Sinclair Wyoming Refining Company v. Pro-Inspect Inc

US niSTRlCi
OiSTRiCT Or WYQhuNo
2Cl9 AUo <i3 	Pi. v>' 11
IN THE UNITED STATES DISTRICT COURT 	. on.r n -p
STEPHAH HARRIS. Cl.i-Kf
CHEYENNE
FOR THE DISTRICT OF WYOMING
SINCLAIR WYOMING REFINING COMPANY,
a Wyoming corporation.
Plaintiff,
vs. 	Case No. 12-CV-196-J
PRO-INSPECT INC, a Texas corporation dba
Moody International Asset Integrity Services Inc,
Defendants.
OPINION AND ORDER STATING FINDINGS OF FACT
AND CONCLUSIONS OF LAW
This matter is beforethe Courtfollowinga nine-daybench trial. At trial, the plaintiff Sinclair
WyomingRefining Company("Sinclair") was representedby Patrick R. Day, Buck S. Beltzer,and
Geraldine A. Brimmer. The defendant Pro-Inspect, Inc. (d/b/a Moody International Asset Integrity
Services, Inc., a Texas Corporation) ("Pro-Inspect" hereafter for purposes of this order) was
represented by Paul J. Hickey, O'Kelley H. Pearson, John J. Kenney, and Jules R. Cattie, III.
Having carefully considered the testimony and evidence presented and the arguments of
counsel, the Court makes the following findings of fact and conclusions of law.'
' Having reviewed the parties' proposed findings of fact and conclusions of law, as wellas
(continued...)
1
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 1 of 46

Introduction and Brief Summary of Contentions
Sinclair owns and operates a refinery located at Sinclair, Wyoming, processing crude oil,
including sour crude from Canada. Sinclair is a Wyoming corporation, with its principal place of
business in Utah. Pro-Inspect is engaged by refiners to perform inspection services at their facilities.
Pro-Inspect is a Texas corporation and its principal place of business is in Texas. 	Sinclair has
assertedtwoclaimsagainstPro-Inspect, breach of contractand negligence. Sinclair's complaintwas
filed August 30,2012, seeking to recover approximately $7.5 million in property damages and $50
million in other "business interruption" losses it claims are attributable to the fire that occurred on
September 1, 2011, when a pipe containing high temperature slop oil ruptured. 	Pro-Inspect has
denied all claims and disputes that Sinclair is entitled to recover damages in any amount. This Court
has diversity jurisdiction pursuant to 28 U.S.C. § 1332. Venue is proper in this district pursuant to
28 U.S.C. § 1390.
Broadly, Sinclair contends that Pro-Inspect's inspector. Josh Kiss, was required by the
parties' contract, and by the American Petroleum Institute (API) Codes governing piping inspections
by API 570 certified inspectors, to review all the data gathered by technicians Malave and Hulsey
and carefully consider potential risks to the piping circuit. Sinclair contends it hired Pro-Inspect
specifically to provide a knowledgeable API 570 certified inspector to conduct inspections at the
'(...continued)
all the testimony and evidence presented at the trial, the Court finds that further argument would not
be helpful to the Court. The Court will decide the matter based upon all matters of record, including
evidence and testimony from the trial, and the parties' written submissions. Both parties submitted
extensive proposed Findings of Fact and Conclusions which clearly set forth their respective
assessments of the trial and the decision they believe to be appropriate.
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 2 of 46

refinery. Sinclair contends the API Code obligates inspectors to, among other things: (1) review all
ultrasound data; (2) consider prior inspection histories; (3) confirm that piping systems are properly
classified for risk; (4) evaluate the need for, and determine the proper number of corrosion
monitoring locations (CMLs); (5) ensure that CML locations are placed on a circuit and that
thickness dataat those locations are collected; (6) consider the datacollected for the riskof failure;
(7) calculate the remaining life of the piping in the circuit; and (8) immediately report thin pipe to
the refinery owner for further evaluation and action. Sinclair contends these obligations are all
components ofa standard industry inspection and are spelled outin API 570, the applicable piping
inspection code. Sinclair contends that Pro-Inspecf s inspector. Josh Kiss, failed to do every one of
these tasks, causing a significant stretch of paper-thin pipe to be missed, proximately causing the
explosion and fire and resultant damages. The section of pipe involved in the fire has been lost or
destroyed by Sinclair and as a consequence could notbe inspected or tested by Pro-Inspect.
Pro-Inspect denies Sinclair's allegations and denies any liability for the September 1,2011
fire. It asserts that its employees. Josh Kiss and Michael Fitzpatrick, were directed by Sinclair to
perform two assignments: one, to organize certain refinery piping systems into manageable circuits
in order to facilitate the inspection process (i.e., to systemize andcircuitize); and, two, to conduct
an extemal visual inspection to look for extemal damage tothe piping structure, which was wrapped
in thick, non-transparent insulation. The only work that Pro-Inspect did on the circuit which is the
subject of this lawsuit, 02-04-02, was extemal visual inspection ofthe piping by Kiss. Neither Kiss
nor Fitzpatrick, nor any other person at Pro-Inspect, was asked or directed by Sinclair to make
ultrasonic thickness ("UT") readings to measure intemal corrosion of the pipes. Sinclair had hired
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 3 of 46

a different contractor, TechCorr, to perform that service through its employees, Juan Malave and
Russell Hulsey.
Pro-Inspect maintains that its inspectors performed all of the tasks that Sinclair directed them
to perform,and that theydid so, with no complaintsor otherinstructionsfrom the Sinclairpersonnel
overseeing their work, Pro-Inspect assertsthat it fulfilled its contractual obligations to Sinclair and
cannot be heldresponsible for the fire. Furthermore, Pro-Inspect urges that anyactsand omissions
Sinclair complains of were the acts of Sinclair or TechCorr, the employer of Malave and Hulsey,
and not Pro-Inspect. Pro-Inspect asserts that the proximate cause of the fire and resulting damages
was Sinclair's poor management of its own refinery and nota result of anything Pro-Inspect didor
failed to do.
Standard for Non-Jury Trial
Fed. R. Civ. P. 52(a) provides that in all actions tried upon the facts without a jury or with
an advisory jury, the court shall find the facts specially and state its conclusions of law separately.
Thus, the role ofthis Court in this action tried upon the facts without ajuryisto find the facts
specially and to state separately its conclusions of law thereon. OCI Wyoming, LP. v. Paciflcorp,
479 F.3d 1199, 1203 (10th Cir. 2007)(citing Fed. R. Civ. P. 52(a)). The Court's findings of fact
"should be sufficient to indicate the factual basis for the court's general conclusion as to ultimate
facts[,]... should indicate the legal standards against which the evidence was measured[,]... [and]
should be broad enough to cover all material issues." 	Id. (citations omitted). 	The Court is not
required to undertake thistask in excruciating detail. Id. at 1204. "Thejudge needonly make brief.
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 4 of 46

definite, pertinent findings and conclusions upon the contested matters; there is no necessity for
overelaboration of detail or particularization of facts." Id. (citations omitted).
Findings of Fact
On September 1,2011, there was a fire at the Sinclair Wyoming Refining Company, which
occurred after a pipe ruptured in therefinery's 585 Vacuum Unit at Circuit 02-04-02. Fortunately,
no one was injured in the fire. Sinclair's claimed damages include property and business interruption
economic damages. Sinclair alleges that the fire and claimed resultant damages were caused by Pro-
Inspect's breach of contract and negligence in the inspection ofthat same circuit in January of 2011,
nearly nine months before the fire. Pro-Inspect denies these claims and asserts that the fire was the
resultof Sinclair'sownfailures andstatesthatit fulfilled allcontractual obligations owedto Sinclair
and was not negligent in the performance of its duties.
There are two main crude processing units in Sinclair's refinery: 	the 582 unit processes
sweet crude and the 581/583 unit processes primarily sour crude. Raymond Hansen, who was the
operations manager at the facility in 2011, testified about production at the Sinclair refinery. He
explained there are a number of intermediate units which process oil from the crude umts into
marketable products, such as LPG, gasoline, jet fuel, diesel, sulfur, and other products for
consumers. There are two components of the 581/583 unit including the 581 atmospheric distillation
tower in which sour crude is heated and distilled into different fractions; reduced crude which is not
distilled by the 581 unit is piped into the 583 unit, which separates reduced crude further in the 583
vacuum tower.
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 5 of 46

A 2008 revamp of the refinery was intended, at least in part, to allow the processing of less
expensive crudes. 	The 2008 revamp project involved a considerable investment by Sinclair,
approximately $90 million. It included extensive pipe and heater replacements to allow production
of the less costly Canadian crude oils. The pipe that ruptured September 1, 2011 in the 02-04-02
circuit and which is at issue here had not been replaced during the 2008 revamp, although some
modifications had been made to the line during the revamp. The particular pipe that had been left
in place during the 2008 revamp had been in service for 30 years at the time of the September 1,
2011 rupture.
In 2010, less costly but more corrosive Canadian Cold Lake crudes were introduced into the
refinery. Canadian Cold Lake and Western Canadian Select crudes were run in the refinery in 2010
and in 2011. Beginning in October 2010, Sinclair's refinery processed up to 40% Canadian Cold
Lake Crude. Jt. Ex. 31, Ex. Z11. Crude oil coming into the refinery may be received from various
sources, called a "basket ofcrude," which might include Canadian, North Dakota or Wyoming crude
oils. Tr. Vol. 1, Hansen, 94. Hansen testified "[w]hat we try to do is run really as smooth as we can
because ofthe complexity ofthe refinery. There's a push and pull between all these different umts
and our incoming inventories, our outgoing inventories, and so we try to run a crude that's really a
consistent sulfur on the sour unit, a consistent sulfur on the sweet unit, and that it's a consistent
density. We refer to that as API gravity." Id. 	Hansen described equipment, noting that there are
massive amounts of piping surrounding the umts, with the piping and interconnecting piping
described as very complex. All of the piping and equipment must be inspected periodically. After
crude is processed, products for sale are temporarily stored in tanks and eventually transported out
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 6 of 46

of the refinery through pipelines. The Canadian crudes, also known in the industry as "opportunity
crudes," are poor quality, less expensive crudes that can increase a refinery's profitability. Ex. A12.
Sinclair itself recognized that the corrosive nature of these crudes was a concern long before the
September 1,2011 rupture/fire happened. Ex. Q.
The downside to using the cheaper opportunitycrudes is that they are highly corrosive and
place greater demands on refinery facilities, especially on piping systems. Heavy sourcrudes contain
high amounts of naphthenic acid which can cause extensive damage to refinery piping systems, and
can cause localized, accelerated corrosion greater thanthat caused by sweeter crudes. With higher
naphthenic acid content, opportunity crudes can cause pipes to corrode by as much as 100 mils to
over 200 mils per year.^ There are different types of processes that might corrode and degrade a
refinery's piping and equipment, much of which depends on the type and quality of the crude oil
being processed. Sulfidation is one type ofcorrosion process that occurs inside a pipe as a result of
a reaction between the pipe's surface and sulfur contained in crude oil. This is the generally expected
corrosion mechanism that affects much of the piping in Sinclair's CrudeA^acuum Unit, including
the vacuum tower slop oil 02-04-02 piping circuit at issue in this case. The characteristics of
sulfidation are gradual thinning over time and fairly uniform thinning throughout a piping circuit.
In other words, the various locations within a piping circuit are generally considered to corrode at
similar rates by sulfidation. 	Sulfidation also results in an adherent sulfide coating on the inside
surface of the pipe which acts like a barrier between the corrosive oil flowing through the piping
mil is one thousandth (.001) inches.
7
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 7 of 46

system and the steel wall so that it effectively slows down the rate of corrosion. Sulfidation would
have been the expected corrosion mechanism operative in the 02-04-02 piping circuit at issue here
as all available information indicated a fairly uniform pattern of thinning throughout the circuit.
Erosion corrosion is another corrosionprocess described in API 571 and is exacerbated by
crude oils containing high levels of naphthenic acid. Erosion corrosion causes accelerated and
generally localized corrosion because ofthe erosive actions oftheoil flowing through a circuit. For
this reason, API 570 directs placement of corrosion monitoring locations ("CMLs") at points on a
circuit where flow changes, rather than straight runs. Crude oils that are more corrosive, such as
those with more naphthenic acid, will increase the rate of erosion corrosion in a piping system.
Vacuum-unit piping such as the slop oil circuit 02-04-02, when exposed to naphthenic acids,
can suffer from severe erosion corrosion and metal loss, depending on the particular variables of
temperature, velocity, sulfur content, total acid number ("TAN"), and the concentrations of
naphthenic acid within the piping circuit. Naphthenic acid corrosion is another form of corrosion
that does not occur uniformly throughout a piping circuit. Instead, it may occur at discrete locations
within a piping circuit and can occur when crude oil containing naphthenic acids, such as Canadian
Cold Lake crude, is put through the system. Naphthenic acid corrosion is not predictable even when
the TAN, the temperature, and velocity are known. Naphthenic acid corrosion is episodic, sporadic,
and localized and can occur at rates of 200 mils per year and higher. No information was made
available to Pro-Inspect that would have alerted itto any issues with this more aggressive corrosion
mechanism.
However, there is no disagreement that the particular piping that ruptured had in fact
8
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 8 of 46

corrodedand was thin pipe at the time and locationthat it rupturedin September of 2011. Whether
thatthinning andrupture in that location was caused byfailures in performing the pipinginspection
nine months earlier was clearly contested. This requires the Court to consider what the parties'
agreement for inspectionsencompassed in this case.
James Eggleston was a corporate project supervisor at the refinery at the time of trial.
Initially, he was hired by Sinclair as an inspector and eventually he became the supervisor of the
piping inspection department, and was the supervisor at the relevant times at issue in this case. The
American Petroleum Institute has published standardized procedures governing inspections,
including API 570, entitled "Piping Inspection Code: In-service Inspection, Rating, Repair and
Alteration ofPiping Systems." Joint Ex. 4. Eggleston was certified in 2008 as an API 570 inspector
employed by Sinclair; all other full time inspectors reported to him. He testified that various third
party inspectors were also hired at the refinery to provide inspection services, including Pro-Inspect,
among others. Eggleston was responsible for directing Pro-Inspect's activities at the refinery prior
to and after 2010 during turnarounds and gave instructions to inspectors.
Eggleston sought and received approval in 2010 to hire TechCorr and Pro-Inspect again for
the update mechanical integrity (sometimes "MI" or "catchup") project because Sinclair personnel
were unable to handle the big job presented by the catchup plan. Thus, contract workers were also
used to help with the catchup inspections. Michael Fitzpatrick, a Pro-Inspect contract inspector at
the time, was already onsite working at the refinery when the catchup plan began. Fitzpatrick was
not then an API certified 570 piping inspector; he was certified for API 510 vessel inspection at that
time. Fitzpatrick worked closely with and received instructions from Eggleston during this time
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 9 of 46

period.
Eggleston himself was an API 570 certified piping inspector and had a mechanical
engineering degreefromthe University of Wyoming. He had inspectionresponsibilities in addition
to supervisory duties. 	He arranged all piping inspections at the refinery. He was responsible for
reviewing inspection reports for deficiencies, communicating deficiencies totherefinery's reliability
engineers and unit inspectors, and for identifying and initiating corrective action. The inspection
department at Sinclair was expected to develop and maintain the thickness monitoring program
allowing for monitoring of internal corrosion in the piping systems at the refinery. Ex. A3,6.3.1.
To facilitate the catchup project, in addition to Sinclair's own inspectors, as stated earlier,
independent contractors were also engaged. Eggleston outlined the scope of the work he wanted
done in the crude units in the beginning of the project and assumed those instructions would be
passed on to Kiss by Fitzpatrick or others. He defined the scope ofwhat he wanted inspected. The
scope of work was orally given to Fitzpatrick to systemize, correct, circuitize, and perform visual
inspections. 	Eggleston maintained that he had not undertaken the detailed planning of the project
and that his plan was simply to get the units inspected based on needs he had identified. Eggleston
acknowledged and agreed that he was responsible for the inspection work performed on the 581 and
583 units. Eggleston, as inspection supervisor, had supervisory authority over contract inspectors
in addition to Sinclair's inspectors and he was responsible for all inspection work done at the
refinery. Atall times, Sinclair retained supervisory authority over contract inspectors' work.
Pro-Inspect was started asa family owned company in 1996, with its business described as
the visual inspection of petrochemical equipment, including piping, pressure vessels, storage tanks
in the refining and chemical plant industry. Pro-Inspect arranged for and coordinated contract API
10
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 10 of 46

certified inspectors and licensed technicians for many refineries needing inspections for piping,
equipment, vessels and other assets. Under the contracts between Sinclair and Pro-Inspect, it was
understood that Pro-Inspect would be providingAPI 570 inspectors, charging its customers an hourly
rate for the work performed by its contract inspectors, dependentupon the inspector's experience,
skills, and certifications. The API 570 certified inspector is the highest qualified employee,with the
requisite years of experience and passage ofthe API test demonstrating knowledge ofthe code. Pro-
Inspect charged Sinclair $72.77 straight time and $99.39 per hour overtime, forJosh Kiss, the API
570 inspector working on this project. 	Josh Kiss was employed by Pro-Inspect and provided
services as directed by Sinclair at the job site once he began work at the refinery in January of2011 ?
When the catchup project was beginning, Pro-Inspect's certified vessel inspector, Fitzpatrick,
was onsite at Sinclair, working on other projects. Eggleston had worked with Pro-Inspect and
Fitzpatrick previously during the 2008 upgrade to the 581/583 umts. During that time, Fitzpatrick
had developed and used inspection work requests (IWR) to recommend immediate repairs based on
inspection findings. IWR forms were presented to Eggleston for further consideration, a standard
process at the refinery. Because oftheir favorable prior work relationship, Eggleston agreed to Pro-
Inspect's Fitzpatrick's request to participate in the catchup inspection project. 	Eggleston and
Fitzpatrick met in late November 2010 to discuss and plan the work on the MI catchup project.
Work on the project included external visual pipeline inspection, calculating and placing CMLs on
piping circuits, consistent with guidelines under API 570 § 5.6.3, among other things. Eggleston
^In Kiss's testimony, he stated he believed the hourly rate he was paid was $52 and that he
was paid time and a half overtime (approximately 10-20 hours/week). Tr. VII, Kiss, 1394. These
discrepancies are not significant to the Court's decision.
11
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 11 of 46

askedFitzpatrickto havePro-Inspect bringanotherAPI570certifiedinspectoron board. Fitzpatrick
was a certified vessel inspector, but did not then have API 570 certification.
Kiss was contacted initially by Brad Wells, of Pro-Inspect, regarding a job in Sinclair in
January of 2011. Wells outlined the basic details of the job and asked if Kiss would be interested,
with Kiss responding yes. Kiss did not recall specificallysending a resume to Pro-Inspectdirectly,
and indicated that he had used different websites, some with recruitment companies, to learn about
upcoming work. Kiss was later telephoned by Mike Fitzpatrick, who outlined thejob in more detail
saying that Sinclair was going to systemize and circuitize three different units in a six month long
project, with two months per unit, and to perform any external visual inspections as needed. Kiss
was interviewed telephonically by Fitzpatrick about work on the catchup project at Eggleston's
request. After that interview. Kiss was called back by Brads Wells of Pro-Inspect about the job,
and met with Wells and possibly others in Pasadena, Texas to discuss the job working at the Sinclair
refinery. In January 2011, Kiss went to the Wyoming Sinclair refinery and reported for work as a
Pro-Inspect API 570 contract inspector on the catchup project. He first reported to the safety council
in Rawlins for a safety training course and clearance before he could begin work at the refinery.
After that. Kiss went to the refinery, met with Fitzpatrick at the construction trailer and was given
information about the scope of work. Fitzpatrick introduced Kiss to the TechCorr techmcians and
to Eggleston. To Eggleston, Fitzpatrick introduced Kiss as the inspector who would be picking up
on systemizing and circuitizing and performing external visuals as needed.
Separate contracts were entered into with TechCorr and Pro-Inspect, with TechCorr charged
with drafting isometric drawings and taking UT readings of the pipe. UT readings provide a snapshot
ofa particular piece of pipe at a particular location. Alone, UT readings are not singular tools for
12
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 12 of 46

identifying troublesome corrosion, but the data gathered with UT readings can be used to determine
rates of corrosion over time by comparing earlier or previous UT measurements to newer, more
recent UT readings. A corrosion rate is a predictive tool but is not designed to identify locations that
arein the mosturgentneedof repair. UT readings aretakenat designated locations andintervals and
are used to calculate how much pipe wall is lost over time throughcorrosion. The same CMLs are
used for repeat or subsequent measurements to generate meaningful corrosion data. Corrosion rates
aid in estimating the remaining life of any particular piping system. 	This is calculated by
determining how long it takes for a thickness reading to reach a predetermined minimum thickness,
with the goal being replacement of piping prior to reaching that minimum thickness. 	Minimum
thickness is defined by API 570 as the greater of pressure design thickness or structural minimum
thickness, but a refinery may elect to utilize a higher thickness minimum value instead of code-
defined minimum thickness values in determining useful life of piping, depending upon whether the
policy at the refinery is conservative and how much risk is acceptable. 	In this case, Sinclair
established a minimum thickness value for all piping systems equal to the piping pressure design
thickness, which is the point where internal pressure would cause the pipe to rupture. For the 02-04-
02 circuit, this is 0.004 inches.
Other tools are available, including radiography, that are also used to monitor piping system
health. Radiography samples a larger area ofa piping circuit than standard UT measurements and
may be more effective when evaluating localized corrosion, such as that seen with the use of sour
crude oil with high concentrations of naphthenic acid in heavy Canadian crude oil. Sinclair did not
use radiography to monitor its piping systems.
In addition to visual inspections, an API 570 inspector might be expected to locate and
13
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 13 of 46

determine the number of necessary CMLs, and after inspection, to submit a report. TechCorr and
Pro-Inspect worked hand in hand on the catchup project. Eggleston reported to John Rosacker, who
was in charge of the Sinclair Process Management/Inspection Department. Eggleston was
responsible for the refinery's inspection program and directed Sinclair's technicians and all of the
refinery's contract inspector technicians. Eggleston directed Sinclair's refinery unit inspectors, the
employees responsible for managing inspections of the crude units, and the activities of third party
contract inspectors, including Pro-Inspect among others.
On January I, 2010, Sinclair and Pro-Inspect entered into a written contract, which was
subsequently extended through Pro-Inspect's work in 2011. Joint Ex. 3. The 2011 contract described
the scope of work simply as follows:
Pro-Inspect will provide API Certified Inspectors + NDE Techs to access [assess]
piping and vessels as directed by Sinclair.
Joint Ex. 3, PI-1656. The scope ofwork language was copied by Pro-Inspect's Misti Jones in her
own handwriting fi*om a previous 2009 contract that had been entered into between Sinclair and Pro-
Inspect. Jt. Ex. 2 ("Pro-Inspect will provide API certified inspectors &NDE technicians to assess
piping &vessels as directed by Sinclair.") Jones was authorized to sign contracts on behalf Pro-
Inspect. Jt. Ex. 2, PI-1558.
The contract further provides "Contractor shall perform the Work diligently and carefully in
a good and workmanlike manner according to accepted standards of construction 	and is an
independent contractor with "full power and authority to select the means, methods and manner of
performing the Work, being responsible to Company for all materials delivered and for the results
contracted for." 	Joint Ex. 3, 1634. 	Excerpts from the deposition testimony of Steve Wells,
14
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 14 of 46

employed by Pro-Inspect between June 2006 and April 2012, were read into the record at trial.
Wells was employed as coordinator and manager of field services for Pro-Inspect, coordinating and
sending inspectors to refineries. He testified astohis expectations of API certified inspectors, tothe
professionalism expected of them, and to the expectation that they will exercise the judgment and
expertise that accompanies API certification. They are expected to understand the API code, know
where to find answers necessary to implement the code, and to work independently in a refinery.
Sinclair's Eggleston explained that he was responsible for arranging all of the inspections
during 2011. Def. Ex. A3. Once the project began, Eggleston claimed he was not involved in the
actual on the ground inspection ofeach circuit and that he received progress reports from Fitzpatrick
in morning meetings. Eggleston claimed that he provided no additional direction about the project.
Minutes ofmorning meetings discussing the project and its progress were received and are included
at PI. Ex. 13. However, at the refinery itself, Eggleston for Sinclair usually gave oral instructions to
Fitzpatrick (who was then with Pro-Inspect) outlining the scope ofwork on the project and work that
was to be accomplished. Oral instructions were shared with API certified inspectors daily or weekly,
but those instructions were not written down. 	In other words, details as to the exact scope of
inspection work to be accomplished were as provided and as directed by Sinclair.
The parties have disagreed about the scope of work for this project. 	Sinclair asserts its
inspection supervisor, Eggleston, specifically told Pro-Inspect's lead supervisor, Fitzpatrick, that
Sinclair wanted a "full API 570" inspection. Sinclair contends this would include review of
ultrasound thickness data (UT data), placement of CMLs, calculation of the remaining life of piping
circuits and verbally reporting problems that might be found. Pro-Inspect has asserted Sinclair only
directed it to conduct external visual inspections of the exterior of the piping systems and related
15
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 15 of 46

supports and says that review and analysis of UT data was Sinclair's responsibility, working
separately to review data collectedbythe TechCorrtechnicians. The Court agreeswith Pro-Inspect.
GP Amerispectworked at the refineryfrom 1999to 2004 and did some inspections in 2002.
Between 2002and 2008,there wereno inspections on the 583 unit. Inspections were conducted by
TechCorrin 2008; no corrosionrates were calculatedfrom the 2008 inspections. The 2008revamp
of the 583 unit was completed in August of 2008. As explained briefly earlier, in 2010, Eggleston
began planning for the 2011 catchup inspections, also called the MI (mechanical integrity) project;
his plans anticipated several phases ofwork, and his catchup plan was approved by Sinclair. Joint
Ex. 21. Eggleston stated in his November 17,2010 email to Sinclair's Jim Larscheid, regarding the
mechanical integrity catchup plan (Jt. Ex. 21):
As you know, we have several phases of work to be completed for the Mechanical
Integrity program to become functional.
The first step is to start using the information that has been gathered. I would like to
move the Sinclair personnel currently employed to a status of "Run and Maintain
where SWRC personnel will begin re-surveying areas ofthe plant and entering data
into MaxiTrak on a daily basis. This would not only move the MI program forward,
but allow scheduled time for SWRC's API certified inspectors to obtain the
necessary on the job training for certification in NDE. Initially, I have stated a goal
of one piping circuit or pressure vessel external inspection per day from each
inspector not in the "Rover" position. This would include gathering the UT data ^d
field walkdown, analyzing the UT data with past history and writing the inspection
report in the MaxiTrak program. 	Issuing IWR's for repairs would be part of this
process as well. Initially the unit priority will be based on the Shutdown schedule for
2011 in an effort to get datapriorto shutdown on these units.
Another phase is to get the units that have been radically revamped since the initial
survey re-circuitized. 	The units included here are 581/583 Crude, 582 Crude,
Reformer, and Hydrocracker units. Additionally, we have two small subsections of
the alky complex that were skipped over in the initial survey effort, such as the cat-
poly unit and the GRU. I would like to utilize contract personnel to perform these
baseline surveys, consisting of one API 570 inspector, and three to four technicians
based on workload. 	These areas will require revision to existing sketches and in
16
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 16 of 46

many cases complete new sketches, along with baseline UT data.
Both of these efforts will require support from insulation and scaffold personnel. The
main support will be from the insulation personnel to install inspection ports in the
piping, every effort will be made to place insulation ports in relevant locations that
will be accessible without scaffold on a long term basis. 	I am sure that I can
coordinatethe scaffold supportthrough the maintenancedepartment,but it might be
a smootherprocess if I had control of a subset of insulation personnel that can be
coordinated by my department to facilitate workflow of the new systems.
The workflow has the following steps:
1.) Systemize the P&ID's and break into circuits.
2.) Send technician to sketch circuit.
3.) The API would calculate the number of CML's, and assign on drawing with input
on accessibility from Technician.
4.) Assign package to technician to mark areas withpainton piping.
5.) Assign package to insulation crew for inspection port installation.
6.) Assign package to technical to gather UT data.
7.) The final step is data entry into MaxiTrak. This can be accomplished two ways:
a. By directentryone circuitat a time, or
b. By entering multiple circuits into a spreadsheet and sending to
Canada for bulk entry.
I also envision a clerkto helpput the information packages together.
Jt. Ex. 21.
Collected data was never entered into MaxiTrak system ina timely manner by Sinclair. The
purpose ofthe program was to organize data and make information easily accessible and retrievable.
The program was also intended to perform corrosion rate and remaining life calculations on piping
circuits. The program had been purchased in 2007, but inspection data had not been entered into the
program in 2011. The data management program was never implemented for Unit 583 for any time
period relevant to this litigation, with Sinclair explaining it lacked manpower resources to do so.
Sinclair inspectors were the only inspectors with access to the MaxiTrak program; contract
inspectors did not have authority to use that program.
Fromhis earlierworkat therefinery, Fitzpatrick wasfamiliar withthe2008 581 and 583 umt
17
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 17 of 46

upgrade project. That project had altered some piping circuits that previously existed when an earlier
inspection was performed by GP Amerispect. For inspections of the pre-2008 upgraded piping,
including the circuit in this case, Eggleston instructed Fitzpatrick to use the prior 2002 GP
Amerispect inspection data when conducting the 2011 inspections. Fitzpatrick did not agree with
Eggleston onthe number of CMLs andhad suggested instead that a CML calculation form he had
used in work at other refineries be used duringthe catchup project. Eggleston said he thought GP
Amerispect's placement of CMLs on the circuits was not adequate and said he told Fitzpatrick he
wanted more CMLs placed on the circuits. Eggleston recognized that the code really did not provide
a specific guideline on how many CMLs there should be. Eggleston stated that he had "developed
a CML calculation form to, um, to settle that argument, I guess, to define a number of CMLs for each
circuit based onthe characteristics of the circuit, um, taking into account the length, the number of
fittings, the corrosion rate, the number of deadlegs, all of these are factors in determining the
appropriate number of XMLs for a particular circuit." 	Tr. Vol. II, 378.
So, Eggleston instructed that the CML Excel spreadsheet calculation form that Eggleston had
developed be used to decide the appropriate placement and number ofCMLs. There was no training
onuse of the form. Thereafter, the workflow for the catchup project began bysegregating piping into
manageable circuits, then moved to creating an isometric drawing of each circuit, locating CMLs,
taking UT readings, analyzing the UT readings and expanding the scope of the inspections if so
indicated by those readings, and preparing an inspection report for the circuit. Eggleston required
the use of his CML calculation form by everyone onthe project, including UT techs and inspectors,
such as Fitzpatrick and Kiss. Interestingly, during trial Eggleston made mistakes himself when he
discussed how calculations were to be made when trying to demonstrate proper use of this CML
18
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 18 of 46

calculation form. 	Subsequent to the fire at issue in this case, Eggleston began to hold specific
training classes for inspectors to make sure that they understood how Eggleston wanted the form to
be used. Egglestonsaid the calculationform was based on API 570 factors, includingclassification
and material codes,total length, numberof fittings, deadlegs and corrosion rates. PI. Ex. 138. The
CMLs GP Amerispect had previously placed on a circuit were to be entered on that form and
retained so as to reflect corrosion between 2002 and 2011. If required, additional CMLs would
provide baseline readings for future inspections.
API 570 5.6.1 states:
CMLs are specific areas along the piping circuit where inspections are to be made.
The nature of the CML varies according to its location in the piping system. 	The
selection of CMLs shall consider the potential for localized corrosion and service-
specific corrosion as described in API 574 and API 571. Examples of different types
of CMLs include locationsfor thicknessmeasurement, locationsfor stress cracking
examinations, locations for CUI'* and locations for high temperature hydrogen attack
examinations.
Joint Ex. 4.
To accomplish this part ofthe project, at trial Eggleston said he wanted the form to be filled
out by an API 570 certified inspector, which he testified required judgment calls and input of the
inspector. 	In practice, the form was used by everyone on the project with information obtained
during external visual inspection, new UT readings by TechCorr, and use ofpre-existing data such
as GP Amerispect's 2008 UT readings.
"^Corrosion under insulation, including stress corrosion cracking under insulation. API 570
3.2. 	Kiss described GUI as a program put in place in many facilities to determine the rates of
corrosion under stainless and carbon steels in insulated piping, to establish suspect areas through
piping systems, have insulation stripped, and conduct inspection under the insulation. Tr. V. VI,
1275.
19
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 19 of 46

API 570, at 4.3.4, addresses authorized piping inspectors, and provides:
When inspections, repairs, or alterations are being conducted on piping systems, an
authorized piping inspector shall be responsible to the owner/user for determining
that the requirements of API 570 on inspection, examination, qualityassurance and
testing are met. The inspector shallbe directly involved in the inspection activities
which in most cases will require field activities to ensure that procedures are
followed. Theinspector isalso responsible forextending thescopeof the inspection
(with appropriate consultation with engineers/specialists), where justified depending
upon the findings of the inspection. Where nonconformances are discovered, the
inspector is responsible for notifying the owner-user ina timely manner and making
appropriate repair or other mitigative recommendations.
The authorized piping inspector may be assisted in performing visual inspections by
other properly trained and qualified individuals, who may or may not be certified
piping inspectors (e.g. examiners and operating personnel). 	Personnel performing
NDEs^ shall meet the qualifications identified in 4.3.5, but need not be authorized
piping inspectors. However, all examination results shall be evaluated and accepted
by the authorized piping inspectors.
Joint Ex. 4.
API 570, at 5.6.3, discusses CML selection and indicates that prior data should be considered,
with thickness measurements and knowledge of the process unit to "optimize the CML selection for
each circuit, balancing the effort ofcollecting the data with the benefits provided by the Data." Joint
Ex. 4. More CMLs can be selected for piping systems with any of the following characteristics:
a) higher potential for creating a safety or environmental emergency in the event of
aleak;
b) higher expected or experienced corrosion rates;
c) higher potential for localized corrosion;
d) more complexity in terms of fittings, branches, deadlegs, injection points, and
other similar items;
e) higher potential for GUI.
API 570, § 5.6.3 continues:
^Nondestructive examination. API 570, 3.2.
20
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 20 of 46

Fewer CMLs can be selected for piping systems with any of the following three
characteristics:
a) low potential for creating a safetyor environmental emergency in the event of a
leak;
b) relatively noncorrosive piping systems;
c) long, straight-run piping systems.
CMLs canbeeliminated for piping systems withanyofthe following characteristics:
a) extremely low potential for creating a safety or environmental emergency in the
event of a leak;
b) noncorrosive systems, as demonstrated by history or similar services; and
c) systems not subject to changes that could cause corrosion as demonstrated by
history and/or periodic reviews.
Every CML should have at least one or more examination points identified.
Examples include:
-locations marked on un-insulated pipe using paint stencils, metal stencils, or
stickers;
-holes cut in the insulation and plugged with covers;
-temporary insulation covers for fittings nozzles, etc;
-isometrics or documents showing CMLs;
-radio frequency identification devices (RFID).
Careful identification of CMLs and examination points are necessary to enhance the
accuracy and repeatability of the data.
Corrosion specialists should be consulted about the appropriate placement and
number of CMLs for piping systems susceptible to localized corrosion or cracking,
or in circumstances where CMLs willbe substantially reduced or eliminated.
Joint Ex. 4.
Additionally, API 570, § 6.1, states in part:
This code is based upon monitoring a representative sampling of inspection locations
on selected piping with specific intent to reveal a reasonably accurate assessment of
the condition of the piping.
Joint Ex. 4.
Locating CMLs isa function integral to an API 570 inspection and an API inspection under
§ 5.6.3 requires an inspector to consider UT thickness data and proper classification of piping and
21
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 21 of 46

corrosion risks, but may not always require placement of CMLs or always require more than an
external visual inspection. Placement of CMLs is, as set out in § 6.1, necessary to get a reasonably
accurate assessment of the condition of the piping. The code also suggests that sometimes
consultation with a corrosionspecialistmay be appropriate. 	A visual inspectionis a component of
an API 570 inspection and includes a number of observations suchas whether there are leaks visible,
physical characteristics of piping in the field, condition of insulation, whether insulation is lagging,
evaluation of vibration, evaluation of piping supports and whether they are in place and adjusted
properly.
Section 3 of API 570, entitled "Terms, Definitions, Acronyms," at a note in § 3.1.36, states
that NDE may be conducted by examiners at the discretion of the authorized piping inspector and
become part ofthe inspection process, but the authorized piping inspector shall review and perform
the results. However, the API Code is not a checklist ora prescribed recipe to follow for inspections
of piping. 	It provides general guidance and guidelines for pipeline inspection which may vary
according to need. As noted above, Eggleston himself was an API 570 certified inspector, and itwas
Eggleston who established the hierarchy, flow, and scope ofwork to be performed. Eggleston had
directed inspectors to use his CML calculation form and had determined that the function of
inspectors was to circuitize and systemize the circuit. 	The project, as outlined by Eggleston to
Fitzpatrick, contemplated the initial inspection, entry of the data into Sinclair's data system, and
subsequent evaluation ofthat data. Eggleston testified he did not provide Sinclair's Inspection Policy
(Ex. A3) to Kiss orFitzpatrick while they were working at the refinery in 2011. He also did not train
Kiss when he began working at the refinery in January of 2011 about calculating CMLS under the
Inspection Policy he had developed for Sinclair. If Eggleston required more than circuitizing and
22
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 22 of 46

systemizing of the API 570 inspections, his testimony clearly reflects his expectations were not
communicatedin writing or orally to any of the persons reporting to him during the course of this
project. 	His after-the-fact attempt to redefine or rewrite the contract to include unspecified
responsibilities or stretch the scope of work is unavailing.
Theprojectbeganwiththe 581 crude and 583 vacuum units andwas to laterinclude the 582
crude unit, thereformer complex and hydrocracker unit. Kiss began working atthe refinery January
17,2011, after the catch up program was well underway. Kiss was instructed by Fitzpatrick thatthe
Sinclair CML calculation form, an Excel spreadsheet, must be used by all API 570 inspectors,
including Kiss,® and all of the UT technicians, to calculate CMLs for each circuit. 	Fitzpatrick's
instructions were the instructions he had been given by Eggleston directing theusethe Sinclair CML
calculation form for these calculations. Kiss testified UT data was collected by TechCorr s
employees, Malave or Hulsey, and reported on Sinclair's required Excel CML form. Kiss did not
recall review of that UT data; he relied on the isometric drawings in conducting his inspection and
reported the results of his API 570 external inspection, signing off on his various reports for
inspected circuits. His report and recommendations for the 02-04-02 circuit are set out in the report
at Joint Ex. 18. Kiss had no recollection that he played any role in adding CMLs on certain isometric
drawings. 	During his testimony, he discussed the system and circuit tracking system, describing
systemizing as "taking your different processes, and you're separating those. So where you have one
®Kiss was employed by Pro-Inspect for approximately eight8 months, mid-January to mid-
August. Six months of the eight were spent circuitizing and systemizing; he stayed on to continue
doing extemal visual inspections on the piping for the additional two months extending into
September. Tr. VI, 1288. Kiss says he left after that because he had fulfilled his original agreement,
and did not likethe facility; he saidhe felt it wasn't safe. Tr. Vol. VI, 1288-1289.
23
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 23 of 46

system might be methanol, and all of the piping within that methanol system you would break down
into smaller increments called circuits." Tr. Vol. VI, at 1291.
Kissstatedhe had been assignedto do systemizing and circuitizingand make externalvisual
inspections anddidnot play any role in calculating CMLs. Calculations for circuit inspections were
received after input of data into Sinclair's own Excel CML spreadsheet, as instructed by Sinclair.
Per Sinclair's instructions, the CML calculation form provided the meansby whichthe number of
CML readings tobe taken ona circuit were tobe determined, based on input of data, including CML
readings from prior inspections, new and additional readings after placement of additional CMLs,
if necessary, and identified piping classifications and fluids in the circuits, using information
supplied by Sinclair. 	For purposes of piping inspections, corrosion rates in mils per year were
assumed to be less than 2 mils per year. 	Kiss's report for the 02-04-02 circuit sets out the results
of his 570 external visual inspection observations. It states "SCOPE: An external visual inspection
ofinsulated circuit 02-04-02 was performed per API 570 piping inspection code, and Sinclair piping
material specification P3 IE."'' His report also included, for example, identification of areas where
there was damaged or missing caulk, insulation jacket damage, steam trace leaks, insulation breaks
or missing cap on insulation, areas ofinadequate support and vibration, and missing CML port plug.
The report covered external visual inspection ofthe insulated 02-04-02 circuit performed per the API
570 code and Sinclair piping material specification P3 IE. The report includes recommendations and
notes of repairs made or recommended, as well as reference photographs. No repairs were made at
the time of inspection. Jt. Ex. 18. Kiss's clean isometric drawing is at Jt. Ex. 19.
'Each Piping Inspection Report signed off on by Kiss included a substantially similar
description of scope of work for circuits for external inspection or external visual inspection. See
e.g., Ex. Z-6.
24
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 24 of 46

Kiss indicated that once the reports were completed, they were filed in the Sinclair filing
system. When a unit inspection was completed, all of the reports were transferred to Eggleston, as
owner/user and API 570 inspectorfor Sinclair. Kiss believedreportswould be reviewedbySinclair,
and repairs would thenbe planned and made by Sinclair as required. If reports were of active leaks
at valve or actual chemical process leak (not steam trace leaks). Kiss said he would report them
directly to operations, the area responsible for running, repairing and maintaining the units. It was
Kiss's understanding that the data collected by TechCorr and reports were filed and stored in
bankers' boxes until ready to be shipped by Sinclair to Canada to be processed to determine the
corrosionrates for those circuits. Kiss statedthat "as far as I knew, once everythingwas turnedover
from Pro-Inspect, or from any inspection firm on site to Sinclair, it was in their [meaning Sinclair's]
hands." Id. at 1287. Kiss testified that during the time he worked at the refinery systemizing and
circuitizing and performing external visual examinations between January and June, he saw
Eggleston about once a week. Eggleston would pop in and check on things and see how they were
going. There were no complaints and Kiss believed things were proceeding as expected.
Kiss did offer that he was there to provide additional support for the UT techs, if needed, and
was always available. Kiss did not do any GUI (corrosion under insulation) inspection, and he
understood Sinclair was not going to perform or fund a GUI program. "I was given a specific scope,
which was to perform an external visual inspection, and, uh, I had made a few inquiries,- nothing
specific, but pertaining to a possible GUI inspection, and the return that I got was that, no, Sinclair
will only perform a, an external visual." /c/. at 1335. Kiss consistently stated that the scope of work
he was to perform was limited to visual external inspection, as instructed by Pro-Inspect's project
leader, Fitzpatrick, whose activities in turn were supervised and directed by Sinclair's Eggleston.
25
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 25 of 46

Fitzpatrick testified that Eggieston directed Pro-Inspect's work and that they had been
instructed by Eggieston to perform two tasks: (1) systemize andcircuitize Sinclair's piping and(2)
perform external visual inspections. Fitzpatrick Depo. 40 ("I was given the scope of work byJ. R.
Eggieston to systemize and circuitize piping P&IDs' and perform visual external inspections only."),
at 41 ("[T]hey hired Josh Kiss [as the API 570], who in turn come into systemize and circuitize the
piping P&IDs and perform external visual inspections."), at 53-54, 66 ("His exact words, that we
were to systemize and circuitize the P&IDs and perform visual inspections. TechCorr will take care
of the UTs."); at 67 ("We had two tasks. I can remember systemize and circuitize P&IDs, perform
the visual inspections. 	TechCorr will take care of the UTs."). 	Eggieston had orgamzed the
progression ofwork flow to systemize and circuitize the work, inspections, and entry ofdata into the
company's electronic data management system, along with review and analysis of the data.
Although he asserted he wanted an API 570 inspection, Eggieston's testimony was somewhat
ambiguous as the scope of work he had actually requested and directed, little of which, if any, was
memorialized in writing in the pertinent contract or otherwise. Eggieston never told Kiss or
Fitzpatrick that it was their specific responsibility to review the TechCorr UT readings. 	To the
contrary, Eggieston indicated that after Fitzpatrick had been hired as a direct employee ofSinclair,
one of Fitzpatrick's functions, along with Eggieston, was to review inspection reports. Eggieston
never told Fitzpatrick or Kiss to analyze UT data. Fitzpatrick stated that the boxes of reports that
included reports for the 02-04-02 circuit were located in his office across the hall from Eggieston's
office. Later, when Fitzpatrick was an employee of Sinclair, Fitzpatrick said he wanted to review
^Process and instrumentation diagram, a drawing showing a section of the refinery and
sketching out various flows and connections in that section. Tr. Vol. II, 361.
26
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 26 of 46

and go through those inspection reports and files before turning them over to Eggleston; Eggleston
expected Fitzpatrick to perform that task. API 570, at 5.5.4, does not explicitlyrequirereviewof
UT thickness data as part of an external visual inspection. Jt. Ex. 4.
Eggleston hadno recollection ifthat occurred before Fitzpatrick left Sincleiir's emplojmient,
but said that if Fitzpatrick had not done so, the responsibility for reading those files and reports
would have fallen to himselfor John Bergeson, another Sinclair employee. 	Most of that review
never occurred until after the September 1,2011 fire. The fact is that the computerized data input
and use of the MaxiTrak system was never utilized as contemplated prior to the September 2011 fire.
Fitzpatrick, who later became API 570 certified but was an API 510 certified vessel inspector
at the relevant times, stated in his deposition:
Q. So Fm wondering, Mr. Fitzpatrick, then, if the project required a 570 inspector,
why it was that there were approximately four months without a 570 inspector for the
project?
A, Because-
A. 	—systems —systemizing and circuitizing takes time. 	You can't go perform
external inspections on piping just walking through the unit. 	You have to have
systems and circuits established. And that requires a 570. So the systemizing and
circuitizing does not require you to be an API 570. Performing visual inspections
does. So with that being said, the P&IDs were being systemized and circuitized and
gathering of information from J. R. Eggleston.
Q. (By Ms. Brimmer) SodoI understand your testimony to be, then, thatthe nature
27
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 27 of 46

of the work performed during the months of August, September, October, November
and December were the systemizing and circuitizing of the P&IDs?
A. Yes.
Q. 	(By Ms. Brimmer) Andthe external visual inspections that you've referred to
in your testimony did not begin until January when Mr. Kiss arrived?
A. Correct. Yes.
Q. (By Ms. Brimmer) And once Mr. Kiss arrived, what was your role during that
time that you and Mr. Kiss overlapped?
A. My role wentto the equipment files.
Q. (By Ms. Brimmer) And what do you mean by the equipment files?
A. All equipment that exists in Sinclair Refinery. They have files for each one of
these pieces of equipment that has certain data in them.
Q. Where were those files located?
A. They were located in the main engineering building.
Q. 	So once Mr. Kiss arrived, do I understand that your responsibilities shifted
somewhat?
A. Not somewhat. They shifted.
Q. (By Ms. Brimmer) Okay. Fair enough. So they shifted to you being in the file
28
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 28 of 46

room that's located near the engineering department.
A, Correct.
Q. 	And what were you doing with those equipment files? 	Were you reviewing
them?
A. I was reviewing files, making sure they had certain documentation.
Q. And this was in connection with a PSM audit?
A. Yes, ma'am.
Q. And who was supervisingyou on this project?
A. John Rosacker, J. R. Eggleston.
Q. Were you interacting at all with Mr. Kiss during this time?
A. At the beginning—
A. -1 gave Josh Kiss the same direction that J. R. Eggleston gave me. Systemize
and circuitize P&IDs, perform visual inspections, and TechCorr would take care of
the UT. At that time, I rolled over to the inspection orthe equipment file project, as
you might say. 	And that's when the whole transition of me becoming Sinclair
became. ...
Fitzpatrick Depo., 70-74 (counsel's various objections to form omitted).
J. Robert Sims discussed API 570, inthe context of the governing contract between Sinclair
and Pro-Inspect. His testimony is consistent with, and elaborates on, the notion that a contract may
provide for specifically defined services or inspections, as occurred in this case. He reviewed the
contract with Pro-Inspect and agreed that the scope of work was determined and directed by Sinclair.
29
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 29 of 46

Sims also reviewed the MI catchup plan crafted by Eggleston that described the workflow of that
plan. UT data was to be gathered by technicians (TechCorr in this case) and entered directly into the
MaxiTrak database and system. Because neither TechCorr nor Pro-Inspect were authorized to access
the MaxiTrak database, of necessity, Sinclair would have had to enter the data and information from
reportsintothat systemwhich wouldall be run throughthat computerprogramfor analysis. Sinclair
did not get that data and other information entered into its system for analysis during the relevant
time frames. Sims opined that, after review of the contract, API 570, and deposition testimony.
Kiss's responsibilities were those necessary to satisfy API 570 with respect to visual external
examination and location or placement of CMLs. 	The contract did not require Kiss to perform
unassigned tasks. Responsibility for tasks not assigned to Kiss would have fallen to Eggleston (or
Bergeson) as the authorized certified 570 piping inspector in charge of inspection. Kiss provided
the visual external examination and met the requirements of API 570 for the assigned task. Kiss
reported 	nonconformities 	in 	his 	visual 	examination 	reports, 	which 	also 	included 	repair
recommendations in some cases. 	The visual inspection reports should have been evaluated by
Sinclair's Eggleston or Bergeson when they were available on paper or after data entry and analysis
into the MaxiTrak program. However, that did not occur prior to the fire in September of 2011.
Among other things, Sims noted that the information he had been provided for review
indicated that Fitzpatrick and Kiss were directed by Sinclair's Eggleston to use classification codes
developed by GE Amerispect in 2001 or 2002; they were instructed to calculate CMLs using the
form developed by Eggleston, in the manner Eggleston directed and using existing data, also as
directed by Eggleston. Sims considered Sinclair's litany of failures by Kiss and Pro-Inspect,
including, simply by way of example, the alleged failures to review or evaluate UT measurements.
30
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 30 of 46

alert Sinclair of nonconformances shown in UT measurements, extend the scope of inspection based
on findings shown in UT measurements, but recognized that Kiss had not been assigned those tasks
and it was not Kiss's responsibility to look at UT data or extend the scope of inspection. Eggleston
for Sinclair would have been the primary person with authorityand responsibilityto considerthose
deficiencies to determine how to address them. Unquestionably, Sinclair has asserted that Kiss had
theobligation and authority to extendor modify thetaskshe was assigned to perform. However, the
agreement between Sinclair and Pro-Inspect required Kiss to perform visual external examinations
consistent with the parameters of API 570. He was not required to perform tasks other than those
encompassed inthe contractual agreement, as assigned to him by the Sinclair certified API inspector,
Eggleston, who identified and supervised the work Kiss was asked to do. Sims, Tr. Vol. V, 894-971.
Sims opined that Kiss did comply with the API 570 requirements of the contract. 	Sims also
acknowledged that while numerous tasks and modes ofinspection are delineated and encompassed
in API 570, the contract defining the scope of work governed what tasks Kiss was expected to
accomplish pursuant to that contract. This is a proposition the Court agrees with.
The Court finds that Sinclair required Pro-Inspect's API 570 inspector Josh Kiss to
systemize, circuitize, and perform visual inspections as directed and assigned by Sinclair. That was
the work Kiss in fact performed. After that work was performed, Sinclair's employees would then
take on the task of recording and evaluating the data collected. Sinclair did not complete that task
nor did it read any inspection reports until after the September 1,2011 fire. The contract between
Pro-Inspectand Sinclair was satisfied.
Evenifthe Courtwasconvinced thatthecontract required something otherthanasdescribed
above, (and it is not so convinced), it is unclear whether the information reflected in the reports and
31
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 31 of 46

data obtained and included in the inspection reports would actually have disclosed that the particular
piping line in the 02-04-02 circuit was so thin that a rupture was imminent and immediate
replacement of the piping was required. Sinclair's Hansen testified that if he had been aware of the
readings and data from the inspection on January 22,2011, he would have taken further measures
at that time and replaced the pipe, which he said could have been accomplished without shutting the
refinery down. Inthe Court's view, this testimony wassomewhat self-serving andquitespeculative,
consisting primarily of a personal beliefthat if the pipe had beenreplaced earlierit would not have
burst as it did. It does not explain Sinclair's failures to review information it actually already had.
The expert testimony received and heard at trial did not persuade the Court that Sinclair
would have taken any action to replace pipe or that it would have done so before the rupture in
September 2011. What all of the expert testimony did reveal is that there is significant variance in
how the standards and guidelines embraced in the API codes are applied and utilized within the
industry. For instance, two experts offered divergent opinions as to probability the pipe would have
ruptured as it did would have changed with different number and/or placement locations for CMLs
on the circuit. Dr. Caligiuri, plaintiffs expert, testified that 46 CMLs placed approximately every
2 feet in an 80 foot stretch of piping on the circuit would have been appropriate, rather than the 11
or 13 that were already in place. Dr. Casey testified that the calculation and placement of the 11
CMLs on the circuit was proper. However, neither expert's testimony was such that the Court was
persuaded that the thinness of the pipe at the point of rupture in the 02-04-02 circuit would have been
more likely to have been discovered during inspection with the placement of more CMLs or would
have prompted immediate repair or replacement of the piping.
Sinclair'sexpert. Dr. Caligiuri, opined that the rupture occurred when extensive localized
32
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 32 of 46

wall thinning caused the pipe to become sufficiently thin that it could no longer withstand the
internal pressure associated with normal operation. Dr. Caligiuri testified that if the correct number
of CMLs had been calculated and placed that the inspection team would have found the thin piece
of pipe. Dr. Caligiuri suggested that at least one of the additional CMLs would have actuallybeen
placed on the piece of pipe where the actual rupture occurred. 	Dr. Caligiuri asserted that if the
inspections on the circuit had been expanded, Sinclair would have been able to prevent the
September 2011 fire. 	Dr. Caligiuri recognized and stated that the API code is nota "cookbook."
However, he opined that Kiss's inspection was notsufficient because he failed to calculate and locate
CMLs without considering UT readings and prior inspection data. 	He believed the inspection
performed did not really assess the condition of the pipe, and that caused Sinclair to lose the
opportunity to identify a problem and have the circuit removed before the September 1 fire. 	Dr.
Caligiuri did opine about ideal 570 inspections; he did not include in his assessment of the Kiss
inspection that Sinclair's contract with Pro-Inspect was for visual external inspection, as
contemplated by the catchup project plan crafted by Eggleston. 	It appears that much of Dr.
Caligiuri's opinion was based upon representations made to him by Eggleston about what he had told
Pro-Inspect he wanted in connection with this inspection and of the work to be performed. 	Dr.
Caligiuri's discussion ofhis understanding oftypical API 570 inspections, combined with what he
learned from Eggleston, may support his ultimate opinion. Standing alone, his opinion is
understandable. However, the evidence presented to the Court at trial, including the testimony of
Eggleston, Fitzpatrick, Josh Kiss and others, and documentary evidence, reflects that the inspection
required at the time was an external visual inspection, with other work, including data entry, review,
and repairs if required to be performed ata later date. This undercuts the validity of Dr. Caligiuri's
33
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 33 of 46

opinion that the inspection performed was not adequate, with the result that the thin pipe was not
replaced or repaired prior to the September 2011 rupture.
Pro-Inspect's expert was Dr. Casey, whose expertise was in failure analysis, mechanical
integrityinvestigations and metallurgical analysis. Dr. Caseyreviewedthe samematerialsreviewed
byDr. Caliguiri, but reached different conclusions. Dr. Casey's opinion wasthat the failure of the
pipe was not foreseeable based upon thedataavailable to Pro-Inspect, and further, thatif Pro-Inspect
had analyzed UT data in the manner Sinclair has suggested it should have done, the remaining life
of the piping circuit would have been either 14 years or approximately 7 years depending on
standards used. Dr. Casey opined that the piping in the relevant circuit was not thin and that, against
objective standards like API 570 and 574, the 0.137 value would indicate that pressure design and
structural minimum was well above the value defined by API 574as alert thickness. He opined there
was nothing to support the assertion that the 0.137 measurement would have prompted immediate
replacement ofthe pipe. Dr. Casey testified that if the number ofCMLS had been increased it was
unlikely that a CML would have been placed on the vertical section of the pipe in the area ofthe
rupture because of API 570 guidance and because the Sinclair CML calculation form gave a high
preference for placement of CMLs at fittings, locations in a piping system potentially susceptible to
accelerated corrosion. To conclude that the addition of more CMLs on the particular line would
have increased the discovery ofthe point of rupture leading to the September 1,2011 fire would be
speculative, particularly given the calculated remaining thickness measurements were not such that
immediate replacement would have been appropriate.
Sinclairswitchedto the useof a morecorrosive Canadian ColdLakeCrudeoil in September
of 2010. This information was not shared with the contract inspectors. 	Information supplied by
34
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 34 of 46

Sinclair to any inspector or tech working on the catchup project was incomplete and often erroneous.
By way of example and not asan exhaustive listing, other problems included incorrect piping circuit
and service classifications, improper use of the CML calculation sheet, corrosion rates were not
assumed, and remaining life for equipment was not calculated appropriately.
Pro-Inspect placed a great deal of emphasis on the switch to Canadian Cold Lake Crude in
September 2010 as a possible factor contributing to accelerated corrosion in the piping system. The
testimony and evidence demonstrated'that the use ofCanadian Cold Lake crude oil in September of
2010 could have caused the piping to erode at an accelerated rate between the time it began to be
used in September of 2010, continuing through the period including the January 2011 inspection and
on through the period up to the September 1, 2011 fire that occurred after the piping ruptured.
Sinclair's awareness that this change in product source was likely having deleterious consequences
and impacts on its equipment is evident when events occurring after January 2011 are considered.
Sinclair's 30(b)(6) designee, Moote, testified in his deposition regarding metallurgy in the
slop wax line, considering the corrosive nature of material, corrosion capabilities in the crude stream,
and temperature. He testified sometimes sulfur can be a corrosion inhibitor with naphthenic acids;
each stream and each condition must be evaluated, a determination made as to what is corroding or
not corroding and when it should be replaced. If replacement is determined to be appropriate, the
type of material to be used to replace materials then in service would be based upon the cause of
corrosion or the cause of thinning. Different metallurgy may be required for different situations.
Moote indicated that Sinclair began processing Canadian Cold Lake crude inabout mid-2010 as part
ofthe crude mix through perhaps as late as June 2011. After that, it was not used as part ofthe crude
being processed as Cold Lake crude had a higher sulfur content than the assay showed and was
35
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 35 of 46

loading up sulfur plants and hydro treaters more than anticipated. "It also had more bottoms to it,
which created more feed for your coker, which we didn't anticipate, so we moved from that crude
to other crudes that would fit our configuration better." Tr. Vol. VII, 1478.
In early2011, Sinclairwasconsidering anddiscussingpossibleuse of a GEprogramoffering
called the Predator Assessment. The program was designed to assess and consider, among other
things, napthenic acidcorrosion control and monitoring. JointEx.59, which wasdated February 2,
2011, with the subject line"Predator Monitoring Proposal" from GEto Sinclair, with attention to
Gregg Byers, Bob Portz and Ray Hansen, outlined plans for sample collection for analysis in the
initial Predator Monitoring Program. 	GE did do some preliminary hydrocarbon analysis for the
581/583 crude unit, a study designed to identify corrosion risks and possible means of mitigating
those risks and a preliminary report in April of2011. Jt.Ex. 56;Ex. V-13. On September 23,2011,
after the incident giving rise to this litigation, GE submitted to Sinclair its 581/583 Predator
Assessment report. 	"The primary scope of the Predator Assessment is to evaluate the impact of
processing opportunity crude oils like WCS and Cold Lake on the physical assets ofthe refinery 581
crude and 583 vacuum units." Jt. Ex. 57,96183. In that September 23,2011 assessment, GEmade
recommendations and gave warnings about the use and processing ofCanadian Cold Lake crude oil.
Jt. Ex. 57. The GE September 23, 2011 assessment continues,
... the thinning occurring on the intemal surface of the T5 low-alloy steel pipe was
likely caused by an erosion corrosion mechanism. 	Erosion corrosion is the
accelerated attack of a metal component because of the relative motion between a
fluid and the metal surface. Metal is removed from the surface as dissolved ions, or
forms solid corrosion products, which are mechanically swept from themetal surface.
High temperature corrosion mechanisms such as naphthenic acid formation or
sulfidation (sulfidic corrosion) may have been involved inthe attack. In addition to
the chemical factors, the velocity in the location where this sample was installed in
the line may also be relevant to the overall erosion mechanism. 	Areas of high
36
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 36 of 46

velocity and turbulence lead to greater metal wastage rates. At temperatures of650-
700 °F, metal loss rates by sulfidic corrosion would approach 0.007-0.014 inch/yr. (7-
14 mpy) in T5 low-alloy steel depending on sulfur content (see Appendix). 	The
presence of hydrogen may also increase sulfidic corrosion rates. Page 4
The conclusions of the assessment include:
1. The internal metal wastage on the pipe sample from the Slop Oil Line of the
Vacuum Unit was likely caused by an erosion corrosion mechanism. Micrometer
measurements indicated a minimum and maximum wall thickness of0.007 and .032
inches. The original wall thickness of the piping was not known.
2. The velocity in the location wherethis sample was installed is directly related to
the overall erosion/corrosion mechanism. Areas of high velocity and turbulence lead
to greater metal wastage rates.
3. Erosion corrosion is usually associated with naphthenic acid formation in high
temperature refinery operations and was likely involved in the attack. Sulfidation is
also possible. It is recommended that a review of slop oil be conducted along with
the determination of the total acid number (TAN) and naphthenic acid number
(NAN) to better understand the cause of damages in this piping.
4. To mitigate high temperature corrosion in this slop oil line it may be necessary to
use a suitable corrosion inhibitor treatment program or up-grade to stainless steel
piping. 304 and 316 austenitic stainless steels offer superior resistance to sulfidic
corrosion at temperatures up to 750° F. Naphthenic acid attack may be mitigated by
using higher molybdenum content austenitic stainless steels such as 317.
Jt. Ex. 57, SWRC096246.
Other problems make it difficult to assess whether Pro-Inspect's alleged failures, if there
were any, caused the damages Sinclair claims that it suffered. After the fire, a6 inch piece ofpipe
was taken from a larger 2-1/2' to 3' section of pipe between the flanges on the south side of the slop
oil loop and was sent by Federal Express to GE. Rosacker, who sent the pipe sample to GE, did not
contact or write GE to request that the pipe be maintained after completing its analysis. A second
piece of pipe evidencing the actual failure ofthe pipe wall was given to Dan Bulkley and George Zak
of the Wyoming OSHA office at the beginning of their investigation after the fire. Bulkley stated
37
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 37 of 46

they then kept the piece of pipe onsite in the trailer at the refinery under lock and key. After OSHA
had concluded its investigation and left the Sinclair site, in September and October 2011, the pipe
remained in the trailer for some period of time, although Bulkley recalled that the last time he saw
the pipe it was in the back of Rosacker's pickup. PI. Ex. 15 (photos- Bulkley). At the time of trial,
and even before this litigation commenced, the pipe was lost or disposed by Sinclair, perhaps taken
to the "boneyard" whereSinclairputsold equipment andpipingoutto pasture, whichmightlaterbe
sold tojunk dealers as salvage. It was never made available to Pro-Inspect or its experts for analysis
and evaluation.
Following the fire in September of 2011, a "lessons learned" memo was prepared by
Eggleston. Jt. Ex. 15. There are numerous statements in the lessons learned memo that cause the
Court to take a skeptical view ofSinclair's claims inthis case, and that also reveal Sinclair's inability
and failure to communicate and direct activities atthe refinery clearly and failure to capture its actual
contract requirements in the pertinent agreements for inspection and assessment ofthe piping in the
circuit. The September 14, 2011 memo stated "[djuring the initial investigation phase of the 583
fire that occurred on 9/1/11, the focus turned to the inspection department and highlighted several
failures in our system. This fire should not have happened, SWRC inspection failed to do the job
properly 	" 	The memo written by Eggleston continues:
1.) 	The circuit that failed was improperly classified per API 570. This particular line
was partially classified as class 2 by GP Amerispect in 2001 and partially as class 3
piping. This portion of the data was not questioned when the umt was re-circuitized
and systemized late last year. The review process failed to take into account that this
system runs ata temperature high enough for auto-igmtion when exposed. The entire
line was assumed to be API 570classthreepipingbasedon the fact that two of the
three GP Amerispect circuits incorporated in the new single circuit (02-04-02) were
class three and the remaining circuit class two.
38
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 38 of 46

Lesson 1 - never assume that the job was done right the first time, take the time and
make the effort to analyze and verify the classification is correct, especially when the
entire unit is to be re-circuitized and systemized. 	If you are unsure about the
classification, ask Tech Services, Engineering, Operations to sit down and help
determine the severity and criticality of the service.
2.) 	The CML calculation sheet that is used to determine the number of CML on a
particular circuit was not used properly. A corrosion rate was not assumed for this
calculation, which is necessary to determine an adequate starting number for CML.
Lesson2 - Correctly use the toolsprovided for thejob. If the number of CMLfeels
wrong, it probably is wrong. If you are consistently getting results that feel wrong,
take the time to ask questions about the process. 	Do NOT just scratch out the
calculation resultand put in a number that matched what wasthereor feels right.
3.) 	Erratic or low readings were not followed up on by the 570 in charge of the piping
project. The low readings were flagged by the technician. 	While the calculations
indicated a moderate corrosion rateof 8-9 mpy, referring this valuebackto the CML
calculation sheet would have triggered more inspection points to be placed on the
line and perhaps flagged this line for immediate replacement.
Lesson 3 - Calculate a remaining life for every piece of equipment inspected. With
every report, if the corrosion rate is higher than expected, gather more data. 	As a
certified inspector, you have been trained and tested for your ability to do these
calculations.
4.) 	This data sat in a box for nine months and was not properly reviewed until an
accident occurred. We cannot fix whatwe do not know about. After reviewing all
ofthe reports, several were identified that mentioned active leaks on process piping.
The notification process is fairly well defined here at SWRC. You will all receive
training on how to notify SWRC personnel ofa potential problem.
Lesson 4- Make sure everyone associated with the inspection department at SWRC
is trained in the IWR process.
5.) 	Lack of SWRC oversight. 	No data was reviewed until after the accident.
This is not acceptable.
Lesson 5 - Do not get offended when someone wants to look over your work and
review it. In fact I encourage you to ask someone else to review the data before it
is turned in or filed. 	Everyone is capable of missing something, but everyone is
capable of catching something that was missed.
39
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 39 of 46

After trial and consideration of the evidence and testimony, the Court finds that Sinclair has
failed to show by a preponderance of the evidence that Pro-Inspect breached the contract and has
failed to show that the January inspection of the 02-04-02 piping circuit was not performed in
accordance \vith the underlying agreement between Sinclair and Pro-Inspect. The tasks required by
thecontract werein factperformed, as directed by Sinclair. The CourtfindsthatPro-Inspect did not
breach the contract, as alleged by Sinclair. Sinclair gotwhatit bargained for. Additionally, Sinclair
has failed to show bya preponderance ofthe evidence that Pro-Inspect was negligent in performing
the piping inspection and failed to show by a preponderance of the evidence that its claimed damages
were caused by Pro-Inspect's alleged negligence. 	Along with the contract claim, Sinclair's
negligence claimagainst Pro-Inspect fails.
Conclusions of Law
1. Any finding of fact which includes a conclusion of law is incorporated herein.
2. The Court has diversity jurisdiction under 28 U.S.C. § 1332(a). Venue is proper in this
Court pursuant to 28 U.S.C. § 1391(a). Jurisdiction and venue are not contested.
2. In a diversity case like this one, "except in matters governed by the Federal Constitution
or by acts ofCongress, the law to be applied in any case is the law ofthe state." James River Ins. Co.
V. Rapid Funding, LLC, 658 F.3d 1207, 1216-17 (10th Cir.2011) (quoting Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)). The Court applies Wyoming
substantive law to all liability and damages questions in this case.
3. A breach of contract claim in Wyoming consists ofthe following elements: (1)a lawfully
enforceable contract, (2) an unjustified failure to timely perform allor anypartof what is promised
40
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 40 of 46

therein, and (3) entitlement of the injured party to damages. Hailing v. Yovanovich, 391 P.3d 611,
616 (Wyo. 2017), quoting Schlinger v. McGhee, 268 P.3d 264,268 (Wyo.2012); see also Morrow
V. Xanterra Parks & Resorts, 925 F. Supp.2d 1231 (D. Wyo. 2013).
4. There is no dispute that the parties have a valid contract, satisfying the first element.
However, there has been no unjustified failure to timely perform all or any part of what was
promised in that contract. Pro-Inspect performed as instructed and in accordance withthe parties'
agreement. The plaintiffhas failed to prove the second element bya preponderance of the evidence.
5. As to the third element,even if Sinclairhad provedthat Pro-Inspectbreachedthe contract,
which it has not, Sinclair has failed to prove thata breach of contract by Pro-Inspect was the cause
ofdamages claimed to have been suffered as a result ofthe September 1,2011 fire. The plaintiff has
failed to demonstrate its entitlement to recover damages in this case, failing to prove the third
elementof the contractclaim by a preponderance of the evidence.
6. The plaintiff, Sinclair, is not entitled to recover damages from Pro-Inspect on its claim
for breach ofcontract. Pro-Inspect is entitled to judgment in its favor of the breach of contract claim
asserted by Sinclair against Pro-Inspect.
7. Plaintiff's negligence claim fails for several reasons. In the usual case, in order to state
a claim for negligence, a plaintiffs factual allegations must establish the following elements: "'(1)
the defendant owed the plaintiff a duty to conform to a specified standard of care; (2) the defendant
breached the duty of care; (3) the defendant's breach of the duty of care proximately caused injury
to the plaintiff; and (4) the injury sustained by the plaintiff is compensable by money damages.' Birt
V. Wells Fargo Home Mortgage, Inc., 75 P.3d 640,658 (Wyo. 2003)." Angell v. Freedom Mortgage
Corporation, 2016 WL 9453335, *5 (D. Wyo. 2016); Hebert v. Sinclair Oil Corp., 2016 WL
41
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 41 of 46

9450460, *4 (D. Wyo. 2016), citing Valance v. Vl-Doug, Inc., 50 P.3d 697,701 (Wyo. 2002); Clark
V. Keller Transport, Inc., 644 Fed. Appx. 846, 851 (10th Cir. 2016) (the same, quoting Laredo v.
SolvayAm., Inc., 212 P.3d 614, 630 (Wyo.2009)).
8. The duty of care is defined by the parties' contract; the Court found the contract was not
breached by Pro-Inspect. Sinclair also failed to proveby a preponderance of the evidence that the
alleged breach proximately caused the claimed injury and damages. Sinclair claims thatthe contract
was breached whenJoshKissand Pro-Inspect failed to doa properAPI570inspection ofthe piping
in January of 2011. The Court has already determined that Sinclair directed inspections and Pro-
Inspect, and Kiss, performed as directed. 	The fire occurred in September of 2011. 	The expert
testimony offered by all the parties failed to demonstrate that the inspection, even if performed as
Sinclair has claimed, was the cause of the fire and resulting damages in September. 	Clearly,
corrosion and thinning of pipe occurred. However, none ofthe evidence and testimony heard by the
Court proved by a preponderance of the evidence that the fire nearly nine months later would not
have occurred if additional CMLs had been placed or the API 570 inspection had been performed
differently. The assertion that Sinclair would have replaced the pipe immediately is self-serving, and
clearly inconsistent with the recognition that Sinclair's own failures contributed to the cascade of
problems that could be regarded as significant contributors to the September 2011 fire. While there
are threads that could be used to weave a logical explanation, the woven explanation remains
speculative. Plaintiff is unable to prove by a preponderance of the evidence the alleged breach of
a duty caused the damages it claims to have suffered. One must speculate that what might or might
not have happened if the January inspections had been done differently or the parties' agreement
clearly required more than an external visual inspection. One must speculate that there might have
42
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 42 of 46

been a different outcome and the pipe rupture and fire would not have occurred. This is not sufficient
to support any decision finding that Sinclair is entitled to an award of damages as a result of
negligence on the part of Pro-Inspect.
9. Additionally, the economic loss rule bars recovery in tort when a plaintiff seeks purely
economic losses unaccompanied by physical injury to person or property. Rissler & McMurty v.
Sheridan Area Water Supply Jt, PowersBd, 929P.2d 1228,1234 (Wyo. 1996). Here, Sinclair has
claimed business interruption and property damages, which are economic losses within the meaning
of the rule. This includes the loss of profits and business interruption damages Sinclair seeks to
recover here. There is no duty in this case that Pro-Inspect is alleged to have breached that is
independent of the contract at issue in this case.
10. This Court has had an opportunity to discuss the economic loss rule in another recent
case, also involving Sinclair. Sinclair Wyoming Refinery Co. v. A&B Builders, Ltd., United States
District Court for the District of Wyoming, Case No. 15-CV-91-ABJ, Doc. 241. While the instant
case is distinguishable, some of the analysis in A&B Builders is helpful. In that case, the moving
party argued that Sinclair was improperly seeking to pursue tort causes of action without alleging
violation ofa duty independent from the parties' contract. \nA&B Builders, the Court acknowledged
the difficulty that exists in examining the independent duty rule apart from the economic loss rule:
A. 	The Independent Duty Rule in General
In orderto resolvethe Motion, the Courtmust applyWyoming's independent
duty rule. Unfortunately, it is difficult to examine the independent duty rule separate
from the economic loss rule as the Court has not found a Wyoming case that deals
with the two separately. Furthermore, Sinclair has relied on the presence of economic
loss in many of the cases below as a distinguishing factor.
The Court will begin by examining the relevant case law starting with JBCof
Wyoming Corp. v. City of Cheyenne, 843 P.2d 1190 (Wyo. 1992). In JBC the
43
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 43 of 46

Wyoming Supreme Court acknowledged that "a breach of an independent duty which
arises out of the contractual relationship may give rise to an action in tort." Id. at 1197
(citations omitted). However, the court held "[f]ailure to pay sums due under a
contract" can only support a breach of contract claim. Id. In declining to extend a tort
cause of action for consequential damages flowing from a breach of contract, the court
listed three reasons:
First, it is not our policy to recognize tort actions for purely economic
damages....Second,tort recoverybasedon the contractualrelationship
should only be allowed where the breach constitutes an independent
injury over and above disappointment of the plaintifTs expectation
interest.... Finally, tort liability can only be premised on a duty
independent of contractual duties.
Id. (citations omitted). Unfortunately, JBC only addresses whether an independent
duty arises for failure to pay under a contract. Id. at 1197. Since failure to pay is not
an issue in the present case, JBC only helps to outline the broad principles of the
independent duty rule.
The next case, Rissler & McMurry v. Sheridan Area Water Supply Joint
Powers Bd, presents a straightforward statement of law that when the parties have
"contracted to protect against economic liability caused by the negligence of the
defendant, there is no claim under Restatement of Torts (Second), supra, § 552 for
purely economic loss." 929 P.2d at 1235. As part of its explanation, the court gave
deference to the ability of sophisticated parties to order their affairs as they saw fit. Id.
The CB&I Parties have taken up this language and pointed out that each party
involved in the present matter is a sophisticated business entity and together they
addressed all the alleged negligence issues in the ECP Contract. ECF No. 176, p. 19.
Sinclair counters that this case is not applicable because the damages in Rissler &
McMurry are economic while Sinclair's are not. ECF No 194, p. 17. For reasons
discussed below, the parties' level of sophistication is much less important than
whether the parties addressed the negligence claims in their contract and the type of
damages is less important than the presence of an independent duty.
The Wyoming Supreme Court expressed the economic loss rule again in Excel
Construction, Inc. v. HKMEngineering, Inc., 2010 WY 34,228 P.3d 40 (Wyo. 2010).
In Excel Construction, the court held that even in cases of purely economic loss, atort
claim can survive if it flows from an independent duty. Id. ^ 31,228 P.3dat 48. This
framing is helpful because it places the specific type of loss, economic or otherwise,
subordinate to the question of whether there is an independent duty. The Wyoming
Supreme Court also identified factors important in determining whether there is an
independent duty. Id., 288 P.3d at 48. These are a "consideration of the conduct
alleged, its relationship to the contractual duties of the parties, the source of the tort
duty alleged to have been breached, and the nature of the damages." Id., 288 P.3d at
48.
Sinclair Wyoming Refinery Co. v. A&B Builders, Ltd., Case No. 15-CV-91-ABJ, Doc. 241,4-6.
44
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 44 of 46

11. The factors identified mA&B Builders, relying upon J5C, provide meaningful guidelines
in allowing the Court in this case to determine that the negligence claim asserted by Sinclair against
Pro-Inspect in this case is barred. This case is one where a party may not sidestep contractual
limitations by pleading a tort claim. Sinclair's attempt to assert the negligence claim is "simply a
repackaged contract claim that requires consideration of the conduct alleged, its relationship to the
contractual duties of the parties, the source of the tort duty alleged to have been breached, andthe
nature of the damages claimed." Excel Construction, Inc. v. HKM Engineering, Inc., 229 P.3d 40,
48 (Wyo. 2010). 	Here, the conduct alleged by Sinclair to support its negligence claim against Pro-
Inspect is the same as the conduct upon which the parties' contractual duties are based and similarly,
the source of the tort duty Sinclair alleges to have been breached. There is no independent duty that
sustains this negligence claim. Pro-Inspect is entitled to judgment its favor on the negligence claim
asserted by Sinclair.
12. The Court concludes that Pro-Inspect was not negligent and that Sinclair is not entitled
to the relief it requests.
Conclusion
For the reasons stated above, the Court concludes that Pro-Inspect is entitled to judgment in
its favor onall claims and that Sinclair isnotentitled to recover from Pro-Inspect on any ofits claims.
\
It is therefore
ORDERED that Sinclair is not entitled to relief in its favor on its breachof contract claim
and that judgment shall be entered in favor of Pro-Inspect on that claim. It isfurther
ORDERED that Sinclair is not entitled to relief in its favor on its negligence claim and that
45
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 45 of 46

judgment shall be entered in favor of Pro-Inspect on that claim. It is further
ORDERED that Pro-Inspect shall recover its costs, pursuant to Fed. R. Civ. P. 54 and
U.S.D.C.L.R. 54.2. It is further
ORDERED that any remaining pending motions shall be, and are, DENIED AS MOOT.
Judgment shall be entered accordingly.
Dated this 2.3 ^day of 	^
46
ALAN B: JOHNSON
UNITED STATES DISTRICT JUDGE
Case 2:12-cv-00196-ABJ Document 211 Filed 08/23/19 Page 46 of 46