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Click here for the full text of this decision FACTS:In the mid 1970s, Equistar Chemicals LP bought two gas compressors from Dresser-Rand Co. Equistar operated the compressors as part of a chemical manufacturing process. Impellers, which resemble large fan blades, are essential parts of the compressors. In 1989 Dresser upgraded the compressors by increasing the size of the existing impellers from 42 inches to 44 inches. While the compressors functioned without major difficulties before the upgrade, afterwards the impellers failed in 1991, 1993 and 1995. To address the recurring failures, Equistar decided to revert to the 42-inch impellers but sought to maintain the higher output achieved by the 44-inch impellers. Accordingly, Equistar retained Dresser. To achieve Equistar’s goal of higher output with the 42-inch impeller, Dresser advised Equistar to operate the 42-inch impeller at a higher speed than the speed at which it was originally operated. On April 1, 1999, the OP-I impeller failed, causing major damage to the compressor, its turbine and adjacent parts of the plant. Dresser supplied engineering and repair services to help repair and reassemble the compressor. The replacement impeller failed on May 14, 1999, again causing extensive damage. On July 24, 2000, Equistar sued Dresser because of the April and May 1999 failures. Equistar sought recovery for the cost of repairing and replacing all the damaged property, including the compressor and impellers, and for losses due to interruption of its business. The case was tried to a jury, which apportioned causation for the occurrences 80 percent to Dresser and 20 percent to Equistar. In answer to the single damages question, the jury found that Equistar’s damages for repairs to its plant resulting from the occurrences in question were $3,641,210. The trial court instructed the jury that, with respect to damages, it was to consider only the cost of repairs “in Harris County, Texas, to restore the Equistar Chemicals’ ethylene plant to the condition it was in immediately before the occurrence(s) in question.” Dresser did not object to the damages question or instruction except for objections to the legal and factual sufficiency of the evidence. The trial court entered judgment over Dresser’s motion for judgment notwithstanding the verdict. Dresser’s motion for new trial and second motion for judgment notwithstanding the verdict were overruled by operation of law. The 14th Court of Appeals held that Dresser’s legal and factual sufficiency objections preserved error as to the economic loss rule and that Equistar’s claims for damages to the compressor were barred by limitations. It reasoned that the compressor was the subject of the relevant contract of sale between the parties, damage to the compressor itself was economic damage recoverable only through a contractual breach of warranty cause of action, and the claim for damage to the compressor, whether caused by original or replacement parts, was barred when the statute of limitations ran out on claims arising from breaches based on the original 1975 contract for sale of the compressor. On appeal to the Texas Supreme Court, Equistar questioned whether Dresser preserved error for appellate review as to the economic loss rule and if it did, the manner in which the court of appeals applied the rule. Dresser asserted that: 1. it preserved error as to the economic loss rule by its motion for judgment notwithstanding the verdict; 2. the court of appeals properly applied the economic loss rule; 3. the jury’s findings of negligence and design, manufacturing and marketing defects are not supported by legally sufficient evidence; and 4. Equistar’s claims in tort are barred by limitations and the statute of repose. HOLDING:Reversed and remanded. The economic loss rule, the court stated, applies when losses from an occurrence arise from failure of a product and the damage or loss is limited to the product itself. Dresser, the court noted, did not object to the damages question or instruction as proposed and submitted. If Dresser believed that the jury charge presented an improper measure of damages because it allowed the jury to find both tort and contract damages by a single answer, the court stated that Dresser was required to timely object to preserve error for appeal. The court agreed with Equistar that Dresser’s no-evidence objections and motions for judgment notwithstanding the verdict, without more, did not preserve error as to the economic loss rule. The court, however, agreed with the court of appeals’ conclusions that: 1. legally sufficient evidence supported the jury’s tort liability findings; 2. Equistar’s tort claims were not barred by limitations; and 3. Dresser waived its statute of repose defense. OPINION:Johnson, J., delivered the opinion of the court. O’Neill and Brister, J.J., did not participate in the decision.

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