Arcadian Corp. v. Olin Corp.

824 So. 2d 396, 2002 WL 922168
CourtLouisiana Court of Appeal
DecidedMay 8, 2002
Docket01-1060
StatusPublished
Cited by8 cases

This text of 824 So. 2d 396 (Arcadian Corp. v. Olin Corp.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arcadian Corp. v. Olin Corp., 824 So. 2d 396, 2002 WL 922168 (La. Ct. App. 2002).

Opinion

824 So.2d 396 (2002)

ARCADIAN CORPORATION, et al.,
v.
OLIN CORPORATION, et al. (Industrial Risk Insurers and Reliance National Insurance Company).

No. 01-1060.

Court of Appeal of Louisiana, Third Circuit.

May 8, 2002.
Rehearing Denied June 19, 2002.

*397 Caleb H. Didriksen, III, Didriksen Law Firm, New Orleans, LA, for Lloyds, London, and AssicurazioniGenerali, S.p.A., Lexington Insurance Company.

Thomas M. Bergstedt, Bergstedt & Mount, Lake Charles, LA, Annette Natalie Peltier, Bergstedt & Mount, Lake Charles, LA, Joel K. Goldman, Bruce Moothart, Husch & Eppenberger, Kansas City, MO, for Defendant/Appellee Olin Corporation.

Huntington Blair Downer, Jr., Houma, LA, for Insurance Company of North America.

R. Joshua Koch, Jr., Spyridon, Koch & Palermo, Metairie, LA, James R. Sutterfield, Hoffman, Sutterfield, et al, New Orleans, LA, Stephen T. Perkins, Cavalier Telephone, LLC, Richmond, VA, Ralph D. McBride, Ileana M. Blanco, Bracewell & Patterson, Richard Sanders, Houston, TX, *398 for Arcadian Partners, L.P., Arcadian Corporation, Arcadian Fertilizer, L.P.

Joseph J. Lowenthal, Jr., Stewart Earl Niles, Jr., Jones, Walker, Waechter, Poitevent, Carrere & Denegre LLP, New Orleans, LA, for Schoeller-Bleckmann Gesellschaftm.b.H.

Dermot S. McGlinchey, Colvin Gamble Norwood Jr., McGlinchey, Stafford, PLLC, New Orleans, LA, for Stamicarbon NV and DSM NV.

Terrence Charles McRea, Zelle, Hofmann, etc., Dallas, TX, for Plaintiff/Appellant Gan Minster Ins. Co., Ltd., Phoenix Assurance Co., Zurich Insurance Co., Starr Technical Risks Agency of Texas, Assurances Generales de France IART, Fireman's Fund Insurance Co., Riunione, Adriatica Di Sicurta, Industrial Risk Insurers/RelianceNational Ins. Co., Commonwealth Ins. Co., The Home Ins. Co.

Court composed of JOHN D. SAUNDERS, OSWALD A. DECUIR, and GLENN B. GREMILLION, Judges.

GLENN B. GREMILLION, Judge.

The plaintiffs, Industrial Risk Insurers and Reliance National Insurance Company (Industrial Risk), appeal the jury's verdict finding no liability on the part of the defendant, Olin Corporation, with regard to the sale and subsequent failure of a urea reactor at Arcadian Corporation's chemical plant in Westlake, Louisiana. For the following reasons, we affirm.

FACTS

This suit is the last of many arising from the catastrophic failure of a urea reactor owned by Arcadian. In 1966, Olin began producing urea fertilizer at its complex in Westlake. On August 17, 1989, Olin sold its ammonia and urea plants to Fertilizer Acquisition Company III(FAC), Arcadian's predecessor in interest.[1]

Included as an asset in the Asset Purchase Agreement was a multi-layer, high pressure vessel known as the R-2 reactor. The reactor, which was approximately ninety feet tall and six feet in diameter, was comprised of a stainless steel liner surrounded by fourteen layers of carbon steel. It was constructed in four twenty-foot sections joined together by five girth welds, which were designated C-1, C-3, C-5, C-7, and C-9. Each section consisted of a one-half inch stainless steel inner layer, surrounded by a dummy layer of carbon steel, and then thirteen additional layers of carbon steel. Heads were welded on at the top and bottom of the vessel. Inside the vessel, eight sieve trays were attached to the vessel liner via welded tray clips. The trays were divided into three sections. The two outer sections were connected to the liner, while the inner section or the "man-way" section was capable of being removed so that inspections or repairs could be carried out inside the reactor. Each tray attached to the vessel by ten tray clips welded to the liner wall.

The vessel also contained a leak detection system which was designed to alert personnel in case a girth or liner weld failed. The system consisted of twentyfour holes drilled through the fourteen layers of carbon steel up to the space between the dummy layer and the stainless steel liner. Stainless steel tubing screwed into the weep hole also terminated at this space. Eighteen weep holes and tubes were located in pairs of three above and below the girth welds, one hundred and twenty degrees apart, at C-3, C-5, and C-7, *399 and three were located above C-1 and below C-9, for a total of twenty-four weep holes.

Olin produced urea fertilizer through a process designed by Stamicarbon BV, a Dutch company. The process required the injection of gaseous carbon dioxide, liquid ammonia, and carbamate[2] into the bottom of the reactor at 3,000 pounds of pressure at 374°F, which formed ammonium carbamate and then urea and water with the addition of heat. Since ammonium carbamate is very corrosive to carbon steel, the stainless steel liner prevented it from reaching the carbon steel layers. Although stainless steel is less susceptible than carbon steel to corrosion, it still corrodes upon contact with ammonium carbamate. However, Stamicarbon patented a process called passivation through which air is injected into the reactor along with the carbon dioxide, which causes oxygen to bath the walls of the reactor forming a layer of chromium or nickel oxide. As long as oxygen is continuously injected into the vessel, the chromium or nickel oxide layer will form to protect the stainless steel layer from corrosion.

Prior to FAC's purchase, Olin mothballed the urea plant for approximately one year, beginning in July 1987. It reactivated the plant in May 1988, under the direction of Baldwin Fruge. Approximately one month later, Dana Baham, an engineer with Olin, became the superintendent of the urea plant. On June 23, 1989, a leak occurred in the reactor at C-5, as evidenced by a twenty-foot stream of a brownish looking mixture of gas and liquid spewing out of a leak detection tube at 5. The reactor was shut down and Schoeller Bleckmann was hired to inspect it. Once the thickness of the liner was measured, Schoeller-Bleckmann determined that the liner was capable of being repaired. Olin carried out the repairs using plans provided by Schoeller-Bleckmann and its own welders. Johann Pesak, a welding inspector for Schoeller-Bleckmann, supervised the welding.

The repairs consisted of grinding down and replacing all of the girth and longitudinal liner welds, removing all of the tray clips and grinding down the welds attaching them to the liner wall, and performing dye penetrate tests to locate cracks and thinned areas of the liner. Once these areas were located, patches of the stainless steel liner were affected at C-3, C-5, and C-7, and all eighty tray clips were rewelded to the liner wall using a full penetration weld. It was important that there be no voids or crevices in the welds because process fluid could enter the weld through a void, taking it out of the reach of passivation and allowing corrosion to proceed. The final report by Schoeller-Bleckmann stated that the next inspection of the reactor should be made after one year at the latest.

On August 17, 1989, FAC purchased Olin's ammonia and urea plants via the Asset Purchase Agreement. In this agreement,[3] Olin expressly warrantied that:

[T]he Assets have been properly maintained and are in satisfactory operating condition (except for ordinary wear and tear which in the aggregate would not have an adverse effect on the Business) and are capable of being used in the Business without present need for repair or replacement except in the ordinary course of business and consistent with prior practice.

*400 The Asset Purchase Agreement further provided:

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824 So. 2d 396, 2002 WL 922168, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arcadian-corp-v-olin-corp-lactapp-2002.