Case Information
*1 #26956-a-SLZ
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *
NATIONWIDE MUTUAL
INSURANCE COMPANY, Plaintiff and Appellant,
v.
BARTON SOLVENTS, INC. and
CITGO PETROLEUM CORPORATION, Defendants and Appellees.
* * * *
APPEAL FROM THE CIRCUIT COURT OF THE THIRD JUDICIAL CIRCUIT LAKE COUNTY, SOUTH DAKOTA * * * *
THE HONORABLE TIM D. TUCKER
Judge
* * * *
MITCHELL A. PETERSON
JUSTIN T. CLARKE of
Davenport, Evans, Hurwitz & Smith, LLP
Sioux Falls, South Dakota Attorneys for plaintiff
and appellant.
MICHAEL F. TOBIN
GARY J. PASHBY of
Boyce, Greenfield, Pashby & Welk, LLP
Sioux Falls, South Dakota Attorneys for defendant and
appellee Barton Solvents, Inc. * * * *
ARGUED ON AUGUST 26, 2014 OPINION FILED 10/01/14 *2 WILLIAM C. GARRY of
Cadwell, Sanford, Deibert & Garry, LLP
Sioux Falls, South Dakota
and
WILLIAM S. BOOTH of
Eimer, Stahl, Klevorn & Solberg, LLP
Chicago, Illinois Attorneys for defendant and
appellee Citgo Petroleum Corporation.
ZINTER, Justice
[¶1.] A.H. Meyer & Sons, Inc. (A.H. Meyer) owned and operated a honey and beeswax processing plant that exploded. The explosion was caused by heptane vapors that were ignited by an electrical switch in the plant. Nationwide Mutual Insurance (Nationwide) paid for the damage and filed suit seeking subrogation from the supplier and the manufacturer of the heptane. Nationwide pleaded causes of action for strict liability and negligence premised on the theory that the defendants failed to adequately warn of heptane’s dangers. Nationwide also pleaded causes of action for breach of express and implied warranties. The circuit court granted the defendants’ motion for summary judgment. We affirm.
Facts and Procedural History
[¶2.] A.H. Meyer produced honey and beeswax at its plant in Winfred, South Dakota. A.H. Meyer was owned by Jack Meyer, Jr. (Jack) and J.B. Meyer (J.B.). J.B. took over operations from his grandfather, Jack Meyer, Sr. Barton Solvents, Inc. (Barton Solvents) marketed, sold, and distributed heptane, a highly volatile and combustible solvent manufactured by CITGO Petroleum Corporation (CITGO). A.H. Meyer used heptane in its beeswax rendering process. Barton Solvents sold heptane to A.H. Meyer for over twenty years and had observed A.H. Meyer’s plant on at least one occasion.
[¶3.] Barton Solvents delivered the heptane to a 10,000 gallon tank located outside the plant. The heptane was then pumped and stored in a “kettle,” a 150- gallon storage tank, inside the plant. Because liquid heptane would occasionally spill from the top of the kettle and vaporize, A.H. Meyer installed a ventilation system in an attempt remove the heptane vapors from the plant.
[¶4.] Barton Solvents provided A.H. Meyer with CITGO’s Material Safety Data Sheet (MSDS) with each delivery. The MSDS was a ten-page document that described the volatile nature of heptane, listed its potential hazards, and provided other warnings. The MSDS specifically warned that heptane liquid and vapor were “extremely flammable” and “may cause flash fire[s].” Right beneath that warning, the MSDS warned that the “[v]apor may travel considerable distance to source of ignition and flash back.” The MSDS therefore recommended that heptane be used only with “adequate” ventilation. The MSDS also warned that “[a]ll electric equipment should comply with the National Electrical Code.” The National Electrical Code (NEC) referenced many recommended practices of the National Fire Protection Association (NFPA). NFPA 497 contained recommended practices for flammable liquids, gases or vapors, as well as the location and selection of electrical installations in chemical process areas. By illustration, NFPA 497 recommended a five-foot distance between heptane and ignition sources such as standard (non- explosive proof) electrical switches. The recommended practices were to be applied with “sound engineering judgment.”
[¶5.] A.H. Meyer suffered two heptane explosions at its plant. The first explosion occurred in 2004. It was caused when a standard electrical switch, 1. Barton Solvents also provided warning labels that Jack personally affixed to the 10,000 gallon tank.
located four feet from heptane, ignited heptane vapors. Jack Meyer, Sr. designed a new plant following the 2004 explosion. A.H. Meyer contacted Premier Engineering, Inc., an electrical and mechanical engineering company, for consultation as to what electrical changes needed to be made to the new facility to avoid another explosion. Premier Engineering told A.H. Meyer that standard electrical switches should not be within five feet of heptane. A.H. Meyer also consulted with the State Fire Marshall regarding risks of fire and explosion. [¶6.] In the new plant, standard switches were installed a minimum of five feet from the kettle and five feet above the floor (because heptane vapor is heavier than air causing it to sink to the floor). Following reconstruction in 2006, a South Dakota State Electrical Inspector conducted a final inspection of the building. He indicated the building “was in compliance with South Dakota Laws and Rules and the National Electric Code.”
[¶7.] The explosion at issue occurred in 2009 when heptane spilled from the kettle and an A.H. Meyer employee pressed a standard switch to turn off a pump. Duane Wolf, a mechanical engineer, was retained as Nationwide’s expert witness in this litigation. He concluded through experimental tests that the ventilation system A.H. Meyer installed possibly had the opposite effect that was intended: it stirred up heptane vapors and moved them more than five feet to a point where they were ignited by the standard electrical switch.
2. As early as 1986, A.H. Meyer was aware that heptane vapors could be ignited by standard electrical switches.
[¶8.] Nationwide filed suit against Barton Solvents and CITGO on causes of action alleging strict liability, negligence, breach of express warranty, breach of implied warranty of fitness for a particular purpose, and breach of implied warranty of merchantability. All theories were directly or indirectly based on the contention that Barton Solvents and CITGO provided inadequate warnings of the dangers of the use of heptane.
[¶9.] Barton Solvents and CITGO moved for summary judgment. They argued that A.H. Meyer failed to meet its summary judgment burden of identifying specific facts showing inadequacy of the warnings. The circuit court agreed with the defendants and granted summary judgment. On appeal, Nationwide contends that summary judgment was inappropriate because material issues of disputed fact existed with respect to the adequacy of the warnings.
Decision Summary judgment is appropriate “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” SDCL 15-6-56(c). “We view all
reasonable inferences drawn from the facts in the light most favorable to the non-
moving party.”
Luther v. City of Winner
,
Products Liability Nationwide argues that the defendants were negligent and strictly
liable because they failed to give adequate warnings of the dangers posed by A.H. Meyer’s use of heptane. Nationwide contends that the warnings were inadequate because Barton Solvents knew of A.H. Meyer’s use of heptane, A.H. Meyer complied with the NFPA 497 five-foot spacing electrical equipment recommendation, but the explosion still occurred. Nationwide contends that a disputed question of material fact exists regarding the adequacy of the warning. Barton Solvents and CITGO concede that the explosion occurred even
though A.H. Meyer complied with the five-foot spacing recommendation. However, they contend that Nationwide failed to identify expert testimony or any evidence indicating the MSDS, NEC, and NFPA 497 warnings were inadequate. They further contend that even though the electrical switch met the five-foot spacing recommendation, the mere fact of an accident is insufficient to prove negligence or strict liability. Negligence in products liability actions involving inadequate warnings
requires a plaintiff to “show that the manufacturer or seller failed to exercise
reasonable care to inform those expected to use the product of its condition or of the
facts which make it likely to be dangerous.”
Jahnig v. Coisman
,
and of itself to meet the summary judgment burden of identifying specific facts to
support the elements of a plaintiff’s product liability claim.
See id
. ¶ 38, 737
N.W.2d at 410. “[T]hose resisting summary judgment must show that they will be
able to place sufficient evidence in the record at trial to support findings
on all the
elements
on which they have the burden of proof.”
Chem-Age Indus., Inc. v. Glover
,
both causation and inadequate warnings are separate but necessary elements of
negligence and strict liability. They are also elements on which Nationwide bore
the burden of proof at trial. Therefore, to successfully resist summary judgment,
Nationwide was required to provide “an evidentiary basis” for both elements.
See
Burley
,
identified no evidence or expert testimony indicating that the MSDS, NEC, and NFPA 497 warnings were inadequate; that the defendants breached any standard of care; or that the defendants did anything wrong. Therefore, although Nationwide established a scientific possibility for the cause of the explosion, that evidence did not establish an evidentiary basis that the MSDS, NEC, and NFPA 497 warnings were inadequate. Ultimately, Nationwide’s inadequate warning claim is based on
nothing more than the fact of the accident, speculation, and conjecture. Such a
showing is insufficient to resist summary judgment.
See Quinn
,
A.H. Meyer used a ventilation system, which their expert indicated was a factor contributing to the explosion. Nationwide further points out that Barton Solvents’s representatives toured the plant, knew the heptane was used for industrial purposes, industrial facilities typically have ventilation, and heptane vapors would respond to the air currents generated by a ventilation system. Nationwide argues that the defendants failed to adequately warn that because of A.H. Meyer’s ventilation system, heptane vapors could travel more than five feet.
4. Nationwide admitted at the summary judgment hearing and at oral argument it did not have experts or other persons who would say that the warning should have been different. The MSDS, however, expressly warned that heptane vapors could
travel long distances. Bold lettering on the front of the MSDS warned that “[v]apor may travel considerable distance to source of ignition and flash back.” The third page of the MSDS warned that vapor “may travel long distances along the ground to an ignition source and flash back.” Thus, although the MSDS and NEC incorporated the NFPA illustration showing five feet of separation, A.H. Meyer was also warned that the distance could be greater; i.e. that heptane vapors could travel considerable and long distances. Moreover, the MSDS specifically warned that heptane was to be used only with “adequate” ventilation, and NFPA 497 warned that use of its five-foot illustration should be used with “sound engineering judgment.” Finally, as the circuit court correctly noted, Nationwide provided no facts indicating that the Barton employees observed anything specific about the ventilation system during their tour of the facility. There was no evidence the employees saw the ventilation system A.H. Meyer designed, saw any particular risks of a heptane explosion in the plant, or were asked to look for such risks. The summary judgment evidence indicated that the warnings provided to A.H. Meyer were the NEC and NFPA standards. Further, although Nationwide established an affirmative evidentiary basis for proceeding to trial on the question of causation, it did not produce an expert or identify specific, affirmative evidence indicating that the MSDS, NEC, and NFPA warnings were inadequate. We conclude that the circuit court did not err in granting summary judgment on strict liability and negligence because Nationwide could not meet its summary judgment burden of producing evidence that the warnings provided were inadequate. Express Warranty SDCL 57A-2-313(b) provides that “[a]ny description of the goods which
is made part of the basis of the bargain creates an express warranty that the goods
shall conform to the description.” Nationwide points out that the heptane invoices
informed the purchaser to read the MSDS. The MSDS warned buyers that: “[a]ll
electrical equipment should comply with the National Electric Code”; the NEC
refered to NFPA 497; and NFPA 497 illustrated the five-foot spacing between
heptane and standard electrical switches. Therefore, Nationwide argues that the
five-foot requirement became the equivalent of an instruction manual or description
of the goods. Nationwide further argues that because there was an explosion, the
heptane did not conform to that description.
See James River Equip. Co. v. Beadle
Cnty. Equip., Inc.
,
was defective, contaminated, or otherwise anything other than the heptane A.H. Meyer contracted to receive. Further, the MSDS, NEC, and NFPA 497 did not expressly warrant the heptane. Those documents warned of the danger associated with heptane’s use. A warning is the “pointing out of danger.” Black’s Law Dictionary (9th ed. 2009). In contrast, a warranty is “[a] promise that the thing being sold is as represented[.]” One is an alert, the other a promise. Although we agree with Nationwide that a warning could constitute a warranty in some cases, NFPA 497 was a recommendation to be used with sound engineering judgment. It was not an incorrect, affirmative promise. Nationwide’s reliance on James River Equipment Co . is misplaced.
James River Equipment Co
. involved an affirmative representation of the number of
hours certain equipment had been used.
6. Nationwide’s reliance on
Weinstat v. Dentsply Int’l, Inc
.,
(Cal. Ct. App. 2010) is misplaced for the same reason. In that case, the products “Directions for Use” incorrectly stated it could be used for oral surgery. at 620.
Nationwide argues those illustrations constituted instructions providing an express
warranty.
See Colgan Air, Inc. v. Raytheon Aircraft Co.
,
airplane maintenance manual stated that “[p]roper winding of the cables on the pedestal and actuator drums, is shown in . . . the Elevator Tab Control Cables Winding illustration in Chapter 27-30-04 for elevator tabs, ensures against crossing the cables causing improper trim tab movement.” at 279 (second emphasis added). Here, the language and illustration in NFPA 497 did not use the word “ensure” or other similar language affirmatively representing that explosions would not occur if the illustration was followed. Nationwide failed to identify evidence suggesting that the defendants’ warnings were an affirmative description, instruction, or illustration that constituted an express warranty of heptane that was untrue.
Implied Warranty of Fitness for a Particular Purpose Nationwide suggests that because of the parties’ lengthy history,
Barton Solvents knew A.H. Meyer’s purpose for using heptane. Nationwide contends that the defendants had reason to know their buyers would rely upon the defendants’ expertise, skill, and knowledge in furnishing suitable goods. Nationwide argues that the heptane was not fit for A.H. Meyer’s particular purpose because the heptane vapors drifted and caused an explosion. “Where the seller at the time of contracting has reason to know any
particular purpose for which the goods are required and that the buyer is relying on
the seller’s skill or judgment to select or furnish suitable goods, there is . . . an
implied warranty that the goods shall be fit for such purpose.” SDCL 57A-2-315.
“When an implied warranty of fitness for purpose is created, the seller must deliver
a product that is fit for the purpose for which it is intended.”
Virchow v. Univ.
Homes, Inc.
,
or unfit for rendering beeswax when the heptane left Barton Solvent’s possession. The fact that A.H. Meyer’s ventilation system possibly moved the heptane vapors more than five feet away from the heptane source did not mean the heptane was not 7. Nationwide does argue that the heptane was defective because it contends that the defendants failed to warn of a foreseeable danger. All authority cited for this argument is premised on inadequate warnings. Here, we have already decided Nationwide failed to identify sufficient affirmative evidence indicating that the warning was inadequate. Nationwide’s authorities are also distinguishable because in those cases: (1) there was no warning; (2) there was evidence indicating the warnings were inadequate; or (3) the product was physically defective for the actual purpose intended.
fit for rendering beeswax. Nationwide failed to identify evidence suggesting the heptane was not fit for rendering beeswax.
Implied Warranty of Merchantability
[¶31.] Under SDCL 57A-2-314, if goods are sold by “a merchant with respect to goods of that kind,” there is an implied contract those goods are merchantable. SDCL 57A-2-314(1). Merchantable goods are those that, among other things . . . :
(c) Are fit for the ordinary purposes for which such goods are used; and . . .
(e) Are adequately contained, packaged, and labeled as the agreement may require; and
(f) Conform to the promises or affirmations of fact made on the container or label if any.
SDCL 57A-2-314(2). Nationwide argues that the heptane was not fit for its ordinary
purpose under SDCL 57A-2-314(2)(c) because it caused an explosion. Nationwide contends that this case is similar to Crandell v. Larkin & Jones Appliance Co., 334 N.W.2d 31, 36 (S.D. 1983) (concluding that by starting a fire, the dryer was not fit for the purpose for which it was purchased). Crandell is inapposite. In that case, a used clothes dryer was sold with
a guarantee for workmanship, parts, and labor. Id. at 32. Fourteen days after the sale, the dryer overheated causing a fire and damage to plaintiff’s home. Id. The fire was caused by defective thermostats in the dryer. at 34. But in this case, 8. Nationwide also argues that the defect stems from the adequacy of the warning and product use instructions. But as we have previously explained, Nationwide failed to identify sufficient evidence to support this theory.
unlike Crandell , there was no defect in the heptane itself and there was no affirmative guarantee of the product.
[¶34.] Nationwide argues that the heptane was not merchantable under SDCL 57A-2-314(2)(e) because it contends the heptane was inadequately labeled. But this is the same argument we have rejected under Nationwide’s other claims. For the reasons previously discussed, this argument is without merit.
[¶35.] Finally, Nationwide argues that the heptane was not merchantable under SDCL 57A-2-314(2)(f). Nationwide contends that the heptane did not conform to the promises or affirmations made by the defendants. Because Nationwide agrees that this argument is premised on the same contentions we rejected under express warranty, we affirm on this claim without further discussion. We affirm the circuit court’s grant of summary judgment. GILBERTSON, Chief Justice, and KONENKAMP, SEVERSON, and
WILBUR, Justices, concur.
9. Nationwide’s other authority is also distinguishable. The cases cited either (1) determined the warning was inadequate and the damage was foreseeable, (2) only recognized the potential of a claim for implied warranty of merchantability, or (3) affirmed summary judgment in favor of defendants on the issue of causation.