Georgia-Pacific Cedar Springs LLC v. Mor PPM, Inc.

GEORGIA-PACIFIC CEDAR SPRINGS LLC, Plaintiff, v. MOR PPM, INC., Defendant.

CASE NO.: 1:13-CV-198 (LJA)

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF GEORGIA ALBANY DIVISION

August 29, 2016

ORDER

Before the Court are the following motions: 1) Defendant's Motion for Partial Summary Judgment (Doc. 20); 2) Defendant's Motion for Spoliation and Sanctions (Doc. 21); 3) Plaintiff's Motion for Partial Summary Judgment (Doc. 22); and 4) Plaintiff's Motion for Sanctions Pursuant to Rule 11 (Doc. 52). For the reasons that follow, Defendant's Motion for Spoliation and Sanctions (Doc. 21) and Plaintiff's Motion for Sanctions Pursuant to Rule 11 (Doc. 52) are DENIED. Defendant's Motion for Partial Summary Judgment (Doc. 20) is DENIED, and Plaintiff's Motion for Partial Summary Judgment (Doc. 22) is GRANTED in part and DENIED in part.

I. BACKGROUND

A. Factual Background¹

Georgia-Pacific Cedar Springs LLC ("Plaintiff") owns and operates a pulp and paper mill in Cedar Springs, Georgia ("the mill"). (Doc. 44 at 1-2). At issue in this case is a part of the mill known as Recovery Boiler No. 1 ("the recovery boiler"). Id. The recovery boiler is a huge building that operates as a furnace, using various chemicals extracted in the pulping process to create energy. Id.; (Doc. 47, ¶ 2). The interior consists of multiple superheated tubes which line the walls and make up the floor. (Doc. 44 at 1-2). The tubes serve multiple functions, including acting as a structural component, moving water, and generating and moving heat and steam. (Doc. 47, ¶ 2). In 2010, as part of its routine maintenance for the recovery boiler, Plaintiff decided to replace the floor. Id. It awarded the contract to MOR PPM, Inc. ("Defendant"). Id.

Prior to the decision to replace the floor, Plaintiff and Defendant had entered into a master Contractor Services Agreement. Id. at 2. On April 26, 2010, Plaintiff and Defendant entered into a more specific contract that provided for Defendant to replace the floor of the recovery boiler. Id. The Contractor Services Agreement and the specific contract for replacement of the floor shall be known collectively as "the Contract." The Contract includes an Indemnity provision, which states in relevant part:

"To the fullest extent permitted by law, the Contractor will protect, defend, indemnify and hold harmless GP, and its officers, directors, consultants, and agents (excluding licensed professionals) and employees (collectively, "Indemnified Parties"), from and against claims, damages, losses or expenses, including, but not limited to, reasonable attorneys' fees, arising out of or resulting from the performance of the Work provided that such claim, damage or loss is attributable to bodily injury, sickness, disease, or death or injury to tangible property (other than the Work itself), but only to the extent caused in whole or in part by any willful or negligent acts or omissions of Contractor, or its subcontractors, or anyone directly or indirectly employed by them or anyone for whose acts they may be liable. (Doc. 1-1, Ex. B, ¶ 13(A)).

The Contract also contained provisions requiring Defendant to perform the work "in a workmanlike manner using qualified, efficient, and careful workers," "in a manner to protect the work... [and] [Plaintiff's] property... from loss, damage, unsafe conditions or injury of any type" and "in strict conformance with best practices consistent with the standard of care applicable." Id. at ¶ 3.5. The Contract further required the "workmanship to be of good quality." Id. at ¶ 3.10. Finally, the specific agreement covering floor replacement stated that "[t]he Contractor is responsible for any damage to GP property during the work." (Doc. 1-1, Ex. A, ¶ 2.1.5).

Defendant commenced the work under the Contract on May, 17 2010, during the boiler outage at the mill. (Doc. 22, ¶ 12). As part of the work, Defendant was required to remove the refractory between the floor tubes and wall tubes. Id. at ¶ 19. Refractory is a cement-like material installed in the floor to cover the connection between the floor and wall tubes. Id. After Defendant worked on the job for a few days, Plaintiff discovered that Defendant damaged multiple tubes and other components within the boiler, necessitating extensive and costly repairs. (Doc. 44 at 3). Plaintiff hired a replacement contractor, RMR, to continue the work that Defendant was originally contracted to perform. Id. at 5. Plaintiff claims that it was important to get the alleged damage fixed quickly because the mill was shut down during the recovery boiler outage. (Doc. 22, ¶ 35).

B. Procedural Background

On December 20, 2013, Plaintiff, Georgia-Pacific Cedar Springs LLC, commenced this action against Defendant, MOR PPM, Inc. (Doc.1). Defendant answered and alleged counterclaims against Plaintiff on May 23, 2014. (Doc. 9). On April 30, 2015, Defendant moved for partial summary judgment as well as for a finding of spoliation and imposition of sanctions against Plaintiff. (Docs. 20, 21). On the same day, Plaintiff also moved for partial summary judgment. (Doc. 22). On May 21, 2015, Plaintiff responded to Defendant's motions for summary judgment and sanctions and Defendant responded to Plaintiff's motion for summary judgment. (Docs. 44, 45, 46, 47). Both parties timely replied on June 4, 2015. (Docs. 48, 49, 50). As such, Defendant's Motions for Summary Judgment andSanctions and Plaintiff's Motion for Summary Judgment are now ripe for review. See M.D. Ga. L.R. 7.3.1(a).

Plaintiff filed a Motion for Sanctions Pursuant to Rule 11 on June 23, 2015 (Doc. 52), and Defendant responded on July 14, 2015. (Doc. 53). Plaintiff timely replied on July 28, 2015. (Doc. 61). As such, Plaintiff's Motion for Sanctions is also now ripe for review. See M.D. Ga. L.R. 7.3.1(a).

II. DEFENDANT'S MOTION FOR SPOLIATION AND SANCTIONS

Defendant alleges that Plaintiff caused spoliation by ordering the replacement contractor to continue the repairs without allowing Defendant to see the alleged damage (Doc. 21-1 at 11). It asks the Court to find that Plaintiff committed spoliation and to impose appropriate sanctions. (Doc. 21 at 1). Spoliation refers to the "destruction or significant alteration of evidence, or the failure to preserve property for another's use in pending or reasonably foreseeable litigation." Graff v. Baja Marine Corp., 310 Fed.Appx. 298, 301 (11th Cir. 2009). As the party seeking sanctions, Defendant has the burden of proof. Stanfill v. Talton, 851 F. Supp. 2d 1346, 1362 (M.D. Ga. 2012). To meet its burden, Defendant "must prove that the missing evidence existed at one time; that the alleged spoliator had a duty to preserve the evidence; and that the evidence was crucial to his case." Id. "A court's power to impose sanctions for spoliation flows from its inherent power to manage its affairs and achieve an orderly and expeditious disposition of cases." Woodard v. Wal-Mart Stores E., LP, 801 F. Supp. 2d 1363, 1371 (M.D. Ga. 2011) (citing Flury v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005)). "Sanctions function to prevent unfair prejudice to litigants and to ensure the integrity of the discovery process." Id. The Court has broad discretion in determining whether to award spoliation sanctions. Flury, 427 F.3d at 945.

Although the Eleventh Circuit has not prescribed "specific guidelines" for imposing spoliation sanctions, the court in Flury set forth the following factors for courts to consider: (1) whether the defendant was prejudiced as a result of the destruction of evidence; (2) whether the prejudice could be cured; (3) the practical importance of the evidence; (4)whether the plaintiff acted in good or bad faith; and (5) the potential for abuse if expert testimony about the evidence is not excluded. Id. Appropriate sanctions for spoliation may include: "(1) dismissal of the case; (2) exclusion of expert testimony; or (3) a jury instruction on spoliation of evidence which raises a presumption against the spoliator." Id. However, an adverse inference should not be drawn unless the circumstances surrounding the evidence's absence indicate bad faith. See Bashir v. Amtrak, 119 F.3d 929, 931 (11th Cir.1997) (finding that "an adverse inference is drawn from a party's failure to preserve evidence only when the absence of that evidence is predicated on bad faith"). "While this circuit does not require a showing of malice in order to find bad faith, mere negligence in losing or destroying records is not sufficient to draw an adverse inference." Mann v. Taser Int'l, Inc., 588 F.3d 1291, 1310 (11th Cir. 2009).

Defendant argues that spoliation occurred when Plaintiff ordered the replacement contractor to continue the repairs without allowing Defendant to see the alleged damage (Doc. 21-1 at 11). Even if Defendant could prove spoliation, however, sanctions would be inappropriate because Defendant has not shown Plaintiff's bad faith. According to Defendant, the very act of terminating Defendant's contract and hiring the replacement contractor is dispositive of Plaintiff's bad faith. (Doc. 22-1 at 15-17). This is insufficient to meet Defendant's burden. During an outage, the entire mill is inoperable, thereby impeding Plaintiff's business. It is more than reasonable to continue repairs in the limited outage time frame so that operation of the boiler may resume. Cf. 325 Goodrich Ave., LLC v. Southwest Water Co., 891 F.Supp.2d 1364, 1377 (2012) (finding no bad faith when defendant could not examine building damage because building was destroyed in the ordinary course of business). At most, Plaintiff was negligent in not offering Defendant a specific time and place to view the alleged damage. Additionally, Plaintiff presented evidence that a claim against Defendant was not considered until after the outage was complete, indicating that it did not have bad faith when ordering the repairs to the boiler. (Doc. 33 at 56; Doc. 45 at 12); see also Kitchens v. Brusman, 303 Ga.App. 703, 707 (2...