Products Liability Law Daily Judgment favoring manufacturer of thermal oxidizer that exploded was proper on failure to warn claim but not design defect claim or causation argument
Monday, March 23, 2020

Judgment favoring manufacturer of thermal oxidizer that exploded was proper on failure to warn claim but not design defect claim or causation argument

By Georgia D. Koutouzos, J.D.

Equipment’s owner submitted sufficient evidence of an alternative design, and reasonable minds could disagree as to whether the manufacturer could foresee that the owner would view the manual’s suggested maintenance as mandatory.

The Minnesota federal court correctly granted summary judgment favoring the maker of a regenerative thermal oxidizer used in the ethanol production process on claims by the equipment’s owner that the manufacturer had failed to warn that inadequate maintenance could result in a malfunction with the potential for fire and explosion hazards, a panel of the U.S. Court of Appeals for the Eighth Circuit advised, nevertheless reversing the lower court’s judgment favoring the manufacturer on the equipment owner’s design defect claim as well as the argument that the owner’s inadequate maintenance of the equipment had been the superseding cause of an explosion caused by a malfunctioning component (Green Plains Otter Tail, LLC v. Pro-Environmental, Inc., March 20, 2020, Benton, W.).

Green Plains Otter Tail, LLC, the operator of an ethanol production facility, purchased a regenerative thermal oxidizer (RTO) manufactured by Pro-Environmental, Inc. (PEI) for purposes of collecting exhaust vapors from a large rotary drum dryer and burning off pollutants before the vapors are released. The RTO contains dampers powered by a hydraulic pump unit (HPU) connected to the other parts of the HPU by couplings to control the flow of vapors in and out of the RTO’s chambers. If a hydraulic pump within the HPU fails, the unit’s accumulator should force its fluid back into the system, moving the dampers to safe positions. The accumulator was precharged with inert nitrogen at the time of commissioning but had to be periodically recharged in order to operate, which Green Plains apparently failed to do during the entire six-year period in which it owned the RTO.

In 2014, an HPU coupling failed, causing a loss of hydraulic pressure to the HPU and sounding several alarms. Green Plains’ staff discovered that the dampers had not moved to safe positions. An hour later, an explosion damaged the RTO as well as other equipment and buildings at the facility. Green Plains filed suit against PEI, asserting negligence and products liability claims alleging defective design and failure to adequately warn users of the explosion risk.

PEI moved for summary judgment on Green Plains’ claims and the trial court granted the motion, concluding that the manufacturer had not created an unreasonably dangerous product and that the warnings in the product’s manuals were sufficient. Instead, Green Plains’ failure to have maintained the equipment as instructed in the product manuals was a superseding cause of the accident, the trial court determined [see Products Liability Law Daily’s October 5, 2018 analysis].

Defective design. Green Plains appealed the trial court’s decision, arguing that the RTO’s design was defective/unreasonably dangerous and emphasizing that the dampers use hydraulic pressure for movement, while other potential designs, like compressed-air systems, could move the dampers without a precharged accumulator. To support that contention, Green Plains pointed to deposition testimony of the owner of a company that designs ethanol production plants where dampers move by compressed air that, in hydraulically controlled systems, dampers have an automatic fail position and can fail "open" with a loss of pressure. Green Plains also pointed to the testimony of its chief boiler engineer that after the explosion, the facility added weights to the dampers so that employees could manually open the dampers if the hydraulics failed. PEI countered that the RTO design was consistent with industry standards and that Green Plains’ expert never had tested the alternative designs.

While a manufacturer’s compliance with industry standards can be evidence of a reasonable design, it is not conclusive proof on the question of whether a manufacturer exercised reasonable care, the appellate panel noted, finding that in the instant case, Green Plains’ experts did not need to test the compressed-air alternatives to prove their feasibility because those alternatives were successfully in use. As such, because reasonable minds could differ about whether the at-issue RTO was defective, Green Plains submitted sufficient evidence of a defective design to survive summary judgment, the panel determined.

Superseding cause. It was undisputed that if the HPU’s accumulator had been recharged, the explosion would not have happened, the appeals court found. In that regard, the trial court concluded that the lack of recharging was a superseding cause that cut off PEI’s liability for any alleged defect because it was unforeseeable that Green Plains would fail to oversee its equipment. However, in order to check the level of precharge in the accumulator, the machine had to be powered off, fluid had to be drained, and a charging and gauging assembly attached, the appellate panel said, finding that reasonable minds could disagree whether PEI could foresee that a company would view the suggested maintenance outlined in the RTO’s manual as mandatory or would ignore it due to the effort required. Therefore, PEI was not entitled to summary judgment on proximate causation, the panel advised.

Failure to warn. As for the adequacy of PEI’s warnings of the dangers of the RTO failing and exploding, the equipment’s manual specifically stated that "[p]eriodic cleaning and maintenance of equipment is required," and that "[f]ailure to do so may cause the equipment to malfunction with the potential for fire and explosion hazards." PEI also gave Green Plains an HPU manual that included instructions on the accumulator’s maintenance—including how to check the precharge. That manual warned "[i]t is imperative that personnel involved in the installation, service, and operation of the power unit be familiar with how the equipment is to be used. They should be aware of the limitations of the system and its component parts; and have knowledge of good hydraulic practices in terms of safety, installation, and maintenance."

Additional warnings from PEI would not have changed Green Plains’ behavior, the appeals court said, ruling that the trial court properly granted summary judgment on the failure to warn claim. Accordingly, the trial court’s decision was affirmed in part and reversed/remanded in part.

The case is No. 18-3357.

Attorneys: A. Elizabeth Burnett (Robins & Kaplan) for Green Plains Otter Tail, LLC. Teri Bentson (Law Office of Thomas P. Stilp) and Amanda Margaret Cialkowski (Nilan & Johnson) for Pro-Environmental, Inc.

Companies: Green Plains Otter Tail, LLC; Pro-Environmental, Inc.

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