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September 30, 1994

ANTONIO BALIOTIS AND ELLEN BALIOTIS, Individually and as Personal Representatives of the Estate of JACK RAYMOND BALIOTIS, Deceased

The opinion of the court was delivered by: THOMAS I. VANASKIE


 Defendant White Consolidated Industries, Inc. ("WCI") and Motorola, Inc. ("Motorola") have jointly moved for summary judgment based upon the "destruction" of the scene of a fire. The tenants and owners of the property severely damaged in the fire have alleged that the conflagration is attributable to a microwave oven manufactured by WCI and for which Motorola purportedly supplied components. In their motion, WCI and Motorola contended that the failure to preserve the fire scene until their representatives could conduct an inspection so impaired their ability to defend these consolidated cases that judgment should be entered in their favor against all claims of all other parties. In their supporting memorandum of law, WCI and Motorola requested, alternatively, that the fire "cause and origin" expert retained by the property owners' insurer be precluded from testifying. For the reasons set forth below, the sanctions requested by WCI and Motorola will not be imposed. Instead, the appropriate sanction for the spoliation of evidence that occurred here is an adverse inference instruction to the effect that physical evidence lost as a result of the destruction of the fire scene would have been unfavorable to the position asserted on behalf of the property owners.


 On August 21, 1990, a tragic fire swept through a home rented by Daniel and Margaret McNeil (the "McNeils") to Antonio and Ellen Baliotis (the "Baliotises"). The fire claimed the life of the Baliotises' three year old son.

 The McNeil house was insured under a home owners policy issued to the McNeils by Liberty Mutual Insurance Company ("Liberty Mutual"). Upon receiving notice of the fire, Peter Alejnikov, a Liberty Mutual claims adjuster, retained Patrick J. McGinley Assoc., Inc. and Paul Zamrowski Associates to investigate the cause of the fire. Ray Zuck, a forensic electrical engineer, was assigned by Paul Zamrowski Associates to conduct the investigation.

  On August 23, 1990, Alejnikov, Patrick McGinley and Zuck inspected the McNeil house. Also at the scene of the fire at that time was State Police Fire Marshal Walter Moschowsky.

 It is undisputed that on August 23, 1990, McGinley was of the opinion that the fire had originated at countertop level in the northeast corner of the kitchen in the area of a microwave oven. (Joint Statement of Material Facts (Dkt. Entry #56) P 10.) Nor is it disputed that on August 23, 1990, Zuck expressed his opinion that the microwave oven and, in particular, an integrated circuit in the oven, caused the fire. (Id., P 11.) *fn1" Finally, there is no dispute that as of August 23, 1990, Zuck and Alejnikov knew that the microwave oven had been manufactured by WCI. (Id., P 12.)

 Zuck and McGinley removed the microwave oven as well as a coffee maker and the wiring from a refrigerator (both appliances having also been identified as possible ignition sources) from the McNeil house on August 23, 1990. The allegedly defective microwave oven has not been destroyed, but has been preserved as evidence for this case. *fn2" McGinley and Zuck both took a number of photographs of the fire scene.

 Fire Marshal Moschowsky concurred with McGinley's determination that the fire was electrical in nature, but concluded that the precise source was unclear. He identified seven "possible electrical ignition sources throughout the scene." (Exhibit "A" to the Brief in Support of Joint Motion for Summary Judgment (Dkt. Entry #58).) *fn3" Fire Marshal Moschowsky concluded that the "most logical source" of the fire was inside the wall and over the sink in the kitchen. (Id.)4 Fire Marshal Moschowsky took a number of photographs of the fire scene.

 An inspection of the fire scene was also undertaken by Mr. Baliotis himself in the company of his brother-in-law, Steve Collora. A video tape, described as being two hours in length, was made during the course of this inspection. (Transcript of oral argument of September 12, 1994 (Dkt. Entry #92) at p. 30.)

 The Baliotises retained a fire "cause and origin" expert, Fred L. DiOrio. He inspected the fire scene on August 31, 1990. He, too, took a number of photographs of the fire scene. In a report dated September 14, 1990, DiOrio attributed the cause of the fire to improper electrical installations. In pertinent part, his report stated:


It is my . . . opinion that this fire originated in the kitchen area, at or near the wall above the sink. It is my understanding that there were appliances, including the microwave oven and automatic coffee maker which were plugged into the duplex receptacles installed in the wall above the kitchen sink. If any of these appliances experienced any kind of malfunction, this event would have normally tripped the safety mechanism contained in the circuit breaker to which the receptacle was wired. This would immediately cause the electricity to this receptacle to cease to flow.


It was evident from my examination of . . . wires leading from the duplex receptacle on the left side of the sink in the kitchen, to the light fixture and duplex receptacle/light switch above and to the right of the sink, that the copper conductor was beaded on the ends and extremely brittle, indicating that it experienced an internal source of heat. (See photos #13 and 16). Had circuit breaker #5 not been taped in an "on" position, and allowed to function properly, this condition of the copper conductor could not have occurred.


By taping the circuit breakers in an 'on' position, the wire was allowed to overheat when the malfunction occurred, thereby causing a fire to occur in those combustible materials immediately surrounding it. It . . . must be noted that the construction of this house lent itself to a very rapid fire spread due to the lack of fire resistant materials used in the construction of the building. In addition, the improper wiring which I observed throughout many areas of the house, particularly those connections made with masking tape, would have only added to the rapid ignition of a fire in this house, had the copper conductor become overheated. [Exhibit 1 to the Deposition of DiOrio.] *fn5"

 DiOrio's conclusion, although apparently consistent with the Fire Marshal's, conflicts with the opinions of Liberty Mutual's experts. By report dated October 5, 1990, Patrick McGinley opined that "the specific ignition mechanism responsible for this fire was the Tappan microwave oven that was located at the point of origin of fire." (Exhibit "H" to the Joint Motion for Summary Judgment (Dkt. Entry #57) at p. 3.) His conclusion was consistent with that expressed in the September 14, 1990 report of Mr. Zuck, which asserted:


In my professional opinion, the malfunction and arcing in the top of the microwave control printed circuit board is the cause and origin of the fire.


The refrigerator, coffee maker, bathroom lighting and wiring, baseboard heater controls and house electrical wiring, did not cause the fire . . . . [Exhibit "I" to the Joint Motion for Summary Judgment (Dkt. Entry #57) at p. 6.]

 Liberty Mutual paid the McNeils for their property loss as well as loss of rental income. Liberty Mutual also authorized demolition of the property, and this occurred in October of 1990.

 By letter dated January 8, 1991, Liberty Mutual informed WCI that a Tappan microwave oven manufactured by WCI was responsible for this accidental fire. The January 8, 1991 letter asserted that Liberty Mutual would hold WCI responsible for the payments made by Liberty Mutual to the McNeils. The January 8, 1991 letter was the first notice that WCI had of this fire.

 On August 20, 1992, the Baliotises, individually and as personal representatives of the Estate of Jack Raymond Baliotis, Deceased, filed this action, naming as defendants, inter alia, the McNeils and WCI. Prior to the commencement of the action by the Baliotises in this Court, the McNeils, on August 7, 1992, had commenced an action against WCI in the Court of Common Pleas of Pike County by causing the issuance of a writ of summons. WCI removed that action to this Court and it was then consolidated with the Baliotis case. The McNeils' Complaint was filed in this Court on October 2, 1992. WCI, on December 21, 1992, joined Motorola as a third-party defendant, alleging, inter alia, that Motorola was the manufacturer of the "printed circuit board" to which reference was made in the Zuck report.

 The Joint Motion for Summary Judgment based upon the allegedly improper demolition of the fire scene was filed on October 21, 1993. The motion has been fully briefed and oral argument was conducted on September 12, 1994. This matter is ripe for disposition.


 Although raised in the context of a summary judgment motion, the arguments of WCI and Motorola address this Court's discretion to impose appropriate sanctions for spoliation of evidence. See Donohoe v. American Isuzu Motors, Inc., 155 F.R.D. 515, 519 (M.D.Pa. 1994). 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, 111 S. Ct. 2123, 2132, 115 L. Ed. 2d 27 (1991). As explained in Uniguard Sec. Ins. Co. v. Lakewood Engineering & MFG Corp., 982 F.2d 363, 368 (9th Cir. 1992), 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.'" *fn6"

 Regardless of whether the issue is addressed under Pennsylvania substantive law or as a matter within the inherent power of a district court under federal evidentiary law, our Court of Appeals in Schmid v. Milwaukee Electric Tool Corp., 13 F.3d 76 (3rd Cir. 1994), established the analytical framework to address requests for sanctions based upon claimed destruction of evidence. Judge Stapleton, writing for the unanimous panel in Schmid, explained that a request for sanctions should be considered in the context of "(1) the degree of fault of the party who altered or destroyed the evidence; [and] (2) the degree of prejudice suffered by the opposing party . . . ." Id. at 79. There is no rigid rule mandating a particular sanction upon a finding of improper destruction or loss or evidence. See Donohoe, 155 F.R.D. at 519. Instead, the matter is committed to the district court's discretion. See Uniguard Sec. Ins. Co., 982 F.2d at 368-69. Our Court of Appeals has admonished that discretion should be exercised with a view to choosing "'the least onerous sanction corresponding to the willfulness of the destructive act and the prejudice suffered by the victim.'" Schmid, 13 F.3d at 79. A sanction that has the "drastic" result of judgment being entered against the party who has lost or destroyed evidence, id., 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." Capellupo v. FMC Corp., 126 F.R.D. 545, 552 (D.Min. 1989).

 A. Fault

 The joint motion of WCI and Motorola is directed against not only the McNeils and their subrogor, Liberty Mutual, but also against the Baliotises. During oral argument, WCI candidly acknowledged that the Baliotises "played no part in the destruction of the [fire scene]." (Transcript of oral argument (Dkt. Entry #92) at 10.) Accordingly, fault cannot be attributed to the Baliotises.

 While acknowledging that a blameless party should not be sanctioned, WCI asserts that the Baliotises should not be beneficiaries of the destruction of the fire scene. WCI maintains that the "playing field can be leveled" by precluding the Baliotises from eliciting testimony from the Liberty Mutual "cause and origin" expert at time of trial. (Dkt. Entry #92 at 14-15.) *fn7"

  While there may be circumstances under which it is appropriate to impose a sanction adversely affecting a blameless party for a third-party's destruction of evidence, perhaps thereby creating a cause of action in favor of the blameless party against the spoliating party, the facts of this case do not warrant such a conclusion. *fn8" If the "fire scene" had been obliterated by some "act of God" or if there had been some other destruction of the evidence of the fire scene, such as a subsequent fire, for which the Baliotises were not responsible, WCI and Motorola would not be entitled to preclusion of otherwise relevant evidence. The fact that Liberty Mutual, after identifying WCI as a potentially responsible party, authorized destruct on of the evidence should not yield a different result insofar as the Baliotises are concerned. *fn9"

 In contrast to the Baliotises, the McNeils and their insurance carrier were in control of the fire scene. At the time the fire scene was demolished, Liberty Mutual had identified WCI as a potential subrogation target. Indeed, the McGinley and Zuck reports expressed the opinion that the WCI microwave oven was responsible for the fire. *fn10"

 A "litigant is under a duty to preserve evidence which it knows or reasonably should know is relevant to the action." Fire Insurance Exchange v. Zenith Radio Corp., 103 Nev. 648, 651, 747 P.2d 911, 914 (1987). That duty arises as soon as a potential claim is identified. As explained in Hirsch:


[A] duty to preserve evidence, independent from a court order to preserve evidence, arises where there is: (1) pending or probable litigation involving the defendants; (2) knowledge by the plaintiff of the existence or likelihood of litigation; (3) foreseeability of harm to the defendants, or in other words, discarding the evidence would be prejudicial to defendants; and (4) evidence relevant to the litigation. 628 A.2d at 1122 [emphasis added.]

 Liberty Mutual contends that at the time it authorized destruction of the fire scene it had not decided to pursue a subrogation claim. Liberty Mutual's assertion that a decision to pursue a subrogation claim was not made until 1992, when it retained outside counsel, is belied by the letter it sent to WCI in January of 1991, asserting, without equivocation, that WCI was responsible for this fire. More importantly, however, the knowledge of a potential subrogation claim is deemed sufficient to impose a duty to preserve evidence. See Fire Insurance Exchange 103 Nev. at 651, 747 P.2d at 914. Accordingly, Liberty Mutual owed a duty to preserve evidence relevant to the origin and cause of this fire as soon as it identified a potentially responsible party.

 "The scope of the duty to preserve evidence is not boundless." Hirsch, 628 A.2d at 1122. At a minimum, however, an opportunity for inspection should be afforded a potentially responsible party before relevant evidence is destroyed. Id. at 1123.

 Liberty Mutual maintains that it did preserve the relevant evidence, i.e., the microwave oven, coffee maker, and refrigerator wiring. Also available to WCI and Motorola is wiring from inside the kitchen wall retrieved by Mr. DiOrio. Liberty Mutual also points out that a number of photographs and a two hour video tape of the fire scene are available to WCI and Motorola. While such evidence may serve to ameliorate the prejudice to WCI and Motorola, Liberty Mutual cannot refute the assertion that demolition of the fire scene resulted in destruction of otherwise relevant evidence.

 Contrary to Liberty Mutual's assertion, a finding of "bad faith" or "evil motive" is not a prerequisite to imposition of sanctions for destruction of evidence. See, e.g., Uniguard Sec. Inc. Co., 982 F.2d at 369; Nation-Wide Check Corp. v. Forest Hills Distributors, Inc., 692 F.2d 214, 219 (1st Cir. 1982). Since Liberty Mutual authorized the destruction of indisputably relevant evidence, it and its insureds, the McNeils, are subject to sanctions.

 The motive for the destruction of evidence is, of course relevant to determining what sanctions, if any, should be imposed. Schmid makes clear that it is "the degree of fault" that is at issue. Evidence warranting a finding of bad faith may support the drastic sanction of preclusion of evidence that could result in the entry of judgment against the spoliating party. See, e.g., Lewis v. Darce Towing Co., 94 F.R.D. 262, 269 (W.D.La. 1982).

 In this case, the evidence does not support a determination that Liberty Mutual acted in bad faith. Although it had identified WCI as a potential subrogation target at the time it authorized demolition of the fire scene, no evidence was presented that a decision had been made by then to pursue a subrogation claim. Nor was any evidence presented that Liberty Mutual sought to destroy the fire scene in order to divert liability from its insureds, the McNeils, to WCI. In addition to the absence of evidence of bad faith, there is evidence that the fire scene was a safety hazard that should have been destroyed as soon as reasonably possible. In this regard, no party has contended that the fire scene should have been preserved indefinitely. The record presented to this Court thus does not permit the conclusion that Liberty Mutual acted in bad faith.

 B. Prejudice

 It is clear, as Motorola and WCI assert, that 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 a fire scene for other potential causes. Schmid, 13 F.3d at 80 ("defendant will want as much evidence as possible relevant to the issue of causation"). It goes too far, however, to assert that demolition of the fire scene "rendered it impossible for [WCI] and Motorola to defend themselves." (Brief in Support of Joint Motion for Summary Judgment, p. 9; emphasis added.)

 In contrast to those case where the allegedly defective product as well as the fire scene were destroyed, e.g. Uniguard Sec. Ins. Co., supra; Fire Insurance Exchange v. Zenith Radio Corp., supra, the microwave oven as well as other items identified as potential causes of the fire have been preserved in this case. WCI and Motorola have the ability to defend their respective products by having experts examine the microwave oven and refute Liberty Mutual's assertions. Moreover, wiring from inside the kitchen wall, identified by other experts as the point of ignition, is available. Also mitigating the prejudice is the existence of scores of photographs and a lengthy video tape of the fire scene. Furthermore, a cause and origin expert retained by the Baliotises has submitted a report in which he concludes that the fire started inside the wall of the kitchen, and the State Fire Marshal identified that area as the logical source of the fire. Indeed, because of burn patterns, he excluded the microwave oven as the potential source of ignition.

 At oral argument, Motorola acknowledged that the evidence supplied by the Baliotises' cause and origin expert "is very supportive of a cause other than the microwave." (Transcript of oral argument (Dkt. Entry #92) at 23.) WCI conceded that it has retained a cause and origin expert who has available to him all of the evidence referenced above. (Id. at 38.) No affidavit has been presented in this case that either WCI or Motorola will be unable to present expert witness evidence on the cause and origin of this fire because of the demolition of the fire scene. *fn11" Accordingly, a defense to this action has not been rendered impossible by the demolition of the fire scene. Thus, neither summary judgment nor preclusion of testimony from McGinley appears appropriate.

 Our Court of Appeals has indicated that where there is no bad faith on the part of the spoliating party and the prejudice is not severe, a sanction of witness preclusion or entry of judgment is unwarranted. 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. The Court explained:


An across-the-board rule that would require an identification of all potential defendants at this nascent stage of the potential controversy and an invitation to each of them to attend an exploratory investigations would be inefficient, if not all together unworkable. Many accident investigation do not lead to litigation and many narrow the field of potential defendants. There are still more situations in which the resources necessary to assemble the experts of potential defendants would be invested with no significant return on the investment. On the other hand, in cases like this one, the attendant delay would pose a significant risk of prejudice to the plaintiff. Id.

 This analysis applies with equal force in the context of a fire scene. Requiring an insurer or property owner to maintain the scene of a fire until all potential defendants have been notified and afforded an opportunity to conduct independent inspections would, at minimum, be inefficient and wasteful. There is also the potential for harm to others by maintaining a safety hazard. Clearly, the blanket rule urged by WCI and Motorola is inconsistent with the approach required in Schmid. *fn12"

 A lesser sanction of a "spoliation inference," however, is warranted. Defense of this case has been rendered more difficult by the failure to have an opportunity to inspect the scene. WCI and Motorola note that Liberty Mutual's experts failed to photograph all relevant evidence and that the photographs are often of poor quality. They also point out that Baliotises' cause and origin expert did not trace all of the wiring throughout the home and was not an expert in electrical matters. Under these circumstances, an inference adverse to Liberty Mutual and its insureds appears appropriate.

 An instruction to the jury that it may consider that the lost evidence would be unfavorable to the McNeils is consistent with the evidentiary rationale underlying the "spoliation inference," which is "the common sense observation that a party who has notice that [evidence] is relevant to litigation and who proceeds to destroy [it] is more likely to have been threatened by [that evidence] than is a party in the same position who does not destroy the [evidence]." Nationwide Check Corp., 692 F.2d at 218. Permitting the jury to draw such an inference also furthers the prophylactic and punitive purposes of the "spoliation inference." Id. Property insurers who permit the destruction of a fire scene after identifying subrogation targets should suffer some sanction where, as here, it is clear that relevant evidence has been lost. *fn13" Knowledge that sanctions may be imposed for loss of relevant evidence attending destruction of a fire scene, resulting in prejudice to subrogation targets, may induce insurers or property owners to provide notice to those targets and an opportunity to inspect. *fn14"


 Having considered the degree of fault of Liberty Mutual, the degree of prejudice suffered by WCI and Motorola, and the least onerous sanction corresponding to the degree of fault and prejudice suffered, the Court concludes that an "adverse inference" instruction is appropriate. Accordingly, to the extent that WCI and Motorola seek summary judgment or the preclusion of Mr. McGinley from testifying, their motion filed on October 21, 1993 will be denied.

 An appropriate Order accompanies this Memorandum.

 Thomas I. Vanaskie

 United States District Judge



 (1) The joint motion for oral argument (Docket Entry #66) has been GRANTED.

 (2) The joint motion for summary judgment filed on October 21, 1993 (Docket Entry #57) is DENIED.

 (3) At time of trial, the trier-of-fact will be permitted to draw an inference adverse to the position asserted on behalf of the McNeils, that inference being that the evidence lost as a result of demolition of the fire scene would have been unfavorable to the position asserted on behalf of the McNeils.

 Thomas I. Vanaskie

 United States District Judge

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