September 7, 2012
NEW JERSEY MUNICIPAL ENVIRONMENTAL RISK MANAGEMENT FUND AS SUBROGEE OF AND BAYSHORE REGIONAL SEWERAGE AUTHORITY, PLAINTIFFS-APPELLANTS,
KILLAM ASSOCIATES CONSULTING ENGINEERS, CHU & GASSMAN CONSULTING ENGINEERS, P.C. AND MIDWEST MECHANICAL CONTRACTORS OF NEW JERSEY, DEFENDANTS-RESPONDENTS, AND ATLAS CONSTRUCTION COMPANY AND ROBBINS ELECTRICAL COMPANY, INC., DEFENDANTS.
On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-484-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 26, 2012
Before Judges Grall, Alvarez and Skillman.
The Bayshore Regional Sewer Authority (Bayshore) and its subrogee, the New Jersey Municipal Environmental Risk Management Fund (Fund), commenced this litigation to recover costs incurred to address a leak in an underground fuel pipeline and remediate the resulting contamination of soil and groundwater. The defendants are the professionals and contractors who designed and installed the pipeline. Plaintiffs appeal from an order dismissing the entire complaint as a remedy for spoliation of evidence.*fn1 Concluding that the record was inadequate to permit dismissal of all of plaintiffs' claims, we reverse and remand for further proceedings.
In January 1991, Bayshore retained defendant Killam Associates Consulting Engineers (Killam)*fn2 to design and oversee the construction of a pipeline to carry fuel from an aboveground storage tank to a generator. By subcontract with Killam, defendant Chu & Gassman Consulting Engineers, P.C. (C&G) agreed to design and install the pipeline, prepare the contract specifications and drawings, conduct special and final inspections and judge the acceptability of the work. Defendant Atlas Construction Company, the general contractor, subcontracted the pipe installation to defendant Midwest Mechanical Contractors of New Jersey and the electrical work to defendant Robbins Electrical Company, Inc. The work on the pipeline was completed before 1998.
The fuel-pipe system has two lines of pipe, one carrying fuel to and one away from the generator. Each line consists of primary steel piping enclosed in secondary fiberglass piping. The specifications require the lines to slope down from the generator to an "accessible containment sump." One purpose of the secondary fiberglass piping is to carry any fuel leaking from the primary steel pipe to the containment sump; another is to protect the steel pipe from corrosive conditions. The containment sump is equipped with leak-detection equipment designed to sound an alarm when fuel enters the containment sump.
The alarm first sounded in May 2004. Bayshore promptly took the pipeline out of service. A pressure test of the primary line was performed, and it indicated a problem in the primary supply line. Accordingly, Bayshore accessed the containment sump and found a "considerable amount" of fuel. To locate the leak, Bayshore excavated along the pipeline for a "few days." On May 11, Bayshore found "a small rupture on the supply line along with a diesel spill." The rupture was in the primary, steel pipeline. On May 12, employees of PMK Group, an environmental consultant obtained by the Fund, visited the Bayshore site. Due to the "considerable volume of petroleum" in the soil and groundwater, PMK concluded that the secondary fiberglass piping had also failed. Scientists from PMK reported their findings to Bayshore's executive director, Robert G. Fischer, on May 17 and 25, 2004 and provided photographs "depicting the location of the spill" that accompanied the reports. At a public meeting on May 17, Bayshore adopted an emergency resolution awarding Independence Constructors (IC) a contract to repair the pipeline and remediate the environmental damage as recommended by PMK and the Fund, and at a public meeting on May 24, Fischer gave a status report on the remediation and explained that the next "course of action" would depend on test results. The minutes of these meetings reflect that an engineer employed by Killam attended the May 24 meeting to address a different project, but they do not reflect any discussion of Killam's involvement with the pipeline at any point in time.
IC commenced work on May 21, 2004. There is, however, no evidence that plaintiffs contacted any defendant to inform them of the leak or otherwise give them notice of or an opportunity to observe the work.
The record we have includes photographs of an exposed primary and secondary line apparently taken while IC's work was in progress, but there are no certifications or transcripts of deposition testimony from employees of Bayshore, IC or PMK explaining when the pictures were taken or describing what they depict. The pipeline shown is in an opened pit, but there is nothing in the record describing how the excavation was done. The photos also show that portions of the secondary piping were removed so as to expose the run of the primary line and the lower half of the couplings that join sleeves of the secondary piping. Again, there is no evidence indicating how the upper- half of the secondary pipe was removed to expose the primary line.
Plaintiffs were considering litigation against defendants as early as September 2004. That month, their attorney asked PMK to provide or recommend an expert witness, explaining that he would need one "to be successful in any type of subrogation against the contractor."
In addition to contemplating litigation against the contractors, plaintiffs worked with New Jersey's Department of Environmental Protection (DEP) from the time the spill was detected. By September 2006, Bayshore applied for a memorandum of agreement that would result in DEP issuing a "No Further Action" letter defining the limits of Bayshore's obligations for the environmental damage. DEP approved that application in November 2006, reserving its right to terminate the agreement for non-compliance, and in February 2008, DEP sent Bayshore a deficiency notice warning that the agreement would be terminated if Bayshore did not correct the problems identified.
Defendants first received notice of plaintiffs' intention to litigate after the complaint was filed, which was done in January 2009. By that time, no portion of the pipeline removed from the failed line was available. Plaintiffs have not offered any explanation for their inability to locate the piping, and there is nothing in the record or briefs suggesting that defendants sought to depose employees of Bayshore, PMK or IC, who might have information as to how that evidence was lost.
According to plaintiffs, some of the initial piping remains intact and in use. By letter of July 27, 2010, Bayshore advised defendants of its existence:
I am pleased to advise that it has come to our attention that portions of the underground piping in this matter remain intact at the Bayshore Regional Sewerage Authority and is available for your inspection. The piping located at the Authority will allow the Defendants to inspect the improper installation and design of the primary and secondary piping.
Plaintiffs have an expert report on liability and damages that was prepared in 2010 by an expert who did not have access to the pipes or witness the work done to excavate and repair the pipeline. That expert, Joyce A. Rizzo, of JD2 Environmental, Inc., did not consider the "intact" portion of the pipeline.
Rizzo based her opinions on a review of: bid documents and contract for the initial project; Killam's and C&G's plans and drawings; correspondence between Atlas and the engineering firms; documents generated during the initial construction such as field notes, change orders, punch lists and test results; and three batches of photos. Rizzo identified the photos as follows: "Photos (12) of piping install & AST (not sure which building)", "Photos (7) of Piping (not identified)" and "Photos (12) (not identified)." She also identified the standards, industry reports and regulations she consulted in concluding that the pipeline failed due to negligence in the design and installation that caused plaintiffs to incur the costs of repair and remediation.
Rizzo relied on the photographs to identify defects in the installation that weakened the structure of the fiberglass secondary pipe: pipes that were "misaligned"; couplings linking lengths of fiberglass pipe that were not bolted together were improperly glued and not "de-gloss[ed]" at the terminus points; excess space between the lengths of fiberglass pipe joined by the couplings; and a section of pipe shared by the supply and return lines that was shorter than that recommended by the manufacturer. Rizzo relied on specifications and documents generated during construction in determining that the slope of the pipe backward from the tank was inadequate and that steel pipes did not have appropriate protection from corrosion given the evidence of corrosion caused by water that was detected and referenced in field notes.
The motions to dismiss filed by Midwest and by Killam and C&G are dated, respectively, July 29 and July 30, 2010. These dates are about six months before the discovery end date, which had been extended to February 1, 2011 by order of July 23, 2010.
In support of their joint motion, Killam and C&G submitted certifications from Clifford S. Wilkerson, P.E., Killam's executive vice president, and William Gassman, P.E., of C&G.
Wilkerson explained the need for dismissal due to the missing pipeline as follows:
6. It is my professional opinion, within a reasonable degree of engineering certainty, that the identity of the party responsible for any defect in the Tank cannot be determined without a review and analysis of the remains of the physical underground transfer pipes and/or any and all written reports and any other records that describe any and all conclusions that the underground transfer pipes that are connected to the Tank suffered a rupture and/or were defective.
7. Killam was . . . not at any time advised of the scheduling or performance of the repair, replacement, maintenance, or disposal of the Tank and was never afforded the opportunity to inspect the Tank and its associated piping.
Gassman also submitted a certification indicating why the pipeline was critical to a fair adjudication of the issues:
5. It is my professional opinion, within a reasonable degree of engineering certainty, that the determination of the identity of any party that is responsible for any defect in the underground transfer pipes that connect to the aboveground storage tank that is located at the Bayshore Sewerage facility cannot be determined without a review and analysis of the remains of the physical underground transfer pipes and/or any and all records that reduce to writing all findings of fact made in relation [to] any determination that the underground pipes suffered a rupture and/or were defective.
6. Chu & Glassman was not at any time advised of the scheduling or performance of the repair, replacement, maintenance, or disposal of the underground transfer pipes that are located at the Bayshore facility and was not otherwise ever afforded the opportunity to inspect the allegedly defective underground transfer pipes.
In a supplemental certification, however, Gassman differed with Rizzo's assessment of what the photographs upon which Rizzo relied depicted, and what the construction and manufacturer's documents disclosed. In pertinent part it reads:
5. First, Ms. Rizzo misidentified the diameter of the primary piping.
6. Having reviewed the drawings for the piping system that is the subject of this litigation, I observed that the designated diameter for the primary piping was one inch (1").
7. I also reviewed the field observation notes that were prepared at the time of the installation of the piping and observed that the notes confirm that the primary piping that was installed conformed with what was called for in the drawings.
8. This finding is also corroborated with my review of change order documents that indicate that the subject primary piping was one inch (1") in diameter.
9. I reviewed the photographs appended to the Rizzo report that are claimed to depict misaligned piping. It appears that the misalignment could have resulted from excavation being performed in a manner that resulted in a shifting or adjustment of the positioning of the piping from the place that it was situated at the time of the original construction (or at any time prior to excavation) to the place that it was situated at the time of the taking of the photographs (post-excavation).
10. I have reviewed the specifications for the primary and secondary piping that was called for in the plans and that was installed and I observed that the piping called for and installed was inherently flexible, and able to conform with contours of the trench.
11. Thus even if the piping was somewhat misaligned at the time of the installation, the flexible nature of the pipe would have compensated.
12. Also, with regard to the slope of the piping, the drawings indicate that the slope was to be one-eight inch (1/8") rise for every horizontal run of one foot (1").
13. Additionally, with regard to the issue of the testing of the piping system, I reviewed the change orders for the project and observed that one change order that involves a contract extra for the installation of the engine fuel oil return line makes reference to test boots.
14. I also reviewed reports that indicate the testing of the supply and return lines was in fact conducted in November of 1992.
15. With respect to the issue of bonding, I reviewed photographs for the project and observed that the piping lines appear to have been de-glossed, that residue (apparently glue residue) was depicted on the piping, and I also observed the presence of bolts for the couplings.
16. I also reviewed the piping manufacturer's literature for the subject piping and found that the literature indicates that the piping containment fittings were pre-sanded at the factory.
The trial court dismissed plaintiffs' complaints against Midwest, Killam and C&G on November 1, 2010 and provided a written statement of reasons. The court found that plaintiffs lost or destroyed the pipe that caused the leak, did not give defendants notice before removing it and did not give defendants an opportunity to inspect it. The court further determined that without that pipe no defendant could properly muster any defense to plaintiffs' charges of negligent installation and design or pinpoint which defendant was responsible for the leakage. In the court's view, the loss of this evidence would be particularly prejudicial in this case in which plaintiffs had a claim under the New Jersey Spill Compensation and Control Act (Spill Act), N.J.S.A. 58:10-23.11 to -23.50, which imposes strict liability on persons with any responsibility for a discharge. See N.J.S.A. 58:10--23.11g(c)(1) (providing that "any person who has discharged a hazardous substance, or is in any way responsible for any hazardous substance, shall be strictly liable, jointly and severally, without regard to fault, for all cleanup and removal costs");
N.J. Dep't of Envtl. Prot. v. Dimant, 418 N.J. Super. 530, 545 (App. Div.), certif. granted, 208 N.J. 381 (2011).
The controlling legal principles are clear. A spoliation claim arises when a party in a civil action has hidden, destroyed or lost relevant evidence and thereby impaired another party's ability to prosecute or defend the action. Rosenblit v. Zimmerman, 166 N.J. 391, 400-01 (2001); Manorcare Health Servs., Inc. v. Osmose Wood Preserving, Inc. 336 N.J. Super. 218, 226 (App. Div. 2001). When litigation is likely, a prospective party aware of that probability has an obligation to preserve evidence foreseeably important to its adversary. Aetna Life and Cas. Co. v. Imet Mason Contractors, 309 N.J. Super. 358, 365-67 (App. Div. 1998). And, where there is a duty to preserve evidence, absence of due diligence - negligence - suffices to warrant a remedy for the aggrieved party. Ibid.
The trial court did not err in finding a legal duty to preserve the lost evidence or a violation of that duty. The existence of a duty is a question of law, id. at 365, and the judge's finding of circumstances giving rise to that duty is well-supported by the record.
While it is not clear when the components of the pipeline at issue became unavailable to plaintiffs, it is clear that the evidence plaintiffs deemed critical to the leak - the ruptured primary pipe and failed secondary piping - was still in the ground when Bayshore contacted its insurer, the Fund, and retained PMK to investigate, advise and recommend a course of action. The potential for litigation to identify the responsible party or parties and importance of that pipe to them had to be apparent to plaintiffs. After all, there is direct evidence that litigation against the contractors responsible for the pipe was contemplated within months of the occurrence and years before the complaint was filed.
Plaintiffs violated the duty to preserve evidence in two respects. First, they failed to alert defendants and thereby deprived them of any opportunity to observe the conditions as they existed and take appropriate measures to avoid prejudicial loss of evidence. Second, they failed to direct their own agents to preserve the components of the dismantled pipeline. Robertet Flavors, Inc. v. Tri-Form Constr., Inc., 203 N.J. 252, 272-73 (2010).
Plaintiffs argue that they satisfied their duty. Relying on Bayshore's discussion of the leak, its repair and remediation at two public meetings, they assert that they gave defendants notice that they would be working on the pipeline. That might be so if plaintiffs had notified defendants that the leak would be discussed or sent a copy of the minutes so indicating, but that did not happen.
Were we to allow plaintiffs to rely on discussion at a public meeting as a substitute for notice, we would essentially impose an obligation on all construction contractors performing work for a governmental entity to monitor all of the agency's future meetings to learn of any actionable occurrences in order to then take the steps necessary to preserve important evidence. Generally, the question of duty is one of "fairness and policy" that takes into account the burden entailed. Snyder v. Amer. Ass'n of Blood Banks, 144 N.J. 269, 292 (1996). Those considerations do not favor obligating contractors to assume that burden.
Having concluded that the trial court properly determined that plaintiffs had and violated a duty to preserve the evidence, we turn to consider the propriety of dismissal of plaintiffs' claims as a remedy for the spoliation.
Selection of the remedy that is "appropriate under the circumstances must be guided by the essential purposes that all of the [spoliation] sanctions are designed to achieve." Robertet Flavors, supra, 203 N.J. at 273. One of those goals is to make the aggrieved party "'whole, as nearly as possible,'" ibid. (quoting Rosenblit, supra, 166 N.J. at 401), by "rectifying the prejudice caused by the spoliation so as to 'place[ ] the parties in equipoise,'" Robertet Flavors, supra, 203 N.J. at 273 (quoting Hirsch v. General Motors Corp., 266 N.J. Super. 222, 266 (Law Div. 1993)).
The inquiry requires careful evaluation of the facts and claims, Robertet Flavors, supra, 203 N.J. at 273, because dismissal is the appropriate remedy "only when no lesser sanction will suffice to erase the prejudice suffered by the non-delinquent party,'" id. at 274 (quoting Zaccardi v. Becker, 88 N.J. 245, 253 (1982)). Lesser sanctions that may be adequate to eradicate the prejudice include preclusion of the offending party's evidence, requiring the offending party to try an issue subject to an adverse inference, and dismissal of those claims affected by the spoliation. Robertet Flavors, supra, 203 N.J. at 273; Manorcare Health Servs., supra, 336 N.J. Super. at 231.
The record, as developed before the trial court and presented on appeal, is inadequate to permit the conclusion that dismissal of the entire complaint is appropriate. The trial court and defendants focused on the missing ruptured pipe in the primary line, without which the leak would not have occurred. To the extent that the trial court concluded that the loss of the pipe impaired defendants' ability to defend against liability for that rupture in a way that could not be cured, we agree substantially for the reasons articulated in the court's written statement.
Plaintiffs, however, asserted an alternate basis for recovery independent of the rupture in the primary steel pipe - failure of the secondary fiberglass piping due to negligent design and installation. On this record, it is not clear why the prejudice from loss of the ruptured primary pipe could not be adequately addressed by precluding plaintiffs from presenting any evidence to establish that defendants were in any way responsible for the leak in the primary pipe. If that sanction were to be imposed, the remaining issues would be defendants' liability for the failure of the secondary piping and the extent to which that piping's failure contributed to the damage.
We recognize that the removal and loss of the secondary fiberglass pipe may also prejudice defendants' ability to defend against the claims of negligent design and installation of that part of the pipeline. It is here, however, that pertinent facts are disputed and the record is inadequate to permit selection of an appropriate sanction.
The record is inadequate because defendants have made no attempt to ascertain what the late-disclosed existence of "intact" piping may show. Moreover, "[e]valuating prejudice [and remedies adequate to address it] in the context of commercial construction projects requires an appreciation of the vast array of alternate sources of information that such projects generally provide, all of which may serve to diminish any prejudice." Robertet Flavors, supra, 203 N.J. at 280-81 (also identifying the relevant sources). Defendant did not address, and the trial court did not consider, those alternative resources of information.
Here, facts pertinent to the prejudice and remedy for spoliation of evidence other than the ruptured pipe are in dispute. On the one hand, defendants assert that the available evidence is inadequate. On the other hand, plaintiffs contend that defendants have other means of defending against those claims, including the "intact piping" that is still available. Indeed, defendants submitted a certification from Gassman, set forth above, that demonstrates that he is quite able to mount a defense against several of the installation defects identified by plaintiffs' expert. He did that based on the photographs the expert considered and the construction documents.
Our decision in Johnson v. Mountainside Hosp., 199 N.J. Super. 114 (App. Div. 1985), provides guidance on the proper course of action in light of the state of the record. There, we concluded that the "sparse record before us [was] not wholly informative with respect to the issue of whether each of the defendants in this matter would be prejudiced" if the litigation proceeded, because the record "did not reveal the nature and extent of the prejudice each of the defendants allegedly ha[d] sustained" by the offending party's discovery malfeasance. Id. at 120. The same problem is presented here and it is exacerbated by the fact that there appears to be evidence available that none of the parties have considered.
Where, as here, defendants seek dismissal as a sanction for spoliation by plaintiff, the court must be satisfied that the prejudice cannot be addressed by a lesser sanction. In this case, the record was neither adequately developed nor so one-sided as to permit a determination on the motion papers and a reversal and remand is therefore appropriate. If facts material to the remedy are in dispute, then a hearing on the motions would be necessary. See, e.g., Robertet Flavors, supra, 203 at 282-84 (discussing the hearing held on the spoliation remedy). On remand, the court should also address the requests for relief plaintiffs included in their cross-motions.
Reversed and remanded for further proceedings.