                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                 March 12, 2014 Session

                GRIFFITH SERVICES DRILLING, LLC, ET AL.
                       v. ARROW GAS & OIL, INC.

                 Appeal from the Circuit Court for Anderson County
                    No. B1LA0022       Donald R. Elledge, Judge


                 No. E2013-01349-COA-R3-CV-FILED-MAY 27, 2014


Griffith Services Drilling, LLC (“Griffith”) and Lexington Insurance Company, Griffith’s
insurance company, sued Arrow Gas & Oil, Inc. (“Arrow”) for property damage caused by
a fire that occurred while Arrow was refueling a drilling rig operated by Griffith in Anderson
County, Tennessee (“the Drilling Site”). Arrow answered the complaint and counterclaimed
for breach of contract based upon Griffith’s refusal to pay for the fuel delivered by Arrow
on the day of the fire. Arrow also filed a motion to dismiss for spoliation, which the Circuit
Court for Anderson County (“the Trial Court”) granted dismissing Griffith’s claims against
Arrow. Arrow then filed a motion for summary judgment on its counterclaim, which the
Trial Court granted in part. Griffith appeals to this Court raising issues regarding the
dismissal of their claims and the grant of summary judgment to Arrow. We find and hold
that both Griffith and Arrow were guilty of spoliation, and, therefore, that dismissal of
Griffith’s claims was not an appropriate sanction. We vacate the dismissal of Griffith’s
claims against Arrow and reinstate them. Because the Trial Court granted Arrow summary
judgment based upon its decision on the issue of spoliation, and we have vacated the Trial
Court’s decision on the issue of spoliation, we also vacate the grant of summary judgment
to Arrow.

   Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Vacated
                                  Case Remanded

D. M ICHAEL S WINEY, J., delivered the opinion of the Court, in which C HARLES D. S USANO,
J R., C.J., and J OHN W. M CC LARTY, J., joined.

Christopher P. Capps, Morrestown, Tennessee, and Max D. Picklesimer, Nicholasville,
Kentucky for the appellants, Griffith Services Drilling, LLC and Lexington Insurance
Company.
W. Bryan Brooks and Alisha M. Toll, Nashville, Tennessee, for the appellee, Arrow Gas &
Oil, Inc.

                                              OPINION

                                             Background

               On June 10, 2008 Tommy Burress, an employee of Arrow, went to the Drilling
Site to deliver fuel.1 An alleged overflow of fuel occurred during the fuel delivery followed
by a fire, which Griffith alleged caused over $1.2 million dollars of damage. After the date
of the fire but before giving notice of intent to make a claim against Arrow, Lexington
Insurance Company authorized Griffith to clean up the site of the fire. Griffith cleaned up
the site and disposed of all evidence of the fire. Almost one month after the fire site was
cleaned up, on July 21, 2008, a notice was mailed to Arrow of plaintiffs’ intent to hold Arrow
responsible for the fire and resulting damage.

               Mr. Burress testified that during the fueling he walked away from Arrow’s
truck to talk to some Griffith employees. While Mr. Burress was talking to the Griffith
employees “[o]ne of the guys hollered that fuel was spraying.” Mr. Burress testified that he
ran to his truck and saw the fire. Specifically, Mr. Burress testified that he saw the fire, but
did not see fuel spilled.

              After Mr. Burress saw the fire, he moved the Arrow truck. When Mr. Burress
moved the truck the fuel nozzle broke leaving the spout of the nozzle in the tank while the
remainder of the nozzle stayed attached to the hose on the fuel truck. The day after the fire,
Mr. Burress took the broken nozzle to be replaced at RBM, a company where Arrow
purchased “nozzles and stuff.” Mr. Burress and the RBM employees worked together to
replace the nozzle. Mr. Burress testified that he traded the broken nozzle in as was his usual
practice when getting a nozzle replaced. There is no dispute that the nozzle is no longer
available. Griffith alleged in its complaint that the automatic shut off mechanism of the
nozzle malfunctioned “triggering an overflow and spill of fuel which was then ignited by
operating equipment nearby . . . .”

               This suit was filed in January of 2011. Arrow filed a motion for sanctions and
dismissal for spoliation due to Griffith’s destruction of evidence of the fire. After a hearing,
the Trial Court entered an order on November 10, 2011 finding and holding, inter alia:


        1
         Many of the facts in this Opinion have not yet been established and genuinely may be disputed. We
discuss these facts only to provide background and give context to the issues raised on appeal. The facts
relevant to our resolution of this appeal are not in dispute.

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       11. Based on the destruction of the fire site and property, Arrow Gas & Oil,
       Inc. is deprived of any ability to make an examination and determine what
       caused the fire. This inability to investigate and make a determination as to the
       cause of the fire is terminal to the litigation.

       12. The plaintiffs gave no notice of their intent to destroy the evidence and
       had no contact with the defendant at all regarding the claim until July 21,
       2008. As of this date, the evidence had been destroyed for over a month.

       13. The destruction of the evidence has eliminated the possibility of a defense
       by the defendant.

       14. There is no other appropriate sanction for the spoliation of the evidence
       other than dismissal. Defendant, Arrow Gas & Oil, Inc.’s Motion for
       Sanctions and Dismissal for Spoliation is therefore granted.

               Arrow filed a motion for summary judgment on its counterclaim seeking
payment for the fuel delivered to the Drilling Site on the day of the fire along with a service
charge and attorney’s fees. Initially, the Trial Court denied Arrow’s motion for summary
judgment and entered an order limiting discovery to the issue of how much fuel was
delivered and received and, based upon its decision to dismiss Griffith’s claims due to
spoliation, preventing any proof of issues of causation or ignition of the fire.

               The Trial Court reiterated during a hearing on pre-trial matters, including jury
instructions, that due to Griffith’s spoliation the Trial Court would not allow testimony or
evidence regarding from where the alleged fuel spray or overflow originated. The Trial
Court then reconsidered its denial of Arrow’s motion for summary judgment and entered an
order granting Arrow summary judgment for the cost of the fuel and sales tax. The Trial
Court denied Arrow’s claim for attorney’s fees. Griffith appeals to this Court.

                                         Discussion

             Although not stated exactly as such, Griffith raises two issues on appeal: 1)
whether the Trial Court erred in dismissing Griffith’s claims because of spoliation; and, 2)
whether the Trial Court erred in granting summary judgment to Arrow on its counterclaim.

               We first consider whether the Trial Court erred in dismissing Griffith’s claims
for spoliation. As this Court explained in Cincinnati Ins. Co. v. Mid-South Drillers Supply,
Inc.:



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               Rule 37 of the Tennessee Rules of Civil Procedure declares that the
       courts have the power to impose sanctions upon a party for failure to make or
       cooperate in discovery. A variety of sanctions are available to the court,
       including, in appropriate cases, “dismissing the action or proceeding or any
       part thereof, or rendering a judgment by default against the disobedient party.”
       Less severe sanctions include prohibiting parties from introducing designated
       evidence, refusing to allow a party to support or oppose designated claims or
       defenses, and striking out pleadings or parts of pleadings.

               Rule 34A of the Tennessee Rules of Civil Procedure deals specifically
       with spoliation of evidence and declares that “Rule 37 sanctions may be
       imposed upon a party or an agent of a party who discards, destroys, mutilates,
       alters, or conceals evidence.” Trial courts have wide discretion to determine
       the appropriate sanction to impose for discovery abuses. Mercer v. Vanderbilt
       University, 134 S.W.3d 121, 133 (Tenn. 2004); Lyle v. Exxon Corp., 746
       S.W.2d 694, 699 (Tenn. 1988); Brooks v. United Uniform Co., 682 S.W.2d
       913, 915 (Tenn. 1984).

                                            ***

       “The trial court’s determination of the appropriate sanction to be imposed will
       not be disturbed on appeal unless the court commits an abuse of discretion.”
       Lyle v. Exxon Corp., 746 S.W.2d 694, 699 (Tenn. 1988). Abuse of discretion
       occurs only when “the trial court has misconstrued or misapplied the
       controlling legal principles or has acted inconsistently with the substantial
       weight of the evidence.” White v. Vanderbilt University, 21 S.W.3d 215, 223
       (Tenn. Ct. App. 1999) (citing Overstreet v. Shoney’s, Inc., 4 S.W.3d 694, 709
       (Tenn. Ct. App. 1999)). Appellate courts should allow discretionary decisions
       to stand even though reasonable judicial minds can differ concerning their
       soundness. White, 21 S.W.3d at 223; Overstreet, 4 S.W.3d at 709.

Cincinnati Ins. Co. v. Mid-South Drillers Supply, Inc., No. M2007-00024-COA-R3-CV,
2008 Tenn. App. LEXIS 39, at **8-12 (Tenn. Ct. App. Jan. 25, 2008), no appl. perm. appeal
filed.

              In Cincinnati Ins. Co. a contract drilling company, Jackson Enterprises
(“Jackson”), purchased a high pressure blue hose from Mid-South Drillers Supply, Inc.
(“Mid-South”). Id. at *2. After the hose was installed on the well-drilling machine an
explosion and fireball occurred causing damage to the machine. Id. Jackson’s insurer,
Cincinnati Ins. Co., hired an investigator to determine the cause of the fire. Id. After the

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investigator had examined the machine and prepared a report, Jackson retained Mid-South
to fix or re-build the machine, but failed to notify Mid-South about the investigation. Id. at
*3. During the repair process Mid-South discarded and replaced the damaged parts of the
machine. Id. Approximately a year and a half after the cost of the repair had been paid,
Jackson sued Mid-South alleging that the blue hose provided by Mid-South was
unreasonably dangerous and defective and was the cause of the damage to the well-drilling
machine. Id. at **3-4. There was some question in Cincinnati Ins. Co. about when the blue
hose was destroyed or disposed of. Id. at **5-7. Initially, Jackson claimed that the
investigator had retained the hose and the parties traveled to the investigator’s headquarters
in Georgia to examine the hose, which the investigator then was unable to produce. Id. at *7.
Jackson later admitted that the hose had been destroyed. Id. This Court upheld the trial
court’s dismissal of the claims because “Cincinnati’s failure to notify Mid-South of the
results of its investigation and its agent’s subsequent destruction of the blue hose, whether
advertent or inadvertent, made it extremely difficult if not impossible, for the defendants to
present an effective defense to counter the plaintiff’s theory of the cause of the fire.” Id. at
*17.

              In the case now before us the Trial Court found that Griffith’s spoliation of
evidence by cleaning up the site removed the possibility of a defense by Arrow and held that
pursuant to the precedent of Cincinnati Ins. Co. dismissal of Griffith’s claims was
appropriate. As this Court noted, however, in Gross v. McKenna 2 :

              The trial court’s wide discretion in imposing sanctions against parties
       who destroy evidence necessarily implies that the factual circumstances of the
       case are crucial, as we noted in Thurman-Bryant Elec. Supply Co. v. Unisys
       Corp.:

                         [T]he trial judge has discretion to impose sanctions on a
                  party for the destruction or loss of evidence. The severity of the
                  sanctions, however, must necessarily depend upon the
                  circumstances of each case i.e., was the evidence lost
                  negligently, inadvertently, intentionally, etc.

       Id., No. 03A01-CV-00152, 1991 Tenn. App. LEXIS 870, 1991 WL 222256,
       at *5 (Tenn. Ct. App. W.S., filed November 4, 1991) (emphasis added).




       2
           In Gross v. McKenna, the Court was dealing with Tenn. R. Civ. P. 34A, not Rule 34A.02.

                                                   -5-
Gross v. McKenna, No E2005-02488-COA-R3-CV, 2007 Tenn. App. LEXIS 659, at *19
(Tenn. Ct. App. Oct. 30, 2007), Rule 11 appl. perm. appeal denied May 5, 2008, (footnote
omitted).

               We find that the case now before us is factually distinguishable from
Cincinnati Ins. Co. for a very important reason. Specifically, in the case now before us both
sides discarded of or destroyed evidence. Griffith cleaned up the site of the fire and Arrow
disposed of the allegedly malfunctioning nozzle. Arrow’s disposal of the nozzle may well
prevent Griffith from being able to prove that the nozzle was defective or that it
malfunctioned causing the alleged overflow. Because of the spoliation, both sides in this
case will be hindered severely in their ability to prove claims and defenses. Since both sides
are guilty of spoliation and both are comparably disadvantaged as a result, dismissal of
Griffith’s claims for cleaning up the site is too severe a sanction. Had Griffith been the only
party to commit spoliation, dismissal might well have been the appropriate sanction. Given
that Arrow, however, also committed spoliation, we hold that dismissal of Griffith’s claims
was too severe. We, therefore, vacate the Trial Court’s dismissal of Griffith’s claims and
reinstate those claims.

               As for the issue of whether the Trial Court erred in granting summary judgment
to Arrow on its counterclaim, a review of the record on appeal reveals that the Trial Court
granted Arrow’s motion for summary judgment after severely limiting the proof based upon
the Trial Court’s decision on the issue of spoliation. As we have vacated the dismissal of
Griffith’s claims because of spoliation and reinstated those claims, the posture of the case has
changed significantly. Given this, we also vacate the grant of summary judgment to Arrow
on its counterclaim.

              In summary, we vacate the dismissal of Griffith’s claims, vacate the grant of
summary judgment to Arrow on its counterclaim, reinstate Griffith’s claims, and remand this
case to the Trial Court for further proceedings consistent with this Opinion. Our decision
does not prevent the Trial Court, if requested, from considering and imposing less severe
sanctions related to the parties’ spoliation as this case proceeds through discovery towards
trial.

                                         Conclusion

               The judgment of the Trial Court is vacated as to the dismissal of Griffith’s
claims and vacated as to the grant of summary judgment to Arrow. Griffith’s claims are
reinstated, and this cause is remanded to the Trial Court for further proceedings consistent
with this Opinion and for collection of the costs below. The costs on appeal are assessed



                                              -6-
one-half against the appellants, Griffith Services Drilling, LLC and Lexington Insurance
Company, and their surety; and one-half against the appellee, Arrow Gas & Oil, Inc.




                                                _________________________________
                                                D. MICHAEL SWINEY, JUDGE




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