Nationwide Agribusiness Ins. Co. v. Aug. Winter & Sons, Inc., 2014AP488.

• Decision Date: 02 October 2014
• Docket Number: No. 2014AP488.,2014AP488.
• Citation: 358 Wis.2d 712,856 N.W.2d 346 (Table)
• Parties: NATIONWIDE AGRIBUSINESS INSURANCE COMPANY as Subrogee of Premier Cooperative, Plaintiff–Appellant, v. AUGUST WINTER & SONS, INC., Defendant–Respondent.
• Court: Wisconsin Court of Appeals

358 Wis.2d 712

856 N.W.2d 346 (Table)

NATIONWIDE AGRIBUSINESS INSURANCE COMPANY as Subrogee of Premier Cooperative, Plaintiff–Appellant

v.AUGUST WINTER & SONS, INC., Defendant–Respondent.

No. 2014AP488.

Court of Appeals of Wisconsin.

Oct. 2, 2014.

Opinion

¶ 1 PER CURIAM.

This case involves litigation over a boiler that exploded during installation and adjustment of the boiler at Premier Cooperative. The plaintiff, Nationwide Agribusiness Insurance Company, as subrogee of its policyholder, Premier Cooperative, sued the installer, August Winter & Sons, Inc. Prior to trial, August Winter asked the circuit court to exclude the only expert witness Nationwide planned to present on the topic of the cause of the explosion. The court excluded the expert witness. The question on appeal is whether the circuit court properly excluded the witness under Wis. Stat. § 907.02(1),¹ Wisconsin's Daubert statute.² We agree with the circuit court that the witness was properly excluded and, therefore, affirm.

Background

¶ 2 The complaint alleges the following. Premier Cooperative contracted with August Winter to have August Winter install and place into service a steam boiler. During January 2009, the boiler exploded as it was being put into service. Just before the explosion, August Winter employee Joe Molenda was making “adjustments on the burner for the boiler.” Molenda negligently made adjustments, resulting in “excessive natural gas accumulated within the combustion chamber,” which caused a “massive explosion” when ignited by the pilot flame. These allegations form the factual basis for both of the complaint's claims: negligence and breach of contract.

¶ 3 Pursuant to an insurance agreement, Nationwide made payments to Premier Cooperative for property damage and business interruption expenses caused by the explosion. Accordingly, Nationwide has subrogation rights to “remedies and claims against” August Winter.

¶ 4 For purposes of proving the cause of the explosion, Nationwide planned to call a single expert witness, Duane Wolf. Wolf prepared a report that gave the opinion that Molenda failed to sufficiently tighten a “set screw,” which resulted in the accumulation of excessive gas. According to the report, the failure to sufficiently tighten the set screw resulted in slippage which, in turn, caused the explosion. In addition, Wolf was deposed on July 2, 2013, and at that time further explained his opinion on the cause of the explosion.

¶ 5 On December 16, 2013, August Winter filed a pretrial motion to exclude the testimony of Wolf. Among other arguments, August Winter contended that Wolf's deposition showed that Wolf's opinion as to the cause of the explosion depended on “an ‘assumed fact’ that has no basis.” The assumed fact was that the “set screw” was too loose at a particular point in time, which Wolf assumed to be true because of scratch marks on “linkage” that controls the flow of gas into the combustion chamber. August Winter argued that Wolf's theory of a too-loose set screw, which slipped to allow too much gas to flow, depended on the premise that the set screw left the scratch marks on the linkage just before the explosion, but without Wolf explaining why the scratch marks could not have occurred at another time.

¶ 6 After considering the briefs and oral argument held on January 3, 2014, the circuit court agreed with August Winter that the probative value of Wolf's opinion hinged on Wolf's factual assumption that the scratch marks showed that the set screw was too loose, a factual assumption without support.³ Accordingly, the circuit court ruled that Wolf's causation opinion was not admissible.

¶ 7 On January 16, 2014, pursuant to a stipulation, the circuit court entered a final order dismissing claims against August Winter. The parties agreed to dismissal because there was no dispute over damages ($100,000) and the only issue to be tried was causation, and Nationwide could not prove causation without Wolf's testimony. Nationwide appeals, challenging the circuit court's decision to exclude Wolf's testimony.

Discussion

¶ 8 Nationwide argues that the circuit court erroneously excluded the testimony of Nationwide's expert witness, Duane Wolf, under Wis. Stat. § 907.02(1) because the court did not engage in a proper analysis under that statute. Nationwide acknowledges that such decisions are discretionary. See State v. Shomberg, 2006 WI 9, ¶ 10, 288 Wis.2d 1, 709 N.W.2d 370 (decision whether to admit expert testimony is discretionary). Nationwide argues, however, that, because the circuit court failed to engage in a proper analysis under § 907.02(1), we should not defer to the court's exercise of discretion, but should instead review the matter de novo.

¶ 9 We could explain why the circuit court's oral decision, though sometimes difficult to track, does in fact contain a sufficient analysis under Wis. Stat. § 907.02(1). However, that discussion is unnecessary because, even reviewing the matter de novo, as Nationwide asks us to do, we conclude that the circuit court correctly excluded Wolf's testimony.

¶ 10 We begin our de novo review by honing in on the dispositive dispute. Nationwide lists five factors that it finds in Wis. Stat. § 907.02(1). According to Nationwide:

Wisconsin Statute § 907.02(1) now provides that expert testimony is admissible if:

1. Scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue;

2. The witness is qualified as an expert by knowledge, skill, experience, training, or education;

3. The testimony is based upon sufficient facts or data;

4. The testimony is the product of reliable principles and methods; and

5. The witness has applied the principles and methods reliably to the facts of the case.

Nationwide then addresses all five factors, pointing to evidence that Nationwide contends supports a ruling that all five are satisfied.⁴

¶ 11 August Winter tells us we need not address all five factors. August Winter argues that this dispute can be resolved by addressing just the third factor above, whether the testimony is based upon sufficient facts or data. We agree. We first explain why we perceive there to be no dispute that, if expert Wolf's causation testimony is based on an unsupported factual assumption, then his testimony is properly excluded. Next, we address the parties' dispute about what the record shows on this topic.

¶ 12 As noted, August Winter asserts that a court is not required to address all five factors if it concludes that an expert's opinion is not based on “sufficient facts.” August Winter supplies legal authority for that assertion, but we need not examine that authority because Nationwide does not dispute the point. Instead, Nationwide states that August Winter's “argument is irrelevant here” because the circuit court made no findings with respect to any of the Wis. Stat. § 907.02(1) factors. In light of Nationwide's contention that we should review the circuit court's decision de novo, this response is insufficient. Under de novo review, why would it matter even if the circuit court had failed to address all of the § 907.02(1) factors? Regardless, we are left with August Winter's undisputed and seemingly reasonable proposition that, if Wolf's opinion is not based on “sufficient facts,” that alone would support excluding Wolf's testimony. Accordingly, for purposes of this opinion, we will treat this proposition as true and proceed to examine the merits of August Winter's argument that Wolf's causation opinion hinges on an unsupported assumed fact.

¶ 13 As the background section above explains, a boiler explosion occurred at Premier Cooperative while Joe Molenda, an employee of August Winter, was making adjustments during boiler installation. Nationwide, Premier's insurer, brought a subrogation action against August Winter to recover amounts Nationwide paid to Premier as a result of the explosion. In broad strokes, Nationwide sought to prove that the boiler explosion was caused by the failure of Molenda to adequately tighten a “set screw” which was part of the “linkage” mechanism that controlled the flow of gas into a combustion chamber of the boiler. Nationwide sought to prove that a set screw slipped during a particular “cycle” because the set screw was too loose, allowing too much gas into the chamber and resulting in the explosion. Although Wolf's testimony and his report regarding the boiler, the setup process, and the various steps involved in the setup and testing of the boiler are often complicated and confusing, it is unnecessary to understand the precise mechanics of the boiler's operation and the adjustment process in order to resolve this case. The dispute focuses on just a few parts of the boiler, a limited sequence of events, and Wolf's opinion about those parts and events.

¶ 14 It was Wolf's opinion that the explosion occurred because Molenda was adjusting linkage, including making adjustments using set screws, in order to regulate the flow of gas into the boiler's combustion chamber. In Wolf's opinion, during that process Molenda failed to sufficiently tighten one of the set screws, allowing the screw to slip and let too much gas into the combustion chamber. Wolf's opinion regarding the tightness of the set screw was an assumption that was solely based on scratch marks.

¶ 15 To clarify, Nationwide does not dispute that Wolf's causation theory hinges on Wolf's opinion that Molenda failed to sufficiently tighten the set screw between two specific boiler cycles. A monitoring device determined that the boiler had cycled 97 times prior to the explosion and that the explosion occurred during the 98th cycle.⁵ Wolf gave the opinion that the set screw slipped between the 97th and 98th cycles, permitting excessive gas build-up in the combustion chamber which, in turn, caused the explosion during the 98th cycle. We perceive no dispute that Wolf's factual assumption that the set screw slipped at this particular...