IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

February 13, 2003 Session

MESSER GRIESHEIM INDUSTRIES, INC. D/B/A MG INDUSTRIES v.

CRYOTECH OF KINGSPORT, INC., ET AL.

 Appeal from the Circuit Court for Knox County

No. 3-64-97 Wheeler A. Rosenbalm, Judge

FILED JULY 10, 2003

No. E2002-01728-COA-R3-CV

This appeal from the Knox County Circuit Court questions whether the Trial Court erred in granting

a summary judgment in favor of the Appellee/Defendant, Eastman Chemical Company, with respect

to various claims connected with the purchase and sale of contaminated carbon dioxide by the

Appellant/Plaintiff, Messer Griesheim Industries, Inc., d/b/a MG Industries. We affirm in part,

vacate in part and remand. 

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed in Part

and Vacated in Part; Cause Remanded 

HOUSTON M. GODDARD, P.J., delivered the opinion of the court, in which D.MICHAEL SWINEY and

CHARLES D. SUSANO, JR., JJ., joined.

Gregory M. Leitner, Chattanooga, Tennessee; Mark G. Arnold, St. Louis, Missouri and Arthur G.

Seymour, Jr., Knoxville, Tennessee, for the Appellants, Messer Griesheim Industries, Inc. d/b/a MG

Industries 

Pamela Blass Bracher, Chattanooga, Tennessee; William Randall Wilson, Chattanooga, Tennessee

and Robert C. Divine, Chattanooga, Tennessee, for the Appellee, Eastman Chemical Company

OPINION

Cryotech of Kingsport, Inc. (hereinafter "Cryotech") operates gas purification facilities and

produces food grade liquid carbon dioxide. The Appellee, Eastman Chemical Corporation

(hereinafter "Eastman"), owns and operates a coal gasification plant in Kingsport. The Appellant,

Messer Griesheim, Inc., d/b/a MG Industries (hereinafter “Messer”), is a distributor of liquid carbon

dioxide, which it purchases in bulk and sells to customers for various food and medical uses. 
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In 1988 Cryotech and Eastman entered into an agreement pursuant to which Cryotech would

purchase a carbon dioxide rich waste stream (hereinafter “feedgas”) from Eastman which Eastman

had, prior to that time, vented into the atmosphere. The price paid to Eastman by Cryotech under

the agreement was determined by the concentration of carbon dioxide in the feedgas and the volume

of feedgas to be purchased was measured by the amount of carbon dioxide Cryotech shipped to its

customers.

At the same time it entered the feedgas agreement Cryotech also entered into a lease of land

belonging to Eastman adjacent to Eastman's Kingsport plant and constructed thereon a carbon

dioxide purification facility. 

Cryotech’s purification facility became operational in 1992 and Cryotech began selling

carbon dioxide to Messer and other customers. Shortly after operations began Cryotech began

experiencing problemsdue to chemical contaminants in the feedgas it was purchasing from Eastman.

In spring of 1993, Eastman discovered the presence of hydrogen cyanide (hereinafter “HCN”), a

toxic and potentially lethal substance, on Cryotech’s catalyst and informed Cryotech of this finding.

The feedgas agreement had not included HCN in a description designated “Typical Composition of

Carbon Dioxide Gas” and deposition testimony indicates that Eastman had previously represented

that it had never detected any cyanide in the feedgas. Because of resulting increased purification

costs, Cryotech withheld payment for the feedgas and eventually owed Eastman an arrearage of over

one million dollars. 

Cryotech began monitoring the HCN content of the feedgas more than once a day and

frequently discussed the results of such monitoring with Eastman representatives. In late 1993

Cryotech detected increasing levels of HCN and complained to Eastman about the increased cost

of its removal. Eastman sought to determine the cause of the increased HCN levels and endeavored

to assist Cryotech in identifying better and less expensive ways Cryotech could remove the HCN.

Eastman also took some actions in its own facility to try to reduce the HCN content of the feedgas.

In 1996 Eastman installed its own HCN analyzer to prepare for compliance with new EPA

regulations; however, this analyzer exhibited various problems and was ultimately determined to be

an unreliable measure of HCN levels.

In March of 1996 Messer began selling carbon dioxide obtained from Cryotech to a large

manufacturer of carbonated beverages. Shortly thereafter, this manufacturer notified Messer that it

was receiving customer complaints regarding the odor and/or taste of its beverages. Testing revealed

the presence of HCN in Cryotech’s carbon dioxide and thereafter Eastman discontinued supplying

feedgas to Cyotech. Subsequently, several of Messer’s other customers claimed that their product

had been adulterated by the contaminated carbon dioxide and that beverage canisters containing the

contaminated carbon dioxide were rendered unusable and had to be destroyed. Messer settled these

claims in anticipation of litigation. Messer also incurred expenses in cleaning its own storage tanks

and tanker cars which had contained the contaminated carbon dioxide. Messer incurred additional

expenses as a result of the adulteration of uncontaminated carbon dioxide when it was mixed with

carbon dioxide purchased from Cryotech. Altogether, Messer asserts that it has sustained damages
1

On October 8, 1999, the Circuit Court granted Mellon’s motion for summary judgment and that ruling was

subsequently affirmed by this Court in Messer Griesheim v. Cryotech of Kingsport, 45 S.W.3d 588 (Tenn. Ct App.

2001). Additionally, all claims against Cryotech were dismissed with prejudice by agreed order entered November 26,

2001. 

2

 On December 10, 1997, the Circuit Court also dismissed Messer’s claims alleging violations of the Federal

Consumer Products Safety Act and the RICO Act because those claims were previously dismissed with prejudice by the

District Court in Chattanooga. 

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totaling nearly eight million dollars as a result of injury to its own property and the property of its

customers and that it has suffered additional damages “including but not limited to, business losses,

substantial attorney’s fees, expenses incurred in determining the origin of the hydrogen cyanide

contamination, and the costs of cover.” There are no allegations of personal injury in this case.

In June of 1996 Messer filed a complaint in the United States District Court for the Eastern

District of Tennessee at Chattanooga against Cryotech seeking reimbursement of funds paid to

satisfy claims of those customers of Messer who had purchased contaminated carbon dioxide. The

complaint was amended in September of 1996 to include as defendants Eastman and Mellon

Financial Services which provided financing for Cryotech’s gas purification facility.1 

On February 4, 1997, Messer filed a complaint in the Circuit Court for Knox County which

essentially duplicated the complaint filed in the District Court. The complaint alleged that the

defendants were liable under theories of breach of contract, fraud, breach of warranty,

misrepresentation, products liability, ultra-hazardous activity, negligence, gross negligence,

recklessness, outrageous conduct, intentional concealment, violations of the Racketeer Influenced

and Corrupt Organizations Act (“RICO”) and violations of the Consumer Product Safety Act. This

complaint was removed to the United States District Court for the Eastern District of Tennessee at

Knoxville where it was consolidated with the federal suit pending in Chattanooga. The District

Court in Knoxville dismissed Messer’s claims for violation of the Consumer Product Safety Act and

the RICO Act and remanded the case to the Knox County Circuit Court.

In July of 1997 Eastman filed a motion to dismiss and for summary judgment or partial

summary judgment in the Circuit Court. Hearing on that motion was held on October 6, 1997, at

which time the Court granted the motion in part. In so doing, the Court dismissed Messer’s product

liability claim upon a finding that Messer had not sustained property damage. The Court also

dismissed Messer’s claim for breach of contract upon a finding that there was lack of privity between

Eastman and Messer and Messer’s claim for breach of warranty for lack of privity and/or property

damage. Finally, the Court dismissed Messer’s claim for violation of the TCPA.2 Remaining

matters under the motion were held in abeyance pending further discovery.

In October of 2001, Messer filed a motion requesting the Court to reconsider its October

1997 ruling granting Eastman’s motion for summary judgment and, on January 15, 2002, Eastman

filed a renewed motion for summary judgment requesting that the Court dismiss all remaining claims

against it.
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On April 18, 2002, the Court granted Eastman’s renewed motion for summary judgment.

The Court also granted Messer’s motion to reconsider with respect to its claim against Eastman

under the Tennessee Consumer Protection Act; however, on May 13, 2002, the Court granted

Eastman’s motion for summary as to this claim also. Thereafter, Messer filed this appeal. 

The issues presented for our review in this case are restated as follows:

1. Did the Circuit Court err in granting Eastman’s motion for summary judgment as to

Messer’s tort claims upon grounds that such claims are barred by the economic loss doctrine?

2. Did the Circuit Court err in granting Eastman’s motion for summary judgment as to

Messer’s fraud and concealment claims upon grounds that such claims are barred by the economic

loss doctrine?

3. Did the Circuit Court err in granting Eastman’s motion for summary judgment as to

Messer’s claim under the Tennessee Consumer Protection Act upon grounds that there was lack of

privity between Eastman and Messer, that there was lack of evidence that Eastman engaged in unfair

or deceptive conduct and that there was lack of evidence of causation?

4. Did the Circuit Court err in granting Eastman’s motion for summary judgment as to

Messer’s tort and contract claims upon grounds that Eastman and Messer were not engaged in a joint

venture?

5. Should the Circuit Court have applied Pennsylvania law in ruling upon Eastman’s motion

for summary judgment as to Messer’s claims against Eastman for breach of warranty?

The standard of review with respect to a trial court’s ruling on a motion for summary

judgment is well settled. Summary judgment is only proper when the moving party has

demonstrated that there are no genuine issues with respect to the material facts relevant to the claim

or defense contained in the motion and the moving party is entitled to judgment as a matter of law.

Byrd v. Hall, 847 S.W.2d 208, (Tenn. 1993). Because our inquiry in determining the propriety of

a summary judgment involves purely a question of law no presumption of correctness attaches to the

trial court’s judgment. Hunter v. Brown, 955 S.W.2d 49 (Tenn. 1997). In assessing evidence in the

summary judgment context we must view the evidence in the light most favorable to the nonmoving

party and draw all reasonable inferences in that party’s favor and a summary judgment should be

granted only when the facts and the conclusions to be drawn from the facts permit a reasonable

person to reach only one conclusion. Byrd, ibid.

The first issue we address is whether the Circuit Court properly granted Eastman’s motion

for summary judgment as to Messer’s tort claims upon grounds that such claims were barred by the

economic loss doctrine.
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The Tennessee Supreme Court has noted that “Tennesseehasjoined those jurisdictions which

hold that product liability claims resulting in pure economic loss can be better resolved on theories

other than negligence.” Ritter v. Custom Chemicals, Inc., 912 S.W.2d 128 (Tenn. 1995). The

economic loss doctrine provides that “[i]n a contract for the sale of goods where the only damages

alleged come under the heading of economic losses, the rights and obligations of the buyer and seller

are governed exclusively by the contract.” Trinity Industries v. McKinnon Bridge Co., 77 S.W.3d

159 (Tenn. Ct. App. 2001). Consequently, a plaintiff may not maintain a claim for purely economic

losses absent contractual privity with the party charged with responsibility for those losses.

However, T.C.A. 29-34-104 provides as follows as to causes of action which do not involve purely

economic losses:

In all causes of action for personal injury or property damage brought on

account of negligence, strict liability or breach of warranty, including actions

brought under the provisions of the Uniform Commercial Code, privity shall not

be a requirement to maintain such action.

In the case before us there was no contractual privity between Eastman and Messer. The

Circuit Court found that the losses claimed by Messer were economic losses and, based upon the

economic loss doctrine, the Court dismissed Messer’s tort claims against Eastman. However,

Messer contends that it asserted claims for property damage and that it’s tort claims should be

allowed pursuant to T.C.A. 29-34-104. Specifically, Messer contends that tank cars it used for

shipping were damaged as a result of contact with the contaminated carbon dioxide and that, when

it placed the contaminated carbon dioxide in storage tanks, it damaged the tanks’ pipes as well as

the uncontaminated carbon dioxide in the tanks with which it was mixed. Messer further contends

that property damage was also incurred when its customers combined the contaminated carbon

dioxide with soft drink ingredients in beverage cans ruining both the ingredients and the cans.

Messer argues that because of this asserted property damage it should be allowed to pursue its tort

claims under T.C.A. 29-34-104. In addition to seeking damages to its own property Messer seeks

recovery for damages to the property of its customers through subrogation or, alternatively, through

contribution.

Eastman argues that the only losses incurred by Messer were economic losses. Eastman

asserts that the money paid by Messer to its customers was paid solely because the carbon dioxide

sold by Messer to these customers did not meet the customers’ commercial expectations.

Accordingly, Eastman argues that these payments constitute economic loss for which Eastman is not

liable because it is not in privity with either Messer or Messer’s customers. Eastman contends that

Messer’s only remedies are those which it may have against Cryotech.

Each party cites two United States Supreme Court cases in support of its position - East River

S.S. Corp. v. Transamerica Delaval, Inc., 106 S.Ct. 2295 (1986) and Saratoga Fishing Co. v. J.M

Martinac & Co., 117 S.Ct. 1783 (1997).
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In East River the plaintiffs chartered four oil-transporting supertankers. While at sea, the

turbines on each of the ships malfunctioned because of design and manufacturing defects. No harm

resulted other than to the turbines themselves. The plaintiffs filed suit in tort against the

manufacturer of the turbines and the issue before the Court was whether a cause of action in tort is

stated when a defective product injures only itself. The Court concluded that a plaintiff cannot

recover in tort for physical damage to a defective product itself and that, in such cases, remedies are

limited to those available under contract. The Court stated as follows at page 2302:

Damage to a product itself is most naturally understood as a warranty claim. Such

damage means simply that the product has not met the customer’s expectations,

or, in other words, that the customer has received “insufficient product value.”

... The maintenance of product value and quality is precisely the purpose of

express and implied warranties.... Therefore, a claim of a nonworking product can

be brought as a breach-of warranty action. Or, if the customer prefers, it can reject

the product or revoke its acceptance and sue for breach of contract....

(Citations omitted.)

In Saratoga, another admiralty case, the plaintiff’s fishing vessel sank as a result of an engine

room fire caused by a defective hydraulic system installed by the defendant boat manufacturer. The

original purchaser of the vessel had added a skiff, a seine net and miscellaneous spare parts and these

were all incorporated into the vessel when it was resold to the plaintiff and were destroyed when it

sank. The Supreme Court noted that under its prior holding in East River, although a plaintiff cannot

recover in tort for physical damage a defective product causes to itself, a plaintiff can recover for

physical damage the defective product causes to other property. The issue in Saratoga was whether

the added equipment - the skiff, seine net, etc.- was part of the “product itself” or “other property”

for which the plaintiff could recover. The Court found that “[w]hen a manufacturer places an item

in the stream of commerce by selling it to an Initial User, that item is the ‘product itself’” and

“equipment added to a product after the Manufacturer (or distributor selling in the initial distribution

chain) has sold the product to an Initial User is not part of the product that itself caused physical

harm. Rather, in East River’s language, it is ‘other property’.” 

Eastman argues that in the instant case the soft drinks were an integrated product and the

carbon dioxide was a component of that product. Eastman contends that when the component was

found to be defective the injury was to the product itself - the soft drinks- and proper recovery is

through contract. Eastman references the Court’s quotation of East River at page 1788 of Saratoga:

“Since all but the very simplest of machines have component parts, [a contrary]

holding would require a finding of ‘property damage’ in virtually every case

where a product damages itself. Such a holding would eliminate the distinction

between warranty and strict products liability.”

We do not find that this statement is supportive of Eastman’s contention that the damaged

soft drinks were the product itself of which the carbon dioxide was a component. The quoted
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language was prompted by the plaintiff’s allegations in East River that each turbine was damaged

by defectively designed components. The Court noted that “[s]ince each turbine was supplied by

[the manufacturer] as an integrated package, ... each is properly regarded as a single unit.” In the

case before us the soft drink was not an integrated unit supplied by Eastman. In the language of the

Court in Saratoga the soft drink was not the item placed in the stream of commerce by Eastman.

Eastman cites McCrary v. Kelly Tech. Coating, Inc., an unreported opinion of this court filed

in Knoxville on August 28, 1985. In McCrary the plaintiff, a swimming pool contractor who

painted pools as part of his job, painted a pool with paint manufactured by the defendant. Because

of defects in the paint the plaintiff was required to repaint the pool. Thereafter, the plaintiff filed suit

against the defendant for the cost of repainting. This court determined that the cost of repainting was

a cost of repair and, therefore, an economic loss. Accordingly, the plaintiff was precluded from

recovering from the defendant because there was no privity between the two. In arriving at this

conclusion we noted the following language from White & Summers, Uniform Commercial Code,

§ 11-4 (2nd Ed. 1980) (quoting from Restatement Second, Torts § 402A (1965):

[W]e use the terms “property damage” on the one hand and “economic loss” on

the other to describe different kinds of damage a plaintiff may suffer. An action

brought to recover damages for inadequate value, costs of repair, and replacement

of defective goods or consequent loss of profits is one for “economic loss.”

Property damage, on the other hand, is the Restatement’s physical harm ... to

[user’s] property.

We do not find that our holding in McCrary bars recovery for at least a portion of the damage

alleged by Messer in the case at hand. We concluded our opinion in McCrary by noting that there

was no evidence that the component (the paint) caused physical damage to the end product (the

swimming pool). In the case before us there is evidence that the component (the carbon dioxide) did

cause damage to the end product (separate property of Messer and its customers).

In further support of its argument that the losses suffered by Messer are not losses attributable

to property damage, Eastman cites Trinity Industries, Inc. v. McKinnon Bridge Co., 77 S.W.3d 159

(Tenn. Ct. App. 2001). Under the facts in Trinity, defective structural steel used in the construction

of a bridge caused the bridge to collapse and the steel’s manufacturer was sued for “the damage to

the steel itself and the attendant costs of salvage, storage, and testing.” We determined that these

damages constituted economic loss rather than property damage. In our discussion of the economic

loss doctrine in Trinity we noted that, although Tennessee does not have definitive body of law on

the doctrine, most courts in other jurisdictions “hold that there is tort liability for the sale of goods

only when there is either personal injury or damage to ‘other property’ which was not a part of the

contract for sale” Eastman relies on the following footnote to this statement:

There is a difference of opinion as to what constitutes “other property” to which,

when injury incurs, can be the basis of a negligence cause of action. We think that

the interpretation of “other property” which is most true to the policy behind the
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rule does not include the type of property that one would reasonably expect to be

injured as a direct consequence of the failure of the defective product, as these

losses are essentially damages for failed commercial expectations, or loss of the

benefit of the bargain.

Based upon this footnote Eastman argues that the ruination of the described property of

Messer and Messer’s customers does not constitute injury to “other property” because, as Eastman

states in its brief, “[t]he most obvious consequence of a noncompliance with [contractual

specifications for food grade carbon dioxide] would be ruination of any food or drink product into

which the [carbon dioxide] was combined and recall and destruction of those products.” 

Although Eastman’s argument is supported by the statement set forth in the referenced

footnote, that statement is obiter dictum and as such, does not constitute binding precedential

authority under the doctrine of stare decisis. Shepherd Fleets, Inc. v. Opryland USA, 759 S.W.2d

914 ( Tenn. Ct. App. 1988). In any event, we deem the statement to be overly broad and we agree

with Messer’s contention that if all property that one would reasonably expect to be injured because

of the defective product is excluded from the definition of “other property” this would result in a

remote buyer never being able to recover from a manufacturer for property damage in tort. This

would be so because proximate cause is a prerequisite to such recovery. King v. Danek Medical,

Inc., 37 S.W.3d 429 (Tenn. Ct. App. 2000). The establishment of proximate cause is contingent

upon a showing that the harm giving rise to the cause of action was reasonably forseeable.

McClenahan v. Cooley, 806 S.W. 2d 767 (Tenn. 1991). Therefore, under the dictum cited by

Eastman, by establishing proximate cause, the plaintiff in a tort action against a manufacturer would

necessarily eliminate its damaged property from the category of “other property” and would, thereby,

undermine its case. 

Guided by the Supreme Court’s holding in Saratoga, we are compelled to conclude that the

contaminated feedgas, as the product placed in the stream of commerce by Eastman, was “the

product itself ” and the property of Messer and its customers which was injured as a result of contact

with the contaminated carbon dioxide was “other property.” Messer is not required to establish

privity to maintain its cause of action in tort for damages arising from injury to this other property

and the Trial Court erred in granting summary judgment against Messer on that basis. It is our

determination that Messer’s carbon dioxide which was contaminated as a result of being mixed with

the contaminated carbon dioxide constitutes such injured property. We also find that the soft drink

ingredients and cans of Messer’s customers which were ruined as a result of contact with the

contaminated carbon dioxide fall within this category. We do not, however, agree that the cost

incurred by Messer in cleaning its tanker cars and storage tanks is properly classified as a cost related

to property damage. In McCrary we determined that the costs of repainting the pool, including the

cost of removing the defective paint, was a cost of repair and, therefore, an economic loss. We find

no basis for distinguishing between the cost of cleaning defective paint from the surface of a pool

and the costs incurred by Messer in cleaning its tanker cars and storage tanks. In this regard we note

the following testimony of David Wolff, a witness for Messer, referenced by Messer in its brief:
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Q. To your knowledge, were any cylinders or tankers or storage tanks rendered

not usable because of this HCN situation?

A. I’m not aware of any cylinders, tankers or storage tanks which were rendered

permanently unusable. They needed to be cleaned properly so that they registered

no presence of HCN.

The next two issues are whether summary judgment was appropriate with respecttoMesser’s

fraud claim and whether summary judgment was appropriate with respect to the claim asserted by

Messer under the TCPA . We find it appropriate to address these two issues as one because we

believe that our analysis of the record regarding Messer’s allegations of misrepresentation and

concealment will resolve both issues.

Specifically, Eastman asserts that it made no representations of any kind to Messer and has

not deceived Messer or anyone else. Eastman points out that, under the feedgas agreement, it

contracted with Cryotech to sell it raw feedgas for purification and that Cryotech contemplated that

the feedgas contained HCN as a constituent. Eastman further maintains that the feedgas agreement

with Cryotech disclaimed any representations about the merchantability or fitness of the feedgas,

expressly contemplated that the constituents of the feedgas might change over time and specifically

permitted Cryotech to terminate the agreement if the impurities in the feedgas reached a level at

which Cryotech could no longer process the gas. Eastman also notes that when it found HCN on

Cryotech’s catalyst it immediately notified Cryotech. Finally, Eastman avers that there is no

evidence that Cryotech knowingly failed to remove impurities from the carbon dioxide it sold to

Messer or that Eastman knew of any such failure.

Messer argues that Eastman engaged in deceptive activity when it placed a defective product

in the stream of commerce knowing that it would damage Messer and failed to disclose this to

Messer. Messer contends that Eastman knew that its feedgas was contaminated with HCN

throughout the term of the feedgas agreement, that Eastman knew that on occasion the

concentrations of HCN exceeded levels of 30 parts per million and that Eastman’s own doctor

testified that he would start being concerned for human safety at concentrations over that amount.

Messer further argues that Eastman knew or should have known that the Cryotech facility was

incapable of removing HCN at those levels and that it was, therefore, inevitable that the carbon

dioxide sold by Cryotech would contain HCN. Finally, Messer states that Eastman knew that

Cryotech was selling Messer carbon dioxide and that this carbon dioxide would be resold for human

consumption and, yet, Eastman never informed Messer that the carbon dioxide it purchased from

Cryotech would contain HCN.

The foodgas agreement betweenCryotechandEastman expresslyacknowledges that Eastman

is generating crude carbon dioxide which, “in its raw form, is not suitable for food use” and that

Cryotech “proposes to construct and operate a facility for the purification and liquefaction” of such

carbon dioxide. The product which Cryotech was in the business of selling and producing was food

grade carbon dioxide. The product sold by Eastman to Cryotech was non-food grade carbon dioxide
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There is no evidence that Eastman ever represented to Cryotech, Messer or anyone else that the

product it was selling to Cryotech was fit for human consumption.

In response to Eastman’s argument that it was merely supplying a raw material that Cryotech

alone was responsible for purifying, Messer states that “Eastman’s own documents evidence its

intent that the Eastman carbon dioxide be ‘refined and put in product form’ for delivery to Cryotech

as a ‘food grade carbon dioxide feed stock,’...after which ‘Cryotech further purifies the gas’”

The documents referred to by Messer consist of two internal memoranda generated by

Eastman. We do not agree that a jury could reasonably conclude from the information referenced in

these documents that Eastman represented that it was supplying, or intended to supply, anything

other than non-food grade carbon dioxide. The phrase “food grade carbon dioxide feed stock’ is

derived from an Eastman memorandum the subject of which is designated “Approval for Product

Commercialization for Carbon Dioxide Coproduct” and appears as follows in that document:

Proposal: It is proposed that a coproduct carbon dioxide rich stream be made in

Acid Division and provided to Cryotech as a food grade carbon dioxide feedstock

The only reasonable construction of this sentence, given the language of the feedgas

agreement that the carbon dioxide produced by Eastman is non- food grade, is that the words “food

grade carbon dioxide” do not describe the grade of the feedstock but instead describe the product for

which the “carbon dioxide rich stream” is to serve as feedstock or raw material. The words “refined

and put in product form” appear in an attachment to the same memorandum designated

“Manufacturing Attachment” in the following context:

1. Equipment and Capacity

 The carbon dioxide is produced in the Plant 12 Gasifiers. The CO2 is refined

and put in product form in Plant 14. The capacity is approximately 550 tons of

CO2 per day. Utilization is expected to be about 225 tons CO2 per day.

There is nothing in this language in its original context which could be construed as evidence

that Eastman is producing carbon dioxide fit for human consumption or making that representation.

 Finally, the words “Cryotech further purifies the gas” appear in a separate Eastman

memorandum, the designated subject of which is “Trace Impurities in Carbon Dioxide CoProduct”

and the original context is as follows:

The Gasification department is currently revising the MSDS for carbon dioxide

coproduct (PM 14324). This gas is sold to a company called Cryotech which

further purifies the gas and sells the carbon dioxide to carbonate beverages.
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The implication that the carbon dioxide was purified by Eastman because it is “further “

purified by Cryotech does not constitute proof that the carbon dioxide is produced by Eastman to be

of food grade quality or that Eastman represents it to be such when it is sold to Cryotech.

As Messer concedes in its brief, Tennessee law requires reliance in misrepresentation cases.

Milwee v. Peachtree Cypress Inv. Co., 510 F. Supp. 284 (E. D. Tenn. 1978). However, Messer

contends that such reliance need not be direct reliance, citing Ladd v. Honda Motor Co., 939 S.W.2d

83 ( Tenn. Ct. App. 1996). 

In Ladd a twelve year old plaintiff was paralyzed as the result of injuries he incurred while

operating an all-terrain vehicle manufactured by the defendant. The vehicle was owned by the

plaintiff’s uncle who had allowed the plaintiff to operate it. The uncle testified that he had believed

that his nephew could safely operate the vehicle because of television advertising by the defendant

which depicted children operating all-terrain vehicles. The Court noted the requirement under

section 402B of the Restatement (Second) of Torts that a consumer must justifiably rely upon a

defendant’s misrepresentation before liability will arise. The Court found that “the reliance required

by Section 402(B) need not be that of the injured consumer but may be that of the purchaser who

passes the product along to the ultimate consumer.” Accordingly, Messer indicates that it need not

have directly relied upon misrepresentations by Eastman. 

In Ladd the plaintiff’s uncle reasonably relied upon misrepresentations in the defendant’s

advertising in allowing the plaintiff to operate the vehicle. However, in the instant matter it cannot

be said that Cryotech reasonably relied upon any misrepresentation by Eastman in marketing carbon

dioxide to Messer. As noted above, Eastman never represented that the product it sold to Cryotech

was anything other than non-food grade carbon dioxide. Furthermore, Messer cannot have relied

upon a misrepresentation by Eastman that the feedgas sold to Cryotech did not contain HCN

because, when the alleged injuries occurred to Messer in 1996, Cryotech was well aware that HCN

was a constituent of the feedgas, having been informed of this fact by Eastman in 1993. 

It is our conclusion that Messer has failed to submit evidence which creates a genuine issue

of material fact as to whether it reasonably relied upon a misrepresentation by Eastman and,

therefore, summary judgment dismissal of it’s cause of action for fraud is appropriate.

This Court has hitherto held that a plaintiff under the TCPA is not required to show reliance

upon a misrepresentation by the defendant in order to maintain a cause of action. Harvey v. Ford

Motor Credit Company, an unreported opinion of this Court filed in Knoxville on July 13 1999.

However, there must be a deceptive act by the defendant before the defendant can be held liable

under the TCPA. McDonald’s Corp. v. Shop At Home, Inc., 82 F. Supp.2d 801 (M.D. Tenn. 2000).

Our analysis of the record in this case, as set forth above, compels us to the conclusion that Messer

has failed to establish a genuine issue of material fact as to whether Eastman engaged in a deceptive

act which would subject it to liability under the TCPA Accordingly, summary judgment was also

appropriate as to Messer’s TCPA claim.
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The next issue we address is whether Messer presented evidence establishing a genuine issue

of material fact as to whether Eastman and Cryotech were engaged in an implied partnership or joint

venture. Messer asserts that, as a joint venturer with Cryotech, Eastman is jointly and severally

liable for Messer’s tort and contract claims against Cryotech because Cryotech and Messer were in

privity. 

As defined by T.C.A. 61-1-202(a) a partnership is “the association of two or more persons

to carry on as co-owners of a business for profit....” Joint ventures and partnerships are governed

by the same rules. Federated Stores Realty,Inc. v. Huddleston, 852 S.W.2d 206 (Tenn. 1992).

Although similar to a partnership, a joint venture exists for a more limited time and for a more

limited purpose. Fain v. O’Connell, 909 S.W.2d 790 (Tenn. 1995). 

In Bass v. Bass, 814 S.W.2d 38 (Tenn. 1991) the Tennessee Supreme Court noted as follows

at page 41:

In determining whether one is a partner, no one fact or circumstance may be

pointed to as a conclusive test, but each case must be decided upon consideration

of all relevant facts, actions and conduct of the parties.... If the parties’ business

brings them within the scope of a joint business undertaking for mutual profit –

that is to say if they place money, assets, labor, or skill in commerce with the

understanding that profits will be shared between them – the result is a partnership

whether or not the parties understood that it would be so.... 

Moreover, the existence of a partnership depends upon the intention of the

parties, and the controlling intention in this regard is that ascertainable from the

acts of the parties.... Although a contract of partnership, either express or implied,

is essential to the creation of partnership status, it is not essential that the parties

actually intend to become partners.... The existence of a partnership is not a

question of the parties’ undisclosed intention or even the terminology they use to

describe their relationship, nor is it necessary that the parties have an

understanding of the legal effect of their acts.... It is the intent to do the things

which constitute a partnership that determines whether individuals are partners,

regardless if it is their purpose to create or avoid the relationship.... Stated another

way, the existence of a partnership may be implied from the circumstances where

it appears that the individuals involved have entered into a business relationship

for profit, combining their property, labor, skill, experience, or money.(Citations

omitted.)

The Trial Court found that “Cryotech and Eastman did not have the right to control each

other’s means and methods of doing business or general business activities, and therefore, these

parties were not partners or joint venturers.” Messer contends that the Trial Court’s ruling was in

error, arguing that there was evidence that Eastman would share profits with Cryotech and did, in

fact, share losses with Cryotech and that this alone establishes a prima facie case of joint venture.
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Messer additionally asserts that there was evidence of a substantial community of interest between

Eastman and Cryotech which permits an inference that Eastman had a right of control. And finally,

Messer asserts that there was direct evidence that Eastman had a right of control.

Eastman contends that Messer submitted the same argument, both factually and legally,

regarding an alleged joint venture between Mellon, Cryotech and Eastman in Messer Griesheim v.

Cryotech of Kingsport, 45 S.W.3d 588 ( Tenn. Ct. App. 2001). In that case we determined that “ the

fact that each of the defendants expected to profit from the relationship does not mean that they

expected to share the profits of Cryotech’s business” Accordingly, we found that Mellon was not

involved in a joint venture or partnership with Cryotech and Eastman. Eastman argues that, based

upon that determination Messer, we should also find that there was no joint venture/implied

partnership in the case now before us. We disagree.

Our determination that there was no joint venture/implied partnership between Mellon and

the other two defendants in Messer was based upon Mellon’s status as a secured creditor and we

found that the actions of Mellon referenced by Messer to establish a joint venture/implied partnership

were nothing more than measures taken by Mellon as the financing lessor of the Cryotech facility

to preserve its security interest. Although some of the evidence presented by Messer to establish a

joint venture/implied partnership in the present matter is not dissimilar to that presented in the earlier

case, the relationship between Eastman and Cryotech is not that of a secured creditor and debtor.

The relationship between Eastman and Cryotech is governed by a totally different agreement and is

properly subject to a separate and different analysis.

Before a partnership may be implied the circumstances must show that the parties intended

to share the profits from their joint enterprise. Wright v. Quillen, 909 S.W.2d 804 (Tenn. Ct. App.

1995), citing Pritchett v. Thomas Plater 7 Co., 232 S.W. 961 (1921). Accordingly, absent evidence

showing an intent by Eastman and Cryotech to share profits we must affirm the judgment of the Trial

Court that there was no genuine issue of material fact in this case with respect to the existence of a

joint venture or implied partnership.

Messer points out this Court’s recognition in Messer that “... Cryotech’s profits and

Eastman’s profits seem to be somehow linked to one another....” Although that statement does

appear as dicta in Messer, we did not in any way indicate in that case that Cryotech and Eastman

were sharing, or intended to share, profits. 

With respect to its assertion that Eastman would have shared profits with Cryotech, Messer

notes that, under the terms of the feedgas agreement, Cryotech paid Eastman for the feedgas based

upon the amount of carbon dioxide Cryotech shipped to customers and the price that Cryotech

charged those customers. “If Cryotech’s price to [Messer] increased by 5%, Eastman was entitled

to a 5% increase in the price it charged Cryotech.” Messer contends that a jury could reasonably

conclude that this pricing mechanism amounted to a sharing of profits. 
-14-

Messer relies upon the case of Memphis Natural Gas Co. v. Pope, 161 S.W.2d 211 (Tenn.

1941) in support of its contention that a jury could conclude that Eastman and Cryotech were

engaged in an agreement to share profits. 

In Memphis Natural Gas Co. the Tennessee Supreme Court found that a joint venture existed

between a natural gas company and a power company. Under the facts of that case the gas company

and the power company were both organized in 1928 for the purpose of bringing natural gas from

gas fields in Louisiana to certain areas of Tennessee. The gas company owned and operated pipe

lines which conveyed the gas from Louisiana to stations owned and operated by the power company

from which it was distributed to the power station’s customers. Each party employed its own workers

and made its own purchase of materials. At least eighty per cent of the gas company’s revenues

consisted of monies derived from its business with the power company.

Under the terms of the contract between the gas company and power company the parties

were required to deliver, each to the other, a monthly statement setting forth costs of operation and

maintenance, taxes incurred, amortization costs, gross revenues realized and the amount of net

surplus or net deficit for the contract year. The contract further provided that the combined net

surpluses and net deficits of the parties be equally divided between them by an annual cash

adjustment and by adjustment of the rates charged by the gas company to the power company “in

order as nearly as possible to effect an equal division of any contemplated combined surplus and/or

deficit for the contract year then current and for subsequent contract years.” Finally, the contract

provided that if in any year all the net deficits of both parties were made up and, in addition, the

power company had received from combined net surpluses an amount equal to one and one-half per

cent of certain investment expenses for every contract year to date then the entire balance of the

combined net surplus would be paid to or retained by the gas company. 

 Our Supreme Court noted in Memphis Natural Gas Co. that the sharing of profits of a

business is prima facie evidence of partnership and that “even without joint control of the operations

that produce profits, persons or corporations may establish relationships that will result in a sharing

of profits, each with the other.” The Court found that the above described contractual provisions

set forth a mathematical formula whereby the parties could calculate profits after each was given

specified credits and that profits from the entire enterprise were divided between them. The Court

noted that under the final provision described above the gas company was not only a participant in

the profits from distribution of gas by the power company but that, after a certain situation was

reached, the gas company would receive all the remaining profits of the distribution. 

Messer correctly points out that in Memphis Natural Gas Co., the Court found that “[t]he

price of gas, if there was ever an actual sale, was not and could not be determined until after the gas

had been delivered to the ultimate consumer.” However, the Court’s determination that there was

a joint venture was not based upon this finding. The gas company’s complaint in Memphis Natural

Gas Co. sought to enjoin the collection of excise taxes collectible on intrastate commerce. The gas

company asserted that the gas was sold at a fixed price to the power company and delivered in the

direct flow of interstate commerce. The question before the Court, therefore, was whether the parties
-15-

were engaged in a joint operation at the time the gas was distributed to customers in Tennessee, in

which case the gas company would be engaged in intrastate, rather than interstate, commerce and

would, therefore, be subject to the tax. The question of when the price of the gas became fixed was

raised in relevance to a determination of whether the gas was, as asserted by the gas company, sold

at a fixed rate and then delivered it to the power company in interstate commerce before intrastate

distribution. However, the Court opined at pages 215-216 that the question of when title to the gas

passed was not important in view of the fact that the parties were engaged in a joint operation:

It is not necessary to determine when title to the gas passed to Memphis power

and Light Company, or whether the title ever actually passed. If title passed, then,

still the business conducted in distributing to consumers was for and on behalf of

both these development and operating corporations, and Memphis Natural Gas

Company was engaged through its co-operative in intrastate business in

Tennessee. 

The price of gas, if ever there was an actual sale, was not and could not be

determined until after the gas had been delivered to the ultimate consumer. Our

view is, that there is not a fixed price in article sixth which is merely adjusted by

article eleventh, but in reality there was an operation in which both companies

were jointly interested. There was an allotment of work performed but a division

of the entire results of that work.

While the Court recognized that the price of the gas was not determinable until after delivery

to the customer, its conclusion that the gas company and power company were engaged in a joint

venture was not based upon that fact but rather upon a finding that the contractual provisions

discussed above constituted an agreement to share profits and losses. 

We are further compelled to point out the distinction between profits and gross revenues. 

Tennessee case law has defined profit to mean the net amount after deduction of proper expenses

incident to the business. Jones v. Davidson, 34 Tenn. 447 (1854). We do not agree that a reasonable

jury could conclude that the pricing mechanism whereby the price received by Eastman for its

feedgas increased in proportion to the price Cryotech charged when selling the carbon dioxide it

processed was a device to share profits. Even if this pricing mechanism were conceived to be an

arrangement for sharing funds received those funds would constitute gross returns not profits and,

unlike the sharing of profits, the sharing of gross returns does not of itself establish a partnership.

T.C.A. 61-1-202(b)(2). Messer’s argument that the pricing mechanism constitutes evidence that

Eastman and Cryotech intended to share profits is without merit. 

Messer has failed to present evidence that Cryotech and Eastman intended to share profits

and has, therefore, failed to establish a genuine issue of material fact as to whether those parties were

engaged in a joint venture or implied partnership. Accordingly, the Trial Court’s summary judgment

with respect to this issue is affirmed.
3

Although Eastman contends that, prior to this appeal, Messer did not raise the issue of whether Tennessee law

allows it to recover property damages for breach of warranty even in the absence of privity, the record shows that Messer

did raise this issue at trial in its September 22, 1997, response to Eastman’s motion to dismiss and motion for summary

judgment or partial summary judgment 

-16-

The final issue we address is whether the Trial Court erroneously dismissed Messer’s breach

of warranty claim based upon the fact that there is no privity between Messer and Eastman. Messer

argues that the Trial Court should have applied Pennsylvania law and that under Moscatiello v.

Pittsburgh Contractors Equipment Co., 595 A2d 1198 (Pa. Super. 1991), even absent privity, a

manufacturer can be held liable for economic losses as well as property damage resulting from a

defective product. Eastman apparently does not dispute this construction of Moscatiello. 

Messer asserts that the HCN in the carbon dioxide supplied by Cryotech caused it to be nonconforming to express and implied specificationssetforth in supply agreements entered into between

Messer and Cryotech and resulted in a breach of express and implied warranties in those agreements.

Messer also asserts that the HCN in Eastman’s feedgas gave rise to breach of warranty claims by

Cryotech against Eastman. Although there is privity between Eastman and Cryotech and between

Cryotech and Messer, there is no privity between Messer and Eastman. However, as previously

indicated in this opinion, we have found that a portion of the damages alleged by Messer arise from

injury to property. Messer is entitled to pursue its claim for property damage under a breach of

warranty theory in Tennessee even in the absence of privity. T.C.A. 29-34-104 and Commercial

Truck & Trailer Sales v. McCampbell, 580 S.W.2d 765 (Tenn. 1979).3

 But Tennessee law does not

allow recovery of economic losses under a breach of warranty theory absent privity and, unless we

determine that Pennsylvania law, rather than Tennessee law, applies to Messer’s breach of warranty

claims we must affirm the Trial Court’s summary judgment to the extent those claims seek recovery

for economic losses. 

Messer asserts, and the record confirms, that it was sold the contaminated carbon dioxide 

pursuant to supply agreements it entered into with Cryotech and that those agreements provide that

they shall be governed by Pennsylvania law, citing Vantage Technology, LLC v. Cross, 17 S.W.3d

637 (Tenn. Ct. App. 1999). Messer argues that, since Messer and Cryotech chose Pennsylvania law

to govern their supply agreements, Pennsylvania law should govern its warranty claims against

Eastman notwithstanding the fact that such claims were filed in Tennessee. Messer also cites T.C.A.

47-1-105 in support of this argument apparently relying on subsection (1) of that statute which states

as follows:

 (1) Except as provided hereafter in this section, when a transaction bears a

reasonable relation to this state and also to another state or nation the parties may

agree that the law either of this state or such other state or nation shall govern their

rights and duties....

In Vantage this Court found that a provision in a covenant not to compete between the

plaintiff employer and the defendant employee was a valid choice of law clause calling for the
-17-

application of Tennessee law. However, in that case both plaintiff and defendant were parties to the

agreement containing the choice of law provision. In the instant matter Eastman was not a party to

the supply agreements entered into between Messer and Cryotech and, therefore, the described

choice of law provision does not merit a finding that Pennsylvania law governs Messer’s warranty

actions against Eastman. Messer presents no authority for the argument that the agreements entered

into between itself and Cryotech are determinative of the proper law to be applied in Messer’s

warranty claims against Eastman.

Messer further contends that it is otherwise appropriate that the law of Pennsylvania govern

in this case because that is where both Messer and Cryotech are headquartered and that is where

Cryotech executed the feedgas agreement with Eastman. Messer also asserts that Pennsylvania law

should apply because it sustained at least a portion of its damages in Pennsylvania, referencing

witness testimony that the carbon dioxide purchased from Cryotech was placed in a storage tank at

Messer’s terminal in Philadelphia where it was mixed with carbon dioxide from other suppliers,

indicating that that is where Messer’s storage tank and other carbon dioxide were contaminated due

to contact with the contaminated product purchased from Cryotech. Messer also states that it has

consistently asserted that Pennsylvania law applies, that it pleaded claims in its amended complaint

underPennsylvania law and that Eastman did not specifically contest the application of Pennsylvania

law in its answer to that complaint. However, Messer fails to cite authority for the proposition that

any of these factors dictates that Pennsylvania law should be applied in this case and, accordingly,

its argument that Pennsylvania law applies based upon each of these factors may be deemed to be

waived. Failure to cite authority for propositions in arguments submitted on appeal constitutes

waiver of the issue. State v. Brown, 795 S.W.2d 689 (Tenn. Cr. App. 1990) and Rhea County v.

Town of Graysville, an unreported opinion of this Court filed in Knoxville on July 25, 2002.

However, even in light of these factors referenced by Messer, we do not agree that the record

supports Messer’s argument that Pennsylvania law should be applied in this case. 

In Hataway v. Mckinley, 830 S.W.2d 53 (Tenn. 1992) our Supreme Court abandoned the lex

loci delecti doctrine which required that the substantive rights of an injured party in a tort case be

determined according to the law of the state where the injury occurred. In its place the Court adopted

the “most significant relationship” approach of the Restatement (Second) of Conflict of Laws. At

page 59 the Court cites §145 of the Restatement which provides under subsection (2) that the

following contacts are to be taken into account in determining the law applicable to an issue:

(a) the place where the injury occurred,

(b) the place where the conduct causing the injury occurred, 

(c) the domicile, residence, nationality, place of incorporation and place of

business of the parties, 

(d) the place where the relationship, if any, between the parties is centered.

In Vantage, ibid. at page 650 we set forth Tennessee’s conflict of law doctrine applicable to

contractual claims as follows:
-18-

Tennessee follows the rule of lex loci contractus. This rule provides that

a contract is presumed to be governed by the law of the jurisdiction in which it

was executed absent a contrary intent. Ohio Cas. Ins. Co. v. Travelers Indem. Co.,

493 S.W.2d 465, 467 (Tenn. 1973).

If the parties manifest an intent to instead apply the laws of another

jurisdiction, then that intent will be honored provided certain requirements are

met. The choice of law provision must be executed in good faith. Goodwin Bro.s

Leasing, Inc. v. H & B Inc., 597 S.W.2d 303, 306 (Tenn. 1980). The jurisdiction

whose law is chosen must bear a material connection to the transaction. Id. The

basis for the choice of another jurisdiction’s law must be reasonable and not

merely a sham or subterfuge. Id. Finally, the parties’ choice of another

jurisdiction’s law must not be “contrary to ‘a fundamental policy’ of a state having

[a] ‘materially greater interest’ and whose law would otherwise govern.” Id., n.

2 (citing RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187(2)

(1971).

Whether Messer’s claims are analyzed under the conflict of law doctrine applicable to

matters arising in tort or that applicable to matters arising in contract, it is our determination that

Tennessee law should govern this case. The feedgas containing HCN was produced at Eastman’s

factory in Tennessee and Eastman performed its duties under the feedgas agreement in Tennessee,

thus the actions/omissions attributed to Eastman by Messer would appear to have taken place in

Tennessee. The feedgas was supplied to Cryotech at Cryotech’s facility in Tennessee. Cryotech

processed the feedgas received from Eastman in Tennessee and delivered the contaminated carbon

dioxide to Messer in Tennessee. Finally, the feedgas agreement between Eastman and Cryotech

provides that that agreement “shall be governed and construed according to the laws of the State of

Tennessee.” Under these circumstances we believe it is appropriate to apply Tennessee law in this

case and Messer’s argument for the application of Pennsylvania law is without merit.

For the foregoing reasons we affirm in part, vacate in part and remand for further action

consistent with our decision herein. Costs of appeal are adjudged equally against Messer and

Eastman.

_________________________________________

HOUSTON M. GODDARD, PRESIDING JUDGE