Becker v. Interstate Properties
| Citation | 569 F.2d 1203 |
| Decision Date | 30 January 1978 |
| Docket Number | No. 76-2520,76-2520 |
| Parties | Gary R. BECKER, Appellant, v. INTERSTATE PROPERTIES, Interstate Construction Corporation, Windsor Contracting Corp., Lawrence Corporation, Diamond Reo, Jamesway Company, Willard F. Edwards, John Doe and Richard Roe, Saul Silverman, A.I.A., Raymond Keyes Engineers. INTERSTATE PROPERTIES and I. P. Construction Corp., Third-Party Plaintiffs, v. WOOD PINE CONSTRUCTORS, INC. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Edward B. Meredith, Meredith, Meredith & Chase, Trenton, N. J., for appellant.
Edward J. McCardell, Jr., Trenton, N. J., Thomas P. Weidner, Princeton, N. J., Jamieson, McCardell, Moore, Peskin & Spicer, Trenton, N. J., for Interstate Properties, I. P. Construction Co. and Saul Silverman.
David S. Gordon, Greenbaum, Greenbaum, Rowe & Smith, Woodbridge, N. J., for Raymond Keyes Engineers.
William M. Lake, Dietrich & Lake, Trenton, N. J., for Wood Pine Constructors, Inc.
Before ADAMS, VAN DUSEN and HUNTER, Circuit Judges.
The task of a federal court sitting in diversity is frequently not an easy one, for it must foresake its realm of expertise and assume the aspect of a court of the forum state. Even when applying well-settled law, the federal tribunal must be alert to nuances of precedent. Where, as here, a federal court is asked to pass on the implication of a declaration by a state high court of a new principle in an evolving area of the law, it must act with even greater sensitivity.
In this case, we are called upon to evaluate the effect of a dictum by the New Jersey Supreme Court that failure to insist on a financially-responsible independent contractor will subject the employer of that contractor to liability to uncompensated victims for the contractor's negligence. This endeavor is a perplexing one, but it is not one this court is free to avoid. In the course of discharging our obligation, we must choose either to reject or to accept a nascent legal rule, and thus risk distorting state law as much by an excess of conservatism as by insufficient attention to stare decisis.
On August 31, 1972, appellant Gary Becker, a 19-year-old construction worker, was severely injured on his job site in Windsor, New Jersey when a heavy truck drove squarely over his pelvis. 1 Mr. Becker has sued to recover his damages, including the $35,000 in medical fees he had expended as of the time the complaint was filed.
The owner and general contractor of the $1.5 million shopping center project on which Mr. Becker was working at the time of the accident was I. P. Construction Corp. (hereinafter the developer). 2 Mr. Becker was employed by Wood-Pine Corp., a small company hired by the developer to pave the shopping center. The developer knew, or should have known, that Wood-Pine would hire subcontractors, since Wood-Pine itself had no trucks. In fact, Wood-Pine hired Windsor Contracting Corp., whose employee, Willard Edwards, drove the truck which injured Mr. Becker. 3
There is evidence to indicate that I. P., at least on some occasions in the past, had required insurance coverage from its subcontractors (395a, 408a-411a). Also, there is evidence that the standard liability insurance coverage in the construction industry allows for recoveries of up to $250,000 per accident. In contrast, Windsor's automobile liability insurance coverage was only $10,000, and Windsor is only minimally capitalized.
To recover for his injuries in this diversity action, Mr. Becker sued Windsor and its employee for negligence, also asserting claims against the developer. Mr. Becker contends that he will be unable to recover his damages from Windsor because of Windsor's limited insurance coverage and marginal capitalization, and that the developer breached its duty in allowing such a financially-irresponsible contractor to be hired.
The district court granted summary judgment for the developer, holding that under New Jersey law the developer could not be held liable for the tort of an independent subcontractor regardless of the financial status of such subcontractor. It is this conclusion that we review here. 4
Inasmuch as no New Jersey cases are squarely on point, it is important to make clear that our disposition of this case must be governed by a prediction of what a New Jersey court would do if confronted with the facts before us. 5 Such an estimate cannot be the product of a mere recitation of previously decided cases. Rather, as in any diversity case, a federal court must be sensitive to the doctrinal trends of the state whose law it applies, and the policies which inform the prior adjudications by the state courts. 6 A diversity litigant should not be drawn to the federal forum by the prospect of a more favorable outcome than he could expect in the state courts. But neither should he be penalized for his choice of the federal court by being deprived of the flexibility that a state court could reasonably be expected to show. 7
The federal tribunal is thus obligated to follow the course that it expects New Jersey courts would adopt in similar circumstances. 8
Because we are dealing here with a summary judgment, our analysis is limited to the inquiry of whether any state of facts reasonably inferable from the record could entitle the plaintiff to send the case to the jury under New Jersey law. Our disposition is also influenced by the reluctance which New Jersey courts have manifested to dismiss innovative tort claims without full development of facts at trial. 9
It is true, as Mr. Becker suggests, that the concept of immunity of the employer of an independent contractor is in tension with the more general tort doctrine of respondeat superior, and that the former represents a judicial gloss on the latter. 10 Indeed some authorities have advocated the all-out abolition of the independent contractor immunity, 11 and one noted commentator has espoused the view that the proliferation of exceptions to the immunity precept is "sufficient to cast doubt on the validity of the rule." 12
Nonetheless, we discern no indication that the New Jersey courts are prepared to abandon on a wholesale basis the rule of an employer's immunity for the acts of his independent contractors and to adopt a pure theory of "enterprise liability." Instead, the New Jersey courts have adhered to the general doctrine of immunity, and the liability of employers has emanated from the exceptions articulated in Majestic Realty Associates Inc. v. Toti Contracting Co. 13
Under Majestic, an employer is responsible for the negligence of an independent contractor if one of three special circumstances is present:
(1) where the employer retains control over the aspect of the activity in which the negligence occurs;
(2) where the contractor employed is incompetent; or
(3) where the performance of the contract involves an inherently dangerous activity. 14
The sharp conflict in the case at hand centers on Mr. Becker's contention that by hiring or permitting the hiring of Windsor a contractor financially unable to respond in damages the developer came within the second exception to the immunity rule. Mr. Becker places his reliance primarily on a passage from Majestic suggesting that, as a matter of distributive justice, an employer should be liable for the torts of financially-irresponsible contractors. A proper construction of that key passage is crucial to the outcome of this litigation.
In Majestic, the New Jersey Parking Authority hired Toti Contracting Co. as an independent contractor to demolish a building owned by the Authority. Toti's employees negligently allowed a part of the demolished building to collapse and to damage Majestic's adjoining property. In a unanimous opinion adjudicating Majestic's claim against the Parking Authority, the New Jersey Supreme Court began by articulating the general rule that employers are immune from liability arising out of the torts of their independent contractors, and set forth the general exceptions to the immunity concept that are adumbrated above. After eliminating the "control" exception as a factor in the case, the New Jersey Supreme Court discussed at length the argument that employing a financially-irresponsible contractor is tantamount to hiring one who is incompetent, and therefore comes within the second exception. The Court cited several commentators advocating such a rule, 15 and then noted that the principle had not been applied previously. Justice Francis went on to state for a unanimous court, albeit in what was characterized as "an incidental comment,":
Inevitably the mind turns to the fact that the injured third party is entirely innocent and that the occasion for his injury arises out of the desire of the contractee to have certain activities performed. The injured has no control over or relation with the contractor. The contractee, true, has no control over the doing of the work and in that sense is also innocent of the wrongdoing; but he does have the power of selection and in the application of concepts of distributive justice perhaps much can be said for the view that a loss arising out of the tortious conduct of a financially irresponsible contractor should fall on the contractee. 16
Imposition of liability under such circumstances is particularly appropriate, the Court said, in light of the ready availability of liability insurance, which is viewed as a normal cost of doing business in the construction industry. 17 Nonetheless, the issue was expressly reserved.
Since the financial-irresponsibility contention had not been raised in appellate briefs or at trial in Majestic, the New Jersey Court declined to rule on it. Instead it held the Authority liable on the ground that demolition constituted an "inherently dangerous" activity.
The initial step in our inquiry as to the probable reaction of New Jersey courts to the...
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