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For opinion see 151 F.3d 297

Briefs and Other Related Documents

United States Court of Appeals,

Fifth Circuit.

Claude CIMINO, et al Plaintiffs-Appellees & Cross-Appellants,

v.

PITTSBURGH CORNING CORPORATION, et al Defendants-Appellants & Cross-Appellees.

Nos. 93-4452 through 93-4611.

March 4, 1994.

On Appeal from the United States District Court for the Eastern District of Texas

Beaumont Division

Brief of Appellant Asbestos Corporation Limited

Michael L. Baker, Theodore P. Ray, of the Firm.

Strong, Pipkin, Nelson & Bissell, L.L.P., 1400 San Jacinto Building, 595 Orleans Street,

Beaumont, Texas 77701-3255, (409) 835-4581, (409) 835-0914 (Facsimile), Attorneys for

Appellant, Asbestos Corporation Limited.

*ii REQUEST FOR ORAL ARGUMENT

Appellant, Asbestos Corporation Limited ("ACL"), believes oral argument would be

beneficial and requests the opportunity to present oral argument. The issues raised in

this appeal are of extreme importance and will have direct impact on toxic tort litigation

for years. In addressing the complex and important issues, in this case, ACL asserts oral

argument will assist the Court.

*iii TABLE OF CONTENTS

CERTIFICATE OF INTERESTED PERSONS ... i

REQUEST FOR ORAL ARGUMENT ... ii

TABLE OF CONTENTS ... iii

INDEX OF AUTHORITIES ... v

NOTE ON REFERENCES AND ABBREVIATIONS ... x

STATEMENT OF JURISDICTION ... 1

STATEMENT OF THE ISSUES PRESENTED FOR REVIEW ... 1

STATEMENT OF THE CASE ... 2

A. COURSE OF PROCEEDINGS AND DISPOSITION IN COURT BELOW ... 2

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B. STATEMENT OF THE FACTS ... 4

SUMMARY OF THE ARGUMENT ... 5

ARGUMENT AND AUTHORITIES ... 7

I. ACL HAD NO DUTY TO WARN THE USERS OF FIBREBOARD'S INSULATION PRODUCTS ... 7

STANDARD OF REVIEW ... 7

A. ACL DID NOT MANUFACTURE OR SELL FIBREBOARD'S ASBESTOS INSULATION PRODUCTS ... 8

B. AS A MATTER OF LAW, FIBREBOARD, THE MANUFACTURER OF THE PRODUCT, CANNOT BE ACL'S

INTERMEDIARY ... 11

1. ALM I DISTINGUISHED ... 11

a. AS A MATTER OF LAW, FIBREBOARD IS AN EXPERT, NOT AN INTERMEDIARY ... 12

b. INGREDIENT SUPPLIERS HAVE NO DUTY TO WARN END USERS ... 13

*iv c. THE DISTRICT COURT'S HOLDING IS CONTRARY TO THE HOLDING IN ALM I ... 15

2. THE BULK SUPPLIER/SOPHISTICATED USER DEFENSE ... 19

C. TEXAS COMPONENT PARTS CASES, NOT ALM I, OFFER A MORE SOUND JUDICIAL ANALOGY ... 22

D. THE COURT'S CONCLUSION THAT FIBREBOARD WAS INCAPABLE OF PASSING ON AN ADEQUATE

WARNING TO THE PLAINTIFF IS INVALID ... 25

II. THE DISTRICT COURT ERRED BY USING A FORMULA BASED ON MARKET SHARE OF FIBER SUPPLY TO

FIBREBOARD AS A FURTHER BASIS FOR ASSESSING LIABILITY AGAINST ACL ... 28

STANDARD OF REVIEW ... 28

A. THE COURT ERRED BY SHIFTING FIBREBOARD'S LIABILITY TO ACL ... 28

1. FIBREBOARD'S LIABILITY ... 28

2. ALTERNATIVELY, APPLYING DERIVATIVE LIABILITY DISCHARGES ACL ... 33

3. OTHER FORMS OF COLLECTIVE LIABILITY ARE NOT APPLICABLE ... 35

CONCLUSION ... 19

RELIEF REQUESTED ... 40

CERTIFICATE OF SERVICE ... 40


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*v INDEX OF AUTHORITIES

CASES

Air Shields, Inc. v. Spears, 590 S.W.2d 574, (Tex.Civ.RE.--Waco, 1979 writ ref'd n.r.e.)

... 12

Aim v. Aluminum Co. of America, 717 S.W.2d 588, (Tex.1986) ... 11, 15-19, 21, 22, 30, 39

Aluminum Co. of America v. Aim, 785 S.W.2d 137, (Tex. 1990) ... 21

Bateman v. Johns-Manville Sales Corp., 781 F.2d 1132, (5th Cir. 1986) ... 38

Bennett v. Span Industries, Inc., 628 S.W.2d 470, (Tex.RE.--Texarkana 1981, writ ref'd

n.r.e.) ... 22, 23

Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076, (5th Cir.1973) cert. den'd, 419

U.S. 869, 95 S.Ct. 127, 421 L. Ed.2d 107 (1974) ... 12, 15, 16, 26, 28, 31

Bristol-Meyers Co. v. Gonzalez, 561 S.W.2d 801, (Tex.1987) ... 26

Childress v. Gresen Manufacturing Co., 888 F.2d 45, (6th Cir.1989) ... 23

Corrosion Proof Fittings v. EPA, 947 F.2d 1201, (5th Cir.1991) ... 10, 14, 36

*vi Davis v. Dresser Industries, Inc., 800 S.W.2d 369, (Tex.RE.--Eastland 1990, writ

den'd) ... 22-24

Doss v. Apache Powder Co., 430 F.2d 1317, (5th Cir.1970) ... 16

Duncan v. Cessna Aircraft Co., 655 S.W.2d 414, (Tex. 1984) ... 33, 34

El Paso Natural Gas Co. v. Berryman, 852 S.W.2d 362, (Tex. 1993) ... 33-35

Gaulding v. Celotex Corp., 772 S.W.2d 66, (Tex.1989) ... 35-38

Gideon v. Johns-Manville Sales Corp., 761 F.2d 1129, (5th Cir.1985) ... 9, 12, 14, 22, 23

Goldman v. Johns-Manville Sales Corp., 33 Ohio St.3d 40, 514 N.E.2d 691, (1987) ... 36

Gonzales v. Caterpillar Tractor Company, 571 S.W.2d 867, (Tex.1978) ... 17

Goodbar v. Whitehead Bros., 591 F.Supp. 552, (W.D.Va.1984) ... 21

Gordon v. Niagara Machine and Tool Works, 574 F.2d 1182, (5th Cir.1978)

............................................... 16

Hall v. E.I. DuPont de Nemours & Co., 345 F.Supp. 353, (E.D.N.Y.1972) ... 36


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*vii Hardy v. Johns-Manville Sales Corp., 681 F.2d 334, (5th Cir.1982) ... 9, 12, 14, 23

Haupt v. Atwood Oceanics, Inc., 681 F.2d 1058, (5th Cir.1982) ... 22

Higgins v. E.I. DuPont de Nemours, Inc. 671 F.Supp. 1055, (D.Md. 1987) ... 20, 21

Hopkins v. Chip-In-Saw, Inc., 630 F.2d 616, (8th Cir.1980) ... 16

In re Asbestos Insulation Material, Products Liability Litigation, 431 F.Supp. 909, (J.P.M

.L. 1977) ... 36

In re Fibreboard Corp., 893 F.2d 706, (5th Cir. 1990) ... 32, 38

Koonce v. Quaker Safety Products & Manufacturing Company, 798 F.2d 700, (5th Cir.1986) ...

22, 23

McKisson v. Sales Affiliates, Inc., 416 S.W.2d 787, (Tex.1967) ... 8

Migues v. Fibreboard Corporation, 662 F.2d 1182, (5th Cir.1981) ... 23

Reyes v. Wyeth Laboratories, 498 F.2d 1264, (5th Cir.1974) ... 29

Salve Regina College v. Russell, 499 U.S. 225 (1991) ... 7, 28

*viii Sara Lee Corp. v. Homasote Co., 719 F.Supp. 417, (D.Md.1989) ... 19-21

Sindell v. Abbott Laboratories, 26 Cal.3d 588, 163 Cal.Rptr. 132, 607 P.2d 924, cert.

denied, 449 U.S. 912, 101 S.Ct. 286, 66 L.Ed.2d 140 (1980) ... 37

Skotak v. Tenneco Resins, Inc., 953 F.2d 909, (5th Cir.), cert. den'd, 113 S. Ct. 98

(1992) ... 7, 28

Soto v. Phillips, 836 S.W.2d 266, (Tex. RE. -- San Antonio 1992, writ denied) ... 33

Thompson v. Johns-Manville Sales Corp., 714 F.2d 851 (1983) ... 38

U.S. Fire Ins. Co. v. State, 843 S.W.2d 283, (Tex. RE. -- Austin 1992, no writ) ... 33

Vigiolto v. Johns-Manville Corp., 643 F.Supp. 1454, (W.D.Pa. 1986) aff'd, 826 F.2d 1058

(3d Cir.1987) ... 36

Walker v. Stauffer Chemical Corp., 19 Cal. RE. 3d 669, 96 Cal. Rptr. 803 (1971) ... 13-15

Weekes v. Michigan Chrome and Chemical Co., 352 F.2d 603, (6th Cir.1965) ... 16, 17

*ix Wenrick v. Schloemann-Siemag Aktiengesellschaft, 523 Pa. 1, 564 A.2d 1244, (1989) ...

23

White v. Weiner, 386 Pa. Super. 111, 562 A.2d 378 (1989), aff'd, 525 Pa. 572, 583 A.2d 789


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(1991) ... 14, 15

UNITED STATES CODE

28 U.S.C. §1291 ... 1

28 U.S.C. §1330(a) ... 2

28 U.S.C. §1602 ... 2

RESTATEMENT OF THE TORTS (2D)

§402A ... 8, 9, 11, 13, 15, 21

MISCELLANEOUS

TEX.PROD.LIAB.LAW 2d ed. Issue 0 (1992) ... 18, 29

*x NOTE ON REFERENCES AND ABBREVIATIONS

Asbestos Corporation Limited is referred to as ACL. The Cimino Plaintiffs are

collectively referred to as plaintiffs.

Record references are made conjunctively to the Record on Appeal and the Deferred

Appendix or Supplemental Appendix Tab Reference as, for example: (R 32420; DA 2456) or (R

23154; Supp A).

*1 TO THE HONORABLE COURT OF APPEALS:

Appellant Asbestos Corporation Limited respectfully submits this its Brief in support of

its appeal from the judgments of the United states District Court for the Eastern District

of Texas, Beaumont Division, in Cause Nos. B-86- 0456-CA, et al, in which Asbestos

Corporation Limited was among the Defendants and in which Appellees/Cross-Appellants were

Plaintiffs.

STATEMENT OF JURISDICTION

This is an appeal from two final judgments on the merits rendered by the United States

District Court for the Eastern District of Texas, Beaumont Division. The Court's

jurisdiction is founded upon 28 U.S.C. §1291.

STATEMENT OF THE ISSUES PRESENTED FOR REVIEW

Chief Judge Politz' December 15, 1993 Order outlined eleven appellate issues relevant to

ACL. ACL has organized its argument on those issues into two general themes, as set out

below:

1. The District Court held ACL had a duty, under Texas law, to warn the ultimate users of

Fibreboard's insulation products. ACL did not manufacture or sell Fibreboard's asbestos

insulation products. Rather, ACL supplied one ingredient, raw asbestos fiber, to


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Fibreboard. Is the District Court's extension of Fibreboard's duty to warn to ACL proper

under Texas law? This issue encompasses outline points II A, E, and F.

2. The District Court held ACL's liability to Fibreboard's ultimate users was derivative

of Fibreboard's liability. The Court then created a formula based upon an estimate of the

amount of raw asbestos fiber ACL supplied to Fibreboard between 1951 and 1961. The formula

sets ACL's percentage of fault at a level equal to the Court's estimate of the amount of

asbestos fiber ACL sold to Fibreboard from 1951 until 1961. Is the District Court's

"derivative/collective liability" formula proper under Texas law? This issue encompasses

outline points II B, C, D, G, H, and I.

*2 To the extent ACL does not address an outlined issue, the issue will not be relied

upon in this appeal.

STATEMENT OF THE CASE

A. COURSE OF PROCEEDINGS AND DISPOSITION IN COURT BELOW:

On October 26, 1989, this litigation began with the consolidation of the 3,031 asbestos

cases which were pending in the Eastern District of Texas, Beaumont Division. (R 5191; DA

2365) On February 8, 1989, Asbestos Corporation Limited (ACL) received notice of this

litigation pursuant to the District Court's order granting provisional certification of

the class. (R 35254; DA 2527)

In order to deal with the large number of cases, the District court implemented an

unprecedented three phase trial procedure.

In Phase I, the claims of the ten class representatives were tried to a jury. Because ACL

was an instrumentality of a foreign sovereign, the claims against ACL were tried to the

Court pursuant to 28 U.S.C. §1602 et seq., and 28 U.S.C. §1330(a). (R 32821; DA 2495)

The jury found Fibreboard and the other manufacturers liable to plaintiffs under the

theories of negligence, gross negligence, and strict product liability. (R 16879; DA 2710)

The Court ruled ACL was liable to two class representative plaintiffs, the Norman Atchison

Estate and Lowell Nations (now the Lowell Nations Estate). (R 32822; DA 2496) (R 32889; DA

2518)

*3 Phase II encompassed the product exposure issues. Rather than try these issues, the

parties "agreed to stipulate as to what the jury findings would have been had Phase II

been tried to a jury." (R 32808; DA 2482) ACL was not a party to the stipulations.

Afterwards, the Court proceeded with Phase III, the "damage issue phase." (R 32806; DA

2480)

After Phase III ended, the Court extended the trial as to ACL. By its October 16, 1990

Order, the Court directed any party wishing to present evidence concerning plaintiffs'

exposure to products containing asbestos supplied by ACL to inform the Court in writing

before October 29, 1990. (R 32420; DA 2456) The Court received no further evidence


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relating to exposure to ACL's fiber or liability. On November 12, 1990, the Court entered

its Opinion and Order regarding ACL's liability. (R 32800; DA 2474)

On October 8, 1992, the District Court approved a class wide settlement between the

Cimino plaintiffs and Fibreboard's insurer, Continental Casualty Company. (R 43467; DA

2547) This settlement encompassed all "product liability claims against Fibreboard

relating to exposure to asbestos-containing products manufactured by Fibreboard." (Supp E)

The Court's Findings of Fact and Conclusions of Law are reproduced in the Record

Excerpts. Since ACL was not a party to the Phase II stipulation, the Court determined ACL

could not be liable based on the agreements between the parties regarding exposure. The

Court further found there was "no independent evidence of exposure to Fibreboard products"

with regard to the *4 remainder of the class. (R 32822; DA 2496) After judgments were

entered in the Atchison and Nations cases, the Court overruled ACL's Motion to Alter or

Amend the Judgment and this appeal followed.

B. STATEMENT OF THE FACTS:

ACL mines raw asbestos fiber primarily in the Thetford Mines - Black Lake Region of the

Province of Quebec Canada. ACL mines only chrysotile asbestos, which is a hydrous

magnesium silicate. (R 2066; DA 2669) The mining process was explained by Jean Paul

Bolduc. (R 16009; DA 5557-5561) The mother rock is removed from the ground and the fiber

extracted. The fiber was sorted into different grades based on length, then bagged, and

shipped to various manufacturing entities, including Fibreboard. (R 15767; DA 5506-5507)

ACL was never involved in the design, manufacture, packaging, sale, or distribution of

finished products containing asbestos, including Fibreboard's asbestos insulation.

On the other hand, Fibreboard manufactured many products with asbestos fiber, including

insulation, linoleum, a mastic for patching roofs, paint, shingles, and gasket material.

Fibreboard began placing asbestos warnings on its packaging in 1966. (R 16012; Supp H)

Ed Torbohn, a former Fibreboard employee, testified Fibreboard purchased fifty percent

(50%) of its raw asbestos from ACL for a period of time before 1962. (R 16606; DA 5574)

Torbohn also testified Fibreboard blended the raw asbestos it *5 purchased from its

various suppliers, and combined both chrysotile and amosite fibers in its products. (R

16606; DA 5574-5576) In 1962, Fibreboard completed its phase out of chrysotile fiber and

ceased purchasing asbestos fiber from chrysotile miners, including ACL. (R 16606; DA 5576)

According to Torbohn, the raw asbestos fiber was refined by Fibreboard through a batching

machine in which the fiber was separated and pulled apart. After this process, the fiber

was no longer considered to be raw fiber. (R 16606; DA 5579)

Plaintiffs introduced abundant evidence from which the jury concluded that Fibreboard

knew or should have known about the dust hazards associated with its asbestos insulation

products. This evidence boiled down to Dr. Thomas Mancuso's testimony that by 1935, the


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hazards associated with asbestos were well known to manufacturers such as Fibreboard. (R

15753; Supp I) (R 15754; Supp J)

SUMMARY OF THE ARGUMENT

The District Court's conclusion that ACL had a duty to warn the end users of Fibreboard's

insulation products rests on three holdings that are legally implausible and simply wrong.

First, the District Court's holding that Fibreboard was ACL's "intermediary" confounds

every legal premise that supports liability for a product in a "warning" or "marketing

defect" case such as this. Manufacturers have intimate knowledge about the characteristics

of their products. In fact, manufacturers are held to the standard of an expert as a

matter of law. Also, *6 manufacturers exercise control over how their products are

marketed and actually reach the ultimate user. Texas is not unique in its view that

manufacturers are in the best position in the stream of commerce to determine whether a

warning accompanies its products. In this case, ACL, an ingredient supplier, had no

control over Fibreboard's insulation products. To burden ACL with Fibreboard's duty to

warn, as if Fibreboard were merely an intermediary is simply a legal fiction which

contradicts the very policies that underlie imposing liability for products on

manufacturers.

Second, the District Court incorrectly concluded that ACL must warn Fibreboard's end

users because Fibreboard was incapable of passing on an adequate warning. This conclusion

runs counter to the very theory of liability which supports a cause of action against

Fibreboard, the state of the art evidence introduced against Fibreboard, the jury findings

based on this evidence, and ultimately, the District Court's affirmation of those jury

findings by its rendition of a final judgment against Fibreboard. At the risk of stating

the obvious; if Fibreboard, the manufacturer of the product, is truly incapable of

warning, how can ACL, an ingredient supplier of a bulk commodity that is literally mixed

into Fibreboard's end product, be expected to warn the end user? Again, the District

Court's solution to the problem of extending Fibreboard's duty to ACL, despite the

existence of legal principle that dictates otherwise, is to engage the proverbial straw

man.

*7 Finally, the District Court's formula for assessing ACL's liability simply accentuates

the District Court's questionable devotion to statistical, rather than legal, models for

resolving legal disputes. Docket management aside, a body of Texas law exists that applies

to this case. By its own terms, the formula does not even measure the question of ACL's

fault. The formula begins with Fibreboard's percentage of causation for a given

plaintiff's damages, and quantitatively contrasts this with the percentage of ACL's market

share at Fibreboard's manufacturing plant. (formula: c/a x (b x .50) = d) Legislatures

have a long history of developing systems of compensation based on math and statistics,

workers compensation laws being the prime example. However, the laws which govern this

case simply do not allow for creating a compensation system by judicial fiat.

Asbestos products are not generic. Imposing generic liability by means of a formulaic

mechanism which assumes generic fault or defect cannot be supported in product liability


1994 WL 16035116 (5th Cir.)


law or policy.

ARGUMENT AND AUTHORITIES

I. ACL HAD NO DUTY TO WARN THE USERS OF FIBREBOARD'S INSULATION PRODUCTS.

STANDARD OF REVIEW

The District Court's rulings that ACL, an ingredient supplier, was responsible to provide

adequate warnings on Fibreboard's end products and that Fibreboard, a manufacturer, is

merely ACL's intermediary, present questions of law that the *8 Court of Appeals reviews

de novo. Salve Regina College v. Russell, 499 U.S. 225 (1991); Skotak v. Tenneco Resins,

Inc., 953 F.2d 909, 912 & n.4 (5th Cir.), cert. den'd, 113 S. Ct. 98 (1992).

A. ACL DID NOT MANUFACTURE OR SELL FIBREBOARD'S ASBESTOS INSULATION PRODUCTS.

Fibreboard was not ACL's intermediary. Fibreboard did not pass ACL's raw asbestos fiber

to the plaintiffs but rather, refined, mixed, and integrated asbestos, supplied by ACL,

into asbestos insulation. It was Fibreboard's asbestos insulation, not ACL's fiber, which

was sold without an adequate warning. The District Court erred in holding Fibreboard was

ACL's intermediary.

One must either manufacture or sell an unreasonably dangerous product in order to be held

liable under Texas product liability law. In McKisson v. Sales Affiliates. Inc., 416

S.W.2d 787 (Tex.1967), the Texas Supreme Court adopted §402A of the Restatement of the Law

of Torts Second, as the legal basis for causes of action based on strict liability in

tort. Section 402A states in pertinent part:

Special Liability of Seller of Product for Physical Harm to User or Consumer

(1) One who sells any product in a defective condition unreasonably dangerous to the

user or consumer or to his property is subject to liability for physical harm thereby

caused to the ultimate user or consumer, or to his property, if

(a) the seller is engaged in the business of selling such a product...

*9 Restatement (Second) of Torts §402A. Fibreboard's "asbestos containing insulation

products" were found to be defective for lack of an adequate warning. (R 16882; DA 2713)

There was no finding that ACL's raw asbestos was unreasonably dangerous.

ACL's raw asbestos fiber is not the same thing as Fibreboard's asbestos insulation. This

Court has already observed that asbestos products cannot be treated generically for the

purpose of determining their defectiveness in a §402A strict liability case:

We have previously held that all asbestos-containing products cannot be lumped together

in determining their dangerousness. Proof that asbestos insulation products are dangerous

or defective does not satisfy the burden of proving that products used for other purposes,

such as asbestos textiles with encapsulated asbestos fibers, are dangerous.

Gideon v. Johns-Manville Sales Corp., 761 F.2d 1129, 1145 (5th Cir.1985) (emphasis in

original).

In Gideon, the court reversed a judgment against a manufacturer of asbestos textile


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products, gaskets, and packing materials, while affirming the judgment as to asbestos

insulation manufacturers. In reversing, the court held the evidence regarding insulation

products did not prove the non-insulation products to be unreasonably dangerous. Id.

Gideon specifically relied upon Hardy v. Johns-Manville Sales Corp., 681 F.2d 334 (5th

Cir.1982), which unequivocally held there is no "generic danger of asbestos" to which

"issue preclusion" would apply such that the "generic ingredient asbestos" would be

hazardous. Hardy, 681 F.2d at 344-5.

*10 This is a "warnings" or "marketing defect" case. Fibreboard was held liable for its

failure to provide an adequate warning with its asbestos insulation. In this type of case,

Texas law focuses on the end product and not the product's separate ingredients.

Although not a tort case, Corrosion Proof Fittings v. EPA, 947 F.2d 1201 (5th Cir.1991),

illustrates why a "warnings" or "marketing defect" case focuses on the end product rather

than the product's separate ingredients. In Corrosion Proof, this Court addressed the

legitimacy of the EPA's rule making procedure. Id. at 1207. Specifically, the Court

reviewed the EPA's issuance of a final rule "to prohibit the future manufacture,

importation, processing, and distribution of asbestos in almost all products." Id. The

Court inquired whether substantial evidence supported the EPA's conclusion that various

asbestos containing products presented an unreasonable risk of injury. Id. at 1212. The

Court concluded that the EPA's rule making was flawed with respect to friction products,

asbestos-cement pipe products, gaskets, roofing shingles, and paper products, and remanded

to the EPA. Id. at 1207. Corrosion Proof recognizes that asbestos products are not

generic, that different manufacturers of different asbestos containing products use

asbestos in different ways, and that differences in use and manufacture necessarily

results in different risks associated with each end product.

*11 ACL was not the manufacturer of these or any other asbestos insulation products. The

District Court's imposition of a duty on ACL to warn users regarding the hazards of

Fibreboard's products is clearly an improper extension of the duty to provide an adequate

warning under Texas law.

Because ACL was not the manufacturer of the asbestos insulation products at issue, the

District Court's error is not simply an incorrect finding of fact or the failure to make

adequate or complete findings of fact. The error here is misinterpreting a basic element

of §402A in a marketing defect case, and the District Court's unwillingness to apply Texas

and Fifth Circuit precedent. Extending the duty to warn end users of the product beyond

the manufacturer of the product is truly unprecedented.

B. AS A MATTER OF LAW, FIBREBOARD, THE MANUFACTURER OF THE PRODUCT, CANNOT BE ACL'S

INTERMEDIARY.

1. ALM I DISTINGUISHED.

Taking a misguided cue from Alm v. Aluminum Co. of America, 717 S.W.2d 588 (Tex.1986)

(Alm I), the District Court concluded that ACL "relied on Fibreboard, as an intermediary,


1994 WL 16035116 (5th Cir.)












to pass on to the ultimate users the warnings of the dangers associated with asbestos" and

that ACL's reliance on Fibreboard as an intermediary was not reasonable. (R 35257-35258;

DA 2530-2531) The District Court's interpretation of Alm I and its application to the

facts of this case are incorrect for several reasons.

*12 a. AS A MATTER OF LAW, FIBREBOARD IS AN EXPERT, NOT AN INTERMEDIARY.

Since ACL did not manufacture or sell Fibreboard's asbestos insulation products, it is

impossible to construe Fibreboard's legal status as being that of ACL's intermediary.

Typically, intermediaries are conduits: distributors, retailers, repackagers of finished

products, or a learned professional as in the case of a physician prescribing drugs. See

e.g. Air Shields, Inc. v. Spears, 590 S.W.2d 574, 582 (Tex.Civ.RE.--Waco, 1979 writ ref'd

n.r.e.). These situations are not even remotely analogous to this case. ACL supplied an

ingredient, asbestos fiber, to a manufacturer. Then, the asbestos fiber was refined and

mixed with magnesium, calcium silicate, and many other substances, to create a new and

different end product. Fibreboard did not merely pass on ACL's asbestos, rather,

Fibreboard turned ACL's asbestos into a totally new product. [FN2]

FN2. As was decided in Hardy and Gideon, asbestos in and of itself is not dangerous

per se. Rather, the inquiry begins with an evaluation of the end product used by the

final consumer.

As a matter of law, because Fibreboard was a manufacturer it was held to the knowledge

and skill of an expert whose duty was to keep abreast of the medical and scientific

literature applicable to its product. Borel v. Fibreboard Paper Products Corp., 493 F.2d

1076, 1089 (5th Cir.1973) cert. den'd, 419 U.S. 869, 95 S.Ct. 127, 421 L. Ed.2d 107 (1974)

and Gideon at 1143. Holding that Fibreboard was ACL's intermediary confounds this long

recognized element of marketing defect liability, and places *13 the burden to warn on the

least feasibly positioned entity, the ingredient supplier. The imposition of this

additional duty is not supported by any authority. In fact, the cases which have addressed

an ingredient supplier's duty support ACL's argument.

b. INGREDIENT SUPPLIERS HAVE NO DUTY TO WARN END USERS.

In Walker v. Stauffer Chemical Corp., 19 Cal. RE. 3d 669, 96 Cal. Rptr. 803 (1971), the

California Court of Appeals held liability could not be imposed, under either strict

liability or negligence principles, on the seller of a substance used as an ingredient in

an allegedly "defective" product. [FN3] In Walker, the court absolved from liability

Stauffer Chemical Corp., the supplier of sulfuric acid used as an ingredient by another

company to produce a drain cleaner. The product at issue, Clear-All, caused injury to a

user due to its sulfuric acid content. The court concluded the drain cleaner manufacturer,

not Stauffer, was liable for the end product, stating:

FN3. In Walker, like in this case, the court based its holding on §402A of the

Restatement of Torts Second.


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The ultimate product ... can in no way be considered to be one and the same [product as

the] bulk sulfuric acid manufactured [and sold] by Stauffer ....... [C]ases imposing

responsibility under the doctrine of strict liability are not applicable to Stauffer and

do not require trial of this action as to that company.

* * *

We see no compelling reason for an extension [of strict liability] to a situation such

as presented in the instant case.... We do not believe it realistically feasible or

necessary to the protection of the public to require the manufacturer and supplier of a

standard *14 chemical ingredient ... not having control over the subsequent compounding,

packaging or marketing of an item eventually causing injury to the ultimate consumer, to

bear the responsibility for that injury. The manufacturer (seller) of the product causing

the injury is so situated as to afford the necessary protection.

19 Cal. RE. 3d at 672, 674 (emphasis added). Thus, the Walker court dismissed the claims

brought against the supplier of a standard but inherently dangerous substance, used as an

ingredient in an end product manufactured by a third party.

Asbestos fiber, like sulfuric acid, is a standard but potentially dangerous substance

used by manufacturers. However, whether any particular asbestos-containing product may

cause a health hazard depends solely on the nature, composition, and marketing of the

particular end product. See Corrosion Proof, Hardy, and Gideon.

Again, in White v. Weiner, 386 Pa. Super. 111, 562 A.2d 378 (1989), aff'd, 525 Pa. 572,

583 A.2d 789 (1991), the plaintiff, whose husband had died from complications of heart

surgery, sued a number of parties including Eli Lilly & Co., alleging Lilly failed to

provide an adequate warning on a chemical compound, protamine sulfate, which it supplied

to the Upjohn Company. Upjohn used the chemical as the active ingredient in a prescription

drug which was administered to plaintiff's decedent, whose death allegedly was caused by

an adverse reaction. The court held Lilly had no common law duty to warn the end product

user. The court reasoned the end product manufacturer, packer, and distributor had a duty

to label their product, and they were *15 in a better position, than the ingredient

supplier, to assess the risks and provide any necessary warnings. Id. at 385.

Interestingly, the White court's rationale was in part based upon FDA requirements that

drug manufacturers were required to test and warn about their products. These requirements

simply mirror the requirements of §402A, which places the same responsibility for testing

and staying abreast of the medical and scientific literature regarding their products on

manufacturers. White at 385; Borel at 1089.

ACL did not manufacture or sell Fibreboard's asbestos insulation products. Conversely,

Fibreboard both manufactured and sold its asbestos insulation products. Indeed, Fibreboard

was found liable for selling their asbestos insulation products without an adequate

warning. (R 16882; DA 2713)

ACL only mined raw asbestos fiber which was only one of many ingredients which Fibreboard


1994 WL 16035116 (5th Cir.)







formerly used in the manufacture of its insulation products. (R 16606; Supp K) No one

disputed asbestos has been used for years by manufacturers in innumerable products. (R

7591; DA 2674) Yet, the District Court's holding that ACL must warn the users of

Fibreboard's products ignored these elemental and undisputed facts.

c. THE DISTRICT COURT'S HOLDING IS CONTRARY TO THE HOLDING IN ALM I.

In Conclusion of Law No. 10, the District Court held that ACL was negligent for relying

on Fibreboard to pass on a warning to the users of Fibreboard's asbestos insulation. (R

35257-*16 35258; DA 2530-2531) Contrary to the clearly controlling principles found in

Walker and White, the District Court's Conclusion of Law No. 10, hinges upon an

application of Alm I that is simply not viable. Citing Alm I, the District Court stated:

there were no warnings accompanying the asbestos which ACL supplied to Fibreboard. ACL

sold its raw asbestos to Fibreboard and other intermediaries with the knowledge that those

intermediaries were selling finished products containing asbestos supplied by ACL without

an adequate warning. ACL's reliance on its intermediaries to pass on adequate warnings was

not reasonable. Alm, 717 S.W.2d at 592. ACL's reliance on its intermediaries does not

relieve ACL of its liability under Texas law."

(R 35258; DA 2531)

Granted, a focal point of Alm I is the issue of whether Alcoa could reasonably rely upon

its intermediary to pass along warnings. However, Alm I is distinguishable. Alm I

addressed the duty of a manufacturer/designer to warn an end user about its product's

dangers, not the duty of an ingredient supplier.

Alm I concludes as follows:

The issue in every case is whether the original manufacturer has a reasonable assurance

that its warning will reach those endangered by the use of its product. Hopkins v.

Chip-In-Saw, Inc., 630 F.2d 616 (8th Cir. 1980); Gordon v. Niagara Machine and Tool Works,

574 F. 2d 1182 (5th Cir. 1978); Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076

(5th Cir.1973); Doss v. Apache Powder Co., 430 F.2d 1317 (5th Cir.1970); Weekes v.

Michigan Chrome and Chemical Co., 352 F.2d 603, 607 (6th Cir.1965).

Alm I, 717 S.W.2d at 591. Interestingly, each case cited by the Alm I court deals with

the duty of a manufacturer, of a finished product, to warn the downstream retailer or user

of a hazard *17 associated with the finished product. [FN4] The defendants' liability in

these cases turns on the recognition that the defendant, as the originator of the end

product, has the responsibility to take reasonable steps to see that its warning, not its

ingredient or component parts supplier's warning, reaches those using its end product.

FN4. In Hopkins, the defendant was a manufacturer of machines which processed logs

into marketable lumber; in Gordon, the defendant manufactured punch presses; in

Borel, the defendants manufactured asbestos containing insulation products; dynamite

was the product in Doss; and, in Weekes, the defendant, Michigan Chrome and Chemical

Co., was a downstream distributor of a wax which it did not manufacture, but did not

argue that it was any different from the manufacturer. Weekes, supra at 604.


1994 WL 16035116 (5th Cir.)



















Alm I's holding was limited to an issue addressed for the first time by the Texas Supreme

Court:

Whether a designer who is not a manufacturer has a duty to warn of hazards associated

with the use of its designed product has not before been addressed by this court.

Alm I 717 S.W.2d at 590. Citing Gonzales v. Caterpillar Tractor Company, 571 S.W.2d 867

(Tex.1978), the Alm I court observed manufacturers had the duty to exercise ordinary care

in the design of their products. The court then extended the same duty to a designer of

the product. Alm I, 717 S.W.2d at 591. Significantly, the rationale upon which the court's

conclusion turned is the same rationale which subverts the District Court's conclusion

that Fibreboard is ACL's intermediary:

There is no reason to distinguish a designer, who has intimate knowledge of a designed

product, from a retailer, wholesaler or manufacturer. Alcoa designed the closure system.

It is the failure of that system which caused Alm's injury. There can be no *18

justification for requiring a user of Alcoa's closure technology to warn of its hazards

while not holding Alcoa to the same duty.

Id. Alm I's emphasis on Alcoa's "intimate knowledge" reflects a fundamental principle

pervasive in product liability law. The originators of the finished product are in the

best position to know the dangers associated with their products and provide a warning to

the users of those products. TEX.PROD.LIAB.LAW 2d ed. Issue 0 (1992) p. 4-17.

Alm I does not change this fundamental principle. Alm I does not propose that

manufacturers or even designers of products have suddenly become conduits, such as

retailers, wholesalers or distributors who do no more than move a manufacturer's product

through their warehouse, showroom floor or retail store. Alm I does not create an

"innocent manufacturer" defense akin to the "innocent retailer" defense. Yet, the logical

extension of the District Court's interpretation of Alm I subverts Alm I's holding by

turning those with the requisite knowledge to warn into mere conduits. Clearly, Alm I

stands for the exact opposite of this proposition. Moreover, nothing like an innocent

manufacturer doctrine can be found in Texas law.

In Alm I, "Alcoa designed, patented, manufactured and marketed" the bottle capping

closure system. Id. at 589. In fact, the ingredient suppliers of the product which reached

the ultimate users of the bottle were not even parties. Id. Nothing in this record even

remotely suggests ACL supplied Fibreboard with the expertise or technology for

manufacturing asbestos *19 insulation products. ACL is not in a position analogous to

Alcoa in Alm I. If anything, ACL is in a similar position to W.H. Hutchinson & Son, Inc.,

the company which supplied the bottle capping material, and who was not even a party in

Alm I. Id. Thus, if Alm I governed this case, it supports ACL's argument not the District

Court's holding.

2. THE BULK SUPPLIER/SOPHISTICATED USER DEFENSE.

Alm I also discusses the "bulk supplier" doctrine as further rationale for concluding a

product designer should take reasonable steps to assure warnings reach the users of its

products, and analogizes Alcoa's position in Alm I to that of a bulk supplier. Alm I, 717


1994 WL 16035116 (5th Cir.)










S.W.2d at 592. Two recent bulk supplier cases demonstrate why the bulk supplier doctrine

cannot be used to support the District Court's holding.

In Sara Lee Corp. v. Homasote Co., 719 F.Supp. 417 (D.Md.1989), BASF and ARCO produced a

raw material known generically as expandable polystyrene beads ("EPS beads"). Sara Lee's

pickle plant was damaged by fire allegedly caused by ceiling panels fabricated from EPS

beads. Sara Lee claimed that ARCO and BASF should have warned about the inherent dangers

of EPS beads. Id. at 419.

BASF and ARCO supplied the EPS beads to Foam Industries. Foam Industries converted the

raw beads into EPS board insulation. A retail hardware store then sold the board

insulation to Sara Lee. Id. It was undisputed that Foam Industries did not provide any

warnings to Sara Lee or any other *20 purchasers of the EPS board insulation. Id. at 424.

Nevertheless, despite the absence of any warnings to the users and without reference to

whether Foam Industries was capable of providing adequate warnings, the court concluded

that neither BASF nor ARCO owed a duty to warn Foam Industries' ultimate purchasers. Id.

at 425. The District Court concluded that Foam Industries was a knowledgeable industrial

purchaser or sophisticated user, and as such, should be reasonably relied upon to warn

ultimate purchasers despite the fact that the ingredient suppliers had not passed on a

warning to the ultimate purchaser. Id. at 428. [FN5]

FN5. See also Higgins v. E.I. DuPont de Nemours, Inc., 671 F.Supp. 1055 (D.Md.

1987), which Sara Lee relies upon extensively, and which also found that two

sophisticated chemical suppliers owed no duty to warn to the users of paint

manufactured by DuPont utilizing the chemicals supplied in bulk.

Conspicuously absent from the District Court's reasoning, is any discussion of the two

fold requirement which supports the holdings in Sara Lee and Higgins. First, the

knowledge, expertise and sophistication of the raw material purchaser, not the supplier,

determines whether the supplier's duty to warn is fulfilled. The court in Sara Lee

observes:

The focus of the bulk supplier/sophisticated user defense is not on the knowledge of the

raw material suppliers, but rather on the knowledge of the industrial purchaser. The

record in this case establishes that Foam Industries knew or should have known at least as

much about the dangers of EPS board insulation to the end user as ARCO and BASF.

Sara Lee at 424 (emphasis added). Based upon that finding, the court concluded that ARCO

and BASF had no duty to warn the *21 ultimate purchaser. Similarly, Fibreboard, as the

manufacturer of the asbestos insulation, is held to the standard of an expert and the jury

found that Fibreboard knew about the dangers of asbestos in 1935; sixteen years before ACL

sold any asbestos to Fibreboard.

Next, the District Court completely ignored consideration of whether ACL could have

feasibly warned Fibreboard's end users.

It would be difficult and unduly burdensome for BASF and ARCO to identify, much less

educate or train, all the consumers of products containing their EPS beads. The EPS beads


1994 WL 16035116 (5th Cir.)







were provided in bulk in one thousand pound containers and were reprocessed and repackaged

for distribution by Foam Industries; consequently, BASF and ARCO could not feasibly place

a warning on the EPS beads that would reach the end user. In Higgins, the Court stated

that a bulk supplier faces an even more impossible task in communicating a warning to true

consumers than it does in communicating a warning to employees of an industrial purchaser

as was the case in Goodbar. 671 F.Supp. at 1061 n.4.

Sara Lee, 719 F.Supp. at 424. [FN6] ACL exercised no control over the marketing of

Fibreboard's asbestos insulation and had no way of placing a warning on their products.

FN6. Even Alm I's stepchild, Aluminum Co. of America v. Alm, 785 S.W.2d 137 (Tex.

1990), acknowledges the duty to warn of the end product's dangers depends upon

whether a defendant exercises control over the end product.

"Intermediary reliance" is pertinent to the bulk supplier/sophisticated user defense, but

was misinterpreted and misapplied by the District Court. This is not a case where ACL was

the manufacturer of the product at issue. The jury's finding that Fibreboard knew or

should have known about the dangers of Fibreboard's asbestos insulation products and

failed to *22 manufacture and sell their products with an adequate warning, relieved ACL

of liability. Indeed, by analogy, Sara Lee and Higgins, and their explanation of §402A,

point directly to that conclusion.

C. TEXAS COMPONENT PARTS CASES, NOT ALM I, OFFER A MORE SOUND JUDICIAL ANALOGY.

This Court and Texas courts have consistently held that a component part manufacturer or

supplier does not have liability for defects in a final product if it did not take part in

the design or assembly of the final product, and its component is not defective. Koonce v.

Ouaker Safety Products & Manufacturing Company, 798 F.2d 700 at 715 (5th Cir.1986); Haupt

v. Atwood Oceanics, Inc., 681 F.2d 1058, 1060 (5th Cir.1982); Davis v. Dresser Industries,

Inc., 800 S.W.2d 369 (Tex.RE.--Eastland 1990, writ den'd); and Bennett v. Span Industries,

Inc., 628 S.W.2d 470 at 472 (Tex.RE.--Texarkana 1981, writ ref'd n.r.e.).

ACL mines raw asbestos fiber. ACL's raw asbestos fiber never reached the plaintiffs in

this case. ACL's asbestos fiber was reprocessed, mixed with other ingredients, including

other types of asbestos, and then made into an entirely new product, asbestos insulation.

At most, ACL's asbestos fiber was a "component part" of Fibreboard's asbestos insulation.

This Court has "refused to hold asbestos products inherently dangerous" and has focused

instead on whether an asbestos product in unreasonably dangerous based on the "specific

qualities of the *23 particular product." Gideon, 761 F.2d at 1143. Therefore, the

asbestos ACL supplied cannot be considered a defective component.

Davis v. Dresser Industries, Inc., supra, illustrates why ACL had no duty to warn

Fibreboard's customers. In Davis, Weiss manufactured a drilling rig according to Royal's

specifications. Davis 800 S.W.2d at 370. Dresser and Joy manufactured two component parts

of the rig, respectively, a "rotary table" and a "kelly bushing." Id. Based on Royal's

decision, a safety feature, a "kelly bushing guard" was not included with Dresser and


1994 WL 16035116 (5th Cir.)



























Joy's components. Id.

Davis' legs were traumatically amputated as a result of an accident involving the rotary

table and the kelly bushing. Id. Davis argued that Joy and Dresser had a duty to warn

Royal, the rig owner, and Weiss, the rig manufacturer, "of the danger of manufacturing a

drilling rig without a kelly bushing guard." Id. Citing Koonce and Bennett, the Davis

court affirmed the trial court's summary judgment that Dresser and Joy had no duty to warn

the ultimate consumer. Id. at 371. The Davis court stated:

The appellant's expert's opinion as to duty, and the appellant's argument on this

appeal, amount to no more than an assertion that knowledge of a potential danger created

by the acts of others gives rise to a duty to abate the danger. We are not prepared to

accept such a radical restructuring of social obligations.

Id., citing Wenrick v. Schloemann-Siemag Aktiengesellschaft, 523 Pa. 1, 564 A.2d 1244 at

1248 (1989). The Davis court went on to state:

[A] component part supplier has no duty, independent of the completed product

manufacturer, to analyze the *24 design of the completed product which incorporates its

nondefective component part.

Id., citing Childress v. Gresen Manufacturing Co., 888 F.2d 45 at 49 (6th Cir.1989).

This Court has consistently and unambiguously held that asbestos products are not

dangerous, per se. Gideon, 761 F.2d at 1143; Hardy, 681 F.2d at 348; and Migues v.

Fibreboard Corporation, 662 F.2d 1182, 1188 (5th Cir.1981). Given the wide variety of

manufacturing applications for asbestos, Davis clearly dictates that the duty to warn

(which neutralizes the unreasonable danger) should not lie with the ingredient supplier,

here ACL.

This Court, Texas courts, and the courts in the jurisdictions which have adopted The

Restatement of Torts Second, have all reached the same conclusion regarding who bears the

duty to warn a consumer of a product's dangers. In each and every case, the duty to

provide an adequate warning lies with the entity which possesses intimate knowledge

concerning the end product, and who is in the best position to warn the consumer. In this

case, the jury and the court both determined that Fibreboard had the duty to warn the

consumers of its insulation products. It is undisputed that Fibreboard was in the best

position to warn the consumers of its products. Simply, no authority exists for the

proposition that an ingredient supplier owes a duty to the consumers of a manufacturer's

product when the manufacturer also has a duty to warn its consumers. Fibreboard *25 was in

a better position to warn its customers, and had a duty to warn its customers. The

District Court's extension of Fibreboard's duty to warn its customers to ACL is not

supported in law, and cannot be supported in logic or policy.

Asbestos products are not generic. Manufacturers that convert raw materials into new and

different end products are not intermediaries. Conclusion of law No. 10 should be

reversed, and ACL discharged of any liability to the users of Fibreboard's end products.

D. THE COURT'S CONCLUSION THAT FIBREBOARD WAS INCAPABLE OF PASSING ON AN ADEQUATE WARNING


1994 WL 16035116 (5th Cir.)














TO THE PLAINTIFF IS INVALID.

The District Court's conclusion that "Fibreboard was incapable of passing on a warning

concerning the dangers of asbestos" is neither supported by the jury's answers, nor logic.

In Jury Question No. VI, the jury was asked to:

find whether Carey Canada had actual knowledge that the raw asbestos it supplied to

Celotex and Eagle-Picher was being made into insulation products and sold by such

companies without an adequate warning.

The jury answered Question VI in the affirmative. Based upon that finding, the Court

stated:

In answering Special Interrogatory VI, the jury implicitly found that Eagle-Picher and

Celotex were incapable of passing on warnings concerning the dangers of asbestos.

(R 23154; Supp A at 5-6) The District Court then applied that finding to ACL, and found

Fibreboard was incapable of passing on an adequate warning to its consumers. (R 23154;

Supp A at 20)

*26 First, Jury Question VI did not ask whether the manufacturers were incapable of

passing on any warnings; and as such, the jury's answer to the question will not support

such a finding. The two basic concepts contained in Jury Question VI are: (1) did Carey

Canada [ACL] have actual knowledge, and (2) was the asbestos it supplied to Celotex and

Eagle-Picher [Fibreboard] being made into insulation products and sold without an adequate

warning. The impossibility of the manufacturers selling their products with an adequate

warning is neither implied in the question, nor can it be inferred from the jury's answer.

Second, the jury was not asked and did not find that asbestos insulation products were so

ultra hazardous that no warning could have made their use safe. This case was tried under

the same marketing defect theory which this Court articulated years ago with regard to

asbestos insulation:

The utility of an insulation product containing asbestos may outweigh the known or

foreseeable risk to the insulation workers and thus justify its marketing. The product

could still be unreasonably dangerous, however, if unaccompanied by adequate warnings.

Borel, 493 F.2d at 1105, 1106.

When a product is deemed to be unreasonably dangerous, the seller of the product has a

duty to give adequate warnings of the product's dangers that were known or should have

known by the application of reasonably developed human skill and foresight. Borel, 493

F.2d at 1090, and Bristol-Meyers Co. v. Gonzalez, 561 S.W.2d 801, 804 (Tex.1987).

*27 In a "warnings" or "marketing defect" case, the tort occurs due to the failure to

give an adequate warning to the user of the product. Borel, 493 F.2d at 1090. It is the

failure of the manufacturer to provide an adequate warning which renders the product

unreasonably dangerous as marketed. Id. Since this is a "warnings" case, the Court begins

with the presumption that the asbestos insulation would have been a "safe" product to use

had it been accompanied by an adequate warning.


1994 WL 16035116 (5th Cir.)











When the Court found Fibreboard was incapable of passing on an adequate warning, one of

two propositions must be true. First, the insulation products must have been so dangerous

that no warning would have made them safe; or second, Fibreboard did not have the

requisite degree of skill, knowledge, or foresight in order to formulate and market the

insulation products with an adequate warning.

As to the first possibility, there is nothing within the jury's verdict which supports

the contention that Fibreboard's asbestos insulation products could not have been made

safe. In fact, since this was a "warnings" case, the law presumes that it is possible to

formulate an adequate warning because it is the failure to provide such an adequate

warning which makes the insulation products unreasonably dangerous as marketed. For

Fibreboard, at least, the feasibility of warning was established because Fibreboard placed

warnings on its insulation products beginning in 1966. (R 16012; Supp H)

*28 As to the second possibility, the District Court's interpretation of Jury Question VI

simply ignores the evidence, the other jury questions on liability, and the judgment on

those findings. The District Court held the defect in the asbestos insulation products was

the lack of an adequate warning. Such a holding is incompatible with the District Court's

finding that the manufacturers were incapable of formulating such an adequate warning.

Thus, whether viewed as a fact finding or a conclusion of law, the District Court's

interpretation of Jury Question VI, and application of that interpretation to ACL, can be

of no legal consequence if the Court is to give legitimacy to the jury's answers to Jury

Questions I, II, III, IV, and V, and the legal theories and evidence which supported their

submission.

II. THE DISTRICT COURT ERRED BY USING A FORMULA BASED ON MARKET SHARE OF FIBER SUPPLY TO

FIBREBOARD AS A FURTHER BASIS FOR ASSESSING LIABILITY AGAINST ACL.

STANDARD OF REVIEW

The court-created formula which shifts Fibreboard's liability to ACL has no legal

precedent and thus presents a question of law for de novo review. Salve Id. and Skotak Id.

A. THE COURT ERRED BY SHIFTING FIBREBOARD'S LIABILITY TO ACL.

1. FIBREBOARD'S LIABILITY.

In discussing the District Court's "derivative/collective" liability formula,

Fibreboard's liability must be considered. First, the jury found Fibreboard knew or should

have known about health hazards associated with the use of its asbestos insulation *29

products beginning in 1935. Second, the quality of Fibreboard's knowledge or conduct was

more than "should have known," because the jury concluded that Fibreboard was grossly

negligent. Third, Fibreboard's duty to warn arose sixteen years before ACL first began

supplying raw asbestos fiber to Fibreboard. Finally, as a matter of law, Fibreboard, as a

manufacturer, is held to the knowledge and skill of an expert. Borel 493 F.2d at 1089-90.


1994 WL 16035116 (5th Cir.)




The defect in Fibreboard's asbestos insulation products which made it unreasonably

dangerous was its lack of an adequate warning. [FN7] The manufacturer controls how an end

product is made and how the end product reaches the consumer. Others, such as retailers,

may become responsible for the product; however, typically, the product is "traced" to the

manufacturer. TEX.PROD.LIAB.LAW 2d ed. Issue 0 (1992) at p. 5-97. Nevertheless, under its

"derivative/collective" liability theory, the District Court shifts this responsibility,

as a matter of law, from Fibreboard to ACL, an entity which has no control of the end

product which leaves the manufacturer's factory.

FN7. Twenty years ago, this Court observed that in a marketing defect case, "the

defect alleged, failure to warn by the manufacturer, is by definition the

manufacturer's dereliction." Reyes v. Wyeth Laboratories, 498 F.2d 1264, 1272 (5th

Cir.1974).

If Fibreboard was grossly negligent in 1935, then the same was true in 1951, whether ACL

or some other mining company supplied asbestos fiber to Fibreboard. The fact that ACL

supplied asbestos fiber to Fibreboard does not vitiate or mitigate Fibreboard's duty or

culpability under the evidence, *30 jury findings, and the judgment entered on those

findings. Nevertheless, the District Court's formula shifts fifty percent (50%) of

Fibreboard's fault for its end product, between 1951 and 1961, to ACL.

Under the Court's formula, what happened to Fibreboard's fault? More to the point, based

on Texas law, is the formula an appropriate legal mechanism for shifting Fibreboard's

fault to ACL?

Between 1951 and 1961, Fibreboard's liability is shifted fifty percent (50%) to ACL.

However, the basis of ACL's liability as determined by the District Court arises from

ACL's supposedly independent Alm I duty to warn users of products manufactured by

Fibreboard. Presumably, if Fibreboard had offered evidence showing which mining companies

supplied the other fifty percent (50%) of its asbestos fiber from 1951 to 1961, under the

formula, one hundred percent (100%) of Fibreboard's fault would have been absolved during

this time period. This would hold true for any other time period were evidence was

introduced regarding the percentage of asbestos supplied to Fibreboard.

However, since the Court held Fibreboard liable for failing to warn its customers, then

how can it reach the conclusion that Fibreboard did not have a duty to warn all of its

customers? In essence, the formula completely relieves Fibreboard of its responsibility.

*31 Under this mechanism, ACL has no means to fulfill the duty envisioned by the District

Court, much less defend itself in this or any product liability action. Was it ACL's legal

obligation to trace the fifty percent (50%) of its fiber through Fibreboard's

manufacturing process to fifty percent (50%) of Fibreboard's end users? Can only ACL be

responsible for fifty percent (50%) of a warning? To what extent would ACL be required to

warn about other characteristics of Fibreboard's end product if it is required to warn

about any characteristic? Or, does the fact of Fibreboard's knowledge satisfy ACL's duty?


1994 WL 16035116 (5th Cir.)





These rhetorical questions show the legal quagmire the formula creates, but as to the

last question the answer is readily discernable because the jury's verdict and the

District Court's judgment establish that Fibreboard's knowledge was at least equal to that

of ACL. In fact, contrary to the District Court's observation that jury's answer to

Question VI means that Fibreboard was incapable of warning, the jury's answers to

Questions I, II, III, IV, V, and VII establish that Fibreboard was not only capable of

warning, but was grossly negligent for failing to warn.

The Court's formula is also inappropriate because it does not measure what it purports to

measure. First, by its own terms, the formula does not measure the quality of ACL's

failure to warn compared to Fibreboard's failure. In fact, the record does not show that

ACL's "state of the art" knowledge is any different than Fibreboard's. The same medical

and scientific *32 literature described in Borel 493 F.2d 1083-1086, was the focus of the

experts in this case. In fact, the plaintiffs introduced evidence which tended to show

Fibreboard should have known of the dangers of asbestos by 1935. (R 14753, 14754; Supp I,

J)

Second, the formula does not measure any individual plaintiff's exposure. The formula

only measures ACL's market share of raw asbestos at the Fibreboard manufacturing plant

between 1951 and 1961. Fibreboard steadily reduced the amount of chrysotile fiber it used

from 1951 until 1962. (R 16606; DA 5575- 5576) While it may be proper to conclude that it

is more likely than not that fiber supplied by ACL made it into some of Fibreboard's end

products, it is clearly erroneous to conclude that for an individual plaintiff that was

ever the case, or always the case between 1951 and 1961. In re Fibreboard Corp., 893 F.2d

706, 711-712 (5th Cir. 1990) specifically rejects generalizations such as this.

Fibreboard's fault is based upon its failure to warn. On the other hand, ACL's fault is

based upon the percentage of its supply to a manufacturing facility far removed from

plaintiffs. The District Court's formula absolves Fibreboard of half of its liability

between 1951 and 1961, by reapportioning liability to ACL. There is no precedent in Texas

law to support such a transfer of liability. ACL recognizes the courts must be innovative

in dealing with their asbestos dockets; however, wholesale changes in the substantive law

of the forum is not appropriate.

*33 2. ALTERNATIVELY, APPLYING DERIVATIVE LIABILITY DISCHARGES ACL.

Even though Fibreboard's fault was based upon its failure to warn its customers and ACL's

fault was based upon the percentage of asbestos it supplied Fibreboard between 1951 and

1961, the Court somehow concludes that ACL's liability is derivative of Fibreboard's. If

the Court is correct in its conclusion that ACL's liability is derivative of Fibreboard's,

then ACL is no longer liable to the Appellees because Fibreboard has settled with those

parties. (R 43309; Supp E)

Derivative liability is a concept under which an individual is held liable for the acts

of another based on his relationship to the person primarily liable. The term "derivative


1994 WL 16035116 (5th Cir.)





liability" is sometimes used interchangeably with the term "vicarious liability". See

generally Soto v. Phillips, 836 S.W.2d 266, 269-70 (Tex. RE. -- San Antonio 1992, writ

denied).

Two components of derivative liability are relevant to this case. First, in cases of

derivative liability, the derivatively liable defendant "stands in the shoes" of the

principal actor and, as such, is only liable to the extent of the principal actor. See

e.g. U.S. Fire Ins. Co. v. State, 843 S.W.2d 283, 285- 6 (Tex. RE. -- Austin 1992, no

writ). Second, in cases where one party may be vicariously liable for the actions of

another, settlement of the case bars future litigation against the vicariously liable

defendant because of the one satisfaction *34 rule. El Paso Natural Gas Co. v. Berryman,

852 S.W.2d 362,364 (Tex. 1993).

While Berryman seems to run afoul of earlier Texas Supreme Court opinions which have

specifically recognized the abolition of the "unity of release" doctrine (e.g. Duncan v.

Cessna Aircraft Co., 655 S.W.2d 414, 422 (Tex. 1984)), it is factually distinguishable. In

Duncan, the court was faced with a situation where multiple tort-feasors bore individual

liability for an injury. In Duncan, the various tort-feasors were not liable for the acts

or omissions of the other defendants (derivative liability), but rather were liable only

for their own acts and omissions which contributed to the plaintiff's injury. Thus, a

settling tort-feasor could only settle his percentage of liability. Duncan, 655 S.W.2d at

432. As a result, the "unity of release" rule was abolished. Duncan, 655 S.W.2d at 422.

By contrast, a derivatively liable principal remains liable to a plaintiff not for its

own acts, but rather for the acts of its agent. Thus, any satisfaction received by a

plaintiff from an agent must serve as that plaintiff's "one satisfaction" because the

agent's derivatively liable principal can only be liable to the plaintiff insofar as his

agent is liable to the plaintiff. The difference between a derivatively liable defendant

and a jointly and severally liable defendant is that the derivatively liable defendant is

liable for the acts of another, while the jointly and severally liable defendant is liable

for his own conduct. c.f. Berryman, 852 S.W.2d at 364.

*35 In stating ACL's liability was derivative of Fibreboard's, the District Court was, in

essence, holding ACL was not independently liable to the plaintiffs. Rather, the District

Court's conclusion is based on the lack of an adequate warning on Fibreboard's insulation

products. The District Court, in effect, asserts that there is a legal unity between ACL

and Fibreboard which stems from Fibreboard's asbestos insulation product, and the lack of

an adequate warning on that end product. Fibreboard has settled the plaintiffs' claims

based on the injuries allegedly caused by these end products. Therefore, as in the

Berryman case, Fibreboard's settlement with the plaintiffs should release ACL.

3. OTHER FORMS OF COLLECTIVE LIABILITY ARE NOT APPLICABLE.

Texas courts have not recognized the various theories of collective liability recognized

in other jurisdictions. Because the District Court's liability formula, when applied to


1994 WL 16035116 (5th Cir.)









ACL, sets ACL's liability at a level equal to its supply of asbestos, the District Court's

opinion appears to embody some form of collective liability and as such the formula has no

support in Texas law.

The District Court's formula embodies a variation of at least three of the collective

liability theories discussed and rejected in Gaulding v. Celotex Corp., 772 S.W.2d 66

(Tex.1989). Gaulding involved alleged household exposure to asbestos dust from the

construction of a vanity cabinet using asbestos *36 containing board. The manufacturer of

the board had not been identified; however, the defendants allegedly "dominated the market

of asbestos containing wall board." The trial court entered a summary judgment in favor of

the defendants holding that the plaintiff could not rely upon various theories of

liability, including joint and several liability, res ipsa loquitur, alternative

liability, concert of action, enterprise liability, and market share liability. Id. at 68

Ultimately, the Texas Supreme Court affirmed and discussed each of these varied theories

of liability. Id. at 71 The Court's formula appears to be an amalgamation of "alternative

liability," "enterprise liability," and "market share liability." In addition to the Texas

Supreme Court's rejection of these theories in Gaulding, a number of other reasons counsel

against the District Court's derivative/collective liability formula.

Alternate liability requires the inclusion of all possible wrongdoers in the same

proceeding, and "when a plaintiff fails to join all possible defendants, alternative

liability does not apply." Gaulding, 772 S.W.2d 66 (Tex.1989); Goldman v. Johns-Manville

Sales Corp., 33 Ohio St.3d 40, 514 N.E.2d 691, 697 (1987); and Vigiolto v. Johns-Manville

Corp., 643 F.Supp. 1454, 1457 (W.D.Pa. 1986) aff'd, 826 F.2d 1058 (3d Cir.1987). Here, all

possible defendants were not joined because the universe of asbestos containing product

manufacturers were not defendants, nor were their asbestos suppliers.

*37 Enterprise liability is also not applicable. Citing Hall v. E.I. DuPont de Nemours &

Co., 345 F.Supp. 353 (E.D.N.Y.1972), the Texas Supreme Court in Gaulding observes that

enterprise liability has been rejected by virtually all jurisdictions in which it has been

considered. Gaulding 722 S.W.2d at 70. Regardless, enterprise liability is not appropriate

here because there are not a "small number of manufacturers in a highly centralized

industry." Gaulding 722 S.W.2d at 70. To the contrary, asbestos has thousands of

manufacturing applications, and is found in as many products. No one industry dominates

its use. Corrosion Proof, Id.; See also In re Asbestos Insulation Material, Products

Liability Litigation, 431 F.Supp. 909 (J.P.M.L. 1977).

Finally, market share liability as articulated in Sindell v. Abbott Laboratories, 26

Cal.3d 588, 163 Cal.Rptr. 132, 607 P.2d 924, cert. denied, 449 U.S. 912, 101 S.Ct. 286, 66

L.Ed.2d 140 (1980), is not appropriate. Sindell contemplates proof of market share at the

geographic point of the injured plaintiff's use or consumption of the end product.

Gaulding, 772 S.W.2d at 70. Sindell also requires that a plaintiff prove a prima facie

case of all elements of the cause of action, except identification of the direct

tort-feasor. Id. Against this backdrop, the District Court's formula is not even an

acceptable extension of Sindell.


1994 WL 16035116 (5th Cir.)
























First, the formula does not measure Fibreboard's end product market share at the

geographic area involved here. Gaulding 772 S.W.2d at 71. Rather, the formula measures

ACL's market share of *38 fiber supply at Fibreboard's manufacturing plant. Under a pure

Sindell approach, ACL's burden would be to establish Fibreboard's end product market share

in Southeast Texas. However, this is an unrealistic burden, because ACL does not have

direct involvement in Fibreboard's insulation product market and would have no practical

means to measure the consumption of Fibreboard asbestos insulation products in Southeast

Texas.

Second, the formula's implementation is based on the plaintiff's prima facie case against

Fibreboard. In effect, the only prima facie case required against ACL is that it supplied

raw asbestos to Fibreboard. Thus, under the guise of derivative liability, the District

Court's formula has imposed absolute liability against ACL because it was an ingredient

supplier to Fibreboard. In a similar context applying Louisiana law, this Court observed:

Both theories represent radical departures from traditional theories of tort liability.

All that Thompson can advance in support of his claim that Louisiana would adopt either if

presented his case is a supposed general tendency or trend on the part of Louisiana courts

to expand the liability of manufacturers.

Thompson v. Johns-Manville Sales Corp., 714 F.2d 851 (1983); See also Bateman v.

Johns-Manville Sales Corp., 781 F.2d 1132 (5th Cir. 1986). In re Fibreboard Corp.

articulates Texas' unequivocal requirement regarding causation. An individual plaintiff

must prove that the defendant supplied the product which caused the injury. In re

Fibreboard Corp., 893 F.2d at 712, quoting Gaulding, 772 S.W.2d at 68. Interpreting Texas

law, *39 In re Fibreboard Corp. specifically addressed and rejected the notion that

statistical estimates can form the basis for establishing the probability of causation in

an individual case. Id. at 711-712. Surely, under Gaulding, the same conclusion must be

reached with respect to the threshold questions of fault or defect.

CONCLUSION:

Constructing a legal theory which: 1) converts manufacturers into intermediaries for

their ingredient suppliers, and 2) moves the duty to warn, in the stream of commerce,

farther away from the end product and the end user complicates rather than benefits the

underlying rationale which supports Texas products liability. The District Court's

Conclusion of Law No. 10 ignores the very underpinnings that drove the Alm I Court: 1)

that manufacturers or designers have the most intimate knowledge of their end products,

and 2) are best positioned to control or warn about their use. Asbestos products are not

generic and treating them as such for purposes of this case offers ominous consequences

and unrealistic legal expectations for ingredient suppliers of the thousands of standard

multi-use bulk substances found in American manufacturing.

Also, the District Court's formula promotes little more than an arbitrary mathematic

shift of responsibility based on production site sales rather than fault or defect. At

best, the Court's theory makes Fibreboard a conduit. Taken to its logical legal end,

Fibreboard need only demonstrate the percentage of *40 fiber from each of its suppliers


1994 WL 16035116 (5th Cir.)












over the years in question and be exonerated.

RELIEF REQUESTED:

ACL requests that the judgment of the District Court finding that ACL is liable to the

Atchison and Nations plaintiffs be reversed, and that judgment be entered in favor of ACL.

Alternatively, ACL requests that the Court find that Fibreboard's class wide settlement

discharges ACL's liability. In the further alternative, ACL requests that the District

Court's judgment in favor of the Atchison and Nations plaintiffs together with its

conclusion that there is no exposure evidence to form the basis of liability against ACL

as to any other plaintiffs be affirmed.

Claude CIMINO, et al Plaintiffs-Appellees & Cross-Appellants, v. PITTSBURGH CORNING

CORPORATION, et al Defendants-Appellants & Cross-Appellees.

1994 WL 16035116

Briefs and Other Related Documents (Back to top)

• 1994 WL 16035117 (Appellate Brief) Appellees' Brief in Response to Brief of Pittsburgh

Corning Corporation (Aug. 11, 1994)Original Image of this Document (PDF)

• 1994 WL 16035115 (Appellate Brief) Cross-Appellants' Brief (Mar. 28, 1994)Original

Image of this Document (PDF)

END OF DOCUMENT


1994 WL 16035116 (5th Cir.)


