Technology & the Retailer’s Duty: Part 2

Last month’s column discussed developing new technologies that may impact the legal duties and obligations of the propane retailer. This month we examine a currently pending lawsuit involving a natural gas utility that raises some of these issues. The case in question is Alexander v. Montana-Dakota Utilities, and it is pending in federal court in Montana.

A Hole in a Customer’s Pipe

On June 10, 2016, an explosion and fire destroyed the home of Jeffrey Alexander in Glasgow, Montana. Alexander received serious burn injuries and later died from them. He had been living alone in the house. His wife had moved to Arizona with their child. It was disputed whether this was the result of an estrangement or for medical treatment for their son.

However, it was not disputed that the incident was caused by the ignition of leaking natural gas. After the incident, investigators found a hole in one of the interior gas pipes and determined that this was the source of the leaking gas.

This hole was not caused by corrosion or fracture of the pipe, but apparently by a hand tool. Natural gas was supplied to the residence by Montana Dakota Utilities (MDU). It is undisputed that there were no leaks on MDU’s pipes or system upstream of the gas meter.

A Question of Duty

Even though MDU did not cause either the leak or the ignition of gas, Alexander’s wife, Stephanie, filed a wrongful death suit against MDU. She claimed that MDU’s computerized meter system was “defective” because it did not flag a significant gas usage spike at the Alexander residence. She also alleged that MDU was negligent because it had noticed the leak via data that was collected by the gas meter at the residence. MDU, she claimed, should have taken action to warn Jeffrey of the leak or shut off the gas before the explosion occurred. Failure to do so, she argued, was negligence.

MDU filed motions for summary judgment and for judgment on the pleadings, arguing that its meter system was not subject to product liability laws, and the duty alleged by the plaintiff “has never been recognized by any court.”

MDU installs a gas meter at each customer location (such meters are rare in the propane industry). This meter measures the amount of gas that goes through it and into the residence, establishing the amount to be billed to the customer each month for gas usage.

Data Collection

MDU’s meters automatically record the meter readings at each customer location and send hourly snapshot readings from each meter to local collection points. Once a day, this data is sent from the collection points to MDU headquarters in Bismark, North Dakota. MDU argued that it does not monitor or analyze this data as it is accumulated, and the data is not converted into consumption amounts until it is used to generate a monthly bill for each customer.

The plaintiff argued that MDU does indeed analyze the data by comparing it to usage over the past three months and to usage over the past three years. If the customer’s usage for the current billing cycle is not consistent with its historical usage, the system automatically generates a billing alert.

As part of the investigation of the incident, the hourly meter reading data for the Alexander residence was downloaded and examined. This data showed two separate gas flow spikes on June 9, the day before the incident.

In the five days leading up to June 9, the highest gas flow through the meter was 18 cubic feet per hour. In the late morning of June 9, something caused gas flows to suddenly jump to about 270 cubic feet per hour. Then, several hours later, there was a second jump in gas flow to about 630 cubic feet per hour. The explosion happened the next morning at about 6:30 a.m.

‘Application of a Hand Tool’

Investigators determined that the leak that caused the explosion was in corrugated stainless-steel tubing (CSST) in the basement of the Alexander home. There was a large hole in this tubing, and close examination during the investigation revealed tool markings around the hole.

MDU later argued that this evidence demonstrated that “the hole was caused by human application of a hand tool.” The two separate gas flow spikes, MDU contended, showed that “the hole was created, and then later acted upon to increase its size and allow for more than double the flow rate.”

The plaintiff did not appear to argue that MDU had actual knowledge that there was a sudden gas usage spike at the Alexander home on June 9. Rather, its contention was that MDU, having installed a system of computerized meters that collected usage data and sent it to MDU headquarters, could “easily” have configured that system to immediately alert it to gas usage spikes such as that at the Alexander residence on June 9.

The Jury’s Decision

On Oct. 23, 2020, Federal Judge Brian Morris issued his decision on MDU’s motions. First, Morris denied the plaintiff’s strict product liability claim against MDU:

“MDU’s tracking system does not qualify as a “product” because it is not a physical good that has passed through the stream of commerce or changes hands from seller to buyer. *** MDU does not sell the tracking system, and the tracking system does not change possession. It cannot serve as the subject of a strict products liability claim. *** Alexander’s novel theory for strict products liability fails as a matter of law. The proper claim for this dispute can be found in principles of negligence law.”

However, Morris ruled that the jury could decide Alexander’s negligence claim against MDU:

“Alexander argues that MDU was negligent because it possessed constructive knowledge of the gas leak and had a duty to warn or take action to ensure the safety of Alexander. Significant facts remain in dispute relating to these claims. These disputed facts include at least the following matters: 1) the duty of a reasonable natural gas provider; 2) evidence of alarm and warning systems; 3) evidence of the state-of-the-art in gas monitoring and delivery; 4) whether MDU had constructive knowledge of the leak; 5) the cause of the leak; 6) the cause of Alexander’s injuries; and 7) the potential effect of an adequate warning or response.”

Trial is currently scheduled for September 2021 in Great Falls, Montana. One interesting sidelight for the trial is the apparent issue of whether Alexander intentionally created the gas leak, and if so, why he would do so.

Gas leaks have been intentionally created in the past for a variety of reasons (see BPN’s December 2020 issue). And, as indicated, there is a hotly disputed issue of whether Jeffrey and Stephanie Alexander were separated or whether Stephanie’s move to Arizona was related to medical treatment for their son.

While technically this is a natural gas case and involves gas meters that propane retailers rarely use, the overarching implications for the propane industry remain.

The increased availability and use of computerized systems and devices for customer data collection and analysis, combined with the increasing ease of wireless data communication, may well provide the basis for a new round of claims by plaintiffs’ attorneys against the propane industry.