Construction Litigation and Preserving Project Documents

Construction litigation is not immune from the perils and pitfalls of "E-Discovery" sanctions. "E-Discovery," or "EDD" - electronic data discovery, is the evolving are of the law that governs a party's duty to preserve and produce electronic documents and data in litigation. Its basic principal is as follows: "The obligation to preserve evidence arises when the party has notice that the evidence is relevant to the litigation or when a party should have known that the evidence may be relevant to future litigation." What is proper notice, when the obligation arises, what evidence is really relevant, and what constitute reasonable steps to preserve evidence are the subjects of many, many court opinions.

In a case out of Tennessee, a General Contractor filed suit against an Owner for claims arising out of deficient plans and specifications that had resulted in over 2000 RFI's during the course of the project. The Owner counterclaimed for liquidated damages. During the course of litigation, the General Contractor discovered, while looking in a trash can at the Owner's office, that the Owner appeared to be destroying documents related to the case. After further investigation, the General Contractor learned that the Owner had allowed its employees to destroy several thousand documents. It further learned that the Owner's project manager kept copies of documents upon which he made notes of his impressions and opinions, but that he had thrown these out. All of these incidences of document destruction occurred after the initial lawsuit was filed. The Court found that the Owner obviously had notice to preserve documents that may be relevant to the litigation because they were in litigation. Further, the destroyed documents were likely relevant as some were kept by the owner's project manager for the project and attempts to reconstruct destroyed documents indicated that they were related to the project. The Court sanctioned the Owner, ruling that the jury could infer that the Owner was destroying documents that were damaging to the Owner's claims and defenses. It also ordered the Owner to reimburse the General Contractor for its legal costs related to this issue. The Court stated "it was incumbent upon the City to establish a procedure that would eliminate the likelihood that potentially relevant documents would be destroyed. Alternatively, the City should have taken control of all documents and had a lawyer examine the documents before they were destroyed."

The "take-away" from this case is the extent of the duty to preserve when construction claims exist related to the project. In this instance, the Owner clearly did not monitor the activities of its employees and probably did not consider the copies of documents retained by its job site personnel, i.e., its project manager. By failing to prevent their destruction, the Owner was placed in the position of appearing to have engaged in a "cover up."

For more information, contact Matthew G. Hjortsberg.