Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-2_14-cv-00014/USCOURTS-alnd-2_14-cv-00014-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

OIL EQUIPMENT COMPANY, 

INC.,

Plaintiff,

v.

MODERN WELDING COMPANY,

INC.; MODERN WELDING 

COMPANY OF GEORGIA, INC.;

MODERN WELDING COMPANY 

OF FLORIDA, INC.,

Defendants.

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Case No.: 2:14-cv-00014-MHH

MEMORANDUM OPINION

This dispute concerns an underground storage tank. Oil Equipment 

Company, Inc. (OEC) bought the tank from Modern Welding Company of 

Georgia, Inc. When problems arose with the tank, OEC contacted Modern 

Welding for assistance. When Modern Welding failed to address the problems to 

OEC’s satisfaction, OEC filed suit against Modern Welding.

1

Questions concerning the tank’s installation and the existence and cause of 

any damage to or defects in the tank form the core of the controversy between the 

parties. Because of OEC’s mishandling of essential evidence, the company cannot

 

1 OEC also sued Modern Welding’s parent company, Modern Welding Company, Inc., and 

another subsidiary, Modern Welding Company of Florida, Inc. The Court has dismissed those 

claims. (Doc. 49).

FILED

 2016 Feb-23 AM 08:53

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 1 of 15
2

carry its burden of proof on its claims; Modern Welding cannot investigate and 

defend against OEC’s allegations; and the Court cannot adequately examine and 

resolve motions pertaining to those allegations. The spoliation of evidence creates 

an insurmountable hurdle that warrants dismissal of this action. Consequently, for 

the reasons explained in greater detail below, the Court denies as moot Modern 

Welding’s motion to exclude the report and testimony of OEC’s expert witness, 

OEC’s motion to strike the report of Modern Welding’s expert, and Modern 

Welding’s motion for summary judgment. (Docs. 35, 40, 45).

I. FACTUAL BACKGROUND

Among other business activities, OEC constructs and maintains gas stations 

and convenience stores. (Doc. 43-5, p. 10). While constructing a gas station in 

Montgomery, Alabama for Interstate Oil Company, OEC bought a Glasteel II

underground storage tank from Modern Welding. (Doc. 41-1, pp. 14, 44–45, 74–

75). OEC installed the tank on June 9, 2010, and the OEC employee supervising 

the installation partially completed an installation checklist provided by Modern 

Welding. (Doc. 41-1, pp. 14, 44–45; Doc. 43-6, p. 6). The OEC employee failed 

to check an answer to the question, “Has special care been used to ensure backfill 

compaction along the tank’s bottom quadrant?” (Doc. 41-1, p. 19; Doc. 43-6, p. 

12). The limited warranty that Modern Welding provided on Glasteel II tanks is 

conditioned in part upon installation “in accordance with the installation 

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 2 of 15
3

instructions” and “the return of the completed installation checklist within 30 days 

of installation . . . .” (Doc. 41-1, p. 43). Modern Welding received the installation 

checklist from OEC on September 23, 2010, more than two months beyond the 

warranty deadline. (Doc. 41-1, p. 44).2

Glasteel II tanks are “composed of a steel primary tank . . . and a secondary 

containment tank made of fiberglass.” (Doc. 41-2, p. 9). The steel and fiberglass 

tanks are separated by an annular or interstitial space, and a monitoring pipe that 

runs through the steel tank allows this interstice to be checked for liquids. (Doc. 

41-2, pp. 9–10). The tank that OEC bought had a bulkhead wall that divided the 

steel compartment into 8,000- and 4,000-gallon sections. (Doc. 41-2, pp. 9, 12–

13). When Modern Welding delivered the tank for installation the wall was intact

and able to hold a vacuum seal. (Doc. 41-1, pp. 17, 35; Doc. 43-6, p. 4).

Less than a year after OEC installed the tank, the vacuum seal was breached. 

Modern Welding visited the installation site in March of 2011 to remove water 

from the interstitial space between the inner steel tank and the fiberglass shell and 

reestablish a vacuum. (Doc. 41-1, pp. 22, 56). A year later, Interstate reported to 

OEC that diesel fuel was leaking into the interstice. (Doc. 41-1, p. 13; Doc. 41-4). 

OEC alerted Modern Welding to the issue and had a company called National 

 

2

The parties have not raised the issue, but the Court notes that OEC apparently failed to satisfy 

the conditions for coverage under the limited warranty.

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 3 of 15
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Tank Monitor assess the tank. (Doc. 41-1, pp. 13, 19, 60–68). National Tank 

Monitor reported a “below product level (wet) portion leak.” (Doc. 41-1, p. 63). 

OEC excavated the top of the 8,000 gallon compartment, and Modern 

Welding hired C&S Petroleum to remove the fuel stored there, cut an access 

opening, and enter and clean the tank. (Doc. 41-1, pp. 28–29, 71). Modern 

Welding also hired Superior Services to inspect the tank. Superior Services “could 

detect no breach in the primary tank,” but “did detect a breach in the outer 

secondary fiberglas[s] shell . . . .” (Doc. 41-1, p. 73; Doc. 41-2, pp. 27–28, 40–41). 

Superior Services removed a liquid from the interstice, but the liquid was an “oily 

water substance,” not diesel fuel. (Doc. 41-1, p. 73). In its report, Superior 

Services noted that C&S Petroleum had observed a “2’ x 7’ flat spot” on the 

bottom of the tank near the bulkhead, and Modern Welding had taken photographs 

of the flattened area. (Doc. 41-1, p. 71; see also Doc. 41-1, pp. 15–16, 56).

In a letter dated October 2, 2012, counsel for OEC demanded that Modern 

Welding honor the limited warranty provided with the tank by supplying a 

replacement tank or refunding the purchase price. (Doc. 41-1, pp. 43, 52). OEC 

advised Modern Welding that failure to honor the warranty would cause OEC to 

“seek recovery of all of its costs . . . .” (Doc. 41-1, p. 52) (emphasis in original). 

Modern Welding responded on October 4, 2012 that any damage to the tank 

“resulting from improper installation would not be covered by the warranty.” 

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 4 of 15
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(Doc. 41-1, p. 57). Modern Welding suggested that OEC may not have installed 

the tank properly because the tank was able to hold a vacuum seal when Modern 

Welding delivered the tank to OEC. As additional support for its theory of 

improper installation, Modern Welding pointed to the flattened area at the base of 

the steel compartment that was observed after installation and the failure of OEC’s 

employee to confirm on the installation checklist that the backfill had been 

properly compacted along the tank’s bottom quadrant. (Doc. 41-1, pp. 44–45, 56–

57). Modern Welding requested advance written notice of the tank’s exhumation, 

so that Modern Welding could send a representative to the exhumation to assess 

whether the tank’s condition was due to improper installation or defects in the 

tank’s materials or manufacture. (Doc. 41-1, p. 57).

OEC ignored Modern Welding’s request and exhumed the tank on October 

16, 2012 without providing notice to Modern Welding. (Doc. 41-1, p. 24). OEC’s 

expert attended the exhumation and conducted a grain size analysis of the backfill 

material while the tank was being removed. (Doc. 41-3, pp. 3, 39, 41). OEC 

determined that a liquid present in the excavation appeared to be groundwater. 

(Doc. 41-1, p. 29). After the tank was removed, a new tank bed was prepared and 

a new tank installed. (Doc. 41, p. 23). The process of preparing the new bed and 

installing the new tank destroyed any evidence that may have existed concerning 

the manner in which the original tank was installed. (Doc. 41-3, p. 7).

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 5 of 15
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Following the exhumation, the original tank was placed in an open field 

owned by an OEC employee. (Doc. 41-1, p. 31). Because the tank was not 

covered, exposure to ultraviolet radiation from the sun caused the fiberglass shell 

to degrade. (Doc. 41-1, pp. 31, 33; Doc. 41-7, pp. 1–3). After the tank had been 

exposed to the elements for nearly one year, OEC filed this action. (Docs. 1, 1-1). 

Modern Welding’s expert examined the tank on May 30, 2014 and offered the 

opinion that “due to improper storage and preservation, weather exposure, and 

handling, there is no way anyone can now determine what might have caused the 

crack in the outer fiberglass shell of the tank.” (Doc. 41-9, p. 9). While this 

litigation was ongoing, and without providing notice to Modern Welding or the 

Court, “OEC had the bottom portion of the tank cut out and tested” to determine if 

the bulkhead welds were defective. (Doc. 44, p. 57).

The parties have filed motions pertaining to the impact of the spoliation of 

evidence on this litigation. The parties have briefed the motions, and the issues are 

ripe for resolution. 

II. DISCUSSION

OEC’s destruction of evidence hampers the company’s ability to proceed 

against Modern Welding on claims under the Alabama Extended Manufacturers’ 

Liability Doctrine (AEMLD) and for breach of contract, express warranty, and 

implied warranties. (Doc. 44, p. 5). Under the AEMLD, “the burden of proof rests 

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 6 of 15
7

with the plaintiff to prove that the product left the defendant's control in an 

unreasonably dangerous condition and not fit for its expected use, and that that 

which caused the product to be in such an unfit condition in fact caused the 

injury.” Bell v. T.R. Miller Mill Co., 768 So. 2d 953, 957 (Ala. 2000). Although 

“identification of an existing defect is not essential to recovery upon an express 

warranty,” a plaintiff must bring forward evidence that “shows, either directly or 

by permissible inference, that the [product in question] was defective in its 

performance or function or that it otherwise failed to conform to the warranty.” 

Barko Hydraulics, LLC v. Shepherd, 167 So. 3d 304, 310 (Ala. 2014), reh'g denied

(Nov. 21, 2014). “If a company . . . wishes to warrant only defects in material and 

workmanship, then it may do so; with such a warranty, the plaintiff would have to 

show that the product was defective in order to show that the goods did not 

conform to the warranty.” Ex parte Miller, 693 So. 2d 1372, 1376 (Ala. 1997)

(footnote omitted).3 The implied warranties of merchantability and fitness for a 

particular purpose require a plaintiff to show that the goods are not “fit for the 

ordinary purposes for which such goods are used” or fit for the “particular purpose 

for which the goods are required,” respectively. §§ 7-2-314, 7-2-315 (Ala. Code 

1975).

 

3

The holdings in Barko and Ex parte Miller appear to be in tension. However, Barko does not 

overrule Ex parte Miller, but rather relies on it for the proposition “that the identification of an 

existing defect is not essential to recovery upon an express warranty.” Barko, 167 So. 3d at 310 

(citing Ex parte Miller, 693 So. 2d at 1376). Accordingly, the Court will interpret both cases so 

as to minimize any apparent contradictions.

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 7 of 15
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When asked to “[d]escribe in detail any and all alleged design and/or 

manufacturing defects in the Tank,” OEC asserted that the tank “was (a) 

improperly designed and manufactured due to a defectively designed bulkhead 

joint and/or (b) failed due to a defective weld at the bulkhead.” (Doc. 41-5, p. 6). 

Similarly, when asked to specify how Modern Welding had “breached any 

contractual obligations and/or warranties,” OEC responded that Modern Welding 

had sold OEC “a tank that was defectively designed and/or manufactured because 

it had a defectively designed bulkhead joint and/or was manufactured with a 

defective or inadequate weld at the bulkhead joint.” (Doc. 41-5, p. 15). In its brief 

opposing Modern Welding’s motion for summary judgment, OEC argued the crack 

in the fiberglass shell demonstrated that Modern Welding had breached the limited 

or implied warranties that covered the tank and that the tank was unreasonably 

dangerous. (Doc. 44, pp. 43, 50, 51).

OEC has not cited materials in the record that would support the assertion 

that the tank’s bulkhead welds were defective, and OEC’s opposition to Modern 

Welding’s motion for summary judgment implicitly abandons the claim. (Doc. 44, 

pp. 56–57). In contrast, both parties have produced evidence that the tank 

developed a crack in its fiberglass shell. (Doc. 41-1, pp. 11, 32, 34, 71–73; Doc. 

41-3, pp. 16–17; Doc. 41-6, p. 2; Doc. 43-1, p. 49; Doc. 43-4, p. 3). Regardless of 

whether OEC identifies the defect in the tank as faulty bulkhead welds or a cracked 

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 8 of 15
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fiberglass shell, OEC cannot prove that the defect was a manufacturing defect that 

was present in the tank at the time of delivery. If the tank’s failure was due to 

OEC’s improper installation, then Modern Welding would not be liable under any 

of the theories advanced by OEC. Because of OEC’s spoliation of evidence, it is 

impossible to determine what caused the crack.

In the Eleventh Circuit, “federal law governs the imposition of spoliation 

sanctions . . . because spoliation sanctions constitute an evidentiary matter.” Flury 

v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005). Sanctions for 

spoliation may include “(1) dismissal of the case; (2) exclusion of expert 

testimony; or (3) a jury instruction on spoliation of evidence which raises a 

presumption against the spoliator.” Id. at 945. A sanction of dismissal “should 

only be exercised where there is a showing of bad faith and where lesser sanctions 

will not suffice.” Id. at 944. To determine if dismissal should be imposed, 

the court must consider: (1) whether the defendant was prejudiced as a 

result of the destruction of evidence; (2) whether the prejudice could 

be cured; (3) the practical importance of the evidence; (4) whether the 

plaintiff acted in good or bad faith; and (5) the potential for abuse if 

expert testimony about the evidence was not excluded.

Id. at 945.

OEC destroyed evidence vital to this action on three separate occasions. 

First, OEC exhumed the Modern Welding tank, prepared a new bedding and 

backfill, and installed a replacement tank. (Doc. 41-1, p. 24; Doc. 41-3, pp. 3, 7). 

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 9 of 15
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Second, OEC failed to preserve the Modern Welding tank once it had been 

removed from the ground. (Doc. 41-1, pp. 31, 33). Third, OEC had destructive 

testing performed on the tank’s bulkhead welds. (Doc. 35-3).

Before exhuming the tank, OEC consulted with counsel and sent a demand 

letter to Modern Welding that threatened legal action. (Doc. 41-1, pp. 52–53). At 

that point, OEC’s obligation to preserve potential evidence relevant to a future suit 

should have been clear. If there was any doubt that removal of the tank would

have legal ramifications, Modern Welding’s reply to the demand letter removed 

that doubt. (Doc. 41-1, pp. 54–57). Modern Welding requested “four days’ 

written notice of the date on which that tank [was] to be exhumed” and permission 

“to have a representative present to witness the exhumation and to examine the 

tank thereafter.” (Doc. 41-1, p. 57). Modern Welding emphasized that coverage 

under the tank’s limited warranty could hinge on information that came to light 

during the tank’s removal. (Doc. 41-1, p. 57). 

It was important for Modern Welding to witness the tank’s removal because 

the exhumation of a potentially faulty tank offers the best chance to identify

defects, and the installation of a new tank necessarily erases signs of improper 

installation that may have existed in the old bedding. (Doc. 41-3, p. 7). OEC 

ignored Modern Welding’s request, but ensured that its own expert was present “to 

verify that the tank was installed properly and that [OEC] had proper backfill.” 

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 10 of 15
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(Doc. 41-1, pp. 24, 39). During the tank’s removal, the owner of OEC and OEC’s 

expert discussed the possibility of a lawsuit. (Doc. 41-3, p. 6). Thus, with full 

awareness of the likelihood of litigation, OEC made a conscious decision to 

exhume the tank in Modern Welding’s absence and to gather evidence that would 

support its case while eliminating any opportunity for Modern Welding to preserve 

favorable evidence.

After the tank was exhumed, OEC was responsible for the tank’s

transportation and storage. (Doc. 41-1, p. 31). Despite knowing that exposure to 

the sun would cause the tank’s fiberglass shell to degrade, the owner of OEC 

allowed the tank to be stored in an open field for nearly a year before filing suit 

against Modern Welding. (Doc. 41-1, pp. 31–33; Docs. 1, 1-1). Almost nineteen 

months passed after the exhumation before Modern Welding was able to examine 

the tank, and by that time “improper storage and preservation, weather exposure, 

and handling” had made it impossible to “determine what might have caused the 

crack in the outer fiberglass shell of the Tank.” (Doc. 41-9, p. 9). OEC’s 

mishandling of the tank further compromised Modern Welding’s ability to develop 

evidence that might have shown the tank was not defective in workmanship or 

materials.

Finally, after pursuing this legal action for over a year, and well after its 

deadline for the disclosure of expert witnesses had passed, “OEC had the bottom 

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 11 of 15
12

portion of the tank cut out and tested” to determine if the bulkhead welds were 

defective. (Doc. 44, p. 57; see also Doc. 1-1; Doc. 13, ¶ 3). OEC removed a 

section of the tank using an oxy-acetylene torch; sawed off specimens from the 

removed section, which caused the specimens to separate into two pieces; ground

the specimens to produce a smooth surface; and then etched the specimens with a 

mixture of nitric acid and alcohol. (Doc. 35-3, pp. 2–3). OEC did not advise 

Modern Welding that this testing would take place. Consequently, no 

representative of Modern Welding was present when a section of the tank was 

removed. (Tr. 1/27/15, p. 22). OEC argues that this conduct does not constitute 

spoliation because the “portion of the tank that was cut has been preserved and is 

available” for Modern Welding to test. (Doc. 44, p. 57). However, it would be 

impossible to restore the tank to the condition it was in before a segment of the 

welds was removed, and whatever Modern Welding might have learned by 

participating in the testing process has been lost.

Applying the factors described in Flury to this action, the Court finds that 

OEC’s actions resulted in severe prejudice to Modern Welding. As in Flury, 

OEC’s “spoliation of critical evidence in this case deprived the opposing party of 

an opportunity to put on a complete defense.” Flury, 427 F.3d at 947. Tests run 

during the exhumation of the tank might have revealed a failure to compact the 

backfill along the tank’s bottom quadrant, evidence that would be consistent with 

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 12 of 15
13

OEC’s omission on the tank’s installation checklist. Modern Welding also might 

have determined that the tank developed a flat spot in the steel compartment and a 

crack in the fiberglass shell because of improper installation. If the fiberglass shell 

of the tank had not been left to decompose in an open field, Modern Welding

might have been able to show that the tank was free of defects in materials or 

workmanship. If Modern Welding had participated in the testing of the tank’s 

bulkhead welds, Modern Welding might have developed expert testimony 

regarding the welds’ condition and the extent to which the condition could have 

caused a breach in the tank. OEC repeatedly destroyed essential pieces of 

evidence.

The prejudice to Modern Welding cannot be cured because the tank’s

bedding, backfill, fiberglass shell, and bulkhead welds cannot be restored, and the 

information these pieces of evidence might have yielded is not otherwise available. 

The practical importance of this evidence to the case cannot be overstated. If OEC 

could prove that the tank’s bedding and backfill were properly laid and the 

fiberglass shell or bulkhead welds contained defects, then OEC might recover

under one of its legal theories. On the other hand, if Modern Welding could 

establish that the bedding and backfill were improperly laid or the fiberglass shell 

and bulkhead welds were not defective, then Modern Welding could pursue an

affirmative defense.

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 13 of 15
14

OEC’s spoliation struck at the heart of the matter, and the evidence 

demonstrates that OEC acted with notice that its failure to inform Modern Welding 

of the date of the tank’s exhumation would unfairly prejudice Modern Welding. 

Modern Welding sent OEC an unambiguous request for notice of the tank’s 

removal. OEC did not inadvertently exclude Modern Welding from the 

exhumation; OEC chose to proceed without Modern Welding. (Doc. 41-1, p. 21). 

Even after the exhumation, OEC could have granted Modern Welding’s request to 

examine the tank or taken precautions to preserve the tank, but instead OEC let the 

tank degrade while OEC prepared its complaint. Then, in the midst of litigation 

that already had triggered allegations of spoliation, OEC decided to subject the 

bulkhead welds to destructive testing, again choosing to gather evidence in a 

manner that denied Modern Welding equal access to that crucial evidence. Any 

one of these instances of spoliation might be sufficient to demonstrate bad faith. 

Taken together, they demand dismissal.

III. CONCLUSION

For the reasons discussed above, the Court DISMISSES WITH 

PREJUDICE all remaining claims in this action. The Court DENIES Modern 

Welding’s motion for summary judgment, Modern Welding’s motion to exclude 

the report and testimony of OEC’s expert witness, and OEC’s motion to strike the 

report of Modern Welding’s expert because those motions are now moot. (Docs. 

Case 2:14-cv-00014-MHH Document 50 Filed 02/23/16 Page 14 of 15
15

35, 40, 45). The Court will enter a separate order consistent with this 

memorandum opinion dismissing this action with prejudice.

DONE and ORDERED this February 23, 2016.

 _________________________________

 MADELINE HUGHES HAIKALA

 UNITED STATES DISTRICT JUDGE

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