Spoliation — In Diversity, Federal Law Governs Adverse Inference — Factors (8th Cir.) — Since a Purpose Is to Shift Burden to Spoliator, No Instruction Against Defendant’s Insurer Where Defendant Has Assigned Rights to Plaintiff

Burris v. Gulf Underwriters Ins. Co., 2015 U.S. App. LEXIS 8707 (8th Cir. May 27, 2015):

Lowell and Joyce Burris (jointly "Burris") appeal the district court's1denial of their motion for a new trial following a jury verdict in favor of Gulf Underwriters Insurance Company ("Gulf"). We affirm.


Lowell Burris was severely injured falling from a ladder in August 2001. In 2007, Burris brought claims in Minnesota state court against the ladder's manufacturers, Versa Products, Inc. and G & L Products, Inc. (jointly "Versa"), and against the seller of the ladder, Menard, Inc. ("Menard"). Menard removed on the basis of diversity jurisdiction.

In May 2008, Gulf, Versa's former insurance company, filed a separate insurance coverage declaratory judgment action, seeking a declaration that it had no duty to defend Menard or Versa. The product liability case was stayed pending the outcome of the insurance coverage issue. In the insurance coverage case, the district court granted Gulf's motion for summary judgment. On appeal, we reversed the district court's decision in the declaratory judgment action, and remanded with instructions to dismiss [*2]  the case. We held the preferred procedure under Wisconsin2 law is for the interested insurance company to intervene in the underlying litigation, rather than the filing of a separate action on the coverage issue alone. See Gulf Underwriters Ins. Co. v. Burris, 674 F.3d 999 (8th Cir. 2012).

1. The Honorable John R. Tunheim, United States District Judge for the District of Minnesota.

2. We reviewed Gulf's liability policy in accordance with Wisconsin law as the case was removed to federal court on diversity jurisdiction and the liability policy was issued in Wisconsin.

Accordingly, in September 2012, Gulf moved to intervene in the product liability action. The district court granted the motion, and stayed the liability proceedings pending the resolution of the coverage issue. In September 2013, Burris and Versa entered into an agreement under Miller v. Shugart, 316 N.W.2d 729 (Minn. 1982),3 in which Versa admitted liability and permitted Burris to seek recovery from Gulf. Versa had a "claims made" insurance policy issued by Gulf effective March 3, 2003, through May 5, 2003 ("Coverage Period"). Under the terms of the policy, a claim would be covered by Gulf if it was "made" within the Coverage Period, regardless of when the underlying injury occurred. The policy stated that a claim was "made" when notice [*3]  of a claim was "received and recorded" by Gulf or any insured, in this case Versa. The policy required Versa to notify Gulf "as soon as practicable" when Versa received a claim.

3. This Minnesota case provided that an insured can stipulate to liability and assign his rights against his liability insurer to a claimant in exchange for the claimant's release of the insured from personal liability. Shugart, 316 N.W.2d at 732-35.


This issue proceeded to a jury trial in December 2013, and both parties submitted motions in limine. One of Burris's requests was for the district court to include an adverse inference instruction on account of alleged spoliation of evidence. Burris asserted that thirty-three boxes of records, which were sent back to Versa by Paul Junius, a third-party claims handler working for Risk Retention Services ("RRS"), were willfully destroyed by Versa in 2006. Burris also requested that the district court exclude any evidence of Letourneau's attorney disciplinary history, arguing that it was irrelevant to this case and prejudicial. The court preliminarily denied Burris's request for a spoilation instruction, noting that [*5]  there was no evidence in the record of intentional destruction, but invited Burris to seek the instruction again after producing evidence at trial that such an instruction was warranted. The district court granted in part, and denied in part, Burris's motion in limine regarding Letourneau's disciplinary history. The district court allowed evidence of Letourneau's disciplinary history which related to his office mailing practices, but excluded introduction of any evidence of the consequences Letourneau faced as a result of the disciplinary proceedings.

At the conclusion of the trial, the jury returned a verdict for Gulf, finding that Versa did not receive the March 2003 Letter within the Coverage Period. Burris moved for a new trial, or in the alternative asked for reconsideration of his motion for summary judgment. Burris argued that the district court erred in declining to issue a spoilation instruction, and in admitting evidence of Letourneau's disciplinary history. The district court declined to grant a new trial, finding that the introduction of

Letourneau's disciplinary history was not error and did not result in a miscarriage of justice, and finding that there was insufficient evidence to show bad faith or intentional destruction in anticipation of litigation as to the records, and that accordingly a spoilation instruction was not warranted. Finally, the district court found that reconsideration of its motion for summary judgment was improper after a trial had already been held. Burris appeals.


A. Motion for a New Trial

1.  Standard of Review

Rule 59(a) of the Federal Rules of Civil Procedure provides that a court may grant a motion for a new trial "on all or some of the issues." Fed. R. Civ. P. 59(a)(1). "We review the denial of a motion for a new trial for a clear abuse of discretion, with the key question being whether a new trial is necessary to prevent a miscarriage of justice." Wagner v. Jones, 758 F.3d 1030, 1033-34 (8th Cir. 2014), cert. denied, 135 S. Ct. 1529 (2015).

2.  Adverse Instruction for Spoliation of Evidence

Burris first argues that a new trial is warranted because the district court erred in declining to issue an adverse inference instruction for spoilation of evidence. We review a district court's decision to give a particular instruction [*7]  for an abuse of discretion. Hallmark Cards, Inc. v. Murley, 703 F.3d 456, 460 (8th Cir. 2013). In such cases, "[w]e will order a new trial only if the error misled the jury or had a probable effect on its verdict." Id. (internal quotation omitted).

Burris requested the district court read the following instruction to the jury:

If evidence is destroyed that could reasonably be expected to have been produced, and the party who destroyed the evidence fails to give a reasonable explanation, you may decide that the evidence would have been unfavorable to that party.

Burris argued to the district court, and continues to argue on appeal, that Lambert made an intentional decision to destroy thirty-three boxes of claim files and records, which Burris asserts may have contained his March 2003 Letter to Versa. As evidence to support his claim for an adverse inference instruction, Burris pointed to a portion of Lambert's deposition, where Lambert acknowledged that the files in question were destroyed and that he and his attorney both agreed they should be destroyed. However, in its order denying Burris's motion for a new trial, the district court concluded this evidence was insufficient to show that the files had been destroyed in anticipation of litigation, and [*8]  thus declined to grant a new trial to Burris on this basis.

In diversity cases, a district court applies federal law to the issue of adverse inference instructions for spoilation of evidence. Sherman v. Rinchem Co., 687 F.3d 996, 1006 (8th Cir. 2012). In order for an adverse inference instruction for spoilation to be warranted, a district court is required to make two findings: "(1) there must be a finding of intentional destruction indicating a desire to suppress the truth, and (2) there must be a finding of prejudice to the opposing party." Hallmark, 703 F.3d at 460 (internal alteration and quotation omitted). The evidence Burris relied upon was insufficient to establish that Lambert destroyed the boxes to suppress the truth regarding Burris's claim. The evidence at trial did not establish that Lambert knew Burris's March 2003 Letter was in the boxes, nor did the evidence suggest Lambert destroyed the boxes because he knew litigation would be forthcoming. Additionally, Lambert's testimony indicated that any letters related to Burris's claim would not have been in the thirty-three destroyed boxes because, at the time Burris's March 2003 Letter was allegedly sent, Versa was no longer using Junius and RRS as their third-party claims handler.5 Thus, the district court [*9]  did not abuse its discretion by denying Burris's request for a spoilation instruction. Cf. Millenkamp v. Davisco Foods Int'l, Inc., 562 F.3d 971, 981 (9th Cir. 2009) (holding that a district court did not abuse its discretion in declining to issue a spoilation instruction where there was no evidence that the party alleged to have spoiled the evidence "knew that litigation would be forthcoming when they allowed the evidence to spoil").

Furthermore, even if Burris had presented evidence that Lambert intentionally destroyed the files to suppress the truth, and that this destruction prejudiced Burris, an adverse inference instruction would not be warranted against Gulf because Gulf had no involvement in the alleged spoilation of the documents, nor any access, or control, over the destroyed files. Adkins v. Wolever, 692 F.3d 499, 504-05 (6th Cir. 2012) (holding that the requirements for a spoilation instruction were not met where the party against whom the instruction was sought had no control over the destroyed evidence). Since the imposition of an adverse inference instruction for spoilation is a kind of sanction meant, in part, to shift the burden to the spoilating party to prove the destroyed evidence was not favorable to them, 126 Am. Jur. 3d Proof of Facts § 21 (2012), it defies the purpose of the sanction to impose [*10]  it on a party that played no part in the alleged spoilation of evidence. Accordingly, the district court did not abuse its discretion in rejecting Burris's requested spoilation instruction.

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