## Facts

- James Surowiec bought a condominium unit in the Shamrock Glen development in Scottsdale, Arizona (2006).
- Capital Title Agency, Inc. served as the escrow/title company, acting through employee Scott Romley as escrow agent.
- Surowiec alleged Romley failed to disclose that the unit would remain encumbered by investors’ deeds of trust (junior liens) connected to the developer.
- Surowiec claimed the undisclosed liens and related foreclosure activity clouded title, prevented resale, and caused financial loss (including carrying costs).
- Surowiec sued for breach of contract, breach of fiduciary duty, fraud, negligent misrepresentation, negligence, and breach of the implied covenant of good faith and fair dealing, seeking compensatory and punitive damages.
- During discovery, Surowiec learned Capital did not preserve certain electronically stored information (including emails) after receiving notice of potential litigation.

## Issues

1. Whether defendants were entitled to summary judgment because Surowiec could not prove compensatory damages with reasonable certainty.
2. Whether defendants were entitled to summary judgment on punitive damages for lack of evidence meeting Arizona’s “evil mind” standard.
3. Whether failure to preserve emails/ESI after litigation became reasonably foreseeable warranted spoliation sanctions, and if so, what sanctions.

## Decision

- Defendants’ motion for summary judgment on compensatory damages was granted in part and denied in part: some claimed damages were sufficiently supported for a jury, while other categories were excluded as speculative or unsupported.
- Defendants obtained summary judgment on punitive damages because the record would not allow a reasonable jury to find the required “evil mind.”
- Plaintiff’s motion for summary judgment was denied due to genuine disputes of material fact on liability, duty, knowledge, causation, and damages.
- Spoliation sanctions were granted in part: the court found at least gross negligence in failing to preserve relevant ESI once litigation was reasonably foreseeable, imposed monetary/evidentiary sanctions, and declined case-terminating relief or a mandatory adverse-inference instruction.

## Legal Principles

- Under Arizona law, compensatory damages must be proven with reasonable certainty; absolute precision is not required, but speculative categories may be removed on summary judgment.
- Punitive damages under Arizona law require proof of an “evil mind,” shown by intent to injure or a conscious and deliberate disregard of a substantial risk of significant harm; negligence or ordinary recklessness alone is insufficient.
- A party’s duty to preserve relevant evidence, including ESI, arises when litigation is reasonably foreseeable; failure to implement a litigation hold and suspension of routine deletion can constitute culpable spoliation.
- Spoliation remedies are calibrated to culpability and prejudice; where the loss is at least grossly negligent but not shown to be in bad faith, intermediate sanctions (fees/costs and limited evidentiary measures) may be appropriate rather than terminating sanctions or mandatory adverse inferences.

## Conclusion

The court narrowed damages to exclude speculative components, eliminated punitive damages for lack of evidence of an “evil mind,” and addressed ESI spoliation by imposing intermediate sanctions after finding Capital failed to preserve emails once litigation was reasonably foreseeable, while leaving disputed liability and causation issues for trial.


Surowiec v. Cap. Title Agency, Inc., 790 F. Supp. 2d 997 (D. Ariz. 2011)