E-Alert Case Updates

Damages claim limited due to spoliation in defective design case.

Kettler Int’l, Inc. v. Starbucks Corp.
2015 U.S. Dist. LEXIS 52310 (VA April 14, 2015) (not yet published)
by Gregory S. Emrick, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://valawyersweekly.com/fulltext-opinions/2015/04/13/015-3-170-kettler-intl-inc-v-starbucks-corp/

Kettler International, Inc. (“Kettler”) is the manufacturer of patio furniture, including chairs. Between 2009 and 2013, Kettler sold approximately 13,870 Carlo Model chairs (“chairs”) to Starbucks Corporation (“Starbucks”). Between 2011 and 2013 Starbucks began to receive complaints that the chairs had caused personal injuries to some of its customers. While 4,791 chairs had already been disposed of during the course of regular renovations, Starbucks elected to remove all of the remaining chairs from its stores. On February 17, 2014, Starbucks Legal entered into an agreement to have all of the chairs removed and recycled, but Starbucks asked the vendor to keep 200 chairs in storage. In April 2014, Starbucks informed Kettler of its intent to institute legal proceedings, to which Kettler responded by alerting Starbucks of its obligation to “preserve every chair upon which a claim is being made.” Thereafter, Starbucks destroyed 2,073 chairs, including 489 chairs after servicing Kettler with the lawsuit.

On May 1, 2014 Kettler filed a three count complaint for a declaratory judgment that (1) it had not breached any warranty; (2) it had not breached any contractual term; and (3) that Starbucks was not entitled to rescission, to which Starbucks filed an Answer and Counterclaim. Kettler then moved for sanctions associated with Starbucks’ alleged spoliation of chairs and requested that the Court limit Starbucks’ claims to only those chairs that had not been destroyed. The Court conducted a hearing on the motion, and thereafter held that “Starbucks’ conduct amounted to spoliation” because after anticipating litigation, Starbucks destroyed over 7,000 chairs. The court limited Starbucks’ counterclaim to the 200 remaining chairs, and one chair which was part of a personal injury claim. Starbucks filed a Motion to Certify Order for Immediate Interlocutory Appeal and for Stay Pending Appeal. Starbucks argued that the issues involved the design of the chairs for which the destroyed chairs were not necessary.

In his written order, District Court Judge Morgan denied Starbucks’ motion. The judge first reviewed the law governing interlocutory appeals, noting that 28 U.S.C. § 1292(b) only applied to controlling questions of law with substantial ground for a difference of opinion, and was to be invoked sparingly. In comparing the facts to Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76 (3d Cir. 1994) and Silvestri v. General Motors Corp., 271 F.3d 583 (4th Cir. 2001), the Court noted that Starbucks’ actions were more akin to those in Silvestri, where the buyer had destroyed the defective vehicle after suit was anticipated in a deliberate act, not accidental or incidental as in Schmid. The Court held that under United States v. Shaffer Equipment Co., 11F.3d 450, 462-63 (4th Cir. 1993), Starbucks’ actions in willfully destroying 99 percent of the evidence and retaining an unrepresentative sample, merited limitation of the recoverable damages. This finding was based on the facts of the case and not a question of pure law. Starbucks’ Motion to Certify Order for Immediate Appeal and for Stay Pending Appeal was denied.