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O'Brien Congeneration, Inc. v. Automatic Sprinkler Corporation America

June 24, 2003

O'BRIEN (NEWARK) COGENERATION, INC., PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
v.
AUTOMATIC SPRINKLER CORPORATION OF AMERICA, DEFENDANT-RESPONDENT/ CROSS-APPELLANT, AND HAWKER-SIDDELEY POWER ENGINEERING, INC., HAWKER-SIDDELEY GROUP, PUBLIC LIMITED COMPANY (PLC), BTR, PLC F/K/A BTR DUNLOP, PLC, AS SUCCESSOR IN INTEREST TO HAWKER-SIDDELEY POWER ENGINEERING, INC., AND HAWKER SIDDELEY GROUP, PLC, INVENSYS INC., AS SUCCESSOR IN INTEREST TO BTR, PLC, F/K/A BTR DUNLOP, PLC, JOHN BROWN POWER LIMITED, JOHN BROWN PLC, GEC ALSTHOM INTERNATIONAL, INC., AND/OR GEC ALSTHOM ELECTRO MECHANIQUE, KLEBER INDUSTRIES, BELMONT CONSTRUCTORS, INC., AND AGMEN, INC., DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-3128-95.

Before Judges Skillman, Cuff and Lefelt.

The opinion of the court was delivered by: Lefelt, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 6, 2003

Plaintiff O'Brien (Newark) Cogeneration, Inc. was the owner of a cogeneration plant which caught fire in 1992 causing the death of three employees and significant property damage. Plaintiff appeals from an order dismissing its suit seeking recovery for the plant's repair costs, expedited labor costs, and lost profits from defendant Automatic Sprinkler Corporation of America (ASCOA). We affirm the trial court's dismissal of plaintiff's claim for repair costs, but reverse the dismissal of plaintiff's lost profits and expedited labor cost claims and remand for trial on those claims.

I.

Between 1988 and 1990, at a cost of $40,952,000, plaintiff built a 90-by-161-foot multi-story cogeneration plant in Newark, which was expected to last thirty to fifty years. To build this plant, plaintiff hired various engineers and construction companies including ASCOA and GEC Alsthom International, Inc. and GEC Electro Mechanique (collectively referred to as Alsthom). Alsthom manufactured and supplied steam turbine equipment and related piping, expansion joints and other equipment for the plant. ASCOA was to provide a fire protection and detection system for the plant, including"an automatic firewater deluge system for the lube oil unit, hydraulic unit and gear box for the... Alsthom... steam turbine/generator." Before beginning operations in November 1990, plaintiff hired defendant John Brown, a professional operation company, to run and maintain the plant.

On December 25, 1992, an oil fire began in the plant. According to the fire investigator, a rubber expansion joint in the steam turbine's lube oil system, which had been manufactured by Alsthom, separated. A fine mist of heated oil sprayed into the air and then flowed onto the floor beneath a 600 square foot table-like concrete pedestal that supported the steam turbine. Within a short time, as the joint continued to break down, the mist turned into a steady flow of oil which fell directly onto the floor below the pedestal. This oil became combustible as it mixed with the air, and subsequently ignited in a low order explosion at the joint which set the oil-slicked floor on fire, damaged an aluminum door and blew in the windows in the nearby control room, coating everything inside with oil.

No sprinklers had been installed under the pedestal even though that area housed the lube oil pump and numerous supply and return lines, and even though the most common hazard in a power generating plant is lube oil leakage. Plaintiff contended that because of the absence of sprinklers or a deluge water spray system that could discharge a high volume of water necessary to put out an oil fire, the fire under the approximately thirty-by-twenty-foot pedestal was not contained and progressed through the plant as the burning oil flowed away and down toward a slightly depressed corner of the plant.

To make matters worse, five days before the fire, one of the roof sprinkler heads had discharged above a gas turbine exhaust duct. To prevent flooding and icing in the plant, John Brown employees closed the water supply valve, which also eliminated the water supply to the remainder of the closed head roof sprinkler system, including that portion above the steam turbine where the fire started, at the opposite end of the plant. Repair of the sprinkler head and restoration of the water supply to the roof sprinkler system was not accomplished in the five days before the fire. Thus, these sprinklers could not activate to contain the fire.

Several battalions from the Newark Fire Department were needed to get the fire under control. Notwithstanding their efforts, three Brown employees inside the plant lost their lives and the plant sustained significant damage. Numerous pieces of equipment beneath the steam turbine had been destroyed. Virtually all of the thirty miles of cabling and wiring in the plant was beyond repair. Much of the roof and some of its support beams needed replacement. The equipment contained in the water purification station was a total loss. Numerous pieces of office equipment had been destroyed and everything in the plant had been coated with an oily soot residue.

According to plaintiff's accountant, the total cost to repair the plant was $26,453,936. Utilizing historical data and taking into account saved operating expenses, the accountant determined that plaintiff had also sustained $9,248,850 in lost profits during the time it took to repair the plant.

As part of the total repair costs, plaintiff incurred $5,359,000 in additional labor costs for expediting the repairs, which according to plaintiff were necessary to avoid breaching plaintiff's long-term power purchase agreement with its sole electric customer, Jersey Central Power & Light (JCP&L). Under this agreement, JCP&L agreed to buy from plaintiff 1248 megawatts of electricity per day over twenty five years. This agreement provided that a breach would occur if"the Seller fails to deliver Electricity for 240 out of 365 consecutive days... for any reason other than force majeure." The agreement defined force majeure as"unforeseeable causes beyond the reasonable control of and without the fault or negligence of [plaintiff] including... fire... which by exercise of due foresight such party could not reasonably have been expected to avoid, and which by the exercise of due diligence it is unable to overcome." When JCP&L failed to confirm that it believed the fire to be a force majeure under the contract, plaintiff expedited the repairs and succeeded in recommencing the generation of electricity in less than 240 days.

Plaintiff began suit against several defendants including John Brown, Alsthom, and ASCOA to recover its repair and labor costs and lost profits. Plaintiff settled with most defendants, but proceeded to trial against Alsthom and ASCOA. After plaintiff rested its case, the trial judge dismissed plaintiff's entire complaint against ASCOA because the judge concluded that plaintiff was required to apportion its damages caused by ASOCA's failure to provide sprinklers under the turbine pedestal. The judge also ruled that the additional labor charges were unreasonably incurred and she removed from consideration by the jury plaintiff's labor cost claim against Alsthom. During the presentation of the defense case, plaintiff settled its dispute with Alsthom. Plaintiff then appealed from the trial court's dismissal of its suit against ASCOA.

On appeal plaintiff argues that the trial judge erred by (1) dismissing the complaint against ASCOA at the close of plaintiff's case for failure to apportion damages among the defendants, (2) precluding expert testimony regarding the reasonableness of the property repairs, and (3) ...


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