Rigdon v. Flowserve Corp.

MICHELLE RIGDON, individually, and as Widow and Next of Kin of GREG RIGDON, deceased, Plaintiff, v. FLOWSERVE CORPORATION, FLOWSERVE US, INC., CVR ENERGY, INC., CVR REFINING, LP,and VIBESERV CORPORATION, Defendants.

Case No. 16-CV-81-GKF-FHM

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA

July 17, 2017

OPINION AND ORDER

Before the court is the Motion for Summary Judgment [Doc. No. 179] of defendants CVR Energy, Inc. and CVR Refining, LP. For the reasons set forth below, the motion is granted.

I. Background

This dispute arises from an explosion at an oil refinery in Coffeyville, Kansas on July 29, 2014. As a result of that explosion, one refinery worker was killed, and three others were severely burned. The refinery—owned by Coffeyville Resources Refining & Marketing, LLC ("CRRM")—is an operating subsidiary of CVR Refining and indirectly owned subsidiary of CVR Energy (collectively, "CVR"). [Doc. No. 180, p. 12, ¶ 7] (noting that "CVR Energy owns 66% of CVR Refining" and "CVR Refining owns 100% of CRRM"). On December 31, 2012, CVR executed a Services Agreement to provide subsidiaries—including CRRM—certain services, including safety advice and asset management. [Doc. No. 108-7, p. 31].

Plaintiff previously moved for partial summary judgment on grounds that the Services Agreement obligated CVR to provide a safe working environment for CRRM employees. Specifically, plaintiff argued that CVR assumed responsibility for the operation and safety of P- 2217, a pump whose seal failure triggered the explosion in this case. The court denied that motion on March 23, 2017. Rigdon v. Flowserve Corp., No. 16-CV-81-GKF-FHM, 2017 WL 1100904 (N.D. Okla. Mar. 23, 2017). It held that "genuine issues of material fact exist[ed] as to: (1) whether the parties intended the Services Agreement as a safety services contract or cost-allocation mechanism; and (2) if a safety services contract, the scope and nature of the duties owed by [CVR] to CRRM employees." Id. at *4. CVR addresses those questions now and moves for summary judgment. It argues that that the Agreement—as a cost-allocation arrangement for management services—does not establish a safety duty to CRRM employees, generally, or with respect to P-2217, specifically.

II. Standard of Review

Summary judgment shall be granted if "there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A dispute is "genuine" if the evidence permits a rational trier of fact to resolve the issue either way. Adler v. Wal-Mart Stores, Inc., 144 F.3d 644, 670 (10th Cir. 1998). A fact is "material" if it is essential to the outcome of the case. Id. On review, a court must examine the record in the light most favorable to the non-movant. Wolf v. Prudential Ins. Co. of Am., 50 F.3d 793, 796 (10th Cir. 1995). But the interpretation of a contract is a question of law that may properly be determined on a motion for summary judgment. See Cargill Meat Solutions Corp. v. Premium Beef Feeders, LLC, 168 F. Supp. 3d 1334, 1343 (D. Kan. 2016).

III. Analysis

Under Kansas law, an employer owes a non-delegable duty to provide employees a safe workplace. See Allen v. Shell Petroleum Corp., 68 P.2d 651, 657 (Kan. 1937); accord Howard v. TMW Enter., Inc., 1998 WL 404358, at *2 (D. Kan. July 8, 1998). To that end, a corporation isnot responsible for the working conditions of a subsidiary's employees solely on the basis of a parent-subsidiary relationship. See Smith v. Atl. Richfield Co., 814 F.2d 1481, 1488 (10th Cir. 1987); Miller v. NEP Grp., Inc., No. 15-CV9701-JAR, 2017 WL 2151843, at *8 (D. Kan. May 17, 2017).

An entity that voluntarily "undertakes to improve safety for [ ] workers," however, "becomes potentially liable under § 324A" of the Restatement (Second) of Torts. See Malkiewicz v. R.R. Donnelly & Sons Co., 703 F. Supp. 49, 51 (W.D. Tenn. 1989); Miller, 2017 WL 2151843, at *8; Schmeck v. City of Shawnee, 651 P.2d 585, 597 (Kan. 1982) (adopting § 324A as basis for liability). Such liability "might originate in a contractual duty." See First Nat'l Bank of Camden, Ark. v. Tracor, Inc., 851 F.2d 212, 214 (8th Cir. 1988); see also Ingram v. Howard-Needles-Tammen & Bergendoff, 672 P.2d 1083, 1088 (Kan. 1983); Johnson v. Bd. of Cty. Com'rs of Pratt Cty., 913 P.2d 119, 130 (Kan. 1996).

Here, CVR contracted to provide safety advice to CRRM. By its plain terms, the Services Agreement was made "for the benefit" of certain refining subsidiaries, including CRRM. [Doc. No. 108-7, p. 1]. Specifically, CVR agreed "to provide certain services necessary to operate the business conducted by the" refining subsidiaries, including "safety and environmental advice," "manage[ment]" of "day-to-day business and operations, including managing [ ] liquidity and capital resources," "compliance with applicable law," and asset management. [Id. at 1, 31]. Such services were required to conform to applicable laws and industry standards. [Id. at 5] ("The Services shall be provided in accordance with . . . applicable material Governmental Approvals and Laws . . . [and] applicable industry standards."). In return, CVR received $13.6 million in 2013 and 2014.

Plaintiff argues that, in the Services Agreement, CVR assumed a duty to provide a safe working environment for CRRM employees. Specifically, plaintiff contends CVR assumed responsibility for P-2217. CVR disputes that characterization. For the reasons set forth below, the court concludes neither the Service Agreement nor CVR's actions establish a basis for liability under § 324A of the Restatement (Second) of Torts.

First, the provision of safety advice does not give rise to a duty. To establish a duty under § 324A, "[n]either mere concern with nor minimal contact about safety matters" will suffice. See Muniz v. Nat'l Can Corp., 737 F.2d 145, 148 (1st Cir. 1984); Miller, 2017 WL 2151843, at *8. Rather, a parent company must take affirmative steps to provide safe working conditions at a subsidiary. See Muniz, 737 F.2d at 148. In other words, the test is not whether CVR had any control of CRRM's operations, but whether it controlled the injury-causing aspect of the refinery operation to such a degree that it directed how that activity should or should not be performed. See Wayts v. Peter Kiewit Sons, Inc., 936 F.2d 584 (Table), at *2 (10th Cir. 1991) (unpublished); Loreda v. Solvay Am., Inc., 212 P.3d 614, 624 (Wyo. 2009).

For that reason, "[c]ase law precludes [an] inference of control by [a parent company] where it operated merely in an 'advisory' role." See Loreda, 212 P.3d at 625; Wayts, 936 F.2d 584 (Table), at *2. Non-binding terms like "advice" "are consistent with a parent/subsidiary relationship," and without more, do not give rise to an inference of direct control. Cf. Atl. Gas Light Co. v. UGI Util., Inc., No. 3:03-cv-614-J-20MMH, 2005 WL 5660476, at *9 (M.D. Fla. Mar. 22, 2005) (evaluating parent-subsidiary control in CERCLA context); see also Black's Law Dictionary 62 (9th ed. 2009) (defining "advice" as "[g]uidance by one person . . . to another"); Wayts, 936 F.2d 584 (Table), at *2. In short, the "retention of an advisory role is not sufficient to" impose liability under § 324A. See Wayts, 936 F.2d 584 (Table), at *2.

That rule makes functional sense. As an analytical matter, it is difficult to define the scope of § 324A liability in advisory contracts. That is to say, it is difficult to know, ex ante, what responsibilities such a contract imposes. Must advice be given on all safety matters, or only some? What differentiates matters that deserve attention from those that don't? Should an advisor monitor compliance with its safety recommendations? And what is the advisor's responsibility when advice is not followed? Hindsight is 20/20, and the Services Agreement requires CVR to be an advisor, not an oracle. Not everything that goes wrong can be laid at its feet. See Roe ex rel. Roe v. Dep't of Soc. & Rehab. Servs., 80 P.3d 1162, 1171 (Kan. Ct. App. 2004) (explaining that "Kansas courts have been slow to see an undertaking sufficient to create a duty"). That is especially so for non-delegable duties, like CRRM's workplace safety duty here. That is why Kansas requires plaintiff to show that CVR either gave advice that increased the risk of harm, assumed the operation, safety, and control of P-2217, or otherwise caused CRRM to neglect its safety operations. See Hoskinson v. High Gear Repair, Inc., 982 F. Supp. 2d 1210, 1223-25 (D. Kan. 2013); Deines v. Vermeer Mfg. Co., 752 F. Supp. 989, 993-97 (D. Kan. 1990).

Plaintiff has not made that showing here. Nothing in the record suggests CVR provided incompetent safety advice or instructed CRRM to disregard pump replacement recommendations. In fact, CVR seems to have been unaware of any safety issue with P-2217 at all. [Doc. No. 180-10, p. 3] (Swanberg Deposition) ("[Q.] [D]uring the entire time you were providing services to Coffeyville, you never reviewed, [and were] never involved in review of the 2010 Isom Unit PHA Revalidation? A. Not of this one specifically, no."); [Doc. No. 180-3, p. 6] (DeVelasco Deposition) ("[Q.] Did you find the slightest indication that any corporate employee in Sugar Land before the incident, spent a single minute reviewing the 2010 Process Hazard Analysis report? A. I don't have any indication of that."); [Doc. No. 180-7] (HaugenDeposition) ("Q. The particular revalidation completed in 2010, did you review the final report? A. No.").

To be sure, CVR offered strategic direction, developed general safety policies, offered technical support, and monitored compliance with general OSHA safety regulations. But "[p]roviding general safety [support] is insufficient to show that a parent corporation affirmatively assumed [a] responsibility" under § 324A. See Miller, 2017 WL 2151843, at *8. That is true even though CVR "advised [CRRM] regarding safety matters [and] injury prevention," "prepared a safety manual," and "monit...