Indiana Court Upholds Verdict Against Parts Distributor, Agrees With Remedial Measures And Spoliation Rulings

In April 2006, the braking system on a crane being used to hoist a ladle of molten iron at a steel mill in Indiana failed, which caused molten iron to spill and ignite an extensive fire.  The mill owner sued the supplier of the braking system’s parts that fractured for breach of contract and breach of implied warranties.  Notably, the parts supplier was not the parts manufacturer.  Following a 22-day trial, a jury found in favor of the mill owner and awarded damages of more than $36 million.  The parts supplier appealed on a number of grounds, but the Court of Appeals of Indiana affirmed the verdict yesterday.

Among the grounds for appeal, the parts supplier argued that the trial court had abused its discretion in denying a motion for sanctions against the mill owner for spoliation of evidence in discarding some of the parts involved in the incident after they were replaced.  The appellate court recognized that the parts had been intentionally discarded (“in the sense that a [mill owner] employee acted purposefully in rebuilding the controller and throwing the parts away”) but deferred to the trial judge’s finding that the mill owner had not intentionally destroyed the parts knowing that it would in fact be relevant evidence.  Moreover, the parts supplier had ample opportunity to question the mill owner’s witnesses about this evidence on cross examination and at deposition.

The parts supplier also argued that the trial court committed reversible error by allowing the mill owner to admit evidence that the crane operated without issues after the blowout coils in the braking system were replaced following the incident, yet excluded the parts supplier’s evidence that the mill owner implemented a new crane procedure following the incident under Rule 407’s exclusion of subsequent remedial measures.  According to the parts supplier, “The jury is entitled to know they’ve changed their procedures, and that’s why there haven’t been any other accidents,” but the appellate court emphasized that this is exactly the type of evidence Rule 407 excludes given that it would be being offered to prove fault.

The trial judge also had awarded more than $3 million in prejudgment interest but the appellate court vacated that award.