Olin Mathieson Chem. Corp. v. Allis-Chalmers Mfg. Co., 20521.

• Decision Date: 23 February 1971
• Docket Number: No. 20521.,20521.
• Citation: 438 F.2d 833
• Parties: OLIN-MATHIESON CHEMICAL CORPORATION, Cross-Plaintiff-Appellant v. ALLIS-CHALMERS MANUFACTURING COMPANY and I-T-E Imperial Corporation, Cross-Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

438 F.2d 833 (1971)

OLIN-MATHIESON CHEMICAL CORPORATION, Cross-Plaintiff-Appellant v. ALLIS-CHALMERS MANUFACTURING COMPANY and I-T-E Imperial Corporation, Cross-Defendants-Appellees.

No. 20521.

United States Court of Appeals, Sixth Circuit.

February 23, 1971.

Hugh E. Reynolds, Jr., Indianapolis, Ind., for appellant; Robert C. Hunt, Hunt & Bell, Chattanooga, Tenn., Locke, Reynolds, Boyd & Weisell, Indianapolis, Ind., on brief.

Silas Williams, Jr., Chattanooga, Tenn., for Allis Chalmers Manufacturing Co.; Spears, Moore, Rebman & Williams, Thomas S. Kale, Chattanooga, Tenn., on brief.

Fred M. Milligan, Chattanooga, Tenn., for I-T-E Imperial Corp.; Milligan, Hooper & Harris, Chattanooga, Tenn., on brief.

Before PECK and BROOKS, Circuit Judges, and McALLISTER, Senior Circuit Judge.

JOHN W. PECK, Circuit Judge.

This appeal presents the question of whether evidence of a malfunction of certain heavy electrical equipment was properly excluded by the trial judge, where the issue presented to the jury was concerned solely with liability resulting from a malfunction of similar equipment which occurred four months earlier.

Appellant Olin-Mathieson Chemical Corporation (hereinafter "Olin-Mathieson") operates a chemical fertilizer plant near Charleston, Tennessee. Prior to the time of the accident in question, the plant had been operating with five regulating transformers manufactured by Westinghouse Electric Corporation. In 1967 Olin-Mathieson contracted with appellee I-T-E Imperial Corporation (hereinafter "I-T-E") to furnish it with three new electrical lines, including three new transformers and associated electrical equipment, together with any engineering services necessary for installation. I-T-E then purchased the three transformers needed for the job from appellee Allis-Chalmers Manufacturing Company (hereinafter "Allis-Chalmers"). Although most of the work of installation was accomplished by various subcontractors, Olin-Mathieson assumed the responsibility of supervision for the work required at its plant.

On June 21, 1968, the job had reached the final testing stage and Olin-Mathieson was attempting to bring the three new units up to full electrical load for the first time, when a massive arc occurred on Unit No. 7 transformer, causing burning oil to erupt, damaging some of the equipment. Two employees who had been working on the equipment were killed.

On November 16, 1968, the second malfunction occurred on Unit No. 7 and a major arc resulted. However, the damage from this incident was much less extensive. Only a limited amount of oil erupted through a release valve, and the length of time needed to repair the equipment was considerably less.

The widow of one of the deceased employees from the June incident brought a wrongful death action against the three parties herein and one of the subcontractors. Olin-Mathieson then cross-claimed against I-T-E on theories of negligence, strict liability and breach of express and implied warranties on the contract and against Allis-Chalmers on similar products liability theories, including negligence. The cross-claim was for recovery of property damages, which Olin-Mathieson sustained as a result of both the June and November incidents. A few days prior to the trial, the claims of the widow were settled out of court. The case then went to trial on the issue of liability for the June occurrence only, it being agreed by the parties that the issues of damages and of the November occurrence would be decided in separate trials. The jury returned a verdict against Olin-Mathieson. A motion for a new trial was made based principally on the exclusion of evidence of the November incident. The motion was denied by the trial judge and this appeal followed.

The jury in the District Court was subjected to a highly complex and technical set of facts, presented through evidence over a period of six days and involving the opinions of many witnesses offered as experts in related fields of engineering. Much of the testimony and the other evidence was offered to prove one critical element, the cause of the malfunction in the June incident. It was primarily for this purpose that Olin-Mathieson sought to introduce evidence of the November incident and thus we have been required to examine the very complicated facts to determine whether an abuse of discretion occurred.

For purposes of illustration, the function and operation of Olin-Mathieson's transformer units can be compared to that of a toy electric train. As the control arm on such a train transformer is moved up or down, the voltage sent to the train increases or decreases respectively, changing its speed. Similarly, at Olin-Mathieson, as a signal is sent from a remote control room to a transformer located some distance away, the transformer functions to increase or decrease the voltage in an electrical line, making the same input current suitable for various designed industrial purposes.

Mounted on the side of each transformer is a board, oriented like the numbers on the dial of a clock, with two arms or "tap changers" indicating the voltage of the transformers. Functionally, these tap changers perform a service similar to that of the arm on the toy train transformer. One tap changer is for fine changes and the other for coarse changes. When the operator in the control room initiates a change, the signal is transmitted to the tap changers through certain relays, including four relays located on a control box on the side of the transformer. The relays function simply to pass the signal on to the tap changers. Once the signal is received, the transformer itself then determines what positions on the tap changers will produce the desired result, and automatically motors in the unit move the tap changers to the new positions.

If the arm of the fine tap changer is moved to a different position, which requires a previous connection on the board to be severed, it draws an arc which is acceptable electrically, because current flowing through that connection is relatively low. On the other hand, the course tap changer for Olin-Mathieson's five older units was never permitted to be moved while under load, because a major arc would be produced upon the severance of the connection.

The Allis-Chalmers' transformers were different, however, in that the coarse tap changers on their units could be moved to a different position while under load when the fine tap changer was in certain specified positions. To accomplish this, Allis-Chalmers added a switch to the coarse tap changer mechanism, called the "odd-even" switch, which prevented the coarse tap changer from making any changes while under load if the fine tap changer was not in one of the specified permissible positions. Following a permissible change to a different voltage, the new positions of the tap changers are displayed on position indicators supplied by Allis-Chalmers.

As might be expected, there are safety devices in the unit, designed to signal circuit breakers when a malfunction occurs and relieving the unit of its electrical load as quickly as possible. These devices are known as "protective relays" and they normally function on a source of power separate from the unit itself, once they sense that a malfunction has occurred in the unit. I-T-E, however, as part of its contractual obligation, drew up a schematic diagram for Olin-Mathieson, indicating that the "protective relays" were to be powered on AC current, rather than an independent source of DC current. This was improper as counsel for I-T-E and one of its employees admitted during the trial. As a result, an inordinate amount of time passed before the malfunction of the unit in the June incident was cleared.

This leads us to the day in question, when Olin-Mathieson was trying to bring Unit No. 7 and the two other transformers up to full load for the first time. An Olin-Mathieson employee was in the control room and observed that Unit No. 7 would neither increase nor decrease its load with the others. After trying it several times, he called for help and an Olin-Mathieson engineer came to investigate the trouble. First, the engineer worked behind the control panel, but with no results. He then left the control room and returned in five or ten minutes and asked the operator to try it again. There was still no change. Finally, the engineer and an employee of one of the subcontractors, went out to the transformer. Shortly thereafter, the massive arc, which sounded like an explosion, occurred, killing the two men and damaging the equipment.

No one had touched the controls in the control room prior to the explosion. An inspection near the transformer revealed that the control box door...