Commercial Litigation and Arbitration

Spoliation of Tangible Evid. — Adverse Inference Instruction Requires Intentionality & Prejudice (8th Cir.) — Court Must Make Findings on the Record — Plain Error If No Objection to Instructions — Failure to Appeal Again after R. 59 Motion Denied

Lincoln Composites, Inc. v. Firetrace USA, LLC, 2016 U.S. App. LEXIS 10346 (8th Cir .June 8, 2016):

Firetrace USA, LLC (Firetrace) appeals the district court's1 denial of its Federal Rule of Civil Procedure 59 motion for new trial or remittitur, following a jury verdict in favor of Lincoln Composites, Inc. (Lincoln). Finding no error, we affirm.2

1   The Honorable John M. Gerrard, United States District Judge for the District of Nebraska.

2   We have jurisdiction pursuant to 28 U.S.C. § 1291.

I. Background

Lincoln manufactures composite tanks for the storage and transport of natural gas in places where pipelines are unavailable. Firetrace makes custom designed fire suppression systems that detect and suppress fires. Through a series of transactions, Lincoln purchased fire detection tubing from Firetrace, which Lincoln then installed in its "Titan Module" tanks. There is no dispute that [*2]  through these transactions the parties entered a contract for the purchase and delivery of Firetrace's tubing, although the parties dispute the terms and conditions of the contract. Some of the tubing was defective and, despite Firetrace's repeated attempts to fix the defect, the tubing failed, resulting in natural gas being vented into the air when there was not a fire. After 18 months, Lincoln decided it could no longer use the Firetrace tubing and demanded Firetrace refund the purchase price. Firetrace refused, contending the contract was governed by its terms and conditions, which limited remedies to repair or replacement of the tubing. Lincoln claimed its terms and conditions governed the contract between the parties, and these terms and conditions did not limit its remedies.

Lincoln then sued Firetrace in Nebraska state court for breach of contract, breach of express warranty, breach of implied warranty of merchantability, and breach of implied warranty of fitness for a particular purpose. Firetrace removed the case to federal court. Following an eight-day trial, a jury returned a verdict in favor of Lincoln, finding Firetrace breached an express warranty to Lincoln. The jury [*3]  awarded damages in the amount of $920,227.76.

Firetrace then filed a Rule 59 motion. Firetrace alleged Lincoln failed to present sufficient evidence on several aspects of its claim and that the district court made several errors in instructing the jury. Prior to the district court ruling on Firetrace's Rule 59 motion, Firetrace appealed from the final judgment entered as well as from orders by the district court denying Firetrace's motion for sanctions and Firetrace's motion for summary judgment. The district court ultimately denied the Rule 59 motion.

II. Jurisdictional Issue

As a preliminary matter, Lincoln argues we do not have jurisdiction over Firetrace's appeal because Firetrace filed its notice of appeal while its Rule 59 motion was still pending and never filed an amended notice of appeal. Under Federal Rule of Appellate Procedure 4(a)(4)(B)(ii), once its Rule 59 motion was denied, Firetrace was required to file an amended notice of appeal.3 Lincoln contends Firetrace's failure to file an amended notice of appeal deprives us of jurisdiction. See Miles v. Gen. Motors Corp., 262 F.3d 720, 722-23 (8th Cir. 2001) (finding no jurisdiction to review order denying new trial where no amended notice of appeal filed).

3   Federal Rule of Appellate Procedure 4(a)(4)(B)(ii) requires:

   A party intending to challenge an order disposing of any motion listed in Rule 4(a)(4)(A), or a judgment's alteration or amendment [*4]  upon such a motion, must file a notice of appeal, or an amended notice of appeal--in compliance with Rule 3(c)--within the time prescribed by this Rule measured from the entry of the order disposing of the last such remaining motion.

One of the motions listed in Rule 4(a)(4)(A) is a Rule 59 motion for new trial. See Fed. R. App. P. 4(a)(4)(A)(v).

Firetrace concedes it did not file an amended notice of appeal but asserts it filed the "functional equivalent." Following the district court's denial of its Rule 59 motion, Firetrace filed an Amended Statement of Issues in our court that included the issue "[w]hether the district court erred by denying Firetrace's Motion for Remittitur and for New Trial." Firetrace also filed an Amended Designation of Record on Appeal that added both parties' briefings related to the motion for new trial and the district court's order denying the motion. Firetrace points out it filed its Amended Statement of Issues within the proper time and asks us to construe that as its Amended Notice of Appeal.

We "liberally construe the requirements of Rule 3" of the Federal Rules of Appellate Procedure. Smith v. Barry, 502 U.S. 244, 248 (1992). We have "jurisdiction over [an] underlying order if the appellant's intent to challenge it is clear, and the adverse party will suffer no prejudice [*5]  if review is permitted." Hallquist v. United Home Loans, Inc., 715 F.3d 1040, 1044 (8th Cir. 2013). Even when the notice is "technically at variance with the letter of [Rule 3], a court may nonetheless find that the litigant has complied with the rule if the litigant's action is the functional equivalent of what the rule requires." Smith, 502 U.S. at 248 (quoting Torres v. Oakland Scavenger Co., 487 U.S. 312, 316-317 (1988)). At oral argument, Lincoln was unable to explain how Firetrace's filings differed from an amended notice of appeal or how it was prejudiced. We conclude Firetrace made its intent clear by filing its Amended Statement of Issues and Amended Designation of the Record on Appeal and that Lincoln will not be prejudiced if we allow review. We now consider the issues raised on appeal.


B. New Trial Based on Jury Instructions

Firetrace argues [*12]  it is entitled to a new trial because the district court erred in several of its instructions to the jury. We generally review a district court's jury instructions for an abuse of discretion, giving the court broad discretion in the form and language it uses. Slidell, Inc. v. Millennium Inorganic Chems., Inc., 460 F.3d 1047, 1054 (8th Cir. 2006). Our review is limited to determining "whether the instructions, taken as a whole and viewed in the light of the evidence and applicable law, fairly and accurately submitted the issues to the jury." Id. We will not reverse a jury verdict unless an erroneous instruction affects a party's substantial rights. Id. A district court abuses its discretion in denying a new trial based on erroneous jury instructions only if "the errors misled the jury or had a probable effect on the jury's verdict." Id.


Firetrace moved pretrial for sanctions based on Lincoln's alleged spoliation of evidence. Firetrace asserted Lincoln intentionally destroyed or failed to preserve tubing that should have been retained for the jury and provided false discovery responses. As a sanction, Firetrace requested an adverse inference instruction. Following extensive briefing, the court4 denied the request, finding there was no evidence to support Firetrace's allegations.

4   The Honorable Cheryl R. Zwart, United States Magistrate Judge for the District of Nebraska, to whom the case was referred for disposition of pretrial matters pursuant [*16]  to 28 U.S.C. § 636(B)(1)(a), presided over the hearing on Firetrace's motion for sanctions and issued a ruling.

In its proposed instructions, Firetrace included an adverse inference instruction. The court's final set of jury instructions did not include Firetrace's proposed instruction. When the court asked Firetrace at the final jury instruction conference whether it had any other proposed instructions, Firetrace stated it did not. We therefore review the district court's failure to submit Firetrace's proposed instruction for plain error. See Littleton v. McNeely, 562 F.3d 880, 890 (8th Cir. 2009) (failure to object to court's rejection of proposed jury instruction waives objection).

On appeal, Firetrace argues the jury should have been allowed to review the evidence and decide if there was sufficient evidence to support Firetrace's claim for spoliation. Firetrace asserts the court wrongfully took that determination away from the jury by not giving its requested instruction. Federal law applies to determine whether an adverse inference instruction was warranted. See Burris v. Gulf Underwriters Ins. Co., 787 F.3d 875, 879 (8th Cir. 2015). For "an adverse inference instruction for spoliation to be warranted, a district court is required to make two findings: '(1) there must be a finding of intentional destruction indicating a desire [*17]  to suppress the truth, and (2) there must be a finding of prejudice to the opposing party.'" Id. (quoting Hallmark Cards, Inc. v. Murley, 703 F.3d 456, 460 (8th Cir. 2013) (internal alteration and quotation omitted)). Because of the gravity of an adverse inference instruction, which "brands one party as a bad actor," we have concluded these findings must be explicitly made on the record before a district court may submit an adverse inference instruction. Hallmark, 703 F.3d at 461.

Here, Firetrace did not ask the court to make the required findings with respect to its adverse inference instruction. It did not even object to the magistrate judge's pretrial order denying its motion for sanctions or ask the district court to review the evidence it had previously submitted. The trial testimony it relies upon is, at best, equivocal. We conclude the district court did not plainly err in not giving an adverse inference instruction. See Burris, 787 F.3d at 879-80.


IV. Conclusion

The judgment of the district court is affirmed.

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