New Jersey Supreme Court Issues Severe Sanctions for Spoliation
Anthony M. Bottenfield, Esq., associate at Cohen Seglias contributed to this post.
The New Jersey Supreme Court recently issued a unanimous opinion that will impact anyone who eliminates evidence of alleged construction defects before providing an opportunity for contractors or design professionals to inspect those defects, even where such “elimination” occurs accidentally. In Robertet Flavors, Inc. v. Tri-Form Construction, Inc., the Court clarified the New Jersey standard for spoliation with a comprehensive and lengthy opinion that affects owners, contractors and design professionals operating in the state. Spoliation is when a party repairs or makes a material alteration to the work, destroying evidence of the defect.
Disputes often arise regarding the quality of work on construction projects. When these disagreements happen, the normal process is for the owner and contractor to meet to inspect the allegedly defective work. Next, some type of plan is typically agreed upon to correct the defect. Before responsibility for the cost of repair is determined, both parties are entitled to inspect any defects before they are repaired.
The lesson of the Robertet case is that severe penalties - such as a court blocking all of the evidence relating to the removal, inspection, and remediation of the defect - can result when an entity is deprived of the right to investigate allegedly defective work.
Background of the Case
This case involved the construction of a new commercial building that included curtainwall and strip window systems. Once the owner occupied the building, it noticed that substantial leaking occurred around the strip windows, and contacted the glass company that installed them. The glass company investigated and attempted to repair the problems but the leaks continued. After two years, the owner hired a private consultant who recommended that the windows, inside walls, insulation, and carpeting be replaced. The owner agreed with this assessment but unfortunately did not share its plans with the glass company.
The owner filed suit in January 2002, and the glass company served its answer two months later. Even though the suit was underway, the owner’s counsel failed to notify the glass company's counsel about the consultant's investigations, mold discovery, or the owner's plan to replace the strip windows. The owner began the remediation process on December 13, 2002, but did not notify the glass company until three weeks before it was finished. The glass company demanded that the remediation stop and that they be given an opportunity to inspect the allegedly defective work. The owner denied the glass company’s request, claiming that halting the process would be impractical.
During litigation, the glass company filed a motion to stop the owner from testifying about the installation of the strip windows. The glass company claimed it had been unfairly prejudiced because it had no opportunity to inspect the condition that resulted from the leaky windows. In reviewing the case, the Court provided a thorough discussion of the construction industry and spoliation of evidence before concluding that the owner could proceed with its claim, but only in a limited capacity, making its case much more difficult to prove. As a result, the owner was barred from presenting any evidence relating to the removal of the windows, discovery of the mold, and installation of the replacement windows, and was only permitted to present evidence relating to the condition and inspection of the windows prior to remediation.
Outcome of the Robertet Case
This decision serves as a cautionary tale for all parties in construction projects. Owners must make sure that all affected parties are given notice of any alleged defects and/or plans to remediate such defects. Contractors also have an obligation to be proactive during the evidence gathering stages. This case makes it clear that when spoliation occurs, a party may not automatically be blocked from recovering for, or defending against, alleged construction defects; however harsh penalties may apply.