Sinclair Wyo. Ref. Co. v. A & B Builders, Ltd.

• Decision Date: 22 February 2021
• Docket Number: No. 19-8042, No. 19-8053,19-8042
• Citation: 989 F.3d 747
• Parties: SINCLAIR WYOMING REFINING COMPANY, a Wyoming corporation, Plaintiff - Appellant, v. A & B BUILDERS, LTD., a Texas limited partnership; Matrix Engineering, Ltd., a Texas limited partnership; Howe-Baker Engineers, Ltd., a Texas limited partnership, Defendants - Appellees, Sinclair Wyoming Refining Company, a Wyoming corporation, Plaintiff - Appellant, v. Applied Control Equipment, LLC, a dissolved Colorado limited liability company, n/k/a Applied Control Equipment, LLLP, a Colorado limited liability partnership; Instrument & Valve Services Company, a Delaware company; Fisher Service Co., d/b/a Fisher Controls International, Inc., a Delaware corporation, n/k/a Fisher Controls International, LLC, a Delaware limited liability company; Emerson Process Management LLLP, a Delaware limited liability partnership, Defendants - Appellees, and A & B Builders, Ltd., a Texas limited partnership; Matrix Engineering, Ltd., a Texas limited partnership; Howe-Baker Engineers, Ltd., a Texas limited partnership, Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

989 F.3d 747

SINCLAIR WYOMING REFINING COMPANY, a Wyoming corporation, Plaintiff - Appellant,

v.A & B BUILDERS, LTD., a Texas limited partnership; Matrix Engineering, Ltd., a Texas limited partnership; Howe-Baker Engineers, Ltd., a Texas limited partnership, Defendants - Appellees,Sinclair Wyoming Refining Company, a Wyoming corporation, Plaintiff - Appellant,

v.Applied Control Equipment, LLC, a dissolved Colorado limited liability company, n/k/a Applied Control Equipment, LLLP, a Colorado limited liability partnership; Instrument & Valve Services Company, a Delaware company; Fisher Service Co., d/b/a Fisher Controls International, Inc., a Delaware corporation, n/k/a Fisher Controls International, LLC, a Delaware limited liability company; Emerson Process Management LLLP, a Delaware limited liability partnership, Defendants - Appellees,andA & B Builders, Ltd., a Texas limited partnership; Matrix Engineering, Ltd., a Texas limited partnership; Howe-Baker Engineers, Ltd., a Texas limited partnership, Defendants.

No. 19-8042

No. 19-8053

United States Court of Appeals, Tenth Circuit.

FILED February 22, 2021

Brad W. Breslau, Cozen O'Connor, Denver, Colorado, (Richard R. Rardin, Susan J. Lloyd, Cozen O'Connor, Denver, Colorado; Thomas M. Regan, Cozen O'Connor, San Diego, California; Kevin P. Caraher, Cozen O'Connor, Chicago, Illinois; Geoffrey D. Farnham, Deneberg Tuffley, Southfield, Michigan, with him on the briefs) for Plaintiff – Appellant.

Nicholas A. Merrell, (Bennett J. Lee, Varela, Lee, Metz & Guarino, LLP, San Francisco, California, with him on the brief); Randy L. Sego, (J. Scott Lasater and April D. Moore, Lasater & Martin, P.C. Highlands Ranch, Colorado with him on the brief); Patrick D. McVey, Fox Rothschild LLP, Seattle, Washington, (James F. Bennett, Dowd Bennett LLP, St. Louis, Missouri; Paul J. Hickey, Hickey & Evans, LLP, Cheyenne, Wyoming with him on the brief) for Defendants – Appellees.

Before MATHESON, SEYMOUR, and KELLY, Circuit Judges.

MATHESON, Circuit Judge.

Table of Contents

I. Background...758

A. Appellees...758

1. CB&I Defendants...758

2. ACE...758

3. IVS Defendants...758

B. Factual Background...758

1. The Unit's Origins...758

2. Process Design by Fluor Corporation...758

3. EPC Contract...759

4. ACE Contract...759

a. Solicitation of the ACE Contract...759

b. Valve inspection by IVS...760

c. Design and manufacture of FV-241...760

5. Project Completion...761

6. 2009 Refinery Fire and Brinell Testing by J.R. Eggleston...762

7. 2013 Refinery Fire and Explosion ...762

C. Procedural Background...764

D. Legal Background ...765

1. Standards of Review...765

a. Dismissal under Rule 12(b)(6)...765

b. Summary judgment under Rule 56...765

2. Ascertaining Wyoming Law ...765

3. Wyoming Contract Interpretation Principles...766

II. Discussion...766

A. Claims Against the CB&I Defendants...767

1. Claim 1 - Breach-of-Contract Claim Against Howe-Baker...767

a. Additional factual background ...767

b. Analysis...768

i. Howe-Baker was not required to plead a contractual limitations defense...768

ii. Article 1.7 bars Sinclair's breach-of-contract claim against Howe-Baker...769

2. Claims 2 and 3 - Sinclair's Negligence Claims Against the CB&I Defendants...770

a. Additional legal background...770

i. Economic loss rule...770

ii. Independent duty doctrine ...771

b. Analysis...772

i. Sinclair has not identified an independent duty...772

ii. Article 1.7 of the EPC Contract bars Sinclair's negligence claims...773

B. CB&I Defendants’ Indemnity Counterclaim...774

1. The EPC Contract's Indemnity Provisions...774

2. Analysis...775

a. The CB&I Defendants may assert their indemnity counterclaim...––––

i. Applicable standard...775

ii. Application...778

b. The EPC Contract requires Sinclair to indemnify the CB&I Defendants...779

C. The Eggleston Order...780

1. Additional Factual and Procedural Background...780

2. Reviewability of the Eggleston Order...781

3. Whether the Eggleston Order was Error...784 a. Additional legal background...784

b. Analysis...785

D. Claims Against ACE and the IVS Defendants...786

1. Claim 4 - Sinclair's Breach-of-Contract Claim Against ACE Based on the Metallurgy Theory...786

2. Claims 5 and 6 - Sinclair's Negligence and Strict Products Liability Claims Against ACE and the IVS Defendants Based on the Metallurgy Theory...787

a. Additional legal background...788

b. Analysis...788

3. Claim 7 - Sinclair's Failure-to-Warn Claim Against ACE and the IVS Defendants...789

a. Sinclair knew before 2013 that FV-241 was made from carbon steel...790

i. Additional legal background...790

ii. Analysis...790

b. Failure-to-warn claim based on FirstVue's limitations...792

i. Legal standards...793

ii. Analysis...793

4. Sinclair's Remaining Claims Based on the OEM Specifications Theory...794

III. Conclusion...794

On September 27, 2013, a refinery unit ("Unit") at the Sinclair Wyoming Refinery Co. ("Sinclair") in Sinclair, Wyoming caught fire and exploded because its "FV-241" control valve fractured and released flammable hydrogen gas. A high temperature hydrogen attack ("HTHA"), a chemical reaction, weakened the valve and caused the fracture. FV-241 was made from carbon steel, which is more susceptible to HTHA than stainless steel.

Sinclair had purchased the Unit in 2004. Sinclair moved the Unit from California to Wyoming and converted it from its previous use to a hydrotreater, a refinery unit that introduces hydrogen to remove impurities from the product stream. Sinclair contracted the design, engineering, and construction work to other companies. During the moving and conversion process, FV-241 was remanufactured and installed on the Unit. Work on the Unit was completed in 2006.

Following the 2013 explosion and fire, Sinclair brought this diversity action against seven companies involved in dismantling the Unit, converting it to a hydrotreater, rebuilding it in Wyoming, and remanufacturing and installing FV-241. The Defendants, now Appellees, divide into three groups:

1. Howe-Baker Engineers, Ltd. ("Howe-Baker") and its subcontractors, A & B Builders, Ltd. ("A & B") and Matrix Engineering, Ltd. ("Matrix") (collectively, "CB&I Defendants"), which provided construction and field engineering services;

2. Applied Control Equipment, LLC ("ACE"), which contracted with Sinclair to repair, refurbish, or replace valves from the Unit including FV-241; and

3. Emerson Process Management, LLLP ("Emerson"), Fisher Services Co. ("Fisher"), and Instrument & Valve Services Co. ("IVS") (collectively, "IVS Defendants"), which—through ACE—provided valve inspection, repair, and replacement services.

Sinclair alleged various contract and tort claims. The district court granted several motions to dismiss and motions for summary judgment that eliminated all of Sinclair's claims. The court also entered summary judgment in favor of the CB&I Defendants’ indemnity counterclaim.

Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

I. BACKGROUND

The following provides (A) additional information about the three groups of Appellees, (B) factual background, (C) procedural background, and (D) applicable legal standards.

A. Appellees

1. CB&I Defendants

The CB&I Defendants consist of Howe-Baker, A & B, and Matrix.¹ Howe-Baker entered into the Engineering, Procurement, and Construction Contract ("EPC Contract") with Sinclair to perform construction and engineering work on the Unit. Howe-Baker subcontracted the construction to A & B and the engineering to Matrix. A & B installed FV-241 on the Unit.

2. ACE

ACE contracted with Sinclair (the "ACE Contract") to inspect, repair, and replace valves from the Unit. It coordinated with the IVS Defendants as a parts broker.

3. IVS Defendants

The IVS Defendants consist of Emerson, Fisher, and IVS. Emerson Electric Co. owns all three.

Through a "Representative Agreement," Emerson appointed ACE as a "sales, engineering, and service representative for" products sold by certain "Emerson Companies," including Fisher. App. at 9541, 9555.

Fisher was the original equipment manufacturer ("OEM") of FV-241. Fisher also developed FirstVue, the software program that ACE used to generate specifications for FV-241.

IVS is a division of Emerson. Id. at 9528 (ACE's proposal to Sinclair, which describes "Emerson's Instrument and Valve Service Division"); id. at 9561 (Representative Agreement's description of IVS as part of Emerson's Process Systems & Solutions Division). IVS repairs and remanufactures valves. It remanufactured FV-241.

B. Factual Background

The material facts are undisputed unless otherwise noted.

1. The Unit's Origins

In 2004, Sinclair purchased the Unit, which was then a hydrocracker—a refinery unit that introduces hydrogen at high temperatures and high pressure to "crack" larger hydrocarbon molecules into smaller ones. App. at 1723 (SAC); id. at 14,917 (declaration of Bill Walters, Sinclair engineer). Sinclair arranged to dismantle the Unit in California, convert it into a hydrotreater, and rebuild it at its refinery ("Refinery") in Wyoming.

2. Process Design by Fluor Corporation

Fluor Corporation ("Fluor"), a nonparty to this action, had provided engineering input for the Unit when it was first constructed in the 1970s or 1980s. Sinclair retained Fluor to help convert the Unit from a hydrocracker to a hydrotreater. Sinclair charged Fluor with preparing a "process design," which yielded detailed specifications for the Unit's conversion. This left some field engineering work to be completed by the CB&I Defendants. App. at 2942-43, 2953, 2960-62.

Sinclair, Fluor, and another firm collaborated to create "piping and instrumentation diagrams" ("P&IDs") for the Unit. Id. at 2953-56. Sinclair viewed the P&IDs as "the controlling document[s] for the construction of [the Unit]," akin to a "[B]ible." Id. at 2957. Consistent with Fluor's process design, the P&IDs instructed that FV-241 and the line of pipes connected to it should be made from stainless steel. Id. at 2956; id. at 10,509 (explaining the relationship between Fluor's work and the third firm's work); see id. at 2898 (deposition testimony of Albert...