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Travelers Indemnity Co. v. Industrial Paper & Packaging Corp.

July 19, 2006

TRAVELERS INDEMNITY COMPANY, AS SUBROGEE OF SMOKY MOUNTAIN LASER AND IDM, INC., PLAINTIFF,
v.
INDUSTRIAL PAPER & PACKAGING CORP., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Thomas W. Phillips United States District Judge

MEMORANDUM AND OPINION

Plaintiff*fn1 has filed the instant action alleging that an accumulation of defective and/or unreasonably dangerous diffusion fluid caused or contributed to a building fire. Five motions for summary judgment [Doc. 70, Doc. 82, Doc. 84, Doc. 88, and Doc. 92] have been filed by defendants. The plaintiff has opposed these motions by filing responses. For the reasons that follow, defendants' motions for summary judgment are GRANTED in part and DENIED in part.

I. Summary of the Facts

As the law requires, all disputed facts and inferences are resolved most favorably for the plaintiff. Furthermore, the Court merely provides an abridged summary of facts for the purposes of this opinion.

The fire that is subject of this lawsuit occurred on September 11, 1999, and damaged Q-Zar Amusement Center located at 716 Parkway, Gatlinburg, Tennessee. This was an arcade business owned by Smoky Mountain Laser and IDM, Inc. ("Smoky Mountain"). The amusement complex was a two-story building. The first floor contained a concession area, video machines, and a laser instruction room. The second floor contained a laser arena that consisted of a maze of walkways to target centers. The fire is alleged to have originated in a 15-ton HVAC unit and to have spread through the unit's duct system due to an accumulation of diffusion fluid in the HVAC system. It appears that diffusion fluid was used in the fogging machines for the laser tag operations.

Plaintiff filed suit against the diffusion fluid manufacturers and/or sellers, Industrial Paper & Packaging Corp ("Industrial Paper"),*fn2 Venture Tech, Inc. ("Venture Tech"), Citgo Petroleum Corporation ("Citgo"), and Reel EFX, Inc. ("Reel EFX"), based upon products liability, breach of warranty, and negligence. Plaintiff also filed suit against Ronald Ogle and Ogle's Repair Company ("Ogle and Ogle's Repair") based on negligence. Specifically, plaintiff's allegations against Ogle and Ogle's Repair are based upon the fact that Ogle serviced the HVAC system on September 3, 1999, eight days before the fire, and that the defendants failed to warn of or remove the accumulation of diffusion fluid in the HVAC system.

The fire caused $736,343.66 in damages. This figure includes $413,243.81 for the building, $198,432.85 for the content, and $124,667.00 for lost profits.

II. Law Applicable to Rule 56 of the Federal Rules of Civil Procedure

Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment will be granted by a court only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. The burden is on the moving party to conclusively show that no genuine issue of material fact exists. A court must view the facts and all inferences to be drawn therefrom in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co., v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Morris v. Crete Carrier Corp., 105 F.3d 279, 280-81 (6th Cir.1997); 60 Ivy Street Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir.1987).

Once the moving party presents evidence sufficient to support a motion under Rule 56 of the Federal Rules of Civil Procedure, the nonmoving party is not entitled to a trial simply on the basis of allegations. The non-moving party is required to come forward with some significant probative evidence, which makes it necessary to resolve the factual dispute at trial. Celotex Corp. v. Catrett, 477 U.S. 317 (1986). The moving party is entitled to summary judgment if the non-moving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof. Celotex, 477 U.S. at 323; Collyer v. Darling, 98 F.3d 220 (6th Cir.1996).

III. Motion for Summary Judgment and Applicable Law

A. Industrial Paper

Before May of 1994, Industrial Paper's salesman, Roger Bowles ("Bowles"), was given a sample of diffusion fluid used at the Q-Zar Amusement Center. Taking this sample to Venture Tech, Bowles found a substitute to market to Smoky Mountain. Smoky Mountain then began purchasing diffusion fluid from Industrial Paper. Thereafter, the fire occurred on September 11, 1999.

In reference to facts to support its summary judgment motion, Industrial Paper asserts that the product provided by Industrial Paper was the same as the sample taken from Q-Zar. Further, Industrial Paper states that the product was never opened nor altered when in Industrial Paper's possession and that Industrial Paper never made any representations regarding the product. Additionally, Industrial Paper claims that plaintiff's expert has not determined that there was anything wrong with the product; has not determined that there were any differences between the subject diffusion fluid and other diffusion fluids; and indicated that Smoky Mountain had a responsibility to keep the diffusion fluid from accumulating in the HVAC system.

Based upon these facts, Industrial Paper argues summary judgment in its favor on the following grounds: (1) the product is not defective nor unreasonably dangerous; (2) Industrial Paper had no duty to warn; and (3) Industrial Paper is not liable based upon the sealed container doctrine (moreover, the exception to the sealed container doctrine, breach of warranty, does not apply in the instant matter). In response, the plaintiff has opposed Industrial Paper's grounds for summary judgment, as well as asserted that Industrial Paper is an apparent manufacturer.

1. Defective and/or Unreasonably Dangerous Product; Duty to Warn; and Causation

It is fundamental to any products liability action that there must be evidence that the product in question was defective or unreasonably dangerous. Under Tennessee law, "[a] manufacturer or seller of a product shall not be liable for any injury to a person or property caused by a product unless the product is determined to be in a defective condition or unreasonably dangerous at the time it left the control of the manufacturer or seller." T.C.A. §29-28-105(a). There are statutory definitions for "defective condition" of products and "unreasonably dangerous" products. "Defective condition" means a condition of a product that renders it unsafe for normal or anticipatable handling and consumption. T.C.A. §29-28-102(2).

"Unreasonably dangerous" means that a product is dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics, or that the product because of its dangerous condition would not be put on the market by a reasonably prudent manufacturer or seller, assuming that the manufacturer or seller knew of its dangerous condition. T.C.A. §29-28-102(8).

The unreasonably dangerousness of a product as well as a lack of warnings about a dangerous product that can serve the basis for a manufacturer's liability, are usually jury questions. Harwell v. American Medical Sys., 803 F.Supp. 1287, 1297 (M.D.Tenn. 1992). It is normally a question for the jury's determination as to whether the product is in a defective condition or is unreasonably dangerous to the user. Id. The Court acknowledges that "the product itself need not be shown to be of defective manufacture. It can be perfectly made, but is rendered unreasonably dangerous by the manufacturer by failure in its duty to warn of non-apparent dangers known or that should be known by the manufacturer." Goode v. Tamko Asphalt Products, Inc., 1988 WL 99985 *3 (Tenn.Ct.App. June 26, 1988), rev'd, 783 S.W.2d 184 (Tenn. 1990) (reversed on grounds of insufficiency of the evidence). Indeed, Tennessee law requires manufacturers to warn of hidden and unknown dangers in their products. Shoemake v. Omiquip Inernational, Inc., 152 S.W.3d 567, 574-75 (Tenn.Ct.App. 2004). In other words, "[r]elevant to the determination of whether a product is defective and/or unreasonably dangerous is the presence or absence of a statement accompanying the product which in some way informs the user of the danger. This statement must be calculated to bring home to a reasonably prudent user of the product the nature and extent of the danger involved in using the product." Harwell, 803 F.Supp. at 1297 (internal citations omitted).

The plaintiff has essentially alleged that the diffusion fluid was unreasonably dangerous due to inherent dangers in the product that are not open and/or obvious and that would not be expected from an unsophisticated consumer, necessitating appropriate warnings. The plaintiff has produced sufficient proof such that a jury could find that the accumulation of diffusion fluid in the HVAC system caused and/or contributed to the fire.*fn3 While the plaintiff's expert did not allude to a manufacture defect, it is undisputed that the warning provided by Venture Tech stated that the product was "non-flammable."*fn4 The warnings of dangers must be sufficient in identifying the dangers posed by a product. Harwell, 803 F.Supp. at 1297. Thus, a reasonable juror could find that the warning provided by Venture Tech was inadequate, creating an unreasonably dangerous product.*fn5 However, the summary judgment analysis as to Industrial Paper does not end here.

2. Sealed Container Doctrine

According to Tennessee law, the seller of a product normally cannot be sued under products liability if the seller acquired and later sold the product in a "sealed container" and/or when the product is acquired and sold by the seller under circumstances in which the seller is afforded no reasonable opportunity to inspect the product, which would or should in the exercise of reasonable care, reveal the existence of the defective condition. T.C.A. §29-28-106(a). As a caveat, however, the doctrine does not apply to a valid breach of warranty action, expressed or implied. T.C.A. §29-28-106(a)(1); see also Wesson v. Woodworks, Inc., 1999 WL 188288 *5 (Tenn.Ct.App. Apr. 6, 1999). As to implied warranty of fitness for a particular purpose, the buyer must prove (1) that the seller was aware that the buyer had a particular purpose for which the goods were required; (2) that the seller knew that the buyer was relying on the seller's skill or judgment to provide the buyer with ...


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