Factory Mutual Insurance, Co. v. Alon USA, L.P., e
705 F.3d 518
5th Cir.2013Background
- FM insured the Scalfuel plant at Veolia's facility; explosion destroyed plant on Feb 18, 2008; FM paid Veolia's claim and pursued subrogation against Alon for negligence; damages measured by pre-loss fair market value, with dispute over valuation method; district court used replacement cost adjusted for betterment and depreciation to compute damages ($3,790,391.96); Alon appealed challenging replacement cost and specific inputs (35% depreciation and 2.25 multiplier); court affirmed district court’s decision and addressed admissibility of expert testimony under Rule 703.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper measure of damages where no market exists | FM seeks replacement cost with depreciation; no market for Scalfuel plants | Alon argues component-pricing reflects market value | Replacement cost appropriate; no market exists; affirmed |
| Rule 703 credibility of depreciation testimony | Miles sufficiently relied on data from Veolia employees | Miles relied on hearsay without independent analysis | No abuse of discretion; Miles reasonably used information from experts for depreciation; affirmed |
| Reasonableness of the 2.25 multiplier | Multiplier within Veolia’s practice range | Multiplier lacks explicit factual basis | Not clearly erroneous; multiplier within range; affirmed |
Key Cases Cited
- Seminole Pipeline Co. v. Broad Leaf Partners, Inc., 979 S.W.2d 730 (Tex. App.—Houston [14th Dist.] 1998) (measures of damages for nonmarket values; replacement value when market not available)
- Gulf States Utils. Co. v. Low, 79 S.W.3d 561 (Tex. 2002) (replacement value permissible when market data lacking)
- City of Harlingen v. Estate of Sharboneau, 48 S.W.3d 177 (Tex. 2001) (when market data lacking, replacement value appropriate)
- Thomas v. Oldham, 895 S.W.2d 352 (Tex. 1995) (measures market value as value before vs after injury)
- In re James Wilson Assocs., 965 F.2d 160 (7th Cir. 1992) (rules on admissibility of expert reliance on hearsay material)
- Mejia, 545 F.3d 179 (2d Cir. 2008) (limits on experts parroting hearsay under Rule 703)
- Loeffel Steel Prods., Inc. v. Delta Brands, Inc., 387 F. Supp. 2d 794 (N.D. Ill. 2005) (agency of relying on others' figures; required expert analysis)
- Primrose Operating Co. v. Nat’l Am. Ins. Co., 382 F.3d 546 (5th Cir. 2004) (admissibility of expert testimony and Rule 703 gatekeeping)