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WESCO Distrib., Inc. v. ArcelorMittal Ind. Harbor LLC

Court of Appeals of Indiana

November 10, 2014

WESCO DISTRIBUTION, INC., Appellant-Defendant,

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APPEAL FROM THE LAKE SUPERIOR COURT. The Honorable John R. Pera, Special Judge. Cause No. 45D10-0802-PL-25.


ATTORNEYS FOR APPELLEE, ArcelorMittal Indiana Harbor LLC: JAMES B. GLENNON, Foran Glennon Palandech Ponzi & Rudloff, P.C., Chicago, Illinois; JOHN E. HUGHES, Hoeppner Wagner & Evans LLP, Merrillville, Indiana; KARL L. MULVANEY, NANA QUAY-SMITH, JESSICA WHELAN, Bingham Greenebaum Doll LLP, Indianapolis, Indiana.

ROBB, Judge. BAKER, J., and BRADFORD, J., concur.

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ROBB, Judge

Case Summary and Issues

On April 28, 2006, a ladle containing molten iron unexpectedly descended from its hoisted position and tipped, causing molten iron to spill and ignite a fire which extensively damaged the steel shop at a mill operated by ArcelorMittal Indiana Harbor LLC (" ArcelorMittal" ) in East Chicago, Indiana. ArcelorMittal determined that the incident was caused when the braking system on the crane hoisting the ladle failed. Specifically, ArcelorMittal determined that parts supplied by WESCO Distribution, Inc. (" WESCO" ) had fractured and led to the braking system failure. ArcelorMittal sued WESCO for breach of implied warranties and breach of contract. After extensive pre-trial proceedings and a twenty-two day trial, a jury found in favor of ArcelorMittal and awarded damages in the amount of $36,134,477. The trial court subsequently awarded ArcelorMittal prejudgment interest in excess of three million dollars on the amount it expended to repair its facility and entered final judgment for ArcelorMittal and against WESCO in the amount of $39,031,555.96.

WESCO appeals the judgment, alleging several instances of reversible error:

1. The trial court erroneously denied WESCO's motion for summary judgment and motion for judgment on the evidence regarding ArcelorMittal's expert testimony on causation, which WESCO vigorously contested as inadmissible and without which it claims there is no evidence that its alleged breach was the cause of the spill;
2. The trial court erroneously failed to sanction ArcelorMittal for destruction of certain evidence WESCO claims was critical to its defense;
3. The trial court erroneously admitted ArcelorMittal's expert testimony on product identification, without which it claims there is no evidence that both contactors on the crane were supplied by WESCO;
4. The trial court erroneously denied WESCO's motion for summary judgment and motion for directed verdict because as a matter of law the " freak convergence of events" leading to the incident was not foreseeable and the fractured parts were not the proximate cause of the event;
5. The trial court erroneously prevented WESCO from admitting evidence of subsequent remedial measures taken by ArcelorMittal.

WESCO also contends the trial court abused its discretion in:

6. Ruling on a dispute regarding the discoverability of certain insurance investigation materials;
7. Awarding prejudgment interest; and
8. Instructing the jury regarding the measure of damages.

We conclude WESCO has not shown that the trial court committed any reversible errors or that the trial court abused its discretion in its handling of the discovery issue. We also conclude, however, that the trial court did abuse its discretion in awarding prejudgment interest to ArcelorMittal. Accordingly, we reverse the award of prejudgment interest and remand

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for re-entry of the final judgment in an appropriate amount. In all other respects, the trial court is affirmed.

Facts and Procedural History[1]

ArcelorMittal operates a steel shop at its mill in East Chicago where molten iron is transported in ladles from one end of the shop via an overhead crane to charge a basic oxygen furnace located at the other end of the shop. The crane rides on rails located near the ceiling and travels over a crosswalk. The crane lifts a ladle and keeps it raised in a standby position until the crane operator receives orders to charge the furnace with the contents of the ladle. The hoist motors that raise or lower the ladle are controlled by a main hoist controller in the cab of the crane. It is described as a joystick-type mechanism such that moving the controller one way causes the ladle to hoist and moving it the other way causes the ladle to lower. Placing the controller in the center or neutral position causes the crane's brakes to engage and hold the ladle in place. The crane has both dynamic and mechanical brakes. When the controller is placed in neutral, dynamic braking contactors (" contactors" ) in the dynamic brake system slow the rotation of the hoist motors by dissipating electrical currents through the contactors' blowout coils.[2] The mechanical brakes then engage to bring the load to a stop and hold it in place. An auxiliary hook moves independently of but in concert with the ladle. When the ladle reaches the furnace, the auxiliary hook is maneuvered into place to catch a " dump lug" on the ladle and tip the ladle so its contents empty into the furnace.

On April 28, 2006, Frank Verta was operating what is known as the east charging crane and had raised a full ladle into a stationary position when it suddenly began descending. Verta was unable to control the ladle's descent with the controller. As the ladle descended, it caught on the auxiliary hook that Verta had previously positioned below the ladle and tipped, spilling the molten iron onto the floor of the shop and igniting a fire that engulfed the command tower in the shop. Due to the extensive damage, the facility was inoperable for approximately two weeks and then only partially operable for approximately two more weeks.

Within hours of the incident, Gerald Rutledge, area supervisor for the shop, and two other ArcelorMittal employees inspected the crane and saw nothing wrong with the mechanical brakes. They asked Verta to operate the crane as they inspected the dynamic brakes, and saw a " flash" from the north contactor. Transcript at 3019. Upon looking closer, they realized the blowout coil in that contactor was separated. They removed the blowout coil, which came out in two pieces, and replaced it. They then asked Verta to run the crane again and although the north contactor was working properly, Verta said the crane was still not acting right. They turned their attention to the south contactor and discovered that its blowout coil was also bad, so they replaced it as well. They then ran the crane several times, and it worked normally. They finished this

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inspection by approximately noon on April 29, and Rutledge told Bruce Black, the shop manager, that the contactors were " burned up" and they had found nothing else wrong with the crane. Tr. at 3050.

Rick Marwitz, who worked for the business administration department of central maintenance for ArcelorMittal, was part of an in-house team that investigated the incident for the plant beginning on Monday, May 1, 2006. As part of the investigation, they looked at the main hoist controller and felt the side-to-side movement was " kind of sloppy," tr. at 3092, and Marwitz told Rutledge within four or five days of the incident that the controller needed some work, tr. at 3093. He did not specifically tell Rutledge to keep any parts that were replaced, though he did ask later to see them. While Rutledge was fixing the issue Marwitz referenced, he just " [t]ook all the guts out," tr. at 3094, and replaced everything in the controller. Rutledge had looked at the controller before it was removed from the crane and again when it was in the shop to be rebuilt and saw nothing out of the ordinary, but as far as he was concerned, they had already found the problem so he was not looking closely. Rutledge said that Henry Pospychala, an ArcelorMittal employee who helped rebuild the controller, thought all the parts from the controller " looked so good . .., he wanted to save them" because " he had a problem with throwing stuff away . . . ." Tr. at 3158-59. But Rutledge threw away the cams, bearings, and contacts because " if you don't get rid of parts you change, that whole shop would be overflowed [sic] with parts . . . ." Tr. at 3156. Neither Rutledge nor Pospychala testified that they were told to save the parts. As part of his investigation, Marwitz tracked all of the Size 8 contactors in the plant, both those currently on cranes and spares not in use. He also reviewed the purchasing information for those contactors. The in-plant investigation did not reach a conclusive determination about the cause of the incident, but Marwitz testified they did know " the blowout coils contributed to the crane not being able to stop for two reasons. One, that's their purpose to slow the load. Two, after they were changed, the crane functioned normally." Tr. at 3789-90.

On May 4, 2006, the investigation was turned over to Engineering Design and Testing (" EDT" ), which had been retained by ArcelorMittal's insurer. As part of EDT's investigation, it took measurements, conducted interviews, and simulated the incident on-site in December 2006; and then fully reconstructed the incident at the plant in August 2007. When EDT bypassed first one and then both of the contactors and the blowout coils to disable the dynamic braking system during the reconstruction, the mechanical brakes alone stopped the ladle from descending. EDT therefore determined the fractured blowout coils could not have been the sole cause of the incident. Ultimately, EDT determined that the cause of the ladle's uncontrolled descent was a fracture of the blowout coils in each of the crane's two dynamic braking contactors coupled with an unexpected electrical configuration within the main hoist controller. ArcelorMittal further determined that it had purchased the contactors and the blowout coils within from WESCO, a distributor of industrial supplies. ArcelorMittal had ordered four contactors from WESCO in 2004; specifically, four " Hubbell DB Contactor NEMA Size 8." Appellant's Appendix at 1412-13; see also id. at 1421-22. Hubbell Industrial Controls, Inc. is a manufacturer of industrial parts. WESCO, however, obtained the contactors from EPSU, Inc., a company that both manufactured and supplied industrial parts. Some of the parts EPSU supplied were manufactured by EPSU, others were obtained

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from other manufacturers. Some of the parts EPSU manufactured were reverse-engineered from other manufacturers' products. In this case, EPSU provided to WESCO which in turn provided to ArcelorMittal " Hubbell-style" contactors which EPSU manufactured and which contained an outdated blowout coil design[3] instead of providing original, current Hubbell contactors with Hubbell components. ArcelorMittal determined there were four contactors purchased from WESCO in the plant at the time of the incident, two in spares and two on the east charging crane.

ArcelorMittal initiated this litigation in 2007. Among the extensive and lengthy pre-trial proceedings and the multiple motions and objections filed and argued at trial, the following are relevant to the issues on appeal:

During discovery, WESCO requested ArcelorMittal produce certain insurance investigator/adjuster documents. ArcelorMittal produced the claim file relating to the loss, but redacted some of the documents produced and withheld other documents altogether on the basis of work product and/or attorney-client privilege. On October 22, 2008, WESCO filed a motion to compel the production of the insurance documents in full. After briefing, argument, and multiple in camera reviews of the disputed documents, the trial court, with limited exception, approved the redaction and withholding of the documents.

As related in the facts above, ArcelorMittal disposed of and/or altered certain parts and equipment in the immediate aftermath of the incident. Specifically, WESCO notes the internal components of the main hoist controller were discarded; the blowout coils were found to be fractured only after the crane was operated after the incident; the contactors continued in service after the fractured blowout coils were replaced; one contactor was ultimately lost; and the crane's braking systems were not preserved in the condition they existed at the time of the incident. In addition, the parts and equipment were not documented in the state they existed at the time of the incident. On June 12, 2012, WESCO filed a motion for sanctions due to spoliation of evidence, seeking dismissal of the case because WESCO's defense had been prejudiced by ArcelorMittal's actions. The trial court deferred ruling on the motion until trial, at the conclusion of which it denied the motion and declined to impose any sanctions on ArcelorMittal. WESCO then requested that the jury be instructed that since ArcelorMittal failed to produce that evidence, it may conclude the evidence was unfavorable to ArcelorMittal. The trial court also declined to give the instruction.

ArcelorMittal intended to offer the testimony of Dr. Timothy Jur and Glenn Robinson, both of EDT, to show that a fracture of the blowout coils in both contactors was the cause of the brake failure. On September 18, 2012, WESCO filed a motion for summary judgment alleging, inter alia, that ArcelorMittal's expert opinions on causation were based upon assumptions that were not supported by the record and therefore did not create a genuine issue of fact regarding whether the blowout coils were the proximate cause of the accident. The trial court apparently made no ruling on the summary judgment motion. On December 14, 2012, WESCO filed a motion to exclude ArcelorMittal's expert testimony alleging it was unreliable and therefore

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inadmissible pursuant to Indiana Rule of Evidence 702. Following a hearing, the trial court denied the motion to exclude. WESCO again argued ArcelorMittal's expert testimony was unreliable in making a motion for judgment on the evidence at the conclusion of ArcelorMittal's case in chief and in making a motion for directed verdict, both of which the trial court denied.

WESCO's motion for summary judgment, motion for judgment on the evidence, and motion for directed verdict also included allegations that the convergence of events leading to the ladle spill and ensuing fire were not foreseeable as a matter of law. WESCO did not prevail on any of those motions. WESCO then raised the foreseeability issue in its motion to correct errors, which was also denied.

In a motion in limine filed December 14, 2012, ArcelorMittal requested an order prohibiting WESCO from " discussing, arguing, attempting to offer into evidence, commenting or in any matter [sic] conveying in the presence of the jury" post-incident remedial measures taken by ArcelorMittal, among other things. App. at 4016, 4025-27. WESCO opposed this motion on several grounds, including that Evidence Rule 407 inures to the benefit of defendants; that even if it could be used by plaintiffs, the evidence ArcelorMittal sought to exclude is admissible under that rule; and further, it is admissible for another purpose under the rule. The trial court determined Rule 407 is " party neutral" and ruled that evidence of subsequent remedial measures was not admissible. During trial, WESCO argued ArcelorMittal had opened the door to evidence of a policy change by ArcelorMittal after the incident regarding where crane operators were to keep the auxiliary hook relevant to the ladle. It also argued evidence regarding the installation of safety features on the controller after the incident should be allowed. The trial court declined to allow the evidence.

During trial, ArcelorMittal offered the testimony of its expert Dr. Jur regarding the source of the blowout coils. WESCO objected because " this is not an area of expert testimony. It's also cumulative of testimony that's already been offered in this case. Pursuant to 7-0-2, it is clearly not within the scope of expert testimony." Tr. at 4239. The trial court ultimately allowed Dr. Jur's testimony, finding that his review of the purchasing and tracking documentation gave him specialized knowledge about the source of the blowout coils. WESCO raised this issue again in its motion for judgment on the evidence and in its motion for directed verdict. The trial court denied both motions.

A jury trial was held from January 14, 2013 to February 14, 2013. The claims submitted to the jury were ArcelorMittal's claims against WESCO for breach of implied warranties and breach of contract.[4] The parties argued at the instruction conference about which instruction with regard to the measure of damages for personal property should be given to the jury. ArcelorMittal advocated an instruction identifying the measure of damages for damaged personal property as the cost of repair, whereas WESCO advocated an instruction identifying the measure of damages for destroyed personal property being its fair market value. Ultimately, the trial court instructed the jury on both standards. WESCO also tendered a " responsible cause" instruction that was given to the jury as a final instruction:

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Sometimes an unrelated event breaks the connection between a defendant's breach of contract or warranty and the injury a plaintiff claims to have suffered. If this event was not reasonably foreseeable, it is an " intervening cause."
When an intervening cause breaks the connection between a defendant's breach of contract or warranty and a plaintiff's injury, a defendant's breach of contract or warranty is no longer a " responsible cause" of that plaintiff's injury.

App. at 4880.

ArcelorMittal requested damages in the amount of $46,301,777. The jury returned a verdict for ArcelorMittal and against WESCO, awarding damages in the sum of $36,134,477. Following the jury's verdict in its favor and the trial court's entry of judgment, ArcelorMittal filed a motion seeking prejudgment interest, claiming it was entitled thereto because the contracts between the ...

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