Jaramillo v. Weyerhaeuser Co.

• Decision Date: 01 August 2008
• Docket Number: Docket No. 07-0507-cv.
• Citation: 536 F.3d 140
• Parties: Mario Miguel JARAMILLO, Plaintiff-Appellant, v. WEYERHAEUSER COMPANY and Technology Licensing Associates, Inc., Defendants-Cross-Claimants-Cross-Defendants-Appellees, Corrugated Gear and Services, Inc., Defendant-Cross-Claimant, Kraft Foods Global, Inc. and Prime Technology, Inc., Defendants-Cross-Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

536 F.3d 140

Mario Miguel JARAMILLO, Plaintiff-Appellant, v. WEYERHAEUSER COMPANY and Technology Licensing Associates, Inc., Defendants-Cross-Claimants-Cross-Defendants-Appellees Corrugated Gear and Services, Inc., Defendant-Cross-Claimant Kraft Foods Global, Inc. and Prime Technology, Inc., Defendants-Cross-Defendants-Appellees.

Docket No. 07-0507-cv.

United States Court of Appeals, Second Circuit.

Argued: March 5, 2008.

Certified Question: August 1, 2008.

James Alexander Burke, Larkin, Axelrod, Ingrassia, & Tetenbaum, LLP, Newburgh, NY, for Plaintiff-Appellant.

Kevin Burns, Goldberg Segalla, LLP, White Plains, NY, for Defendant-Cross-Claimant-Cross-Defendant-Appellee Weyerhaeuser Company.

Before: WESLEY, LIVINGSTON, Circuit Judges, and COGAN, District Judge.^*

LIVINGSTON, Circuit Judge:

Plaintiff-appellant Mario Miguel Jaramillo appeals from a judgment of the United States District Court for the Southern District of New York (Buchwald, J.), granting defendant-appellee Weyerhaeuser Company's ("Weyerhaeuser") motion for summary judgment, denying Jaramillo's cross-motion, and dismissing the complaint. Jaramillo v. Weyerhaeuser Co., No. 03 Civ. 1592(NRB), 2007 WL 194011 (S.D.N.Y. Jan.24, 2007). Jaramillo seeks in this diversity action to hold Weyerhaeuser strictly liable under New York law for a personal injury he sustained in 2002 while operating an industrial machine called a Flexo Folder Gluer ("FFG") that Weyerhaeuser purchased second-hand in 1971 and used for fifteen years before selling to Jaramillo's employer, Glenwood Universal Packaging ("Glenwood") in 1986. Weyerhaeuser argues that it cannot be held strictly liable because it was a "casual" or "occasional" seller of FFGs, not an "ordinary" or "regular" seller. We conclude that this case requires us to resolve a significant question concerning when a seller of used machinery may be deemed a regular seller for purposes of New York's strict products liability law. For the reasons that follow, we believe this question should be answered by the New York courts and, accordingly, we certify it to the New York Court of Appeals.

BACKGROUND

Unless otherwise noted, the following facts were undisputed for purposes of the summary judgment motions.

A. Weyerhaeuser's Business Operations

Weyerhaeuser is an international paper company with its principal place of business in the state of Washington. It is involved in numerous ventures, including growing and managing forests, producing paper and wood, and providing certain financial services. Among its many business activities, Weyerhaeuser operates plants that produce cardboard boxes from corrugated cardboard sheets. FFGs are used in the manufacture of such boxes. In the 1980s, most of Weyerhaeuser's 65 box plants in the United States and Europe used two or three FFGs. As of 2005, the company employed about 197 such machines at its 79 U.S. plants.

The FFG at issue in this case was sold used in 1986 by Weyerhaeuser's Investment Recovery Business ("IRB"), the division through which the company generally disposes of its obsolete or otherwise unneeded equipment. According to the IRB's 1983 Policy and Procedure Manual, the purpose of the IRB "is to manage the orderly disposition of idle facilities, equipment, material and supplies, which are no longer economically useful to Weyerhaeuser Company in their present form or location." The manual provides that the IRB's objectives include, among other things, maintaining cash flows by providing for the timely disposal of surplus assets, recovering the maximum value from surplus assets, and increasing the margins on third-party sales by offering refurbished equipment and engaging in full-time sales efforts. The surplus assets sold by the IRB have included Flexo machines such as the FFG, as well as other equipment from Weyerhaeuser's box plants, including conveyors, drives, sheeters, and trucks and automobiles. The 1983 IRB manual indicates that the IRB markets Weyerhaeuser's used equipment by distributing quarterly catalogs, advertising in trade journals, telemarketing, and conducting market research on potential buyers and dealers of used equipment.

Although the parties disagree on the precise amount, it is common ground that the IRB grossed somewhere between $7.5 and $8.5 million in 1986, the year Weyerhaeuser sold the FFG that eventually injured Jaramillo. This accounted for approximately 0. 15 percent of Weyerhaeuser's net sales of about $5.65 billion that year. The IRB had around 15 employees at that time and maintained three facilities where surplus equipment was awaiting sale.

B. Flexo Folder Gluers

1. Weyerhaeuser and FFGs Generally

There is no evidence in the record concerning Weyerhaeuser's sales of used FFGs before 1986. There is some dispute concerning the frequency with which Weyerhaeuser sold used FFGs thereafter. The parties submitted documents from Weyerhaeuser's "WEYPAC" accounting system, which inventoried the items sold through the IRB from 1986 to 2006. According to Jaramillo, the WEYPAC documents show that during that time, Weyerhaeuser sold around 60 FFGs in the United States—an average of about 3 per year—and that these sales generated revenues of about $6.4 million—an average of about $107,000 per machine. Jaramillo maintains that these numbers do not account for all of the FFGs sold by Weyerhaeuser during this time.

Weyerhaeuser asserts that Jaramillo misinterprets the WEYPAC documents and includes in his count machines that are not FFGs. Weyerhaeuser contends that the proper number is about 19 machines sold in the United States in the last 25 years, an average of less than one machine per year.

In addition, there is evidence that Weyerhaeuser owns patents related to technology used in FFGs, and that the company maintains relationships with FFG manufacturers. It has occasionally made recommendations to manufacturers about how to improve FFG design, including with regard to safety features. When it has detected safety issues with an FFG, the company has also sometimes suggested that the manufacturer install a new safety mechanism in the machine in question. Specifically relevant to this case, older FFGs have "open architecture," which means that they have open spaces between operating sections that a person can enter while the machine is in operation. "Closed architecture" machines, in contrast, do not permit such entry. To make open architecture machines safer, a safety mat or an interlocking device may be installed to stop the machine automatically if a safety gate leading to one of the open spaces is accessed. Weyerhaeuser has added interlocking devices to some of its open architecture FFGs or had the manufacturer do so.

2. The FFG in this Case

The FFG that injured Jaramillo was an open architecture machine manufactured around 1964 by S & S Manufacturing ("S & S"), a Brooklyn-based company that went bankrupt around 1986. The FFG was sold new to the General Foods Company, which used the machine in a cereal plant in Battle Creek, Michigan from about 1964 until 1971. Weyerhaeuser purchased the machine from General Foods in 1971 for about $36,500, and installed it in its Lynchburg, Virginia box plant. Weyerhaeuser added a vacuum transfer system and installed a solid state drive and motor. In 1984, Weyerhaeuser also conducted a "rebuild" of the machine, replacing all worn parts. It made no changes to the safety mechanisms installed by S & S in the original manufacture. Weyerhaeuser's total investment in the machine was around $282,000.

The machine was still functional in 1986—fifteen years after its purchase by Weyerhaeuser and more than twenty years following its manufacture—and Weyerhaeuser had it running two shifts per day. Weyerhaeuser nevertheless decided to sell the machine through the IRB to Glenwood, a Yonkers-based company, for about $70,000. The machine was disassembled in Virginia by a Glenwood employee, transported to Yonkers, and reassembled at the Glenwood plant.

The parties were unable to locate the invoice from the 1986 sale. The heading of a sample IRB sales invoice from 1986, however, states that equipment is "SOLD AS IS, WHERE IS, WITH ALL FAULTS." According to the deposition testimony of former Weyerhaeuser employee Walter Paulson, this meant that potential buyers were invited to inspect IRB products to decide if they wanted to buy them in the condition in which they were displayed. Paulson testified also that "most of the time" IRB sales were "done as-is, where-is," and that the company "never warranted anything, guaranteed anything." Accordingly, while there is little direct evidence of the conditions of the sale, the existing evidence indicates that the machine was sold "as is, where is" and without any express warranties.¹

C. The Accident and Subsequent Litigation

Glenwood used the FFG it had purchased from Weyerhaeuser for sixteen years without incident. By March 9, 2002, the date of his injury, Jaramillo had been employed by Glenwood for about five years and had operated the machine on numerous occasions. Jaramillo set up the machine on the morning of March 9 and ran an initial test print of a cardboard box. During the test, he "entered" the machine—that is, stepped into one of the open spaces between the operating sections—while it was running. His right hand was inadvertently caught between two rollers and seriously injured.

Jaramillo filed a complaint in New York Supreme Court naming Weyerhaeuser, Corrugated Gear and Services, Inc., the successor-in-interest to S & S, Technology Licensing Associates, Inc. and Prime Technology, Inc., purchasers of some of S & S's bankrupt estate, and Kraft Foods Global, Inc., the successor-in-interest to General Foods, the original purchaser of the machine. The claim against Weyerhaeuser sounded principally in strict products liability. Jaramillo's theory in essence was that by 1986, when Weyerhaeuser sold the used FFG to Glenwood, open architecture machines were...