72 F.3d 1491 (10th Cir. 1996), 94-3009, City of Wichita, Kan. v. United States Gypsum Co.

Docket Nº:94-3009.
Citation:72 F.3d 1491
Party Name:CITY OF WICHITA, KANSAS, Plaintiff-Appellant, v. UNITED STATES GYPSUM COMPANY, a Delaware corporation, Defendant, and United States Mineral Products Co., a New Jersey corporation, and Asbestospray, a New York corporation, Defendants-Appellees.
Case Date:January 05, 1996
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 1491

72 F.3d 1491 (10th Cir. 1996)

CITY OF WICHITA, KANSAS, Plaintiff-Appellant,

v.

UNITED STATES GYPSUM COMPANY, a Delaware corporation, Defendant,

and

United States Mineral Products Co., a New Jersey

corporation, and Asbestospray, a New York

corporation, Defendants-Appellees.

No. 94-3009.

United States Court of Appeals, Tenth Circuit

January 5, 1996

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Gerald Sawatsky (Charles P. Efflandt and Jeff P. DeGraffenreid of Foulston & Siefkin, Wichita, KS, and Edward J. Westbrook and Edward B. Cottingham, Jr., of Ness, Motley, Loadholt, Richardson & Poole, Charleston, SC, with him on the brief), of Foulston & Siefkin, Wichita, KS, for Plaintiff-Appellant.

C. Brooks Wood (Robert D. Brownson of Stich, Angell, Kreidler & Muth, P.A., Minneapolis, MN, with him on the brief), of Hillix, Brewer, Hoffhaus, Whittaker & Wright, L.L.C., Kansas City, MO, for Defendant-Appellee Asbestospray Corporation.

John T. Broderick, Jr. (Mark E. Howard of Broderick & Dean, Manchester, NH, and Marc A. Powell of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, KS, with him on the brief), of Broderick & Dean, Manchester, NH, for Defendant-Appellee United States Mineral Products Co.

SEYMOUR, Chief Circuit Judge, SETH, Circuit Judge, and KANE, Senior District Judge [*].

KANE, Senior District Judge.

Plaintiff, the City of Wichita, Kansas ("City"), initiated this action on June 30, 1989 alleging asbestos-containing building products sold by the Defendants for use in the City's Century II Civic Cultural Center ("Century II") have released and continue to release harmful asbestos fibers causing property damage and health risks to its citizens. The City asserted claims against Defendants for negligence, strict liability, breach of implied warranty, fraudulent misrepresentation, and fraudulent concealment.

The District Court granted Defendants' motion for summary judgment as to the negligence, strict liability, and breach of implied warranty claims on statute of limitations grounds. The case proceeded to the jury on the fraud claims. The jury found the fraud claims were not barred by the statute of limitations, but entered a verdict in favor of Defendants. Judgment was entered on the jury's verdict. We affirm in part and reverse in part.

I.

The City contends the District Court committed prejudicial error in instructing the jury on the elements of the City's fraud claims. The City argues the instructions invaded the province of the jury and imposed a greater burden of proving the materiality of alleged misrepresentations and concealments than is appropriate under Kansas law. We agree.

The determination of the substance of a jury instruction in a diversity case is a matter of state law, but the grant or denial of tendered instructions is governed by federal

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law and rules. Slane v. Jerry Scott Drilling Co., Inc., 918 F.2d 123, 126 (10th Cir.1990). The admission or exclusion of a particular jury instruction is within the sound discretion of the trial court. Harris Market Research v. Marshall Mktg. & Communications, Inc., 948 F.2d 1518, 1528 (10th Cir.1991). We review the trial court's conclusions on legal issues de novo, however, and need not defer to its decisions on questions of law. Key v. Liquid Energy Corp., 906 F.2d 500, 505 (10th Cir.1990).

It is error for a trial court to expand improperly a legal duty or burden of proof by grafting its own fact-finding on an instruction of law. See Mason v. Texaco, Inc., 862 F.2d 242, 248 (10th Cir.1988). Under Kansas law the materiality of the facts allegedly misrepresented or concealed is an element of actionable fraud. DuShane v. Union Nat'l Bank, 223 Kan. 755, 576 P.2d 674, 678 (1978); Griffith v. Byers Constr. Co., 212 Kan. 65, 510 P.2d 198, 205 (1973); Lesser v. Neosho County Community College, 741 F.Supp. 854, 863-64 (D.Kan.1990). A fact is material if it is one to which a reasonable person would attach importance in determining his or her choice of action in the transaction involved. Timi v. Prescott State Bank, 220 Kan. 377, 553 P.2d. 315, 325 (1976); Pattern Instructions of Kansas 2d (Supp.), Civil, 14.42 (1993).

Over objection by the City 1, the District Court instructed the jury that the City was required to prove Defendants concealed or misrepresented "material facts concerning unreasonable health hazards...." In a separate instruction, the jury was told an unreasonable health hazard was "a hazard which can reasonably be expected to cause harm and cannot be controlled or prevented by reasonable means or methods." Thus, the court's instructions limited the scope of what the jury could determine to be a material fact from "any fact to which a reasonable person would attach importance in determining a choice of action" to "material facts concerning unreasonable health hazards which can reasonably be expected to cause harm and cannot be controlled or prevented by reasonable means or methods."

The City contends the District Court invaded the province of the jury by pre-determining which facts a reasonable person could deem important. We agree. For example, the jury here was precluded from considering that Defendants' products may have created an unreasonable but controllable health hazard that reduced the value of the City's property and would have been costly to maintain because such a fact could not, under the Court's instructions, have been "material." For the same reason, the jury was precluded from considering that Defendants may have known their products posed a cancer risk or that they would require "reasonable" post-installation maintenance.

Where a jury instruction is legally erroneous, we must reverse if the jury might have based its verdict on the erroneously given instruction. SEC v. Peters, 978 F.2d 1162, 1167 (10th Cir.1992). Even if that possibility is "very unlikely," reversal is required. Adams-Arapahoe Joint School Dist. v. Continental Ins. Co., 891 F.2d 772, 780 (10th Cir.1989). The substance of the jury instructions in a diversity case is a matter of state law, but the question of whether an error is harmless is one of federal law. Id. at 778.

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