Spoliation risk shows ill wisdom of state awarding contract to defendant in lawsuit over same project

The eastbound span of the Washington Bridge remains functional.
Jef Nickerson via Flickr CC BY-SA 2.0

The state of Rhode Island has found itself in an awkward spot trying to prevent the spoliation of evidence in civil litigation.

In my recent screed against, inter alia, corruption in contracting, I mentioned that Rhode Island had awarded the nearly $50 million contract for a major bridge demolition to a company that also is among the 13 defendants Rhode Island has sued for failing to diagnose the defective bridge in the first place.

I suggested, and maintain, that the state's simultaneously friendly and adversarial relationship with Aetna Bridge Co. is symptomatic of problematically cozy ties between government and contractors. These relationships cost taxpayers in Rhode Island and elsewhere tens of millions of dollars in overpriced projects, I believe, effecting a form of what I call "lawful corruption."

In a schadenfreude-inducing twist in the case, demolition of the I-195 Washington Bridge in Providence was halted this week for fear that evidence in the state's civil suit would be lost. "[R.I. Attorney General (AG) Peter] Neronha told WPRO radio he had spent two days working to safeguard bridge evidence from the wrecking ball and jackhammer," The Providence Journal reported Tuesday (subscription).

Spoliation of evidence occurs in a civil action or potential civil action when (1) an actor has a legal or contractual duty to preserve evidence relative to the civil action; (2) the spoliation defendant negligently or intentionally fails to preserve evidence in accordance with the duty; (3) absence of the evidence significantly impairs the complaining party's ability to prove the civil action; and (4) the complaining party accordingly suffers damages for inability to prove the civil action (1 Tortz 335 (2024 ed.)). Though a wrongful act, most states, including Rhode Island to date, regard spoliation as a doctrine of evidence, subject to procedural remediation within the four corners of a case, rather than a separate liability theory in tort law.

The instant case puts Aetna Bridge Co. and its partners in the bizarre position of being contractually bound to destroy parts of the Washington Bridge and to dispose of the debris in accordance with state law, while also being vulnerable to state accusations of spoliation if contract performance results in the destruction of evidence. The contradiction is yet more reason that the contract award was improper.

I'm doubtful that the state on its own even realized the problem. It was Wednesday last week that the Journal asked the AG's office whether parts of the bridge would remain available as evidence in the litigation. An AG spokesman had no "comment on ongoing litigation" on Thursday, and demolition stopped abruptly this week on Tuesday, after what Neronha described as "two days" of efforts.

£5.41m reg fine over energy traders' WhatsApps cautions attorneys also on retention, spoliation, FOI

Electrical pylons on the Leeds-Liverpool Canal, England.
Mr T via Geograph CC BY-SA 2.0

The British gas and electric regulatory authority (Ofgem) fined investment bank Morgan Stanley £5.41m in late August for failure to record and retain traders' messages on WhatsApp.

News of the fine has shaken up the British compliance sector. The case should grab the attention of compliance attorneys, of course, but also corporate counsel and government attorneys throughout the Anglo-American legal system.

Wholesale energy traders discussed market transactions on WhatsApp on their personal devices. Rules on market manipulation and insider trading require that communications "relevant" to trading be documented and retained for Ofgem review; the messages were not.

The enforcement action therefore represents a wake-up call, but not a new standard. The case probably resonated for two reasons. First, employee use of personal devices for communication is increasingly common, if not expected, and it's difficult to police. Second, WhatsApp is known for its end-to-end encryption, a feature that makes it appealing to users, but incompatible with regulatory transparency.

I'm not a fin reg wonk, but it was those characteristics of the case that caught my attention. The enforcement action should remind corporate counsel that record retention requirements cut across devices and applications and can even follow employees home. Moreover, when records might be perceived reasonably to have potential relevance in future litigation, the cost of non-retention in spoliation can be steep.

Similarly, the enforcement action should remind government authorities that neither non-public location nor software-driven encryption countermands record retention and freedom-of-information laws. Transparency law was once vexed by problems such as proprietary access and private location; it is no longer. Just ask Hillary Clinton about her State Department emails or Donald Trump about his bathtub war plans.

The enforcement action is Ofgem, Penalty Notice: Finding That Morgan Stanley & Co. International PLC Has Breached Regulation 8 of the Electricity and Gas (Market Integrity and Transparency) (Enforcement etc.) Regulations 2013 (the REMIT Enforcement Regulations) (Aug. 23, 2023).

Automatic-door failures fuel injuries, tort claims, but road to recovery in litigation can be bumpy

Pixabay by djedj

An Australian woman struck by a malfunctioning airport security door was denied recovery in April after failing to prove that the malfunction caused her injury.  The outcome strikes me as questionable, and the case is instructive of tort principles anyway.

If you travel much, as I do, you probably have passed through those one-way transparent security doors that whip open and closed to allow only a person at a time to pass.  They frighten me a bit, and I never linger on the threshold.  The plaintiff in the instant case likewise denied having paused upon egress from Wagga Wagga City Airport arrivals in New South Wales, yet was struck by one of the doors.  She complained of shoulder and back injury, requiring surgery, and the court confirmed that the impact of the door at least worsened a preexisting condition.

Arrivals at Wagga Wagga Airport
(2012 photo by Bidgee CC BY-SA 3.0 AU)

The doors were in fact malfunctioning.  There are two batteries, at different heights, of photoelectric cells that sense a person in the way and prevent the doors from closing.  The lower set were out of commission.  However, tests and maintenance on the doors showed that the non-functioning cells were not essential for safety; the higher set still kept the doors open when so much as a person's leg was in the way.  The plaintiff therefore failed to show a causal connection between her injury and the malfunction, nor any alleged misfeasance by the airport defendant, such as a failure to warn.

The outcome strikes me as questionable, because there seems to be no dispute that the 44-year-old plaintiff was struck by the door, and that that's never supposed to happen.  Even if the photoelectric cell failure cannot be blamed, the case seems well suited to res ipsa loquitur, which, to the best of my knowledge, is recognized in New South Wales common law, and is not mentioned by the court.  Maybe the plaintiff failed to plead the theory.  Or maybe this is a Palsgraf-esque scenario in which the court concealed skepticism of the plaintiff's injury.  Of 100,000 arriving passengers annually, there were no other reported incidents, the court troubled to say.

Anyway, the case reminds me of one that I use sometimes in torts class to teach punitive damages with a dash of professional responsibility.  In 2015, 61-year-old James Hausman won a $21.5m verdict against the Holland America Line (HAL) after being hit by an automatic sliding door on a cruise ship, in an incident captured on camera.

There's plenty to inform a class discussion just there.  Hausman's injury did not look too bad in the video, but traumatic brain injury is tricky.  And the court awarded $16.5m in punitive damages after hearing about 16 other sliding-door injuries on HAL ships.  The plaintiff's lawyer accused HAL of trying to save on air conditioning, which HAL denied, the ABA Journal reported.

Then the case took a turn.  In 2016, the district court threw out the verdict after revelations of spoliation.  The ugly dissolution of an employment relationship between Hausman and a personal assistant led to an undiscovered personal email account and deleted messages that cast doubt on Hausman's veracity (ABA Journal, Seattle Times).  The court ordered a new trial and clarified that there was no evidence the plaintiff's attorney was complicit in wrongdoing.  The docket suggests that the case ended in settlement later that year.

The Australian case is Gray v. Wagga Wagga City Council, [2021] NSWDC 108, 07 April 2021 (Wolters Kluwer).  Simon Liddy at HWLEbsworth published commentary.  The American case is Hausman v. Holland America Line-USA, No. 2:13-cv-00937 (W.D. Wash. 2016) (Court Listener).