Crook v. Kaneb Pipe Line

• Decision Date: 12 May 2000
• Docket Number: No. 99-3248,DEFENDANTS-APPELLEES,PLAINTIFF-APPELLANT,99-3248
• Citation: 231 F.3d 1098
• Parties: (8th Cir. 2000) GENON CROOK, PERSONAL REPRESENTATIVE OF THE ESTATE OF KENNETH E. CROOK, DECEASED,, v. KANEB PIPE LINE OPERATING PARTNERSHIP, L.P., A KANSAS PARTNERSHIP, FARMLAND INDUSTRIES, INC., A KANSAS CORPORATION; AND FARMER'S COOPERATIVE BUSINESS ASSOCIATION, A NEBRASKA CORPORATION, Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1098

231 F.3d 1098 (8th Cir. 2000)

GENON CROOK, PERSONAL REPRESENTATIVE OF THE ESTATE OF KENNETH E. CROOK, DECEASED, PLAINTIFF-APPELLANT, v. KANEB PIPE LINE OPERATING PARTNERSHIP, L.P., A KANSAS PARTNERSHIP, FARMLAND INDUSTRIES, INC., A KANSAS CORPORATION; AND FARMER'S COOPERATIVE BUSINESS ASSOCIATION, A NEBRASKA CORPORATION, DEFENDANTS-APPELLEES.

No. 99-3248

United States Court of Appeals For the Eighth Circuit

Submitted: May 12, 2000

Filed: November 7, 2000

Appeal from the United States District Court for the District of Nebraska

Before McMILLIAN, Bright, and Wood, Jr., ¹ Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

Kenneth E. Crook, a resident of Nebraska, was killed as a result of a propane gas leak and explosion on October 11, 1994, at his place of employment, Farmer's Cooperative Business Association (the "Coop"), a Nebraska corporation. ² Crook's estate sued the Coop, Kaneb Pipe Line Operating Partnership, L.P. ("Kaneb"), a Delaware corporation with its principal place of business in Kansas, and Farmland Industries, Inc. ("Farmland"), a Kansas corporation with its principal place of business in Missouri. Kaneb, a common carrier, piped the propane to Farmland. Farmland, as part of its business, in turn sold propane gas to its customers, one of which was the Coop.

Plaintiff filed in state court but the case was removed to the United States District Court in Nebraska by defendants Kaneb and Farmland based upon diversity of citizenship. The district court found that defendants were entitled to judgment as a matter of law upon determining there were no genuine issues of material fact.

I. BACKGROUND

The circumstances surrounding the explosion are not contested by the parties, only liability. ³ The Coop was a fairly large corporation which maintained facilities at several different locations in Nebraska. It had its own liquified petroleum gas products department and a full-time department manager to supervise Coop employees who dealt with propane. The propane was purchased from Farmland by the Coop, partly for its own use, and partly for resale in the regular course of the Coop's business to residential, agricultural, and industrial consumers. The Coop, in the three-and-a-half months prior to the explosion, had purchased approximately 494,000 net gallons of propane.

The Coop maintained two 18,000-gallon bulk propane storage tanks for the propane, which would then be pumped into delivery trucks for retail sale. The bulk tanks also supplied propane to two 1,000-gallon supply tanks that fueled the Coop's grain dryer. A separate high pressure, underground propane pipeline approximately 300 feet long ran from the supply tanks to the grain dryer. The line came out of the ground approximately 50 feet before it reached the dryer.

This propane line had been regularly pressure-tested by Coop employees each year up to and including 1993. However, without explanation, this line was not pressure-tested in 1994, the year of the explosion. In the past, the Coop had also checked the propane line for leaks with hand-held, electronic leak detectors, but discontinued their use prior to October 1994 because of the expense. The estate points out that a reliable electronic gas detector similar to a smoke detector was available prior to the accident, but not acquired for use by the Coop.

The explosion occurred at the Coop's Gresham facility where the decedent had been employed as the branch manager since 1987. He had worked for the Coop for 28 years. From 1975 to 1987, he had been branch manager at another of the Coop's facilities. One of his duties as branch manager was to develop training programs for employees under his supervision, depending on the requirements of the employee's particular position. The training program included employee Dan Noble, who for the past 22 years had been responsible for the use, hauling, and handling of propane gas. Noble served as the Coop's propane delivery truck driver and advised the Coop's customers as to the characteristics of propane and ethyl mercaptan. The Coop regularly sent Noble to safety seminars relating to the use and handling of propane.

Propane gas is a fuel which is used for both vehicles and a variety of appliances, such as barbeque grills, water heaters, and grain dryers. Liquid propane is stored under pressure in a tank or cylinder and is generally vaporized from a liquid to a gas before it leaves the container. Because liquid propane is odorless, colorless, and highly flammable, federal regulations, 29 C.F.R. 173.315(b)(1), and the Nebraska fire code required Kaneb, as a propane shipper, to place an odorant into the propane as a means of identifying a propane leak. The most commonly used odorant is ethyl mercaptan, which is used by ninety-five percent of propane sellers and shippers, and which was used in this case. This additive gives propane a distinctive smell which warns of the presence of propane. However, this odorant has limitations. Propane gas leaking from buried gas lines may lose its odor as it passes through the soil, thereby losing its effectiveness. This is known as odorant fade, which is what happened in this case.

Propane is heavier than air and does not dissipate as rapidly as natural gas, which, when leaking, may initially cause the propane to collect at low areas, such as basements. The underground pipeline connecting the storage tanks to the grain dryer apparently leaked propane which collected in the basement area of the Coop's nearby office building. Although some of the Coop employees were in and out of the basement on the morning of the explosion, no one detected any odor. Nevertheless, a little later in the day, a spark ignited the propane and caused an explosion, resulting in the death of the decedent. There is no disagreement that it was a case of odor fade. Nor is it disputed that the leak occurred around the threads in an underground pipe coupler, which was used to connect the two 1,000-gallon tanks to the grain dryer.

At this point, as we approach the issue of liability, the estate and the defendants disagree. The issues after the district court hearings became condensed into two liability theories, negligence and strict liability. More specifically, as stated by the estate, the two remaining issues are: first, whether "the district court erred in finding that the Coop and Kenneth Crook knew or should have known of the dangerous condition of the product and methods available to protect themselves," and secondly, whether "the district court erred in granting summary judgment in favor of defendants Kaneb and Farmland by finding they had no liability under Nebraska law if the Coop and Kenneth Crook knew or should have known of the dangerous condition of the product and methods that were available to protect themselves." This requires us to examine the basis of the district court's finding that the Coop and the decedent knew or should have known of the propane's dangers, and the district court's interpretation of applicable Nebraska law. The other available method of propane leak detection as alleged by the estate will be considered separately.

The "knew or should have known" issue requires some factual review of both the warnings given by the defendant and the knowledge of the decedent. We have already mentioned the decedent's long-term employment by the Coop and his duties as branch manager, including the responsibility for training the other four employees at the Gresham facility. One of those employees under his direct supervision was Dan Noble, who was the "Propane and Grain Serviceman." Noble was responsible for hauling and handling propane gas for over 22 years. When first hired in 1976, he was instructed about the characteristics of propane. He knew it was pressurized, could not be detected without an additive to give it a detectable odor, would settle in low areas, and was dangerous if not handled properly.

In all, it was understood that propane could be a dangerous business, partly because of odor fade. Noble passed his knowledge of propane on to the Coop's customers. In addition to his long on-the-job training, he had attended a number of seminars since 1977 concerning the characteristics of propane and the problem of odor fade. Although the district court found that Noble was certified by the National Propane Gas Association as a specialist in the installation of propane piping, Noble's deposition was not clear about this certification. The estate argues Noble's deposition testimony was misleading and not sufficient for an undisputed finding of fact upon which to grant summary judgment. However, whether Noble was actually certified as to propane pipe installation or not is immaterial, as it is uncontested that he attended yearly propane safety seminars. Noble and several other employees were members of the Nebraska Petroleum Marketers, Inc., and/or the Nebraska Propane Gas Association. In 1993, Noble and three other Coop employees attended a hazardous materials training workshop jointly-sponsored by those organizations. Noble also attended a two-day "Revised Certified Propane School" in February 1994 and a three-day "LP Gas School" in March 1994.

The record provides...