Eglet Adams Associate Attorney Danielle Miller discusses Nevada Supreme Court Advance Opinion #72 in the case of MDB Trucking, LLC VS. Versa Products Co., INC. that addresses spoliation of evidence and case ending sanctions.
MDB Trucking, LLC VS. Versa Products Co., INC.
On November 5, 2020, the Nevada Supreme Court published Advanced Opinion #72 which reversed case ending sanctions imposed on MDB Trucking for destruction of evidence by the Washoe County Second Judicial District Court. The Evidence that Defendant Versa Products Company claimed was destroyed were hydraulic valves that operated MDB Trucking's trailer dump gates.
On July 7, 2014, one of the 18-wheel tractors owned by MDB Trucking was driving west on Interstate 80 outside Reno when the gate on the third trailer opened, dumping a load of gravel onto the highway. The release of gravel caused several collisions, damage to vehicles and injuries to other drivers. On the same day, a second MDB tractor had a dump gate open unexpectedly, releasing the load of sand it was carrying. This incident also occurred on Interstate 80, three miles away from the first rig's gravel dump, no accidents or injuries were reported with the second spill.
Anticipating litigation for these incidents, MDB trucking retained experts who determined that the Versa valve system, which was responsible for opening and closing the lift gates on the 18-wheel tractors, had design defects that caused the lift gates to open through no action from the tractor drivers. Over the next year before any lawsuits were filed, MDB Trucking had mechanics perform routine maintenance on the first trailer. During maintenance, the mechanics replaced a plug, two sockets and a damaged cord that were part of the electrical circuit controlling the Versa valve. MDB Trucking's mechanics believed that these parts were irrelevant and discarded them after replacement.
As anticipated, eight plaintiffs from the first gravel dump filed lawsuits against MDB Trucking and MDB Trucking filed a cross-claim against Versa Products Company due to the defective valves. In response, Versa Products Company filed a motion for sanction seeking to dismiss MDB Trucking's cross-claim for destruction of evidence. Versa Products Company claimed that they were unable to defend against MDB Trucking's cross-claim due to the fact that they were not presented with the ability or opportunity to inspect the parts that had been discarded by MDB Trucking's mechanics.
MDB Trucking responded stating that the repairs were routine and the replaced parts were irrelevant, so sanctions were unwarranted. The Washoe County Second Judicial District Court ruled that MDB Trucking's failure to preserve the replaced parts caused Versa Products Company prejudice that lesser sanctions could not cure and ordered MDB Trucking's claims dismissed with prejudice. MDB Trucking appealed and Versa Products Company filed a motion for attorney fees and costs which was granted in part and denied in part. Versa Products Company appealed and MDB Trucking cross-appealed from this order.
Nevada Supreme Court Advanced Opinion
In the Supreme Court's Advanced Opinion, the Court analyzed Rule 37(b) of the Nevada Rules of Civil Procedure as a source of authority to impose sanctions for destruction of evidence. The Nevada Supreme Court noted that Rule 37(b) would not apply to most pre-litigation destruction claims and instead recognized the Court's inherent authority to impose sanctions for pre-litigation destruction of evidence. Because case ending sanctions are so severe, the Court ruled that there is a heightened standard of review that a court must apply when reviewing a sanction order. The factors to consider were set forth in Young v. Johnny Ribeiro bldg., Inc., 106 Nev. 88,92,787 P.2d 777,779 (1990). The five factors set forth in Young that a district court should consider before imposing case-terminating sanctions are:
- The degree of willfulness of the offending party.
- The extent to which the non-offending party would be prejudiced by a lesser sanction.
- If evidence was irreparably lost.
- The feasibility and fairness of alternative, less severe sanctions, such as an order deeming facts relating to improperly withheld or destroyed evidence to be admitted by the offending party.
- The policy favoring adjudication on the merits, whether sanctions unfairly operate to penalize a party for the misconduct of his or her attorney and the need to deter both the parties and future litigants from similar abuses.
Through the review of these factors, the Nevada Supreme Court concluded that the imposition of case-terminating sanctions was unwarranted and that the District Court should have considered a less severe sanction, such as a permissive adverse jury instruction. The Nevada Supreme Court reversed the case-terminating sanctions against MDB Trucking and remanded back to the District Court for further proceedings consistent with the Nevada Supreme Court’s opinion. The orders granting in part and denying in part Versa Products Company's motions for costs and fees were vacated.