Seventh Circuit finds ConAgra not liable for grain bin explosion; tosses its share of $180M jury award

By Bethany Krajelis | Sep 10, 2014

Overturning its share of a nearly $180 million jury award, a federal appeals panel on Tuesday found ConAgra Foods Inc. not liable for a 2010 explosion in a southern Illinois grain elevator because it had hired a self-proclaimed expert to deal with smoldering bin before it blew up and injured three men.

In its 10-page opinion, the Seventh Circuit Court of Appeals said U.S. District Judge Michael Reagan of Illinois’ Southern District should have granted ConAgra's motion for judgment as a matter of law and as such, reversed the judgment against the Nebraska-based packaged foods company.

The panel also reversed the punitive damages award against West Side Salvage, the contractor hired to deal with ConAgra’s hot bin, while upholding the compensatory damages against it; affirmed a contract judgment against West Side; and remanded the matter for a determination on how its rulings affect indemnification or contribution.

ConAgra hired West Side, who then hired A&J Bin Cleaning to help with the job, after it had discovered a burning smell coming from one of the bins at its grain facility in Chester, Ill. in March 2010. Following negotiations and delays, work on the bin began April 20.

On April 27, after detecting smoke, West Side’s foreman told ConAgra to call the fire department and then sent A&J employee John Jentz and West Side employee Justin Becker back in the bin to retrieve tools that may have been blocking access.

While they were in there, the explosion occurred, severely injuring them and injuring Robert Schmidt, an A&J employee who was in a nearby elevator.

The three men, as well as one of their wives, sued ConAgra in southern Illinois’ federal court, claiming it knew the bin was dangerous, but didn’t get it fixed in a timely manner because it was trying to find a cheaper contractor than West Side.

ConAgra then filed cross-claims for contribution against West Side, alleging it was the proximate cause of the plaintiffs’ injuries as its foreman sent two of the men back into the bin after it had been evacuated and before it exploded.

Following a 17-day trial, a jury awarded the plaintiffs nearly $180 million in compensatory and punitive damages against ConAgra and West Side. About $100 million of the total damages award was against ConAgra.

On appeal, ConAgra argued it shouldn’t be held liable for the plaintiffs’ injuries because it had hired West Side, a self-proclaimed expert in hot bins, to deal with its smoldering bin, making it liable.

Although it didn't contest liability to the three injured men, West Side accused ConAgra of failing to provide it with a safe place to work. It also argued it shouldn't be liable for the costs of repairing the grain facility because it never returned a signed contract, which included a promise to indemnify ConAgra for any damage caused by its negligence.

During arguments in October, both parties told the Seventh Circuit the damages awarded were excessive. ConAgra’s attorney said the punitive damages award in this case was believed to be the largest such award in Illinois history.

In his opinion, Judge Frank Easterbrook explained why he and Judges Ilana Diamond Rovner and Daniel Manion let ConAgra off the liability hook.

“Although the plaintiffs and West Side weakly contend that it did not know that C15 [the bin that later exploded] was a hot bin, the evidence overwhelmingly establishes that it did – indeed, it knew that this is why it had been hired—and no reasonable jury could have concluded otherwise,” Easterbrook wrote for the panel.

While the plaintiffs argued the risk of explosion may have been reduced had ConAgra hired West Side earlier, the appellate judges noted "no one contends that ConAgra failed to answer accurately all questions West Side posed. Having hired a self-proclaimed expert in hot bins, ConAgra was entitled to assume that West Side would ask for whatever information it needed. "

The appellate judges likened the situation of ConAgra hiring West Side to a person in need of legal representation hiring an attorney.

“People who hire lawyers rely on them to ask for information material to the situation, and no court would hold a client liable to his lawyer for failing to reveal spontaneously something that the lawyer never asked about; similarly people who hire specialists in controlling the risks of grain storage are entitled to rely on them to know what matters and ask for the material information,” Easterbrook wrote.

Aside from finding ConAgra liable and overturning the jury awards against it, the panel also set aside the punitive damages award the jury ordered West Side to pay Jentz.

Noting that Illinois law requires willful and wanton conduct or at least a “gross deviation from the standard of care” in order for punitive damages to be awarded, Easterbrook said the jury lacked support to award these damages.

The jury awarded $1 million in punitive damages to Jentz stemming from the decision of West Side's foreman decision to send him and Becker back into the bin to retrieve the tools. West Side argued there was no evidence that it exhibited willful and wanton behavior or a conscious disregard for the safety of others.

“The verdict appears to be a consequence of hindsight bias—the human tendency to believe that whatever happened was bound to happen, and that everyone must have known it,” Easterbrook wrote, adding, “Hindsight bias is not enough to support a verdict.”

In addition to its rulings on the jury awards, the panel affirmed the finding that West Side is liable to ConAgra for the cost of the damage the explosion caused to its facility.

Like Reagan, the panel rejected West Side’s argument it that isn’t liable because it never returned a signed contract to ConAgra.

“The district judge thought this irrelevant, because performance usually is as good as a signature as a way to accept a proposed written contract,” Easterbrook wrote. “We agree with that conclusion as well as the district judge’s resolution of all disputes about the amount of damages the jury awarded on this subject.”

He added, “The district judge covered these issues ably; more words are unnecessary.”

ConAgra was represented in arguments before the Seventh Circuit by Christopher Landau of Kirkland & Ellis LLP in Washington D.C. John G. Schultz of Franke, Schultz & Mullen PC in Kansas City represented West Side and Andrew Schapiro of Quinn, Emanuel, Urquhart & Sullivan LLP in Chicago argued on behalf of the plaintiffs.

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