In a case whittled down to one of four original claims following arbitration, a federal magistrate judge has declined to dismiss the remaining claim on the grounds of spoliation.

U.S. Magistrate Judge Lynne A. Sitarski of the Eastern District of Pennsylvania agreed to proceed to trial de novo on the breach of contract claim made by Denise Rogers against Allstate Insurance Co., which had been the insurer of her BMW, despite Allstate’s argument that Rogers’ disposal of her laptop constituted spoliation of evidence drastic enough to warrant dismissal.

“The court cannot conclude at this juncture that the ultimate sanction — dismissal — is appropriate,” Sitarski said in Rogers v. Allstate Insurance.

The judge ruled that it wasn’t apparent that Rogers knew she had a duty to preserve her laptop — not enough to warrant throwing out her whole case.

Rogers’ 2004 BMW 525i was in an accident on March 7, 2010, when her son’s friend took the car on a test drive, according to the opinion. She made a claim with Allstate when she learned about the accident, but the company refused coverage, saying that the policy wasn’t in force on the date of the accident.

Rogers had gone to the Allstate website on March 12, 2010, and canceled the BMW’s insurance coverage, according to the opinion. However, Allstate and Rogers disagree about when the cancellation was to take effect. Allstate maintains that Rogers had requested a cancellation date of March 5, 2010, while Rogers says that she requested the policy be canceled on March 12 and Allstate backdated it to March 5.

Rogers initially made claims for breach of contract, bad faith, violation of the Unfair Trade Practices and Consumer Protection Law and fraudulent misrepresentation in the Northampton County Court of Common Pleas.

After the case had been removed to federal court, it was scheduled for arbitration according to the Eastern District’s Local Rules of Civil Procedure, because the amount at issue was less than $150,000.

During arbitration, though, Rogers only presented evidence for the breach of contract claim, Sitarski said.

The arbitration panel ruled in favor of Allstate on all counts and Rogers moved for a trial de novo. She stipulated the dismissal of her third and fourth counts shortly after requesting a trial, according to the opinion.

Addressing Allstate’s motion to strike the request for trial, Sitarski held that Rogers had met the standard for “meaningful participation” on her breach of contract claim, so that claim could go forward to trial, but had not met the standard for her bad-faith claim, so that one could not.

Citing several Eastern District cases, Sitarski said, “In cases where a request for trial de novo was stricken for failure to meaningfully participate, the defendant did not appear for the arbitration, at all. … Here, plaintiff’s participation in the arbitration process was meaningful as to Count I. Plaintiff appeared with counsel, presented documentary and testimonial evidence from plaintiff and her son and cross-examined defendant’s adjuster and agent. The arbitration hearing lasted three hours, and one arbitrator would have found in favor of plaintiff.”

However, regarding the second count, Sitarski held that Rogers’ failure to address it during arbitration meant that it couldn’t go on to trial.

“Plaintiff’s counsel explicitly stated that they had unilaterally determined that plaintiff would not proceed on the bad-faith claim at the arbitration,” Sitarski said.

“Plaintiff thus presented no evidence or argument relating to the bad-faith claim. Plaintiff did not give advance notice of this decision to defendant, or to the arbitration panel. Indeed, plaintiff’s counsel interjected during defendant’s opening statement to announce that plaintiff would proceed only on the breach of contract claim,” Sitarski said.

Sitarski declined to dismiss the only surviving claim because of what Allstate argued was significant spoliation of evidence.

“Allstate argues that Ms. Rogers’ disposal of her laptop computer constitutes spoliation of evidence, and asks this court to dismiss plaintiff’s entire case as a sanction,” she said.

Citing case law stating that the extreme sanction of dismissal should be used in only extreme situations, Sitarski quoted the Pennsylvania Superior Court’s 2003 opinion in Oxford Presbyterian Church v. Weil-McLain, saying, “A more common penalty for spoliation is a jury instruction on the inference that may be drawn from the spoliation.”

Though Sitarski found that Rogers did dispose of her laptop computer through a recycling program at her office and the computer might have had evidence that could have settled when the actual cancellation date of the policy was, she found that Rogers didn’t necessarily know that she should have retained the computer as evidence.

“We cannot conclude that plaintiff had a reasonably foreseeable duty to preserve the computer,” Sitarski said. “A party can only be sanctioned for spoliation of evidence if it had a duty to preserve it.”

The discovery request for the computer wasn’t made until April 2012, which was after Rogers had already disposed of it, Sitarski said.

Allstate had argued that Rogers should have preserved any potential evidence starting in March 2010, when it became clear that there was a conflict over the date of cancellation, according to the opinion.

“Here, it is unclear whether a layperson, such as Ms. Rogers, would have known to keep her computer merely because of potential litigation,” Sitarski said. “The computer itself is not the subject of Ms. Rogers’ potential claim against Allstate.”

Sitarski concluded the parties would proceed to trial on the breach of contract claim.

Neither Stephen Mowrey, who represented Rogers and has a practice in Bethlehem, Pa., nor Kristin Jones of Pepper Hamilton in Philadelphia, who represented Allstate, could be reached immediately for comment.

Saranac Hale Spencer can be contacted at 215-557-2449 or sspencer@alm.com. Follow her on Twitter @SSpencerTLI.

(Copies of the 10-page opinion in Rogers v. Allstate Insurance, PICS No. 12-2075, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •