Nationwide Agribusiness Insurance v. SMA Elevator Construction Inc.

Citations: 816 F. Supp. 2d 631; 2011 U.S. Dist. LEXIS 96856; 2011 WL 3796166Docket: C 09-4002-MWB

Court: District Court, N.D. Iowa; August 29, 2011; Federal District Court

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Nationwide Agribusiness Insurance Company filed a diversity action against SMA Elevator Construction Inc., Schlagel, Inc., and Baldor Electric Company regarding claims of product liability, negligence, and breach of warranties stemming from an explosion and fire at a grain elevator in Alton, Iowa, on July 9, 2008. The plaintiff alleges the incident was caused by a defective pillow block bearing manufactured by Baldor, which was installed by SMA and Schlagel. All defendants have filed motions for summary judgment challenging various claims against them.

The memorandum opinion by District Judge Mark W. Bennett outlines the structure of the legal analysis, including standards for summary judgment and specific claims against each defendant. Key topics addressed include:

1. **Negligence/Strict Liability Claims**: The court examines SMA's immunity regarding product claims and evaluates the nature of the claims against Baldor for warning, design, and manufacturing defects. Additionally, it considers installation defects and general negligence claims against Schlagel.

2. **Breach of Implied Warranties**: The analysis includes claims for the warranty of merchantability, fitness for a particular purpose, and workmanlike manner, with specific focus on timeliness and immunity issues.

3. **Breach of Express Warranties**: The claims against SMA, Schlagel, and Baldor are analyzed, including various legal arguments and defenses presented by each party.

4. **Breach of Contract**: The court reviews the arguments and analysis relevant to any breach of contract claims.

The opinion aims to clarify which claims survive the summary judgment motions based on the parties' arguments and the applicable legal standards.

The litigation revolves around the Alton grain elevator, built in 1997-1998, which features multiple bucket elevators or "legs" for transporting grain. Each leg includes a head pulley that powers the conveyor system and is secured with two Dodge brand non-expansion tapered anti-friction roller pillow block bearings. On July 9, 2008, while a farmer was unloading grain, an explosion and subsequent fires occurred at the elevator. Experts for the plaintiff, Nationwide Agribusiness Insurance Company, assert that the ignition originated in the head section of the south receiving leg and that the non-drive bearing overheated, potentially due to inadequate lubrication or other factors. There is contention regarding whether the bearing's overheating caused the explosion or was a result of it. The defendants include SMA Elevator Construction Company, the general contractor; Schlagel, Inc., the subcontractor responsible for the elevator's design and manufacturing; and Baldor Electric Company, the manufacturer of the bearing. SMA claims it relied on Schlagel for the design and installation of the elevator leg, while Nationwide disputes this, alleging SMA acted as a designer, manufacturer, and installer.

Nationwide claims that Schlagel products and services were integral to the design and installation of the elevator at Alton, alleging that SMA performed assembly tasks such as placing cups on belts and shimmying bearings. Although defendants acknowledge SMA's involvement, they argue that most of the leg components were preassembled by Schlagel. Schlagel, as SMA's subcontractor, designed and manufactured equipment, including elevator legs, but asserts it does not sell directly to end users or perform installation services. Nonetheless, Nationwide contends that Schlagel had direct interactions and sales with Midwest Farmers Cooperative.

The parties dispute the specifics of the installation materials provided by Schlagel for the elevator legs. Baldor, which produced bearings, did not sell directly to end users, instead supplying them through licensed distributors like GEECO. In 1997, Baldor manufactured the relevant bearing and sold it to GEECO, including an instruction manual with lubrication guidance. Baldor also offered accessory products such as an end closure and an E-tect seal, which were not installed on the bearing at the Alton elevator. Nationwide argues that these components should have been sold as a complete set.

Procedurally, Nationwide initiated this lawsuit on November 24, 2008, in Iowa District Court for Sioux County, leveraging its subrogation rights as the insurer for Midwest Farmers Cooperative. The case was removed to federal court on January 9, 2009, based on diversity jurisdiction. The defendants responded to Nationwide's claims, with S-M Enterprises and GEECO eventually settling and exiting the case. The current relevant document is Nationwide's Fourth Amended Complaint, filed on March 21, 2011.

Nationwide claims to have insured Midwest Farmers Cooperative for losses from the explosion or fire at the Alton grain elevator and has made payments on its behalf. Midwest Farmers Cooperative has assigned its claims to Nationwide, positioning Nationwide as the real party in interest. Nationwide asserts multiple claims against the defendants, including negligence/strict liability, breaches of various implied and expressed warranties, and a breach of contract against SMA. The defendants responded with answers to the complaint in April and May 2011. A jury trial was initially set for September 26, 2011, but was postponed to May 7, 2012, due to scheduling conflicts. Each defendant filed separate motions for summary judgment on May 2, 2011, to which Nationwide responded on June 8, 2011, with a unified statement of facts supporting its resistance. The defendants filed joint objections and replies regarding Nationwide's statements in early July 2011, requesting oral arguments. However, scheduling conflicts prevented these arguments from occurring. The legal analysis indicates that summary judgment is intended to resolve unmeritorious claims by demonstrating that there are no genuine issues of material fact, allowing the moving party to obtain judgment as a matter of law, based on the evidence presented.

Substantive law determines which facts are material, with an issue of material fact being genuine if it has a real basis in the record or if a reasonable jury could return a verdict for the nonmoving party. The moving party has the initial responsibility to inform the court of the basis for its motion and to identify portions of the record showing a lack of a genuine issue. If the moving party meets its burden under Rule 56(c), the nonmoving party must then present specific facts demonstrating a genuine issue for trial, rather than relying on mere allegations. The Eighth Circuit emphasizes that facts must be viewed favorably towards the nonmoving party only when a genuine dispute exists. Credibility determinations and weighing of evidence are jury functions, not the judge's. The nonmoving party must provide specific facts to show a genuine issue exists; mere metaphysical doubt is insufficient. If the overall record does not allow a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.

In terms of claims, Nationwide has brought "negligence/strict liability" claims against three defendants: SMA, Schlagel, and Baldor. Most of these claims are categorized as "product liability" claims, which include allegations related to product warning and instruction defects, design defects, and manufacturing defects. Additionally, Nationwide asserts "installation defect—general negligence" claims against SMA and Schlagel, but not Baldor. The analysis for the defendants' Motions for Summary Judgment will consider these claims collectively rather than individually by defendant.

Summary Judgment grounds for Nationwide's product defect claims against SMA are examined by focusing on SMA's immunity under IOWA CODE § 613.18. SMA claims it is immune from liability as a non-manufacturer, asserting it did not manufacture, design, or assemble the allegedly defective products, which were produced by Baldor, Schlagel, and former defendant S. M. SMA contends that Nationwide has not demonstrated that it manufactured or designed the components in question, nor has it established a causal link between SMA's assembly activities and the damages incurred.

Nationwide, while not disputing the applicability of IOWA CODE § 613.18, argues SMA does not qualify for immunity since SMA designed and assembled the entire grain elevator. Referencing Weyerhaeuser Co. v. Thermogas Co., Nationwide asserts that liability attaches to assemblers of defective components, claiming SMA made safety decisions regarding the elevator and failed to provide proper operational guidance. Additionally, Nationwide presents an alternative argument that the grain elevator should not be classified as a "product" under the statute. 

Nationwide further alleges that SMA's actions in specifying and being aware of defective components led to the explosion and subsequent damages. In response, SMA claims Nationwide's focus on component defects rather than the elevator itself misapplies Weyerhaeuser and emphasizes that the individual components held independent commercial value, indicating that any liability would not extend to a general contractor like SMA without direct involvement in the assembly process related to the alleged defect. SMA argues that liability only arises under IOWA CODE § 613.18(2) when the assembly process has a causal connection to the defect, which it claims is not present in this case.

SMA's immunity argument is based on Iowa Code § 613.18, which limits products liability for non-manufacturers. The statute distinguishes between two subsections: 

1. **Subsection 613.18(1)** pertains to non-manufacturers such as wholesalers, retailers, and distributors who do not assemble the product. It is further divided into:
   - **Paragraph 613.18(1)(a)** grants immunity from strict liability or breach of implied warranty claims if the claim arises solely from defects in the original design or manufacture of the product.
   - **Paragraph 613.18(1)(b)** limits liability for claims not solely based on original defects, requiring proof that the manufacturer is subject to the state’s jurisdiction and not insolvent.

2. **Subsection 613.18(2)** applies to retailers who assemble products but limits liability if the assembly is not causally related to the injury claimed.

The Iowa Supreme Court has noted that the statute lacks clarity, emphasizing that immunity under paragraph 613.18(1)(a) does not require proof of the manufacturer's jurisdiction or solvency, unlike paragraphs 613.18(1)(b) and 613.18(2). The statute does not apply to claims against sellers who did not assemble, design, or manufacture the product if the claims arise solely from original defects. Additionally, it highlights that claims like failure to warn may invoke paragraph 613.18(1)(b).

Statutory protections under Iowa Code § 613.18(1)(a) and (1)(b) apply specifically to product defect claims related to original design or manufacture and include claims such as "failure to warn." Claims of "installation defects" are not explicitly precluded by Iowa Code § 613.18(1) and may fall under § 613.18(2), which addresses potential liability for "assemblers." The statute lacks definitions for "assembly" and "assembler," leading to reliance on common dictionary meanings that encompass the concept of installation. The Iowa Supreme Court has indicated that assemblers can be liable for component failures they did not manufacture. The case at hand raises two key questions: the definition of "product"—which pertains to the grain elevator, elevator leg, hazard monitoring system, or bearing—and the identification of an "assembler," which influences the applicable statutory provisions. Nationwide contends that SMA's assembly involved placing cups on belts and shimming bearings, an assertion SMA acknowledges.

A reasonable juror could determine that SMA "assembled" the elevator leg by combining components such as cups and belts, which would mean that the immunity and non-liability provisions of Iowa Code § 613.18(1) do not apply to SMA regarding defects in the elevator leg. If SMA is not deemed an "assembler," it would qualify for immunity under § 613.18(1). However, the inquiry into SMA's potential immunity or non-liability does not conclude there; it also requires consideration of whether SMA can invoke the non-liability protection under § 613.18(2), which pertains to retailers that assemble products.

Nationwide alleges that SMA’s actions in placing cups on the conveyor and shimming the bearing constituted assembly, but it fails to demonstrate that these actions had a causal relationship to the injury claims under § 613.18(2). The manufacturer of the elevator leg, Schlagel, is a party to the litigation, subject to jurisdiction, and has not been declared insolvent. Therefore, even if SMA is found to be an "assembler," there are no genuine issues of material fact preventing summary judgment on SMA's non-liability for product defect claims.

The Iowa Supreme Court's ruling in Weyerhaeuser supports the notion that assembler liability applies when a defective component is incorporated; however, it did not address the implications of § 613.18(2). Nationwide’s interpretation that Weyerhaeuser negates SMA's immunity or non-liability if considered an assembler would undermine § 613.18(2), which is not inferred to be the court's intent. Consequently, regardless of the classification of SMA as an "assembler" or "installer," it is entitled to immunity or non-liability for product defect claims related to the elevator leg, leading to the conclusion that SMA is entitled to summary judgment on these claims.

SMA is entitled to statutory protection from Nationwide's claims regarding manufacturing, design, and warning defects related to the bearing and hazard warning system. Nationwide failed to provide evidence suggesting that SMA was involved in the assembly, design, or manufacturing of these components, which supports SMA's immunity under Iowa Code § 613.18(1)(a). Additionally, both Baldor and S-M, the manufacturers of the bearing and hazard warning system respectively, are subject to the state's jurisdiction and have not been declared insolvent, further reinforcing SMA's non-liability for warning defect claims under § 613.18(1)(b). 

Regarding "installation defect" claims, statutory protection under § 613.18(2) applies only if the assembly had no causal relationship to the injury. The sole claim identified by Nationwide as an "installation defect" is actually a "design defect" claim disguised as an installation issue, which does not qualify for exemption from statutory protections. Specifically, Nationwide's assertion that SMA failed to install the head pulley bearing correctly lacks sufficient factual basis, as the installation followed the design specifications provided by Schlagel.

As a result, there are no genuine issues of material fact regarding SMA's installation practices, and SMA is entitled to summary judgment on Nationwide's claims, as they are effectively design defect claims, not installation defects.

Nationwide's product defect claims against SMA regarding the grain elevator cannot proceed because the grain elevator does not qualify as a "product" under Iowa products liability law or section 613.18. SMA cannot be considered an "assembler," "manufacturer," or "designer" of the bearing or hazard warning system, thus granting SMA immunity from defect claims related to these components under section 613.18(1). Regarding the elevator leg, if SMA is deemed not an "assembler," it similarly enjoys immunity under section 613.18(1). If classified as an "assembler," SMA would still have non-liability protection under section 613.18(2) for claims related to the elevator leg. Consequently, SMA is entitled to summary judgment on Nationwide's product defect claims connected to both the elevator leg and the hazard warning system.

Additionally, the only cognizable claim resembling an "installation defect" is actually a "design defect" claim, for which SMA has statutory protection. The summary judgment proceedings do not address SMA's other arguments related to design, manufacture, warning, or installation defects. However, SMA is not granted summary judgment on all claims in Division I; Nationwide's Fourth Amended Complaint contains various "general negligence" claims beyond product defects, which SMA has not adequately addressed in its motion. The court recognizes that while the claims have been treated as product defect claims, Division I does not limit itself to that categorization, and SMA's motion does not cover the general negligence claims raised by Nationwide.

SMA is protected from "product defect" claims, and claims related to elevator design can be categorized as general negligence claims instead. The claims that survive summary judgment include: failure to exercise reasonable care in elevator design; failure to include safety features to mitigate fire and pressure wave propagation; negligence due to a manufacturing defect; violation of NFPA 61 standards; negligence in selecting a hazard monitoring subcontractor; failing to commission the hazard monitoring system; and not providing the Dodge maintenance manual to the end user. SMA is not entitled to summary judgment on these negligence claims.

Regarding warning or instruction defect claims against Baldor, SMA has statutory protection from such claims, and Schlagel has not sought summary judgment on these claims. Baldor argues that under Iowa law, strict liability failure-to-warn claims are not recognized, and such claims must be framed as negligence. Baldor asserts that its duty to warn was limited since Schlagel, a sophisticated intermediary, was responsible for the elevator's design and manufacturing. Baldor provided information about its products to Schlagel but was not involved in the construction of the elevator. Baldor claims it fulfilled its warning duty by informing Schlagel, which was responsible for determining the appropriate use of the bearings.

Baldor contends that any failure to warn about the bearings was not the proximate cause of the incident, as personnel from Midwest Farmers Cooperative acknowledged they did not read the Dodge bearing instruction manual and claimed they never received it or communicated with Baldor. Baldor had provided information on expansion and non-expansion bearings to Schlagel, who chose to use non-expansion bearings for the leg in question and did not share relevant information with SMA or others. Additionally, Baldor supplied Schlagel with a catalog detailing hazard monitoring systems and bearings that could accommodate internal sensing equipment, but the decision to use such components lay solely with Schlagel. There is no evidence that the lack of these components would have prevented the incident.

Nationwide counters that Iowa's adoption of the RESTATEMENT (THIRD) undermines the "sophisticated intermediary" defense, which was based on the RESTATEMENT (SECOND) OF TORTS, asserting that this defense has only been recognized in the context of prescription drugs and medical devices. If the defense is still applicable, Nationwide argues that the reasonableness of Baldor's actions is a matter for the jury. They contend that a reasonable jury could find Baldor’s repeated interactions with Midwest Farmers Cooperative, knowledge of Schlagel's inadequate warnings, and Baldor's insufficient instructions to be grounds for rejecting the defense. Nationwide highlights that Baldor was aware of the use of bearings in grain elevators, the serious risk of grain dust explosions from overheated bearings, and that Baldor could have directly warned Midwest Farmers Cooperative but failed to do so. They also argue that the "bulk supplier" doctrine does not apply and that Baldor's instructions were inadequate, contributing to the explosion.

The Iowa Supreme Court has established that failure to warn claims cannot be pursued under strict liability, as affirmed in Scott v. Dutton-Lainson Co. 774 N.W.2d 501, 504 (Iowa 2009).

The Iowa Supreme Court has affirmed that strict liability applies to manufacturing defect cases, while negligence principles are more appropriate for other defective product claims, as established in Wright v. Brooke Group, Ltd. Failure-to-warn claims, according to the Restatement (Third) of Torts: Products Liability, are treated as negligence claims under Iowa law. A product is deemed defective for inadequate warnings or instructions if the foreseeable risks of harm could have been mitigated or avoided by providing reasonable warnings. The Restatement recognizes a defense for intermediaries in warning defect claims, stating that there is no absolute duty for sellers to directly warn end-users if an intermediary is involved. However, the seller must consider the reasonableness of relying on the intermediary to pass on warnings, taking into account factors such as the risk posed by the product and the likelihood of effective communication by the intermediary. If there is doubt that an intermediary, such as an employer, will relay necessary warnings to employees, the seller must provide direct warnings if feasible. The wholesale adoption of these principles in prior cases suggests that the intermediary defense remains valid under Iowa law.

Nationwide's failure-to-warn claim against Baldor remains viable, as the court finds no limitation in Wright concerning the defense's applicability beyond prescription drugs and medical devices. Favoring Nationwide's perspective, the court indicates that a reasonable juror could establish all elements of the claim and dismiss the "intermediary" defense proposed by Baldor. Evidence suggests that proper warnings about necessary safety equipment and lubrication could have mitigated the risk of incidents related to grain elevator operations. The court also notes that Baldor's reliance on intermediary Schlagel for adequate warnings was unreasonable, given the serious risks associated with grain elevator operations and Schlagel's lack of expertise.

Regarding design defect claims, Baldor's motion for summary judgment is considered in light of Nationwide's arguments. Baldor contends that no evidence supports a design defect claim, asserting that Iowa law requires expert testimony for such claims. Nationwide's experts reportedly do not criticize the bearing’s design and fail to present an alternative design or evidence that the bearing was unsafe when it left Baldor's control. Baldor emphasizes that any alleged design defects involve complex technical issues warranting expert analysis, which Nationwide lacks. Consequently, Baldor maintains that Nationwide has not demonstrated any reasonable alternative design that would have mitigated the harm suffered by the injured party.

Baldor argues that none of Nationwide's experts have identified flaws in the design of the bearing's sealing system. Baldor asserts that a cover over the bearing is impractical as it would hinder fitting on a shaft and clarifies that end caps can be added post-installation. It contends there is no evidence that the absence of pre-drilling for internal sensors constitutes a design defect, as the choice not to use such bearings was made by Schlagel. Baldor claims that the lack of alarms was due to the external system not being activated, not the bearing's design. Furthermore, Baldor maintains that the absence of optional features does not indicate a defective design, and if Nationwide wishes to claim that a Dodge end cap or internal sensors should have been included, that claim should be directed elsewhere.

In contrast, Nationwide identifies at least five design flaws: the absence of E-tect seals, end caps, corrosion-proof coatings, pre-drilling for internal temperature sensors, and the use of a non-expansion bearing instead of an expansion bearing. While Nationwide acknowledges that Dodge offered these features at the time the elevator was constructed, it argues that this highlights the feasibility of these alternatives. Nationwide claims that Baldor recklessly marketed E-tect seals and end caps as optional add-ons, which could mislead buyers, especially those in the grain industry, like Schlagel. It contends that a jury could find Baldor's omission of these features unjustifiable, despite recognizing that the E-tect seal complements the existing R-seal rather than replaces it. Nationwide admits that its experts do not criticize the R-seal itself, but they do criticize the failure to integrate E-tect seals and end caps into the bearing design for elevator use, and they suggest that coatings to prevent corrosion should have been applied.

Nationwide contends that a more expensive bearing coating is a reasonable alternative due to the risks of overheating and dust explosions, and argues that internal temperature sensors are more effective than external ones. Nationwide further claims that a combined internal temperature and vibration hazard monitoring system constitutes a reasonable alternative to relying solely on external temperature monitoring. In response, Baldor maintains that Nationwide's design defect claims do not assert that the actual bearing used was defectively designed, but rather that Schlagel should have opted for additional accessories or a different bearing type. Baldor asserts that it cannot be held liable for design defects when a purchaser, like Schlagel, chooses not to buy known options, and emphasizes that Nationwide has not pleaded a defect claim regarding non-expansion bearings versus expansion bearings, which Baldor did offer at the time. The legal standard for design defect claims, as outlined in Iowa case law, posits that a product can be deemed defectively designed if it poses foreseeable risks that could have been mitigated by a reasonable alternative design. This standard emphasizes a risk-utility analysis and does not strictly categorize claims under negligence or strict liability, as established in the Restatement (Third) of Torts: Products Liability.

To establish a design defect claim under Restatement (Third) section 2(b), a plaintiff typically must demonstrate a reasonable alternative design that could have mitigated the foreseeable harm from the product. In the case involving Nationwide's claims against Baldor regarding the Dodge TAF bearing, the claims are deemed fundamentally flawed. The distinction between the Dodge TAF bearing and the elevator leg, which integrated the bearing, is not adequately maintained. The Dodge TAF bearing is characterized as multi-purpose and not defective per expert testimony; none of Nationwide's experts criticized the design of the bearing itself. Nationwide's assertion that the bearing design was defective due to the absence of an E-tect seal, end caps, and other features is legally unsupported. The cited expert opinions do not substantiate this claim and fail to differentiate between the bearing and the elevator leg, which was not designed by Baldor but included a bearing assembly for which Baldor provided optional components. An expert's report mentioned the need for protective measures against environmental contaminants affecting bearings, but this does not bolster Nationwide's argument against Baldor.

Maintaining cleanliness between the bearing and head cover dust seal is crucial to prevent grease and dust buildup. The Dodge catalog presents the "E-Tect" bearing seal kit as an option for bearings exposed to moisture and dust, which should be mandatory for grain industry applications, particularly in bucket elevators, due to the inadequacy of standard seals in protecting against contamination. Maness asserts that the E-Tect seal kit is essential for such uses, but it is only a semantic argument to claim that this optional item is inherently part of the bearings. The opinions cited suggest that the design of the bucket elevator, rather than the bearings themselves, is flawed due to the absence of this optional protection. Basta indicates that the E-Tect seal would enhance protection against grease contamination from external sources, but this does not imply that the bearings are defective without it; the elevator design is what lacks adequate protection. Metallurgist Larry Hanke notes that the bearing assemblies were poorly sealed against moisture, indicating a defect in the assembly design rather than the bearings themselves. Finally, although Sibley suggests that an E-Tect seal is preferable to an R-seal, his assertion reinforces the notion that the elevator leg design is deficient without the added moisture protection, as the E-Tect seal serves as an optional enhancement rather than a replacement for the R-seal.

Baldor is not liable for a design defect in the bearing assembly as a matter of law, even if it is considered the pertinent product. The Fifth Circuit in *Scallan v. Duriron Co. Inc.*, 11 F.3d 1249 (5th Cir. 1994), established that a claim for design defect under Louisiana law requires proof that: 1) the product's danger outweighs its utility, 2) safer, alternative products are available, or 3) a feasible, safer alternative design exists. The court found no meaningful distinction between the Louisiana "risk/utility" test and similar standards under Iowa law. In *Scallan*, the court dismissed the claim that a pump manufacturer was liable for a design defect due to the absence of an automatic annunciator, as the manufacturer offered this option, and the purchaser chose the manual sight glass system. Allied, the purchaser, was aware of its operational needs and made an informed decision after evaluating the pump and requesting adjustments. The court concluded that liability could not be imposed on the manufacturer for design choices made by a knowledgeable purchaser who rejected the offered safer alternative. Furthermore, the argument that a manufacturer cannot escape liability by shifting design responsibility to the purchaser was also rejected, as the manufacturer had provided the option for a safer design.

The Fifth Circuit Court of Appeals concluded that the manufacturer, Baldor, met its obligation to provide a safer product by offering optional safety features, such as an automatic annunciator and various bearing options, to Duriron and others. The court found no legal precedent supporting the idea that a manufacturer is liable for not incorporating safety devices that the purchaser deliberately rejects. It referenced a similar ruling in Austin v. Clark Equipment Co., which stated that manufacturers are not required to make products accident-proof or to compel buyers to purchase safety features. The critical factor in this case was that Baldor provided the options that Nationwide argued would enhance safety, yet Schlagel chose not to purchase these options for its elevator leg.

The district court correctly noted that Duriron was given the option of an automatic annunciator but opted for a manual sight glass instead. Nationwide failed to cite any authority suggesting that Baldor could be held liable for not including optional safety features in the product design when the purchaser opted against them. The RESTATEMENT (THIRD) OF TORTS indicates that liability might arise if a party in the distribution chain neglects to adopt a safer design when incorporating another product, but the defect attributed to the failure to include protective options does not hold Baldor accountable.

Nationwide's claims were further weakened as their experts did not criticize the bearing's design but rather pointed to the lack of protective options being made known to designers like Schlagel. This situation was characterized as a warning and instruction defect rather than a design defect claim. Consequently, the court granted Baldor summary judgment on Nationwide's design defect claims, while also addressing that manufacturing defect claims against Baldor and Schlagel were asserted by Nationwide.

SMA is statutorily protected from claims, allowing consideration of Baldor's and Schlagel's motions for summary judgment concerning manufacturing defect claims. Both Baldor and Schlagel argue that Nationwide lacks evidence of any deviation from the intended design of the bearing or elevator leg, which is essential for a manufacturing defect claim. Baldor specifically points out that Nationwide has not shown any design deviation that led to the incident. Nationwide has not responded to Baldor’s motion but contends that Schlagel failed to follow Baldor's installation directions, resulting in what Nationwide characterizes as a manufacturing defect, although it appears to be an "installation" defect related to the absence of an expansion bearing. 

In Baldor’s reply, it highlights Nationwide's lack of response to its arguments, while Schlagel emphasizes that there is no evidence of a manufacturing deviation in its product design. The analysis references Iowa Supreme Court rulings, clarifying that strict liability applies in manufacturing defect cases, distinguishing them from design defect and warning defect claims where negligence principles are relevant. According to the RESTATEMENT (THIRD) OF TORTS, a product is deemed defective if it departs from its intended design, irrespective of care taken during manufacturing. Iowa law stipulates that a plaintiff cannot recover under a manufacturing defect theory if the product was in the condition intended by the manufacturer. Both negligence and strict liability claims require proof of a manufacturing defect present at the time of sale that contributed to the plaintiff's harm.

If the bearing or elevator leg was free from manufacturing defects at the time of sale, Nationwide's claims against Baldor and Schlagel for manufacturing defects would fail under both negligence and strict liability theories. Nationwide has not established any genuine issues of material fact regarding the condition of the bearing or elevator leg at the time of sale, thus warranting summary judgment for Baldor and Schlagel on these claims. Nationwide's attempt to recast its manufacturing defect claim against Schlagel as a negligent installation claim raises questions about its viability, which will be addressed separately.

With respect to the installation defect and general negligence claims against Schlagel, the latter argues that it owed no duty in relation to the installation as it did not participate in the product's installation or post-installation inspection. Schlagel maintains that Iowa law does not recognize installation defect claims against a component manufacturer. Nationwide counters that its manufacturing defect claim against Schlagel is essentially a negligent installation claim, asserting that Schlagel deviated from Baldor's design by improperly placing non-expansion bearings. However, Nationwide does not argue that its labeled installation defect claims are viable. In its reply, Schlagel asserts that Nationwide has not demonstrated that it acted as an installer or repairer, further supporting its entitlement to judgment as a matter of law on these claims.

Nearly all of Nationwide's claims against Schlagel, labeled as "installation defect" claims, are essentially rephrased "design defect" and "manufacturing defect" claims. The distinction lies in merely replacing "install" with "design" or "manufacture." Although alleging an alternative recovery theory is permissible, a legal and factual basis must exist. Nationwide cites RESTATEMENT (SECOND) OF TORTS § 404, which addresses negligence in making or repairing a chattel, positing that a negligent contractor faces similar liability as manufacturers. The Iowa Supreme Court interprets § 404 as applicable to independent contractors who negligently rebuild or repair, with the rationale of deceptive safety appearances. 

Schlagel argues it is neither a "repairer" nor an "installer" and thus not subject to the duties outlined in § 404, as it had no role in the elevator installation or inspection. The evidence shows Schlagel provided a nearly fully assembled elevator leg to SMA, which then installed it. Consequently, Schlagel is characterized as the original designer and manufacturer of the leg, making § 404 irrelevant to its situation. Thus, the court concludes that § 404 does not apply to Nationwide's claims against Schlagel, granting Schlagel summary judgment on all related claims. Additionally, Nationwide's claims also include various "breach of warranty" claims beyond the product defect allegations.

Claims of breach of the implied warranty of merchantability are brought by Nationwide against SMA, Schlagel, and Baldor, each of whom contest these claims in their motions for summary judgment, albeit on different bases.

SMA asserts a statutory immunity from Nationwide's claims under IOWA CODE § 613.18, which also extends to product defect claims. Therefore, SMA is entitled to summary judgment on the breach of implied warranty claim for similar reasons articulated in prior rulings regarding product defects.

Schlagel challenges the timeliness of Nationwide's claim based on IOWA CODE § 554.2725(2), which stipulates that the statute of limitations for breach of warranty claims begins upon the delivery of goods, irrespective of the buyer's knowledge of the breach. Although Baldor did not raise this specific argument, it is deemed applicable to Baldor as well, given that both defendants' implied warranty claims derive from the sale of "goods" as defined by Iowa law.

The court notes that it could grant summary judgment in favor of Baldor sua sponte if it finds it appropriate to do so for Schlagel, as Nationwide had adequate notice of the timeliness issue and an opportunity to respond. The court references precedents confirming that summary judgment may be issued if the opposing party had sufficient warning to present evidence against it. Given that the claim may be time-barred, further consideration of its merits against Baldor would be futile.

The five-year statute of limitations for breach of implied warranty claims began when the goods were tendered, meaning it expired in 2003. Schlagel references a non-existent section in its brief regarding this argument, but does point to Section III.D., which asserts that the limitations period starts at delivery, regardless of the buyer's knowledge of defects. Nationwide counters by invoking the "discovery rule," which posits that the statute of limitations does not begin until the injured party is aware of the facts supporting a claim; Nationwide's lawsuit was filed in the same year as the incident in question. Schlagel argues that Nationwide's reliance on the discovery rule is misguided, as the case cited does not pertain to goods. Both parties agree on the statute of limitations applicable to Nationwide's claims; however, they dispute the triggering event for this five-year period. Nationwide claims the discovery rule applies, while Schlagel disagrees, emphasizing that under Iowa law, actions for breach of implied warranty related to goods accrue at the time of delivery, not upon discovery of any damage. The Iowa Supreme Court has clarified that the limitations period should start from the earlier of either the discovery of the injury or the time when it should have been discovered, but in this context, the relevant statute specifically states that claims for breach of implied warranty involving goods accrue at delivery.

A cause of action accrues upon the occurrence of a breach, regardless of whether the aggrieved party is aware of it. A breach of warranty is deemed to occur at the time of delivery, unless a warranty explicitly extends to future performance, in which case the cause of action accrues upon discovery of the breach. The Iowa Supreme Court in Speight determined that the claim did not pertain to the sale of "goods," thus the UCC provision (Iowa Code 554.2725(2)) was inapplicable. The court clarified that "goods" are movable items identified for sale, and home construction does not qualify under this definition. Consequently, the discovery rule applies to claims involving express and implied warranties, except where statutes specify otherwise. The trial court's application of the discovery rule was appropriate. While the discovery rule applied in Speight due to the absence of "goods," it does not apply in the current case involving elevator legs, which are classified as "goods." Nationwide's assertion regarding an implied warranty of merchantability as a common-law claim lacks support, as Iowa cases do not recognize a common-law implied warranty of merchantability. Relevant precedents, including Speight and Wright, confirm that implied warranties related to "goods" are statutory rather than common-law.

Nationwide's claim against Schlagel for breach of the implied warranty of merchantability is time-barred due to the five-year statute of limitations, as established under Iowa law, and therefore Schlagel is entitled to summary judgment. The same reasoning applies to Nationwide's claim against Baldor, allowing for summary judgment in Baldor's favor on the untimeliness of the claim as well. 

Regarding the breach of implied warranty of fitness for a particular purpose, Nationwide asserts claims against SMA, Schlagel, and Baldor, with each defendant presenting slightly different arguments for summary judgment. SMA contends that Nationwide has not sufficiently pleaded the specific purpose for which the grain elevator was intended and cannot prove that any breach caused damage. Nationwide counters that the purpose of a grain elevator is self-evident and that it has adequately highlighted SMA's representations regarding safety and quality. SMA argues that Nationwide fails to distinguish between the warranties and does not present sufficient evidence to support its claims. The Iowa Supreme Court recognizes the implied warranty of fitness for a particular purpose in such construction contracts, but it remains to be seen if Nationwide has generated genuine issues of material fact to support its claim against SMA.

A construction contract includes an implied warranty that the completed structure will be suitable for its intended purpose. If a contract includes any express or implied guarantees of the contractor's work meeting a specific purpose, the contractor bears the risk of achieving that purpose unless the owner waives it. Substantial performance is contingent upon the work being adequate for its intended use. The implied warranty of fitness for a particular purpose extends beyond chattel sales and does not categorize construction contracts under Article 2 of the Uniform Commercial Code since they are primarily service agreements.

To recover under the implied warranty of fitness, three elements must be established: the contractor must know the consumer's specific purpose, the contractor must understand that the consumer relies on their expertise, and the consumer must indeed rely on that expertise. This warranty must address specific consumer needs rather than general purposes, and the existence of such a warranty typically depends on the factual context of the parties' negotiations. In a referenced case, the specific need was for a sewer hookup without disturbing existing paving.

In the current case, while the grain elevator serves the general purpose of grain storage, the specific needs of Midwest Farmers Cooperative remain undefined. The assertion that a "safe" grain elevator constitutes a peculiar need is questionable, as safety is a standard expectation for any elevator. Nationwide claims its particular need was for a "state of the art" grain elevator, but has not demonstrated that this requirement was clearly articulated at the time of contracting, nor has it provided sufficient detail regarding safety features that would differentiate it from standard construction expectations.

A grain elevator can be considered "state of the art" in various non-safety aspects, such as handling speed, grain volume capacity, and energy efficiency. SMA is entitled to summary judgment regarding the breach of the implied warranty of fitness for a particular purpose claim, as there is no analogous specificity of purpose in the case at hand, unlike the "peculiar need" identified in Semler. 

Schlagel claims that Nationwide's breach of the implied warranty of fitness for a particular purpose is untimely under the five-year statute of limitations, asserting that the "discovery rule" does not apply. While Nationwide argues that it can assert both common-law and statutory implied warranty claims, Schlagel counters that such claims cannot coexist in this context, especially since the statutory claim pertains to "goods." 

Under Iowa law, there are both statutory and common-law implied warranties for fitness for a particular purpose. However, the Iowa Supreme Court has indicated that a party cannot selectively assert both types of claims based on the same facts. Nationwide’s assumption that it can maintain both claims, suggesting that the common-law claim is timely despite the statutory claim being time-barred, lacks support from relevant case law. The court referenced authority for statutory implied warranties in the context of the sale of goods and noted that previous cases recognized implied warranties in different contexts, such as bailments or contracts for hire.

The excerpt addresses the legal principles surrounding implied warranties in the context of bailments and commercial leases, particularly focusing on the implied warranty of fitness for a particular purpose. The Iowa Supreme Court has established that similar obligations can arise in bailments, as reflected in cases like Meester v. Roose and Morris Plan Leasing Co. v. Bingham Feed & Grain Co. It was noted that a common-law implied warranty of fitness can exist even in commercial leases, as illustrated in a case involving railroad cars. 

However, the excerpt emphasizes that, based on Iowa law, claims for breach of implied warranty of fitness related to the sale of goods must adhere to statutory limitations. Specifically, under Iowa Code § 554.2725(2), such claims accrue at the time of delivery, which occurred in 1998, rendering any claims by Nationwide time-barred as of 2003.

Consequently, both Baldor and Schlagel are entitled to summary judgment on Nationwide's claims regarding the breach of implied warranty of fitness for a particular purpose due to the statute of limitations. Furthermore, it is noted that Baldor would also prevail on the merits of the claim if it had been timely. 

Additionally, the excerpt discusses Nationwide's claim for breach of implied warranty of workmanlike manner against SMA, Schlagel, and Baldor. SMA argues that this warranty typically applies to home construction, aimed at protecting buyers in a weaker bargaining position. SMA contends that the circumstances of the case do not warrant such a warranty and claims that Nationwide has not provided sufficient evidence of a specific defect attributable to SMA, thus lacking any genuine issue of material fact regarding a breach.

Nationwide asserts that Iowa courts have broadened the implied warranty of workmanlike manner to include commercial and agricultural construction projects, not just residential ones. They highlight that the Minnesota Supreme Court has referenced Iowa case law to extend this warranty to grain elevators affected by faulty construction. Nationwide criticizes SMA for failing to cite any cases that limit the application of this warranty exclusively to residential construction. They argue that as the designer and general contractor of the elevator, SMA had a duty to perform workmanlike, and that inappropriate component choices led to an unsafe elevator.

In response, SMA contends that Nationwide lacks recent Iowa Supreme Court authority supporting the warranty's application in commercial contexts, claiming the older cases cited by Nationwide are not applicable. SMA emphasizes that it was not the designer of the systems in question. The analysis rejects SMA's position, affirming that the implied warranty of workmanlike manner is not confined to residential construction contracts. The court notes that despite recent Iowa Supreme Court decisions focusing on residential contexts, previous rulings have recognized a broader application of the warranty. Specifically, the ruling in Kirk v. Ridgway established that the warranty applies to construction contracts generally, citing relevant cases involving commercial buildings. The Markman case, referenced by the court, explicitly addresses the breach of the warranty of workmanlike manner, strengthening the argument against SMA's narrow interpretation.

In building and construction contracts, there is an implied warranty that structures will be built in a good and workmanlike manner and be fit for their intended purpose unless explicitly stated otherwise. Evidence indicates that the roofs of the tunnel and warehouses were not constructed properly, undermining the defendant's claim that no breach of contract occurred. SMA is not entitled to summary judgment based on the argument that the implied warranty does not apply beyond home construction. Instead, SMA contends it did not breach the warranty because it did not design, manufacture, or install the defective systems. However, Nationwide asserts that as the designer and general contractor for the elevator, SMA had a duty to perform in a workmanlike manner but failed by selecting inappropriate components, leading to an unsafe elevator.

To prove breach of the implied warranty in the commercial context, Nationwide must demonstrate: 1) the Alton grain elevator was intended for grain handling; 2) SMA constructed it for Midwest Farmers Cooperative; 3) the elevator was not fit for its purpose or was poorly constructed when delivered; 4) Midwest Farmers Cooperative was unaware of defects at the time of turnover; and 5) damages resulted from the defects. The court clarifies that whether SMA designed the defective systems is not decisive for the claim, as SMA qualifies as the "general building contractor" responsible for the project's overall completion. Genuine issues of material fact exist regarding SMA's alleged defects, indicating a breach of the implied warranty of workmanlike manner.

Conversely, Schlagel and Baldor are entitled to summary judgment because Schlagel, as a subcontractor providing equipment and not the direct seller to Midwest Farmers Cooperative, does not meet the definition of a "builder" against whom the warranty claim can be asserted. Nationwide’s brief does not contest this ruling.

Baldor argues that a breach of the implied warranty of workmanlike manner claim is not applicable under Iowa law as Baldor was not the "builder." The court finds no opposition in Nationwide's brief against granting summary judgment in favor of Baldor on this claim, thus awarding summary judgment to Schlagel and Baldor regarding Nationwide's claim.

In terms of breach of express warranties, Nationwide alleges claims against SMA, Schlagel, and Baldor, all of whom have sought summary judgment. SMA contends that Nationwide cannot establish genuine issues of material fact on essential elements of its claim, including the existence of an express warranty, reliance by Midwest Farmers Cooperative, breach of the warranty, and damages caused by any breach. SMA argues that claims of a "turnkey operation" and "state of the art" elevator are mere opinions rather than express warranties. SMA claims it delivered a functional grain elevator and asserts that there is no evidence of reliance on its statements since Midwest Farmers Cooperative had already engaged SMA before these statements were made. Furthermore, SMA argues that it fulfilled its obligations by providing a "turnkey operation" and that Nationwide cannot demonstrate the elevator was not "state of the art," citing evidence of maintenance failures by Midwest Farmers Cooperative that sever the causal link to any alleged breaches.

In contrast, Nationwide argues that SMA did breach its express warranty by not providing the promised "state of the art" features, framing the extent of SMA's warranty as a matter for the jury to decide. Nationwide asserts that "state of the art" can be defined based on the best available technology at the time of construction, making it a viable basis for an express warranty.

Nationwide contends that the combination of "turnkey" and "state of the art" requirements implies that SMA was obligated to deliver a fully operational and safe elevator, specifically tailored for Midwest Farmers Cooperative, without necessitating any adjustments for safety. Nationwide asserts that Midwest Farmers Cooperative relied on SMA's express warranty, particularly given their mutual understanding of the risks posed by grain dust explosions. They argue that SMA breached this warranty by supplying a dangerous elevator, which had multiple defects and safety violations that increased explosion risk. Additionally, Nationwide claims SMA cannot invoke a "sole proximate cause" defense, as the maintenance issues cited were foreseeable by SMA. They highlight that the facility was maintained and that the sensor was operational at the time of the explosion, suggesting that the absence of expansion bearings was a critical factor leading to the incident.

In response, SMA argues that Nationwide has failed to provide evidence of an express warranty regarding the elevator's features, suggesting that the terms "turnkey" and "state of the art" were merely opinions or commendations, insufficient to establish an express warranty. The legal framework governing the breach of express warranties is grounded in the Iowa Supreme Court's ruling in Flom v. Stahly, which states that express warranties arise from distinct assertions of quality rather than mere opinions, and that the plaintiff must demonstrate reliance on such assertions and a causal link to the damages incurred. The elements of Nationwide's claim against SMA for breach of express warranty include: 1) SMA's assertion of quality, not mere opinion; 2) SMA's intent for Midwest Farmers Cooperative to rely on this assertion; 3) actual reliance by Midwest Farmers Cooperative; 4) non-conformance of the elevator to SMA's assertion; and 5) the non-conformance being a proximate cause of damage. The first two elements are noted as particularly contentious.

The Iowa Supreme Court in Flom determined that detailed statements in a sales contract regarding the construction of a building's walls and heating system constituted express warranties rather than mere opinions, as buyers relied on these representations. Similarly, in Busker v. Sokolowski, the court held that a builder's commitment to construct a "first-class house" could support a breach of express warranty claim, emphasizing the plaintiffs' reliance on quality materials and workmanship. The distinction between actionable express warranties and non-actionable opinions was highlighted, with examples showing that vague claims (like describing an elevator as "state of the art" or "turnkey") might not suffice unless further specifics were provided. Nationwide contended that discussions between SMA and Midwest Farmers Cooperative added necessary specificity to the claims, arguing that "state of the art" in construction implies adherence to recognized engineering standards, as supported by testimony from Midwest's CEO regarding the expectations for a complete and safe construction.

Proof of reliance by the buyer on the assertions is contested, as Mr. Hein's deposition indicates that SMA was already the "lead company" for the Alton grain elevator project and that Midwest Farmers Cooperative was nearly committed to using SMA when he became CEO. Nonetheless, Mr. Hein's further testimony reveals that the choice of contractor was influenced by SMA's assertions, specifically that the selected contractor would offer a "turnkey" operation with advanced safety features desired by Midwest Farmers Cooperative. 

The elements of "breach" and "proximate cause" present challenges for Nationwide. SMA highlights the significant time gap between its completion of the grain elevator and the subsequent explosion, alongside evidence of maintenance neglect and safety equipment deactivation during that period. In contrast, in Flom, expert testimony established that the failure to adhere to specified construction techniques caused moisture issues and deterioration, thus satisfying the proximate cause element. Here, expert evidence suggests that both inadequate maintenance and original construction errors contributed to the explosion and its damage, particularly regarding safety features that did not meet "state of the art" standards as per NFPA 61.

Consequently, SMA's motion for summary judgment on Nationwide's breach of express warranty claim is denied. 

Regarding claims against Schlagel and Baldor, these are focused on express warranties related to their products rather than the overall construction of the grain elevator. The Uniform Commercial Code (U.C.C.), specifically Iowa Code § 554.2313, governs these claims. Schlagel contends that while Iowa Code § 554.2313 outlines the creation of express warranties for goods, Iowa Code § 554.2318 does not apply such warranties to third-party beneficiaries like Midwest Farmers Cooperative who claim only economic loss, as interpreted by the Iowa Supreme Court to limit "injured" to instances of physical harm to persons or property.

Schlagel contends that Nationwide has failed to provide any written evidence or express statements supporting its claims of breach of express warranty, emphasizing the absence of such statements as a foundation for their agreement. This argument remains unaddressed in Nationwide's brief, as noted by Schlagel. Additionally, Baldor asserts that Nationwide has only made conclusory claims without providing evidence that Baldor communicated any express warranty to Midwest Farmers Cooperative concerning the bearing in question, either pre- or post-sale. Baldor further claims there is no proof that any purported express warranty influenced the terms of the sale or that Baldor breached such a warranty.

In response to Baldor's summary judgment motion, Nationwide argues that Iowa Code § 554.2318 does not hinder its express warranty claim against Baldor, asserting that as an end user, it is entitled to the warranty, despite Baldor not raising this defense. Nationwide contends that a jury could determine that Schlagel relied on Baldor for selecting the appropriate bearing and received guidance on lubrication, as Baldor had familiarity with Schlagel's operations. Nationwide also maintains that Baldor's advertising claims about the bearing's sealing capabilities are essential since the failure of the bearing is attributed to under-lubrication and contamination. 

Nationwide challenges Baldor's lubricating instructions, suggesting they imply the bearing should not fail catastrophically if lubricated accordingly, while claiming genuine issues of material fact exist regarding the seal's failure to prevent moisture and contaminants. Conversely, Baldor responds that Nationwide's arguments regarding Iowa Code § 554.2318 address points it never raised, and it claims Nationwide has only recently cited language it purports to constitute an express warranty, lacking evidence to show that this warranty was part of the bargaining process for Schlagel's purchase as required under Iowa law. Baldor also points out the absence of evidence that Schlagel or Midwest Farmers Cooperative relied on any express warranty.

The analysis highlights that the grounds for granting Baldor summary judgment on Nationwide's claim of breach of implied warranty of merchantability were similar, as the claim was deemed untimely under Iowa Code § 554.2725(2).

Summary judgment in favor of Baldor may be granted on the basis that Nationwide's express warranty claim is barred by IOWA CODE § 554.2318, despite Baldor not having raised this issue. The court notes that if Schlagel's motion for summary judgment, which did raise this issue, is granted, it would be appropriate to extend the same ruling to Baldor. Nationwide had adequate notice and opportunity to address the express warranty claims related to both Schlagel and Baldor, as the matter was clearly outlined in Schlagel's motion, and Nationwide responded, even if indirectly through its response to Baldor.

The court emphasizes that sua sponte summary judgments are permissible when the affected party has been properly notified and given a chance to present evidence against such a ruling. Nationwide was aware that the application of § 554.2318 concerning the claim also pertained to Baldor. The court further states it would be futile to evaluate the merits of Nationwide's claim against Baldor if it is indeed barred by this section.

IOWA CODE § 554.2318 allows a seller's warranty to extend to any person who may reasonably be expected to use the goods and who suffers injury from a breach of warranty. The Iowa Supreme Court has clarified that to qualify as an extended beneficiary under this statute, the beneficiary must have suffered actual injury, not merely economic loss. Although Nationwide claims that its insured, Midwest Farmers Cooperative, experienced physical harm to its property due to the noncompliance of the goods with their express warranties, the court notes that extended beneficiaries' claims remain limited. The Iowa Supreme Court has ruled that remote buyers cannot recover for consequential economic losses under express warranty claims, which would preclude recovery for loss of profits or similar damages in this context.

Determining whether a party is "in privity" with another hinges on whether they are parties to a contract. Parties that have contracted with one another are in privity; those who have not are not. In this case, Tomka is considered a non-privity buyer because he purchased Finaplix from veterinarians, not directly from the manufacturer, Hoechst. Tomka's claim for damages pertains to consequential economic loss, which includes lost profits and goodwill, rather than direct economic loss, defined as the difference between the accepted goods' value and the warranted value. The Iowa Supreme Court, in *Beyond the Garden Gate*, delineated direct economic loss as damages directly resulting from product quality issues, while consequential economic loss encompasses broader impacts, such as lost profits and business reputation. The court ruled that non-privity buyers like Tomka may only seek direct economic loss damages for breach of express warranty. Consequently, the trial court's decision to direct a verdict for the defendant on this liability theory was correct, as Tomka’s claims fell under the category of consequential economic loss.

Midwest Farmers Cooperative lacked privity with Schlagel and Baldor as it did not purchase their products directly, but rather obtained Schlagel's elevator leg and Baldor's bearings through intermediaries (SMA and GEECO). Consequently, Nationwide's breach of express warranty claim, focused on damages to the Alton grain elevator rather than direct economic loss, falls outside the scope of claims permitted for remote buyers under Iowa Code § 554.2318. The case of Midland Forge, which Nationwide cites, predates key clarifications by the Iowa Supreme Court regarding remote buyer claims and does not support Nationwide's position. Thus, Schlagel and Baldor are entitled to summary judgment based on this ground.

Additionally, Nationwide failed to fulfill its burden to demonstrate a genuine issue for trial regarding its breach of express warranty claim against Schlagel, not providing evidence to counter Schlagel's challenges. Therefore, Schlagel is also granted summary judgment on this alternate basis. In contrast, Nationwide attempted to provide evidence for its claim against Baldor, necessitating an examination of the merits of that claim. Iowa Code § 554.2313 outlines that express warranties can be created through affirmations of fact, promises, descriptions, or samples related to the goods, which forms the basis of the bargain.

An express warranty does not require the seller to use specific terms like "warrant" or "guarantee," nor does it necessitate a clear intention to create a warranty. However, mere statements about the value or opinions regarding goods do not constitute a warranty. According to Iowa Code 554.2313, advertising materials can establish an express warranty if the claim meets necessary legal elements, including reliance. For a breach of an express warranty to be proven, the plaintiff must demonstrate that the sale would not have occurred without the seller's representations, and that such representations formed part of the "basis of the bargain."

Nationwide must prove that Baldor created an express warranty through its sales literature, that Midwest Farmers Cooperative relied on this warranty, that the bearing did not conform to it, and that damages resulted from this breach. The court notes that Nationwide has not provided evidence showing that any express warranty was part of the bargain or relied upon by Schlagel or Midwest Farmers Cooperative. Nationwide's evidence of reliance, indicating Baldor's knowledge of the use of its bearings, does not imply reliance on the express warranties. Consequently, Baldor is entitled to summary judgment on this claim.

Regarding the breach-of-contract claim against SMA, SMA seeks summary judgment, arguing that Nationwide has not alleged any violation of specific contract terms, asserting that the claim stems from SMA's alleged failure to construct a safe elevator.

SMA is contesting the breach-of-contract claim brought by Nationwide, arguing that the obligations to construct a grain elevator, ensure safety, and use "state of the art" components are not included in their written contract. SMA asserts that both parties were sophisticated enough to incorporate all necessary terms into the multi-million dollar contract, indicating an intention to exclude any additional duties outside the written agreement. Since Nationwide cannot identify a specific breached term in the contract, SMA claims that there is no genuine issue of material fact, warranting summary judgment in its favor.

In response, Nationwide does not dispute SMA's characterization of the alleged breaches but argues that there are unresolved jury questions regarding its claim. Nationwide highlights that the initial contract was merely a preliminary document to secure SMA's commitment for design work and that the elevator's design was incomplete at the time of the contract signing. It contends that SMA has acknowledged other documents related to their duties, which have not been produced, and invokes the RESTATEMENT (SECOND) OF CONTRACTS. 202 to argue for a broader interpretation of the contract based on the parties' dealings and expectations. Nationwide maintains that the contract's purpose was to design a safe grain elevator and that it was not fully integrated, as it lacked essential safety and quality terms and had no merger clause.

SMA counters that Nationwide's claims are inconsistent with their explicit agreement and that Exhibit 1055, described as a contract, is the binding document. SMA emphasizes the absence of any additional agreements and contends that Nationwide's arguments do not adequately interpret the contract's provisions but instead attempt to introduce extrinsic terms. SMA believes that Nationwide’s claims resemble a breach of warranty rather than a breach of contract, lacking specific contractual breaches.

The Iowa Supreme Court outlines that to prove a breach-of-contract claim, one must demonstrate the existence of a contract and its terms and conditions.

A party alleging breach of contract must demonstrate: (1) performance of all contractual terms by the plaintiff, (2) a specific breach by the defendant, and (3) resulting damages to the plaintiff. A breach is defined as a failure to perform any promise within the contract without legal justification. The Iowa Supreme Court case Horsfield Construction, Inc. v. Dubuque County is relevant in determining if a document characterized as a contract or bid constitutes a binding agreement. The court adopted the Restatement (Second) of Contracts, section 27, which states that parties' manifestations of assent can form a contract even if they intend to create a written memorial later, unless the parties view the agreement as incomplete. Factors influencing whether a contract has been finalized include the clarity of terms agreed upon, industry norms for written contracts, the complexity and value of the transaction, and actions taken towards performance during negotiations. In this case, HCI's bid represented a clear offer to perform work according to the County's specifications, specifying a start date and duration for project completion.

The excerpt details the terms and conditions surrounding the acceptance of bids for a construction project. It establishes that the consideration, including per unit and total prices for each bid item, was clearly outlined in HCI's bid, which was cross-referenced with the County's engineering plans and the Blue Book. The document emphasizes that the parties did not intend to negotiate new terms upon signing a formal contract. The Board's October 7 letter unconditionally approved HCI's bid, indicating a binding acceptance without any stipulation for a subsequent written contract. This aligns with legal precedent stating that bid acceptance must be absolute and unconditional to be binding.

Subsequently, when the County re-bid the project, it revised its proposal to state that acceptance was subject to confirmation and that no enforceable contract existed until all parties executed a written agreement. The excerpt references cases illustrating that a bidder's refusal to sign a contract as written allows the governing body to reject the bid. The Board's approval was viewed as final, as it expressed eagerness to commence work, which led HCI to make significant financial commitments based on this acceptance, including purchasing equipment and contacting subcontractors.

The conclusion drawn is that the intent of both parties was to be bound by the acceptance of HCI's bid, with the written contract serving merely as a record of their agreement. Exhibit 1055, which represents the agreement between SMA and Midwest Farmers Cooperative, is deemed a complete and binding contract, reflecting the approved bid without conditions that would delay or complicate enforcement. The only stipulations mentioned pertained to external approvals and did not affect the binding nature of the contract, which was clear in terms of cost and scope of work as specified in the contract documents.

The contract documents, attached as subsequent pages, define the agreement without referencing other documents. The bid specifies various aspects, including elevator capacity, construction materials, compliance with OSHA, utility access, and exclusions from the contractor's work. It details the "scope of work" and specific specifications for the project, emphasizing that no additional contract documents were intended. The parties have not produced any documents suggesting a completed contract beyond the bid. The mention of "conceptual drawings" does not indicate the anticipation of further contractual terms. SMA relied on the contract to design and construct the Alton grain elevator, and Nationwide has not demonstrated any genuine material issues regarding the contract's integration. An integrated agreement is determined by the totality of the evidence, and the absence of an integration clause does not imply the agreement is not integrated. The completeness and specificity of Exhibit 1055 suggest it is a fully integrated agreement. Nationwide's claims regarding missing terms related to safety and quality represent an attempt to introduce parol evidence to alter the agreement rather than a valid argument against its integration. Under the parol evidence rule, any external evidence cannot contradict or supplement a fully integrated agreement, which in this case lacks terms requiring SMA to ensure the elevator's safety.

An elevator was constructed for safely handling grain using "state of the art" components. However, there are no genuine issues of material fact regarding whether these aspects constituted terms of the contract, leading to the conclusion that Nationwide's breach of contract claim against SMA fails as a matter of law. Consequently, SMA is entitled to summary judgment on the claim.

In the court's ruling on Baldor's May 2, 2011, Motion for Summary Judgment, the following decisions were made: 
1. The motion is denied for product defect claims related to warning defects but granted for design and manufacturing defects.
2. Summary judgment is granted against Nationwide for breach of the implied warranty of merchantability, fitness for a particular purpose, workmanlike manner, and express warranties, due to the failure of the design defect claim. 
3. Additionally, claims for implied warranties against Baldor are deemed untimely and beyond the scope of authorized claims under Iowa law.

Regarding SMA's May 2, 2011, Motion for Summary Judgment, the court granted the motion in part and denied it in part:
1. Claims relating to the elevator as a whole and certain product defect claims are dismissed based on statutory protections.
2. Summary judgment is granted for breach of the implied warranty of merchantability and fitness for a particular purpose against SMA, supported by statutory protections. 

Claims related to negligence were not dismissed, indicating ongoing litigation on those issues.

The motion regarding breach of implied warranty of workmanlike manner and breach of express warranties against SMA in the Fourth Amended Complaint is denied. Conversely, the motion for breach of contract against SMA is granted. Defendant Schlagel's motion for partial summary judgment is granted concerning Nationwide's claims of manufacturing and installation defects, as well as breach of implied warranties of merchantability, fitness for a particular purpose, and workmanlike manner. The case will proceed to trial on specific negligence claims against SMA, the claims for breach of implied warranty of workmanlike manner and express warranties against SMA, and product defect claims against Schlagel and Baldor regarding warning and design defects. Additional notes clarify that facts were recast for clarity, and mentions prior settlements involving GEECO and S-M Enterprises. The defendants also filed a motion for spoliation sanctions and dismissal with prejudice.

Sanctions, including dismissal, are deemed appropriate due to Nationwide's destruction of evidence from the grain elevator explosion before defendants could conduct an independent investigation. This motion is currently pending before Chief United States Magistrate Judge Paul A. Zoss. The court expresses uncertainty about the viability of tort claims in this context, referencing the Iowa Supreme Court's analysis in *Wright v. Brooke Group, Ltd.*, which distinguishes between product defect claims and breach of warranty claims. The court notes that a warranty of merchantability is based on the expectation that goods will be free of significant defects. Additionally, while claims of serious product defects can support both strict liability and breach of warranty theories, there is a distinction made between defect claims related to safety hazards (addressed through tort actions) and those related to quality and suitability (addressed through contract actions). The Uniform Commercial Code (U.C.C.) only requires the seller to ensure commercial fitness and does not extend to health hazards unless specified otherwise. Injured parties must seek remedies beyond U.C.C. warranties if health hazards are involved. Personal injury claims can be pursued under both tort and warranty theories, but claims seeking only economic losses are limited to warranty claims. The court questions whether Nationwide's product defect claims can proceed if only economic damages are sought. Furthermore, there are no genuine issues regarding whether SMA "manufactured" or "designed" the elevator leg, necessitating reliance on dictionary definitions of those terms, as the statute lacks specific definitions.

The excerpt defines the terms "manufacture" and "design" as per Merriam-Webster's Collegiate Dictionary and discusses the implications for a legal case involving SMA and the design of an elevator leg. It clarifies that merely providing specifications to Schlagel does not equate to SMA manufacturing or designing the elevator leg, as these actions do not involve creating or fabricating the product from raw materials or conceiving its design. The excerpt emphasizes that SMA's role was restricted to providing information for the design rather than engaging in the manufacturing process. It also references Iowa Civil Jury Instruction No. 1000.3 concerning product liability and failure-to-warn claims, outlining the necessary elements for a plaintiff to recover damages, including proof of the defendant's role in selling or distributing the product, the existence of foreseeable risks, and the omission of adequate warnings or instructions that contributed to the plaintiff's damages. Additionally, it notes that if a plaintiff fails to prove any of these elements, they are not entitled to damages. The excerpt further mentions Iowa Civil Jury Instruction No. 1000.2, which sets forth the elements of a design defect claim aligned with relevant case law and legal principles.

To recover damages for a design defect claim against the defendant's product, the plaintiff must establish the following elements: 1) the defendant sold or distributed the product; 2) the defendant was engaged in the business of selling or distributing the product; 3) the product was defective at the time it left the defendant's control; specifics must be supported by evidence; 4) a feasible alternative safer design could have been adopted at the time of sale or distribution; 5) this alternative design would have mitigated the foreseeable risks of harm from the product; 6) the absence of the alternative design rendered the product unsafe; 7) the alternative design would have reduced or prevented the plaintiff's harm; 8) the design defect was a proximate cause of the plaintiff's damages; and 9) the amount of damages. Failure to prove any element precludes recovery, while proving all entitles the plaintiff to damages. In cases where an affirmative defense is presented, the second sentence should be replaced to consider the defense as explained in the relevant instruction.

For a manufacturing defect claim, the plaintiff must prove: 1) the defendant sold or distributed the product; 2) the defendant was engaged in the business of selling or distributing the product; 3) the product contained a manufacturing defect that deviated from its intended design when it left the defendant's control; 4) the manufacturing defect was a proximate cause of the plaintiff's damages; and 5) the amount of damages. Similar to the design defect claim, failure to establish any of these elements results in no entitlement to damages, while proving all leads to potential recovery.

The discussion indicates that the claims in Division VII of the Fourth Amended Complaint primarily pertain to product defects, particularly focusing on "elevator legs" rather than the entire elevator. Additionally, Schlagel asserts it sufficiently disclaimed all implied warranties and argues that Nationwide cannot succeed on its claim due to a lack of identified specific promises that would support any implied warranty. Schlagel further contends that testifying experts indicated the bearings' failure was due to inadequate lubrication, not a breach of warranty.

Baldor claims that under Iowa law, a breach of the implied warranty of merchantability requires the same evidence as product defect claims according to the RESTATEMENT (THIRD) OF TORTS: PRODUCTS LIABILITY. Baldor argues it is entitled to summary judgment on Nationwide's warranty claim for the same reasons it received summary judgment on Nationwide's product defect claims. Nationwide counters that it has established genuine issues of material fact regarding Baldor’s design defect claim. Citing the Iowa Supreme Court's decision in Wright, which states that warranty claims based on fitness for ordinary purposes are similar to tort claims for defective products, the requirement for proving warranty liability necessitates demonstrating a product defect as defined in the Restatement. Nationwide has limited its warranty claim against Baldor to design defects; however, the court found no genuine issues of material fact supporting this claim, thus granting summary judgment for Baldor.

Conversely, Schlagel's grounds for summary judgment include effectively disclaiming the warranty and asserting that Nationwide could not demonstrate its awareness of Midwest Farmers Cooperative's specific purpose for the elevator legs or reliance on Schlagel to fulfill that purpose. Even if the disclaimer were deemed conspicuous, the court noted that Nationwide raised genuine issues of material fact regarding its effectiveness. Specifically, Schlagel's disclaimer, presented only at the time of delivery—after the agreement for design and manufacture was established—was ruled ineffective, supported by precedent that post-sale disclaimers cannot alter pre-existing agreements.

Evidence exists suggesting that Schlagel was aware of Midwest Farmers Cooperative's specific needs for elevator legs and that the cooperative relied on Schlagel's expertise to provide a suitable product. Schlagel had access to detailed site-specific criteria from SMA, including blueprints and specialized information, and purportedly had an engineering department focused on custom equipment design. Conversely, Nationwide failed to establish any material facts indicating that Baldor was aware of the specific purpose for the bearing used in the elevator leg or that any parties relied on Baldor for the selection of that bearing. While there were instances where Schlagel utilized Baldor's expertise, these were not directly linked to the Alton grain elevator project. The bearing in question was a multi-purpose product sold generically to a distributor, lacking any specific connection to the project. Iowa Model Civil Jury Instruction 1100.1 outlines the requirements for recovery on an express warranty claim, which include proving the sale of a product with an express warranty, reliance on that warranty, non-conformance with the warranty, and that the breach caused damages. The standard does not require proof that the seller intended for the buyer to rely on their representation.