Opinion
3:CV-02-1040.
May 16, 2005
MEMORANDUM
Defendant Applica Consumer Products, Inc. ("Applica") has moved for summary judgment based upon Plaintiff's failure to preserve the fire scene for inspection and failure to preserve relevant evidence from the fire scene. Plaintiff Erie Insurance Exchange ("Erie"), as a suborgee of Donald McCracken, the former owner of the property where the fire occurred, asserts that the fire was caused by a malfunction in a coffee maker that was manufactured and placed into the stream of commerce by Applica under the trade name of "Black Decker." In its motion Applica claims that Erie's failure to timely notify it of a possible subrogation claim prevented Applica's representatives from conducting their own investigation of the fire scene, and Erie's failure to preserve an electric range located in the kitchen of the McCracken home prevented it from investigating other potential causes of the fire.
Applica claims that Erie's failure has impaired its ability to put forth an adequate defense and, therefore, judgment should be entered in its favor. Applica has also filed a companion motion requesting the Court to exclude the testimony of Erie's electrical engineering expert, Randolph Marshall, on the basis that it lacks reliability. Applica maintains that judgment must be entered in its favor if Mr. Marshall's testimony is excluded. For the reasons set forth below, the Motion for Summary Judgment and the Motion to Preclude the Testimony of Randolph Marshall will be denied.
I. BACKGROUND
On November 14, 2000, a fire occurred at 86 Leisure Lands, East Stroudsburg, Pennsylvania, the home of Donald McCracken ("McCracken"). The fire caused extensive damage to Mr. McCracken's home. He incurred repair costs of $85,808.78, and personal property damage of $74,400. (Id.) The McCracken home was insured under a policy issued by Erie. Upon receiving notice of the fire by McCracken, Erie immediately retained Michael J. Hartley ("Hartley") of HSH Investigations, to investigate the cause and origin of the fire. Hartley conducted his investigation the day following the fire and determined that the cause of the fire was a coffee maker that was located on the kitchen countertop in the McCracken home. (Hartley's report of 11/16/00 at 3.) The coffee maker was a Black Decker, Versa Brew Series DCM 1250. During his investigation of the fire scene, Hartley was accompanied by a Pennsylvania State Police Fire Marshal, who concurred with his determination. (Id.) At the conclusion of his investigation, Hartley removed the Black Decker coffee maker, a toaster oven, a waffle iron, and an electrical outlet from the scene of the fire as possible ignition sources. Hartley did not remove an electric range that was located in the kitchen because he had ruled it out as a possible source of the fire. Photographs as well as a videotape were taken of the scene of the fire. Erie also retained the expert services of Randolph Marshall ("Marshall") of Dawson Engineering, Inc. Marshall is an electrical engineer who was hired to investigate the cause of the fire and to perform tests on the coffee maker to determine whether it was defective. Erie insisted that the coffee maker be fully examined by Marshall prior to notifying any potential subrogation targets. Marshall's examination of the coffee maker was completed approximately four (4) months after the fire occurred. (Id. at 2) Upon receiving Marshall's report, notice was given to Applica of a possible subrogation claim. At that time, the fire scene was no longer available for Applica to conduct its own inspection.
Marshall prepared three reports pertaining to the cause of the fire. In each report, he expressed his professional opinion that the fire at the McCracken residence was caused by a malfunction of the Black Decker coffee maker. (E.g., Marshall's Engineering Report of 1/7/04 at 6.) Applica had the opportunity to review Marshall's reports as well as review Erie's investigation file, photographs, and videotape of the fire scene. Applica also hired its own electrical engineering expert, Lawrence Sacco ("Sacco"), to evaluate and examine the coffee maker. In his report, Sacco opined that the coffee maker was not the cause or origin of the fire. (Sacco's Engineering Report of 12/23/03 at 4.) He believed that the coffee maker was exposed to an external fire attacking it from the left, the exact location of McCracken's electric range, and as such, he felt that the electric range could not be eliminated as the source of the fire. (Id. at 2, 4.) Applica claims that Erie's conduct in failing to preserve the fire scene so that Applica could perform its own investigation, and failure to preserve the electric range in order that appropriate tests could be performed on it to determine if it was the source of the fire, has prejudiced it in presenting a complete defense.
II. THE SUMMARY JUDGMENT MOTION
Summary judgment should be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). A fact is "material" if proof of its existence or nonexistence might affect the outcome of the suit under the applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party."Id.
All doubts as to the existence of a genuine issue of material fact must be resolved against the moving party, and the entire record must be examined in the light most favorable to the nonmoving party. Cont'l Ins. Co. v. Bodie, 682 F.2d 436, 438 (3d Cir. 1982). The moving party has the burden of showing the absence of a genuine issue of material fact, but the nonmoving party must present affirmative evidence from which a jury might return a verdict in the nonmoving party's favor. Anderson, 477 U.S. at 256-57. Merely conclusory allegations taken from the pleadings are insufficient to withstand a motion for summary judgment. Schoch v. First Fid. Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). Summary judgment is to be entered "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
The basis of Applica's motion for summary judgment is that Erie's failure to preserve relevant evidence from the scene of the fire and provide Applica with an opportunity to conduct its own inspection of McCracken's kitchen constitutes a spoliation of evidence, which should result in a dismissal of Plaintiff's claims. Applica's motion for summary judgment is a request for the ultimate sanction of dismissal for Erie's alleged spoliation of evidence. See Donohoe v. American Isuzu Motors, Inc., 155 F.R.D. 515, 519 (M.D. Pa. 1994). There is no rigid rule mandating a particular sanction upon a finding of improper destruction or loss of evidence. See Id. It is a discretionary decision by the district court and this discretion should be exercised with a view toward choosing the "least onerous sanction corresponding to the willfulness of the destructive act and the prejudice suffered by the victim."Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994) "A sanction that has the `drastic' result of judgment being entered against the party who has lost or destroyed evidence must be regarded as a `last resort', to be imposed only `if no alternative remedy by way of a lesser, but equally efficient sanction is available.'" Baliotis v. McNeil, 870 F. Supp. 1285, 1289 (M.D. Pa. 1994) (citing Capellupo v. FMC Corp., 126 F.R.D. 545, 552 (D. Minn. 1989)).
Sanctions that may be appropriate for the destruction of evidence include; (1) outright dismissal of claims; (2) exclusion of countervailing evidence; or (3) a jury instruction on the spoliation inference, which permits the jury to assume that destroyed evidence would have been unfavorable to the position of the offending party. Howell v. Maytag, 168 F.R.D. 502, 505 (M.D. Pa. 1996) (citing Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 78 (3d Cir. 1994)).
The authority to impose sanctions for the destruction of relevant evidence is recognized under state products liability law, e.g., Lee v. Boyle-Midway Household Products, Inc., 792 F. Supp. 1001, 1005 (W.D. Pa. 1992), and the inherent power of district courts to utilize sanctions in order to "manage their own affairs so as to achieve the orderly and expeditious disposition of cases." Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991). As explained in Baliotis, "sanctions for loss of evidence is part of a district court's inherent powers . . . to make discovery and evidentiary rulings conducive to the conduct of a fair and orderly trial." Baliotis, 870 F. Supp. at 1289.
The Third Circuit established the analytical framework for examining spoliation claims in Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994). In Schmid, the Court stated that when considering the imposition of a sanction against a party for spoliation of the evidence, three factors must be considered:
(1) the degree of fault of the party who altered or destroyed the evidence;
(2) the degree of prejudice suffered by the opposing party; and
(3) whether there is a lesser sanction [compared to the complete exclusion of evidence] that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future.Id.; Schroeder v. Commw. Dep't of Transp., 710 A.2d 23, 26-27 (Pa. 1998) (the Pennsylvania Supreme Court expressly adopted the three-prong test set forth in Schmid). "In determining the applicability of the spoliation doctrine, a court cannot focus entirely on only one prong of the test, but must balance the facts of the case involved as to each prong." Tenaglia v. Proctor Gamble Inc., 737 A.2d 306, 308 (Pa.Super.Ct. 1999).
A. Fault
Applying the first prong of the Schmid test to Erie's actions, it appears that Erie, either through inadvertence or neglect, bears a large degree of fault for the loss of relevant evidence. The electric range that was located in McCracken's kitchen at the time of the fire was inspected by Erie's investigator and ruled out as a possible source of ignition or as a cause of the fire. The mere fact that Hartley had to rule out the electric range as a possible source of the fire makes it apparent that the appliance was important to his investigation. Yet, Erie specifically chose not to preserve the electric range as evidence even though it did preserve a toaster oven, a waffle iron, and an electric outlet. It is also apparent that one of the reasons why Erie conducted its cause and origin investigation was to determine if a subrogation claim existed.
"A litigant is under a duty to preserve evidence which it knows or reasonably should know is relevant to the action." Baliotis, 870 F. Supp. at 1290. This duty arises as soon as a potential claim is identified. Erie knew as early as November 16, 2000, less than 48 hours after the fire occurred, that the Black Decker coffee maker was a potential cause of the fire, thereby making Black Decker a potential target for subrogation. Despite this knowledge, Erie waited almost four months before contacting Black Decker and by that time the site of the fire was no longer available for inspection. Erie claims that it had not decided to pursue a subrogation claim until approximately four months after the fire when it received the initial expert engineering report of Marshall.
"[T]he knowledge of a potential subrogation claim is deemed sufficient to impose a duty to preserve evidence." Id.
Erie required that the coffee maker be x-rayed by Dawson Engineering in order to determine whether a defect existed in the machine prior to notifying Black Decker of a potential subrogation claim. Erie attributes the delay in notification to Dawson Engineering because it did not complete the testing on the coffee maker until February 28, 2001. After receiving the testing results from Dawson Engineering, Erie placed Black Decker on notice of a potential subrogation claim on March 6, 2001.
It is apparent that Erie was aware of a potential subrogation claim immediately following the fire after receiving the cause and origin report of Hartley, which concluded that the Black Decker coffee maker was a potential cause of the fire. At that point a duty was imposed upon Erie to preserve the relevant evidence for inspection. Accordingly, Erie owed a duty to preserve evidence relevant to the origin and cause of the fire, including the electric range.
"The scope of the duty to preserve evidence is not boundless. At a minimum, however, an opportunity for inspection should be afforded to a potentially responsible party before relevant evidence is destroyed." Baliotis, 870 F. Supp. at 1290-91. Thus, Erie should have provided Applica with the opportunity to inspect the electric range.
Erie's motive for failure to preserve the electric range is relevant in determining what sanctions, if any, should be imposed. Schmid makes it clear that "the degree of fault" is the issue. The evidence as presented does not support a determination that Erie acted in bad faith. There was no evidence presented that Erie sought to destroy the fire scene or the electric range in order to prevent Applica from performing its investigation, or to divert liability away from its insured, McCracken.
B. Prejudice
Having established that Erie breached its duty to preserve relevant evidence from the fire, this Court must now determine what prejudice, if any, resulted to Applica from this breach. Under the second prong of the Schmid analysis a manufacturer of a product that is allegedly responsible for causing a fire is prejudiced if it cannot have its own cause and origin expert inspect the fire scene for other potential causes. Schmid, 13 F.3d at 80 ("defendant will want as much evidence as possible [that is] relevant to the issue of causation"). However, the Black Decker coffee maker, which Erie believes to be the cause of the fire, as well as the waffle iron, toaster oven, and the electrical outlet were preserved. Applica has had the ability to defend its product by having its expert examine the coffee maker to refute Erie's assertion that it was the cause of the fire. Plaintiff's expert, Sacco, has examined the coffee maker as well as the other appliances and has provided his opinion that the coffee maker was not the cause of the fire and that it was not defective. Furthermore, Applica has not presented any affidavits in this case that it is unable to present expert witness evidence on the cause and origin of the fire because of the inability to inspect the fire scene or the electric range. In fact, Sacco has testified that the information and evidence provided to him, which included photographs of the McCracken kitchen, videotape of the McCracken residence, Hartley's cause and origin report, and Marshall's reports were sufficient to allow him to formulate his expert opinion. Accordingly, a defense of this action has not been rendered impossible by Erie's failure to allow Applica to investigate the fire scene or its failure to preserve the electric range.
Applica's defense, however has been hampered by the destruction of the electric range. As pointed out by Applica, Erie is proceeding on a product malfunction theory. Under this approach, a plaintiff must present, inter alia, evidence eliminating other reasonable secondary causes for the fire. See e.g., Walters ex rel. Walters v. General Motors Corp., 209 F. Supp. 2d 481, 486-87 (W.D. Pa. 2002). Here, Erie has presented evidence from its cause and origin expert eliminating the electric range as an ignition source, but Applica has been deprived of the means to test this assertion. Thus, Erie has prejudiced the defense of this action by failing to preserve the electric range.
The Third Circuit has indicated that "in the absence of bad faith by the breaching party and where the resulting prejudice is not severe, a sanction of witness preclusion or entry of judgment is unwarranted." Schmid, 13 F.3d at 81. The Third Circuit specifically rejected a blanket preclusion rule based on the proposition that an expert witness "has an affirmative duty not to conduct an investigation without affording all potential defendants an opportunity to have an expert present." Id. InBaliotis, this Court determined that this rule applies to a fire scene. It would be impractical to require an insurance company to maintain the scene of a fire until all potential defendants are notified and afforded the opportunity to conduct independent inspections. To do so would create a safety hazard, and be wasteful and inefficient.
Dismissal of a complaint or preclusion of evidence regarding an allegedly defective product is an extreme sanction reserved only for those instances where an entire product or the allegedly defective portion of a product is lost, spoiled or destroyed. See Mensch v. BIC Corp., No. Civ.A. 90-6002, 1992 WL 236965 at *2 (E.D. Pa. Sept. 17, 1992).
This Court in Baliotis determined that a lesser sanction of a "spoliation inference" was warranted under facts similar to the facts of this case. An instruction to a jury that it may consider that the lost evidence would be unfavorable to Erie is consistent with the evidentiary rationale underlying the spoliation inference. As explained in Baliotis, "permitting the jury to draw such an inference furthers the prophylactic and punitive purposes of the `spoliation inference.'" Baliotis, 870 F. Supp. at 1292. Knowledge that sanctions may be imposed for loss of relevant evidence attending destruction of a fire scene and a possible cause of the fire, resulting in prejudice to subrogation targets, may induce insurers or property owners to provide notice to those targets and an opportunity to inspect. Accordingly, this Court will impose a sanction of a "spoliation inference" instruction to the jury at the time of trial.
III. THE ADMISSIBILITY OF MARSHALL'S TESTIMONY
Applica has filed a motion to exclude the testimony of Randolph Marshall, Erie's electrical engineering expert. Applica asserts that Marshall's conclusion lacks indicia of reliability because of the purportedly improper methodology he used in arriving at his opinions.
The admissibility of expert testimony in federal court is governed by Federal Rule of Evidence 702, which provides:
If scientific, technical or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in form of opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.
The Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589 (1993), held that Rule 702 imposes a special obligation on the trial judge to "ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable." The purpose of this gatekeeping role is to establish a standard of evidentiary reliability. Id. at 590;Kannankeril v. Terminix Int'l Inc., 128 F.3d 802, 806 (3d Cir. 1997).
In assessing whether the proffered scientific expert testimony is reliable, the Third Circuit has explained that the trial court should admit expert testimony "if there are `good grounds' for the expert's conclusions," notwithstanding "the judge's belief that there are better grounds for some alternative conclusion." Heller v. Shaw Industries, Inc., 167 F.3d 146, 152-53 (3d Cir. 1999). "Novel" conclusions should not be excluded where the methodology and its application are reliable. Id. at 153. "[A]n expert opinion must be based on reliable methodology and must reliably flow from that methodology and the facts at issue — but it need not be so persuasive as to meet the party's burden of proof or even necessarily its burden of production." Id. at 152. Furthermore, the Supreme Court inDaubert emphasized that the Rule 702 inquiry was a "flexible one." Daubert, 509 U.S. at 594.
In order to determine whether to admit the expert testimony of Marshall the Court must begin by reviewing the methodology used by Marshall in formulating his opinions. Marshall's evaluation included:
1. Exposure of a small sample of the plastic housing from the exemplar coffee maker to an open flame
2. Evaluating x-rays of the remains of the coffee maker
3. Examining the burn pattern on the coffee maker
4. Examining the damaged power cord connected to the coffee maker and an evaluation of the internal wiring of the coffee maker
5. Reviewing the videotape and photographs from the scene of the fire and a review of Hartley's cause and origin report.
The x-rays of the coffee maker revealed that the shroud of the capacitor was detached and propelled five inches away into the plastic housing, and metal splatter was found in the area of the capacitor. The only explanation, according to Marshall, for both the projection of the shroud and the splattering of metal is an explosion due to internal electrical energy. (Marshall's Engineering Report of 1/7/04 at 4.) Marshall also explains that the burn patterns on the remains of the coffee maker were consistent with an internal fire, and in addition, the damage to the circuit board could not have occurred unless the fire developed internally because the circuit board is shielded behind a plastic housing, made of heat resilient materials. (Id. at 5.) Thus, Marshall was able to rule out the electric range as a source of the fire since he determined that the fire was ignited internally in the coffee maker.
Applica's argument attacking Marshall's opinion is based on his failure to perform further testing to determine whether the internal components in the location of the coffee maker where Marshall claims the fire originated were capable of generating sufficient heat to ignite the fire. Applica asserts that it is this failure to perform additional testing that renders Marshall's testimony unreliable and, therefore, inadmissible.
Unlike the electrical engineer whose testimony was excluded in Pappas v. Sony Electronics, Inc., 136 F. Supp. 2d 413 (W.D. Pa. 2000), Marshall did inspect the power cord for the suspect appliance, finding that this "very important evidence needed to determine whether the [appliance] was energized at the time of the fire," id. at 419 n. 9, indicated that the coffee maker had been energized. Also unlike Pappas, Defendant in this case has failed to produce affidavits of an expert asserting that Marshall's methodology of "determining cause based on the physical evidence ran afoul of those techniques generally accepted by fire investigators." Id. at 423. Finally, unlikePappas, other experts who examined the device in question concluded that the coffee maker was the likely origin of the fire.
Marshall's opinion is not rendered unreliable and inadmissible simply because he failed to determine the exact component of the coffee maker that caused the ignition of the internal fire. He based his conclusions on observations from x-rays and detailed examinations of the damaged product. These observations afford "good grounds" for a person with requisite expertise in electrical devices to base an opinion that an electrical source inside an appliance caused the fire. Marshall has articulated explanations premised upon electrical engineering principles that rule out a flame source external to the coffee maker. Specifically, examination of the burn patterns on the remains of the coffee maker and the results of the x-rays allowed Marshall to rule out the range as a source of ignition and conclude that an electrical malfunction inside the coffee maker triggered the fire. He pinpointed the origin of the fire to a two-inch square area housing electrical components. It is not for this Court to determine whether the opinion offered by Marshall is correct or incorrect. "The analysis of the conclusions themselves is for the trier of fact when the expert is subject to cross-examination." In re: TMI Litigation, 193 F.3d 613, 665 (3d Cir. 1999). "The admissibility inquiry thus focuses on the principles and methodology, not the conclusions generated by the principles and methodology." Id. "The goal is reliability not certainty." Id. Despite its focus on reliability, the Court "must examine the expert's conclusions in order to determine whether they could reliably follow from the facts known to the expert and methodology used." Heller, 167 F.3d at 153.
This Court does not find that there is a significant gap between the information used by Marshall and the opinion he has proffered. His conclusions logically follow from the results of the information available to him. The fact that further testing could have been conducted by Marshall in forming his opinion is not determinative of the reliability of his testimony. The test for "admitting his expert testimony is not a question of whether his methods were perfect or whether a possibility exists that [he] might have done a better job." Eclipse Electronics v. Chubb Corp., 176 F. Supp. 2d 406, 412 (3d Cir. 2001). Erie has presented sufficient evidence to establish the reliability of Marshall's testimony in accordance with the principles set forth in Daubert and Rule 702. His failure to conduct voltage or temperature testing may serve to undermine his opinions, but it does not render them inadmissible. Accordingly, Marshall's testimony will not be excluded.
IV. CONCLUSION
For the reasons set forth above, and after consideration of the degree of prejudice suffered by the Defendant, this Court concludes that "an adverse inference instruction" is appropriate as the least onerous sanction, which corresponds to the harm that resulted from Plaintiff's breach of the duty to preserve evidence. Accordingly, Defendant's motion for summary judgment will be denied. Because Randolph Marshall articulated "good grounds" for his conclusions, the motion to exclude his testimony will also be denied. An appropriate Order follows.
ORDER
NOW, THIS 16th DAY OF MAY, 2005, for the reasons set forth in the foregoing Memorandum, IT IS HEREBY ORDERED THAT:1. Defendant's "Motion for Summary Judgment" (Dkt. Entry 43) is DENIED.
2. At the time of trial, the trier-of-fact will be permitted to draw an inference adverse to the position asserted by Plaintiff, that inference being that the evidence lost as a result of Plaintiff's failure to preserve the fire scene and electric range for inspection by Defendant would have been unfavorable to the position asserted by Plaintiff.
3. Defendant's "Motion to Exclude the Testimony of Randolph Marshall" (Dkt. Entry 44) is DENIED.
4. A telephonic scheduling conference will be held on June 3, 2005, at 11:00 a.m. Counsel for the plaintiff shall be responsible for placing the call to 570-207-5720 and all parties shall be ready to proceed before the undersigned is contacted.