Opinion
Civil No. 02-4858 ADM/RLE.
September 2, 2004
Eric E. Caugh, Esq., and Daniel N. West, Esq., Zelle, Hofmann, Voelbel, Mason Gette LLP, Minneapolis, MN, appeared for and on behalf of Plaintiff.
Robert J. Terhaar, Esq., and Ryan A. Johannsen, Esq., Terhaar, Archibald, Pfefferle Griebel LLP, Minneapolis, MN, appeared for and on behalf of Defendant.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
The Motion for Summary Judgment [Docket No. 15] of Defendant JJ Industrial Sales, Inc. ("Defendant") was argued before the undersigned United States District Judge on July 2, 2004. Defendant argues that Plaintiff Blandin Paper Company's ("Plaintiff") claims for negligence, breach of contract and declaratory judgment must be dismissed because Plaintiff cannot prove that Defendant damaged Plaintiff's paper machine. Defendant contends that Plaintiff cannot establish causation without expert testimony, and that the Court should exclude the opinions of Plaintiff's experts because they are neither reliable nor scientifically sound. Alternatively, Defendant argues that exclusion is a proper sanction for Plaintiff's spoliation of evidence. For the reasons explained below, Defendant's Motion is denied.
II. BACKGROUND
This dispute stems from the failure of paper machine number four ("Machine #4") at Plaintiff's multiple-line paper mill in Grand Rapids, Minnesota. Machine #4, which was installed in the early 1960s, consists of a roots vacuum compressor ("Vacuum Compressor"), two steam turbines, piping, oil filters, bearings and two oil coolers/heat exchangers ("oil cooler"). To lubricate these parts, Machine #4 has an oil system that holds about 800 gallons of oil. See Wiberg Supp. Report of 06/22/04 at 4 (Wiberg Aff. Ex. 2). The oil cooler uses treated river water to cool the oil, and contains tubes which normally separate the oil and water. See Patnode Dep. at 30-31 (Caugh Aff. Ex. 27). Only one oil cooler was working during the time-frame pertinent to this lawsuit. Id. at 60.In November 1999, Plaintiff hired Defendant to remove water scale from the Vacuum Compressor in Machine #4. See Letter from Jarvis to Blake of 11/16/99 (Caugh Aff. Ex. 4). On November 30 and December 1, 1999, Defendant cleaned Machine #4 with a chemical cleaning solvent, Sublime, which contained hydrochloric acid. See Letter from Jarvis to Blake of 01/03/00 (Caugh Aff. Ex. 6); Sublime Brochure at 2-3; Material Safety Data Sheet at 1 (Caugh Aff. Ex. 1). Sublime was designed to remove rust, dirt and other inorganic materials from commercial and industrial process equipment. See Sublime Brochure at 2-3; Material Safety Data Sheet at 1.
Machine #4 experienced mechanical problems in mid-December 1999. On December 15, 1999, Plaintiff replaced a failed bearing in the line shaft gearbox. See Machine #4 Outage Report of 12/99 (Caugh Aff. Ex. 3). The oil system lubricates the gearbox and its bearings, and during the bearing replacement on December 15, 1999 the oil in the system looked fine. Id.; see also Patnode Dep. at 10-11, 25-26.
After a second bearing failed on December 16, 1999, Plaintiff observed that the oil in Machine #4 had turned green. Id. Plaintiff ultimately replaced several bearings and had the green oil tested for contaminants. Machine #4 Outage Report of 12/99;see also Email from Snowden to Patnode of 12/20/99 (Caugh Aff. Ex. 2); Mobil Oil Report (Caugh Aff. Ex. 2). Tests revealed that the oil was highly acidic and had been contaminated with water which had leaked into the oil system. Id. Due to the water contamination, Plaintiff concluded that the oil cooler had failed and was allowing water into the oil system. Patnode Dep. at 18-19. Plaintiff then drained the oil filters, oil cooler, and oil reservoir, and discovered granular rust sediment in the oil reservoir which had not been observed previously. Id. at 18-19, 53-54. Finally, Plaintiff added new oil, temporarily piped-in a new oil cooler, and began operating Machine #4 again on December 17, 1999. See Machine #4 Outage Report of 12/99. Oil sampled on December 20, 1999 was in good condition. Id.
On December 28, 1999, Plaintiff stopped running Machine #4 to permanently install a new oil cooler. Id. While repairing Machine #4, Plaintiff found that the oil in the oil system was dirty and that the replaced bearings exhibited signs of chemical corrosion. Id. Plaintiff replaced approximately fourteen bearings, drained the oil from the oil system, flushed the oil system, and cleaned the oil tank. Id. The oil tank contained about "ten pitchers full" of sediment. Patnode Dep. at 75-76. Plaintiff discarded the old oil cooler because it does not repair oil cooolers. Id. at 80.
Machine #4 was shut down again on January 4, 2000 because it was vibrating excessively. See Machine #4 Outage Report of 12/99. Plaintiff, after determining that the oil in Machine #4 was dirty and the bearings were discolored, used a solvent to clean the oil system and reservoir for the first time. Id.;see also McCarthy Report of 11/03/00 at 2 (Caugh Aff. Ex. 17).
On January 7, 2000, Plaintiff contacted its insurance company about the $1.5 million loss it sustained from Machine #4's failures. See Property Claim for Report of Loss of 01/07/00 (Caugh Aff. Ex. 19). Plaintiff filed suit on December 19, 2002, filing claims of declaratory judgment, breach of contract and negligence. See Am. Compl. at 6-8.
III. DISCUSSION
Defendant now moves for summary judgment.
A. Summary Judgment Standard
Federal Rule of Civil Procedure 56(c) provides that summary judgment shall issue "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). On a motion for summary judgment, the Court views the evidence in the light most favorable to the nonmoving party. Ludwig v. Anderson, 54 F.3d 465, 470 (8th Cir. 1995). However, the nonmoving party may not "rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial." Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
In a negligence action, a defendant is entitled to summary judgment "when the record reflects a complete lack of proof on any of the four elements necessary for recovery: (1) the existence of a duty of care; (2) a breach of that duty; (3) an injury; and (4) the breach of that duty being the proximate cause of the injury." Louis v. Louis, 636 N.W.2d 314, 318 (Minn. 2001). Courts may decide causation as a matter of law when the evidence "leave[s] no room for differences of opinion among reasonable [people]." Gibraltar Sav. v. Commonwealth Title Ins. Co., 907 F.2d 844, 848 (8th Cir. 1990) (internal quotation omitted).
B. Necessity of Expert Testimony to Prove Causation
Plaintiff argues that it can prove Defendant damaged Machine #4 without using testimony from its experts, and claims it will use non-expert circumstantial evidence, rather than direct evidence, to establish that Defendant's negligence substantially contributed to Plaintiff's loss. Plaintiff will rely heavily on lay person testimony to prove causation.
Plaintiff also intends to prove causation through unchallenged expert testimony, admissions from Defendant and its experts, and "extensive circumstantial evidence." See Pl's Mem. in Opp'n at 11.
Federal Rule of Evidence 701 governs opinion testimony of lay witnesses. See Fed.R.Evid. 701. Lay opinion testimony under 701 "is limited to those opinions or inferences which are (a) rationally based on the perception of the witness and (b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue." Id.; see also U.S. v. Espino, 317 F.3d 788, 796-97 (8th Cir. 2003). Rule 701 testimony may not be "based on scientific, technical, or other specialized knowledge within the scope of Rule 702." Fed.R.Evid. 701. Further, lay people may not "provide specialized explanations or interpretations that an untrained layman could not make if perceiving the same acts or events." See U.S. v. Peoples, 250 F.3d 630, 641 (8th Cir. 2001); see also U.S. v. Shedlock, 62 F.3d 214, 219 (8th Cir. 1995) (explaining that expert testimony concerns matters "beyond the knowledge of average individuals").
The Advisory Committee Notes to Rule 701 caution courts to scrutinize whether a party is "proffering an expert in lay witness clothing." Fed.R.Evid. 701, cmts. to 2000 Amendments. Typical examples of evidence suitable for lay person testimony include the "appearance of persons or things, identity, the manner of conduct, competency of a person, degrees of light or darkness, sound, size, weight, distance, and an endless number of items that cannot be described factually in words apart from inferences." Asplundh Mfg. Div. v. Benton Harbor Eng'g, 57 F.3d 1190, 1196 (3rd Cir. 1995). Courts have expanded this list, allowing business officers to testify as lay people concerning the value and projected profits of their businesses. See Allied Sys., Ltd. v. Local 604, Int'l Bhd. of Teamsters, 304 F.3d 785, 792 (permitting business officer to offer lay person testimony about business damages because of "the particularized knowledge that the witness has by virtue of his . . . position in the business"). Lay witnesses may also testify about the weight or identity of illicit drugs based on their experience as drug users. See Espino, 317 F.3d at 797; U.S. v. Westbrook, 896 F.2d 330, 335-36 (8th Cir. 1990). However, any testimony based on scientific, technical, or other specialized knowledge is governed by the qualification language of Rule 702. See Fed.R.Evid. 701, cmt. to 2000 Amendments.
Plaintiff's proposed strategy of using lay person testimony will violate Rule 701 if it requires lay people to testify about matters "beyond the knowledge of average individuals." See Shedlock, 62 F.3d at 219. For example, in outlining the circumstantial evidence it plans to submit on causation, Plaintiff cites excerpts from the reports of its own experts. These areas of proposed testimony include: (1) a discussion of whether the amount of Sublime in Machine #4's lubrication oil system can be quantified; (2) an explanation of how Sublime was emulsified in oil and how this did not prevent surface wetting; and (3) test results showing 384 parts per million of iron ions contained in an oil sample taken from Machine #4, suggesting that Sublime attacked the rust in Machine #4. See Pl's Mem. in Opp'n at 11-12.
It is unclear from Plaintiff's Memorandum whether it apprehends that Defendant is contesting this type of testimony from Plaintiff's experts. However, because Defendant argues that the opinions of Plaintiff's experts are inadmissible in their entirety, the examples of expert testimony cited above are challenged as well.
Testimony on these topics by "lay" witnesses would go well beyond the knowledge of the average individual, and their submission as evidence requires testimony based on specialized scientific and technical knowledge. See Fed.R.Evid. 701;see also Shedlock, 62 F.3d at 219. Plaintiff does not explain how it might establish causation without this evidence, or indicate how a witness could possibly testify as a lay person about this material. Therefore, Plaintiff's argument that it can prove causation without testimony from its experts is unavailing.
C. Reliability and Relevance of the Testimony from Plaintiff's Experts
Defendant argues that the proposed testimony from Plaintiff's experts is inadmissible under the standards established in Rule 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). Rule 702, which was amended in 2000 to reflect the analysis in Daubert, requires district courts to act as gate-keepers and ensure the reliability and relevancy of expert testimony. Fed.R.Evid. 702, cmts. to 2000 Amendments; see Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 149 (1999);see also Fed.R.Evid. 104(a). District courts may admit expert testimony to help the jury understand the evidence or determine a disputed fact if: (1) the witness qualifies as an expert by her knowledge, skill, experience, training, or education; (2) the witness bases her testimony on sufficient facts or data; (3) the testimony is the product of reliable principles and methods; and (4) the witness has applied the principles and methods reliably to the facts of the case. Fed.R.Evid. 702. "The proponent of the expert testimony must prove its admissibility by a preponderance of the evidence." Lauzon v. Senco Prods., Inc., 270 F.3d 681, 686 (8th Cir. 2001) (citing Daubert, 509 U.S. at 592, n. 10).
In Daubert, the U.S. Supreme Court outlined four nonexclusive factors courts may weigh in determining admissibility. 509 U.S. at 593-94. These include: (1) whether the theory or technique has been tested; (2) whether it has been subjected to peer review and publication; (3) the theory or technique's known error rate; and (4) whether the theory or technique is widely accepted. Id. Courts may consider other factors as well, including "whether the proposed expert ruled out other alternative explanations, and whether the proposed expert sufficiently connected the proposed testimony with the facts of the case." Lauzon, 270 F.3d at 687.
Defendant argues that the opinions from Plaintiff's experts are unreliable because the experts have not determined whether Sublime acts as a solvent when mixed with 800 gallons of oil, or concluded how much Sublime would be required to dislodge the sediment or sludge in Machine #4. Additionally, Defendant claims Plaintiff's experts have not reliably ascertained the amount of Sublime that was in Machine #4 when it malfunctioned on December 16, 1999, or excluded the possibility that it was damaged by the oil cooler failure and faulty cleaning efforts of Plaintiff's employees. Plaintiff contends that its experts employed a scientifically valid methodology in concluding that Sublime caused its loss.
Plaintiff's proffered expert testimony that Sublime damaged Machine #4 is sufficiently reliable to pass the threshold requirements of Rule 702. Plaintiff has reliably established that Sublime is a likely source of the solvent which caused the build-up of sediment in Machine #4. The oil sample removed from Machine #4 on December 16, 1999 contains both chlorine, a solvent, and Sublime. See Wiberg Report of 11/07/03 at 4 (Wiberg Aff. Ex. 1); Wiberg Supp. Report of 06/22/04 at 2-4 (Wiberg Aff. Ex. 2). Plaintiff will provide testimony that Sublime contains chlorine in the form of hydrochloric acid, and that Sublime is marketed as a "water scale solvent" that removes lime deposits, corrosion, rust and dirt.See Sublime Brochure at 2-3; Material Safety Data Sheet at 1. Plaintiff's experts did not find other solvents in the oil sample. Wiberg Supp. Report of 06/22/04 at 4; see also Harris Report of 05/14/04 at 10 (Harris Aff. Ex. 1). Finally, the experts eliminated other possible sources of the chlorine and connected the proposed testimony to the facts of the case because they found that Machine #4 failed before Plaintiff attempted to clean it, and that the oil system lacked chlorinated salts which would have been present had the chlorine come from the oil cooler. Wiberg Supp. Report of 06/22/03 at 2-3; Patnode Dep. at 53-54, 75-76. Therefore, Plaintiff's expert opinion evidence is admissible under Rule 702. See Lauzon, 270 F.3d at 687.
The failure of Plaintiff's experts to meet all four Daubert factors does not alter this conclusion. Defendant correctly asserts that the theory proposed by Plaintiff's experts has not been tested or subjected to peer review and publication. Further, the theory's potential rate of error is unknown. See Daubert, 509 U.S. at 593-94; see also Peitzmeier v. Hennessy Indus., Inc., 97 F.3d 293, 296-98 (8th Cir. 1996). However, because these Daubert factors are not exclusive measurements of reliability, Plaintiff may utilize other measures to support the opinions of its experts. See Kumho, 526 U.S. at 150-51 (explaining that "we can neither rule out, nor rule in, for all cases and for all time the applicability of the factors mentioned in Daubert . . . [because] too much depends upon the particular circumstances of the particular case at issue").
The facts here differ from those in Peitzmeier which Defendant cites in support of its Daubert argument. InPeitzmeier, the Eighth Circuit held that the opinion of the plaintiff's expert lacked reliability. See Peitzmeier, 97 F.3d at 297-98. The expert had concluded that the defendant's tire changing machine contained a design defect. Id. However, he had not built or tested an alternative model to determine whether it was possible to add safety features, or concluded whether the changes would hinder the performance of the defendant's model. Id. Rather, because the expert based his theory solely on rough sketches of his proposed machine, there was no evidence that his model presented a viable alternative to the defendant's tire changing machine. Id.
Here, Plaintiff has presented sufficient evidence supporting its theory that Sublime acted as a solvent and caused the release of sludge in Machine #4. While Plaintiff's experts did not test how Sublime reacts when mixed with 800 gallons of oil, or quantify the amount of Sublime likely needed to loosen the sludge, there is no dispute that Sublime contains chlorine and that chlorine is a solvent. Sublime Brochure at 2-3; Material Safety Data Sheet at 1. Plaintiff's experts conducted tests and found that the oil system contained both Sublime and chlorine, an ingredient in Sublime. Wiberg Report of 11/07/03 at 4; Wiberg Supp. Report of 06/22/04 at 2-4. The experts did not find any other solvents besides chlorine in the oil. Wiberg Supp. Report of 06/22/04 at 4; see also Harris Report of 05/14/04 at 10. They concluded further that the Sublime was the likely source of the chlorine because there would have been chlorinated salts in the oil system if the chlorine had come from the failed oil cooler. Wiberg Supp. Report of 06/22/03 at 2-3. Consequently, unlike the expert in Peitzmeier, Plaintiff's experts have presented evidence supporting their theory. Their failure to test Sublime with 800 gallons of oil, publish articles about the theory and subject it to peer review, or measure a potential error rate does not change this result. See Kumho, 526 U.S. at 150-51.
Finally, Rule 702 favors admitting expert testimony. See Arcoren v. United States, 929 F.2d 1235, 1239 (8th Cir. 1991) (holding that Rule 702 "is [a rule] of admissibility rather than exclusion"). Rather than having the Court exclude the testimony of Plaintiff's experts because they failed to perform certain tests, Defendant should attack the weight of Plaintiff's explanations during cross-examination. See Daubert, 509 U.S. 596 (explaining that "[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence"). Therefore, Defendant's Motion for Summary Judgment on Rule 702 grounds is denied.
D. Spoliation of Evidence
Defendant argues further that the Court should exclude the opinions of Plaintiff's experts because Plaintiff destroyed evidence. Specifically, Defendant alleges that it cannot prove its alternative theory that the failed oil cooler contaminated Machine #4 with chlorine because Plaintiff discarded the broken oil cooler, used oil filters and sludge. Defendant also faults Plaintiff for failing to itemize and save all of the failed bearings from Machine #4's numerous shut downs in December 1999 and January 2000.
District courts may sanction parties for spoliating evidence when a party destroys discoverable material that he knew or should have known was relevant to litigation. See Sylla-Sawdon v. Uniroyal Goodrich Tire Co., 47 F.3d 227, 280-81 (8th Cir. 1995). The destruction must prejudice the opposing party for sanctions to issue. See Dillon v. Nissan Motor. Co., 986 F.2d 263, 267 (8th Cir. 1993).
Given this standard, the Court declines to sanction Plaintiff for failing to preserve the oil cooler, used oil filters, bearings and sludge. First, Defendant has not made an adequate showing of prejudice by the loss of this evidence, particularly the oil cooler. While Defendant's experts claim they cannot fully test their hypotheses because the oil cooler has been discarded, they are able to use other evidence to support their theories. For example, Edward Funk, an expert in chemistry and chemical engineering, has opined that the "most probable cause of the plant failure was the failure of the oil cooler and flow of water and built-up corrosion products into the oil system." See Letter from Funk to Terhaar of 02/25/04 (Caugh Aff. Ex. 20). Thus, Defendant can present credible expert testimony concerning causation without examining the oil cooler. Further, unlike the situation in Patton v. Newmar Corp., 538 N.W.2d 116 (Minn. 1995), cited by Defendant to support its spoliation argument, neither party here was able to study the oil cooler. Defendant is not forced to rely on Plaintiff's experts as was the case inPatton. See 538 N.W.2d at 117-20.
Second, even assuming that Defendant has suffered prejudice from the destroyed evidence, Defendant has not shown that Plaintiff knew or should have known the oil cooler and bearings were relevant to litigation. Plaintiff's employees discarded the oil cooler in December 1999, nearly three years before litigation was initiated. See Patnode Dep. at 80. Though Plaintiff contacted Defendant for additional information about Sublime on December 16, 1999, and requested reimbursement from its insurance company on January 7, 2000, these events do not reveal that litigation was "imminent." See Fax from Jarvis to Blake of 12/16/99 (Terhaar Aff. Ex. I); Property Claim for Report of Loss of 01/07/00. The parties undoubtedly could have conducted a more thorough investigation of Machine #4's failures had Plaintiff preserved all broken parts, sludge and contaminated oil. However, this fact does show that Plaintiff either knew or should have known that its pre-litigation, internal investigation concerning Machine #4 would eventually result in a prolonged lawsuit. Cf. Sylla-Sawdon, 47 F.3d at 280-81 (holding that sanctions were proper where the plaintiff failed to preserve tires after hiring attorneys and contemplating a lawsuit claiming that the tires had a manufacturing defect); Dillon, 986 F.2d at 265 (affirming district court's decision to impose sanctions where the expert hired by plaintiff's attorney to find design defects in a seat-belt retractor from the plaintiff's car had the car destroyed). Therefore, Defendant is not entitled to sanctions in this case.
IV. CONCLUSION
Based on the foregoing, and all the files, records and proceedings herein, IT IS HEREBY ORDERED that: Defendant's Motion for Summary Judgment [Docket No. 15] is DENIED.