June 01, 2007

INDIANA CASE REVIEW: Spoliation of Evidence and Enforcement of Attorney Liens

Indiana Case Review

Spoliation of Evidence and Enforcement of Attorney Liens

Stephen E. Arthur

Spoliation of Evidence

Spoliation of evidence is the intentional destruction, mutilation, alteration, or concealment of evidence. An employee whose injuries are covered by the Worker’s Compensation Act has no independent claim against the employer for third-party spoliation of evidence relevant to claims arising from that accident.

The Indiana Supreme Court revisited independent claims for spoliation of evidence in Glotzbach v. Froman, 2006 WL 2730424 (Ind. 2006). In Glotzbach, Midwest Material Services, Inc. was hired to clean waste from a tank. Midwest contacted an agency who assigned Froman, the deceased, to work under Midwest’s supervision. Froman was killed assisting one of Midwest’s owners, Darling, when a pump exploded on the job.

Darling was interviewed by the police and fire departments and did not recall the brand of the pump but that it was explosion proof. Darling then removed Midwest’s equipment and debris and was asked by the Indiana Occupational Safety and Health Administration not to dispose of it. Darling, however, threw away all of the materials from the explosion site.

Thereafter, Froman’s estate brought a claim against a “John Doe Company” as manufacturer of the pump. Negligent and intentional spoliation of evidence was also alleged as an independent claim against Midwest. Midwest filed its motion to dismiss the spoliation claim arguing that Indiana law does not permit a claim against an employer for spoliation of evidence relating to a claim by its employee. The trial court denied the motion and certified the question for interlocutory appeal. The Indiana Court of Appeals affirmed the trial court’s denial by finding that a “special relationship” existed between Froman and Midwest.

On transfer, the Indiana Supreme Court reversed the trial court. The Court began by summarizing previous holdings that an independent claim for spoliation of evidence was not available in first party litigation. It noted, however, the court had specifically left open the question of whether Indiana law recognizes a tort of spoliation by third parties. On the facts of this case, the Court held that existing case law and public policy do not support an independent third party cause of action.

The Supreme Court found that an employer’s knowledge of an employee’s injury does not give rise to a special relationship or accompanying duty. Specifically, “[if] knowledge were sufficient to establish a special relationship, the practical effect would be that an employer always has a duty to preserve evidence on behalf of its employee for use in potential litigation against third parties.” Further, IOSHA’s notice to not dispose of the evidence created a duty, if one was created, owed to IOSHA and not Froman.

Additionally, the Court found that litigation resulting from the pump explosion was foreseeable. Foreseeability, however, is not controlling. Instead, the relationship of the parties determines whether a claim for spoliation against a third party can survive.

Lastly, policy considerations were fatal to recognizing spoliation as a tort in Froman. As in first-party spoliation, it is in a party’s interest to preserve evidence. Criminal sanctions apply; the Indiana Rules of Professional Conduct act to deter attorneys from being involved the misconduct; contempt sanctions against non-parties who frustrate the discovery process may be issued; and an employer may recover worker compensation benefits if the employee can establish a product liability claim.

Attorney or Retaining liens

A retaining or attorney’s lien is the right of an attorney to retain possession of a client’s documents, money, or other property which comes into his hands professionally, until the balance due him for professional services is paid.

The Indiana Court of Appeals discussed retaining liens in Four Winds, LLC v. Smith & Debonis, LLC, 854 N.E.2d 70 (Ind. Ct. App. 2006). In Four Winds, Bank One sued Four Winds seeking to foreclose on a construction loan which was to be used in building an apartment complex. Four Winds retained the plaintiff, Smith, to assist its counsel with its counterclaims against Bank One.

A concern about the condition of the uncompleted construction project arose and the trial court appointed American Express as receiver. American Express was ordered to take possession and preserve the property.

Four Winds then decided that American Express was not properly maintaining the project and brought suit against American Express in federal court. Four Winds retained Smith to represent it against American Express and agreed to a forty percent contingency. Later, Four Winds terminated Smith and a dispute regarding his attorney’s fees arose. Four Winds voluntarily filed a lien in the American Express lawsuit in favor of Smith.

Smith, in response to the dispute over his attorney’s fees, retained Four Winds’ file regarding the American Express lawsuit pursuant to an attorney’s or retaining lien. The trial court, however, ordered Smith to surrender the file to Four Winds so that it could continue litigation. Because the retaining lien is only valid so long as the attorney possesses the file, the trial court granted Smith a judicial lien over Four Winds’ real property in the amount of $637,015.70, subject to an exact determination of his fees. Four Winds appealed claiming, among other things, that the retaining lien only extends to the contents of a client’s file created or recovered for the client and not property which the attorney did not create or recover.

The Indiana Court of Appeals noted the trial court’s dilemma and commended its solution. Four Winds needed the file to continue federal litigation, however, a trial court may order the file turned over only if it provides the attorney with adequate security for the unpaid fees. Further, the lien filed in the American Express lawsuit entitled Smith to fees from a contingency agreement in a federal lawsuit being tried by another attorney. The Court found this to be inadequate security. Nevertheless, judgment for Smith had been entered in Smith’s favor and replaced the judicial lien. The Court of Appeals, therefore, found that it need not decide whether placing a lien on the property as security for Smith’s attorney’s fees was improper.

Stephen Arthur ( is a partner with Harrison & Moberly, LLP, in Indianapolis, concentrating his practice in federal and state complex commercial litigation. Mr. Arthur is the author of books on Indiana Civil Trial Practice and Indiana Procedural Forms, and co-author of Professor Harvey’s volumes in West Publishing’s Indiana Practice Series. The author thanks Paul Carroll for his assistance in preparing this case review. The opinions and analysis expressed in this column are those of the author.


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