As with every other facet of business and life, electronic communications have taken over the construction world. From the simplest project emails to CAD files to electronic schedules to BIM modeling, it is self-evident that communications on construction projects of any size travel electronically. Unlike a telephone call, electronic communications are stored away until deleted. They reside in email inboxes, as attachments to emails, as files on hard drives, as old files on server backup tapes, and even as deleted documents that can be recovered through forensic analysis of electronic storage media. Even cell phone text message strings and photo files are being used as evidence. Add individual facebook and twitter posts to the heap, and the body of available electronic data is immense.
Over the last decade, the State and Federal legal communities have struggled with how to handle this mountain of information when litigation arises. Gone are the days when all of the project records reside in a file cabinet. Collecting, tracking, managing, and producing electronic information in response to a request in litigation has been coined "E-Discovery." E-Discovery is a rapidly developing area of the law as lawyers and judges try, mostly in vain, to keep up with technology. Whole week-long conferences are dedicated to E-Discovery concepts. This article focuses on one aspect of E-Discovery---spoliation---in connection with construction projects. Generally speaking, spoliation is the destruction or modification (either innocent or intentional) of discoverable information in violation of a duty not to do so. Spoliation is punished harshly in both State and Federal Courts, with punishments ranging from additional discovery to cost-shifting to monetary sanctions, and in egregious cases, "terminating" sanctions that end the case.
The duty to preserve information first arises when litigation becomes "reasonably probable." In a car accident case, the point at which litigation is "reasonably probable" is relatively obvious---the moment of the accident (though even then there could be circumstances suggesting otherwise). Once litigation is "reasonably probable," the involved persons must preserve all potentially relevant evidence, suspend any deletion/destruction policy, and take an active role to ensure that electronic (as well as paper) files are not modified or destroyed.
At a recent talk I gave on the subject of E-Discovery, a public-entity general counsel asked me "when in the construction claims process does litigation become reasonably probable." My first tongue-in-cheek answer was that litigation becomes reasonably probable on a public contract before the bid. Ultimately I answered that I was not aware of any cases in either the State or Federal courts stating when in a construction claims process litigation becomes "reasonably probable" for spoliation purposes, but that the safest bet is to assume litigation is reasonably probable at the first sign of a dispute.
After the conference, I decided to take a closer look at the question. Not many cases have addressed when litigation becomes "reasonably probable" on a troubled construction project. The issue has not yet come up in the California courts in the context of construction contracts. The issue has been addressed, however, by the Federal Court of Claims. Though the Federal cases are not controlling on the issue in California courts, they would likely be persuasive to a California court looking at the issue.
Both cases involved increased cost and time claims resulting from unanticipated site conditions. In both cases, the Courts refused to find that the first mention of the dispute in correspondence from the contractor was, in itself, sufficient to create a "reasonable probability" of litigation. However, neither case definitively found that such early correspondence could not, in the proper circumstance, raise the duty to retain information. However, both courts found that the duty attached long before litigation was filed, and before the contract was even complete. In one case, the duty attached when the government issued a notice to cure after the contractor moved its dredging operation in response to the changed site conditions. In the other, the duty attached when the contractor submitted a "Request for Equitable Adjustment" for increased costs.
The safest approach is to err on the side of caution. This means suspending document-management and document-deletion policies that would modify or delete potentially relevant documents and files. However, if you find yourself fighting off a spoliation claim, it would seem to take a bit more than just a letter raising a potential issue to trigger the duty. Once a claim is filed or a change request is made on the disputed issue, however, the duty is almost certainly triggered.
© 2012 All rights reserved. Please note that the information contained herein is not intended to provide specific legal advice. You should consult with an attorney and not rely on any information contained herein regarding your specific situation.