Hot Bins

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October 14, 2014
Ruth Robinson
SmithAmundsen Agribusiness Alert

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Last month the Seventh Circuit Court of Appeals voided much of a $180 million verdict against ConAgra awarded by an Illinois federal jury in 2012.

A grain bin in Chester, Illinois exploded on April 27, 2010 injuring three workers. After a 17 day trial an Illinois federal jury awarded almost $180 million in compensatory and punitive damages against ConAgra Foods and Westside Salvage. ConAgra, an Omaha, Nebraska based company owned the facility, part of a flour mill. ConAgra’s position at trial was that liability in the case rested with Westside Salvage, an entity that ConAgra had hired to address problems in one of the silos. It was identified at trial that explosions are a constant risk in grain storage, which produces not only a lot of combustible dust and carbon monoxide (which can oxidize explosively to carbon dioxide) but also, through the decay of a bin’s contents heat can set off a blast.

In March 2010 ConAgra discovered a burning smell in one of its silos which contained wheat pellets. ConAgra contacted Westside Salvage, which touts expertise in handling “hot bins." ConAgra’s negotiations with Westside and its competitors (since ConAgra wanted a lower price) delayed the start of the work. The jury learned of this delay as documents and e-mails regarding the bid pricing were introduced into evidence. However, Westside’s own busy schedule apparently added to the delay. Work finally commenced on April 20, 2010 and Westside hired A&J Bin Cleaning to do some of the task. Two of the injured workers were employees of A&J Bin Cleaning. The third injured worker was employed by Westside itself.

Of course ConAgra wanted to salvage as much of the grain as possible but as pellets were removed from the top more oxygen reached wheat composting at the bin’s bottom. Westside Salvage decided that it needed to remove some of the grain via side tunnels. On April 27 Westside Salvage detected smoke coming from the bin. Its crews sprayed water on the pellets and used an air lance to try to discover the smoke’s source. All of its efforts failed. Westside’s foreman told ConAgra to call the fire department. While waiting for the firefighters to arrive Westside’s foreman sent two workers into a tunnel instructing them to remove tools that might impair the firefighter’s access. While the two workers were in the tunnel the explosion occurred. These workers were severely injured but survived. A third worker, that was in an elevator nearby, was also injured but less seriously.

Normally employees of an independent contractor cannot obtain damages from the owner of the premises at which the contractor was working. (Restatement (Third) of Torts, §55-57). In light of this the plaintiffs alleged that ConAgra was liable for its failure to provide Westside Salvage with a safe place to work. ConAgra’s response to this claim by Westside was “of course” the silo at issue was unsafe, that is why Westside Salvage had been hired! At trial, ConAgra relied upon the principle that someone who engages an independent contractor to redress an unsafe condition is not liable when the feared event occurs. In other words, ConAgra argued that since it had hired Westside to deal with the hot bin, all liability rested with Westside. ConAgra argued that Westside could have negotiated for an indemnity agreement or insurance for its benefit (and that of its workers and subcontractors) but did not do so.

At trial, Westside tried to contend that it did not know that the silo was a “hot bin.” The court was not convinced by this argument as evidence overwhelming established that Westside knew that the silo was a hot bin and knew why they had been hired. The Seventh Circuit Court of Appeals held that having hired a self-proclaimed expert in hot bins, ConAgra was entitled to assume that Westside would ask for whatever information it needed and therefore dismissed the claim by the plaintiff and Westside that ConAgra did not volunteer all of the information concerning the temperature readings taken in the silo obtained before its engagement with Westside. Additionally, the court was not convinced by the plaintiff’s argument that ConAgra should have hired Westside sooner, without shopping for lower bids saying this might have reduced the risk.

The court drew analogy from the “Firefighter’s Rule,” which stands for the proposition that firefighters cannot recover from homeowners for creating the conditions that led to the fire and conversely homeowners cannot recover from firefighters who fail to bring the blaze under control quickly or without damaging the home. The court also cited an Illinois Supreme Court case which dealt with a client’s malpractice claim against is accountants. The accountants in that case argued that the client was comparatively negligent because it created (financial) conditions that made it easier for accountants to err.

The conclusion that an accountant’s malpractice is not mitigated by the fact that the client created risky financial or bookkeeping conditions applies equally to a claim by a grain-removal specialist (and its employees) against the owner of the grain storage facility. Despite the fact that the jury allocated almost all of the $100 million in punitive damages to ConAgra, this was reversed on appeal and it was held that ConAgra was not liable to the plaintiffs. Also, contrary to the finding of the lower court, the Seventh Circuit Court of Appeals held that ConAgra should have been victorious in its contract claim against Westside asking Westside to indemnify ConAgra for any damage caused by Westside’s negligence. Westside tried to argue that since it did not return a signed copy of the contract to ConAgra the contract was not valid. The court however found that Westside agreed to undertake the job and set to work but simply did not sign on the dotted line. The court held that performance is usually is as good as a signature in accepting a proposed written contract.

This case highlights the importance of written contracts, indemnity agreements and the fact that e-mail exchanges may ultimately be shared with a jury at trial. The fact that ConAgra was shopping around for lower bids and that there were e-mail exchanges in this regard no doubt inflamed the jury resulting in the high punitive damages. The jury believed that ConAgra was more concerned with the money than avoiding an explosive situation. The court found however that ConAgra’s retention of an expert placed the responsibility square on the shoulders of that expert to determine how and in what manner to remedy the hot bin situation.