Kaiser Aluminum & Chemical v. Ingersoll-Rand Co.

• Decision Date: 26 March 1981
• Docket Number: No. CV479-167.,CV479-167.
• Citation: 519 F. Supp. 60
• Parties: KAISER ALUMINUM & CHEMICAL CORPORATION, a corporation, Plaintiff, v. INGERSOLL-RAND COMPANY, a corporation, and The D. M. Weatherly Company, a corporation, Defendants.
• Court: U.S. District Court — Southern District of Georgia

519 F. Supp. 60

KAISER ALUMINUM & CHEMICAL CORPORATION, a corporation, Plaintiff, v. INGERSOLL-RAND COMPANY, a corporation, and The D. M. Weatherly Company, a corporation, Defendants.

No. CV479-167.

United States District Court, S. D. Georgia, Savannah Division.

March 26, 1981.

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COPYRIGHT MATERIAL OMITTED

A. James Anderson, William H. Stanhope, Robins, Davis & Lyons, Atlanta, Ga., A. Martin Kent, Savannah, Ga., for plaintiff.

Oliver, Maner & Gray, Joseph M. Oliver, Savannah, Ga., Neely, Player, Hamilton & Hines, Edgar A. Neely, Jr., Atlanta, Ga., for D. M. Weatherly Co.

Edward E. Dorsey, Thomas S. Richey, Powell, Goldstein, Frazer & Murphy, Atlanta, Ga., for Ingersoll-Rand Co.

ORDER

B. AVANT EDENFIELD, District Judge.

I. Background

Before the Court are the motions of defendants Ingersoll-Rand Company (Ingersoll-Rand) and D. M. Weatherly Company (Weatherly) for summary judgment.

This litigation concerns the breakdown of an air compressor train. The air compressor train is part of a facility built at Port Wentworth, Georgia for fertilizer production. The air compressor train is utilized to make nitric acid, an important ingredient in the manufacture of fertilizer. The function of an air compressor train is to compress air so that nitric acid may be produced. Air is forced into the train and compressed by use of both rotary blades acting as fans and stationary blades which serve to direct the flow of air. One of these stationary blades, referred to as an inlet guide vane, broke and caused damage to additional parts of the machine resulting in a temporary closing of the nitric acid plant. Kaiser Aluminum and Chemical Corporation (Kaiser) is the owner-operator of the nitric acid plant. Weatherly contracted to build the plant for Kaiser. Ingersoll-Rand supplied Weatherly with the air compressor train used. Kaiser has asserted theories of recovery in this litigation, including theories based on negligence, contract, and fraud against both Weatherly and Ingersoll-Rand.

II. The Facts

There are undisputed facts in this litigation although they are often obscured by the hotly disputed facts. Although the parties disagree on facts related to those listed, a core of agreement appears.

1. Ingersoll-Rand is a manufacturer of air compressor trains. Weatherly is a constructor of nitric acid plants. The two companies have often worked together and have been involved in the construction of five compressor trains for nitric acid plants over a period of years.

2. In late 1973, Kaiser submitted a bid package to Weatherly requesting Weatherly to bid on the construction of a nitric acid plant.

3. After preliminary discussions in late 1973 between employees of Weatherly and Ingersoll-Rand, Weatherly prepared and submitted to Ingersoll-Rand the written performance specifications for the air compressor train. Ingersoll-Rand prepared a written proposal for a compressor train and submitted it to Weatherly in a letter dated December 12, 1973.

4. In a letter dated December 21, 1973, Ingersoll-Rand gave Weatherly a firm price for the compressor train and promised to hold the price at that level until the end of January, 1974 if Weatherly would issue a letter of intent to purchase the compressor. Weatherly responded in a letter dated December 26, 1973 in which it committed itself to the Ingersoll-Rand compressor train subject to Weatherly being awarded the Kaiser contract and Kaiser accepting the use of the Ingersoll-Rand compressor train in its plant.

5. Weatherly submitted a bid proposal for construction of the Port Wentworth plant on January 3, 1974. Kaiser and Weatherly signed a contract for the project on January 31, 1974, after numerous negotiations and meetings between the two had been held.

6. Before Kaiser entered into this contract with Weatherly, it was operating five nitric acid plants. The specifications for the Kaiser Plant in Port Wentworth included an axial air compressor manufactured by Ingersoll-Rand.

7. The contract between Kaiser and Weatherly defined "work" as including design, construction, workmanship and testing. In the contract Kaiser received the right to make additions, changes, deletions, or alterations in the work to be performed by Weatherly.

Kaiser drafted Exhibit "B" to the Purchase Order/Contract with Weatherly which clause prepared by Kaiser reads:

"17. ENTIRE CONTRACT

This purchase order together with any written documents which may be incorporated by specific reference, constitutes the entire agreement between the parties and supersedes all previous communications between them, either oral or written. All such previous communications are hereby abrogated and withdrawn, and no stipulations, representations or agreements by Purchaser or any of its officers, agents or employees shall be binding on the Purchaser unless contained in this Purchase Order or incorporated herein by reference as above-provided and no local, general or trade customs or previous course of dealing or performance shall alter or vary the terms hereof."

Kaiser drafted Exhibit "C" of the Kaiser general conditions for contracts which is part of the Kaiser/Weatherly contract which Kaiser writing reads:

"35. ENTIRE CONTRACT: This Contract contains the entire agreement of the parties and supersedes all negotiations, proposals, notices of award, purchase orders, agreements and understandings, if any, written or oral, heretofore had between the parties relating to the work. In the event any specification, drawing or exhibit forming a part of this Contract contains terms or conditions inconsistent with these General Conditions, these General Conditions shall control. No amendment, variance or change in the provisions of this Contract shall be made except in writing signed by the authorized representatives of the parties hereto."

8. The Kaiser-Weatherly contract contains a section entitled "General Liability" containing the following paragraph:

"Seller shall not be liable for owner's consequential or contingent damages, loss of production, loss of business or loss of profits."

That section also provides:

"Seller's liability for damages due to defects in materials and workmanship, late completion of the work, and similar damages, exclusive of the liabilities stated in the Performance Guaranty, in the indemnity provisions and in the patent provisions, shall be limited to $200,000."

9. On the day that Kaiser and Weatherly signed their contract, Weatherly issued a verbal purchase order to Ingersoll-Rand for the air compressor train. Later, on February 25, 1974, Weatherly issued a formal written purchase order. There is disagreement as to whether Weatherly's terms or Ingersoll-Rand's terms are the binding contract provisions.

10. Gary F. Merritt was Kaiser's project manager for construction of the nitric acid plant at Fort Wentworth. Mr. Merritt was authorized by Kaiser to receive and transmit information regarding the nitric acid plant.

11. A meeting of representatives from Kaiser, Weatherly, and Ingersoll-Rand was held on February 20th. The purpose of the meeting and its content are disputed.

12. On or after February 20, 1974, Kaiser obtained an installation list which showed each of the nitric acid plants in which Ingersoll-Rand equipment was in use. That installation list showed that the air compressor set proposed for Kaiser would contain the largest capacity 1,000 frame axial air compressor in that service. It also showed that the next largest unit was the Ultrafertil compressor.

13. On November 12, 1974, at a meeting at the Ingersoll-Rand plant in Phillipsburg, Mr. Merritt discussed with Ingersoll-Rand engineers the fact that the Kaiser unit was the largest capacity compressor in its frame size and that the next largest was the Ultrafertil compressor. Mr. Merritt was told that there had been problems in the Ultrafertil compressor and that modifications were necessary.

14. Attempts to start the plant were begun in early 1976. Operating problems became apparent to Kaiser and Weatherly during these start up attempts and a bona fide dispute arose as to their cause.

15. Even though information had been received by Kaiser concerning both the Ultrafertil failure and the inclusion of larger than usual rotor blades in the first stage of the axial air compressor, Kaiser did the following:

(a) Failed to object, protest, or reject the compressor train, but allowed continued work on the compressor and made efforts to expedite its construction and delivery.

(b) Kaiser made payments on its contract with Weatherly which it knew were to be applied to the compressor train.

(c) Kaiser accepted delivery of the compressor train at its Port Wentworth plant.

(d) Kaiser operated the compressor train and the plant and used the nitric acid it produced.

16. When refractory material was ingested into the expander in March, 1976, Kaiser insisted that Ingersoll-Rand be engaged to repair the expander.

17. In October, 1976, Kaiser entered into a new agreement with Weatherly. This agreement reads in pertinent part:

"A. Kaiser Agricultural Chemicals and D.M. Weatherly Company agree that on September 20, 1976, and thereafter, each of them has fulfilled all their respective, and have no further obligations to each other or to their respective agents, successors or assigns arising from or in any way related to Kaiser Purchase Order No. 510MO48022 and Kaiser Construction Contract No. SA-190 except for (a) the back-charges to Weatherly for Kaiser labor and materials, (b) those items listed in paragraph B scope of work in this agreement, and (c) the payment by Kaiser to Weatherly for the balance due on said purchase order and contract. Kaiser will promptly, upon completion of all Weatherly work listed in paragraph B of this agreement (a) give Weatherly its final acceptance of the nitric acid plant and all work performed by Weatherly pursuant to Kaiser purchase order No. 510MO48022, Kaiser construction contract No.

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