Adams-Arapahoe School Dist. No. 28-J v. GAF Corp.

• Decision Date: 23 March 1992
• Docket Number: ADAMS-ARAPAHOE,No. 91-1058,91-1058
• Citation: 959 F.2d 868
• Parties: , 73 Ed. Law Rep. 936, Prod.Liab.Rep. (CCH) P 13,139 SCHOOL DISTRICT NO. 28-J, Plaintiff-Appellee, v. GAF CORPORATION, Defendant-Appellant, United States Gypsum Company; Armstrong World Industries, Inc.; Flintkote Company; Ryder Industries, Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 868

959 F.2d 868

60 USLW 2636, 73 Ed. Law Rep. 936,

Prod.Liab.Rep. (CCH) P 13,139

ADAMS-ARAPAHOE SCHOOL DISTRICT NO. 28-J, Plaintiff-Appellee, v. GAF CORPORATION, Defendant-Appellant United States Gypsum Company; Armstrong World Industries Inc.; Flintkote Company; Ryder Industries, Defendants.

No. 91-1058.

United States Court of Appeals Tenth Circuit.

March 23, 1992.

Richard M. Foster (Todd Jansen of Cockrell, Quinn & Creighton, Denver, Colo., Marc Weingarten and Jonathan Miller of Greitzer and Locks, Philadelphia, Pa., with him on the briefs), of Cockrell, Quinn & Creighton, Denver, Colo., for plaintiff-appellee.

John C. Siegesmund III (James D. Hinga and Andrew B. Prosser of Parcel, Mauro, Hultin & Spaanstra, P.C., Denver, Colo., Shauna L. Hilgers of Law Firm of Mike Hilgers, Arvada, Colo., Michael L. Hardy, Theodore E. Laszlo, Jr. and Gary M. Glass of Thompson, Hine and Flory, Cleveland, Ohio, with him on the briefs), of Parcel, Mauro, Hultin & Spaanstra, P.C., Denver, Colo., for defendant-appellant.

Before LOGAN and BRORBY, Circuit Judges, and DAUGHERTY, ^* District Judge.

BRORBY, Circuit Judge.

Defendant GAF Corporation (GAF), a former manufacturer of vinyl asbestos floor tile, appeals from a jury verdict in favor of Plaintiff Adams-Arapahoe School District No. 28-J (School District). Because we conclude the School District had only one legally compensable claim, and because we conclude the School District failed to provide sufficient evidence of physical injury to justify sending that claim to the jury, we reverse and remand with instructions for the district court to enter a directed verdict in favor of GAF.

I. BACKGROUND

"Asbestos-in-buildings" cases have been litigated for over a decade. This case is somewhat unusual, however, as it represents the first in which the plaintiff sought recovery for alleged property damage caused by vinyl asbestos floor tile (VAT). VAT is a resilient floor covering that was widely used, both commercially and residentially, from the 1950's into the 1980's. Because of its durable wear characteristics and affordable price, VAT was typically specified as the floor covering of choice for schools. Today, however, asbestos building products are no longer used due to the health dangers associated with exposure to respirable asbestos fibers.

Respirable asbestos fibers may be released from "friable" asbestos-containing materials when such materials are disturbed. A "friable" asbestos material is one that, "when dry, may be crumbled, pulverized, or reduced to powder by hand pressure, and includes previously nonfriable material after such previously nonfriable material becomes damaged to the extent that when dry it may be crumbled, pulverized, or reduced to powder by hand pressure." 40 C.F.R. § 763.83 (1990); see also Colo.Rev.Stat. § 25-7-502(6) (1990). In-place, properly maintained VAT does not readily fit this definition; therefore, VAT has not previously been the target of this type litigation.

The School District commenced this action in 1984 to recover the cost of removing asbestos-containing building products from Aurora, Colorado, public schools. ¹ In its complaint, the School District named several former asbestos product manufacturers as defendants, and asserted various tort and contract causes of action. The trial was ultimately trifurcated on the basis of product groups. This appeal derives from Phase III of that trial, which involved only those claims against VAT manufacturers. ² Phase III was submitted to the jury on the School District's negligence and strict products liability claims. ³ However, the jury returned a verdict against GAF ⁴ on the negligence claim alone. Our review is therefore limited to the validity of that claim.

II. DISCUSSION

Although GAF has presented six issues for consideration on appeal, we need only address one: Did the School District suffer an injury cognizable in tort?

A federal court sitting in diversity on this issue must "ascertain and apply Colorado law [with the objective] that the result obtained in the federal court [should be] the result that would [be] reached ... in a Colorado court." Lutz Farms v. Asgrow Seed Co., 948 F.2d 638, 641 (10th Cir.1991); Erie R.R. Co. v. Tompkins, 304 U.S. 64, 72-73, 58 S.Ct. 817, 819-820, 82 L.Ed. 1188 (1938). In the absence of authoritative precedent from Colorado's highest court, and predict how the Colorado Supreme Court would rule. Daitom, Inc. v. Pennwalt Corp., 741 F.2d 1569, 1574 (10th Cir.1984). We review this state-law determination de novo. Salve Regina College v. Russell, --- U.S. ----, 111 S.Ct. 1217, 1225, 113 L.Ed.2d 190 (1991).

The School District identifies three distinct injuries allegedly caused by GAF VAT: 1) injury in the mere presence of VAT; 2) injury in the nature of the risk inherent in VAT; and 3) injury in the nature of contamination caused by past releases of asbestos fibers from VAT. While the School District integrates these injuries into a single assertion of damages, the better analysis requires us to examine each injury separately to determine whether it is an injury for which damages are recoverable under Colorado tort law and, if so, whether the School District presented sufficient evidence to overcome GAF's motion for a directed verdict.

A.

The School District asserts that "[t]he mere presence of VAT in [its] buildings damages those buildings because it requires the School District to incur additional costs in conducting renovations in the vicinity of the VAT where the renovation might cause the VAT to become friable." The School District cites Hiigel v. General Motors Corp., 190 Colo. 57, 544 P.2d 983 (1975), as controlling precedent.

The plaintiff-purchaser in Hiigel sued a motor home manufacturer after a defective wheel attachment system caused the wheels to detach from and thereby damage the plaintiff's motor home. The plaintiff claimed no personal injury or property damage other than that sustained by the motor home itself. The Colorado Supreme Court upheld the plaintiff's tort action, extending the doctrine of strict liability to situations where only the defective product is injured. ⁵ The Colorado Supreme Court was careful, however, to expressly limit the application of strict liability to physical harm to person or property, thereby declining to extend the doctrine to commercial or business loss. Id. 544 P.2d at 989 (quoting the Restatement (Second) of Torts § 402A and citing Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (1965)).

Likewise, negligence is not actionable in Colorado unless it results in physical damage to persons or property. See Jardel Enters., Inc. v. Triconsultants, Inc., 770 P.2d 1301, 1304 (Colo.App.1988) (economic loss rule "does not prevent a negligence action to recover for physical injury to property or persons") (emphasis added); Bayly, Martin & Fay, Inc. v. Pete's Satire, Inc., 739 P.2d 239, 242 (Colo.1987) (injury characterized by "actual loss or damage resulting to the interests of the plaintiff" is an essential element of a negligence action; citing W. Keeton, Prosser and Keeton on Torts § 30, at 164-65 (5th ed. 1984)). The dispositive issue here therefore becomes whether the mere presence of VAT satisfies this physical harm requirement.

The School District asserts this is not a typical "loss of the bargain case" ⁶ and therefore cannot be characterized as a claim for economic (commercial or business) loss. From this assertion the School District apparently presumes the presence of asbestos fibers in tile manufactured to contain asbestos constitutes physical harm to the tile itself--a compensable injury under Hiigel. We cannot accept this presumption of physical harm.

When reinforcing the physical harm requirement in Hiigel, the Colorado Supreme Court relied on the seminal case of Seely v. White Motor Co., which distinguished physical injury and economic loss for purposes of strict liability and negligence actions. This distinction, observed the California Supreme Court, "is not arbitrary and does not rest on the 'luck' of one plaintiff in having an accident causing physical injury." Seely, 45 Cal.Rptr. at 23, 403 P.2d at 151. Rather, the distinction drawn between tort recovery for physical injuries and warranty recovery for economic loss rests on

an understanding of the nature of the responsibility a manufacturer must undertake in distributing his products. He can appropriately be held liable for physical injuries caused by defects by requiring his goods to match a standard of safety defined in terms of conditions that create unreasonable risks of harm. He cannot be held for the level of performance of his products in the consumer's business unless he agrees that the product was designed to meet the consumer's demands. A consumer should not be charged at the will of the manufacturer with bearing the risk of physical injury when he buys a product on the market. He can, however, be fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will.

Id. Applying the Seely distinction to facts analogous to this case, the district court in Arizona v. Cook Paint & Varnish Co., 391 F.Supp. 962, 971-72 (D.Ariz.1975), aff'd 541 F.2d 226 (9th Cir.1976), held the costs of removing a highly flammable insulation product and the resulting loss in the building's value were economic in character and did not result from negligent or accidental physical injury to the building or to the occupants.

The School District's claim of injury in the mere presence of VAT appears to be little more than an invitation to recognize some fictional property damage as a vehicle upon which to carry an economic loss action into the province of tort law. While the presence of asbestos in VAT may well impose increased renovation costs, any additional expense is best characterized as economic loss--consequential damages resulting from the failure of...