See et al v. Swagelok Company
Filing
163
ORDER denying 139 Motion to amend to add a claim for punitive damages. (Written Opinion) Signed by Magistrate Judge Katherine M. Menendez on 6/6/2019. (BJP)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
In re: McNeilus Manufacturing Explosion
Coordinated Litigation
Case No. 17-cv-5237-PJS-KMM
Filed as to See, et al. v. Swagelok,
et al., 17cv5237
ORDER
This matter is before the Court on the Motion to Amend the Complaint to Add
Claims for Punitive Damages filed by the plaintiffs, Eemou and Sing See. [ECF No. 139.]
As explained below, the Sees’ motion to amend is denied.
I.
Allegations in the First Amended Complaint1
McNeilus manufactures large trucks for waste removal purposes that are
powered by a compressed natural gas (“CNG”) system. The gas is stored in pressurized
cylinders on top of the vehicles. During the manufacturing process, after the CNG
trucks are painted, they are moved into a heated baking room so that the paint can cure.
On January 11, 2017, McNeilus was finishing a CNG vehicle for Waste
Management. The truck had four CNG cylinders atop the vehicle, which were connected
to a manifold with a high-pressure hose manufactured by Swagelok Company
(“Swagelok”) and distributed by San Diego Valve and Fitting Company (“San Diego
Valve”).
1
The current operative pleading in the Sees’ case is the First Amended Complaint
[ECF No. 62], which the Court summarizes here.
1
At the time of the events giving rise to this lawsuit, Eemou See was a production
worker at a McNeilus facility. Around 10:00 a.m. on January 11th, a massive explosion
occurred while the Waste Management truck was in the baking room. The explosion
caused serious injuries to several people and severely damaged the McNeilus building.
Ms. See suffered burns over nearly half of her body and the amputation of each finger
on her left hand.
In the aftermath of the explosion, the Dodge County Sheriff’s Office and the state
fire marshal investigated its cause. The sheriff’s report noted that a hose came
unfastened from the CNG system—the hose appeared to have pulled out of the factorycrimped connection. The fire marshal’s initial investigation similarly suggested that the
hose became “undone and may have released some of the natural gas product into the
room.” [First Am. Compl. ¶ 44.]
Ms. See and her husband brought this lawsuit against Swagelok and San Diego
Valve under negligence and strict-liability theories. They allege that the defendants
defectively designed and manufactured the hose and hose assemblies. They also allege
that Swagelok and San Diego Valve provided inadequate warnings with their products
regarding how to use them safely. The Sees claim that the CNG hose connecting the
cylinders to the manifold on the truck was not properly inserted into the fitting; if it had
been, the hose would not have decoupled from the fitting, releasing natural gas into the
baking room. The Sees also claim that Swagelok and San Diego Valve failed to properly
test the hose assembly, which would have caught the flaw prior to the explosion.
2
II.
Motion to Amend Complaint to Add Claims for Punitive Damages
The Sees ask the Court to allow them to amend their complaint so they can seek
punitive damages from Swagelok and San Diego Valve. [ECF No. 139.] The defendants
oppose the motion, arguing that the proposed amendment is futile. For the reasons set
forth below, the Sees’ motion is denied.
A. Legal Standard
Except in situations where amendment is permitted as a matter of course or the
parties agree, neither of which apply here, a party may amend its pleadings only with
leave of court. Fed. R. Civ. P. 15(a)(2). Federal courts should grant leave to amend
freely “when justice so requires.” Id. Courts will, however, deny leave to amend for
several reasons, including: “undue delay, bad faith, or dilatory motive, repeated failure
to cure deficiencies by amendments previously allowed, undue prejudice to the nonmoving party, or futility of amendment.” Streambend Props. II, LLC v. Ivy Tower
Minneapolis, LLC, 781 F.3d 1003, 1015 (8th Cir. 2015) (quoting Moses.com Sec., Inc. v.
Comprehensive Software Sys., Inc., 406 F.3d 1052, 1065 (8th Cir. 2005)). In this case,
only the futility of the proposed amendment is at issue.2
2
Under Minnesota law, a complaint cannot be amended to add a claim for punitive
damages unless the motion to amend is supported by prima facie clear and convincing
evidence that a defendant has shown deliberate disregard for the rights and safety of
others. See Ulrich v. City of Crosby, 848 F. Supp. 861, 866–69 (D. Minn. 1994)
(discussing the standards applicable to a motion to amend under Minn. Stat. § 549.191).
Though this District has long applied Minn. Stat. § 549.191 when plaintiffs seek leave to
add a claim for punitive damages, the defendants recognize that most recent decisions
have concluded that amendment is properly governed by the Rule 15. [Swagelok Opp’n
at 5–8; San Diego Opp’n at 11–13.] Because the standards for amendment under Rule 15
and Minn. Stat. § 549.191 conflict, the Court concludes that Rule 15 applies here.
See, e.g., Barry v. Consolidated Asset Recovery Sys., 2019 WL 351339, at *2 n.1 (D.
(footnote continued ...)
3
When determining whether to deny amendment because a proposed amendment
is futile, a court must “reach the legal conclusion that the amended complaint could not
withstand a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure.” Zutz v. Nelson, 601 F.3d 842, 850 (8th Cir. 2010) (quoting Cornelia I.
Crowell GST Trust v. Possis Med., Inc., 519 F.3d 778, 782 (8th Cir. 2008)). Under
Rule 12(b)(6), courts look only at the sufficiency of the allegations in the proposed
amended complaint to determine whether it “contain[s] sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)).
The Court’s futility analysis in this context asks “whether [the Sees’ proposed
amendment] states a plausible claim for punitive damages in light of substantive
Minnesota law.” Shank v. Carleton College, No. 16-cv-1154 (PJS/HB), 2018 WL
4961472, at *4 (D. Minn. Oct. 15, 2018) (emphasis in original); Barry, 2019 WL 351339,
at *4 (same). Minnesota’s substantive law makes punitive damages available to a
plaintiff upon a showing “that the acts of the defendant show deliberate disregard for
the rights or safety of others.” Minn. Stat. § 549.20, subd. 1(a). Deliberate disregard
occurs when “the defendant has knowledge of facts or intentionally disregards facts
Minn. Jan. 29, 2019) (“In conformity with other recent decision in this District, the
undersigned concludes that Rule 15 and not Minn. Stat. § 549.191 controls the
adjudication of motions to amend.”); see also Selective Ins. Co. of S.C. v. Sela, 353 F.
Supp. 3d 847, 855–63 (D. Minn. 2018) (concluding Minn. Stat. § 604.18, which imposes
similar pleading requirements for adding claims of bad-faith denial of insurance
benefits, conflicts with Fed. R. Civ. P. 8 and 15); but see Inline Packaging, LLC v.
Graphic Packaging Int’l, LLC, No. 15-cv-3183 (ADM/LIB) (D. Minn.) [Doc. No. 354]
(Brisbois, Mag. J.) (finding the court is required to apply Minn. Stat. § 549.191).
4
that create a high probability of injury to the rights or safety of others.” Id. § 549.20,
subd. 1(b).
B. Proposed Amendments
The starting point for the Court’s analysis is the Sees’ Proposed Second
Amended Complaint, which contains eleven new paragraphs setting forth the factual
basis for the plaintiffs’ punitive damages claim. [Proposed Second Am. Compl. (“PSAC”)
¶¶ 48–58, ECF No. 138 (redlined version).] The Sees allege that Swagelok and San
Diego Valve were aware of a high probability of harm to others for the following
reasons: (1) before the January 11, 2017 explosion at McNeilus, both defendants knew
that under-inserted hoses present significant risks; (2) the defendants had identified
flaws in their manufacturing processes that led to under-inserted hoses; and (3) the
defendants failed to take adequate measures to prevent under-inserted hoses from
entering the marketplace.
The Sees point to a July 2013 incident in which an under-inserted hose “blew
off” its assembly. [PSAC ¶ 49 (“In July of 2013, a Swagelok hose that was not properly
pre-assembled blew off an installed hose.”).] After that incident, Swagelok responded
by requiring more detailed inspections of hoses assembled at Swagelok. [PSAC ¶ 50.]
Specifically, Swagelok “began requiring second-person inspection of all hoses” at its
own facility, but it allegedly did not require its distributors to do the same. [PSAC
¶ 50.] The Sees claim that Swagelok hoses continued to be manufactured and sold by
distributors who were using an older process that Swagelok knew had the potential to
blow out from their fittings. [PSAC ¶ 50.]
5
The Sees also base their proposed claim for punitive damages on the discovery
of under-inserted hoses in April and June of 2016 at San Diego Valve. In April that
year, San Diego Valve learned that a temporary employee assembled four natural gas
hoses that failed conductivity testing because the end of the hose failed to contact a
conductive eyelet that was seated inside the fitting.3 [PSAC ¶ 52.] All four hoses were
eventually found to be under-inserted. [PSAC ¶ 52.] In June 2016, “several more”
hoses assembled at San Diego Valve by a different employee failed conductivity testing
and were found to be under-inserted as well. [PSAC ¶ 53.] In response to these 2016
events, San Diego Valve “changed its assembly process” and began requiring
conductivity testing at an earlier step in the manufacturing of each hose. [PSAC ¶ 55.]
The Sees claim that even though Swagelok and San Diego Valve knew that a
significant number of hoses had been assembled with the process that predated San
Diego Valve’s switch to performing conductivity tests on all hoses prior to crimping,
“neither Swagelok nor [San Diego Valve] took any action to contain the problem and
continued to market and sell hoses that had been manufactured under the defective
process.” [PSAC ¶ 56.] Swagelok and San Diego Valve did not try to determine if other
hoses that were previously assembled had the same under-insertion problem, and they
3
“Conductivity testing” is not described in the Proposed Second Amended
Complaint, though the allegations suggest that a conductive eyelet should make contact
between the hose and the inside of the fitting. [PSAC ¶ 52.] The plaintiffs indicate that
conductivity testing can identify hoses that are under-inserted. [Pls.’ Mem. at 5 n.3.]
The defendants argue that a failure of conductivity testing does not necessarily reveal
an under-insertion problem both because hoses that are fully inserted can fail
conductivity testing, and because hoses that are under-inserted may pass. [Swagelok
Mem. at 16–17; San Diego Valve Mem. at 6 n.1.]
6
did not issue a recall or provide post-sale warnings to customers or end-users who
were using hose assemblies that were manufactured under the older process. [PSAC
¶¶ 57–58.]
C. Analysis
For at least three reasons, despite taking the plaintiffs’ allegations as true, they
are insufficient to show that Swagelok or San Diego Valve exhibited a deliberate
disregard for the rights or safety of others.4 The facts set forth in the Proposed Second
Amended Complaint simply fail to establish that the conduct of either defendant showed
deliberate disregard for the safety of others.
1. Prompt Response
First, the plaintiffs’ punitive-damages theory is flawed because the facts alleged
suggest that Swagelok and San Diego Valve acted promptly in response to the incidents
that arguably put them on notice that their hoses might suffer from an under-insertion
problem. After Swagelok became aware of an under-insertion issue with one hose in
4
The Sees submitted matters outside the pleadings in connection with their motion
to amend. Because the Court has analyzed the sufficiency of the proposed amended
pleading under the futility standard, the allegations in the Proposed Second Amended
Complaint control the analysis. The Sees’ affidavits and exhibits were not embraced by,
incorporated into, or attached to the proposed pleading, so they are beyond the record
that may be considered by the Court. See Zean v. Fairview Health Servs., 858 F.3d 520,
526–27 (8th Cir. 2017). Therefore, the Court’s conclusion that the proposed amendment
is futile is not based on the evidentiary record. Nevertheless, the Court also reviewed
the broader record, and concludes that even had the amended complaint itself been
strengthened with additional detail from the supplemental record, the outcome of the
motion to amend would be the same. In other words, the problem here is one of
substance, not of form.
7
April 2013,5 it began requiring two-person inspections of all hoses. And San Diego
Valve tested every hose after manufacture but before sale, and sent any hoses
identified as flawed to Swagelok for further analysis. When several hoses failed
conductivity testing at San Diego Valve three years later in April and June 2016, San
Diego Valve started requiring mid-assembly conductivity testing on all hoses. These
facts do not show that in the face of a serious risk of harm, Swagelok and San Diego
Valve intentionally disregarded that risk or acted with indifference to it; instead the
facts alleged suggest that they tried to address the issues of which they were aware.
See Rogers v. Mentor Corp., No. 12-cv-2602 (SRN/SER), 2018 WL 2215519, at *8 (D.
Minn. May 15, 2018) (providing that the substantive punitive damages statute in
Minnesota “requires (1) knowledge of or an intentional disregard of facts that make
injury to the plaintiffs’ rights probable; and (2) action despite such knowledge”) (internal
quotation marks omitted).
Of course, the Court does not suggest that the defendants’ conduct absolves
them of all responsibility for the accident that caused Ms. See’s injuries, and the Court
offers no commentary here on the strengths or weaknesses of the underlying claims.
Indeed, accepting them as true, the new allegations in the Proposed Second Amended
Complaint reasonably support an inference that Swagelok and San Diego Valve’s
response to the under-insertion issue was negligent. But, of course, punitive damages
5
There are no allegations in the Proposed Second Amended Complaint to suggest
that San Diego Valve was aware of the incident in April 2013 or was even one of
Swagelok’s distributors at that time. Therefore, the Court has not considered the April
2013 incident when evaluating whether the plaintiffs have alleged a plausible claim for
punitive damages against San Diego Valve.
8
are not available simply because a defendant is negligent. Here, the conduct of
Swagelok and San Diego Valve described in the amended pleading does not demonstrate
a deliberate or intentional disregard of the rights and safety of others.
2. Awareness of High Probability of Injury
Second, the plaintiffs’ proposed amendment would not survive a motion to
dismiss because it does not show that Swagelok and San Diego Valve were aware of a
high probability that their products could cause injuries. See Minn. Stat. § 549.20,
subd. 1(b). The plaintiffs allege that the defendants must have been aware of such a
risk. Certainly, it is reasonable to infer from the allegations here that an under-inserted,
high-pressure hose assembly could allow gas to escape a CNG system, creating
significant safety risks. However, the Proposed Second Amended Complaint does not
support the separate inference that the defendants were aware that under-inserted
hoses routinely eluded the defendants’ quality-control measures and entered the
market. According to the Sees’ pleading, Swagelok was aware of one under-inserted
hose that “blew off” in the field in 2013. For three years after that incident, there are
no allegations that Swagelok or San Diego Valve received even one report that their
hoses had an under-insertion problem. Given that the plaintiffs allege Swagelok is one
of America’s largest privately held companies with significant market share [see PSAC
¶¶ 6–7], the identification of a single occasion where an under-inserted hose failed in
the field prior to the tragedy in this case does not state a plausible claim that the
defendants were aware of a high probability of injury to others.
The next “incidents involving under-inserted hose assemblies at [San Diego
Valve]” [Pls.’ Mem. at 2], did not come up until April and June 2016, prompting San
9
Diego Valve to change its testing process. The three-year gap suggests not only that
the problem the plaintiffs identified is uncommon, but also that San Diego Valve’s
existing testing and inspection processes could identify under-insertion problems
before hoses made it into the into the stream of commerce.6
These same reasons also undermine the plaintiffs’ argument that Swagelok and
San Diego Valve showed deliberate disregard for the safety of others because they
failed to issue a recall or to warn end-users that they may have received hoses that
were under-inserted. [PSAC ¶ 58; Pls.’ Mem. at 2, 9.] If anything, the record
demonstrates that the defendants were aware that their testing program was catching
under-inserted hoses before sale. Because the allegations fail to show that either of the
defendants had knowledge of facts indicating a high probability of injury, the failure to
issue a recall or provide post-sale warnings is not indicative of a deliberate disregard
for others’ safety.7
6
The plaintiffs’ assertion that the defendants were aware that “numerous hoses
assembled with the prior process that failed to detect under-inserted hoses had been
placed in the stream of commerce” [PSAC ¶ 56], is conclusory rather than factual, and
therefore is not the type of allegation that can support the motion to amend.
7
The defendants argue that the failure-to-recall allegations are unhelpful to the
Sees because Minnesota law does not recognize a manufacturer’s duty to issue a recall
and because this is not a special case in which a post-sale duty to warn would be
recognized. [See Swagelok Mem. at 19–20 & n.55.] The defendants essentially suggest
that unless Minnesota law would support a separate underlying tort claim for the
manufacturer’s post-sale conduct, the manufacturer’s action or inaction cannot legally
form the basis of a claim for punitive damages. In Berczyk v. Emerson Tool Co., 291 F.
Supp. 2d 1004 (D. Minn. 2003), the court rejected an argument that the manufacturer
exhibited deliberate disregard by failing to issue a recall, simply noting that Minnesota
has not recognized any duty to recall or retrofit a product. Id. at 1016. However,
Berczyk offers little reasoning to support the proposition advanced by the defendants,
and the issue has not been substantially briefed in this proceeding. The Court does not
(footnote continued ...)
10
3. Olson v. Snap Products
Finally, the Court is not persuaded by the plaintiffs’ reliance on Olson v. Snap
Prods., Inc., 29 F. Supp. 2d 1027 (D. Minn. 1998). If anything, a careful reading of Olson
demonstrates why the showing made by the plaintiffs in this case is inussificient to
support a claim for punitive damages. In Olson, the defendant manufactured an aerosol
“fix a flat” tire inflator and marketed it as containing a “NON-EXPLOSIVE FORMULA.”
Id. at 1029. Mr. Olson was injured by an explosion that occurred when he attempted to
weld a tire rim attached to a tire that contained the defendant’s product. Id. Though the
inflator had a label advertising that the product was non-explosive, the record provided
support for punitive damages because the defendant was aware of serious safety risks
that contradicted its marketing claims. For example, the manufacturer used a propellant
that it confirmed was unsafe and had previously criticized as “highly flammable” when it
was used by a competitor. Id. at 1030–31. Third-party testing showed the propellant
was extremely flammable, the defendant’s internal investigations revealed concerns
about the product’s ability to cause bodily harm or death, and before Mr. Olson’s
accident occurred, the defendant was sued twice for injuries resulting from tire
explosions during rim welding. Id. at 1032–33. Despite all of this, the defendant
rely upon this argument in determining that the Sees’ proposed amendment is futile.
However, the Coutr doubts that a manufacturer’s failure to offer post-sale warnings or
issue a recall where a high probability of injury exists is as irrelevant to the question of
deliberate disregard as the defendants now argue. 54 Am. Jur. Trials 443 § 20 (May
2019 Update) (“A manufacturer's failure to redesign or recall or reduce the risk of a
known danger has been the predominant basis for imposing punitive damages in
products liability litigation.”).
11
continued marketing the product as containing a non-explosive formula and failed to
change its labeling to accurately reflect the well-known risks, supporting an inference
that the defendant acted with deliberate disregard because it elevated its own interest
in maintaining a market advantage over the safety of others. See id. at 1037–39 and
1038 n.3.
In several respects, the rather astonishing facts supporting the motion to amend
in Olson stand in stark contrast to the allegations in the Proposed Second Amended
Complaint here. This case obviously lacks the presence of previous lawsuits brought
against the manufacturer for essentially the same type of injury alleged in the Sees’
complaint. There are no allegations here that Swagelok or San Diego Valve were aware
that their hoses in the field were likely to be under-inserted the way that the
manufacturer in Olson knew that its widely distributed product was extremely
flammable. And the plaintiffs have not alleged facts supporting an inference that
Swagelok and San Diego Valve essentially sought to maintain economic advantage in the
market by misleading end-users into thinking their hoses were not prone to do the
exact thing that prior incidents and testing revealed was likely to occur. The plaintiffs
may wish their case were more like Olson for the purpose of putting punitive damages
on the table, but the allegations in the proposed amended pleading simply do not
support the comparison.
III.
Order
Based on the discussion above, the Court concludes that the Sees’ proposed
punitive damages claim is futile because the allegations in the Proposed Second
Amended Complaint do not show that Swagelok or San Diego Valve engaged in conduct
12
showing a deliberate disregard for the rights or safety of others. Accordingly, IT IS
HEREBY ORDERED THAT the plaintiffs’ Motion to Amend the Complaint to Add Claims
for Punitive Damages [ECF No. 139] is DENIED.
Date: June 6, 2019
s/Katherine Menendez
Katherine Menendez
United States Magistrate Judge
13
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