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May 16, 2005.

ERIE INSURANCE EXCHANGE, as Subrogee of Donald McCracken Plaintiff
APPLICA CONSUMER PRODUCTS, INC., Formerly Known as Windmere Corp., Defendant.

The opinion of the court was delivered by: THOMAS VANASKIE, Chief Judge, District


Defendant Applica Consumer Products, Inc. ("Applica") has moved for summary judgment based upon Plaintiff's failure to preserve the fire scene for inspection and failure to preserve relevant evidence from the fire scene. Plaintiff Erie Insurance Exchange ("Erie"), as a suborgee of Donald McCracken, the former owner of the property where the fire occurred, asserts that the fire was caused by a malfunction in a coffee maker that was manufactured and placed into the stream of commerce by Applica under the trade name of "Black & Decker." In its motion Applica claims that Erie's failure to timely notify it of a possible subrogation claim prevented Applica's representatives from conducting their own investigation of the fire scene, and Erie's failure to preserve an electric range located in the kitchen of the McCracken home prevented it from investigating other potential causes of the fire.

Applica claims that Erie's failure has impaired its ability to put forth an adequate defense and, therefore, judgment should be entered in its favor. Applica has also filed a companion motion requesting the Court to exclude the testimony of Erie's electrical engineering expert, Randolph Marshall, on the basis that it lacks reliability. Applica maintains that judgment must be entered in its favor if Mr. Marshall's testimony is excluded. For the reasons set forth below, the Motion for Summary Judgment and the Motion to Preclude the Testimony of Randolph Marshall will be denied.


  On November 14, 2000, a fire occurred at 86 Leisure Lands, East Stroudsburg, Pennsylvania, the home of Donald McCracken ("McCracken"). The fire caused extensive damage to Mr. McCracken's home. He incurred repair costs of $85,808.78, and personal property damage of $74,400. (Id.) The McCracken home was insured under a policy issued by Erie. Upon receiving notice of the fire by McCracken, Erie immediately retained Michael J. Hartley ("Hartley") of HSH Investigations, to investigate the cause and origin of the fire. Hartley conducted his investigation the day following the fire and determined that the cause of the fire was a coffee maker that was located on the kitchen countertop in the McCracken home. (Hartley's report of 11/16/00 at 3.) The coffee maker was a Black & Decker, Versa Brew Series DCM 1250. During his investigation of the fire scene, Hartley was accompanied by a Pennsylvania State Police Fire Marshal, who concurred with his determination. (Id.) At the conclusion of his investigation, Hartley removed the Black & Decker coffee maker, a toaster oven, a waffle iron, and an electrical outlet from the scene of the fire as possible ignition sources. Hartley did not remove an electric range that was located in the kitchen because he had ruled it out as a possible source of the fire. Photographs as well as a videotape were taken of the scene of the fire. Erie also retained the expert services of Randolph Marshall ("Marshall") of Dawson Engineering, Inc. Marshall is an electrical engineer who was hired to investigate the cause of the fire and to perform tests on the coffee maker to determine whether it was defective. Erie insisted that the coffee maker be fully examined by Marshall prior to notifying any potential subrogation targets. Marshall's examination of the coffee maker was completed approximately four (4) months after the fire occurred. (Id. at 2) Upon receiving Marshall's report, notice was given to Applica of a possible subrogation claim. At that time, the fire scene was no longer available for Applica to conduct its own inspection.

  Marshall prepared three reports pertaining to the cause of the fire. In each report, he expressed his professional opinion that the fire at the McCracken residence was caused by a malfunction of the Black & Decker coffee maker. (E.g., Marshall's Engineering Report of 1/7/04 at 6.) Applica had the opportunity to review Marshall's reports as well as review Erie's investigation file, photographs, and videotape of the fire scene. Applica also hired its own electrical engineering expert, Lawrence Sacco ("Sacco"), to evaluate and examine the coffee maker. In his report, Sacco opined that the coffee maker was not the cause or origin of the fire. (Sacco's Engineering Report of 12/23/03 at 4.) He believed that the coffee maker was exposed to an external fire attacking it from the left, the exact location of McCracken's electric range, and as such, he felt that the electric range could not be eliminated as the source of the fire. (Id. at 2, 4.) Applica claims that Erie's conduct in failing to preserve the fire scene so that Applica could perform its own investigation, and failure to preserve the electric range in order that appropriate tests could be performed on it to determine if it was the source of the fire, has prejudiced it in presenting a complete defense.


  Summary judgment should be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). A fact is "material" if proof of its existence or nonexistence might affect the outcome of the suit under the applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

  All doubts as to the existence of a genuine issue of material fact must be resolved against the moving party, and the entire record must be examined in the light most favorable to the nonmoving party. Cont'l Ins. Co. v. Bodie, 682 F.2d 436, 438 (3d Cir. 1982). The moving party has the burden of showing the absence of a genuine issue of material fact, but the nonmoving party must present affirmative evidence from which a jury might return a verdict in the nonmoving party's favor. Anderson, 477 U.S. at 256-57. Merely conclusory allegations taken from the pleadings are insufficient to withstand a motion for summary judgment. Schoch v. First Fid. Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). Summary judgment is to be entered "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

  The basis of Applica's motion for summary judgment is that Erie's failure to preserve relevant evidence from the scene of the fire and provide Applica with an opportunity to conduct its own inspection of McCracken's kitchen constitutes a spoliation of evidence, which should result in a dismissal of Plaintiff's claims. Applica's motion for summary judgment is a request for the ultimate sanction of dismissal for Erie's alleged spoliation of evidence. See Donohoe v. American Isuzu Motors, Inc., 155 F.R.D. 515, 519 (M.D. Pa. 1994). There is no rigid rule mandating a particular sanction upon a finding of improper destruction or loss of evidence. See Id.*fn1 It is a discretionary decision by the district court and this discretion should be exercised with a view toward choosing the "least onerous sanction corresponding to the willfulness of the destructive act and the prejudice suffered by the victim." Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994) "A sanction that has the `drastic' result of judgment being entered against the party who has lost or destroyed evidence 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.'" Baliotis v. McNeil, 870 F. Supp. 1285, 1289 (M.D. Pa. 1994) (citing Capellupo v. FMC Corp., 126 F.R.D. 545, 552 (D. Minn. 1989)).

  The 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, 43 (1991). As explained in Baliotis, "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." Baliotis, 870 F. Supp. at 1289.

  The Third Circuit established the analytical framework for examining spoliation claims in Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994). In Schmid, the Court stated that when considering the imposition of a sanction against a party for spoliation of the evidence, three factors must be considered:
(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and
(3) whether there is a lesser sanction [compared to the complete exclusion of evidence] that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future.
Id.; Schroeder v. Commw. Dep't of Transp., 710 A.2d 23, 26-27 (Pa. 1998) (the Pennsylvania Supreme Court expressly adopted the three-prong test set forth in Schmid). "In determining the applicability of the spoliation doctrine, a court cannot focus entirely on only one prong of the test, but must balance the facts of the case involved as to each prong." Tenaglia v. Proctor & Gamble Inc., 737 A.2d 306, 308 (Pa.Super.Ct. 1999).

  A. Fault

  Applying the first prong of the Schmid test to Erie's actions, it appears that Erie, either through inadvertence or neglect, bears a large degree of fault for the loss of relevant evidence. The electric range that was located in McCracken's kitchen at the time of the fire was inspected by Erie's investigator and ruled out as a possible source of ignition or as a cause of the fire. The mere fact that Hartley had to rule out the electric range as a possible source of the fire makes it apparent that the appliance was important to his investigation. Yet, Erie specifically chose not to preserve the electric range as evidence even though it did preserve a toaster oven, a ...

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