The Project as Proof: The Parameters of the Duty to Preserve Construction Defects

When a problem develops after construction, the first instinct of any diligent property owner may be to fix it. Given the delay associated with litigation and other formal dispute resolution procedures, it is common for owners to want to undertake repairs without waiting for litigation to commence (let alone be fully and finally resolved).

There are merits to the “fix now and litigate later” approach, most notably that repairs need not wait while litigation drags on. But making repairs before the litigation is over is not without risk since remediating evidence of defects, if not managed properly, can become the basis to sanction parties for “spoliation” of evidence.

Spoliation and Duty to Preserve

“Spoliation” refers to the destruction or alteration of property for another’s use as evidence in pending or future litigation. If a court determines evidence was spoliated after a duty to preserve existed, the court may elect to sanction the spoliating party. The sanctions imposed by courts in this context can be severe and even result in dismissal of a party’s claims.

Although there has been an increasing focus on understanding the duty to preserve electronically stored information (“ESI”), less guidance has been given to the safeguards that should be followed to preserve the actual brick-and-mortar that may become relevant in any construction dispute. Owners and contractors alike must appreciate that, when it comes to construction defect claims, the project is proof. Proof that can be used to substantiate—or refute—claims. After all, there is arguably no better evidence of the existence or absence of a construction defect or design deviation than the actual work-in-place.

Most courts have held that the duty to preserve in the construction context is not without limitation and that the duty to preserve must be tempered by allowing custodial parties to remediate evidence when the situation “reasonably requires.” It may be difficult to anticipate what repairs a court will deem “reasonable” and, as a result, hard to understand when the duty to preserve is being abridged. However, a review of cases where spoliation claims were brought and resolved in construction defect disputes reveals five key take-aways that owners and contractors should understand in order to prosecute and defend construction defect claims effectively.

1. Trial judges have a great deal of discretion in applying sanctions for the spoliation of evidence.

It can be hard to generalize best practices to ensure parties will avoid sanctions for repairing defects given that determining whether to sanction and what sanction to impose is a fact-intensive inquiry that is often based on what judges refer to as the “totality of the circumstances.”

Judges can focus upon the facts of any dispute that they find the most probative on the issue and will be afforded a great deal of deference in navigating these issues when they do arise.

Even on appeal, a trial court’s determination will not be overturned unless one of the parties can establish that the judge’s decision was an abuse of discretion. This is a high bar to overcome and will require any appellant seeking to challenge a spoliation ruling to show that the judge misapplied the law or issued a ruling that was manifestly unreasonable.

Although attorneys can develop best practices to assist their clients in navigating these situations, there is no guarantee that they will always avoid a spoliation claim.

2. Before repairing construction defects, it is essential to provide notice to interested parties whose work may be altered or implicated.

In most (if not all) of the cases where a court declined to sanction an owner for repairing defects while the dispute concerning those defects was still pending, the owner was found to have sent the defendant adequate notice of a potential claim and provided an opportunity to inspect the relevant evidence before conducting the repairs.

Sending a well-timed notice may afford owners some degree of safe harbor should a spoliation question later arise.[1]

There may still be disagreements over whether defendants were provided sufficient notice and an opportunity to protect their interests. In resolving this issue, courts are likely to scrutinize both the content and timing of the notice. To be most effective, the notice should, among other things:

• Explicitly state that a claim may be brought against the recipient to recover damages for the alleged defect;
• Provide a reason why the work must be done immediately and should not wait;
• Describe in as much particularity as possible what the contemplated repairs will be and when the work will be performed; and
• Invite the recipient to inspect the property prior to the repairs being made and have an independent consultant attend and observe the repair process.

As to the timing of the notice, there is no definitive guidance as to how much advanced warning will be sufficient. One court that considered the question affirmed the dismissal of the plaintiff’s complaint when she had removed and replaced the allegedly defective siding on Labor Day and only provided notice to the defendant by fax sent the Friday before.[2]

To ensure the widest net of recovery remains available down the road, it is a good idea to provide notice and opportunity to inspect to anyone who may be liable for the issue, even third parties and subcontractors with whom the owner/developer may not have a direct contractual relationship.

As with most issues in the spoliation realm, sending a single letter may not be enough to hold off a spoliation argument. The owner should be prepared to make good on any offer to provide reasonable access to their property for inspections and should update the claim respondents as the repair work continues and evolves.

3. Parties who receive claim notices of defects or upcoming repairs should not squander the opportunity to inspect.

When notice has been provided that claims may be brought for a construction defect or design deviation, contractors should not squander the opportunity to inspect. Notwithstanding whether the owner acted reasonably, courts are less inclined to grant spoliation sanctions when the non-custodial party slept on its rights to inspect and document an alleged defect prior to repair.

In Robertet Flavors, Inc. v. Tri-Form Construction Inc., the Supreme Court of New Jersey observed that a contractor who was called back to a building repeatedly, but merely glanced at the work, made little effort to identify a cause or find a solution will “have less ground to complain when the owner seeks assistance from others.”[3]

Likewise, the Washington Court of Appeals in Homeworks Construction, Inc. v. Wells, reversed the lower court’s sanction for spoliation where defendants were served before demolition had been completed and did nothing to view or preserve the evidence they later claimed was vital.[4]

These cases and others like them suggest that it would be good practice for any contractor receiving notice of potential defects to respond to the claimant in writing and advise the noticing party not to remediate or repair the condition unless and until the contractor has had an opportunity to inspect the condition. It is good practice for the contractor to forward the claimant’s notice to any subcontractors whose work may be affected to preserve the right to bring pass-through claims should the need arise.

4. Documenting work with photographs alone may not be effective insulation against spoliation claims.

Courts have different tests that they apply to determine whether to sanction a party for spoliation of evidence. However, one factor common to the analysis adopted in several jurisdictions requires a court to consider the degree to which the party seeking sanctions for spoliation has been prejudiced by the loss of evidence.

The party accused of spoliating evidence by repairing defects will commonly contend that it should not matter that the condition has been remediated since they documented the repair process through photographs and videos, all of which have been made available to the other side for review.

The problem with this contention is that some courts have concluded that photographs of the remediation process are not sufficient to place parties deprived of the opportunity to be present for repairs on equal footing. Such courts reason that photographs can be selectively sampled and that the non-spoliating party should not be limited to viewing the evidence literally “through the lens” of the plaintiff.[5]

Courts also reason that, had the non-custodial party been given the opportunity to retain its own consultant, they could have performed independent tests and explored other investigative avenues to arrive at a different conclusion, determine an alternate cause for any defect, or identify a less costly repair.[6]

5. Even parties acting in good faith may be subject to severe sanctions for altering evidence of construction defects.

In 2015, the Federal Rules of Civil Procedure were modified to clarify that, in the event ESI (such as emails or text messages) are lost, the most severe sanctions like the dismissal of claims should be reserved for situations where the spoliating party “acted with the intent to deprive another party of the information’s use in the litigation.”[7]

This may be the governing rule in many jurisdictions when it comes to ESI, but, when it comes to the physical evidence of defect, most courts hold that an owner may be subjected to even the most severe sanction—dismissal of a party’s claims—without finding the spoliating party acted in bad faith.

Although this rule may seem harsh, it is in keeping with fact that sanctions for spoliation, like other forms of punishment, serve purposes that are both retributive (justified because it is deserved) and utilitarian (justified because of the good it will achieve in the future). Indeed, the three explanations courts generally give for the need for spoliation sanctions are that they will:

• “Even the playing field”;
• “Penalize” those who have spoliated evidence; and
• “Deter others” who may be tempted to behave in a similar way.[8]

Closing Thoughts

Owners and contractors should use the take-aways above as guideposts and consult with counsel as soon as defect claims are anticipated. This may be the best way to avoid future sanctions and ensure that they are not featured prominently in the next cautionary tale.

Article Content is Not Legal Advice. This article is for informational purposes only. The content in this article is not legal advice and should not be construed nor relied upon as such. This is not a substitute for personal legal advice.

[1] See Miller v. Lankow, 801 N.W.2d 120 (Minn. 2011) (custodian with legitimate need to destroy evidence may be absolved of failure to preserve evidence by providing sufficient notice and full and fair opportunity to inspect the evidence to noncustodial party).

[2] Fines v. Ressler Enterprises, Inc., 820 N.W.2d 688 (N.D. 2012).

[3] 1 A.3d 658, 676 (N.J. 2010).

[4] 133 Wash. App. 892, 138 P.3d 654 (2006).

[5] See Ihli v. Lazzaretto, 864 N.W.2d 483, 487 (N.D. 2015) (no abuse of discretion where trial court dismissed complaint after plaintiff demolished house without notice to defendant contractor).

[6] See Construction Litigation Handbook 3d § 16:43 (3d ed.) (citing Robertet Flavors, 1 A.3d 658, 676 (dismissing related allegations where mold was remediated without opportunity for defendant to conduct independent tests despite availability of lab reports and photographs)).

[7] See Fed. R. Civ. P. 37(e)(2).

[8] See, e.g., Fines, 820 N.W.2d 688 at 690; Robertet Flavors, 1 A.3d 658 at 671.