Messer Griesheim Industries, Inc. v. Eastman Chemical Company ( 2005 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
September 12, 2005 Session
MESSER GRIESHEIM INDUSTRIES, INC. v.
EASTMAN CHEMICAL COMPANY
Appeal from the Circuit Court for Knox County
No. 3-64-97 Wheeler Rosenbalm, Judge
No. E2005-00226-COA-R3-CV FILED NOVEMBER 10, 2005
Eastman Chemical Company (“Eastman”) and Cryotech of Kingsport, Inc. (“Cryotech”) entered into
an agreement whereby Cryotech would purchase non-food grade feedgas from Eastman which was
roughly 78% carbon dioxide (“CO2"). Cryotech then would purify the feedgas and sell it as food
grade CO2. Messer Griesheim Industries, Inc. (“Messer”) purchased the CO2 from Cryotech. Messer
in turn sold the CO2 to soft drink manufacturers. The CO2 sold to Messer was contaminated with
cyanide and resulted in property damage to Messer and Messer’s customers. In the third appeal
arising from this litigation, we must determine whether the Trial Court correctly granted summary
judgment to Eastman on Messer’s claims for breach of warranty, products liability, and negligence,
and whether the Trial Court properly refused to allow Messer to amend its complaint to assert a
claim for negligence per se. We affirm in part, vacate in part, and remand for further proceedings.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit
Court Affirmed in Part and Vacated in Part; Case Remanded
D. MICHAEL SWINEY , J., delivered the opinion of the court, in which HERSCHEL P. FRANKS, P.J., and
CHARLES D. SUSANO , JR., J., joined.
Gregory M. Leitner, Michael K. Alston, and Timothy L. Mickel, Chattanooga, Tennessee, Mark G.
Arnold, St. Louis, Missouri, Arthur G. Seymour, Jr., Knoxville, Tennessee, for the Appellant Messer
Griesheim Industries, Inc., d/b/a MG Industries.
W. Randall Wilson, James T. Williams, IV, and William A. Harris, III, Chattanooga, Tennessee, for
the Appellee Eastman Chemical Company.
OPINION
Background
This is the third occasion we have had to consider an appeal in this litigation. Our
opinion from the second appeal sets forth a good summary of what gave rise to this lawsuit. Finding
no need to reinvent the wheel, we quote liberally from that opinion to set forth the general
background:
Cryotech of Kingsport, Inc., (hereinafter "Cryotech") operates
gas purification facilities and produces food grade liquid carbon
dioxide. The Appellee, Eastman Chemical [Company] (hereinafter
"Eastman"), owns and operates a coal gasification plant in Kingsport.
The Appellant, Messer Griesheim, Inc., d/b/a MG Industries
(hereinafter "Messer"), is a distributor of liquid carbon dioxide, which
it purchases in bulk and sells to customers for various food and
medical uses.
In 1988 Cryotech and Eastman entered into an agreement
pursuant to which Cryotech would purchase a carbon dioxide rich
waste stream (hereinafter "feedgas") from Eastman which Eastman
had, prior to that time, vented into the atmosphere. The price paid to
Eastman by Cryotech under the agreement was determined by the
concentration of carbon dioxide in the feedgas and the volume of
feedgas to be purchased was measured by the amount of carbon
dioxide Cryotech shipped to its customers.
At the same time it entered [into] the feedgas agreement
Cryotech also entered into a lease of land belonging to Eastman
adjacent to Eastman's Kingsport plant and constructed thereon a
carbon dioxide purification facility.
Cryotech's purification facility became operational in 1992
and Cryotech began selling carbon dioxide to Messer and other
customers. Shortly after operations began Cryotech began
experiencing problems due to chemical contaminants in the feedgas
it was purchasing from Eastman. In spring of 1993, Eastman
discovered the presence of hydrogen cyanide (hereinafter "HCN"), a
toxic and potentially lethal substance, on Cryotech's catalyst and
informed Cryotech of this finding. The feedgas agreement had not
included HCN in a description designated "Typical Composition of
Carbon Dioxide Gas" and deposition testimony indicates that
Eastman had previously represented that it had never detected any
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cyanide in the feedgas. Because of resulting increased purification
costs, Cryotech withheld payment for the feedgas and eventually
owed Eastman an arrearage of over one million dollars.
Cryotech began monitoring the HCN content of the feedgas
more than once a day and frequently discussed the results of such
monitoring with Eastman representatives. In late 1993 Cryotech
detected increasing levels of HCN and complained to Eastman about
the increased cost of its removal. Eastman sought to determine the
cause of the increased HCN levels and endeavored to assist Cryotech
in identifying better and less expensive ways Cryotech could remove
the HCN. Eastman also took some actions in its own facility to try to
reduce the HCN content of the feedgas. In 1996 Eastman installed its
own HCN analyzer to prepare for compliance with new EPA
regulations; however, this analyzer exhibited various problems and
was ultimately determined to be an unreliable measure of HCN
levels.
In March of 1996 Messer began selling carbon dioxide
obtained from Cryotech to a large manufacturer of carbonated
beverages. Shortly thereafter, this manufacturer notified Messer that
it was receiving customer complaints regarding the odor and/or taste
of its beverages. Testing revealed the presence of HCN in Cryotech's
carbon dioxide and thereafter Eastman discontinued supplying
feedgas to [Cryotech]. Subsequently, several of Messer's other
customers claimed that their product had been adulterated by the
contaminated carbon dioxide and that beverage canisters containing
the contaminated carbon dioxide were rendered unusable and had to
be destroyed. Messer settled these claims in anticipation of litigation.
Messer also incurred expenses in cleaning its own storage tanks and
tanker cars which had contained the contaminated carbon dioxide.
Messer incurred additional expenses as a result of the adulteration of
uncontaminated carbon dioxide when it was mixed with carbon
dioxide purchased from Cryotech. Altogether, Messer asserts that it
has sustained damages totaling nearly eight million dollars as a result
of injury to its own property and the property of its customers and that
it has suffered additional damages "including but not limited to,
business losses, substantial attorney's fees, expenses incurred in
determining the origin of the hydrogen cyanide contamination, and
the costs of cover." There are no allegations of personal injury in this
case.
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Messer Griesheim Indus., Inc. v. Cryotech of Kingsport, Inc., 131 S.W.3d 457, 460-61 (Tenn. Ct.
App. 2003)(hereafter “MG II”).
The first appeal surrounded numerous claims by Messer against Mellon Financial
Services Corp. #3 (“Mellon”). Mellon approved a construction loan enabling Cryotech to build the
gas purification facility on Eastman’s premises. After approving the construction loan, Mellon took
an active role during the construction of the facility. Once the facility was completed, the financing
agreement between Cryotech and Mellon was converted into a lease of the structure and equipment,
“with Mellon denominated the owner-lessor and Cryotech the lessee.” Messer Griesheim Indus.,
Inc., v. Cryotech of Kingsport, Inc., 45 S.W.3d 588, 595 (Tenn. Ct. App. 2001)(hereafter “MG I”).
It was this lessor/lessee relationship which gave rise to many of the claims Messer asserted against
Mellon.
At issue in MG I was whether the Trial Court properly granted summary judgment
to Mellon on all of Messer’s various claims.1 We initially discussed whether summary judgment was
appropriate on Messer’s negligence claim. In affirming the judgment of the Trial Court, we
determined that the lease between Mellon and Cryotech actually was a financing lease, as opposed
to a “true” lease, and the purpose of the lease was for Mellon to reserve “unto itself some rights in
order to secure its financial interest in the facility.” MG I, 45 S.W.3d at 603. Because of the nature
of the lease as a financing lease, we concluded that Mellon did not owe Messer a duty of care and
Messer’s negligence claim against Mellon properly was dismissed.2 We also rejected Messer’s
argument that Mellon had a non-delegable duty of care, holding that the manufacture of liquid
carbon dioxide for use in soft drinks and for other uses was not an inherently dangerous activity. Id.
Messer also asserted various products liability and breach of warranty claims against Mellon. We
concluded these claims also properly were dismissed because there was no duty owed by Mellon to
Messer and because there was no privity of contract between these two entities. In short, we
concluded that the Trial Court correctly granted summary judgment to Mellon as to all of Messer’s
claims.
This case was remanded to the Trial Court after we affirmed the grant of summary
judgment to Mellon. While on remand, Messer settled with Cryotech and an agreed order dismissing
Cryotech was entered in November of 2001, thereby leaving Eastman as the sole defendant. See MG
II, 131 S.W.3d at 461 n.1. After Eastman filed its motion for summary judgment, the Trial Court
concluded that Messer’s alleged damages were properly characterized as economic losses rather than
property damage. Because privity of contract was necessary to recover for economic losses, and
because there was no privity between Messer and Eastman, the Trial Court dismissed Messer’s
products liability and breach of contract claims. Likewise, Messer’s breach of warranty claim was
1
W hen the Trial Court granted summary judgment to Mellon, the judgment was certified as a final judgment
pursuant to Tenn. R. Civ. P. 54.02. See MG I, 45 S.W .3d at 598. This allowed us to consider whether it was proper to
dismiss those claims even though the battle between Messer and defendants Cryotech and Eastman raged on.
2
Because Mellon owed no duty to Messer we also affirmed the grant of summary judgment on M esser’s
negligent entrustment claim as well as its claim based on the Restatement (Second) of Torts § 389.
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dismissed for “lack of privity and/or property damage.” MG II, 131 S.W.3d at 461. After the Trial
Court also dismissed Messer’s claim pursuant to the Tennessee Consumer Protection Act, the few
remaining claims were held in abeyance. Id. at 461-62. A few months later, Eastman filed a
renewed motion for summary judgment on the remaining claims. The Trial Court ultimately granted
the motion, and Messer appealed for the second time. Id. at 462.
Several of the issues in Messer II centered around whether Messer’s claimed damages
were properly categorized as economic losses or property damage. We observed that the “economic
loss doctrine provides that ‘[i]n a contract for the sale of goods where the only damages alleged come
under the heading of economic losses, the rights and obligations of the buyer and seller are governed
exclusively by the contract.’ Trinity Industries v. McKinnon Bridge Co., 77 S.W.3d 159 (Tenn. Ct.
App. 2001). Consequently, a plaintiff may not maintain a claim for purely economic losses absent
contractual privity with the party charged with responsibility for those losses.” MG II, 131 S.W.3d
at 463. However, we went on to add that pursuant to statute, if the loss is properly characterized as
property damage, then there is no need for privity for claims based on negligence, strict liability,
breach of warranty, or the Uniform Commercial Code. See Tenn. Code Ann. § 29-34-104. After
noting the distinction between recovering on a claim for economic loss versus property damage, and
because there was no privity of contract between Messer and Eastman, we set about to determine into
which of these two categories Messer’s alleged damages fell. We resolved this as follows:
[W]e are compelled to conclude that the contaminated feedgas, as the
product placed in the stream of commerce by Eastman, was "the
product itself" and the property of Messer and its customers which
was injured as a result of contact with the contaminated carbon
dioxide was "other property." Messer is not required to establish
privity to maintain its cause of action in tort for damages arising from
injury to this other property and the Trial Court erred in granting
summary judgment against Messer on that basis. It is our
determination that Messer's carbon dioxide which was contaminated
as a result of being mixed with the contaminated carbon dioxide
constitutes such injured property. We also find that the soft drink
ingredients and cans of Messer's customers which were ruined as a
result of contact with the contaminated carbon dioxide fall within this
category. We do not, however, agree that the cost incurred by Messer
in cleaning its tanker cars and storage tanks is properly classified as
a cost related to property damage.…
MG II, 131 S.W.3d at 466. Thus, we affirmed the grant of summary judgment on Messer’s claim
for damages incurred in having to clean its tanker cars and storage tanks. However, because other
losses sought by Messer were “property damage” and because the Trial Court had dismissed those
claims solely because it believed them to be economic losses, we reversed the grant of summary
judgment as to those claims.
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We next addressed whether the Trial Court properly granted summary judgment to
Eastman on Messer’s claims alleging fraud as well as a violation of the Tennessee Consumer
Protection Act (“TCPA”). After summarizing the proof and inferences each party claimed could be
derived from that proof, we concluded the undisputed material facts showed that Eastman had not
engaged in any fraudulent or deceptive acts prohibited by the TCPA or otherwise. We stated:
The [feedgas] agreement between Cryotech and Eastman
expressly acknowledges that Eastman is generating crude carbon
dioxide which, "in its raw form, is not suitable for food use" and that
Cryotech "proposes to construct and operate a facility for the
purification and liquefaction" of such carbon dioxide. The product
which Cryotech was in the business of selling and producing was
food grade carbon dioxide. The product sold by Eastman to Cryotech
was non-food grade carbon dioxide. There is no evidence that
Eastman ever represented to Cryotech, Messer or anyone else that the
product it was selling to Cryotech was fit for human consumption.
***
Eastman never represented that the product it sold to Cryotech was
anything other than non-food grade carbon dioxide. Furthermore,
Messer cannot have relied upon a misrepresentation by Eastman that
the feedgas sold to Cryotech did not contain HCN because, when the
alleged injuries occurred to Messer in 1996, Cryotech was well aware
that HCN was a constituent of the feedgas, having been informed of
this fact by Eastman in 1993.
MG II, 131 S.W.3d at 467, 469 (emphasis in original).3
To summarize, the only remaining defendant after the second appeal was concluded
was Eastman. Messer had settled all of its claims against Cryotech, and we had affirmed the grant
of summary judgment to Mellon. We also had affirmed the grant of summary judgment to Eastman
on Messer’s claims for fraud and a violation of the TCPA. The only remaining claims were Messer’s
claims against Eastman for “other” property damaged by the contaminated feedgas, which did not
include costs incurred by Messer in cleaning its storage tanks and tanker cars and the like because
those were purely economic losses for which Messer could not recover in the absence of privity with
Eastman.
3
Although not directly pertinent to this appeal, another significant issue in MG II was whether Eastman and
Cryotech were engaged in an implied partnership or joint venture which Messer claimed would render Eastman jointly
and severally liable for Messer’s tort and contract claims against Cryotech. M G II, 131 S.W.3d at 469. Finding no
evidence that Cryotech and Eastman ever intended to share profits, we affirmed the Trial Court’s determination that
Cryotech and Eastman were not engaged in an implied partnership or a joint venture. Id. at 473.
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On remand, Eastman filed another summary judgment motion seeking dismissal of
the remaining claims which had survived the second appeal. Following a hearing, the Trial Court
granted the motion for summary judgment, although it did not specify the exact reasons for granting
the motion. Messer appeals raising the following issues, which we quote:
I. The Trial Court erred in granting Eastman summary judgment
on MG’s breach of express warranty claims because there is
substantial evidence that Eastman breached an express
warranty to provide feedgas in compliance with the
description in the feedgas agreement.
II. The Trial Court erred in granting Eastman summary judgment
on MG’s product liability claims because there is substantial
evidence that Eastman manufactured a defective product or
substantially participated in the integration of its feedgas into
Cryotech’s defective product.
III. The Trial Court erred in granting Eastman summary judgment
on MG’s negligence claims because there is substantial
evidence that Eastman breached a duty to protect downstream
purchasers from unreasonable and foreseeable harm from its
cyanide-laced feedgas.
IV. The Trial Court erred in granting Eastman’s motion to strike
MG’s negligence claims based upon violations of the FDCA
because MG sufficiently pleaded the facts supporting this
theory of negligence.
Discussion
In Blair v. West Town Mall, our Supreme Court recently reiterated the standards
applicable when appellate courts are reviewing a motion for summary judgment. Blair v. West Town
Mall, 130 S.W.3d 761 (Tenn. 2004). In Blair, the Court stated:
The standards governing an appellate court’s review of a
motion for summary judgment are well settled. Since our inquiry
involves purely a question of law, no presumption of correctness
attaches to the lower court’s judgment, and our task is confined to
reviewing the record to determine whether the requirements of
Tennessee Rule of Civil Procedure 56 have been met. See Staples v.
CBL & Assoc., Inc., 15 S.W.3d 83, 88 (Tenn. 2000); Hunter v.
Brown, 955 S.W.2d 49, 50-51 (Tenn. 1997); Cowden v. Sovran
Bank/Central South, 816 S.W.2d 741, 744 (Tenn. 1991). Tennessee
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Rule of Civil Procedure 56.04 provides that summary judgment is
appropriate where: 1) there is no genuine issue with regard to the
material facts relevant to the claim or defense contained in the
motion, and 2) the moving party is entitled to a judgment as a matter
of law on the undisputed facts. Staples, 15 S.W.3d at 88.
***
When the party seeking summary judgment makes a properly
supported motion, the burden shifts to the nonmoving party
to set forth specific facts establishing the existence of
disputed, material facts which must be resolved by the trier of
fact.
To properly support its motion, the moving party must
either affirmatively negate an essential element of the
non-moving party’s claim or conclusively establish an
affirmative defense. If the moving party fails to negate a
claimed basis for the suit, the non-moving party’s burden to
produce evidence establishing the existence of a genuine issue
for trial is not triggered and the motion for summary judgment
must fail. If the moving party successfully negates a claimed
basis for the action, the non-moving party may not simply rest
upon the pleadings, but must offer proof to establish the
existence of the essential elements of the claim.
Blair, 130 S.W.3d at 763-64, 767 (quoting Staples, 15 S.W.3d at 88-89).
Our Supreme Court also has provided instruction regarding assessing the evidence
when dealing with a motion for summary judgment, stating:
The standards governing the assessment of evidence in the
summary judgment context are also well established. Courts must
view the evidence in the light most favorable to the nonmoving party
and must also draw all reasonable inferences in the nonmoving
party’s favor. See Robinson v. Omer, 952 S.W.2d at 426; Byrd v.
Hall, 847 S.W.2d at 210-11. Courts should grant a summary
judgment only when both the facts and the inferences to be drawn
from the facts permit a reasonable person to reach only one
conclusion. See McCall v. Wilder, 913 S.W.2d 150, 153 (Tenn.
1995); Carvell v. Bottoms, 900 S.W.2d 23, 26 (Tenn. 1995).
Staples v. CBL & Assocs., Inc., 15 S.W.3d 83, 89 (Tenn. 2000).
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The Feedgas Agreement refers to Eastman as the “Seller” and Cryotech as the
“Buyer” and contains the following provisions:
WHEREAS, Seller is now generating non-food grade crude
carbon dioxide gas (“CO2 Gas”) as a co-product from Seller’s
existing coal gasification plant (“Seller’s Plant”) located in the
vicinity of Kingsport, Tennessee, which CO2 Gas, in its raw form as
generated by Seller, is not suitable for food use….
****
5.0 QUALITY
Based upon the average of the analyses of the CO2
Gas conducted during the normal operation of Seller’s
Plant, Seller represents to Buyer that a typical
composition of the CO2 Gas to be supplied by Seller
is set forth in Exhibit A attached hereto and made a
part hereof. If the composition of the CO2 Gas varies
materially from that set forth in Exhibit A, then the
price paid by Buyer shall be adjusted in accordance
with Article 8.0 hereof.
****
8.0 PRICE AND PAYMENT TERMS
****
8.4 If the quality of the CO2 Gas made available
by Seller to Buyer varies materially from the
composition set forth in Exhibit A attached
hereto, then the price paid by Buyer shall be
adjusted in accordance with Exhibit B
attached hereto.
****
13.0 TERMINATION
****
13.3 If after six (6) months prior written notice to
Buyer, Seller alters its operations so as to
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substantially modify the CO2 Gas in its
present form, and Buyer, in Buyer’s sole
discretion, determines that Buyer, for any
economic or technical reason, is unable to use
the modified gas, this Agreement can be
terminated by Buyer as of the time of the
modification.
15.0 LIABILITY
15.1 BUYER ASSUMES ALL RISKS OF LOSS
THAT RESULT FROM THE USE OF THE
CO2 GAS PURCHASED HEREUNDER
WHETHER USED SINGLY OR IN A
COMBINATION WITH OTHER
SUBSTANCES OR IN ANY PROCESS.
SELLER SHALL NOT BE LIABLE AS TO
GOODS DELIVERED FOR ANY
EXEMPLARY OR SPECIAL DAMAGES,
OR FOR CONSEQUENTIAL DAMAGES;
provided, however, that such limitation of
liability shall not apply to property damage
suffered solely by Buyer as a result of Seller’s
negligence.
****
15.3 Seller makes no representation or warranty,
expressed or implied, as to the fitness or
merchantability of the CO2 Gas or the LCO2.
Seller’s liability to Buyer shall be limited to
the value of the CO2 Gas delivered to Buyer.
15.4 The warranties of Seller set forth herein are
exclusive of and in lieu of all other
representations or warranties of Seller whether
statutory, written, oral or implied, and Seller
has not made and does not hereby make, nor
shall it be deemed by virtue of having sold the
CO2 Gas pursuant to this Agreement to have
made, any representation or warranty as to the
merchantability or fitness for a particular
purpose of the CO2 Gas.
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15.5 Limitations of Liability
(a) Determination of the suitability of the
LCO2 furnished hereunder for the use
contemplated by Buyer is the sole
responsibility of Buyer, and Seller
shall have no responsibility in
connection therewith.…
19.0 GENERAL PROVISIONS
19.1 This Agreement, the Exhibits and other
attachments hereto, and all documents
incorporated herein by reference, constitute
the entire agreement between the parties
hereto, supersede all previous agreements and
understandings, whether oral or written,
relating to the subject matter hereof, and may
not be changed or modified orally….
Exhibit A to the Feedgas Agreement sets forth the “typical” composition of the
feedgas stating it is 78.5% ± 2% CO2, with the remaining 21.5% ± 2% being something other than
CO2. The list of other components typically contained in the feedgas did not include cyanide.
Messer argues that because Eastman provided Cryotech with a specific description
of the “typical” composition of the feedgas, and because that description did not identify cyanide as
something that may be in the feedgas, this amounts to an express warranty that the feedgas would
not contain cyanide. We disagree. As we have already held, “Eastman never represented that the
product it sold to Cryotech was anything other than non-food grade carbon dioxide.” MG II, 131
S.W.3d at 469. There is no dispute that the feedgas sold to Cryotech was non-food grade at all times.
Messer downplays our previous holding by stating it is “not claiming that Eastman warranted a food-
grade product. MG simply asserts that Eastman warranted carbon dioxide gas of a certain
composition and quality.” The Feedgas Agreement is clear that Eastman and Cryotech contemplated
the composition of the feedgas could change over time and this understanding was specifically
reflected in the agreement. Section 5.0 of the Feedgas Agreement provides that the price of the
feedgas shall be adjusted if the feedgas varies materially from the “typical” composition contained
in Exhibit A. This, of course, presumes that the composition as varied still is usable for Cryotech’s
intended purposes. However, Section 13.3 of the Feedgas Agreement goes on to provide that if the
composition of the feedgas is substantially modified to the point that it is unusable by Cryotech for
“any economic or technical reason,” then Cryotech, at its sole discretion, could terminate the Feedgas
Agreement altogether.
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Eastman correctly points out that in the lease between Cryotech and Eastman dated
July of 1998, Exhibit B is titled “Typical Return Condensate Stream Composition (anticipated).”
Part 1 of that Exhibit describes “[m]aterial received from and [to be] returned to Eastman.” The
materials listed in Part 1 were derived from a feedgas analysis provided by Eastman and one of the
components listed in Part 1 is Hyrdogen Cyanide. We further note that Messer acknowledges in its
brief that “Cryotech designed its plant to accommodate for concentrations of cyanide up to two
ppm.” If Eastman expressly warranted to Cryotech that the feedgas never would contain any
cyanide, it makes absolutely no sense for Cryotech to go to the expense and trouble of designing a
plant to accommodate the presence of a substance which was expressly warranted never to be
present.
We agree with the Trial Court that the undisputed material facts demonstrate that
Eastman made no express warranty to the effect that the feedgas never would contain any cyanide.
The Trial Court’s grant of summary judgment on Messer’s claim for breach of warranty is affirmed
and any remaining issues regarding whether Eastman could or did properly disclaim any warranties
are pretermitted.
Next, we will consider whether the Trial Court properly granted summary judgment
to Eastman on Messer’s products liability claims. Messer argues that Eastman is liable as a
manufacturer and seller of a component part of the contaminated feedgas, because the feedgas was
defective or unreasonably dangerous and/or because Eastman substantially participated in the
integration of its feedgas into Cryotech’s defective product. Messer points out that under the
Tennessee Products Liability Act, a manufacturer is defined as a “designer, fabricator, producer,
compounder, processor or assembler of any product or its component parts.” Tenn. Code Ann. § 29-
28-102(4). Eastman argues that it is not a “manufacturer” as that term is defined in Tenn. Code Ann.
§ 29-28-102(4) because all Eastman did was supply Cryotech with a crude raw material. Eastman
cites no authority in support of this conclusion and fails to offer any explanation as to how or why
it is not a producer or processor of the feedgas it sold to Cryotech when the Feedgas Agreement itself
states that the carbon dioxide gas sold by Eastman to Cryotech is “a co-product from [Eastman’s]
existing coal gasification plant….” Simply because Eastman had no viable use for the feedgas it
produced prior to its relationship with Cryotech does not mean that the feedgas was not produced
by Eastman as a byproduct in its coal gasification plant. We agree with Messer that Eastman is a
“manufacturer” as that term is defined in Tenn. Code Ann. § 29-28-102(4).
In Davis v. Komatsu America Indus. Corp., 42 S.W.3d 34 (Tenn. 2001), our Supreme
Court adopted Section 5 of the Restatement (Third) of Torts: Products Liability (1997) as being the
law in Tennessee. According to Davis:
Consistent with the overwhelming weight of authority, the
drafters of the Restatement (Third) of Torts: Products Liability
(1997) included a streamlined and simplified statement of the
doctrine as follows:
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§ 5. Liability of Commercial Seller or Distributor of Product
Components for Harm Caused by Products into Which
Components are Integrated
One engaged in the business of selling or otherwise
distributing product components who sells or distributes a
component is subject to liability for harm to persons or
property caused by a product into which the component is
integrated if:
(a) the component is defective in itself ... and the
defect causes the harm; or
(b)(1) the seller or distributor of the component
substantially participates in the integration of the
component into the design of the product; and
(2) the integration of the component causes the
product to be defective ...; and
(3) the defect in the product causes the harm.
Echoing the judicial decisions discussing this issue, comment a
explains the rationale for Section 5 as follows:
If the component is not itself defective, it would be unjust and
inefficient to impose liability solely on the ground that the
manufacturer of the integrated product utilizes the component
in a manner that renders the integrated product defective.
Imposing liability would require the component seller to
scrutinize another's product which the component seller has
no role in developing. This would require the component
seller to develop sufficient sophistication to review the
decisions of the business entity that is already charged with
responsibility for the integrated product.
Comment e clarifies the parameters of the liability described by
Section 5(b):
When the component seller is substantially involved in the
integration of the component into the design of the integrated
product, the component seller is subject to liability when the
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integration results in a defective product and the defect causes
harm to the plaintiff. Substantial participation can take
various forms. The manufacturer or assembler of the
integrated product may invite the component seller to design
a component that will perform specifically as part of the
integrated product or to assist in modifying the design of the
integrated product to accept the seller's component. Or the
component seller may play a substantial role in deciding
which component best serves the requirements of the
integrated product. When the component seller substantially
participates in the design of the integrated product, it is fair
and reasonable to hold the component seller responsible for
harm caused by the defective, integrated product. A
component seller who simply designs a component to its
buyer's specifications, and does not substantially participate
in the integration of the component into the design of the
product, is not liable within the meaning of Subsection (b).
Moreover, providing mechanical or technical services or
advice concerning a component part does not, by itself,
constitute substantial participation that would subject the
component supplier to liability.
Having fully reviewed numerous authorities describing and
defining the doctrine, we conclude that Tennessee products liability
law recognizes and includes the component parts doctrine.
Davis, 42 S.W.3d at 40-41.
We acknowledge that the facts in the present case do not fit squarely into the
component parts doctrine. The reason for this is that Cryotech was to purify the feedgas supplied
by Eastman and, in effect, get rid of the contaminants. In other words, the feedgas was not a single
component of the final product, but rather, the final product was the whole of Eastman’s original
product, i.e., the feedgas as supplied by Eastman, less any contaminants that had been removed.
Having said that, we nevertheless believe that the rationale behind the component parts doctrine
applies to this fact situation. The reason for this is that the attendant protections to be afforded
consumers in certain circumstances are no less compelling here. The underlying theory supporting
the doctrine does not disappear simply because Cryotech’s final product was less than instead of
more than the initial product supplied by Eastman. The feedgas supplied by Eastman is still very
much a part of the final product sold by Cryotech, and is even more so than in the typical case
involving a component part.
We reject Messer’s claim that the feedgas supplied by Eastman was per se defective
or unreasonably dangerous. The Products Liability Act defines a “defective condition” as “a
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condition of a product that renders it unsafe for normal or anticipatable handling and consumption.”
Tenn. Code Ann. § 29-28-102(2). The Act defines “unreasonably dangerous” as follows:
“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.
Tenn. Code Ann. § 29-28-102(8).
Eastman’s “product” was non-food grade carbon dioxide. By definition, it was not
to be used for human consumption and any “normal or anticipatable” use of that particular product
would not involve human consumption such as using it in soft drinks or the like. It was only after
Cryotech purchased the non-food grade carbon dioxide and purified it that any potential use was to
involve human consumption. Simply because Cryotech failed to properly purify the feedgas does
not make the non-food grade feedgas supplied by Eastman to Cryotech either defective or
unreasonably dangerous.4
In Davis, supra, the Supreme Court also recognized that the component parts doctrine
is based on the premise that the obligation of a component parts manufacturer does not extend to
anticipating how a component which is not in and of itself dangerous or defective can become
dangerous or defective depending upon how it is integrated into the final product and sold by
another. To hold otherwise would force component part manufacturers to “to retain private experts
to review an assembler's plans and to evaluate the soundness of the proposed use of the
manufacturer's parts. The added cost of such procedure both financially and in terms of stifled
innovation outweighs the public benefit of giving plaintiffs an additional pocket to look to for
recovery.” Davis, 42 S.W.3d at 40 (quoting Orion Ins. Co., Ltd. v. United Technologies Corp., 502
F. Supp. 173, 178 (E.D. Pa. 1980)).
We do not think the Tennessee Products Liability Act or the Restatement (Third) of
Torts: Products Liability § 5 prohibits Eastman from simply selling its feedgas to an entity who
claims the ability to purify the feedgas and then resell it. Nor do we believe that Eastman was
obliged “to retain private experts to review an assembler's plans and to evaluate the soundness of the
proposed use.” However, this does not mean Eastman cannot be liable if it knew the feedgas
contained cyanide and thereafter it: (1) substantially participated in the integration of its feedgas into
the design of the food grade carbon dioxide as sold by Cryotech; (2) the integration of the feedgas
4
It is important to note that Messer acknowledges in its brief that technology was available that could have
removed the increased level of cyanide from the feedgas.
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caused Cryotech’s product to be defective; and (3) the defect in Cryotech’s product caused the
property damage. See Restatement (Third) of Torts: Products Liability § 5(b)(1) - (3).
As we noted previously:
In late 1993 Cryotech detected increasing levels of HCN and
complained to Eastman about the increased cost of its removal.
Eastman sought to determine the cause of the increased HCN levels
and endeavored to assist Cryotech in identifying better and less
expensive ways Cryotech could remove the HCN. Eastman also took
some actions in its own facility to try to reduce the HCN content of
the feedgas.
Messer II, 131 S.W.3d at 460.
From the record now before us, Eastman’s activities in assisting Cryotech were more
extensive after the increased levels of cyanide were detected than before. For example, an Eastman
memorandum dated August 28, 1995, summarizes a meeting held in Pittsburgh to discuss the
problem involving the increased levels of cyanide. The meeting was attended by various
representatives from Eastman and Cryotech. The stated purpose of the meeting was to “come to an
agreement on the financial issues and to get a plan to solve the technical issues.” Attached to the
memorandum was an exhibit detailing what had already been done to help remedy the problem, and
what was planned for the future. According to the exhibit, the following already had been done: (1)
analytical work to identify HCN as contaminant; (2) adjusted N2 flow to help CO2 purity; (3)
decoupled C-5 and C-6 columns (MeOH); (4) experiments to find a control knob for HCN; (5)
filtered water on C-6; (6) cleaned E-20 to reduce MeOH injection; (7) purged MeOH for five weeks
at cost of $5,000/wk to reduce NH3/HCN; (7) worked with ICI Katalco and local (Ken Hingle) to
recommend: (a) more scrubber purge (NH3 and MeOH), hotter catalyst bed temperature, regenerate
with N2 instead of CO2, and also working as is Cryotech with ICI for an HCN catalyst; and (8)
PI/Development support equivalent to ½ man-year. The memorandum also identified the following
that would be done: (1) find an exchanger 200ft², 300 psig for heating gas to catalyst; (2) will install
HCN and TOC analyzers, (3) will continue to investigate regeneration process (regenerate gas
analyses and catalyst analyses); (4) continue PI support; (5) improve control strategy for MeOH and
H2S; and (5) implement new operating strategy.5
The foregoing is by no means exhaustive of the actions taken by Eastman to resolve
the cyanide problem so that the entire undertaking between it and Cryotech could move forward.
At this point in the litigation, we need not decide whether Eastman is liable as a component part
5
The memorandum lists “W hat we have done” and “What we will do.” Because the memorandum was authored
by an Eastman representative and refers to Cryotech separately, as applicable to the resolution of Eastman’s summary
judgment motion we assume the memorandum is detailing only what Eastman had done, as opposed to what Eastman
and Cryotech had done collectively. Our ultimate resolution of this issue would not change if in fact the memorandum
details the latter instead of the former.
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manufacturer pursuant to the law as set forth in Davis, supra, and Section 5 of the Restatement
(Third) of Torts: Products Liability (1997). Although we have already concluded that Eastman’s
feedgas was not per se defective, the CO2 sold by Cryotech for food grade use clearly was. What
must be decided is if there is a genuine issue of material fact regarding whether Eastman
substantially participated in the integration of its feedgas, which it knew contained high levels of
cyanide, into the final product sold by Cryotech. Based on the facts set forth above, we conclude that
there is a genuine issue of material fact as to whether Eastman can be held liable as a component part
manufacturer due to its substantial participation in the integration of its feedgas into Cryotech’s final
product. The Trial Court’s grant of summary judgment to Eastman on Messer’s products liability
claim is, therefore, vacated.
The third primary issue raised by Messer is whether the Trial Court erred when it
granted summary judgment to Eastman on Messer’s negligence claim. Messer claims there is a
genuine issue of material fact regarding whether Eastman “breached a duty to protect downstream
purchasers from unreasonable and foreseeable harm from its cyanide-laced feedgas.” One of the few
matters in which both parties to this appeal agree is that courts generally apply the component parts
doctrine to negligence as well as products liability claims. As stated by Eastman in its brief,
“Eastman agrees with MG that the component part manufacturer doctrine … is equally applicable
to negligence claims as product liability claims.”
Eastman’s argument that summary judgment was proper on Messer’s negligence
claim for the most part tracks its argument on Messer’s products liability claim. For example,
Eastman argues that it was merely a supplier of a raw material and, therefore, cannot be deemed a
component part manufacturer, an argument which we have rejected. Eastman further argues that the
decision to sell the improperly purified CO2 to Messer rested solely with Cryotech and was
something over which Eastman had no control. Eastman also argues that it was not aware that
Cryotech was selling contaminated CO2 and, therefore, Eastman had no duty to warn downstream
purchasers.
Matthew Stevens (“Stevens”) was a superintendent in Eastman’s gasification
department until sometime in 1994. In his deposition, Stevens initially stated that he did not know
Cryotech was selling CO2 that was contaminated with cyanide. However, Stevens acknowledged
that Cryotech had designed its plant around the feedgas specifications supplied by Eastman, and
during the relevant time period Cryotech was claiming its plant was not designed to compensate and
remove cyanide at the levels being received in the feedgas. Stevens also testified as follows:
Q. Did it ever become a concern of your’s that Cryotech
might be selling CO2 to the public that contained hydrogen cyanide?
A. When I learned that there was hydrogen cyanide in
those samples, that I think there was some samples that was evaluated
by Hedrick and some others, I was concerned from a safety
perspective.… And so when I saw that there was hydrogen cyanide
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present in that gas, I wanted to know, for my own personal
understanding, what levels of cyanide were there. I knew that from
some analyses, although I wasn’t sure about the exact compositions.
I wanted to know, and that’s why I sent a note to Dr. Blickenstaff to
find out. I wanted to know about the safety of that hydrogen cyanide
in that gas.
Q. Safety to humans?
A. Yeah, safety to any people that were exposed to that.
Q. Because you knew that Cryotech was selling CO2 to
the beverage market, didn’t you, sir?
A. Yes, I did.
William L. Trapp (“Trapp”), also a superintendent at Eastman, testified that he knew
Cryotech was selling CO2 to be used in soft drinks. Trapp stated he did not recall specifically asking
anybody at Eastman whether contaminated CO2 was being sold on the market by Cryotech.
However, Trapp acknowledged that there “was probably some general discussion about that. I really
don’t remember a specific question, but it was discussed at least at some low level.” Trapp then
added that there was a “mild concern” at Eastman about whether cyanide was getting through
Cryotech’s processes. According to Trapp, Eastman inquired about Cryotech’s ability to analyze the
feedgas, and when Cryotech showed Eastman the equipment they had in place, “we were satisfied.”
Trapp also stated that he believed the inquiry surrounding whether Cryotech was selling cyanide
contaminated CO2 took place prior to the Messer “incident.”
From the record before us, Messer has created a genuine issue of material fact
regarding whether Eastman was negligent. There is a factual issue over whether Eastman
substantially participated in the integration of its feedgas into the design of the food grade CO2 sold
by Cryotech while knowing that the CO2 was contaminated with cyanide and being sold by Cryotech
on the market to purchasers who intended to use the CO2 in a manner requiring food grade quality.
Again, we need not and do not express any opinion on whether Eastman actually had or should have
had such knowledge and was negligent. As with the products liability claim, we hold only that based
on the record now before us, there is a genuine issue of material fact on this aspect of Messer’s
negligence claim.
Eastman also claims it had no control over whether or not Cryotech sold its final
product to Messer and, therefore, Eastman cannot be found liable for negligence. We agree with this
statement only to a point. Cryotech certainly had the ability not to sell the CO2 if it knew the CO2
had not been properly purified and contained potentially dangerous levels of cyanide. At the same
time, however, Eastman had the ability to stop selling Cryotech its feedgas if it knew or reasonably
should have known that: (1) Cryotech’s technology was insufficient to rid the feedgas of the
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cyanide, or for whatever reason the CO2 was not being properly purified and contained potentially
dangerous levels of cyanide; and (2) Cryotech nevertheless was selling the cyanide laced CO2 to
purchasers who in turn were using that CO2 for food grade purposes. Stated another way, even if
a manufacturer such as Eastman makes no express warranty about the quality of its product and that
product is not inherently dangerous or defective, we do not believe that such a manufacturer may
escape potential liability if it continues to sell its product after learning its product contains a
dangerous contaminant that is not being removed as it should be by its purchaser who is selling the
contaminated final product to be used in the manufacture of food or the like. This factual scenario
gives rise to a duty to the downstream purchasers separate and apart from whether the manufacturer
substantially contributed to the integration of its product into the final product under the component
parts doctrine. There is a genuine issue of material fact as to whether the underlying facts would
support imposition of such a duty on Eastman and, if so, whether Eastman acted reasonably in
carrying out that duty. Finding a genuine issue of material fact, the Trial Court’s grant of summary
judgment on Messer’s negligence claim is vacated.
The final issue is whether the Trial Court erred when it granted Eastman’s motion to
strike Messer’s negligence claim based upon a violation of the federal Food, Drug and Cosmetic Act
(“FDCA”), 21 U.S.C. § 331 et seq. Eastman’s most recent motion for summary judgment, which
followed the first two appeals, moved to strike Messer’s negligence per se claim because that claim
had not been specifically pled in the complaint, as twice amended. Messer argues that the complaint
references a violation of the FDCA and this should be considered sufficient for pleading a negligence
per se claim.
In Alex v. Armstrong, 215 Tenn. 276, 385 S.W.2d 110 (1964), our Supreme Court
stated:
The rules in Tennessee relating to liability for the violation of a
statute have been stated as follows:
"It is well settled that a failure to perform a statutory duty is
negligence per se, and, if the injury is the proximate result or
consequence of the negligent act, there is liability." Wise &
Co. v. Morgan, 101 Tenn. 273, 278, 48 S.W. 971, 44 L.R.A.
548.
"It has long been well settled in this State that a violation of
a statute which causes injury to one within the protection of
the statute is negligence per se and actionable." (citing
numerous cases) Null v. Elec. Power Board of Nashville, 30
Tenn. App. 696, 707, 210 S.W.2d 490, 494.
"In order to found an action on the violation of a statute, or
ordinance, * * * the person suing must be such a person as is
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within the protection of the law and intended to be benefited
thereby * * * We think that one not a beneficiary of a statute
may neither base an action nor a defense on a violation
thereof." Carter v. Redmond, 142 Tenn. 258, 263, 218 S.W.
217, 218.
Armstrong, 385 S.W.2d at 114.
Thus, not every statutory violation gives rise to a negligence per se claim. Stated
differently, simply referencing the violation of a statute does not necessarily mean that a negligence
per se claim is being asserted. Messer’s complaint, as amended, claims that the CO2 sold by
Cryotech was adulterated as that term is defined in the FDCA. The complaint, however, was filed
against Mellon, Cryotech, and Eastman. Assuming Messer actually was attempting to state a
negligence per se claim, the complaint is altogether unclear whether such a claim was being made
against any defendant other than Cryotech. We also note that while the complaint meticulously sets
forth a total of seventeen counts against the various defendants, it fails to mention “negligence per
se.”
In Messer’s briefs on appeal in Messer II and in the present appeal, its Statement of
the Case describes its complaint as bringing claims “under theories of breach of contract, fraud,
breach of warranty, misrepresentation, products liability, ultra-hazardous activity, negligence, gross
negligence, recklessness, outrageous conduct, intentional concealment, violations of RICO and the
Consumer Product Safety Act.”6 Noticeably missing from Messer’s own summary of its claims is
negligence per se or a violation of the FDCA, while all of the other numerous claims are covered.
We will treat the Trial Court’s granting of Eastman’s motion to strike as, in effect,
a denial of a motion to amend the complaint to specifically plead a negligence per se claim. Tenn.
R. Civ. P. 15.01 provides that leave to amend a pleading “shall be freely given when justice so
requires." We have interpreted this provision as substantially lessening the trial court's discretion
with regard to permitting parties to amend their pleadings. See Guarantor Partners v. Huff, 830
S.W.2d 73, 77 (Tenn. Ct. App. 1992). Even though a trial court’s discretion is lessened, it still
exists. It is apparent that neither the Trial Court nor Eastman read the complaint as asserting a
negligence per se claim against Eastman. This conclusion is supported by the record. The issue then
becomes whether the Trial Court abused its discretion by not allowing Messer to amend its
complaint to assert a negligence per se claim. Given that this litigation had been ongoing for years
and the vast majority of the discovery as well as two appeals had been concluded, we will not hold
that the Trial Court abused its discretion when it refused to allow Messer to amend its complaint at
the very last minute to assert a new claim. We affirm the Trial Court’s refusal to permit Messer to
proceed with a very belated negligence per se claim at this point in the litigation.
6
The federal claims alleging a violation of RICO and the Consumer Product Safety Act were dismissed by the
Unites States District Court several years ago and are not at issue on this appeal.
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Conclusion
The Trial Court’s grant of summary judgment to Eastman on Messer’s claim for
breach of warranty is affirmed, as is the Trial Court’s refusal to permit Messer to proceed with a
negligence per se claim. However, we vacate the Trial Court’s grant of summary judgment to
Eastman on Messer’s products liability and negligence claims. This cause is remanded to the Trial
Court for further proceedings as necessary and consistent with this Opinion and for the collection
of the costs below. Costs on appeal are assessed one-half against the Appellant Messer Griesheim
Industries, Inc., and its surety, and one-half against the Appellee Eastman Chemical Company.
___________________________________
D. MICHAEL SWINEY, JUDGE
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