Opinion
Case No. 2:02-CV-00526 TC.
January 11, 2005
ORDER
I. Background
This lawsuit began as an effort by Travelers Indemnity ("Travelers") to recover money it paid on various insurance policies as a result of a fire at The Promenade at Red Cliff Mall in St. George, Utah ("the Promenade"). The case was subsequently consolidated with others related to the same occurrence.
Daystar Development ("Daystar") owned, operated, and managed the Promenade. The Gridiron Sports Grill ("Gridiron") leased space in the mall for the operation of a restaurant. On May 31, 2000, a fire originated in a utility room in the Gridiron and did extensive damage not only to the Gridiron, but also to other parts of the building including properties leased by other merchants. Investigation by fire department inspectors revealed that the likely cause of the fire was a power strip located in the utility room of the Gridiron.
Defendant Randy Stewman provided receipts from Staples Office Supply ("Staples") showing that he had purchased various power strips and surge protectors at Staples. These receipts also identified those items through their stock-keeping unit numbers ("SKU numbers") which were assigned to products manufactured and distributed by Woods Industries ("Woods"). Plaintiffs collectively charge that Woods, Gridiron, Randy Stewman, and Staples are liable on a variety of theories including: strict products liability, negligence, and breach of various warranties.
This matter is before the court on four separate motions: (1) a motion for summary judgment by Defendant Woods Industries; (2) a motion for summary judgment by Defendants Stewman and Gridiron; (3) a motion to dismiss by Defendant Stewman; and (4) a motion to amend or set aside discovery deadlines by Plaintiff Traveler's Indemnity. A hearing was conducted on these various motions on November 23, 2004.
Defendant Randy Stewman has also filed a motion in limine seeking to strike all evidence relating to a felony conviction for arson and other misconduct which occurred after the subject fire. This issue will be decided at a date closer to trial.
II. Current Motions
A. Motions for Summary Judgment
A party is entitled to summary judgment, and a judgment as a matter of law, on all claims as to which there is no genuine issue of material fact. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Before receiving an affirmative ruling on a motion for summary judgment the moving party must satisfy its burden of production in one of two ways: (1) by putting evidence into the record that affirmatively disproves an element of the non-moving party's claim, or (2) by directing the court's attention to the fact that the non-moving party lacks the evidence to support an element of its claim. "[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986).
If the moving party has satisfied its burden of production, the non-moving party must then "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The non-moving party must provide facts sufficient to demonstrate a genuine issue of fact to be determined at trial; mere reference to the pleadings or allegations are insufficient for this purpose. Anderson, 477 U.S. at 248. The court must view the factual record, and the reasonable inferences derived therefrom, in the light most favorable to the non-moving party.See Bowdry v. United Airlines, Inc., 58 F.3d 1483, 1486 (10th Cir. 1995). But the "mere existence of a scintilla of evidence in support of the nonmovant's position is insufficient to create a dispute of fact that is `genuine.'"Lawmaster v. Ward, 125 F.3d 1341, 1347 (10th Cir. 1997). An issue of material fact is only "genuine" if the facts presented by the non-movant are such that a reasonable jury could find in its favor. Id.
1. Woods Motion for Summary Judgment
Central to Plaintiffs' complaint against Woods is the assumption that the product which is alleged to have started the May 31, 2000 fire was manufactured and distributed by Woods. Woods has moved for summary judgment on the basis that it did not manufacture, sell, or otherwise possess or distribute the electrical power strip alleged to be the cause of the fire. Woods claims that since it had no involvement in the production or distribution of the suspect power strip, there is no factual basis for its inclusion in this lawsuit. The facts are sufficiently alleged in the pleadings and will be repeated here only where necessary.
Utah has adopted the strict product liability doctrine as established by Section 402A of the Restatement (Second) of Torts.See Ernest W. Hahn, Inc. v. Amoco Steel Co., 601 P.2d 152, 158 (Utah 1979). Section 402A states:
(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if:
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.
Restatement (Second) Torts § 402A.
It is well-established that a party is strictly liable "when an article he places on the market, knowing that it is to be used without inspection for defects, proves to have a defect that causes injury to a human being." Greenman v. Yuba Power Prods., Inc., 377 P.2d 897, 900 (Cal. 1962); see also Hahn, 601 P.2d at 156. The Restatement rule is one that has been recognized as "a judicially created rule of liability designed to place the burden of compensation for injuries caused by defective products on the manufacturer or seller . . ." Muhlerin v. Ingersoll-Rand Co., 628 P.2d 1301, 1302 (Utah 1981) (emphasis added). Without sufficient allegation that a defendant is either a manufacturer or seller, then further analysis as to the defect is unnecessary and summary judgment warranted.
Mr. Stewman testified at his deposition that he had purchased a total of three power strips from the Staples store in the same mall as his restaurant. More specifically, he testified that he purchased a two-pack of power strips for a price of approximately six to nine dollars and placed one of those in the utility room and the other under the bar. (Randy Stewman Depo. at 28-29, 51, 53-54) ("Stewman Depo.") According to Mr. Stewman, at some point, the power strip under the bar failed and he replaced it with an individually purchased power strip. (Stewman Depo. at 30-31) Mr. Stewman, in recounting his observations of photographs of the fire scene and various power strips, identified the power strip under the bar as the strip he or an employee had purchased individually. (Stewman Depo. at 45-46) Through the process of elimination, Mr. Stewman determined that the second strip from the two-pack was the power strip located in the utility room. (Stewman Depo. at 45-46) The single power strip had been purchased approximately three weeks after the purchase of the original two-pack. (Stewman Depo. at 80) Mr. Stewman testified that he could not recall purchasing any power strips for the restaurant other than the two-pack and the single replacement. (Stewman Depo. at 149-50)
Mr. Stewman testified that, after the fire, he provided the receipts from the purchase of the power strips to James Wolf, an independent fire investigator. Mr. Wolf confirmed that one of the receipts' SKU numbers was for the purchase of a two-pack of Woods Industries surge protectors, which retailed for about six dollars. (Stewman Depo. at 47-48, James Wolf Depo. at 27, 40) ("Wolf Depo.") Mr. Wolf testified that he had copied the information from the receipts and proceeded to Staples where a manager looked up the various numbers for him and identified one purchase as the Woods two-pack. (Wolf Depo. at 27, 37-40) Mr. Stewman also described a trip he made to Staples after the fire, accompanied by Mr. Wolf, during which he identified the Woods power strips by their packaging and location in the store. (Stewman Depo. at 47) He testified that he knew the exemplar he purchased with the fire investigator was the same as previously purchased because "I'm cheap. It was like six bucks for two versus nine bucks for one, so I went and got two for six versus one for nine." (Stewman Depo. at 28)
Woods does not dispute that the SKU numbers on the receipt provided by Mr. Stewman are assigned to its products. But it contends that, while Mr. Stewman purchased its product, it was not this product which caused the fire.
The alleged defective power strip was recovered from the fire scene and inspected by all parties to the lawsuit or their representatives at a laboratory in Arizona on August 14, 2003. At this inspection, the power strip was compared with an exemplar Woods product. The exemplar had the same SKU number as one of the products purchased by Gridiron. Steven R. Moses, Woods' Vice President of Quality Assurance and Agency Management, conducted an inspection of both products and concluded that the product alleged to have started the fire was not a Woods product. Mr. Moses, in addition to being a Woods employee, has a degree in mechanical engineering, sits on six technical panels for the evaluation of power strips and surge protectors, and is the Chairman of a tri-national harmonization committee for cord sets and power supply cords. (See Def.'s Mem. Supp. Summ. J., Ex. C at 2-3, 6)
Although Woods has provided evidence that the power strip was not manufactured, possessed or distributed by Woods, the evidence must be looked upon in the light most favorable to the non-moving party. Bowdry, 58 F.3d at 1486. Plaintiffs have provided sufficient evidence to create a factual dispute that must be resolved at trial.
2. Motion for Summary Judgment By Randy Stewman; Grid Iron Sports Grill
Randy Stewman and Gridiron have moved for summary judgment on two grounds. First, they assert that the Utah Fire Marshal's Office conclusively determined that the fire was the result of an accident and that neither the actions of Mr. Stewman nor the Gridiron in any way caused the fire. Second, they claim that the release and waiver of subrogation provisions in Daystar's lease with the tenants has extinguished all claims against Mr. Stewman and the Gridiron as a matter of law.
a. Proof of Fault and Causation
Mr. Stewman and Gridiron assert that James H. Dudzinsky, an investigator with the Utah Fire Marshal's Office, concluded that the fire was accidental and likely originated at the subject power strip. Mr. Stewman and Gridiron further contend that without any evidence of causation, summary judgment in their favor is appropriate.
Mr. Dudzinski concluded that:
(a) The origin of the fire was in the storage room on the west side of the interior of the business. The remains of the surge protectors electrical [ sic] were found and were plugged in. The V pattern on the west wall and the fire damage in the room supports this conclusion.
(b) Indicators of other accidental causes of the fire and their related appliances were not found.
(c) Indicators of incendiary or other accidental fire causes and there [ sic] appliances were not found.
(Def. Gridiron Sports Grill and Randy Stewman Mem. Supp. Summ. J., at para. 5) Mr. Dudzinski's report and affidavit both state that neither Mr. Stewman nor any Gridiron personnel engaged in any conduct expecting or intending that the subject fire would occur. (Aff. James H. Dudzinski, para. 8)
Plaintiff State Farm Fire and Casualty Company ("State Farm") contends that Randy Stewman or the employees of Gridiron improperly used the power strip/surge protector so as to negligently cause the fire. State Farm points to a Preliminary Report from Dean Jacobsen, Ph.D., of Forensic Engineering, Inc., which suggests that the power strip was connected to both a recirculating pump on a water heater and a light. (Pla.'s Mem. Opp. Summ. J., Ex. B at 1) State Farm claims that this is an improper use of the power strip which could have caused the fire. Additionally, Dr. Jacobsen's report stated that the cord of the power strip was pinched tightly in the valve handle of the water heater plumbing and that this destroyed the insulation on the cord. (Pla.'s Mem. Opp. Summ. J., Ex. B at 3) State Farm contends that the improper use of the power strip, as indicated in Dr. Jacobsen's report, is sufficient to raise a disputed issue of fact regarding its claim of negligence.
The court agrees with State Farm. The trier of fact must resolve this issue.
b. Release and Waiver of Subrogation Provisions in the Lease
Mr. Stewman and Gridiron's second ground for summary judgment is that Gridiron's lease with Daystar contained release and waiver of subrogation provisions. Mr. Stewman and Gridiron assert that, pursuant to their lease, all tenants of the Promenade relinquished the rights of their insurers and as such, the Plaintiff insurers are precluded from recovering as subrogees of the various tenants.
The lease agreement between Daystar and Gridiron reads:
Tenant shall . . . at its sole expense, insure the store fronts, Tenant's Work, alterations or improvements . . . against loss or damage by fire . . . which insurance shall be an amount equal to at least one hundred percent (100%) of the full replacement value with building code endorsements. Landlord shall not be liable for any damage by fire or other casualty, no matter how caused, it being understood that Tenant will look solely to its insurer for reimbursement. . . .
Whenever (a) any damage or expense resulting from any personal injury, death, fire, theft or any accident or perils incurred by any party to this Lease in connection with the Realty, and (b) such party is then covered in whole or in part by insurance with respect to such damages or expense, then the party so insured hereby releases the other party from any liability it may have on account of such damage or expense to the extent of any amount recovered by reason of such insurance and waives any right of subrogation which might otherwise exist in or accrue to any person or entity on account thereof; provided that such release of liability and waiver of the right of subrogation shall not be operative in any case where the effect is to invalidate such insurance coverage. . . .
(Def. Gridiron Sports Grill and Randy Stewman Mem. Supp. Summ. J., Ex. B at para. 20). This passage indicates that there is a waiver and/or release of liability in response to situations like this fire, but as State Farm notes, this is an agreement between the landlord and the tenant, not between the various tenants.
Mr. Stewman and Gridiron rely on Bakowski v. Mountain States Steel, Inc., 52 P.3d 1179 (2002), for the proposition that the subrogation waiver in their lease agreement with the landlord is valid and applicable to all other parties to the suit.Bakowski does validate subrogation waivers generally, but is factually distinct from the present case. Bakowski was a dispute between the two parties to the lease agreement and did not involve nonparty claims whereas Mr. Stewman and Gridiron seek to bind various parties to their lease agreement with Daystar.
It is a long-established principle of contract law that a nonparty to a contract cannot be bound by that contract. See Wheelwright v. Sessions, 255 P. 175, 178 (Utah 1927); Kenai Oil and Gas v. Dept. of the Inter., 522 F.Supp. 521, 525 (D.Utah 1981) ("It is an elementary principle of contract law that a nonparty to a contract is not bound thereby."). Even if the other tenants of the Promenade had the same lease agreement with Daystar, there is no evidence of an agreement in which those tenants waived their subrogation rights as to Stewman and Gridiron.
Accordingly, Mr. Stewman and Gridiron are not entitled to summary judgment on this ground.
B. Randy Stewman's Motion to Dismiss
Defendant Randy Stewman has moved for an order dismissing all claims against him individually and d/b/a Gridiron Sports Grill pursuant to a discharge in bankruptcy. Mr. Stewman asserts that an August 7, 2002 Order of the Bankruptcy Court for the District of Utah requires that claims against him and Gridiron be dismissed. Defendants Staples and Woods have opposed the motion. In the alternative, Staples and Wood contend that, even if Mr. Stewman is dismissed because of his discharge in bankruptcy, he should remain a party for the purpose of fault allocation.
Mr. Stewman may be dismissed from the suit, but retained as a party in order to establish degree of fault despite the discharge in bankruptcy. 11 U.S.C. § 524(e) ("discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt."). A creditor is permitted "to bring or continue an action directly against the debtor for the purpose of establishing the debtor's liability when . . . establishment of the liability is a prerequisite to recover from another entity."Walker v. Wilde (In re Walker), 927 F.2d 1138, 1142 (10th Cir. 1991); see also In re Western Real Estate Recovery Fund, 922 F.2d 592, 601 n. 7 (10th Cir. 1990) (not a violation of § 524(a)(2) to allow suit to continue in an effort to recover from insurer). The retention of Mr. Stewman as a Defendant for the sole purpose of fault allocation is necessary in the attempt to assure that the other Defendants are not forced to assume damages disproportionate to their fault.
In his motion, Mr. Stewman also seeks dismissal of the case against Randy Stewman d/b/a Gridiron Sports Grill. Gridiron Sports Grill was incorporated under the laws of the state of Utah in approximately August of 1999. (Stewman Depo. at 99, 102-03) While Mr. Stewman held a 70% interest in the corporation it was, after August of 1999, a separate business entity. Gridiron Sports Grill, Inc., never received a discharge in bankruptcy and is not within the scope of Mr. Stewman's personal discharge.
Mr. Stewman's discharge in bankruptcy requires his dismissal from the case, but he remains a party as necessary for the purpose of fault allocation. Gridiron Sports Grill, Inc., as a separate entity is not entitled to dismissal.
C. Motion to Amend/Set Aside Discovery Deadlines
This case was initially filed on May 31, 2002. United States Magistrate Judge David Nuffer signed the scheduling order on July 14, 2003. At that time the parties were aware that the cutoff for factual discovery was May 31, 2004, and September 30, 2004, for expert discovery. This order provided over ten months for factual discovery and fourteen months for expert discovery. The court finds that extending these discovery deadlines is unnecessary. The parties have had ample time to perform all discovery sought.
ORDER
For the reasons set forth, (1) the court DENIES Woods Industries' Motion for Summary Judgment (dkt. 56); (2) the court DENIES Randy Stewman and Gridiron Grill's Motion for Summary Judgment (dkt. 60); (3) the court GRANTS Randy Stewman's Motion to Dismiss although he will remain a party for the sole purpose of fault allocation; the court DENIES the motion as to Randy Stewman d/b/a Gridiron Sports Grill (dkt. 89). Further, (4) the court DENIES Travelers Indemnity's Motion to Amend or Set Aside Discovery Deadlines (dkt. 118).