Opinion
Civ. No. 01-1058 (JEL/JGL)
October 10, 2002
Peter D. Favorite, Esq., Gislason Hunter LLP, appeared for Plaintiff Minnesota Energy, Inc.
Lisa R. Griebel, Esq., Terhaar, Archibald, Pfefferle Griebel, LLP, appeared for Defendant and Third-Party Plaintiff Ronning Engineering Company, Inc.
Bradley J. Lindeman, Esq., Meagher Geer, P.L.L.P., appeared for Third-Party Defendant PBBS Equipment, Corp.
Joel M. Muscoplat, Esq., Gislason, Martin Varpness, P.A., appeared for Third-Party Defendant Par Piping and Fabrication, Inc.
ORDER
This action arises from a fire that occurred at Minnesota Energy, Inc.'s (Minnesota Energy) ethanol plant in November 1998. In May 2001, Minnesota Energy sued the designer of the plant's boiler stack heat recovery system, Ronning Engineering Company, Inc. (Ronning), claiming that the fire was caused by the defective design and installation of the system. The matter comes before the Court on Ronning's Motion for Summary Judgment. At issue is whether Minnesota Energy's action is barred by Minnesota's two-year statute of limitations for actions arising out of the defective and unsafe condition of improvements to real property, Minn. Stat. § 541.051, subd. 1(a) (2000). The Court concludes that it is.
SUBJECT MATTER JURISDICTION
The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332(a)(1), 1441(a) (2000).
BACKGROUND
Minnesota Energy operated an ethanol plant in Buffalo Lake, Minnesota, that produced fuel-grade ethanol by fermenting and distilling alcohol from corn. (Johansen Aff. ¶ 1-2; Johansen Dep. at 18.) After distillation, the corn was dried in a large, cylindrical, steel drum dryer, creating an animal feed product known as dried distiller's grain with solubles (DDGS). (Johansen Aff. ¶ 3-4; Johansen Dep. at 18-19).
In 1995, Minnesota Energy hired Ronning to assist in the design of the plant's dehydration system. (Ronning Aff. ¶ 3.) Ronning designed the plant's boiler stack heat recovery system. (Johansen Aff. ¶ 7; Johansen Dep. at 28; Ronning Aff. ¶ 3.) It also designed the plant's screw conveyor system, centrifugal separator, blending chamber, and a modification to the drum dryer. (Ronning Aff. ¶ 6.)
On November 6, 1998, a fire broke out in the dryer drum during the commissioning, or start-up, of one of the plant's boilers. (Griebel Aff., Ex. D.) Within 24 hours, the general manager of Minnesota Energy concluded that the fire was caused by defects in the boiler stack heat recovery system. (Johansen Dep. at 70-72.) An engineering company hired to investigate the fire reached the same conclusion in a written report dated January 4, 1999. (Griebel Aff., Ex. D; Gronvall Aff., Ex. D.)
On May 8, 2001, Minnesota Energy commenced this action against Ronning in Minnesota state court, alleging negligence, strict liability, and breach of contract. (Compl.) The Complaint alleges that the November 6, 1998, fire was caused by Ronning's improper design and installation of the boiler stack heat recovery system. (Id. ¶ 5-6.) Ronning removed the action to this Court pursuant to 28 U.S.C. § 1446 (2000). In March 2002, Ronning brought third-party complaints against PBBS Equipment Corp. (PBBS), whose employee had commissioned the boiler on the day of the fire, and Par Piping and Fabrication, Inc. (Par Piping), the company that manufactured, fabricated, and installed the boiler stack heat recovery system. Ronning now moves for summary judgment, arguing that Minnesota Energy's action is barred by Minn. Stat. § 541.051, subd. 1(a).
Minnesota Energy's Complaint also seeks to recover damages resulting from an explosion that occurred in December 1998. In its Memorandum in Opposition to Ronning's Motion for Summary Judgment and at the hearing on Ronning's motion, Minnesota Energy represented that it was no longer pursuing any claims related to the December 1998 explosion. (Plaint.'s Mem. Opp. Summ. J. at 5-6 n. 2.)
DISCUSSION
Summary judgment is proper "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 a judgment as a matter of law." Fed.R.Civ.P. 56(c). When the evidence in the record demonstrates that an action is barred by the applicable statute of limitations, summary judgment should be granted for the defendant. See Am. Spirit Graphics Corp. v. Toshiba Mach. Co., Ltd., 27 F.3d 353, 355 (8th Cir. 1994) (affirming summary judgment for defendant when plaintiff's claim was barred by Minn. Stat. § 541.051); Moen v. Rexnord, Inc., 659 F. Supp. 988, 990 (D.Minn. 1987) (granting summary judgment for defendant when plaintiff's claim was barred by Minn. Stat. § 541.051).
Under Minn. Stat. § 541.051, subd. 1(a), actions against a designer of "an improvement to real property" that arise out of the defective or unsafe condition of the improvement must be brought no more than two years after the injury is discovered. There is no dispute in this case that Minnesota Energy brought its action against Ronning more than two years after it discovered its injury. The issue presented is whether the action involves "an improvement to real property" within the meaning of the statute.
The full text of section 541.051, subdivision 1(a), is as follows:
Except where fraud is involved, no action by any person in contract, tort, or otherwise to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, nor any action for contribution or indemnity for damages sustained on account of the injury, shall be brought against any person performing or furnishing the design, planning, supervision, materials, or observation of construction or construction of the improvement to real property or against the owner of the real property more than two years after discovery of the injury or, in the case of an action for contribution or indemnity, accrual of the cause of action, nor, in any event shall such a cause of action accrue more than ten years after substantial completion of the construction. Date of substantial completion shall be determined by the date when construction is sufficiently completed so that the owner or the owner's representative can occupy or use the improvement for the intended purpose.
In Pacific Indemnity Co. v. Thompson-Yaeger, Inc., 260 N.W.2d 548 (Minn. 1977), the Minnesota Supreme Court adopted a "common-sense interpretation" of the phrase "improvement to real property," defining it as "a permanent addition to or betterment of real property that enhances its capital value and that involves the expenditure of labor or money and is designed to make the property more useful or valuable as distinguished from ordinary repairs." Id. at 554.
Ronning argues that the boiler stack heat recovery system was a component of the dehydration system, and that the dehydration system as a whole falls squarely within this definition. Minnesota Energy concedes that the dehydration system is an improvement to real property. It argues, however, that the boiler stack heat recovery system was separate and distinct from the dehydration system, and that, standing alone, the boiler stack heat recovery system is not an improvement to real property.
The evidentiary material submitted by the parties supports Ronning's position that the boiler stack heat recovery system was a component of the dehydration system. It is undisputed that Minnesota Energy hired Ronning for the purpose of designing a dehydration system for its ethanol plant (Ronning Aff. ¶ 3), and that Ronning designed the boiler stack heat recovery system (Johansen Aff. ¶ 7; Ronning Aff. ¶ 3; Ronning Aff. (Second) ¶ 3-4). There is nothing in the record to suggest that Minnesota Energy ever hired Ronning to perform additional duties that would require it to design systems or equipment that were separate and distinct from the dehydration system. Furthermore, Ronning's original design drawing of the dehydration system included the boiler stack heat recovery system. (Id. ¶ 3, Ex. A.) The deposition testimony of Minnesota Energy's general manager, Joe Johansen, indicates that Ronning submitted its design for the boiler stack heat recovery system as part of its design of the dehydration system. (Johansen Dep. at 28-29.) In sum, the evidence in the record demonstrates that Ronning designed the boiler stack heat recovery system as a component of the dehydration system.
The evidence also shows that the boiler stack heat recovery system functioned as a component of the dehydration system. The boiler stack heat recovery system consisted of approximately 54 feet of ductwork attached to the top of the plant's boilers by scrolls or diverters. (Johansen Aff. ¶ 10; Ronning Aff. ¶ 7.) From the boilers, the ductwork ran along the ceiling, through a wall, and into a blending chamber. (Johansen Aff. ¶ 10; Ronning Aff. ¶ 8; Ronning Aff. (Second), Ex. A.) The boiler stack heat recovery system reduced Minnesota Energy's energy costs by diverting hot air produced by the boilers into the blending chamber, where it was combined with hot air produced by an attached furnace and then blown into the dryer drum in which the distilled corn was stored and dried. (Johansen Aff. ¶ 8; Johansen Dep. at 25, 131; Ronning Aff. ¶ 10.) The hot air diverted by the boiler stack heat recovery system provided 17.4% of the dehydration system's energy requirements during the summer months and 20% of its energy requirements during the winter months, saving Minnesota Energy approximately $96,000 to $114,000 in energy costs per year. (Ronning Aff. ¶ 10-11.) It appears from these facts that the primary, if not the sole, function of the boiler stack heat recovery system was to enhance the efficiency of the dehydration system.
Minnesota Energy contends that the boiler stack heat recovery system was not a component of the dehydration system because the dehydration system can be operated without it. It notes that the dehydration system was operating before the boiler stack heat recovery system was installed (Johansen Aff. ¶ 7-8, 14), and that the dehydration system continued to operate after the boiler stack heat recovery system was removed following the November 1998 fire (id. ¶ 15). Minnesota law does not require that a component be necessary to the functioning of the system as a whole. See Farnham v. Nasby Agri-Systems, Inc., 437 N.W.2d 759, 761-62 (Minn.Ct.App. 1989). In Farnham, the Minnesota Court of Appeals held that a removable grate was part of an underground grain auger system for purposes of section 541.051. 437 N.W.2d at 762. The grate consisted of several metal pipes placed horizontally over the opening of the auger. Id. at 760. The grate was normally kept in place to protect workers, but it could be removed to gain access to the auger and to allow some types of grain to flow more easily into the auger. Id. at 760-61. Although the grate made the auger system safer, it was not necessary to the auger system's operation.
Relying on language in Farnham, Minnesota Energy also argues that the boiler stack heat recovery system should not be viewed as a component of the dehydration system because it was not a "critical part" of the dehydration system. The plaintiff in Farnham cited Massie v. City of Duluth, 425 N.W.2d 858 (Minn.Ct.App. 1988), in support of its position that the grate was not an improvement to real property. Farnham, 437 N.W.2d at 761. The court of appeals distinguished Massie, stating:
[Massie] held that an outdoor recreational water slide adjacent to a swimming pool was not an improvement to real property within the meaning of Minn. Stat. § 541.051. In that case, the water slide was used only during the summer season and placed in storage for the off-season. A water slide is merely incidental to a swimming pool and is not crucial to the functioning of the pool. However, in the present case, the grate was a critical part of the auger system, permitting the inflow of grain while protecting workers.
Farnham, 437 N.W.2d at 761-62. It is evident from this passage that Farnham construed Massie as involving the question of whether the water slide was a part of a swimming pool. A close reading of Massie, however, reveals that the water slide was attached to a shallow lake at the Twin Ponds Recreation Area in Duluth, rather than a swimming pool. 425 N.W.2d at 859. Thus, the issue in Massie was whether the water slide, standing alone, was an improvement to real property. Id. at 860.
Because Farnham's description of the grate as a "critical part" of the auger system was made as a means of distinguishing what turns out to be a hypothetical factual scenario involving a water slide and a swimming pool, the Court questions whether Farnham should be read as adopting a rule that only critical parts of a system are components of that system for purposes of section 541.051. Nevertheless, even if Farnham is read as creating such a rule, the Court concludes that the boiler stack heat recovery system at issue in this case was at least as critical to the dehydration system as the grate was to the auger system in Farnham. Based on these considerations, the Court concludes that the boiler stack heat recovery system was a component of the dehydration system.
Again, Minnesota Energy concedes that the dehydration system as a whole is an improvement to real property. Cases interpreting section 541.051 establish that, in determining whether a defective item is an improvement to real property, there is no distinction between the component parts of a system and the system as a whole. See Kemp v. Allis-Chalmers Corp., 390 N.W.2d 848, 851 (Minn.Ct.App. 1986) ("The distinction between portions of the whole and the whole itself has never been used in Minnesota for the purpose of determining whether the unit is an improvement to real property."); Moen, 659 F. Supp. at 990 (following Kemp on this point). Thus, following Kemp and Moen, the Court concludes that the boiler stack heat recovery system, a component of an improvement to real property, must also be considered an improvement to real property.
Because Minnesota Energy's action arises from the defective condition of an improvement to real property, it is governed by the two-year statute of limitations set forth in section 541.051, subdivision 1(a). Minnesota Energy did not bring its action against Ronning within this period of limitation, and Ronning is therefore entitled to a judgment as a matter of law. See Am. Spirit Graphics, 27 F.3d at 355; Moen, 659 F. Supp. at 990.
CONCLUSION
For the foregoing reasons, IT IS ORDERED THAT:
1. Defendant Ronning's Motion for Summary Judgment [Docket No. 34] is GRANTED.
LET JUDGMENT BE ENTERED ACCORDINGLY.