For the first time, a jury awarded damages--more than $20 million--to a plaintiff based on the value of the records they lost, not the value of the boxes in which the records were stored.

When a fire engulfed Diversified Information Technologies' West Patterson, Pennsylvania, document storage facility on May 5, 1997, some 800,000 boxes of corporate records were destroyed. One customer, Mobil Oil Corp., said it lost 67,000 boxes of documents because part of the facility's sprinkler system was on and part of it was off. Mobil Oil contended that the system did not emit enough water fast enough to put out a fire and was improperly configured. The company sued Diversified and Grinnell Corp. (the manufacturer of the sprinkler system), alleging that both were negligent in failing to have the system fully functioning, and it sued Grinnell separately for products liability, alleging that it was following the wrong National Fire Protection Association (NFPA) standard and, accordingly, defectively designed the system.

In Mobil Oil Corp. v. Grinnell Corp. and Diversified Information Technologies Inc., Mobil Oil argued that its damages totaled approximately $24 million. It also sought damages for lost tax deductions and lost underground storage tank (UST) remediation reimbursements because supporting documentation was destroyed in the fire. Mobil Oil also sought damages for a marine technical library and ship drawings that were destroyed in the conflagration.

Grinnell and Diversified denied the charges, but the jury found both companies negligent. It found that Grinnell's sprinkler system was a defective product and awarded Mobil $20,750,653 in damages. On the negligence claim, Grinnell was found 40 percent liable and Diversified was found 60 percent liable. The jury award included $8,981,441 for the value of the 67,000 boxes of Mobil Oil's documents destroyed in the fire, $7,406,558 for lost tax deductions, and $1,347,654 for lost UST remediation reimbursements because supporting documentation was destroyed in the fire. In addition, the jury awarded Mobil Oil $3,015,000 for the destroyed marine technical library and ship drawings.

Mobil Oil Corp. v. Grinnell Corp. and Diversified Information Technologies Inc. was a companion lawsuit--First Union, another plaintiff, was awarded approximately $20.5 million in December 2001, and two other plaintiffs settled the case out of court. Attorneys for Charlotte, N.C.-based First Union, which lost 152,000 boxes of records in the fire, had claimed the bank sustained damages worth $22.5 to $37.4 million. The jury awarded the bank $20,554,953, an amount that included $9.5 million to cover the bank's estimated future costs in reconstructing personal and charitable trust documents that were lost.

According to Rae Cogar, an attorney and chair of ARMA International's Government Relations Committee (GRECO), there has never been an award for the value of records based on the information they contain or the cost of recreating that information. In the past, awards have amounted to the $1 or $2 per-box figure for which the boxes were insured.

"If records are lost, be it in a fire or other reason, the fact that courts and juries are awarding damages for the value of that information rather than [for] the paper it is printed on is a big change from the past, and more companies should be aware of this--and more records storage centers should be aware, also," Cogar says.