Environmental Contractor Penalized At Trial For Failure To Cooperate With Discovery
The Michigan Court of Appeals has ruled that a trial court properly found a defendant liable for damages caused by the negligent removal of underground storage tanks, despite prohibiting him from presenting an affirmative defense of comparative negligence at the trial for damages.
Kalamazoo Oil Company (KOC) hired John Boerman (Boerman), an environmental excavator, to remove several underground storage tanks from its property. Afterward, KOC claimed that Boerman had failed to remove or properly cap a fuel oil pipe attached to an active petroleum loading dock, causing fuel oil to flow through the pipe and into the soil and groundwater, causing environmental damage. KOC brought suit, alleging negligence, breach of contract, and violation of Michigan's Environmental Protection Act.
A default judgment was initially entered against Boerman for failure to file an answer to KOC's complaint in the lawsuit, but was later set aside by the trial court pursuant to both parties' stipulation. Later, the trial court entered another default judgment against Boerman because he refused to participate in discovery as required under the Michigan Court Rules and, specifically, because he refused to appear for a court-ordered deposition in response to KOC's motion for an order compelling discovery. The trial court then denied both Boerman's motion to set aside the default judgment and his motion for rehearing.
After entering the default judgment on Boerman's liability, a jury trial was held to decide the amount of damages for which he was liable. Boerman attempted to introduce at trial evidence that KOC had been comparatively negligent so that the jury could allocate the damages that Boerman owed in relation to his degree of fault. The trial court, however, did not allow Boerman to introduce any evidence of KOC's comparative negligence. The jury found Boerman liable to KOC for over $337,000, plus interest and costs. Boerman appealed.
On appeal, Boerman argued that the trial court erred by prohibiting him from introducing evidence at trial of KOC's comparative negligence. The Court of Appeals initially observed that, under Michigan law, it is an established principle that where a trial court has entered a default judgment against a party, that party's liability is conceded and the party is estopped from litigating issues of liability. The appeals court further observed, however, that a default judgement is not an admission as to the amount of damages. The trial court entered a default against Boerman as punishment for discovery abuses, that is, because he failed to comply with the rules of discovery and because he failed to comply with court orders requiring him to submit to a deposition. Therefore, the Court of Appeals found that the default judgment settled the issue of Boerman's liability, but that the question of damages still remained, and the trial court correctly proceeded with a jury trial to determine the amount of damages for which Boerman was liable.
During the jury trial, Boerman tried to present evidence to the jury establishing that KOC was comparatively negligent and that the damages owed by Boerman to KOC should be reduced to the extent of KOC's negligence. Under Michigan Supreme Court precedent, a plaintiff's recovery of damages is reduced to the extent that the plaintiff's negligence contributed to the injury suffered by the plaintiff. If the trier of fact finds comparative negligence, then damages are allocated in proportion with the extent of each party's liability.
In the jury trial on damages, however, the court prevented Boerman from presenting evidence of KOC's comparative negligence, ruling that allowing Boerman to do so would effectively allow Boerman to relitigate his liability, which had already been decided by the default judgment, thus rendering the default sanction meaningless. Boerman argued that this ruling was in error and should be reversed.
The Court of Appeals reviewed the law of other states on this issue because it had not been considered by Michigan appellate courts, noting that some states have allowed comparative negligence to be raised during the damages phase of a trial where a party has been defaulted, while others have not. The trial court had relied upon a Pennsylvania case for its ruling that Boerman was precluded from raising the affirmative defense of comparative negligence during the damages phase of trial after having been defaulted as a sanction for his failure to comply with the discovery rules and the court's orders.
The Court of Appeals held that, as in the present case, where the entry of a default judgment is based on discovery abuses and the case proceeds to trial on damages only, the decisive factor in whether to admit evidence of comparative negligence is the extent of the sanction necessary, as decided by the sanctioning court. In other words, it is within the trial court's discretion to allow or prohibit the defaulted party from introducing evidence of a party's comparative negligence at the trial on damages. In this way, the trial court, which is in the best position to judge the severity of the discovery abuses, may conform the sanction of default to the severity of the party's discovery abuses in the damages phase of the trial. The appeals court stated further that, because default is such a severe sanction, it is imperative that the trial court balance the factors it considers and explain its reasons for imposing the default sanction in order that an appellate court may meaningfully review the trial court's decision.
In considering Boerman's appeal, the Court of Appeals found that the trial court had decided to prohibit Boerman from presenting evidence of comparative negligence at the damages phase of trial before the jury without even realizing that it had the discretion to allow the evidence. The Court of Appeals found, however, that the record clearly showed that even if the trial court had been aware of its discretion to allow the evidence, it would not have reached a different result, given Boerman's conduct during the proceedings showing his disdain for the court's authority and his total unwillingness to participate in the discovery process.
The Court of Appeals also found Boerman's other arguments to be without merit. Boerman argued that the trial court erred by entering the default judgment against him as a discovery sanction and by failing to set aside the default in response to his motions. The Court of Appeals found Boerman deserving of a severe sanction, such as being defaulted, because the record clearly revealed Boerman's deliberate noncompliance with court rules and a discovery order, as well as what the trial court viewed as an attempt to mislead the court and disrupt the progression of the lawsuit.
Boerman also argued that the trial court erred by prohibiting him from testifying, as well as calling other witnesses, during the trial before the jury on damages. The Court of Appeals observed that Boerman had failed to file a witness list, as required under the trial court's scheduling order, and did not disclose until the morning of trial that he wanted to testify and call an expert witness to testify on damages. The trial court explained it would not allow Boerman to testify because he had repeatedly refused to have his deposition taken. The trial court additionally noted that it would have been unfair to require KOC to prepare for Boerman's expert witness on such short notice and without any chance to have conducted any discovery on the witness. Therefore, the Court of Appeals agreed with the trial court that Boerman failed to show good cause to allow his and his expert's testimony, and found no abuse of discretion by the trial court.
Accordingly, the Court of Appeals found no basis for reversing the jury's verdict and, therefore, affirmed the trial court's decision.
Kalamazoo Oil Co. v. Boerman, 2000 WL 1050967, July 28, 2000
This article was prepared by Brian J. Negele, a partner in our Environmental Department, and previously appeared in the December, 2000 edition of the Michigan Environmental Compliance Update, a monthly newsletter prepared by the Environmental Department and published by M. Lee Smith Publishers.