Steel Dynamics Columbus, LLC v. Altech Env't USA Corp.
| Decision Date | 31 March 2017 |
| Docket Number | NO. 1:14–CV–124–DMB–DAS,1:14–CV–124–DMB–DAS |
| Citation | 273 F.Supp.3d 627 |
| Parties | STEEL DYNAMICS COLUMBUS, LLC, Plaintiff v. ALTECH ENVIRONMENT USA CORP., Defendant |
| Court | U.S. District Court — Northern District of Mississippi |
Brian Craig Kimball, Kathleen I. Carrington, Phillip B. Abernethy, Butler Snow LLP, Ridgeland, MS, for Steel Dynamics Columbus, LLC.
Edward J. Currie, Jr., Rebecca B. Cowan, Gaines Spencer Beard, Jr., Michael F. Myers, Currie, Johnson, Griffin, Gaines & Myers, Jackson, MS, for Altech Environment USA Corp.
In August 2010, Steel Dynamics Columbus, LLC (under its former name, Severstal Columbus, LLC),1 contracted with Altech Environment USA Corp. to purchase two continuous emissions monitoring units ("CEMS") for its steel plant in Columbus, Mississippi. The CEMS, installed at Steel's plant in 2011, were required by the Mississippi Department of Environmental Quality ("MDEQ") under the Title V permit issued to Steel. After experiencing multiple operating issues with the CEMS over the course of three years, Steel commenced this action against Altech, alleging the CEMS were defective. Steel seeks to recover from Altech damages for (1) the cost of the CEMS; (2) the costs incurred in trying to make the CEMS work; (3) a fine imposed by MDEQ; and (4) attorney's fees.
The Court held a three-day bench trial on Steel's claims for negligence, breach of contract, breach of warranties, and contractual indemnification. At the bench trial, after Steel's case in chief, the Court granted Altech's motion for a judgment on partial findings as to Steel's contractual indemnity claim only. After the presentation of all evidence at trial, the Court took under advisement Altech's renewed motion for a judgment on Steel's remaining claims. Upon consideration of the trial evidence and the applicable law, the Court issues this memorandum opinion as its ultimate findings of fact and conclusions of law.
On June 30, 2014, Steel filed this action against Altech in the Circuit Court of Lowndes County, Mississippi. Doc. # 2. On August 4, 2014, Altech removed the case to this Court based on 28 U.S.C. § 1332.2 Doc. # 1 at ¶ 5. On October 14, 2014, Steel filed an amended complaint, asserting claims for breach of contract, breach of implied warranties, breach of express warranty, negligence, and contractual indemnification.3 Doc. # 13 at ¶¶ 22–25, 36–39.
On November 6, 2015, Altech filed a "Motion for Partial Summary Judgment on the Issue of Contractual Limitation of Remedies." Doc. # 49. Though denying liability, Altech limited its motion to "how ... provisions [in the parties' purchase contract] limit recoverable damages." Doc. # 50 at 2. The Court denied Altech's motion without prejudice, concluding that ruling on only the issue of damages before a trial in which liability would be contested would be inefficient. Doc. # 85 at 2 n.5, 3. The Court further stated that it preferred to consider the issue of damages in view of all facts to be presented at the bench trial4 rather than just on the motion record. Id.
The Court held a bench trial from June 20, 2016, to June 23, 2016. At the close of Steel's case in chief, Altech moved for a judgment on partial findings on all of Steel's claims, which the Court granted only as to Steel's contractual indemnity claim.5 At the close of Altech's case, Steel declined to present a rebuttal case, and Altech re-urged its motion for judgment as to Steel's remaining claims. The Court took Altech's re-urged motion under advisement and ordered that the record be left open for seven days following trial. After the close of the record, Steel and Altech filed proposed findings of fact and conclusions of law on October 21, 2016. Doc. # 96; Doc. # 97.
Steel operates a steel plant in Columbus, Mississippi, that melts scrap metal in an electric arc furnace. Tr. at 45, 90, 93.6 The process releases pollutants regulated by Title V of the Clean Air Act. Id. at 94.
MDEQ issued Steel a Title V permit which, among other things, required Steel to install two CEMS. CEMS provide continuous data on the level of monitored pollutants in industrial emissions. Steel's Title V permit required the installation of the CEMS to monitor levels of four regulated pollutants—Nitrogen Oxides (NOx), Carbon Monoxide (CO), Volatile Organic Compounds (VOCs), and Sulfur Dioxide (SO2). Ex. P–1 at §§ 3.B.12–B.19.
In May 2010, Steel, which had no experience with CEMS, solicited bids to purchase the CEMS required by MDEQ. Tr. at 96, 307–08. Altech, an Illinois provider of environmental monitoring systems, responded with a written proposal dated August 10, 2010. Ex. P–2.
Altech's proposal specified that Altech would supply CEMS that would monitor the pollutants regulated under Steel's Title V permit. Id. at 28–30, 40.7 The proposal included a "DAS" computer, which would be pre-loaded with software to operate CEMS and would be necessary to receive usable information from the CEMS.8 Id. at 29. The concentration ranges within which the CEMS would measure the regulated pollutants were to be set "as required." Id. at 28. As proposed, Altech represented that its CEMS would be "very well suited to monitoring emissions on arc furnaces." Id. at 23.
Under Altech's proposal, Altech would begin a "7–Day Drift Test" on the CEMS within five to seven days after "Equipment Startup" and, within a year after that, a more extensive "Relative Accuracy Test Audit" ("RATA") required by Steel's Title V permit. Id. at 41, 45, 49; Tr. at 526. The proposal included a one year maintenance contract, which included quarterly maintenance, as well as support services for startup, RATA testing, and "regulatory approval." Ex. P–2 at 29–30, 46.
The proposal also specified installation and maintenance requirements to be met by Steel and Altech. Regarding installation, the CEMS were to be mounted on a wall in a temperature-controlled room provided by Steel. Id. at 26, 41. Regarding maintenance, the proposal specified quarterly, semi-annually, and yearly maintenance, with the first year of maintenance to be performed by Altech under a proposed quarterly maintenance contract. Id. at 45. Every quarter, the CEMS were to undergo a performance test known as a "Calibration Gas Audit" and preventative maintenance, including servicing filters in the probe assembly.9 Every year, the CEMS were to undergo a RATA. Id.
On August 17, 2010, Steel issued a purchase order to Altech in the amount of $447,610.20 for two CEMS. Ex. P–3. The purchase order, which referred to Altech's proposal both by its identifying number and by specific numbered items, included a one year quarterly maintenance contract, a DAS computer with CEMLink5™ software from Contec, and a quality assurance plan for regulatory approval. Id. ; Ex. P–2 at 28–30. When Steel ordered the two CEMS, "[Altech] understood that [Steel] intended to use the CEMS units to monitor emissions [from its steel plant] in compliance with the Title V Permit that MDEQ issued to [Steel]." Doc. # 86 at § 9.a.(5), (6).
The undated "Goods and Services: Terms and Conditions of Purchase" ("Terms") include two sections relating to liability.10 One section provides for an express warranty, and the other disclaims all implied warranties. Ex. P–4 at § 14. As relevant here, the Terms warrant that the CEMS "(i) shall be of good quality and free from defects, latent and patent, in design, materials and workmanship; [and] ... shall be suitable and sufficient for their specified purpose." Id. The Terms also state that "THERE ARE NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR AN INTENDED PURPOSE." Id.
The Terms include two sections pertaining to remedies. One limits Steel's recourse for breach of the express warranty to repair and/or replacement of the CEMS at Altech's option.11 Id. The other contains two clauses limiting Steel's recoverable damages—one limits all damages (except for indemnity) to the CEMS purchase price, and the other precludes all incidental and consequential damages.12 Id. at § 27.
The first CEMS was installed between January 25 and January 27, 2011, with Altech supplying the DAS computer loaded with software. Ex. P–9 at 1; Tr. at 479, 551. In June 2011, Altech prepared specifically for Steel an operating manual setting forth maintenance requirements for CEMS. Tr. at 394; Ex. D–7 at 21253; Ex. P–2 at 21.
The second CEMS was installed on July 22. Ex. P–9 at 13; Tr. at 496. Both of the installed CEMS included the same three basic components: (1) a probe assembly, which is an umbilical that feeds airflow sample into the analyzer, fitted at both ends with filters; (2) a flow monitor, which measures total airflow volume; and (3) an analyzer, described as the "heart" of the CEMS, which measures the concentrations of pollutants. Tr. at 392–93, 584; Ex. D–7 at 21259, 21263.
During installation of the first CEMS, there were problems relating to inaccurate configuration data provided by Steel but by mid–March, the analyzers had been "re-ranged" with updated data Steel provided. Ex. P–6 at 23684; Ex. P–9 at 1–2.13 In two subsequent service visits over the next two months, Altech engineers addressed analyzer and computer issues, with an Altech engineer concluding as early as mid–April that service work remained "incomplete" because computer changes were required. Ex. P–9 at 3–4, 12.
By mid–October, the analyzer in the second CEMS could not measure SO2or NOx, the DAS computer was "not working," and all three temperature controllers in the first CEMS malfunctioned and had to be replaced. Id. at 14. Similar problems continued throughout 2011. Id. at 15–16; Ex. P–6 at 24162.
Throughout 2012, there were multiple service visits and persistent problems with the analyzers in both CEMS and their shared DAS computer. See, e.g. , Ex. P–9 at 20, 56; Ex....
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