Golden Spread Coop., Inc. v. Emerson Process Mgmt., 5:17-CV-069-D

• Citation: 360 F.Supp.3d 494
• Decision Date: 31 January 2019
• Docket Number: 5:17-CV-069-D
• Parties: GOLDEN SPREAD COOPERATIVE, INC., Plaintiff, Westport Insurance Company, as Subrogee of Golden Spread Electric Cooperative, Intervenor, v. EMERSON PROCESS MANAGEMENT POWER & WATER SOLUTIONS, INC., Defendant.
• Court: U.S. District Court — Northern District of Texas

360 F.Supp.3d 494

GOLDEN SPREAD COOPERATIVE, INC., Plaintiff,

Westport Insurance Company, as Subrogee of Golden Spread Electric Cooperative, Intervenor,

v.EMERSON PROCESS MANAGEMENT POWER & WATER SOLUTIONS, INC., Defendant.

5:17-CV-069-D

United States District Court, N.D. Texas, Lubbock Division.

Signed January 31, 2019

ORDER

SIDNEY A. FITZWATER, SENIOR JUDGE

On November 19, 2018 the United States Magistrate Judge entered his findings,^* conclusions, and recommendation on the following motions: (1) defendant Emerson Process Management Power & Water Solutions, Inc.'s ("Emerson's") April 16, 2018 motion for summary judgment, and (2) Emerson's September 10, 2018 motion in limine and motion to exclude expert testimony. The magistrate judge recommends that the summary judgment motion be granted and the two pending evidentiary motions be denied as moot. Plaintiff Golden Spread Cooperative, Inc. ("Golden Spread") filed objections to the findings, conclusions, and recommendation on December 3, 2018, which intervenor Westport Insurance Company ("Westport") joined the same day.

After making an independent review of the pleadings, files, and records in this case, the findings, conclusions, and recommendation of the magistrate judge, the objections of Golden Spread and Westport, and Emerson's December 17, 2018 response to the objections, the court concludes that the conclusions and recommendation are correct. It is therefore ordered that the objections are overruled, the conclusions and recommendation of the magistrate judge are adopted, and Emerson's April 16, 2018 motion for summary judgment against Golden Spread and Westport is granted. The motion in limine and motion to exclude expert testimony are denied without prejudice as moot. The court enters judgment in favor of Emerson by judgment filed today.

SO ORDERED .

FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

D. GORDON BRYANT, JR., UNITED STATES MAGISTRATE JUDGE

Pursuant to a Standing Order of Reference, this case has been referred to the undersigned United States Magistrate Judge for pretrial management, including decisions as to non-dispositive matters and making findings and recommendations as to dispositive matters. ECF No. 74. This case, removed from state court on diversity jurisdiction, arises out of a contract in which Defendant Emerson Process Management Power & Water Solutions, Inc. (Emerson) agreed to replace the distributed control system (DCS) for a steam turbine at Plaintiff Golden Spread Electric Cooperative, Inc.'s (GSEC) power station. Emerson now moves for summary judgment on GSEC's contract (breach of contract and express warranty) and tort (negligence and strict liability) claims for damages allegedly sustained by the steam turbine as a result of defects in the DCS. See Def. Emerson Process Management Power & Water Solutions, Inc.'s Mot. for Summ. J. (ECF No. 71) [hereinafter Def.'s Mot. Summ. J.]. For the reasons that follow, the undersigned recommends that the District Judge GRANT Emerson's motion.

I. Background

GSEC operates Mustang Station Power Plant (Mustang Station), a consumer-owned power plant located near Denver City, Texas. Mustang Station became operational in 2000, and has multiple generators capable of producing a combined 958 megawatts of power. App. to Pl.'s Resp. to Def.'s Mot. Summ. J., at 1¹ (ECF No. 78) [hereinafter Pl. App.]. This litigation centers on one of those generators—an Alstom steam-turbine generator known as Unit 3—and a control system designed by Emerson. GSEC purchased Unit 3 from Alstom and installed it in the Mustang Station during 1999–2000. Id. at 2.

In 2013, GSEC solicited proposals to replace Unit 3's DCS, and Emerson submitted the winning bid. Def. Emerson's Br. in Supp. of its Mot. Summ. J., at 8 (ECF No. 72) [hereinafter Def.'s Br.]; Pl.'s Br. in Opp'n to Def.'s Mot. Summ. J., at 6–7 (ECF No. 77) [hereinafter Pl.'s Resp.]. GSEC and Emerson subsequently negotiated and executed a contract that required Emerson to design, develop, program, and install the new DCS for Unit 3. Pl. App., at 2. The DCS is "the necessary means for operation and control of the steam turbine's integrated subsystems" and includes "computer hardware, software and associated equipment." App. to Def. Mot. Summ. J., at 2 (Decl. of Glen Wagner) (ECF No. 73) [hereinafter Def. App.]. Specifically, the executed contract requires, in part, that Emerson provide "control solutions that will target and analyze specific processes in Golden Spread's Mustang Station, determining optimal operating conditions and offering tremendous cost savings to Golden Spread's Mustang Station facility." Pl.'s First Am. Compl., at 3 (ECF No. 36). The contract encompassing the parties' agreement consists of four parts, numbered in their "order of precedence" for interpretation: (1) Cover Letter; (2) Proposal; (3) License Agreement; and (4) Terms and Conditions. Def. App., at 290.

During Emerson's testing and commissioning of the new DCS, Mustang Station lost power and Unit 3 tripped offline. Pl. App., at 2; Def.'s Br., at 9; Pl.'s Br., at 7. As Unit 3 coasted to a stop, the lube-oil system failed to remain engaged, causing the turbine to overheat and suffer extensive friction damage. Def.'s Br., at 9; Pl.'s Br., at 7. Investigation after the incident revealed that the new DCS created and installed by Emerson for Unit 3 contained a logic error in the software that caused the lube-oil system to prematurely shut off during the turbine roll-down. Def.'s Br., at 9; Pl.'s Br., at 7.

Following the incident, and pursuant to the parties' agreement, GSEC submitted a warranty claim to Emerson. Def.'s Br., at 9–10. Emerson completed modifications to the DCS software, which GSEC subsequently approved, and GSEC returned Unit 3 to service. Def. App., at 2–3 ¶ 11 (Decl. of Glen Wagner). Emerson performed this warranty work at no charge to GSEC. Joint Stipulation of Facts, at 1 (ECF No. 98).

GSEC and Westport Insurance Company² filed this suit in an attempt to recover for the damages sustained by Unit 3 due to Emerson's alleged improper design, development, programming, and installation of the replacement DCS. Pl.'s First Am. Compl., at 4–12. They seek $ 8,352,996.94 in damages for steam turbine repair costs caused by the lack of lubrication following the power failure. GSEC's Amended Complaint alleges claims for breach of contract, breach of express warranty, negligence, and strict product liability. Id. Emerson moves for summary judgment as to all claims. Def.'s Br., at 10–22.

Emerson contends that GSEC's breach of contract and warranty claims fail as a matter of law because the parties' negotiated contract unambiguously provides that GSEC's sole and exclusive remedy is for Emerson to either correct any nonconformity or defect or, if impracticable, to refund the purchase price. Def.'s Br., at 11–13; Def. Emerson's Reply Br. in Supp. M. Summ. J., at 5–10 (ECF No. 83) [hereinafter Def.'s Reply]. Emerson further asserts that Texas's economic loss doctrine bars GSEC's tort claims as a matter of law. Def.'s Br., at 13–19; Def.'s Reply, at 10-15. Emerson also proffers alternative theories for granting partial or full summary judgment, arguing the parties contracted for a disclaimer of consequential or incidental damages arising from either contract or tort claims, and a total damage cap equal to the greater of the defective item's purchase price or $ 2.5 million. Def.'s Br., at 19–22; Def.'s Reply, at 15.

In response, GSEC argues that Emerson misinterprets the terms of the contract, and that the Limited Warranty provisions cited by Emerson are not the sole and exclusive contractual remedies available. Pl.'s Br., at 10–13. In addition, GSEC contends the economic loss doctrine does not preclude recovery in this case because it bargained for the new DCS separately from the original turbine. Id. at 14-22. GSEC further asserts that the damage to Unit 3 was not consequential, but instead direct and foreseeable damage not limited by the contract. Id. at 22–24. Lastly, GSEC claims that the damages cap in the contract does not cover or apply to their claim for attorney's fees. Id. at 24–27.

II. Summary Judgment Standard

"Summary judgment is required when ‘the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ " Trent v. Wade , 776 F.3d 368, 376 (5th Cir. 2015) (quoting Fed. R. Civ. P. 56(a) ). A fact is "material" when it "might affect the outcome of the suit under the governing law," and a dispute is "genuine" when the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Tagore v. United States , 735 F.3d 324, 328 (5th Cir. 2013) (quoting Anderson v. Liberty Lobby , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). In determining whether a dispute is "genuine," courts "consider all facts and evidence in the light most favorable to the nonmoving party[,] ... draw all reasonable inferences in favor of the nonmoving party[,] ... [and] disregard all evidence favorable to the moving party that the jury is not required to believe." Haverda v. Hays Cty. , 723 F.3d 586, 591 (5th Cir. 2013) (quotations and internal citations omitted).

The movant "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). When the nonmovant bears the burden of proving such material facts at trial, movants may satisfy their burden by either affirmatively showing the nonmovant's inability to establish such material facts or "merely demonstrat[ing] an absence of evidentiary support in the record for the non-movant's case." Wesley v. Gen. Drivers, Warehousemen & Helpers Local 745 , 660 F.3d 211, 213 (5th Cir. 2011) (quoting Bayle v. Allstate...