Clow Valve trial after one week

By MICHAEL SCHAFFER

OSKALOOSA — The first week of a projected four-week civil trial involving a major Oskaloosa manufacturer wrapped up Friday afternoon.

Week two of the civil lawsuit Clow Valve filed against Chevron USA, Diamond Oil Company and Oskaloosa Gas and Oil resumed today at 9 a.m. at the Mahaska County Courthouse with Monroe County Judge Annette Scieszinski presiding.

Clow contends the defendants in the civil suit filed in June of 2006 participated in a pattern of breach of warranties, breach of contracts, strict liability, negligence, and fraudulent and negligent misrepresentation. The heart of the lawsuit is Clow’s contention the defendants provided a product — Chevron FM extreme pressure grease — that caused corrosion of upper stems used in Medallion and F2500 fire hydrants produced between July 2002 and July 2004.

In August 2006, Clow Valve began testing hydrants for corrosion and instituted an upper stem replacement program. According to Clow, the company has spent between $6 and $7 million to change out valve stems in some 55,000 fire hydrants, out of 113,340 fire hydrants sold from 2002 to 2004.

According to a Clow Valve press release dated Oct. 29, 2007, “During its replacement of the upper stem and lubrication in hydrants to date, Clow has found hydrant stems exhibiting corrosion caused by the calcium acetate in the grease. It appears the corrosion is increasing as time passes.”

Ultimately, the 11 member, three alternative jury, based on the preponderance of evidence and court instructions, will decide the outcome of the case. As plaintiff attorney Randy DeGeest on Oct. 7 during opening statements said, it comes down to which slice of the cherry pie is bigger and has that extra piece of fruit in it.

Jim Wakefield, assistant general manager for Clow Valve, testified on Wednesday that prior to 2000, they used a general-purpose grease before switching to a food-grade grease early that year because customers were requesting it. The grease Clow started using was Mystik grease, produced by Citco, based in Tulsa, Okla.

“It was frequent enough that we decided we needed to go to a food-grade grease across the board,” Wakefield said.

Then beginning in July of 2002, Clow switched from Mystik grease to Chevron FM food-grade grease, Wakefield said. That switch lasted until mid-2004. The switch from Mystik grease, Wakefield said, was made because they were told the supply was drying up.

Part of Friday’s testimony brought out the relationships Clow Valve, Diamond Oil Company and Oskaloosa Gas and Oil had formed over the years.

Testimony given by Diamond Oil Company President Jason Chance indicated they went to Chevron in 2001 as primary product marketer, while still selling Mystik grease. According to an exhibit offered by plaintiff attorney Dennis Johnson, Oskaloosa Gas and Oil agreed to purchase Chevron products from Diamond Oil Company and sell them until June 30, 2002.

The agreement included incentives. Because Diamond Oil switched to Chevron, they were looking to turn a “sub-jobber” like Oskaloosa Gas and Oil to Chevron.

If Oskaloosa Gas and Oil went to Chevron, would they receive an incentive payment, Johnson asked.

“A very minimal one, yes,” Chance replied.

While Diamond Oil’s profit margin on Chevron FM grease was 2 percent higher than it was on Mystik grease, Chance said he would not knowingly supply a product to a customer if it would not work for them.

Chance told Johnson the supply of Mystik grease was unreliable and in mid-June 2002, Citco told Diamond Oil they were cut off.

Under cross-examination by defendant attorney Mark Tripp, Chance said if Clow Valve purchased 15,000 pounds of Chevron FM grease, Oskaloosa Gas and Oil would have received $200, contradicting an earlier statement to Tripp where he insisted Oskaloosa Gas and Oil would not have received any money from the sale. Chance said his company was cut off from Citco sometime after August 2002 and Mystik was less than 1 percent of sales.

Brian Bright, Diamond Oil Company operations manager, testified he could not recall any supply problems with Mystik grease in 2002, then recounting he does remember finding out they were cut off. Johnson does cite an invoice from June 4, 2002, showing Diamond Oil purchasing Mystik grease.

Chevron salesman Wes Krause testified Friday that Mystik grease was not a big product line for Diamond Oil.

While under cross-examination by Tripp, Krause said he could not think of any other customer of his that was having corrosion or lack of performance issues while using Chevron FM grease. According to Krause, a Chevron competitive comparison chart shows Chevron FM grease is comparable to Mystik grease.

When Clow Valve switched, did you have any reason to believe Chevron FM grease would not be compatible for use in fire hydrants? Tripp asked.

“No sir,” Krause replied.

Clow’s lawsuit alleges Krause participated in fraudulent activity.

Chevron lubrication business manager, Bob E. Shorter, of Lodi, Calif., a certified lubrication specialist, testified he had met with Clow officials, along with Krause, in early 2002, in order to get then to switch from Mystik to Chevron FM grease

“And (Krause) asked you to persuade Clow to switch?” asked Johnson to Shorter.

“That was Wes’s goal,” replied Shorter.

Shorter would go on to say it was his understanding that a person could not switch from Mystik grease to Chevron FM grease and not experience some issues. An understanding he said he did not remember if he had told Krause or not.

Johnson read from a booklet published by Chevron and given to distributors who market food-grade products: Chevron FM oils and greases are formulated to the same standards of performance as conventional products.

“Not accurate?” Johnson asked.

“Debatable,” Shorter replied, which he later clarified as meaning greases have different capabilities.

Shorter said he had no reason to doubt Chevron FM extreme pressure grease would not be compatible for use in fire hydrants. He verified his thinking by calling Jim Ofcacek, a Chevron Lube Tech Hotline expert, by telephone, who assured him Chevron FM grease would work.

Johnson cited the fact that Chevron has changed the formulation of Chevron FM grease to eliminate calcium acetate, the ingredient Clow contends caused the grease to absorb water and contribute to corrosion.

Shorter said he was not aware of any complaints concerning Chevron FM grease while it had calcium acetate in it.

The written transcript of former Chevron lubrication business manager Michael Rooney, whose territory for Chevron from 1996 to 2004 included Iowa, being read by plaintiff attorneys, positioned himself as an expert able to make recommendations to his customers. He reiterated Mystik was an equivalent to Chevron FM grease and would provide excellent wear, rust and corrosion protection.

Rooney said he was not concerned Clow was using Chevron FM grease in fire hydrants, and despite having success with Mystik, he was unsure he would have told Clow they should test the new grease.

Johnson referenced a letter Chevron sent to Clow Valve detailing four factors for corrosion in fire hydrants: Bare metal, moisture, enclosed space and acetate.

Rooney said he was not surprised by the first three, but was surprised acetate could cause corrosion.

Herald City Editor Michael Schaffer can be reached at mschaffer@oskyherald.com

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