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Olin Corp. v. E.I. DuPont De Nemours and Co.

February 21, 2007

OLIN CORPORATION, PLAINTIFF,
v.
E.I. DUPONT DE NEMOURS AND COMPANY, AND NATIONWIDE BOILER, INC. DEFENDANTS.



The opinion of the court was delivered by: William M. Skretny United States District Judge

DECISION AND ORDER

I. INTRODUCTION

Plaintiff Olin Corporation ("Olin") commenced this action on February 14, 2005, and filed an Amended Complaint on March 24, 2005, asserting contract and negligence claims against Defendant E.I. DuPont Nemours and Company ("DuPont") and a breach of contract claim against Defendant Nationwide Boiler, Inc. ("Nationwide"). On April 8, 2005, DuPont moved to dismiss the Amended Complaint against it and to compel arbitration, which motion was granted in its entirety on March 27, 2006. Thus, only Olin's breach of contract claim against Nationwide remains.

Presently before this Court is Nationwide's Motion for Summary Judgment dismissing the Amended Complaint against it. (Docket No. 39.)*fn1 For the reasons stated below, Nationwide's Motion for Summary Judgment is granted.

II. BACKGROUND

From 1984 to 1997, Olin and former-Defendant DuPont operated a facility for the production of caustic soda, chlorine, hydrogen, hydrochloric acid and certain by-products ("Chlor Alkali Facility") as a New York general partnership. (Am. Compl. ¶¶ 7-9; Affidavit of Hassan Arabghani, sworn to May 17, 2005 ("Arabghani Aff."), ¶ 5.) The Chlor Alkali Facility was located on land owned by DuPont in Niagara Falls, New York. (Am. Compl. ¶¶ 6, 8.) On February 7, 1997, DuPont conveyed its interest in the Chlor Alkali Facility to Olin. (Arabghani Aff. ¶ 5.)

In conjunction with that conveyance, DuPont and Olin entered into an agreement dated February 7, 1997, pursuant to which DuPont sold to Olin certain services it needed for the continued operation of the Chlor Alkali Facility on DuPont's property.*fn2 (Id. ¶ 6.) One of the services DuPont agreed to provide was steam from its boiler house. (Id. ¶ 7.) At that time, the DuPont boiler house was providing steam to DuPont's own Terathane production operation and its Reactive Metals business ("RMS"), as well as to the Chlor Alkali Facility. (Docket No. 52, Attach. 4 at 30:19-23.) Terathane production consumed about 55 percent of DuPont's steam supply, RMS consumed approximately 10 percent, and Olin utilized the remaining 35 percent, with usage at the Chlor Alkali Facility accounting for approximately 30 percent of the total steam supply. (Id. 30:19-23 and 31:5-12.)

In April 2002, DuPont announced that it would close its Terathane plant. (Arabghani Aff. ¶ 9.) Because DuPont intended to demolish both its Terathane plant and its boiler house, it began looking into leasing a package boiler system to supply steam to the remaining operations at the Niagara Falls site.*fn3 (Docket No. 52, Attach. 4 at 48:4-49:8.) DuPont prepared the specifications for the boiler system based on its assessment of usage at the site. (Id. at 50:2-20.) Pursuant to a rental agreement fully executed on April 25, 2002, DuPont leased from Nationwide two trailer-mounted boilers and two deaerating boiler feedwater systems. (Declaration of Michael Medina, dated May 19, 2006 ("Medina Decl."), ¶ 18, Ex. K.) In addition to the equipment, Nationwide was to provide to DuPont one set of operation manuals, one site visit for startup and operator training, and bimonthly site visits for maintenance and operation review. (Id. Ex. K.)

Two alterations were made to the DuPont-Nationwide rental agreement within six months after its execution. The first, dated April 29, 2002, just four days after the underlying agreement was fully executed, specified a shipping address for the leased equipment. The second, dated September 9, 2002, increased the equipment rental rate for the remainder of the agreement's term to amortize the cost to DuPont of Nationwide's removing and replacing a fuel train and re-tuning a boiler. (Docket No. 52, Ex. B, Ex. C at 55:13-57:1.)

III. DISCUSSION

In its Amended Complaint, Olin alleges that, pursuant to its services agreement with DuPont, DuPont was obligated to provide reliable uninterrupted steam in sufficient quantity and at sufficient pressure so as not to delay or interfere with Olin's Chlor Alkali Facility. Olin further alleges that DuPont gave it an implied warranty of merchantability relative to the steam supplied as well as an implied warranty of the steam's fitness for Olin's purpose of operating its Chlor Alkali Facility. (Am. Compl., ¶¶ 13, 21, 25, 30.)

According to Olin, DuPont did not meet its obligation to provide uninterrupted steam sufficient for Olin's purpose. Specifically, there were 66 steam service interruptions over the 10-month period from June 2002 to March 2003 that impacted the quality and operability of the Chlor Alkali Facility. (Id., ¶ 16.)

As for the DuPont-Nationwide rental agreement, Olin alleges that Nationwide's boiler system was defective and failed to operate properly, and that Nationwide failed to provide satisfactory contract services to DuPont relative to the operation and maintenance of the boilers. (Id., ¶¶ 15, 17, 41, 42.) According to Olin, the DuPont-Nationwide rental agreement was made for Olin's sole and direct benefit for the purpose of providing the steam requirements at its Chlor Alkali Facility. (Am. Compl., ¶¶ 38-40.) In short, Olin urges that it is the third party beneficiary of that agreement and that its lost production directly resulted from Nationwide's alleged breach.

Nationwide seeks summary judgment on the ground that, as a matter of law, Olin is not an intended beneficiary of its rental agreement with DuPont. In their respective Local Rule 56.1 Statements, Nationwide and Olin agree that the DuPont-Nationwide rental agreement executed on April 25, 2002 does not mention Olin, does not specify the precise location for installation of the leased boilers, does not contain an express intent to benefit a third party, and does not state that Olin is to be the sole and direct beneficiary of the rental agreement. (Docket Nos. 40, ¶¶ 3-6 and Ex. K; 51, ¶¶ 3-6.) It is also undisputed that Olin is not named in any proposal or other written communication between DuPont and Nationwide made prior to the execution of the rental agreement on April 25, 2002.*fn4 (Docket Nos. 40, ¶ 7 and Exs. A through J; 51, ¶ 7.) Finally, the parties agree that it was not until sometime after April 25, 2002 that Nationwide learned DuPont would be using the leased boilers to, among other things, supply steam to Olin's Chlor Alkali ...


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