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Manorcare Health Services, Inc. v. Osmose Wood Preserving

January 11, 2001


On Appeal from Superior Court of New Jersey, Law Division, Middlesex County, L-1109-97.

Before: Judges Petrella, Newman, and Wells.

The opinion of the court was delivered by: Newman, J.A.D.


Argued December 11, 2000:

In this spoliation of evidence case, we address the issue of appropriate sanctions in a case involving fire retardant treated (FRT) plywood, where the manufacturer was afforded an opportunity to inspect the damaged plywood and did so, but was denied notice of the removal and replacement of the damaged plywood and thereby lost the ability to monitor the removal and replacement phase. We conclude that the appropriate sanction would have been to bar at trial the admissibility of evidence obtained during the removal and replacement stages, but nonetheless allow the case to proceed forward instead of dismissing the complaint.

Plaintiff ManorCare Health Services, Inc. ("ManorCare") appeals from a summary judgment dismissing its complaint against defendant Osmose Wood Preserving, Inc. ("Osmose"), based upon ManorCare's failure to provide Osmose with timely notice as to precisely when roof repairs at ManorCare's Medbridge Medical and Physical Rehabilitation Facility ("Medbridge facility") would be taking place. This failure to provide notice precluded Osmose from having its representatives present during the repairs. Osmose, the sole remaining defendant in this case, was granted summary judgment as to ManorCare's remaining claims of common law fraud and violations of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-2. The trial judge also awarded Osmose $10,000 in counsel fees incurred in its motion for summary judgment. We now reverse.

The facts are relatively straight forward. The allegedly defective FRT plywood roof sheathing involved in this case was manufactured by two companies: defendant Osmose and defendant Hoover Treated Wood Products, Inc. ("Hoover"). By letters dated December 22, 1994 and January 4, 1995, James A. MacCutcheon, Senior Vice President of ManorCare, attempted to place Hoover and Osmose, respectively, on notice "that there has been significant degradation of the plywood roof sheathing at" ManorCare's Medbridge facility. MacCutcheon demanded in each letter that the recipient take all steps necessary at its cost and expense to replace the degraded roof sheathing. He also indicated that ManorCare would proceed with the necessary repairs and replacements and hold the recipients fully responsible for such costs if no written response agreeing to effectuate the repairs was received by ManorCare within seven business days.

By letter dated January 10, 1995, T. Gregory Slother, counsel for Osmose, responded to ManorCare's letter and requested information and documentation concerning the facility. Slother concluded the letter as follows:

Finally, I note that your correspondence mentions the possibility of your company proceeding without further delay to perform repairs. On behalf of Osmose, as set forth above, we are willing to discuss this matter with you if the above conditions are met. Nonetheless, I do need to advise you that Osmose must insist on being notified of any repair or replacement and being granted the opportunity to inspect and witness such repair or replacement. If your company is unwilling to do this and proceeds with repairs, Osmose will be forced to take the position that this constituted a destruction of evidence. Hopefully, however, we will be able to proceed as outlined above and avoid any such problems. ... [Emphasis added.]

By letter dated February 21, 1995, Stephen R. Mysliwiec, counsel for ManorCare, responded to the Slother letter, providing information and documentation requested by Osmose. Mysliwiec's letter included the following paragraph:

Manor HealthCare is happy to arrange a time for you and/or Mr. Wangle to inspect and examine the above-referenced facility. The company would also like to engage in discussions with you to attempt to settle the company's claim against Osmose. In addition, the company will notify you prior to the repair of the roof at the facility so that you may comment on the intended repairs in advance and observe the repairs being made. [Emphasis added.]

Also by letter dated February 21, 1995, Mysliwiec requested that counsel for Hoover respond to the demands made in MacCutcheon's December 22, 1994 letter. Mysliwiec's letter to Hoover explained that "[t]he roof at the above-referenced facility is scheduled to be replaced in the next several weeks. Please contact me if [Hoover] would like to inspect the roof at this facility prior to or at the time of the repair."

By letter dated March 8, 1995, Mysliwiec explained to Slother that Slother and/or Robert K. Wangel, Manager of Architectural Engineering at Osmose, could inspect the Medbridge Facility on March 27, 1995. Mysliwiec proposed that the parties then meet the following day in Piper & Marbury's Washington, D.C. office to discuss resolution of ManorCare's claim. Slother replied by letter dated March 13, 1995, confirming the meeting on March 27, 1995 and the follow-up meeting in Washington, D.C. on March 28, 1995.

The inspection took place on March 27, 1995. Slother and Wangel appeared on behalf of Osmose, and their visit was memorialized in a seven-page inspection report prepared by Wangel. Wangel's report stated that Larry Godla, Vice President of Construction, and Edward A. Kubis, Assistant General Counsel of ManorCare, accompanied them during the inspection. The report summarized Wangel's observations and referenced thirty-seven photographs apparently taken by Wangel, under four headings corresponding to distinct areas of the Medbridge facility attic: the West Wing, the Second Floor Main Roof Structure, the East Side of main attic area, and the Residential Wing. Wangel noted: All parties present agreed that there was approximately 50% Osmose brand fire retardant treated plywood product located in the far West wing (½ of the wing was Osmose brand plywood, the other half was [Hoover] Protex). There was approximately 5% (generous) Osmose brand fire retardant treated plywood in the attic over the resident's section of the roof's structure.

Wangel's report recounted that he had urged both Godla and Kubis to accompany Slother and him to the proposed meeting with Mysliwiec in Washington, D.C. the following day. However, because neither Godla nor Kubis were able to attend, Wangel and Slother agreed to postpone such a meeting until an undetermined future date.

On the following day, March 28, 1995, Mysliwiec sent a letter to counsel for Hoover, indicating that the Osmose's representatives had inspected the Medbridge facility's roof, wherein they observed "that most of the FRT plywood was manufactured by" Hoover. Mysliwiec also stated that "the repairs are scheduled to take place by sometime next week, depending on the weather." No correspondence was sent from Mysliwiec or any ManorCare representative to Osmose indicating when the repairs would likely commence.

By letter dated April 4, 1995, Mysliwiec informed counsel for Hoover that counsel and/or an inspector on behalf of Hoover were scheduled to inspect the Medbridge facility's attic and roof on April 6, 1995. Mysliwiec explained that "[i]t is unlikely that the inspection would take more than a half day. The inspection by the Osmose inspector and Osmose's attorney took approximately 2.5 hours." ManorCare ultimately settled its claims against Hoover.

According to deposition testimony of Charles M. Albert, whose bid for the entire roof replacement was accepted by ManorCare, the roof repairs had been approved by February 21, 1995. Albert testified that he did not believe that anyone from ManorCare ever instructed him to notify representatives of Osmose prior to commencement of the roof repairs.

Osmose's initial written notice that the roof repairs were already underway came by letter from Mysliwiec dated September 22, 1995. In this letter, Mysliwiec stated that the roof repairs, "which [he] thought were further along, are just now being completed." By letter dated October 4, 1995, Mysliwiec advised Slother that sample panels of the FRT plywood taken from the Medbridge facility's roof during the repairs were being "stored at a site near [ManorCare's] corporate headquarters in Silver Spring, Maryland," and that Osmose's inspector should contact Albert to make arrangements to inspect them. The record reveals no prior correspondence from Mysliwiec or any ManorCare representative to Slother or any Osmose representative indicating precisely which day the repair work was to begin, the ...

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