Toman Engineering Co. v. Koch Construction

FILED
IN THE OFFICE OF THE
CLERK OF SUPREME COURT
MAY 26, 2022
STATE OF NORTH DAKOTA
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2022 ND 104Toman Engineering Company, Plaintiff and Appellee
v.
Koch Construction, Inc. and Marilyn Koch,
Personal Representative of the Estate of
Michael P. Koch, Defendants and Appellants
No. 20210186
Appeal from the District Court of Burleigh County, South Central Judicial
District, the Honorable Daniel J. Borgen, Judge.
REVERSED AND REMANDED.
Opinion of the Court by VandeWalle, Justice.
John E. Ward (argued) and David A. Tschider (appeared), Bismarck, ND, for
plaintiff and appellee.
Randall J. Bakke (argued) and Bradley N. Wiederholt (on brief), Bismarck, ND,
for defendants and appellants.
Toman Engineering Co. v. Koch Construction
No. 20210186
VandeWalle, Justice.
[¶1] Koch Construction, Inc.; Marilyn Koch, Personal Representative of the
Estate of Michael P. Koch; and Koch Property Investments, Inc. (collectively
“appellants”) appealed from the judgment and amended judgment entered in
favor of Toman Engineering Company (“Toman”). The appellants argue the
district court erred in deciding they committed intentional spoliation of
evidence and dismissing their counterclaim as a sanction. We conclude the
district court abused its discretion when it dismissed the appellants’
counterclaim as a sanction for spoliation of evidence. We reverse the judgment
and remand for a new trial.
I
[¶2] Michael Koch owned and operated Koch Construction and Koch Property
Investments (“KPI”). Michael Koch died in August 2017, and his wife, Marilyn
Koch, was appointed the personal representative of his estate.
[¶3] Toman provided engineering services to Koch Construction on various
projects, including designing a stormwater management system for the Koch
Meadow Hills residential development project in Dickinson. The stormwater
management system included a detention pond referred to as the Marilyn Way
Stormwater Pond, which is the detention pond at issue in this case.
[¶4] In 20161, Janet Prchal, Dean Kubas, and Geraldine Kubas, owners of
property near the Koch Meadow Hills development, sued the City of Dickinson
and KPI for damages, alleging the development of Koch Meadow Hills caused
water to drain and collect on their properties. The Prchal lawsuit was settled
in September 2018, and the settlement required modifications to be made to
1 The timing of the events in this case are relevant to the issue of notice raised in this appeal.
1
the Marilyn Way Stormwater Pond before June 30, 2019. The reconstruction
work on the detention pond occurred during the summer and fall of 2019.
[¶5] In November 2017, Toman served a summons and complaint on Koch
Construction and Marilyn Koch, as personal representative of the Estate of
Michael P. Koch, (collectively “defendants”) to collect unpaid amounts for
engineering services Toman provided to the defendants. Toman filed the
complaint in the district court in June 2019.
[¶6] On December 7, 2017, the defendants served Toman with an answer and
counterclaim requesting monetary damages. The defendants alleged Toman
failed to perform and negligently performed the engineering services, causing
damages to the defendants, including requiring the defendants to hire other
engineering companies to correctly perform the engineering services. The
defendants also alleged Toman’s negligent performance in properly surveying,
designing, and providing for required drainage had caused the defendants
damages and subjected them to the Prchal lawsuit. The defendants requested
that the district court award damages for Toman’s negligence and failure to
perform and that the court determine Toman is “liable for Defendant, Koch
Property Investment, Inc.’s, attorney’s fees and costs, and any and all liability,
in [the Prchal lawsuit].” On June 17, 2020, the defendants and non-party KPI
moved for leave to serve an amended counterclaim.
[¶7] On August 3, 2020, Toman moved for sanctions for spoliation of evidence.
Toman argued the defendants willfully modified the Marilyn Way Stormwater
Pond before giving Toman any notice that the defendants were claiming Toman
improperly designed the detention pond. Toman argued it was completely
deprived of its right to have an independent expert inspect the pond as it
existed prior to modification. Toman requested the counterclaim be dismissed
as a sanction.
[¶8] The defendants opposed Toman’s motion for sanctions for spoliation of
evidence. They claimed that the Marilyn Way Stormwater Pond is located on
public property open to inspection at all times; the pond was reconstructed to
bring it into compliance with local ordinances and as a settlement condition in
2
the Prchal lawsuit; Toman was on notice of the claimed defects in the pond
since the summer of 2014; and Toman was unequivocally put on notice on
December 7, 2017, that the defendants were suing Toman for its defective
design work on the pond. The defendants claimed the 2019 reconstruction of
the pond was not a secret and Toman failed to inspect the pond or have its
representatives or experts inspect the pond during that time.
[¶9] On August 24, 2020, the district court ordered that KPI was allowed to
join as a necessary party and granted the motion to amend the counterclaim.
On August 25, 2020, the defendants and KPI filed an amended counterclaim,
listing KPI as a counterclaim plaintiff. They alleged Toman failed to perform
and negligently performed engineering services, including design work,
construction administration, and construction management work that Toman
agreed to perform for or on behalf of KPI and/or Koch Construction. They also
alleged they incurred damages as a result of Toman’s negligent performance,
including the cost of hiring another engineering company, Apex Engineering
Group, to correctly perform the engineering services Toman should have
performed and the costs of the remedial work to the detention pond.
[¶10] On October 21, 2020, the district court granted Toman’s motion for
sanctions for spoliation of evidence. The court determined the defendants and
KPI were culpable in the destruction of the evidence and ordered dismissal of
the counterclaim as a sanction.
[¶11] The defendants subsequently moved to vacate the order dismissing the
counterclaim, arguing Toman had advance notice that the detention pond was
at issue in the lawsuit and had notice the pond would be reconstructed during
the 2019 construction season. Toman opposed the motion. The district court
denied the motion.
[¶12] Toman moved to exclude the testimony of Marilyn Koch with respect to
the operation, course of business, business practices, and relationship between
Koch Construction and Toman which occurred before Michael Koch’s death.
Toman alleged Marilyn Koch testified that she had no involvement with Koch
Construction before Michael Koch’s death, she has no personal knowledge, and
3
therefore all testimony related to such matters should be excluded. The
defendants opposed the motion. After a hearing, the district court granted the
motion to exclude Marilyn Koch’s testimony, concluding it was inadmissible
because of her lack of personal knowledge.
[¶13] Before trial, Toman moved to exclude evidence associated with the
defendants’ equitable recoupment and other defenses related to the alleged
deficiencies of the Marilyn Way Stormwater Pond, arguing the spoliation
sanction dismissing the counterclaim also applied to the defenses. After a
hearing, the district court granted Toman’s motion, concluding the evidence
used for the counterclaim would also be used for the defenses. The court
excluded all testimony relating to alleged deficiencies of the detention pond,
including the counterclaim and defenses.
[¶14] Toman also moved to exclude the testimony of the defendants’ expert
witness, Scott Schneider, arguing Schneider cannot provide expert testimony
because he lacked personal knowledge and did not conduct an independent
analysis of Toman’s design of the stormwater detention pond. The district court
granted the motion and excluded Schneider’s testimony.
[¶15] A jury trial was held, and the jury returned a verdict in favor of Toman
and against the defendants. The jury found there was a contract between
Toman and the defendants, the defendants breached the contract, Toman did
not breach the contract, and Toman was entitled to $181,277.36 in damages as
a result of the defendants’ breach of contract. Judgment was entered in favor
of Toman and against Koch Construction and Marilyn Koch, as personal
representative of Michael Koch’s estate, for the amount of the damages with
interest. The district court later ordered the defendants pay Toman’s costs and
disbursements in the amount of $26,711.46. An amended judgment was
entered.
II
[¶16] The appellants argue the district court abused its discretion when it
determined they committed intentional spoliation of evidence and dismissed
4
their counterclaim and defenses as a sanction. They contend the court erred in
making various findings in support of its decision.
[¶17] The district court’s decision to impose a sanction for spoliation of
evidence will not be reversed on appeal unless the court abused its discretion.
Simmons v. Cudd Pressure Control, Inc., 2022 ND 20, ¶ 15, 969 N.W.2d 442. A
court abuses its discretion when it acts in an arbitrary, unreasonable, or
unconscionable manner, it misinterprets or misapplies the law, or when its
decision is not the product of a rational mental process leading to a reasoned
determination. Id. The appellant has the burden to prove the district court
abused its discretion, and “that burden is met only when it is clear that no
reasonable person would agree with the trial court’s assessment of what
sanctions are appropriate.” Ihli v. Lazzaretto, 2015 ND 151, ¶ 8, 864 N.W.2d
483 (quoting Fines v. Ressler Enters., Inc., 2012 ND 175, ¶ 15, 820 N.W.2d
688).
A
[¶18] There is a duty to preserve evidence when litigation is reasonably
foreseeable. Simmons, 2022 ND 20, ¶ 16. Spoliation is the destruction or failure
to preserve probative evidence. See Ihli, 2015 ND 151, ¶ 8.
[¶19] The district court may exercise its inherent power to sanction when a
party violates the duty to preserve evidence and evidence relevant to the
lawsuit is destroyed. Fines, 2012 ND 175, ¶ 7. Sanctions, including dismissing
claims, may be appropriate when relevant evidence is destroyed. Ihli, 2015 ND
151, ¶ 8. “The purpose of imposing sanctions for spoliating evidence is to
penalize the party who spoliated the evidence, to protect the integrity of the
legal process by ‘evening the playing field,’ and to prevent others from engaging
in similar conduct.” Simmons, 2022 ND 20, ¶ 16. “Sanctions for spoliation of
evidence require a case-by-case analysis of the facts and circumstances present
in each case.” Ihli, at ¶ 9 (quoting Fines, at ¶ 8).
[¶20] The duty to preserve evidence is not unlimited, and a party may
reasonably need to destroy evidence that it has a duty to preserve. Other courts
have recognized that under some limited circumstances a custodial party may
5
destroy evidence after discharging the duty to preserve by giving the opposing
party notice that allows for a full and fair opportunity to inspect the evidence.
See Allstate Ins. Co. v. Hamilton Beach/Proctor Silex, Inc., 473 F.3d 450, 458
(2d Cir. 2007) (holding the duty to preserve evidence does not continue
indefinitely and the district court abused its discretion by sanctioning the
insurer for spoliation after the insurer provided the manufacturer with full and
fair opportunity to inspect the evidence and the manufacturer disclaimed
interest in the evidence); Miller v. Lankow, 801 N.W.2d 120, 129 (Minn. 2011)
(holding a custodial party with a legitimate need to destroy evidence may be
absolved of a failure to preserve evidence by giving the other parties’ sufficient
notice and a full and fair opportunity to inspect the evidence); Diversified
Concepts LLC v. Koford, 495 P.3d 755, 766 (Utah Ct. App. 2021) (holding a
custodial party may discharge its duty to preserve evidence if it has reasonable
grounds for destroying the evidence and provides advance notice to the
noncustodial party that allows for a full and fair opportunity to inspect that
evidence); Am. Family Mut. Ins. Co. v. Golke, 768 N.W.2d 729, 737 (Wis. 2009)
(holding a party or potential litigant with a legitimate reason to destroy
evidence discharges its duty to preserve relevant evidence within its control by
providing the opposing parties with: “(1) reasonable notice of a possible claim;
(2) the basis for that claim; (3) the existence of evidence relevant to the claim;
and (4) reasonable opportunity to inspect that evidence.”). We agree with these
jurisdictions.
[¶21] Effective notice includes notice of the potential claim and notice of the
intent to destroy the evidence. See Diversified Concepts, 495 P.3d at 767. The
notice must be “specific enough and be given far enough in advance to allow
the noncustodial party to protect itself against the loss of evidence, through a
full and fair opportunity to inspect that evidence before its destruction.” Id. at
766 (internal quotations and citations omitted); see also Miller, 801 N.W.2d at
131 (holding the totality of the circumstances are considered to determine
whether the custodial party gave notice that was sufficient for the noncustodial
parties to protect themselves). “Placing this burden on the custodial party
balances the interests of the parties and, if complied with, effectively obviates
any need for the court to impose spoliation sanctions.” Diversified Concepts, at
766.
6
[¶22] The law cited above is consistent with our prior cases. In Ihli, 2015 ND
151, ¶ 1, we held the district court did not abuse its discretion by dismissing
the lawsuit as a sanction for the homeowner’s spoliation of evidence. We noted
the destroyed evidence was within the homeowner’s control and the
homeowner did not give the opposing party notice of her intent to destroy the
evidence until all practical ability to have an expert inspect the evidence was
removed. Id. at ¶ 14. Similarly in Fines, 2012 ND 175, ¶¶ 1, 11, we held the
district court did not abuse its discretion by dismissing the homeowner’s action
as a sanction for spoliation when the evidence was in the homeowner’s control,
the homeowner did not give the opposing party notice of the intent to destroy
evidence until all practical ability to have an expert inspect the evidence was
removed, and the homeowner ignored the opposing party’s request to delay the
destruction of the evidence until the opposing party had an opportunity to
inspect.
[¶23] In summary, we conclude the duty to preserve evidence is discharged and
the evidence may be destroyed if the custodial party has a legitimate need to
destroy the evidence and has provided sufficient notice to the other parties
allowing for a full and fair opportunity to inspect the evidence. Sufficient notice
includes notice of the claim and notice of the intent to destroy the evidence.
The district court may not sanction for spoliation of evidence if these conditions
have been met and the duty to preserve evidence has been discharged.
[¶24] However, when the district court determines a party has violated the
duty to preserve evidence, the court should consider the following factors to
determine an appropriate sanction: “1) ‘the culpability, or state of mind, of the
party against whom sanctions are being imposed;’ 2) ‘a finding of prejudice
against the moving party, and the degree of this prejudice, including the impact
it has on presenting or defending the case;’ and 3) ‘the availability of less severe
alternative sanctions.’” Ihli, 2015 ND 151, ¶ 9 (quoting Bachmeier v. Wallwork
Truck Ctrs., 544 N.W.2d 122, 124-25 (N.D. 1996)). Dismissal of the entire case
with prejudice is the most restrictive sanction and may be appropriate when
spoliation is willful or merely neglectful. Ihli, at ¶ 9. But courts are encouraged
to employ less severe remedies when they are adequate. Id. at ¶ 15.
7
[¶25] Whether an opposing party had notice before the destruction of the
evidence is relevant both in deciding whether the duty to preserve was
discharged and in considering whether there was prejudice to the non-
custodial party for purposes of determining an appropriate sanction. Other
courts have held it may be inappropriate to sanction the custodial party if the
opposing party had sufficient knowledge to protect its interests and failed to
take any steps to inspect or preserve the evidence before it was destroyed. See
Miller, 801 N.W.2d at 131-32 (holding the failure of the custodial party to
provide further notice of the destruction should not deprive it of an otherwise
valid claim or defense if the noncustodial party had sufficient knowledge to
protect their interests but still failed to inspect the evidence). Even when the
custodial party has not met requirements to discharge the duty to preserve, a
court may still consider the type of notice provided in determining an
appropriate sanction. See Diversified Concepts, 495 P.3d at 769. “[I]f the
custodial party fails to discharge its duty to preserve evidence, but the
noncustodial party is nevertheless on notice of specific facts that render its
failure to take any steps to preserve or inspect evidence unreasonable, there
will be less cause for the court to remedy a situation that the noncustodial
party failed to prioritize.” Id. at 773.
B
[¶26] In this case, the district court found the appellants spoliated evidence
and dismissed their counterclaim as a sanction. The court explained:
The Court finds the [defendants and KPI] culpable in the
modifications of the Pond. Marilyn Koch, in her capacity as the
president of Koch Property Investments, Inc., entered into the
Settlement Agreement for the Prchal lawsuit knowing it involved
retaining Apex Engineering to modify the Pond. As the named
defendant in this case, Marilyn Koch knew of the present litigation
when she entered into the agreement, making her culpable.
The Court finds that Toman is prejudiced by the modification
of the Pond. The [defendants and KPI] took no efforts to preserve
the evidence. Rather, [the defendants and KPI] entered into an
agreement regarding the modification of the Pond. [They] did so
8
without providing [Toman] any notice of the destruction of the
Pond.
. . . [A]t the time of the modification of the Pond, Toman had
no notice that the [counterclaim] related to the Pond, giving Toman
no reason to inspect the Pond. . . . The [defendants’ and KPI’s]
broad Counterclaim did not specifically identify the cause of the
alleged damages and failed to make any reference to the Pond.
Because Toman did not have notice of the claim regarding
the Pond, it was unable to have an expert inspect the allegedly
improperly functioning pond. The Pond no longer exists as it did
at the time of the alleged damages. Toman cannot examine the
Pond or have experts observe, inspect, or test the Pond. The Court
finds this prejudicial to [Toman]. The Court cannot expect Toman
to defend the Counterclaim without any opportunity to have an
expert inspect the Pond. The Court finds the [defendants’ and
KPI’s] spoliation of the evidence highly prejudicial to Toman.
There is no less severe alternative sanction. All information
existing relating to the Pond would come from Apex Engineering.
Toman’s expert witness can only view the evidence through the
lens of the [defendants’ and KPI’s] engineers. The Court finds this
prevents Toman from fully defending against the Counterclaim.
. . .
The [defendants and KPI] had possession and control over
the Pond when it was destroyed. When Marilyn Koch negotiated
the settlement of the Prchal lawsuit, which included the
modification of the Pond, she was aware of the present litigation.
The [defendants and KPI] failed to provide Toman any notice of the
modification of the Pond, leaving Toman no ability to have an
expert inspection. Additionally, the spoliation factors weigh in
favor of Toman. The Court finds that dismissal of the Counterclaim
is the proper sanction for the [defendants’ and KPI’s] destruction
of the evidence.
[¶27] In denying the defendants’ motion to vacate the order dismissing the
counterclaim, the district court considered the defendants’ argument that
Toman had actual notice of the destruction of the detention pond because
Toman’s counsel requested a copy of the settlement agreement in the Prchal
lawsuit from the City of Dickinson, stating:
9
[T]he [defendants and KPI] failed to file any documents in the
present case that would have provided Toman notice of the
destruction of the Pond. Even if the Court would consider the open
records request sufficient notice of the destruction, that notice
would be irrelevant to Toman without knowledge that the Pond
was the source of the alleged damage to the [defendants and KPI].
Toman had no reason to have experts investigate the Pond prior to
learning the [defendants and KPI] were alleging the Pond was
improperly engineered, which occurred only after the destruction
of the Pond. Without notice of the specific damages the [defendants
and KPI] were alleging, any notice of the destruction of the Pond
was insufficient. As the Court concluded in its Order on sanctions,
the [defendants and KPI] failed to provide notice of their specific
claim for damages prior to the destruction of the Pond.
Further, an open records request does not absolve the
[defendants and KPI] of their duty to preserve evidence. The
[defendants and KPI] were aware of the present litigation and had
an obligation to preserve the Pond. . . . The [defendants and KPI’s]
destruction of the Pond was prejudicial to Toman, especially when
Toman was unaware of the specific cause of the alleged damages
from the [defendants’ and KPI’s] broad Counterclaim that failed to
make reference to the Pond.
[¶28] The district court gave a detailed explanation of its decision and
considered the proper factors to determine a sanction for spoliation. However,
the evidence does not support some of the findings that were the basis for the
court’s decision.
[¶29] Evidence established the detention pond was constructed in 2012. In
July 2014, Toman was sent an email about a meeting in which neighbors of the
Koch Meadow Hills development, including Janet Prchal and Dean Kubas,
expressed concerns they had with the water drainage from the development.
The email stated the neighbors claimed water was running onto their
properties, silt was damaging their properties, and the pond outlet damaged
their fence. The email also stated the neighbors wanted a “wet pond” to be
created, which they believed would solve a lot of the issues they were seeing,
and the parties involved in the meeting were working on “restitution for the
perceived damages.”
10
[¶30] On December 7, 2017, the defendants’ answer and counterclaim in this
action was served on Toman. The counterclaim alleged Toman failed to perform
and negligently performed the engineering services it agreed to provide and
Toman’s “negligent performance in properly surveying, designing, and
providing for required drainage has caused Defendants damages, and
subjected Defendants to a lawsuit brought by Janet Prchal, Dean Kubas, and
Geraldine Kubas, against the City of Dickinson and Koch Property
Investments, Inc., Case No. 45-2016-CV-00357.” The defendants requested an
order “[d]etermining [Toman] is liable for Defendant, Koch Property
Investment, Inc.’s attorney’s fees and costs, and any and all liability, in Case
No. 45-2016-CV-00357.”
[¶31] On September 20, 2018, KPI and the City of Dickinson entered into a
settlement agreement in the Prchal lawsuit. The agreement required
modifications to the Marilyn Way Stormwater Pond and stated, “[KPI] is
responsible for the construction work on the pond, one-hundred percent (100%)
of the construction costs and will continue to be responsible for maintaining
the pond.” The agreement also required KPI to make all reasonable efforts to
complete the work on the pond “as soon as possible but no later than June 30,
2019.”
[¶32] In a letter dated October 30, 2018, Toman’s attorney requested from the
City’s attorney a copy of the settlement agreement in the Prchal lawsuit. The
letter stated, “Some of the allegations in this matter relate to [the Prchal case].”
In a letter dated November 5, 2018, the City’s attorney sent Toman’s attorney
a copy of the settlement agreement. The reconstruction of the detention pond
was complete sometime in fall 2019.
[¶33] The appellants argue they did not have possession or control over the
destroyed evidence because the City of Dickinson had sole ownership of the
pond, including when the decision was made to reconstruct it, and therefore
the City had both possession and control of the pond at all relevant times. They
claim they had no ability to control whether the pond was reconstructed or over
the City’s requirement that the work be performed by a certain date. They also
11
claim the detention pond is located on public property and Toman had access
to it at all times.
[¶34] Although the City may own the detention pond and the pond may be on
public property, the terms of the Prchal settlement agreement required KPI to
be responsible for the construction work modifying the detention pond and to
continue to maintain the pond. The evidence supports the district court’s
finding that the pond was in KPI’s custody and control, and it was responsible
for the construction work on the pond that destroyed the evidence. Cf. Golke,
768 N.W.2d at 743 (stating insurance company did not own the home at issue,
but had a duty to preserve the evidence and it provided sufficient notice and
an opportunity to inspect). Under the facts and circumstances of this case, the
district court did not err in finding KPI had possession and control over the
pond when it was destroyed. The appellants had a duty to preserve the
evidence.
[¶35] The appellants may not have had the ability to delay the construction
work modifying the pond, but the settlement agreement was reached in
September 2018, and there was no evidence the work began on the pond until
sometime in mid-2019. The appellants had the ability to provide Toman with
notice the evidence was going to be destroyed with sufficient time to inspect
the evidence. There is no evidence in the record that the appellants provided
any notice to Toman that the evidence was going to be destroyed. The
appellants had the burden to show they gave adequate notice to Toman before
the evidence was destroyed to discharge their duty to preserve the evidence.
The appellants did not provide sufficient notice the evidence was going to be
destroyed, and therefore they violated the duty to preserve the evidence.
[¶36] Although the appellants did not provide Toman with sufficient notice to
discharge the duty to preserve the evidence, evidence established Toman had
sufficient knowledge to protect its interests, which is relevant in determining
an appropriate sanction. Evidence in the record established Toman had notice
of the defendants’ claims in December 2017 when it was served with the
counterclaim. The counterclaim did not explicitly mention the Marilyn Way
Stormwater Pond, but it specifically referenced the Prchal litigation and
12
requested Toman pay for any and all liability KPI incurred related to the
Prchal suit. The detention pond was specifically at issue in the Prchal lawsuit.
The City’s attorney sent Toman a copy of the settlement agreement in the
Prchal lawsuit in November 2018 at Toman’s request. The settlement
agreement required construction work on the pond to be completed by June 30,
2019. By November 2018, Toman had notice of the claims, that the pond was
relevant to the claims, and that the pond would be modified. The pond was
located on public property and there was no evidence access to it was limited.
Toman had sufficient time to inspect the pond before the modifications were
made. Toman failed to act or take any steps to protect its interests. Under these
facts and circumstances, dismissal of the counterclaim was not an appropriate
sanction.
C
[¶37] We conclude the district court abused its discretion in dismissing the
counterclaim as a sanction for appellants’ spoliation of evidence. Under these
circumstances, dismissal as a sanction was too severe.
[¶38] Furthermore, there were at least two asserted claims related to the
detention pond. The appellants alleged Toman was negligent in designing the
detention pond and in its construction management of the project. Toman
alleged the detention pond was not constructed as Toman designed the project.
The appellants have conceded that the detention pond was not constructed as
Toman designed. Because the pond was not constructed as designed, the
destroyed evidence was not relevant to the counterclaim alleging Toman
negligently designed the stormwater management system, and the court erred
in dismissing or limiting evidence related to the design portion of the
counterclaim as a spoliation sanction.
[¶39] Although we concluded dismissal of the counterclaim was not an
appropriate sanction, we also concluded the appellants violated the duty to
preserve evidence and the district court may consider a less severe sanction on
remand. The court also limited the defendants’ defenses against Toman’s
claims as a result of its spoliation decision. The court must also reconsider that
13
decision on remand. We conclude the judgment must be reversed and a new
trial held.
III
[¶40] Although we have concluded the district court erred in dismissing the
counterclaim as a sanction for spoliation and we are reversing and remanding
for a new trial, we will address remaining issues that are likely to arise again
on remand. See Quamme v. Quamme, 2021 ND 208, ¶ 12, 967 N.W.2d 452.
[¶41] The appellants argue the district court abused its discretion by excluding
testimony from an expert witness, Scott Schneider. They contend Schneider
would have testified the stormwater runoff curve used to design the pond was
incorrect and the design would not have met the city’s ordinance even if the
pond had been built as designed. They claim Schneider’s testimony would have
allowed the jury to award their counterclaim damages for Toman’s professional
negligence, determine they did not breach the contract, and offset all or part of
Toman’s damages.
[¶42] Rule 702, N.D.R.Ev., allows an expert witness to testify in the form of an
opinion or otherwise if the expert’s specialized knowledge will help the trier of
fact to understand the evidence or to determine a fact in issue. The court has
discretion in deciding whether to allow expert witness testimony, and the
court’s decision will not be reversed on appeal unless the court abused its
discretion. Klein v. Estate of Luithle, 2019 ND 185, ¶ 3, 930 N.W.2d 630.
[¶43] Scott Schneider, the operations manager at Apex Engineering Group,
was called as a witness out of the presence of the jury to allow the district court
to determine if he should be allowed to testify, and the court decided to exclude
his testimony. His deposition was also submitted as an offer of proof.
[¶44] Schneider testified he did his own pre-development modeling so he could
develop a solution to mitigate the concerns of neighboring property owners, he
compared the information from his model to the information in Toman’s model,
and his pre-development modeling produced different results than the Toman
pre-development modeling produced. He testified his model of the pre-
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development peak flow rate for water showed some type of control structure
would likely be needed to control the water to meet the city ordinance for
stormwater management criteria. He testified he reviewed the reports for
Toman’s stormwater management design and those types of control structures
were not used in Toman’s design.
[¶45] Schneider also testified that Toman’s design worked on paper and that
in the design report Toman’s design met the city ordinances requiring the post-
development water runoff to be no more than the predevelopment rates.
During Schneider’s deposition he testified Toman’s reports showed its plans
met the city ordinances, but Apex’s model showed higher pre-development flow
rates than Toman’s reports showed and in his opinion the Toman design still
would have been short of meeting the requirements of the ordinance if the pond
had been constructed as designed. But Schneider later testified to the court
that he did not have any personal knowledge Toman’s design would not have
worked and that he would not be able to provide an expert opinion Toman’s
design was deficient in any way. He testified that he would be able to testify
about the pond as-constructed, but he would not be able to testify about the
design. The court asked Schneider if he could testify to the jury that there was
a problem with Toman’s design and it would not work, and Schneider said, “No,
not the design.”
[¶46] Schneider’s testimony was inconsistent. The district court ruled it would
not allow Schneider to testify and the evidence was excluded under Rule 702
because the issue was whether Toman’s design was defective, Schneider told
the court he never ran Toman’s models as designed and would not be able to
testify if the design was defective. The court did not abuse its discretion.
However, because Schneider testified that he could provide testimony about
the pond as constructed, his testimony may be relevant to other issues on
remand and the court may reconsider completely excluding his testimony.
IV
[¶47] The appellants argue the district court erred by excluding Marilyn
Koch’s testimony regarding the scope of an oral agreement for Toman’s
services. The appellants contend Toman provided more than engineering
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services and the court’s exclusion of evidence eroded their ability to prove
Toman’s liability for the improper construction of the pond. A district court’s
decision to admit or exclude evidence will not be reversed on appeal unless the
court abused its discretion. See Command Ctr., Inc. v. Renewable Res., LLC,
2021 ND 59, ¶ 21, 956 N.W.2d 755.
[¶48] The district court excluded Marilyn Koch’s testimony about the business
practices and relationship between Koch Construction and Toman occurring
before Michael Koch’s death. The court found Marilyn Koch’s deposition
testimony established her lack of personal knowledge. The court explained
Marilyn Koch repeatedly confirmed during her deposition that she was not
involved in the Koch entities prior to her husband’s death and she had no
personal knowledge about negotiations or agreements between Toman and
Koch Construction. The court also found Marilyn Koch has no personal
knowledge about the alleged agreements for Toman to provide oversight and
management of the construction of the storm water detention system. The
court determined Marilyn Koch’s testimony about Michael Koch’s business
practices and habits was not admissible under N.D.R.Ev. 404 because her
involvement in the entities was limited to payroll and quarterly reports and
therefore the testimony would be based on hearsay or speculation. The court
also determined Marilyn Koch’s testimony was not admissible under N.D.R.Ev.
701 as an opinion by a lay witness or under N.D.R.Ev. 804 as an exception to
the hearsay rule. The court concluded Marilyn Koch’s testimony was
inadmissible due to her lack of personal knowledge.
[¶49] Marilyn Koch’s deposition testimony supports the district court’s
findings about her lack of personal knowledge. We conclude the court did not
abuse its discretion by excluding Marilyn Koch’s testimony related to the scope
of the oral agreement for Toman’s services.
V
[¶50] Because we are reversing the judgment and remanding for a new trial,
we also reverse the costs and disbursements awarded to Toman as the
prevailing party. We reverse the judgment and amended judgment and remand
for a new trial.
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[¶51] Jon J. Jensen, C.J.
Gerald W. VandeWalle
Daniel J. Crothers
Lisa Fair McEvers
Jerod E. Tufte
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