motion to dismiss, in which Miller made no

argument that he should be treated differently than American Eagle. Likewise, at

the hearing before the district court, Miller’s counsel declined the court’s

invitation to speak to the motion to dismiss, saying he would defer to counsel for

American Eagle, who drafted the written response. See Appellants’ App. at 252.

Thus, Miller and American Eagle presented a united front to the district court, and

Miller made no suggestion that either his duty or his culpability was any less than

that of American Eagle. The first time that Miller even suggested to the district

court that it should distinguish between him and American Eagle in imposing a

sanction was in his motion to reconsider, filed after the district court entered the

order at issue on appeal. The district court did not abuse its discretion in

declining to reconsider its order based upon this new argument.

                                         -11-
      A litigant has a duty to preserve evidence that he knows or should know is

relevant to imminent or ongoing litigation. See Dillon, 986 F.2d at 267;

Vazquez-Corales, 172 F.R.D. at 11. At the district court hearing, counsel for

American Eagle, whom Miller had authorized to speak on his behalf, conceded

that plaintiffs had a duty to preserve the landing gear, see Appellant’s App. at

262, and that MACS had a right to examine it, see id. at 255. The undisputed

evidence also established that Miller had authorized SCAR to take possession of

his airplane and make necessary repairs. Under the circumstances, Miller cannot

now be heard to argue that he had no duty to preserve the landing gear once it was

in SCAR’s possession.

      Other courts have sanctioned a party for failing to preserve evidence even

when the evidence was not in the party’s actual possession at the time the

spoliation occurred. Thus, in Sylla-Sawdon v. Uniroyal Goodrich Tire Co., 47

F.3d 277, 281 (8th Cir. 1995), the court rejected the plaintiff’s argument that she

should not be sanctioned for failing to preserve evidence because she did not have

ownership or custody of the evidence. The plaintiff was injured when the rear

tire on the car in which she was a passenger blew out and the driver lost control

of the car. Id. at 279. After the accident, title to the car passed from the

plaintiff’s mother to the mother’s insurance carrier, which then sold it for salvage.

Before suit was filed, plaintiff’s attorneys inspected the car at the salvage yard

                                         -12-
and purchased the seat belt mechanism, but did not purchase the three remaining

tires. Id. at 280. When plaintiff subsequently sued the tire manufacturer, alleging

that a tire defect caused the accident, a question arose as to the age of the tire that

blew out, which could be answered definitively only by an inspection of the

remaining three tires. Id. Because the plaintiff had failed to preserve the other

tires, the district court imposed an evidentiary sanction against her. Id. The

appellate court upheld the sanction, concluding that the plaintiff’s attorneys knew

or should have known that all of the tires would be relevant to a future suit and

should be preserved, and that they should have acquired the tires from the salvage

yard when they had the opportunity to do so. Id. at 281.

      In Dillon, 986 F.2d at 265, the plaintiff, who was injured when the car in

which he was a passenger collided with a trailer, sued the manufacturer, alleging

his injuries arose from a defective seat belt retractor. Before the suit was filed,

the plaintiff’s attorney arranged for the car to be examined by an expert. The

expert removed the seat belt retractor mechanism and the pillar to which it was

attached, but did not preserve the rest of the car. Id. Instead, when the police

asked him to remove the vehicle from his parking lot, he had it towed to a salvage

yard. The plaintiff’s attorney was notified of the move approximately two weeks

before the car was destroyed. Id. The district court concluded that sanctions

against the plaintiff were warranted because both the plaintiff’s attorney and his

                                          -13-
expert knew or should have known that the entire car would be relevant to

ensuing litigation and, therefore, they should have preserved the car in its

entirety. Id. at 267. The appellate court concluded that the plaintiff’s failure to

preserve the evidence, coupled with the resulting prejudice to the defendant,

justified the district court’s imposition of sanctions. Id. at 267-69. See also

Moyers ex rel. Moyers v. Ford Motor Co., 941 F. Supp. 883, 884 (E. D. Mo.

1996) (concluding that sanctions were warranted where, shortly after accident, car

was purchased from plaintiff’s insurer and taken to salvage yard, whose

employees removed seat belts at request of plaintiff’s counsel and set them aside,

but later discarded them); Barker v. Bledsoe, 85 F.R.D. 545, 547-48 (W.D. Okla.

1979) (concluding that sanctions were warranted where plaintiff’s expert witness

destroyed evidence in the course of his examination, thereby prejudicing

defendant’s ability to obtain a fair trial).

       Miller knew that the damaged landing gear was relevant to his claims

against MACS, and he, therefore, had a duty to preserve the evidence. His

argument that only American Eagle had a duty to preserve the landing gear is

misguided. American Eagle did not enter the suit as a party until almost a year

after Miller filed his complaint. Moreover, that American Eagle may also have

had a duty to preserve the evidence did not absolve Miller of his duty to preserve

evidence that was relevant to his own claims against MACS. Under the

                                           -14-
circumstances, Miller’s failure to preserve the landing gear provided a basis for

the imposition of sanctions.

      “Before a sanction for destruction of the evidence is appropriate, however,

there must also be a finding that the destruction prejudiced the opposing party.”

Dillon, 986 F.2d at 267. The district court here found that the destruction of the

landing gear severely prejudiced MACS. As the court noted, before the landing

gear was lost or destroyed, Miller and his agents had an opportunity to inspect its

components, both on and off the aircraft, and to develop a theory of liability.

MACS, however, had no such opportunity.

      The two experts retained by MACS gave detailed explanations in their

affidavits as to why a visual inspection of all the components of the landing gear,

as well as testing, was critical to the defense. Based on the evidence before it, the

district court concluded that “hands-on inspection and testing is critical to a fair

trial and due process for the Defendants.” Appellants’ App. at 189. As the court

noted, “[t]he sworn opinion of an expert is not entitled to probative credit if the

hypothesis upon which it is based is flawed.” Id. Thus, without visual inspection

and testing, the testimony of MACS’ experts would be speculative at best. The

district court considered and rejected plaintiffs’ argument that the parties were on

a level playing field because plaintiffs were as prejudiced by the loss of the

landing gear as was MACS. See id. at 260. Given that plaintiffs’ agents had the

                                         -15-
opportunity to visually inspect the landing gear components and, presumably,

would testify that their observations supported a finding of liability on the part of

MACS, we cannot say that the district court erred in rejecting plaintiffs’ “level

playing field” argument. Based upon our review of the record, we conclude that

the district court did not abuse its discretion in determining that the prejudice to

MACS warranted the imposition of sanctions against Miller.

      Having rejected Miller’s arguments that neither his conduct nor the

resulting prejudice to MACS justified the imposition of a sanction against him,

we briefly consider the nature of the sanction imposed. As the district court

acknowledged, a court should impose the least onerous sanction that will remedy

the prejudice and, where applicable, punish the past wrongdoing and deter future

wrongdoing. See id. at 190; see, e.g., Schmid, 13 F.3d at 78. “[D]ismissal is

usually appropriate only where a lesser sanction would not serve the interest of

justice.” Meade v. Grubbs, 841 F.2d 1512, 1520 (10th Cir. 1988) (quotation

omitted). Nonetheless, dismissal as a sanction is clearly within a district court’s

discretion. See Chambers, 501 U.S. at 44 (“[O]utright dismissal of a lawsuit . . .

is a particularly severe sanction, yet is within the court’s discretion.”); Dillon,

986 F.2d at 268 (“[W]hether the extent of a sanction is appropriate is a question

peculiarly committed to the district court.”).

                                          -16-
      In the district court, Miller and American Eagle argued only that neither

their conduct nor the prejudice to MACS justified the imposition of any sanction;

they did not discuss what lesser sanction, short of dismissal, would cure the

prejudice to MACS if the court determined that some sanction was warranted.

Nonetheless, the court’s order reflects that it considered sanctions other than

dismissal. See Appellants’ App. at 190 (“Sanctions could include dismissal,

claim preclusion, or the giving of an adverse inference instruction. The Court

may also impose no sanction.”).

      The district court rejected the sanction of an adverse inference instruction,

concluding that it would not restore MACS’ right to a fair trial, and “would result

only in probative ambiguity in such a case as this.” Id. at 191. In light of our

recent opinion in Aramburu, 112 F.3d at 1407, it also appears that an adverse

inference instruction would not have been appropriate here, because there was no

evidence of bad faith on the part of either American Eagle or Miller. In his reply

brief, Miller suggests that the district court could have excluded expert testimony

as a lesser sanction. Given the district court’s findings, however, such a sanction

would not have cured the prejudice to MACS. Perhaps a sanction that excluded

all evidence arising from the visual inspection of the landing gear would have

leveled the playing field, but, and at that point, Miller would have been unable to

prove liability on the part of MACS. See, e.g., Unigard Sec. Ins. Co., 982 F.2d at

                                         -17-
365-66 (excluding testimony from two of plaintiff’s witnesses and evidence from

heater and burned vessel, which witnesses’ had inspected, and then granting

summary judgment because plaintiff could not establish liability without the

excluded evidence).

      Under the circumstances, we conclude that the district court did not abuse

its discretion in dismissing Miller’s claims for damages arising out of the landing

gear as a sanction for the loss or destruction of the landing gear. See Allstate,

53 F.3d at 804, 806-07 (upholding dismissal of case as sanction where insurance

adjustor and expert witness threw away evidence they believed was unimportant,

resulting in prejudice to defendant); Moyers ex rel. Moyers, 941 F. Supp. at

884-86 (granting summary judgment to defendant based on substantial prejudice

that resulted from plaintiff’s counsel’s failure to preserve evidence when he had

the opportunity to do so).

      AFFIRMED.

                                                     Entered for the Court

                                                     James E. Barrett
                                                     Senior Circuit Judge

                                         -18-