Nationwide Agribusiness Ins. Co. v. Sma Elevator Constr. Inc.

Decision Date29 August 2011
Docket NumberNo. C 09–4002–MWB.,C 09–4002–MWB.
Citation816 F.Supp.2d 631
PartiesNATIONWIDE AGRIBUSINESS INSURANCE COMPANY, Plaintiff, v. SMA ELEVATOR CONSTRUCTION INC.; Schlagel, Inc.; Baldor Electric Company; Baldor Electric Company, formerly known as or also known as Dodge; Dodge, also known as or now known as Baldor Electric Company, Defendants.
CourtU.S. District Court — Northern District of Iowa

OPINION TEXT STARTS HERE

Donald G. Beattie, Beattie Law Firm PC, Des Moines, IA, for Plaintiff.

Angel Anna West, Mark D. Aljets, Matthew Roger Eslick, Richard J. Sapp, Nyemaster Goode Voigts West Hansell & O'Brien, PC, Erik Steven Fisk, Thomas Irving Henderson, Whitfield & Eddy, PLC, Des Moines, IA, Bryant Matthew Struble, David A. Dick, Nicholas J. Lamb, Matt B. Struble, Thompson Coburn, LLP, St. Louis, MO, Daniel L. Hartnett, Jonathan J. Blum, Marci L. Iseminger, Crary–Huff–Inkster–Sheehan–Ringenberg–Hartnett–Storm, Sioux City, IA, for Defendants.

Brett J. Beattie, Beattie Law Firm PC, Des Moines, IA, FOR Plaintiff/Defendants.

MEMORANDUM OPINION AND ORDER REGARDING DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

MARK W. BENNETT, District Judge.

+-----------------+
                ¦TABLE OF CONTENTS¦
                +-----------------+
                
                I. INTRODUCTION                                                       637
                
 A. Factual Background                                              637
                   B. Procedural Background                                           638
                
                II. LEGAL ANALYSIS                                                    640
                
 A. Standards For Summary Judgment                                  640
                   B. Negligence/Strict Liability Claims                              642
                
 1. Immunity of SMA to product claims                          643
                
 a. Arguments of the parties                               643
                            b. Analysis                                               644
                
 i. The applicable statute                            644
                                ii. The pertinent “products”                      646
                                iii. Was SMA an “assembler”?                       647
                                iv. Summary as to “product defect” claims         650
                                v. Remaining negligence claims against SMA           650
                
 2. Warning or instruction defect claims against Baldor        651
                
 a. Arguments of the parties                               651
                            b. Analysis                                               653
                
 3. Design defect claims against Baldor                        655
                
 a. Arguments of the parties                               655
                            b. Analysis                                               657
                
 4. Manufacturing defect claims against Baldor and Schlagel    662
                
 a. Arguments of the parties                               662
                            b. Analysis                                               662
                
 5. Installation defects and general negligence claims againstSchlagel   664
                
 a. Arguments of the parties                               664
                            b. Analysis                                               664
                
 C. Breach Of Implied Warranties                                    666
                
 1. Warranty of merchantability                                666
                
 a. Immunity of SMA                                        666
                            b. Timeliness of the claim against Schlagel and Baldor    666
                
 i. Arguments of the parties                          667
                                ii. Analysis                                          667
                
 2. Warranty of fitness for a particular purpose               670
                
 a. The claim against SMA                                  670
                
 i. Arguments of the parties                          670
                                ii. Analysis                                          670
                
 b. Timeliness of the claim against Schlagel and Baldor    672
                
 i. Arguments of the parties                          672
                                ii. Analysis                                          672
                
 3. Warranty of workmanlike manner                             674
                
 a. The claim against SMA                                  674
                
 i. Arguments of the parties                          674
                                ii. Analysis                                          675
                
 b. The claim against Schlagel and Baldor                  677
                
 D. Breach Of Express Warranties                                    677
                
 1. The claim against SMA                                      677
                
 a. Arguments of the parties                               677
                            b. Analysis                                               678
                
 2. The claims against Schlagel and Baldor                     681
                
 a. Arguments of the parties                               681
                
 i. The arguments as to Schlagel                      681
                                ii. The arguments as to Baldor                        681
                
 b. Analysis                                               682
                
 i. The effect of § 554.2318                         682
                                ii. Schlagel's other grounds for summary judgment     685
                                iii. Baldor's other grounds for summary judgment       685
                
 E. Breach Of Contract                                              686
                
 1. Arguments of the parties                                   686
                        2. Analysis                                                   688
                
                III. CONCLUSION                                                        691
                

This diversity action, involving claims of products liability, negligence, and breach of warranties, arises from an explosion and fire on or about July 9, 2008, at a grain elevator in Alton, Iowa. The plaintiff insurance company alleges that the explosion was caused by an overheated or hot pillow block bearing manufactured by one defendant, and selected, specified, and installed on an elevator leg by two others, the general contractor that built the grain elevator and the subcontractor that designed and manufactured the elevator legs that moved the grain around the elevator. Each of the defendants has moved for summary judgment on some or all of the claims against it.

I. INTRODUCTION
A. Factual Background

I will not attempt here an exhaustive dissertation on the undisputed and disputed facts in this case. Rather, I will set forth sufficient of the facts, both undisputed and disputed, to put in context the parties' arguments concerning the defendants' motions for summary judgment. Unless expressly indicated otherwise, the parties agree that the facts stated are undisputed. 1

At the center of this litigation is the Midwest Farmers Cooperative grain elevator in Alton, Iowa (the Alton grain elevator), which was constructed in 19971998. The Alton grain elevator was equipped with multiple “legs,” or “bucket elevators,” each of which was essentially an enclosed conveyor that carried grain from the “pit,” where farmers dump grain, to the top of the elevator leg, using cups attached to a conveyor belt. When a cup on the conveyor reached the top of the leg, the grain was dumped out and fell by gravity through a distributor, which directed the grain to one of a number of different silos. Near the top of a grain elevator leg is a “head pulley,” which is the shaft, motor, drive, gearboxes, bearings, and other equipment that help to power the movement of the conveyor and also secure the top of the conveyor to the greater elevator structure. The shaft in the head pulley at issue here (on the south receiving leg of the Alton grain elevator) was secured to the structure with two Dodge brand “non-expansion” tapered anti-friction (TAF) roller pillow block bearings. In a “non-expansion” bearing, the internal part of the bearing cannot move with the shaft relative to the outer housing. One such bearing was on the “drive side,” and the other was on the “non-drive side” of the conveyor and shaft. The Dodge TAF bearing at issue is a multi-purpose bearing that can be used for any number of purposes in any number of different industries or applications.

On the afternoon of July 9, 2008, a farmer was unloading grain at the Alton grain elevator. He dumped his grain into the “pit,” and it was conveyed to the top of the grain elevator by the south leg. An explosion and fire occurred shortly after the farmer started dumping his grain. A series of other explosions and fires continued at the Alton grain elevator for a few days after July 9, 2008. The plaintiff's experts have opined that the origin of the ignition of the explosion is at and/or in the head section of the south receiving leg and that the non-drive bearing on that leg became white hot. There is some dispute about whether the overheating of the bearing was because of inadequate lubrication, exposure of the uncovered bearing to weather and contaminants, corrosion, or fatigue, and whether the explosion and fire could have been avoided by adequate dust control or hazard monitoring systems or other measures. In other words, the parties dispute whether the bearing was the cause of the initial explosion and fire or was damaged by the explosion and fire.

The parties in this action are plaintiff Nationwide Agribusiness Insurance Company (Nationwide), as the insurer for Midwest Farmers Cooperative's Alton grain elevator; defendant SMA Elevator Construction Company (SMA), which was the general contractor for the construction of the Alton grain elevator; defendant Schlagel, Inc. (Schlagel), which was the subcontractor for the grain elevator responsible for designing and manufacturing the grain handling equipment, including the elevator legs; and defendant Baldor Electric Company (Baldor), which is the successor by merger to Reliance Electric Company, and the manufacturer and seller of the Dodge brand bearing at issue here.2 The role of each of these defendants requires a little more discussion.

SMA was the general “design-build” contractor for the Alton grain elevator. Midwest Farmers Cooperative contracted with SMA to build the Alton grain elevator as a “turnkey operation.” SMA performed the construction of the Alton grain elevator, including installation of equipment supplied by subcontractors. SMA...

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