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Upholding the largest verdicts ever handed up by a Luzerne County, Pa., jury — now worth more than $60 million with delay damages and post-judgment interest — the Pennsylvania Superior Court has rejected the appeals of a sprinkler system manufacturer that was held partially liable for a 1997 warehouse fire that destroyed millions of stored documents. In an unpublished 43-page opinion in Mobil Oil Corp. v. Grinnell Corp. and First Union Corp. v. Grinnell Corp., a unanimous three-judge panel rejected the argument that the sprinkler system was not a “product” as that term is defined in products liability law because it was not completely installed at the time of the fire. Instead, the panel concluded that Grinnell had installed the sprinkler system in segments and had already issued “certificates of completion” for portions of the installation. As a result, the panel said, “the part of the sprinkler system that failed in this case was no longer in the process of being installed.” The ruling upholds two verdicts — a December 2002 award of more than $20.5 million to First Union, and a January 2003 award of more than $20.7 million to Mobil. Both verdicts have since swelled considerably with interest. Luzerne County Common Pleas Judge Mark Ciavarella awarded delay damages of more than $6.4 million to First Union and more than $5.3 million to Mobil. Mobil’s lawyer, Richard Stabinski of Phelan Pettit & Biedrzycki, said the combined judgments are now worth more than $60 million because post-judgment interest has been accruing at a rate of about $8,000 per day. The verdict for First Union was a victory for attorneys Marc B. Zingarini, Susan Schulman and Thomas E. Butler Jr. of Weber Gallagher Simpson Stapleton Fires & Newby in Philadelphia, and local counsel Harry V. Cardoni of Kingston, Pa. (Schulman has since been appointed to the Philadelphia Court of Common Pleas and, in the Democratic primary, earned enough votes to win a place on the ballot in November.) The verdicts are not only the largest ever in Luzerne County, they also stem from the county’s longest-running trial. The suits stemmed from a May 1997 fire that destroyed three warehouses in West Pittston, Pa., owned by Diversified Records Services Inc. Each warehouse was immense — larger than a football field and 39 feet tall — with a storage system consisting of rows of metal shelving. Experts testified that the fire started in a warehouse with a faulty sprinkler system that had not even been activated, and then spread to the two other warehouses where it overwhelmed the sprinkler systems. The experts also said the sprinkler systems installed by Grinnell in all three buildings were inadequate because they were designed for typical office buildings with solid floors, and not for warehouses with wire racking systems. Due to the sheer volume of paper in the warehouses, fire officials said, the fires could not be contained and burned for nearly five weeks. Nine lawsuits were filed by companies that lost records, and Ciavarella consolidated all of the cases for trial. In the first phase of the trial, the jury considered only liability and returned a verdict in favor of all nine plaintiffs. It found that Diversified was 60 percent responsible for the fire and that Grinnell was 40 percent responsible. (Three other defendants — the building’s architect, the general contractor that built it and a fire alarm company — had settled prior to trial.) But mid-trial, Diversified had struck an undisclosed settlement with Grinnell of a separate suit in which Diversified blamed Grinnell for the fire. As a result, under the principle of joint and several liability, Grinnell stood to bear the full brunt of the jury’s damage awards. Ciavarella had bifurcated the trial between liability and damages, and then announced that he would hold four separate damages trials, with First Union going first; Mobil going second; and the remaining seven defendants split between two trials. The same 12-member jury that had begun its service in August 2002 was scheduled to hear all four damage trials. But ultimately only two of those trials were held because Grinnell settled with the remaining defendants after a pair of verdicts for First Union and Mobil each topped $20 million. Court records show that the remaining several plaintiffs all had much smaller claims, totaling about $2.4 million. But lawyers for First Union and Mobil argued in their damages trials that they had suffered devastating losses due to the irreplaceable nature of the records they lost. Court records show that First Union lost 156,000 boxes of documents and Mobil lost 68,000. At trial, plaintiffs lawyers argued that Diversified had promised that its storage buildings were “state of the art” — a promise, they said, that was in turn based on Grinnell’s claim that its sprinkler system was also state of the art. Evidence at trial showed that Grinnell had completely installed its sprinkler systems in two of the warehouses, but had only partially installed the system in the third building because it was not yet fully in use. But the Superior Court panel also found there was evidence that Grinnell had certified that the partial system in the third building was already functional. “Even though Grinnell left the site with the water turned off and the sprinkler system deactivated, there were various indications that the water was actually on,” the court said. Evidence at trial showed that Grinnell had conducted extensive tests on the system and issued nine “material and test certificates.” The issuance of such certificates, the appellate court found, “confirmed that acceptance testing was performed, the sprinkler system was functioning, and the building was capable of being used for its intended purpose.” The court’s 43-page per curiam memorandum opinion was joined by Judges Correale F. Stevens, Mary Jane Bowes and Seamus P. McCaffery. On appeal, Grinnell’s lawyer — Charles W. Craven of Marshall Dennehey Warner Coleman & Goggin — argued that the verdicts should be set aside because its sprinkler system did not meet the definition of a “product” under the Restatement (Second) of Torts. Because the system was “admittedly incomplete,” the law of strict liability cannot apply, Craven argued. The Superior Court disagreed, saying, “Even though the sprinkler system concededly had not yet been installed in the entire building because no documents were stored in that portion of the warehouse, the system was to be installed in segments as the building became filled.” The panel also rejected Grinnell’s argument that all of the blame lay with Diversified. “Grinnell was responsible for the design and installation of an adequate sprinkler system. � Grinnell failed to fulfill its obligation to turn the water on and activate the sprinkler system, despite knowing that boxes of combustible documents were located on the storage racks,” the court said. In the damages trial for First Union, the plaintiffs lawyers set out to show the jury the myriad ways in which the loss of the documents was costing the bank significant sums. Schulman said most of the damages related to the increased cost of litigation. In case after case, she said, the bank was able to show that its lawyers spent countless hours reconstructing the documents. Zingarini said that in many cases, the bank was forced to pay more than it would have if the documents had been available. More than $4.4 million of the award, he said, related to lost loan documents that the bank could have used to sell non-performing loans to companies that specialize in hard-to-collect cases. In Mobil’s damages trial, Stabinski told the jury that Mobil’s damages claim included significant tax consequences it suffered when it lost the records it would have used to justify its returns. He also said Mobil also lost a huge library of architect’s drawings that the company routinely used for its work in offshore drilling. Craven could not be reached for a comment Monday on the Superior Court’s decision.

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