Opinion
No. 01-03-01126-CV
Opinion Issued May 20, 2005.
On Appeal from the 80th District Court, Harris County, Texas, Trial Court Cause No. 2001-24857.
Panel consists of Justices TAFT, ALCALA, and HANKS.
MEMORANDUM OPINION
Appellants, Imelda and Fernando Cardoza, appeal from a take-nothing judgment rendered in favor of appellee, Reliant Energy HLP ("Reliant"). We determine whether the trial court erred in denying the Cardozas' request for an irrebuttable spoliation-presumption instruction, in granting Reliant's summary judgment motion, and in rendering a take-nothing judgment against the Cardozas. We affirm.
Facts
On May 24, 2000, a fire severely damaged the Cardozas' home and personal property. The Cardozas' homeowners insurer, Farmers Insurance Exchange ("Farmers"), brought a subrogation action against Reliant for breach of contract, breach of warranty, and negligence for allegedly improperly installing, maintaining, servicing, designing, and inspecting the equipment bringing electricity into the home. Farmers sought damages for the amounts paid under the policy (including repair, replacement, and cleaning costs for the home and its contents and the cost of the Cardozas' living expenses during the home's repair), the costs of Farmers's investigation to determine the cause and origin of the fire, and attorney's fees.
A few months later, the Cardozas intervened, also asserting claims against Reliant for breach of contract, breach of warranty, and negligence. They sought recovery of "damages suffered as a result of [Reliant's] conduct," including repair and replacement costs for their real and personal property, but also sought mental-anguish damages and lost wages, as well as attorney's fees incurred by their own counsel. In later briefing filed with the trial court, the Cardozas described the damages that they sought as "damages not covered by their homeowners insurance."
The Cardozas then moved the trial court for a spoliation instruction because, during the fire, Reliant had removed part of the power line running from its pole to the home ("the drop line") and destroyed the drop line soon thereafter. Specifically, the Cardozas prayed that the court (1) give the jury a spoliation instruction "that it is presumed that had the drop line been produced, it would have revealed cause and origin findings [for the fire] unfavorable to Reliant" and also that the court (2) prevent Reliant from rebutting this spoliation presumption. The trial court denied the motion.
Although the trial court denied the Cardozas' spoliation motion on November 20, 2002, the parties continued to brief the spoliation issue until just before the trial court's final ruling of July 28, 2003, in which it rendered summary judgment for Reliant. As discussed below, the court's final summary judgment ruling stood or fell on its ruling on the Cardozas' spoliation motion. Accordingly, because both parties continued to litigate the spoliation issue after November 20, 2002, and because the trial court's summary judgment ruling was dependent on its spoliation ruling, we deem the trial court's order rendering summary judgment in Reliant's favor also to have implicitly denied the Cardozas' spoliation motion a second time, or at least to have reaffirmed the court's earlier ruling denying their motion. Accordingly, as the parties do on appeal, we consider all of the spoliation evidence and arguments that they made up until the time of the trial court's ruling granting Reliant's summary judgment motion.
A few months after the trial court's spoliation ruling, Reliant moved for no-evidence summary judgment "on the claims of interveners Fernando and Imelda Cardoza" on the grounds that no evidence of breach or proximate cause existed. See TEX. R. CIV. P. 166a(i). In response, the Cardozas re-urged their spoliation motion and attached evidence relevant to spoliation, implicitly acknowledging — as they do on appeal — that a spoliation presumption was the only way for them to provide evidence of breach and causation and thus to defeat the summary judgment motion. The trial court at first denied Reliant's summary judgment motion, but, upon Reliant's motion for reconsideration, the court granted the motion to reconsider, granted Reliant's summary judgment motion, and rendered judgment that the Cardozas take nothing "on all of their claims," which the court then dismissed with prejudice.
By this time, the trial court had signed an order non-suiting Farmers's claims against Reliant.
Spoliation
Under their sole issue, the Cardozas first argue that the trial court erred in denying their request for a spoliation-presumption instruction.
A. Standard of Review
Trial courts have broad discretion in taking measures to address spoliation of evidence. See Wal-Mart Stores, Inc. v. Johnson, 106 S.W.3d 718, 721 (Tex. 2003); Trevino v. Ortega, 969 S.W.2d 950, 953 (Tex. 1998). A trial court abuses its discretion by acting arbitrarily, unreasonably, or without consideration of guiding principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). A trial court generally does not abuse its discretion when it bases its decision on conflicting evidence. Davis v. Huey, 571 S.W.2d 859, 862 (Tex. 1978).
B. The Law Concerning Spoliation
Spoliation is the improper destruction of evidence relevant to a case. Malone v. Foster, 956 S.W.2d 573, 577 (Tex.App.-Dallas 1997), aff'd on other grounds, 977 S.W.2d 562 (Tex. 1998). When they determine that spoliation has occurred, "[t]rial judges have broad discretion to take measures ranging from a jury instruction on the spoliation presumption to, in the most egregious case, death penalty sanctions." Trevino, 969 S.W.2d at 953. "As with any discovery abuse or evidentiary issue, there is no one remedy that is appropriate for every incidence of spoliation; the trial court must respond appropriately based upon the particular facts of each individual case." Id.
"When a party believes that another party has improperly destroyed evidence, it may either move for sanctions or request a spoliation presumption instruction." Id. at 954 (Baker, J., concurring); Offshore Pipelines, Inc. v. Schooley, 984 S.W.2d 654, 666 (Tex.App.-Houston [1st Dist.] 1998, no pet.) (favorably citing and following Justice Baker's concurring opinion on this and related matters concerning spoliation). The trial court should then determine, as a preliminary legal issue, whether a spoliation-presumption instruction or sanctions are appropriate. Trevino, 969 S.W.2d at 954 (Baker, J., concurring); Schooley, 984 S.W.2d at 666. "This legal inquiry involves considering: (1) whether there was a duty to preserve evidence; (2) whether the alleged spoliator either negligently or intentionally spoliated evidence; and (3) whether the spoliation prejudiced the nonspoliator's ability to present its case or defense." Trevino, 969 S.W.2d at 954-55 (Baker, J. concurring); Schooley, 984 S.W.2d at 666.
Our Court has adopted the position of Justice Baker's concurring opinion in Trevino that evidence may be intentionally or negligently spoliated. See Offshore Pipelines, Inc. v. Schooley, 984 S.W.2d 654, 666-68 (Tex.App.-Houston [1st Dist.] 1998, no pet.); Trevino v. Ortega, 969 S.W.2d 950, 954-55 (Tex. 1998) (Baker, J., concurring). A majority of the Texas Supreme Court has yet to decide the matter. See Wal-Mart Stores, Inc. v. Johnson, 106 S.W.3d 718, 722 (Tex. 2003) ("[W]e need not decide whether a spoliation instruction is justified when evidence is unintentionally lost or destroyed, or if it is, what standard is proper."). We note that, here, we are concerned only with the intentional destruction of evidence: the Cardozas repeatedly asserted below that the extreme spoliation instruction that they sought was merited because Reliant had intentionally destroyed the drop line.
As for the first consideration (duty), "a duty arises only when a party knows or reasonably should know that there is a substantial chance that a claim will be filed and that evidence in its possession will be material and relevant to that claim." Johnson, 106 S.W.3d at 722. As for the second consideration (negligent or intentional spoliation),
[a] spoliator can defend against an assertion of negligent or intentional destruction [of evidence] by providing other explanations for the destruction. For example, if the destruction of the evidence was beyond the spoliator's control or done in the ordinary course of business. . . . Importantly though, when a party's duty . . . arises before the destruction or when a policy is at odds with a duty to maintain records, the policy will not excuse the obligation to preserve evidence.
Trevino, 969 S.W.2d at 957 (Baker, J., concurring); see Schooley, 984 S.W.2d at 667-68. As for the final consideration (prejudice), courts should consider, among other matters, "the destroyed evidence's relevancy." Trevino, 969 S.W.2d at 958 (Baker, J., concurring).
As for the appropriate remedy, courts should fashion it on a case-by-case basis. Johnson, 106 S.W.3d at 721. Courts that have opted for sanctions, as opposed to spoliation-presumption instructions, have, for example, dismissed the spoliator's action, rendered default judgment against the spoliator, or excluded evidence or testimony. Trevino, 969 S.W.2d at 959-60 (Baker, J., concurring) (citations omitted). Alternatively, courts may give a spoliation-presumption jury instruction. See Johnson, 106 S.W.3d at 721; Trevino, 969 S.W.2d at 960-61 (Baker, J., concurring). Courts may give two types of spoliation-presumption jury instructions: first, a rebuttable presumption that the destroyed evidence is unfavorable to the spoliating party, under which the burden shifts to the spoliating party to disprove the presumed fact, or second, "an adverse presumption that the evidence would have been unfavorable to the spoliating party," under which instruction the burden does not shift, but remains on the non-spoliating party to prove his case. Trevino, 969 S.W.2d at 960-61 (Baker, J., concurring); see Johnson, 106 S.W.3d at 721 (expressly recognizing second type of presumption instruction).
C. Additional Facts Relevant to Spoliation
The Reliant employee who was called to the scene, James Hefner, followed fire department personnel's instructions to cut the service out of the drop line in order to protect firefighters from inadvertent electrical shock and to remove a possible source for further damage. Hefner discovered that the drop line was burned in half, with a portion hanging from the utility pole and the other half still connected to the electrical equipment on the back of the garage. Hefner proceeded to "de-energize" the portion of the drop line still attached to the pole by physically removing it with the assistance of another Reliant employee. After having removed that portion of the drop line, Hefner rolled it up, threw it in the back of his truck, and returned to the service center, where he unloaded the drop line on the dock to be recycled. The same day that the drop line was placed on the dock, it would have been put in a recycling bin with other materials for recycling, at which point the drop line would "likely not [have been] identifiable." No one asked Hefner to preserve the drop line.
The fire began in the back of the Cardozas' attached garage.
The normal operating procedure for a Reliant employee who collected wire at the scene of a fire was to put it in his truck and to unload the wire on Reliant's dock to be "cleaned up," that is, to be recycled and salvaged. It was Reliant's standard operating procedure to dispose of drop lines recovered from fire scenes unless someone in charge at the fire scene (such as a fire marshal or arson investigator) asked the Reliant employee to retain the drop line. There was some evidence that Reliant employees received on-the-job training to follow whatever instructions the fire personnel give them at a fire site, including to preserve materials from the site. However, there was also evidence that, during its training of employees like Hefner, Reliant did not discuss the need to preserve evidence. On May 25, 2000, the day following the fire, Farmers's attorney faxed Reliant a letter requesting that Reliant preserve "all evidence removed from the fire scene." Reliant's litigation specialist, Ronald Wendt, admitted receiving the letter; Wendt also testified that, because he was busy on another matter, he assigned the case to a Reliant claims manager, Karen Rogers. Months later, when Wendt began his investigation and preparation for discovery and asked Rogers about the case, she informed him that she had no knowledge of the case. Although Wendt testified that the drop line "would be likely not identifiable" once it was placed in the recycling bin on the day of the fire, he also testified that, had Rogers responded to Farmers's request on the day after the fire, "there would have been a chance" of recovering the drop line.
Farmers's three loss investigators were unable to determine the cause of the fire because, in part, a portion of the drop line had been removed, the fire had severely burned some of the electrical components remaining at the site, and the gas company had dug behind the garage to repair the gas piping.
D. Discussion
For purposes of our discussion, we assume without deciding that the drop line was relevant and that its destruction prejudiced the Cardozas.
Although Reliant was undisputedly notified to preserve all relevant evidence the day following the fire, the trial court could reasonably have given weight to Reliant's evidence that the drop line had already been placed in the recycling bin, in the ordinary course of business, the day of the fire — that is, the day before Reliant received Farmers's notice. The trial court could also have considered Reliant's evidence (albeit disputed) that Reliant employees received on-the-job training to follow instructions given them by fire personnel, including instructions to preserve materials from the site, and that no fire personnel instructed Hefner to retain the drop line. The trial court would also not have abused its discretion if it concluded that, despite the fact that the drop line lay in the recycling bin for up to a week after Reliant had received Farmers's notice letter, the drop line could not have been retrieved from the bin because it "would be likely not identifiable" once it had been placed there.
We thus hold that, based on the disputed evidence set out above, the trial court would not have abused its discretion if it concluded either that (1) Reliant did not intentionally destroy evidence relevant to the Cardozas' claim or (2) Reliant had no duty to preserve the drop line because it had already disposed of it, and could not retrieve it, before receiving notice of the claim.
Again, we note that the Cardozas repeatedly argued below that Reliant had intentionally destroyed the drop line, not that it had negligently done so.
Furthermore, given the disputed facts of this case relating to duty and intent, the trial court would not have abused its discretion if it concluded that the Cardozas' requested instruction was too extreme to fit the circumstances. The usual spoliation-presumption instruction is rebuttable in the ways set out above. See Trevino, 969 S.W.2d at 960-61 (Baker, J., concurring); see also Johnson, 106 S.W.3d at 721. In contrast, the Cardozas requested an irrebuttable spoliation-presumption instruction that, in effect, would have relieved them of their burden of proof at trial. Such an instruction far exceeds the usual spoliation instruction; considering the evidence that the trial court could have believed indicating that Reliant had not intentionally destroyed the drop line, the trial court would not have abused its discretion in denying such an instruction as being too extreme for the circumstances. Cf. Trevino, 969 S.W.2d at 959 (Baker, J., concurring) ("[C]ourts must be sensitive to certain constitutional due process considerations and avoid depriving a party of the right to have its case heard on the merits. . . . Thus, courts can dismiss an action or render a default judgment when the spoliator's conduct was egregious, the prejudice to the nonspoliating party was great, and imposing a lesser sanction would be ineffective to cure the prejudice.").
Summary Judgment
In the remainder of their sole issue, the Cardozas assert that the trial court erred in rendering summary judgment against them. However, the only argument that the Cardozas make in support of this assertion is that the trial court abused its discretion in denying their motion for a spoliation instruction. We thus construe the Cardozas to acknowledge in this Court, as they indicated to the trial court, that summary judgment was erroneously rendered only if their spoliation motion was erroneously denied. Because we have already held that the trial court did not abuse its discretion in denying the Cardozas' spoliation motion, we also hold that the trial court did not err in rendering summary judgment against the Cardozas and in dismissing their claims with prejudice.
Conclusion
We affirm the judgment of the trial court.