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Travelers Property Casualty Company of America, As Subrogee of Superior Graphite Company v. Rapid Power Corporation and Dynapower Company

May 3, 2013

TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, AS SUBROGEE OF SUPERIOR GRAPHITE COMPANY
PLAINTIFF
v.
RAPID POWER CORPORATION AND DYNAPOWER COMPANY DEFENDANTS



MEMORANDUM OPINION

This matter comes before the Court on the Defendants' motion for summary judgment. (Defs.' Mot. Summ. J., Docket Number ("DN") 45.) The Plaintiff responded. (Pl.'s Resp., DN 49.) The Defendants replied. (Defs.' Reply, DN 50.) Fully briefed, this matter is now ripe for adjudication. For all of the following reasons, the Defendants' motion is GRANTED.

I.

The Defendants, Rapid Power Corporation and Dynapower Company (referred to collectively as "Dynapower"),*fn1 design and manufacture power generation equipment for industrial clients. Subrogor Superior Graphite Company ("Superior") manufactures a variety of graphite-derived products. Superior uses Dynapower's equipment to generate electricity for use in some of its industrial processes. During the period relevant to this action, Subrogee Travelers Property Casualty Company of American ("Travelers") insured property located at Superior's Hopkinsville, Kentucky production facility.

This action arises from the manufacture and sale of a rectifier transformer by Dynapower to Superior. The Court provides the following limited recitation of facts and supplements as appropriate in the analysis below.

Superior solicited Dynapower to build the rectifier transformer at issue as a replacement for a substantially similar transformer previously built by Dynapower for the Hopkinsville facility. Dynapower submitted a proposal to Superior for the replacement transformer on February 13, 2008. Five days later, on February 18, 2008, Superior and Dynapower entered into a written contract for the purchase of the transformer. This contract contained the material provisions governing the agreement and the express warranties discussed below. The transformer was delivered to Superior's production facility in Hopkinsville on September 8, 2008. Superior installed the transformer when received. Dynapower played no role in the installation. The transformer functioned without issue until February 1, 2011, when it was destroyed in a catastrophic failure. Travelers contends that Dynapower is responsible for the failure.

Travelers insured property at the Hopkinsville facility and paid Superior the proceeds of the policy that covered the transformer. Travelers, acting as subrogee to Superior, now seeks to recover those proceeds from Dynapower. Travelers pursues recovery on a number of theories, including breach of contract, breach of express warranty, negligence, and strict products liability. Dynapower moves for summary judgment on all counts. It contends that the economic loss rule bars the tort claims for negligence and strict products liability. Furthermore, it argues that the record of evidence demonstrates a lack of any genuine dispute and that it did not breach the contract with Superior or the express warranty contained therein.

II.

Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

"[N]ot every issue of fact or conflicting inference presents a genuine issue of material fact." Street v. J. C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir. 1989). The test is whether the party bearing the burden of proof has presented a jury question as to each element in the case. Hartsel v. Keys, 87 F.3d 795, 799 (6th Cir. 1996). The plaintiff must present more than a mere scintilla of evidence in support of his position; the plaintiff must present evidence on which the trier of fact could reasonably find for the plaintiff. See id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). Mere speculation will not suffice to defeat a motion for summary judgment; "the mere existence of a colorable factual dispute will not defeat a properly supported motion for summary judgment. A genuine dispute between the parties on an issue of material fact must exist to render summary judgment inappropriate." Monette v. Elec. Data Sys. Corp., 90 F.3d 1173, 1177 (6th Cir. 1996).

While the substantive law of Kentucky is applicable to this case pursuant to Erie Railroad v. Tompkins, 304 U.S. 64 (1938), a federal court sitting in diversity applies the standards of Federal Rule of Civil Procedure 56, not "Kentucky's summary judgment standard as expressed in Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991)." Gafford v. Gen. Elec. Co., 997 F.2d 150, 165 (6th Cir. 1993) (abrogated on other grounds in Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010)).

III.

Travelers claims that Dynapower is labile for damages under the tort theories of negligence and strict products liability. According to Travelers, the transformer catastrophically failed because Dynapower did not incorporate a device known as a "snubber" into the transformer's design, or did not, at minimum, recommend that Superior install a snubber external to the transformer. In other words, Travelers claims that Dynapower had a duty to either incorporate or recommend the installation of components that could have prevented the transformer's failure but negligently failed to do so.

Charles Raymond, an expert witness for Travelers, described the need for snubbers in his report:

[Dynapower] should have recognized the risk to the transformer caused by vacuum switching and recommended the application of components to mitigate the risk of transient damage to the transformer insulation. The risks to transformers caused by vacuum switches are well known to transformer manufacturers and effective means of mitigating the operational risk caused by switching transients through ...


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