Acadia Insurance Co. v. United States of America et al

Filing 69

MEMORANDUM OPINION AND ORDER that the 22 MOTION to Dismiss or Motion for Sanctions is DENIED as more fully set out in order. Signed by Judge C Lynwood Smith, Jr on 3/10/2015. (AHI)

FILED
2015 Mar-10 AM 10:09
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
ACADIA INSURANCE CO.,
Plaintiff,
vs.
UNITED STATES OF AMERICA,
Defendant.

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Civil Action No. CV-13-S-895-NE

MEMORANDUM OPINION AND ORDER
Plaintiff, Acadia Insurance Co., as subrogee of Yedla Management Company,
Inc., and Hospitality Enterprises of Huntsville, Inc., commenced this action against
the United States of America. The action presently is before the court on defendant’s
motion for sanctions under Federal Rule of Civil Procedure 37, based upon plaintiff’s
alleged spoliation of evidence. Upon consideration, the court concludes that the
motion is due to be denied.
I. STANDARD OF REVIEW
A district court’s power to sanction a party for spoliation is derived from its
“inherent power” to manage its own affairs and remedy discovery abuses. Flury v.
Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005). “Accordingly,
sanctions for discovery abuses are intended to prevent unfair prejudice to litigants and
to insure the integrity of the discovery process.” Id. (alteration supplied).

District courts have broad discretion to fashion sanctions for discovery abuses;
even so, “that discretion is not unbridled.” United States v. Certain Real Property
Located at Route 1, Bryant, Ala., 126 F.3d 1314, 1317 (11th Cir. 1997). The
Eleventh Circuit has recognized three sanctions for spoliation: i.e., exclusion of
expert testimony; a jury instruction which raises a presumption against the spoliating
party; and dismissal. Flury, 427 F.3d at 944. “Dismissal represents the most severe
sanction available to a federal court, and therefore should only be exercised where .
. . lesser sanctions will not suffice.” Id. at 945.
II. SUMMARY OF FACTS
The pertinent facts in this case arose from a fire that occurred on the evening
of September 22, 2010, in the “Country Inn & Suites” motel located at 4880
University Drive in Huntsville, Alabama.1 That motel, owned by Yedla Management
Company, Inc., and its wholly-owned subsidiary, Hospitality Enterprises, Inc., was
insured against fire and other perils by plaintiff, Acadia Insurance Company.2
Michael Siegling, a special agent of the United States Federal Bureau of
Investigation, occupied Room 2207 in the motel on the night of the fire.3 In fact,
Siegling had occupied that room since August 14 of that year, when he traveled from

1

Doc. no. 15 (Amended Complaint); doc. no. 33-1 (Wilkerson Deposition), at 30.

2

Doc. no. 15 (Amended Complaint), ¶ 9.

3

Id. ¶¶ 11–12.
2

San Francisco, California, to Huntsville for the purpose of attending a bomb
technician certification training program at Redstone Arsenal.4 The fire started at
approximately 10:30 p.m. on September 22, 2010, in the motel building that
contained Room 2207 — i.e., “Building 2.” An unidentified motel guest pulled a fire
alarm soon after, and the Huntsville Fire Department responded.5
Huntsville Fire District Chief Michael D. Dodson observed upon his arrival at
the motel that the second and third floor balconies of Building 2 were engulfed in
flames.6 Dodson and his team extinguished the fire and summoned Fire Investigator
Daniel R. Wilkerson, who arrived less than one hour later.7 Wilkerson conducted an
investigation of the premises and determined that the origin of the fire was the
balcony of Room 2207. Wilkerson found discarded “Marlboro Light” cigarettes on
the ground underneath the balcony of Room 2207, as well as a pack of the same brand

4

Doc. no. 26-1 (Defendant’s Responses to Discovery Requests), at ECF 58, 63. “ECF” is
the acronym for “Electronic Case Filing,” a system that allows parties to file and serve documents
electronically. See Atterbury v. Foulk, No. C-07-6256 MHP, 2009 WL 4723547, *6 n.6 (N.D. Cal.
Dec. 8, 2009). Bluebook Rule 7.1.4 permits citations to the “page numbers generated by the ECF
header.” Wilson v. Fullwood, 772 F. Supp. 2d 246, 257 n.5 (D.D.C. 2011) (citing The Bluebook: A
Uniform System of Citation R. B. 7.1.4, at 21 (Columbia Law Review Ass’n et al., 19th ed. 2010)).
Even so, the Bluebook recommends “against citation to ECF pagination in lieu of original
pagination.” Wilson, 772 F. Supp. 2d at 257 n.5. Thus, unless stated otherwise, this court will cite
the original pagination in the parties’ pleadings. When the court cites to pagination generated by the
ECF header, it will, as here, precede the page numbers with the letters “ECF.”
5

Doc. no. 21-2 (Icove Declaration), at 20.

6

Id.

7

Id.
3

of cigarettes in the interior of that room.8 He did not collect any of the discarded
cigarettes.9 Michael Siegling composed a written statement for Wilkerson, in which
he stated that he had last smoked a cigarette on the balcony on the day before the fire
and had extinguished that cigarette in a styrofoam cup filled with water.10 Fire
Investigator Wilkerson ultimately concluded that the cause of the fire was Siegling’s
“careless use of smoking materials.”11 He ruled out an electrical malfunction as a
potential cause of the fire because there was no electrical equipment in the immediate
vicinity of what he had deemed the area of origin — i.e., the balcony of Room 2207.12
For that reason, he did not conduct an electrical “arc mapping” of the scene.13
Wilkerson did not collect any physical evidence from the fire scene, but he
took numerous photographs. He explained in his deposition:
I’m usually pretty cautious on what I disassemble and destroy, because
if it’s not a criminal case, then I try to leave the scene as intact as
possible for whoever is coming after me. Sometimes insurance
companies will hire an investigator that will show up a couple of days
after we do our investigation, and typically they’re more — they have
more interest in it than the City of Huntsville does.
Doc. no. 33-1 (Wilkerson Deposition), at 51–52.

8

Doc. no. 33-1 (Wilkerson Deposition), at 82–83.

9

Id.

10

Doc. no. 21-7 (Written Statement of Michael K. Siegling to Dan Wilkerson), at ECF 3.

11

Doc. no. 21-13 (Fire Department Report), at ECF 6.

12

Doc. no. 33-1 (Wilkerson Deposition), at 66.

13

Id.
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Cook Claims Services, Inc., plaintiff’s claims service, hired Rod Williams of
EFI Global, Inc., to conduct an investigation into the origin and cause of the fire five
days later, on September 27, 2010.14 Williams also concluded from his investigation
that the fire began on the balcony of Room 2207, and that it was caused by
“improperly discarded smoking materials.”15 He also noted that “[s]ystematic debris
removal began with the fire department during their investigation. Some of the fire
debris had been removed from the area of origin, in search of the ignition source.”16
Williams did not collect any physical evidence during his investigation, but he took
numerous photographs of the scene.17
On that same day, Cook Claims Services submitted a report to plaintiff stating
that the Huntsville Fire Department had determined that the cause of the fire was
“careless smoking of the occupant of [Room 2207], who[m] we are advised is a[n]
FBI agent.”18 The report also stated that there was “a possibility of subrogation since
the origin can reportedly be determined and the individual who was smoking has been
identified,” and that “governmental immunity” probably would not apply to that
individual.19
14

Doc. no. 26-1 (Williams Declaration), ¶ 2, ECF 41.

15

Id. ¶ 32, ECF 51.

16

Id. ¶ 18, ECF 47 (alteration supplied).

17

Id. ¶ 20, ECF 48.

18

Doc. no. 21-5 (Cook Claims Services Report, Sept. 27, 2010), at 2 (alterations supplied).

19

Id. at 3 (alteration supplied).
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On August 1, 2012, nearly two years after the fire, plaintiff submitted a “Claim
for Damage, Injury, or Death” to the FBI, claiming property damages associated with
the fire “caused by Michael Siegling.”20 That claim was submitted in accordance with
the provision of the Federal Tort Claims Act that requires claims against the United
States to be “presented in writing to the appropriate Federal agency within two years
after such claim accrues.” 28 U.S.C. 2401(b). The FBI did not respond to plaintiff’s
claim within six months; thus, the claim was statutorily deemed to have been denied
on February 1, 2013.21 See 28 U.S.C. § 2675(a) (“The failure of an agency to make
final disposition of a claim within six months after it is filed shall, at the option of the
claimant any time thereafter, be deemed a final denial of the claim”). Plaintiff filed
this action three months later, on May 10, 2013.22
Defendant hired David J. Icove, a fire investigation expert, on October 25,
2013.23 Three months later, on January 24, 2014, defendant asked plaintiff to allow
Icove to inspect the fire scene. Icove conducted his inspection on February 20, 2014,
and noted in his report that the fire scene already had been repaired.24 He explained:
Since the fire damage to Room 2207, Room 2307, and the third floor
attic space had already been repaired, the February 20, 2014 inspection
20

Doc. no. 21-8 (Claim for Damage).

21

Doc. no. 15 (Amended Complaint), ¶ 7.

22

Doc. no. 1 (Complaint).

23

Doc. no. 21-1 (Icove Declaration) at 4.

24

Id. at 5, 36; doc. no. 26-1 (Defendant’s Request for Production), ¶ 18.
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did not produce any evidence of lead value in this case that could
provide insight into the origin and cause of the fire on September 22,
2010.
Also, any necessary destructive or [in]vasive internal
examinations behind the walls of the electrical, plumbing, and structural
conditions could also not be accomplished to confirm that the repairs
had remedied deficiencies which could have served as competent and
accidental ignition sources or support alternative hypotheses for the fire
on September 22, 2010.
Doc. no. 21-2 (Icove Declaration), at 36 (alteration supplied). Icove also stated that
“critical evidence that should have been preserved include all electrical fixtures and
wiring within the area the Plaintiff’s investigators believed to the be the room of fire
origin,” as well as the cigarette butts Daniel R. Wilkerson had identified as the cause
of the fire.25 Icove emphasized plaintiff’s failure to preserve the electrical circuit
panels, exterior lighting fixtures, and “electrical junction box” physically inspected
by Rod Williams.26 He concluded that:
The scene destruction, especially the removal and alteration of
potentially exculpatory evidence such as improper and dangerous
electrical wiring in this case, only further undermines the opportunity for
a potential Defendant to understand and meaningfully participate in the
investigation and to develop alternative hypotheses for the fire’s origin
and cause to defend itself in a subsequent legal action.
...
Photography alone does not support the notion that a scene could
be processed and evaluated later by another expert who could derive the
same evidentiary value from those photographs as if they had been
physically present at the scene. A thorough scene examination would
25
26

Id. at 43; doc. no. 21-3 (Icove Declaration), at 44.
Id. at 44–45.
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have required clearly-taken photographs of the investigative process
being undertaken; the condition of electrical equipment, wiring and
other utilities; and the layered processing (de-layering) of the fire debris
down to discrete burn patterns. The Defendant’s expert in this case was
provided with only a limited number of photographs and those were not
clear, nor were they sufficiently comprehensive to even approach the
investigative value of having been physically present.
...
The Defendant’s expert in this case is plainly hindered in
countering the Plaintiff’s allegation that the fire was caused by an
improperly discarded cigarette by not having available any tangible
evidence, exhibits, or definitive photographs. . . .
In summary, the evidence supports my professional conclusion
that the Defendant has been deprived of an opportunity to conduct a
first-hand investigation of a myriad of possible alternative ignition
sources at the scene of the fire and is being forced instead to rely on an
unclear and incomplete investigation conducted by Plaintiff Acadia
Insurance Company’s investigator in order to rebut the Plaintiff’s claims
in this action. The Defendant has been deprived of any opportunity to
examine the original fire scene evidence in situ, intact and unspoiled.
Doc. no. 21-3 (Icove Declaration), at 56–59.
III. DISCUSSION
Defendant seeks sanctions under Federal Rule of Civil Procedure 37 for
plaintiff’s alleged spoliation of evidence from the fire scene at the Country Inn &
Suites. Defendant seeks dismissal or, in the alternative, a jury instruction that the
spoliated evidence would have been unfavorable to plaintiff.27 Such sanctions are
available only when “the circumstances surrounding the [alleged spoliation or, as in
27

Doc. no. 23 (Brief on Motion to Dismiss), at 19.
8

this case, the failure to preserve allegedly relevant evidence] indicate bad faith.”
Bashir v. Amtrak, 119 F.3d 929, 931 (11th Cir. 1997) (alteration supplied); see also
Barnes v. Dalton, 158 F.3d 1212, 1214 (11th Cir. 1998) (same). The Eleventh Circuit
has defined “bad faith” in the context of a party’s allegation of spoliation as
constituting something more than negligence, but less than acts showing actual
malice. See, e.g., Mann v. Taser International, Inc., 588 F.3d 1291, 1310 (11th Cir.
2009) (“While this circuit does not require a showing of malice in order to find bad
faith, mere negligence in losing or destroying records is not sufficient to draw an
adverse inference.”).
Defendant emphasizes the following facts. First, plaintiff was aware of the
likelihood of a subrogation lawsuit as early as September 27, 2010, when it was
informed by its claims service that there was “a possibility of subrogation since the
origin can reportedly be determined and the individual who was smoking has been
identified,” and that “governmental immunity” probably would not apply to the FBI
agent who allegedly caused the fire.28 Second, even so, plaintiff waited almost two
years to notify the FBI that it might be liable for the fire. During those intervening
years, plaintiff made no effort to preserve any physical evidence of the fire, and
allowed the complete repair of the structure damaged by the fire. Plaintiff, a
sophisticated entity in the business of insuring against fires, was undoubtedly aware
28

Doc. no. 21-5 (Cook Claims Services Report, Sept. 27, 2010), at 3.
9

that any potential litigant would have a strong interest in conducting a thorough
physical investigation of the fire scene. Indeed, plaintiff wasted no time in retaining
an expert to investigate the fire scene before any repairs had been made. Such
behavior might indicate that plaintiff’s failure to notify defendant for nearly two years
was more than mere negligence. Cf. Bashir, 119 F.3d at 931 (holding that tampering
with — or purposeful destruction of — evidence indicates bad faith); see also
Swofford v. Eslinger, 671 F. Supp. 2d 1274, 1282 (M.D. Fla. 2009) (finding that
“knowing and willful disregard for the clear obligation to preserve evidence that was
solely within the possession and control of the Defendants and whose contents have
no other source than that which has now been spoliated” indicated bad faith).
Even so, other factors indicate that plaintiff’s conduct did not rise to the level
of either malice, or bad faith. For example, defendant has produced no evidence that
plaintiff failed to preserve the fire scene because it knew or suspected that it
contained evidence that would harm its case. In other words, there is no evidence to
“sustain an inference of consciousness of a weak case.” Bashir, 119 F.3d at 931
(internal quotation marks omitted); see also Silvestri v. General Motors Corp., 271
F.3d 583, 591–92 (4th Cir. 2001) (holding that, even though plaintiff’s attorney knew
of the need to preserve evidence and notify a potential litigant, his failure to do so
may not have risen to the level of bad faith). Further, plaintiff granted defendant’s

10

first request to inspect the fire scene — a request made one and a half years after
plaintiff submitted its administrative claim to defendant, and more than eight months
after plaintiff filed this action. It also must be noted that, according to plaintiff’s
expert, Rod Williams, the Huntsville Fire Department already had removed some of
the fire debris before Williams conducted his investigation on September 27, 2010.29
Defendant appears to have acknowledged the lack of evidence of bad faith
when it argued, in a bold-face heading, that it “Does Not Need to Show That Plaintiff
Acted in Bad Faith but Only That Plaintiff is Culpable.”30 In any event, defendant has
failed to show that plaintiff’s conduct in failing to preserve physical evidence of the
fire was predicated upon bad faith, and its motion for sanctions is due to be denied.
IV. CONCLUSION AND ORDER
Accordingly, it is ORDERED that the motion for sanctions filed by the United
States of America is DENIED.

29

Doc. no. 26-1 (Declaration of Rod Williams), ¶ 18 (ECF 47).

30

Doc. no. 28 (Defendant’s Reply Brief), at 17. Defendant’s argument that “culpability” is
the appropriate standard, and its citation to Alabama law in support of that argument, ignores the
Eleventh Circuit’s clear holding in Bashir that spoliation sanctions are available only when “the
circumstances surrounding the [spoliation] indicate bad faith,” 119 F.3d at 931 (alteration and
emphasis supplied), and the court’s subsequent holding in Flury that federal law governs spoliation
sanctions. 427 F.3d at 944; see also Rodda v. Joy Mining Machinery, F. Supp. 3d 1156, 1157–58
(N.D. Ala. 2014) (Blackburn, J.) (reconciling that holding in Flury with the court’s subsequent
application of Georgia law on spoliation).
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DONE and ORDERED this 10th day of March, 2015.

______________________________
United States District Judge

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