Court Opinion

ID: 167844
Source: CourtListenerOpinion
Date Created: 2010-08-14 10:04:45+00
Date Added: 2024-06-11T17:24:54.723844
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                     UNITED STATES CO URT O F APPEALS
                                                                        July 26, 2006
                            FO R TH E TENTH CIRCUIT                 Elisabeth A. Shumaker
                                                                        Clerk of Court

    TRAVELERS IND EM NITY
    COM PA NY, as subrogee of
    Commercial Brick Corporation,

                Plaintiff-Appellant,               Nos. 04-7062 & 04-7128
                                                   (D.C. No. 03-CV-389-W )
    v.                                                   (E.D. Okla.)

    H A N S LIN G L A N LA G EN BA U UND
    V ERFA H REN STEC HN IK G MBH &
    C O. K G ; TH E N O RTH A ME RICAN
    M A N U FACTU RIN G CO M PA NY,
    LTD.; ENCERTEC, IN C.,

                Defendants-Appellees.

                             OR D ER AND JUDGM ENT *

Before H E N RY, A ND ER SO N, and TYM KOVICH, Circuit Judges.

         After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of

these consolidated appeals. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G ).

The cases are therefore ordered submitted without oral argument.

*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
      This lawsuit arises from a kiln explosion that occurred in W ewoka,

Oklahoma on D ecember 28, 2000. Commercial Brick Corporation (CBC) owned

and operated the commercial kiln, known as Kiln B, to make bricks. Plaintiff

Travelers Indemnity Co. (Travelers), CBC’s insurance carrier, paid over $4

million on CBC’s claim for property damage and business interruption losses.

The defendants provided various components to the structure and operation of

Kiln B. Claiming those components were defective and caused the explosion,

Travelers, as subrogee of CBC, sued defendants to recover the insurance pay-out.

The district court granted summary judgment to defendants. In a later order, the

district court ordered Travelers to pay defendants’ attorney fees. Travelers

appeals both judgments, which we have consolidated for disposition.

                                  I. Background

      Kiln B is a brick making facility. It was constructed in 1981 by defendant

Hans Lingl Anlagenbau Und Verfahrenstechnik G M BH & Co. KG (Lingl KG),

and upgraded in 1997–1998, using components provided and installed by

defendants North American M anufacturing Co., Ltd. (NAM CO) and Encertec,

Inc. One of the upgraded components, made by NAM CO, was a set of preheat

burners equipped with a Flame Supervision System (FSS). The purpose of the

FSS was to stop the flow of natural gas to the preheat burners when a flame w as

not detected.

                                        -2-
      After its installation, the FSS repeatedly malfunctioned, causing the burners

to shut down even in the presence of a flame. Consequently, CBC’s foreman,

Leonard Dooley, wired around the FSS, effectively disabling it, so the burners

would continue to operate and CBC would not suffer a loss of brick production.

      A pow er outage caused the kiln to shut down on December 26, 2000. On

December 28, CBC employees started the kiln without incident. The explosion

happened during a second start-up procedure necessitated by the failure of a

pressure blower after the first start-up. Foreman D ooley told a fireman to shut off

the gas valves going to the preheat burners, but the fireman failed to do so, and

Dooley did not check. Dooley also did not check the vestibule door or the kiln

door. Therefore, unbeknownst to the CBC employees, gas flowed into the kiln

via the preheat burner valves for five to seven minutes before the ignition switch

was thrown, causing the explosion.

      After paying CBC on its insurance policy, Travelers filed suit in CBC’s

shoes, alleging various theories of recovery. During the discovery phase,

Travelers designated Philip Ambrose as its corporate deponent, pursuant to Fed.

R. Civ. P. 30(b)(6). M r. Ambrose declined to answer deposition questions about

the factual bases for Travelers’ claims, following the advice of counsel. Travelers

maintained that the information sought was protected by the attorney-client

privilege and the work-product doctrine. During the deposition, the parties

telephoned the district judge, who declined to grant defendants’ motion to compel

                                         -3-
because it would be futile to order a witness to answ er questions to which he said

he did not know the answ er. The district judge warned Travelers, however, that if

it continued to deny knowledge and refuse to reveal information, it could not later

claim knowledge in any summary-judgment proceedings. In his later order

granting summary judgment to defendants, the judge characterized Ambrose’s

deposition testimony as “effectively [giving] no answer, [which stood] as

plaintiff’s evidentiary presentation.” Aplt. App. Vol. 8, at 1734. Accordingly,

the district judge granted summary judgment to defendants, holding that Travelers

was precluded from presenting evidence in addition to or contrary to the evidence

it produced at the Rule 30(b)(6) deposition, which was inadequate to resist

summary judgment.

      The district court also issued an alternative ruling in granting summary

judgment to defendants. After considering Travelers’ expert reports, the district

court concluded that Travelers’ failed to prove causation for purposes of summary

judgment. The court also rejected Travelers’ agency theory against defendant

Lingl KG because it was raised too late in the proceedings. Finally, the court

awarded attorney fees in full to all defendants as prevailing parties.

      Travelers appeals the district court’s grant of summary judgment based on

its trial tactics. It also appeals the summary judgment entered on the merits based

on products liability against all defendants, and breach of warranties against

NAM CO only. Travelers contends that the following four components of the

                                          -4-
1997-1998 upgrade were defective and caused the explosion: the purge system, 1

explosion relief, 2 the FSS and preheat burners, and lack of written warnings and

instructions. Travelers has abandoned on appeal all other claims, including those

for negligence and breach of contract.

                                   II. Discussion

A. Travelers’ Litigation Tactics

      Before turning to the merits, we address the district court’s grant of

summary judgment based on Travelers’ obdurate litigation tactics. In directing its

corporate representative not to answ er numerous relevant questions germane to its

complaint, Travelers’ counsel invoked the attorney-client privilege and

work-product doctrine. M ost of these objections were entirely baseless; the

objectionable questions merely sought routine factual support for the allegations

underlying the complaint.

      Even though we do not affirm on this ground, we express our strong

disapproval of Travelers’ deposition tactics. Travelers w ould have had difficulty

1
      “A properly designed timed purge system w ill ensure that there will be no
accumulation of gas in the kiln at the time the burners are ignited.” Aplt. App.
Vol. 4, at 853 (report by Raymond Ostrowski, expert witness endorsed by
Travelers).
2
      “Explosion relief is simply a wall section or panel fitted to the furnace and
designed such that the material has less resistance to an explosion than the
furnace itself. The relief components are designed to fail, vent the explosion and
minimize the damage and destructive effects to the kiln.” Aplt. App. Vol. 2, at
403 (report by W illiam M . Norman, consulting engineer engaged by Travelers).

                                         -5-
demonstrating an abuse of discretion in the district court’s discovery rulings,

particularly since Travelers did not follow the preferred course of action and seek

a pre-deposition order on its unusual work-product position. See Cummings v.

Gen. M otors Corp., 365 F.3d 944, 952-53 (10th Cir. 2004) (reviewing district

court’s discovery rulings for abuse of discretion); Resolution Trust Corp. v.

Dabney, 73 F.3d 262, 266-67 (10th Cir. 1995) (chastising counsel for not seeking

pre-deposition order, despite his pre-deposition belief that the work-product

doctrine might foreclose certain lines of questioning).

B. Summary Judgment

      1. Legal Standards

      In this diversity action we apply Oklahoma substantive law. See

Cooperm an v. David, 214 F.3d 1162, 1164 (10th Cir. 2000). W e review de novo

the district court’s grant of summary judgment, viewing the record in the light

most favorable to the party opposing summary judgment. Lanm an v. Johnson

County, 393 F.3d 1151, 1154-55 (10th Cir. 2004). Summary judgment is

appropriate if there is no genuine issue of material fact and the moving party is

entitled to judgment as a matter of law . Fed. R. Civ. P. 56(c); Celotex Corp. v.

Catrett, 477 U.S. 317, 322-23 (1986).

                                         -6-
      2. Products Liability Claims Against NAM CO and Encertec

      Travelers contends that Kiln B was defective after the upgrade. As noted

above, it maintains the following defects caused the explosion: the FSS and

preheat burners, the lack of a purge system, and the lack of an explosion relief

system. Travelers further claims that the component products were defective due

to the lack of written warnings and instructions.

      As an initial matter, although the briefs are unclear on this point, Travelers

has not established that any defendant contracted to provide either a purge system

or an explosion relief system as part of the upgrade. Instead, Travelers argues

that the safety standards promulgated by the National Fire Protection Association

(NFPA) imposed an affirmative duty on defendants to undertake to install these

systems in Kiln B, even though CBC did not specifically request such an overhaul

of the kiln or contract to pay for them. 3 Travelers has cited no authority for its

position that the NFPA standards place any duty on NAM CO or Encertec, and

under the circumstances of this case, we decline to entertain this argument. See

Simpson v. T.D. Williamson Inc., 414 F.3d 1203, 1206 n.4 (10th Cir. 2005)

(declining to address claims unless supported by legal authority or by argument

that position is sound despite lack of authority); cf. Fellers v. St. Louis-San

Francisco Ry. Co., 572 P.2d 972, 977 (Okla. 1977) (Simms, J., dissenting) (noting

3
      As noted, Travelers has abandoned its claims for breach of contract and
negligence.

                                          -7-
that industry standards, “[w]hile not carrying the force of law, . . . are recognized

as relevant and material on the issue of negligence”). Therefore, we will consider

only Travelers’ arguments based on the FSS and preheat burners, as well as the

lack of written warnings and instructions.

      Under Oklahoma law, a products-liability plaintiff must prove that the

defective product was the cause of the injury. Prince v. B.F. Ascher Co., 90 P.3d

1020, 1026 (Okla. Civ. App. 2004); accord Kirkland v. Gen. M otors Corp., 521

P.2d 1353, 1363 (Okla. 1974). “If some act of the plaintiff caused the injury,

rather than the defective product itself, causation is missing, and the plaintiff may

not recover.” Kirkland, 521 P.2d at 1366.

      Oklahoma law defines a proximate cause “as one that, ‘in the natural and

continuous sequence, produces [the plaintiff’s] injury and without which the

injury would not have happened.’” Woolard v. JLG Indus., Inc., 210 F.3d 1158,

1172 (10th Cir. 2000) (quoting Dirickson v. M ings, 910 P.2d 1015, 1018–19

(Okla. 1996)) (further quotation omitted). An asserted causal connection may be

rejected if a factfinder must “heap conclusion upon conclusion as to the course

events would have taken . . . in order to establish the causal connection between

the defective [product] and the ultimate [damage].” Hardy v. Sw. Bell Tel. Co.,

910 P.2d 1024, 1029 (O kla. 1996) (quotation omitted).

      Travelers submitted reports of two experts, both of whom opined that the

explosion could have been avoided or the damages minimized if Kiln B operated

                                          -8-
with an effective purge system and explosion relief system. Neither expert said

the condition of the FSS or the preheat burners caused or contributed to the

explosion. Furthermore, Traveler’s initial investigator stated that “[t]he explosion

was caused by employees failing to insure that the gas valves to the preheat

burners had been shut off prior to igniting the preheat burners.” Aplt. App. Vol.

3, at 570. That was also the opinion held by Foreman Dooley and CBC’s

president. Id. Vol. 1, at 132; Vol. 6, at 1219.

      Travelers first argues that the fact of CBC employees’ negligence as a

contributing cause of the explosion does not defeat its products-liability claim

because contributory negligence is irrelevant to the claim. See Hogue v. A.B.

Chance Co., 592 P.2d 973, 975 (Okla. 1978) (holding contributory negligence not

relevant to products liability action absent showing that plaintiff knew of danger).

However, this argument misses the mark because liability may only be imposed

on defendants if plaintiffs first prove that defendants’ product caused the harm.

      It is undisputed that the FSS was not in use and that the preheat burners “lit

and ran fine.” Aplt. App. Vol. 1, at 160. Consequently, Travelers rests its legal

theory on the following logic: if the FSS had w orked properly it would not have

been disabled and would have turned off the gas flow to the preheat burners,

which, in turn, would have prevented the kiln from igniting, thus preventing the

explosion.

                                          -9-
      This theory does not withstand scrutiny. It attempts to impose liability on a

manufacturer not because the product did not function as designed, but because it

had been disabled by the user. Travelers confuses CBC’s failure to maintain the

FSS system w ith a failure of the system to operate properly. Under this logic,

however, one could just as easily presume that if the FSS had not been disabled, it

would have prevented the explosion. Or, conversely, one could also easily

presume that if the FSS had been repaired, the explosion also would have been

avoided. But to assume that a worker’s zeal to ignite the kiln and subsequent

dismantling of the FSS that might have prevented the explosion, is no basis to

show that the FSS proximately caused the accident. In short, for Travelers to

prevail under its theory of causation, a factfinder would be required

impermissibly to “heap conclusion upon conclusion as to the course events w ould

have taken” in order to find that defendants’ products caused the explosion. See

Hardy, 910 P.2d at 1029. Accordingly, we affirm the district court’s

determination that a reasonable factfinder could not conclude that the disabled

FSS proximately caused CBC’s injuries under a theory of strict product liability. 4

      Travelers also argues that defendants’ products were defective because they

did not come with written warnings and safety labeling. It contends that it is

entitled to the rebuttable presumption that CBC employees would have read and

4
      In so holding, we need not address the district court’s alternative rulings on
supervening cause, assumption of the risk, and misuse of the product.

                                        -10-
heeded an adequate warning. See Black v. M & W Gear Co., 269 F.3d 1220,

1231-32 (10th Cir. 2001) (applying Oklahoma law). The presumption can be

rebutted with evidence that the plaintiff would not have followed the warning. Id.

at 1232. In addition, Oklahoma law provides that “[w]here the danger or

potentiality of danger is known or should be known to the user, the duty to w arn

does not attach.” Prince, 90 P.3d at 1027. Furthermore, there is no duty to w arn

a knowledgeable user of the dangers of a product, and there is no duty to warn of

an obvious danger. Duane v. Okla. Gas & Elec. Co., 833 P.2d 284, 286 (Okla.

1992). “The plaintiff must establish that the failure to warn was a proximate,

producing cause of the injuries received.” Id.

      W e agree with the district court that this claim also fails as a matter of law.

Foreman D ooley testified that he knew it was unsafe to operate the kiln with the

FSS disabled. M oreover, it is undisputed that CBC operated the kiln from 1981,

when it was first constructed, until the 2000 explosion, fully aw are of the kiln’s

safety features, including the FSS. W e agree with the district court that CBC was

a knowledgeable user who could be expected to, and did, appreciate the danger of

disabling the FSS. Accordingly, there was no duty to warn.

      3. Breach of Warranty Claims Against NAMCO

      To prevail on its claims for breach of warranty, Travelers must demonstrate

that the breach “was the proximate cause of the loss sustained,” in addition to

showing the existence of a warranty and a breach of it. Am. Fertilizer Specialists,

                                         -11-
Inc. v. Wood, 635 P.2d 592, 595 & n.10 (Okla. 1981). Our conclusion that

Travelers’ evidence of causation is insufficient to resist summary judgment as to

its products-liability claims also defeats its breach-of-warranty claims against

NAM CO.

       4. Claims Against Lingl KG.

       Finally, Travelers’ claims against Lingl KG are without merit. Travelers’

theory of liability against Lingl KG was that Encertec was Lingl KG’s agent. The

district court ruled that this agency theory was raised too late in the proceedings.

W e need not review this ruling, however, because we have concluded that

Encertec is not liable to Travelers. Consequently, even if Encertec were Lingl

KG’s agent, no liability would attach to Lingl KG. See, e.g., Sisk v. J.B. Hunt

Transport, Inc., 81 P.3d 55, 60 & n.21 (Okla. 2003) (stating where agent not

liable, principal also not liable).

C. Attorney Fees

       Travelers contends that the district court erred in awarding attorney fees to

defendants not authorized under Oklahoma law. In particular, it argues that

Oklahoma law does not allow the award of fees in successfully defending

products liability claims, although it acknowledges that prevailing-party attorney

fees were authorized on the claims for breach of warranty and negligent or willful

injury to property. See Okla. Stat. tit. 12, §§ 936, 939 & 940. As a result,

Travelers contends the district court should have apportioned fees among the

                                         -12-
various theories of liability, thereby reducing the overall amount of the award.

Defendants do not claim that Oklahoma law permits an attorney fee award for a

products-liability claim; rather, defendants maintain that their defense to all of the

various theories of recovery was the same. Therefore, defendants claim

apportionment was not required.

        Generally, an award of attorney fees is reviewed for an abuse of discretion.

Browder v. City of M oab, 427 F.3d 717, 719 (10th Cir. 2005). “[W ]e review de

novo whether the district court applied the correct legal standard, and we review

its findings of fact for clear error.” Id.

        The Oklahoma Supreme Court has held that attorney fees must be

apportioned between claims for which there is statutory authority for an award of

attorney fees and those for w hich there is not. Green Bay Packaging, Inc. v.

Preferred Packaging, Inc., 932 P.2d 1091, 1098 (Okla. 1996); Sisney v. Smalley,

690 P.2d 1048, 1051-52 (Okla. 1984). But where non-authorized claims contain

comm on components of a claim for which attorney fees are authorized, it may be

proper to award fees without apportionment. Green Bay Packaging, 932 P.2d at

1098.

        Here, defendants’ opposition to the products-liability claims was the same

as its defense to the other claims— the explosion was caused by CBC employees’

                                             -13-
actions and not by any of the defendants’ products or services. 5 Accordingly, it is

apparent that the time defendants’ attorneys devoted to the products-liability

claims was necessarily incurred in defending the other claims, for which attorney

fees are authorized. See Transpower Constructors v. Grand River Dam Auth., 905

F.2d 1413, 1423 (10th Cir. 1990) (applying Oklahoma law to hold that prevailing

party can recover fees for his attorney’s work on claims not covered by

fee-shifting statute where those fees were necessarily incurred on claims for

which attorney fees w ere authorized). Therefore, we hold that the district court

did not err in refusing to apportion the attorney fee award, and we affirm the

award.

      The judgment of the district court is AFFIRMED.

                                                    Entered for the Court

                                                    Timothy M . Tymkovich
                                                    Circuit Judge

5
      As Travelers points out, defendants did not argue that the products were not
unreasonably dangerous, a theory limited to the products-liability claim. If
defendants had, the attorney fees generated for such a defense arguably should
have been deducted.

                                        -14-