GATX Corp. v. Ga. Power Co.

674 F.Supp.3d 1322

GATX CORPORATION, Plaintiff, v. GEORGIA POWER COMPANY, Defendant.

CIVIL ACTION NO. 1:19-cv-4790-AT

United States District Court, N.D. Georgia, Atlanta Division

Signed May 5, 2023

Thomas Matthew Bailey, Katie Lamb Balthrop, Thomas Edward Reilly, Troutman Pepper Hamilton Sanders LLP, Atlanta, GA, for Defendant.

James William Cobb, Timothy Brandon Waddell, Caplan Cobb LLC, Atlanta, GA, John C. Gekas, Michael J. Pollock, Elizabeth A. Thompson, Saul Ewing Arnstein & Lehr, LLP, Chicago, IL, for Plaintiff.

ORDER

Amy Totenberg, United States District Judge

It is never a good thing for an item you own to be ripping at the seams, particularly if the item is intended to carry something. This breach of contract case involves railcars that Plaintiff contends will "unzip" at the seams and cause a commodity spill or derailment if they are not rebodied. This matter is before the Court on cross-Motions for Summary Judgment [Docs. 75, 76]. For the following reasons, Plaintiff's and Defendant's Motions for Summary Judgment are both DENIED.

I. Background¹

Before the Court fast tracks into the background of this matter, it finds it beneficial to provide a list of the parties, companies, and individuals relevant to the matter.

GATX:

GATX Corporation ("GATX") is the Plaintiff in this case.

Larry Bank

Mr. Bank is GATX's Manager of Steel Inspection. (Bank Depo., Doc. 79 atECF 38:1-12.)

Gabe Buzas

Mr. Buzas is GATX's International Senior Equipment Engineer. (Buzas Depo., Doc. 97 atECF 32:8-10.)

Tyler Dickman

Mr. Dickman is GATX's Director of Fleet Portfolio Management. (Dickman Depo., Doc. 93 atECF 18:19-21.)

Jay Leadingham

Mr. Leadingham is GATX's Vice President of Coal and Steel. (Leadingham Depo., Doc. 85 atECF 17:23-25.)

Philip Daum

Through counsel, GATX retained Mr. Daum of Engineering Systems, Inc. ("ESi") to investigate the corrosion at issue in this litigation. Mr. Daum is GATX's expert. (Daum Report, Doc. 84-3 at 5.)

David Horowitz

Mr. Horowitz is GATX's 30(b)(6) representative. He is the Vice President and Executive Director of Fleet Portfolio

   Management and an engineer by trade. (Horowitz Depo., Doc. 94 atECF 27:5-12.) Georgia Power Company  Georgia Power Company ("GPC") is the Defendant in this case.  Harry Mullins  Mr. Mullins was a GPC Railcar Specialist prior to his retirement. (Mullins Depo., Doc. 86 at 13:13-16.)  Michael Dunn  Mr. Dunn is one of GPC's 30(b)(6) representatives. He acts as the Railcar Maintenance Manager at Southern Company Services. (Dunn Depo., Doc. 100 atECF 15:15-16.)  Christine Lewter  Ms. Lewter is one of GPC's 30(b)(6) representatives. She acts as the Coal Logistics Manager at Southern Company Services. (Lewter Depo., Doc. 96 at 15:2-4.)  Steve Pitts  Mr. Pitts was employed by Southern Company Services in limestone and fuel oil procurement prior to his retirement. (Pitts Depo., Doc. 87 at 13:2-13.)  Cheryl Gulledge  Ms. Gulledge was a Senior Coal Procurement Agent for Southern Company Services at the time of the issues giving rise to this litigation. (Gulledge Depo., Doc. 81 at 11:7-16.)  William M. Kane, III, Ph.D., P.E.  Through counsel, GPC retained Mr. Kane and Mark Viz of Exponent, Inc. ("Exponent") to investigate problems related to the condition of the Railcars at issue in this litigation. (DSOAF, Doc. 109-2 ¶ 17; Pl. Resp. to DSOAF, Doc. 116 ¶ 17; Viz-Kane Report, Doc. 120-10 at 3.)  Mark J. Viz, Ph.D., P.E.  Through counsel, GPC retained Mr. Viz and William Kane of Exponent to investigate problems related to the condition of the Railcars at issue in this litigation. (DSOAF, Doc. 109-2 ¶ 17; Pl. Resp. to DSOAF, Doc. 116 ¶ 17; Viz-Kane Report, Doc. 120-10 at 3.)  National Steel Car  National Steel Car is the company that was chosen by GPC to build the Railcars at issue in this litigation. 

Progressive Rail

Progressive Rail is a third-party shop that stored the Railcars at issue in this litigation prior to their inspections.

Finite Element Analysis

A finite element analysis ("FEA") is a computer modeling analysis that tests the mechanical and structural integrity of railcars and indicates whether and under what condition railcars can be put back into service. (Buzas Depo., Doc. 97 atECF 206:17-207:17, 208:15-209:10, 299:22-301:9; Viz-Kane Report, Doc. 120-10 at 25.)

Fatigue Analysis

A fatigue analysis evaluates the remaining life of a railcar generally and the remaining life of a railcar with certain reinforcements. (See Viz-Kane Report, Doc. 120-10 at 46-47.)

A. The Master Lease Agreement

On March 8, 2004, Plaintiff GATX Corporation ("GATX") and Defendant Georgia Power Company ("GPC") entered into a Railcar Master Net Lease Agreement (the "Master Lease").² (Plaintiff's Statement of Material Facts ("PSOF"), Doc. 76-2 ¶ 1; Def. Resp. to PSOF, Doc. 109-2 ¶ 1; Master Lease, Doc. 76-3.) GATX drafted the Master Lease. (Def.'s Statement of Additional Material Facts ("DSOAF"), Doc. 109-2³ ¶ 2; Pl. Resp. to DSOAF, Doc. 116⁴ ¶ 2.) However, the parties conferred regarding the lease terms. (See Doc. 77-8 at 2; Doc. 75-35 at 2.)

Under the Master Lease, GATX acted as the lessor of certain railcars, and GPC acted as the lessee. (See Master Lease, Doc. 76-3.) The Master Lease includes the following relevant provisions:

2.5 Net Leases. "Lessee shall have no right to . . . be released, relieved or discharged from the obligation or liability to make all payments due thereunder for any reason whatsoever, including but not limited to the following: . . . any defect in, or damage to, or loss or destruction of, any Car from any cause."

3.1 Disclaimer. "THE CARS ACCEPTED BY LESSEE UNDER EACH LEASE ARE ACCEPTED 'AS IS, WHERE IS.' LESSOR SHALL NOT BY VIRTUE OF HAVING LEASED THE CARS BE DEEMED TO HAVE MADE ANY REPRESENTATIONS OR WARRANTIES TO LESSEE, WHETHER WRITTEN, ORAL OR IMPLIED. LESSEE ACKNOWLEDGES AND AGREES THAT: (A) LESSOR IS NOT A MANUFACTURER OF OR A DEALER IN PROPERTY OF SUCH KIND AS THE CARS; (B) LESSOR HAS NOT MADE AND DOES NOT HEREBY MAKE, ANY

REPRESENTATION, WARRANTY OR COVENANT WITH RESPECT TO THE DESIGN, OPERATION, MERCHANTABILITY, DESCRIPTION, CONDITION, QUALITY OR DURABILITY OF THE CARS, THEIR SUITABILITY FOR THE PARTICULAR PURPOSES AND USES OF LESSEE."

6.1 Maintenance. "Lessee, at its sole cost and expense, shall maintain each of the Cars in good operating condition, normal wear and tear excepted, with any broken, damaged, or missing parts replaced, substantially in the same condition as when received by Lessee."

8.2 Return Condition. "Lessee shall return the Cars to Lessor . . . in the same operating condition, complete with all parts (and with all parts working and not broken), equipment, and accessories as when initially delivered to Lessee, ordinary wear and tear excepted" and "in full compliance with Section 6 hereof."

9.1 Risk of Loss; Damages. "(i) Lessee shall bear all risk of, and shall be solely responsible for, any loss, theft, governmental seizure (if not caused by the action or inaction of Lessor), appropriation, destruction and damage of or to each Car, however caused, and all physical or other damage to persons or property caused by each Car or Lessee's (or any sublessee's or other party's) use, maintenance operation or possession thereof, and (ii) Lessee shall bear all costs, charges and expenses related to each Car, unless otherwise expressly provided in the relevant Lease."

(See id.)

On October 1, 2007, the parties executed Supplement No. 2 to the Master Lease, which provided for the lease of seventy-five brand-new open top hopper railcars (the "Supplement No. 2 Cars"). (PSOF, Doc. 76-2 ¶ 2; Def. Resp. to PSOF, Doc. 109-2 ¶ 2; Master Lease Supplement No. 2, Doc. 76-4.) That same day, the parties also executed Supplement No. 3 to the Master Lease, which provided for the lease of eighty-five brand-new open top hopper railcars (the "Supplement No. 3 Cars"). (PSOF, Doc. 76-2 ¶ 3; Def. Resp. to PSOF, Doc. 109-2 ¶ 3; Master Lease Supplement No. 3, Doc. 76-5.)

GPC leased the brand-new Supplement No. 2 Cars and Supplement No. 3 Cars (collectively, the "Railcars") for the purpose of transporting limestone and gypsum to and from its coal-powered electricity plants. (PSOF, Doc. 76-2 ¶ 8; Def. Resp. to PSOF, Doc. 109-2 ¶ 8.) GATX was aware that the Railcars would be used for this purpose. (See 2014 Contract Renewals, Doc. 75-24 at 44-51.) However, GATX did not select the type of railcar to lease to GPC for this purpose. (Id. ¶ 10.) Instead, GPC issued its own request for proposals ("RFP"), and through the RFP process, selected National Steel Car to build the Supplement No. 2 and Supplement No. 3 Cars. (Id.) GATX then purchased the Railcars - selected by GPC and built by National Steel Car - and leased them to GPC. (Id.) Still, GATX did not make any representations or warranties regarding the Railcars and whether they could be used for GPC's purposes. (Id. ¶ 58.) Indeed, in the parties' Master Lease, GATX affirmatively disclaimed any warranty regarding the Railcars' "suitability for the particular purposes and uses of [GPC]" and regarding the Railcars' "condition, quality, or durability." (Master Lease, Doc. 76-3 at 4.)

B. The Return of the Railcars

1. The Supplement No. 2 Cars

In November 2017, GPC returned the Supplement No. 2 Cars to GATX after having used them to carry gypsum and limestone for a decade.⁵ (PSOF, Doc. 76-2 ¶ 11; Def. Resp. to PSOF, Doc. 109-2 ¶ 11; DSOAF, Doc. 109-2 ¶ 4; Pl. Resp. to DSOAF, Doc. 116 ¶ 4.) On December 18, 2017, Larry Bank of GATX conducted a preliminary inspection of seventy-two of the seventy-five Supplement No. 2 Cars to determine their condition at the end of the parties' Master Lease.⁶ (See 3/5/2018 Inspection Report, Doc. 76-9 at 4.) During his preliminary inspection, Mr. Bank inspected several Cars at random and found them to have "corrosion damage present to the slope sheets, hoppers, partition sheets, center sill hoods and outlet doors." (Id.) He then concluded that he would have to conduct further testing on the...