Knife River Corporation - Northwest v. Safeco Insurance Company of America et al

Filing 47

MEMORANDUM DECISION AND ORDER denying as moot 29 Motion to Strike ; denying as moot 36 Motion to Strike ; granting 38 Motion for Extension of Time to File Response/Reply ; denying 21 Motion to Amend/Correct; granting in part and denying in part 22 Motion for Partial Summary Judgment; denying 23 Motion for Sanctions; granting 24 Motion for Summary Judgment. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (st)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

UNITED STATES OF AMERICA, for
use and benefit of KNIFE RIVER
CORPORATION – NORTHWEST, an
Oregon corporation doing business as
Knife River,
Plaintiff,
v.
SAFECO INSURANCE COMPANY OF
AMERICA, a Washington corporation,
and ASCORP, INC., an Idaho
corporation doing business as Debco
Construction,
Defendants.

ASCROP, INC., an Idaho corporation
doing business as Debco Construction,
Counterclaimant,
v.
KNIFE RIVER CORPORATION –
NORTHWEST, an Oregon corporation
doing business as Knife River,
Counterdefendant.

MEMORANDUM DECISION AND ORDER - 1

Case No. 3:14-cv-00190-BLW
MEMORANDUM DECISION AND
ORDER

INTRODUCTION
The Court has before it Defendant-Counterclaimant’s Motion for Extension of
Time to File Disputed Material Facts (Dkt. 38), Defendant-Counterclaimant’s Motion for
Partial Summary Judgment (Dkt. 22), Plaintiff-Counterdefendant’s Motion for Partial
Summary Judgment (Dkt. 24), Defendant-Counterclaimant’s Motion to Amend its
Counterclaim (Dkt. 21), Defendant-Counterclaimant’s Motion for Spoliation Sanctions
(Dkt. 23), and Plaintiff-Counterdefendant’s two Motions to Strike (Dkts. 29, 36). The
Court will address each motion below.
BACKGROUND
Debco has worked on highway construction projects with the Federal Highway
Administration (“the FHWA”) since 2001. Knife River Undisp. Facts ¶ 1, Dkt. 24-2. In
September 2010, Debco entered into a contract with the FHWA to perform work on the
Salmon River Road near Riggins, Idaho. Compl. ¶ 7, Dkt. 1. Debco’s contract with the
FHWA (“the Main Contract”) required that all paving on the Salmon River Road be done
with asphalt containing 1% lime content. Main Contract § 401.01, Dkt. 21-18.
Debco subcontracted paving work on the Salmon River Road to Knife River in
May 2013. Compl. ¶ 9, Dkt. 1. Debco’s contract with Knife River (“the Subcontract”)
required Knife River to perform “the Subcontract Work in strict accordance with the
Main Contract.” Subcontract at 4, Dkt. 22-47.

MEMORANDUM DECISION AND ORDER - 2

Knife River’s initial work on the Salmon River Road project lasted from
approximately May 17 until June 6, 2013. Knife River Undisp. Facts ¶ 25, Dkt. 24-2. But
on June 6, 2013, Debco issued Knife River a stop-work order after discovering that Knife
River’s asphalt mixture contained less than 1% lime. Answer ¶ 34, Dkt. 6. The stop-work
order remained in effect until June 20, 2013, at which time the FHWA approved a
corrective action plan and permitted Knife River to complete its paving work on the
Salmon River Road. Simpson Aff. ¶ 39, Dkt. 21-2.
Knife River completed its paving work on the Salmon River Road on July 2, 2013.
Id. ¶ 40. After doing so, Knife River submitted an invoice to Debco seeking payment for
the June 6 to June 20 work delay and liquidated damages. Id.; Invoice, Dkt 21-33. Debco
disputed Knife River’s invoice, and this lawsuit arose shortly thereafter.
DISCUSSION
1.

Debco’s Motion for Extension of Time
The Court first addresses Debco’s Motion for Extension of Time to File Disputed

Material Facts. Debco asks the Court to excuse the untimely filing of its disputed facts in
response to Knife River’s Motion for Partial Summary Judgment. Dkts. 37, 38. The Court
would have considered denying the motion if Debco’s untimely filing had prejudiced
Knife River. However, Knife River stipulated to Debco’s untimely filing and submitted
briefing to address Debco’s disputed facts. Dkt. 42. Accordingly, the Court will grant
Debco’s Motion for Extension of Time to File Disputed Material Facts.

MEMORANDUM DECISION AND ORDER - 3

2.

Motions for Partial Summary Judgment
A principal purpose of summary judgment “is to isolate and dispose of factually

unsupported claims . . . .” Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).
Summary judgment is “not a disfavored procedural shortcut,” but instead is the “principal
tool[ ] by which factually insufficient claims or defenses [can] be isolated and prevented
from going to trial with the attendant unwarranted consumption of public and private
resources.” Id. at 327. “[T]he mere existence of some alleged factual dispute between the
parties will not defeat an otherwise properly supported motion for summary judgment;
the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247-48 (1986).
The Court must view the evidence in the light most favorable to the non-moving
party and must not make credibility findings. Id. at 255. However, the Court is not
required to adopt unreasonable inferences from circumstantial evidence. McLaughlin v.
Liu, 849 F.2d 1205, 1208 (9th Cir. 1988).
The moving party bears the initial burden of demonstrating the absence of a
genuine issue of material fact. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001)
(en banc). To carry this burden, the moving party need not introduce any affirmative
evidence, like affidavits or deposition excerpts, but may simply point out the absence of
evidence to support the non-moving party’s case. Fairbank v. Wunderman Cato Johnson,
212 F.3d 528, 532 (9th Cir. 2000).

MEMORANDUM DECISION AND ORDER - 4

The burden then shifts to the non-moving party to produce evidence sufficient to
support a jury verdict in her favor. Id. at 256-57. This requires the non-moving party to
go beyond the pleadings and show by “affidavits, or by the depositions, answers to
interrogatories, or admissions on file” that a genuine issue of material fact exists. Celotex,
477 U.S. at 324.
A.

Debco’s Motion for Partial Summary Judgment
(1)

Breach of Contract

Debco seeks partial summary judgment on its counterclaim for breach of contract,
arguing that Knife River breached the Subcontract by failing to ensure the asphalt
mixture contained 1% lime. A breach of contract claim consists of four elements: (1) the
existence of a contract; (2) a breach of the contract; (3) the breach caused damages; and
(4) the amount of those damages. Mosell Equities, LLC v. Berryhill & Co., Inc., 297 P.3d
232, 241 (Idaho Sup. Ct. 2013). The only disputed element the Court need address is
whether a breach of the Subcontract occurred.
The parties do not dispute that Debco’s Main Contract with the FHWA required
the asphalt mixture to contain 1% lime. Main Contract § 401.01, Dkt. 21-18. In turn, the
Subcontract required Knife River to perform all work in “strict accordance” with the
Main Contract. Subcontract at 4, Dkt. 22-47. It is also undisputed that Knife River failed
to ensure the asphalt mixture contained 1% lime. Knife River Undisp. Facts ¶ 28, Dkt.
24-2. Indeed, Knife River’s asphalt manager acknowledged that Knife River “did not
meet the requirement for lime introduction.” Smith Depo. at 111, ll. 18-19, Dkt. 21-9.

MEMORANDUM DECISION AND ORDER - 5

Though Knife River’s failure to perform work in “strict accordance” with the
Main Contract is not disputed, Knife River argues that its breach of the Subcontract is
nevertheless excused. Knife River contends that Debco breached the Main Contract with
the FHWA by failing to perform “the necessary and vital quality control measures”
required under the Main Contract’s Contractor Quality Control Provision. Knife River
Opp. at 9, Dkt. 27. Knife River maintains that Debco’s breach of the Main Contract
excused Knife River’s breach of the Subcontract.
Despite Knife River’s argument, the undisputed facts demonstrate that Knife
River’s breach of the Subcontract was not excused for two reasons. First, Knife River
was not a party to Debco’s Main Contract with the FHWA. Nor has Knife River
submitted evidence showing that the FHWA considered Debco to have breached the
Main Contract’s Quality Control Provision. Second, Knife River has not demonstrated
that the Subcontract incorporated the Main Contract’s Quality Control Provision. Thus,
Knife River cannot rely on the Main Contract’s Contractor Quality Control provision to
excuse its breach of the Subcontract.
Because the undisputed facts show that Knife River breached the Subcontract, the
Court will grant Debco summary judgment on its counterclaim for breach of contract.
(2)

Forfeiture of Damages Claims

Debco also seeks summary judgment on its defense that Knife River forfeited its
claims for damages. When Knife River submitted its invoice to Debco seeking payment
for work delay and liquidated damages, Debco instructed Knife River to certify a claim

MEMORANDUM DECISION AND ORDER - 6

with the FHWA in compliance with the Main Contract. Debco Br. at 3, Dkt. 22-2; Knife
River Opp. at 11-12, Dkt. 27. Since Knife River did not certify a claim with the FHWA,
Debco contends that Knife River forfeited its claims for damages.
The Court finds questions of fact as to whether the Subcontract required Knife
River to certify claims with the FHWA. Based on the limited briefing on this issue,
Debco has not met its burden to show that the Subcontract incorporated the Main
Contract’s dispute resolution procedure. Debco points to General Condition A-1 of the
Subcontract, which states that “Subcontractor agrees to be bound to Contractor by all of
the terms and provisions of the Main Contract . . . .” Subcontract at 7, Dkt. 22-47. But a
reasonable jury could find that this provision does not incorporate the Main Contract’s
dispute resolution procedure. Indeed, General Condition A-1’s introductory clause states
that it applies only “[w]ith respect to the Subcontract work . . . .” Id. Thus, questions of
fact exist as to whether General Condition A-1’s scope encompasses the Main Contract’s
dispute resolution procedure.
Questions of fact also surround whether the Dispute T-1(a) provision of the
Subcontract incorporated the Main Contract’s dispute resolution procedure.1 Dispute T1(a) provides:

1

Debco did not raise this provision in its briefing. Nevertheless, the Court addresses it because
Lonnie Simpson raised it in his affidavit. See Simpson Aff. ¶ 46, Dkt. 22-3.

MEMORANDUM DECISION AND ORDER - 7

In the event that a claim, cause of action, dispute, or other matter in
question is asserted by Subcontractor against Contractor but which
Contractor, in its sole discretion, asserts is the responsibility of the Owner,
the Architect, or their agents or representatives . . . Subcontractor agrees
that the dispute shall be resolved in accordance with any and all dispute
resolution procedures in the Main Contract . . . .
Subcontract at 15, Dkt. 22-47. According to Debco, this provision means that “[a]ny
dispute which Knife River had that might have involved the FHWA as owner was to be
administered as a ‘pass-through claim’ under the procedures of the Main FHWA
Contract.” Simpson Aff. ¶ 46, Dkt. 22-3. With no briefing or oral argument on this
provision, the Court is not persuaded. Accordingly, the Court finds that reasonable minds
could differ as to the construction and the enforceability of the Dispute T-1(a) provision.
For these reasons, the Court will deny summary judgment on Debco’s forfeiture of
damages claims defense.
B.

Knife River’s Motion for Partial Summary Judgment

Knife River seeks summary judgment on Debco’s counterclaim for fraud. Fraud
requires: “(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s
knowledge about its falsity or ignorance of its truth; (5) his intent that it should be acted
upon by the person and in the manner reasonably contemplated; (6) the hearer’s
ignorance of its falsity; (7) his reliance on the [representation]; (8) his rights to rely
thereon; (9) his consequent and proximate injury.” Jenkins v. Boise Cascade Corp., 108
P.3d 380, 386 (Idaho Sup. Ct. 2005) (citation omitted). Fraud must be proven by clear
and convincing evidence. Doe v. Boy Scouts of Am., 356 P.3d 1049, 1054 (Idaho Sup. Ct.
2015). At summary judgment, then, the question is whether a reasonable jury could find

MEMORANDUM DECISION AND ORDER - 8

that clear and convincing evidence supports the claim; if so, summary judgment must be
denied. See Liberty Lobby, 477 U.S. at 255-56.
Debco’s fraud claim rests on Knife River’s failure to disclose it was breaching the
Subcontract by failing to ensure the asphalt contained 1% lime. Debco Opp. at 13, Dkt.
30. “Ordinarily, a breach of contract is not a tort.” Taylor v. Herbold, 483 P.2d 664, 669
(Idaho Sup. Ct. 1971). “To found an action in tort, there must be a breach of duty apart
from the nonperformance of a contract.” Id. “It can also be said that if a cause of action
for breach of a duty based on a contractual promise could also be maintained without the
contract by virtue of a statutory or common law duty, then the action is founded upon
tort, not contract.” Sumpter v. Holland Realty, Inc., 93 P.3d 680, 685 (Idaho Sup. Ct.
2004). Put another way, “[m]ere nonfeasance, even if it amounts to a willful neglect to
perform the contract, is insufficient to establish a duty in tort.” Carroll v. United
Steelworkers of Am., 692 P.2d 361, 363 (Idaho Sup. Ct. 1984).
However, “[i]f the relation of the plaintiff and the defendants is such that a duty to
take due care arises therefrom irrespective of contract . . . then the action is one of tort.”
Taylor, 483 P.2d at 669. The Idaho Supreme Court has recognized that an independent
duty to disclose may arise when:
(a) [A] party to a business transaction is in a fiduciary relationship [or other
similar relationship of trust and confidence] with the other party; or (b)
disclosure would be necessary to prevent a partial or ambiguous statement
of fact from becoming misleading; or (c) subsequent information has been
acquired which a party knows will make a previous representation untrue or
misleading; or (d) a party knows a false representation is about to be relied
upon; or (e) a party knows the opposing party is about to enter into the
transaction under a mistake of fact and because of the relationship between

MEMORANDUM DECISION AND ORDER - 9

them or the customs of trade or other objective circumstances would
reasonably expect a disclosure of the facts.
Walter v. Krebs, 962 P.2d 387, 391 (Idaho Sup. Ct. 1998) (quoting St. Alphonsus Reg’l
Med. Ctr. v. Krueger, 861 P.2d 71, 78 (Idaho Ct. App. 1992)).
The undisputed facts demonstrate that Knife River had no duty independent of the
Subcontract. Although Debco maintains that each of the above five factors gives rise to
Knife River’s duty to disclose, Debco merely restates Knife River’s duties under the
Subcontract. Debco argues, for example, that Knife River misrepresented “that [it] would
strictly comply with the contract specifications” by remaining silent about its breach
while performing under the Subcontract. Debco Opp. at 14, Dkt. 30. Debco also argues
that Knife River’s performance caused Debco to “rely[] upon Knife River’s
misrepresentations that it was complying with the contract specifications.” Id. at 15.
Debco finally asserts that “there was no reason for Debco to have doubted contract
compliance . . . .” Id.
None of Debco’s arguments illustrates any duty independent of the Subcontract.
See Steiner Corp. v. Am. Dist. Tel., 683 P.2d 435, 439 (Idaho Sup. Ct. 1984) (“Apart from
this contract, ADT could not be said to have a duty . . . . The only duty to which ADT
could be held under the facts of this case is that which arose by virtue of the contract
obligating it to maintain this fire alarm system.”). Thus, Debco’s arguments would turn
most, if not every, claim for breach of contract into one for fraud, thereby undermining
the distinction between contract and tort.

MEMORANDUM DECISION AND ORDER - 10

Because the undisputed facts show that Knife River had no duty independent of
the Subcontract, the Court will grant Knife River summary judgment on Debco’s
counterclaim for fraud.
3.

Debco’s Motion to Amend for Punitive Damages
Debco moves to amend its counterclaim to seek punitive damages. Because

punitive damages claims are substantive in nature, Idaho law controls. See Strong v.
Unumprovident Corp., 393 F. Supp. 2d 1012, 1025 (D. Idaho 2005). Idaho Code § 61604 governs punitive damages claims, providing:
In any action seeking recovery of punitive damages, the claimant must
prove, by clear and convincing evidence, oppressive, fraudulent, malicious
or outrageous conduct by the party against whom the claim for punitive
damages is asserted.
Idaho Code § 6-1604(1). The Court has discretion whether to allow a punitive damages
claim to proceed. Vendelin v. Costco Wholesale Corp., 95 P.3d 34, 41-42 (Idaho Sup. Ct.
2004). Conduct justifying punitive damages requires both “a bad act and a bad state of
mind.” Linscott v. Rainier Nat. Life Ins. Co., 606 P.2d 958, 962 (Idaho Sup. Ct. 1980).
The offending party must act (1) in extreme deviation from reasonable standards of
conduct with an awareness of—or disregard for—likely consequences; and (2) with an
extremely harmful state of mind, described variously as with malice, oppression, fraud,
gross negligence, wantonness, or willfulness. See Myers v. Workmen’s Auto Ins. Co., 95
P.3d 977, 983 (Idaho Sup. Ct. 2004).
To satisfy this burden at trial, the party seeking punitive damages must show, “by
clear and convincing evidence, oppressive, fraudulent, malicious or outrageous conduct

MEMORANDUM DECISION AND ORDER - 11

by the party against whom the claim for punitive damages is asserted.” See Idaho Code §
6-1604(1). But on a motion to amend, the party seeking punitive damages need only
show “a reasonable likelihood of proving facts at trial sufficient to support an award of
punitive damages.” Id. § 6-1604(2).
Having found summary judgment proper for Knife River on Debco’s counterclaim
for fraud, the Court approaches the punitive damages inquiry with the recognition that
Debco’s remaining counterclaim is for breach of contract. Idaho courts are generally
reluctant to allow punitive damages for breach of contract, instructing that punitive
damages for breach of contract “should be awarded only in the most compelling
circumstances . . . cautiously and within narrow limits.” Cuddy Mountain Concrete Inc. v.
Citadel Constr. Inc., 824 P.2d 151, 158 (Idaho Ct. App. 1992). Given this caution, the
Court concludes that no punitive damage claim should be permitted.
Punitive damages for breach of contract require the breaching party to have acted
in bad faith or engaged in misconduct that was oppressive, unreasonable, or irrational.
See id. at 160. Factors relevant to this analysis include: “(1) the presence of expert
testimony; (2) whether the unreasonable conduct actually caused harm to the plaintiff; (3)
whether there is a special relationship between the parties . . . ; (4) proof of a continuing
course of oppressive conduct; and (5) proof of the actor’s knowledge of the likely
consequences of the conduct.” Id. at 160-61. While the Court will address each factor, the
ultimate question is whether Knife River acted in extreme deviation from reasonable

MEMORANDUM DECISION AND ORDER - 12

standards of conduct with a harmful state of mind and a disregard for the likely
consequences of its actions. See id. at 158-61.
First, the expert testimony factor provides some support to Debco’s amendment.
Debco’s expert is Dale Decker, a civil engineer who has specialized in the asphalt paving
industry for approximately 39 years. Decker Aff. ¶¶ 2-4, Dkt. 21-7. He opined that Knife
River’s conduct was “extraordinary and cavalier . . . without question an extreme
deviation from reasonable standards of conduct in the paving industry.” Id. ¶ 28. Knife
River has submitted conflicting testimony. The Court need not resolve the parties’
conflicting testimony. At this stage, expert testimony provides at least some support for
Debco’s motion, even if it is contradicted by Knife River’s testimony. See Kuhn v.
Coldwell Banker, 245 P.3d 992, 1004 (Idaho Sup. Ct. 2010) (affirming punitive damages
amendment supported by expert affidavit). However, of importance is that Decker only
opined as to relevant standards in the paving industry; Decker offers no opinion, and
indeed, can offer no opinion, on whether Knife River acted with a harmful state of mind.
Second, the actual harm factor weighs against Debco’s amendment. The actual
harms Debco experienced were project delays and reduced payments from the FHWA.
Debco Br. at 14-15, 18, Dkt. 21-1. These harms are simply the expected results of Knife
River’s breach of the Subcontract and, therefore, are insufficient to warrant punitive
damages. Debco also argues that Knife River caused it actual harm by seeking payment
for the June 6 to June 20 work delay and liquidated damages. Debco Br. at 18, Dkt. 21-1.
But the Subcontract permitted Knife River to seek liquidated damages. Subcontract at 4,

MEMORANDUM DECISION AND ORDER - 13

Dkt. 22-47. Thus, while Knife River’s breach caused Debco actual harm, Debco’s harm
did not result from “conduct which is unreasonable and irrational in the business
context.” Cuddy, 824 P.2d at 161 (finding actual harm from unreasonable conduct when
the breaching party with superior bargaining power abruptly terminated the contract and
withheld money for work performed, making the non-breaching party unable to repay its
operating loan or obtain credit). As such, this factor weighs against Debco’s amendment.
The third factor weighs against Debco’s amendment because the parties did not
share a special relationship. See St. Alphonsus Reg’l Med. Ctr. v. Krueger, 861 P.2d 71,
78 (Idaho Ct. App. 1992) (holding that parties to a commercial contract do not share “a
special relationship requiring disclosure”).
Fourth, there is little indication of a continuing course of oppressive conduct.
Knife River did indicate its intent to “take Debco to the cleaners” after Debco issued a
stop-work order. Knife River Email Dkt. 21-60. The Court, however, is not persuaded
that this is anything more than typical “saber rattling” which often precedes commercial
litigation. Thus, this factor does not support Debco’s amendment.2

Debco also points to Knife River’s alleged desire to conceal its breach from the FHWA. That
desire, if true, does not indicate oppressive conduct towards Debco. See Hardenbrook v. United Parcel
Serv., Co., 2009 WL 3530735, at *10 (D. Idaho Oct. 26, 2009) (explaining that the breaching party’s
oppressive conduct directed at third parties is irrelevant). It is also true that Knife River is unable to
produce Brown’s personal notebook, and Debco claims that it has been prejudiced as a result. See Cuddy,
824 P.2d at 158 (noting that “post-termination revision of the daily work reports” supports punitive
damages). But as discussed in Part 4, the Court is not persuaded that the loss of Brown’s notebook was
willful or that it resulted in significant prejudice.
2

MEMORANDUM DECISION AND ORDER - 14

Finally, a jury might reasonably infer that Knife River knew the likely
consequences of its conduct. Decker, Debco’s expert, testified that “[p]aving contractors
and subcontractors universally understand that the failure to . . . [meet] project
specifications is likely to have dire and sometimes disastrous consequences.” Decker Aff.
¶ 14, Dkt. 21-7. Thus, pavement operators are “extremely cautious to properly calibrate
the scales and measuring devices on their plants . . . [and] to know and record precise
amounts of each ingredient . . . .” Id. ¶ 18. These tasks are “so fundamental that it is a
standard in the industry that [paving contractors] double-check their work each day.” Id.
¶ 20. Nevertheless, Knife River conceded that it “d[id]n’t have the means to weigh the
lime.” Smith Depo. at 131, ll. 19-22, Dkt. 23-8. Knife River also conceded that it “didn’t
have a record onsite to show how much lime was going into the mix.” Brown Depo. at
124, ll. 13-16, Dkt. 23-9. Based on Knife River’s operation, Decker concluded “[n]obody
[could] have a reasonable expectation of satisfying the project specifications under the
circumstances described.” Decker Aff. ¶ 29, Dkt. 21-7. For these reasons, a jury could
reasonably infer that Knife River knew the likely consequences of its conduct. But, as
noted above, the only real consequence of Knife River’s conduct is a breach of the
Subcontract, which may be fully remedied without exemplary damages. Thus, the fifth
factor is, at best, neutral.
After weighing all the factors, the Court finds that Debco has not met its burden to
show a reasonable likelihood of proving facts at trial sufficient to support an award of

MEMORANDUM DECISION AND ORDER - 15

punitive damages. See Idaho Code § 6-1604(2). The Court will therefore deny Debco’s
motion to amend its counterclaim.
4.

Motion for Spoliation Sanctions
Debco seeks spoliation sanctions for Knife River’s inability to produce

handwritten records of its plant operator, Trevor Brown. In his deposition, Brown
testified how he calibrated lime into the asphalt mixture. Brown Depo. at 76, ll. 15-23;
78, ll. 2-11, Dkt. 23-9. Brown further testified how he used a personal spiral notebook to
record his notes concerning the lime calibration process. He indicated that he was not
required to keep these notes, they were not intended for anyone else to review, and they
would be largely unintelligible to anyone other than himself. Affidavit of Trevor Brown,
¶¶ 7-11, Dkt. 28-2. Because it was his personal notebook, Brown never included it in the
project records. Id. ¶¶ 15-16.
Knife River promoted Brown to project manager in January 2014. Id. ¶ 17. Brown
believes he left his notebook in a file cabinet in the control shack. Id. ¶ 19. He did not tell
Jerry Walker, his successor, about his notebook or suggest that Walker should maintain
similar records. Id. ¶¶ 17-19. Brown denies destroying or disposing of the notebook. Id. ¶
20. In any event, when Debco sought discovery of Brown’s notebook, Knife River was
unable to produce it, explaining that it had been lost when Walker took over Brown’s
position and took over the control shack. Knife River Reply Br. at 5, Dkt. 28.
The Court has inherent discretionary authority to make appropriate evidentiary
rulings and to levy sanctions in response to spoliation of relevant evidence. Glover v. BIC

MEMORANDUM DECISION AND ORDER - 16

Corp., 6 F.3d 1318, 1329 (9th Cir. 1993). A party engages in spoliation as a matter of law
if the party had some notice that the evidence was potentially relevant to litigation before
its destruction. See United States v. Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir.
2002). Bad faith is not required for spoliation sanctions.3 See Glover, 6 F.3d at 1329.
Sanctions may instead be imposed on the basis of simple notice of potential relevance to
litigation. See id. Sanctions may include dismissal of claims, exclusion of evidence, or an
instruction that the jury may presume that the destroyed evidence, if produced, would
have been adverse to the party who destroyed it. See Unigard Sec. Ins. Co. v. Lakewood,
982 F.2d 363, 369 (9th Cir. 1992).
Citing Knife River’s inability to produce Brown’s notebook, Debco requests that
the Court (1) dismiss Knife River’s claims for delay damages; (2) exclude certain
evidence; and (3) instruct jurors that they may presume Brown’s records would have
been adverse to Knife River. To determine the severity of sanction to impose for
spoliation, the Court must consider the “(1) willfulness or bad faith of the party
responsible for loss of evidence; (2) degree of prejudice sustained by opposing party; and

3

The Court notes that recent amendments to the Federal Rules of Civil Procedure impact the
propriety of various sanctions when bad faith intent is absent. Fed. R. Civ. P. 37(e), as amended in
December 2015, requires a finding of bad faith intent before the Court may “(A) presume that the lost
information was unfavorable to the party; (B) instruct the jury that it may or must presume the
information was unfavorable to the party; or (C) dismiss the action or enter a default judgment.” Rule
37(e), however, applies only to electronically stored information. It therefore does not impact the Court’s
inherent sanctioning authority when spoliation of tangible evidence is at issue.

MEMORANDUM DECISION AND ORDER - 17

(3) what is required to cure prejudice.” Miller v. Four Winds Int’l Corp., 827 F. Supp. 2d
1175, 1181 (D. Idaho 2011). The Court will address each factor below.
The first issue to consider is whether Knife River’s inability to produce Brown’s
notebook constitutes willful or bad faith spoliation. The Court is not persuaded that Knife
River’s conduct was willful or done in bad faith. Knife River notified Debco that it
planned to file suit at least 5 months before Brown’s notebook was lost, and it was
therefore on notice of foreseeable litigation, even though this action was not filed until
some time later. However, there is no indication that anyone at Knife River, other than
Brown, knew anything about Brown’s notebook until the fact of its existence arose for
the first time in Brown’s deposition. More importantly, there is no indication that
Brown’s notebook was intentionally destroyed. Rather, the record strongly suggests that
Brown’s notebook was simply lost or inadvertently destroyed when Walker took over
Brown’s office. For these reasons, the Court is unwilling to find that the loss of Brown’s
notebook was willful or that Knife River acted in bad faith.
The second inquiry is whether Knife River’s inability to produce Brown’s
notebook prejudiced Debco. While Brown’s notebook may be relevant, it is not clear how
prejudicial its loss is. There is no dispute that Knife River’s lime mixture did not meet the
Subcontract’s requirements and, for that reason, the Court has granted summary
judgment to Debco on that issue. Beyond that issue, Debco argues that Brown’s notebook
would have been relevant to its fraud and punitive damage claims because it may
establish Knife River’s “state of mind” in manufacturing and installing the defective

MEMORANDUM DECISION AND ORDER - 18

asphalt. However, it is not at all clear how probative Brown’s cryptic hand-written notes
would be to establish Knife River’s state of mind. It would instead seem that deposition
testimony of Knife River’s employees would be far more probative on that issue.
Moreover, as discussed above, the Court has concluded that this is nothing more than a
garden-variety contract dispute and, accordingly, has granted summary judgment on
Debco’s fraud claim and denied Debco’s motion for leave to pursue a punitive damages
claim.
Since the Court has concluded that Knife River’s conduct was not willful and that
any prejudice to Debco is minimal, it concludes that no sanction is necessary or
appropriate.
5.

Knife River’s Motions to Strike
Knife River filed two motions seeking to strike paragraphs from the affidavits of

Lonnie Simpson, Jaime Edelmayer, Chuck Martinez, and Jim Penzkover. Dkts. 29-1, 361. Given the rulings in this Order, both motions are now moot. The Court did not rely on
the disputed paragraphs of these affidavits in any way.
ORDER
IT IS ORDERED:
1.

Defendant-Counterclaimant’s Motion for Extension of Time to File

Disputed Material Facts (Dkt. 38) is GRANTED.
2.

Defendant-Counterclaimant’s Motion for Partial Summary Judgment (Dkt.

22) is GRANTED in part, and DENIED in part.

MEMORANDUM DECISION AND ORDER - 19

3.

Plaintiff-Counterdefendant’s Motion for Partial Summary Judgment (Dkt.

24) is GRANTED.
4.

Defendant-Counterclaimant’s Motion to Amend its Counterclaim to Seek

Punitive Damages (Dkt. 21) is DENIED.
5.

Defendant-Counterclaimant’s Motion for Spoliation Sanctions (Dkt. 23) is

DENIED.
6.

Plaintiff-Counterdefendant’s two Motions to Strike (Dkts. 29, 36) are

DENIED as MOOT.

DATED: March 9, 2016

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

MEMORANDUM DECISION AND ORDER - 20