Affiliated FM Ins. Co. v. Trane Co.

• Decision Date: 09 September 1987
• Docket Number: Nos. 86-2108,86-2181 and 86-2759,s. 86-2108
• Citation: 831 F.2d 153
• Parties: Prod.Liab.Rep.(CCH)P 11,548 AFFILIATED FM INSURANCE COMPANY, Plaintiff-Appellant, Cross-Appellee, v. The TRANE COMPANY, Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 153

831 F.2d 153

Prod.Liab.Rep.(CCH)P 11,548

AFFILIATED FM INSURANCE COMPANY, Plaintiff-Appellant, Cross-Appellee, v. The TRANE COMPANY, Defendant-Appellee, Cross-Appellant.

Nos. 86-2108, 86-2181 and 86-2759.

United States Court of Appeals Seventh Circuit.

Argued April 17, 1987.

Decided Sept. 9, 1987.

H. Curtis Meanor, Podvey, Sachs & Catenacci, Newark, N.J., for plaintiff-appellant, cross-appellee.

Earl M. Munson, LaFollette & Sinykin, Madison, Wis., for defendant-appellee, cross-appellant.

Before BAUER, Chief Judge, CUMMINGS, Circuit Judge, and ESCHBACH, Senior Circuit Judge.

BAUER, Chief Judge.

The issue presented for review is whether we should expand Wisconsin products liability law to permit plaintiff, Affiliated FM Insurance Company ("Affiliated"), to claim damages from the defendants, The Trane Company, ("Trane"), by allowing Affiliated to sue Trane directly under the strict liability theory in tort. The district court granted Trane's motion for summary judgment on plaintiff's claims of strict liability and breach of warranty on the basis that Trane was neither the manufacturer nor the seller of the product in question and that no privity existed between the plaintiff and the defendant. The court refused to extend Wisconsin products liability law to allow Trane, a non-manufacturer product designer to be sued directly. Wisconsin law holds manufacturers and sellers strictly liable, but not designers. The court concluded that such policy decisions are the type of questions that the legislature is in a better position to determine. We affirm.

I.

The case is about a fire allegedly caused by a gas-fired unit heater manufactured and sold by The Trane Company of Canada, Limited ("Trane-Canada"), which, until it was acquired by American Standard, was a subsidiary of Trane.

The specific product in this case is a Model GPH200M gas-fired unit heater. It was produced and sold by Trane-Canada between 1965 and 1967. The heater was built on a design developed by Trane, modified by Trane-Canada to meet special high altitude requirements.

The building in question was built in 1966 as a vegetable warehouse. Several owners used the warehouse for this purpose until 1976 when Hostess Food Products, Limited, ("Hostess") leased a portion for production of potato chips and snack foods. In 1979, Hostess purchased the building and made some modifications to accommodate its method of manufacturing snack foods. Two of the Trane heaters were installed in the shipping area of the building when it was built in 1966. Later, the heaters were repaired both by Hostess employees and by outside firms.

The fire occurred on December 14, 1982. The Alberta Provincial Fire Inspector reported that many unresolved possible causes of the fire existed. Plaintiff brought suit two years after the fire, contending that as a result of fatigue to the gas-line manifold connection the Trane heater failed. This allegedly was caused by vibration and stress from the weight of gas piping which resulted from the failure to properly design the heater to include a support bracket or brace.

The trial was scheduled to begin on June 2, 1986. On May 29, 1986, the district court heard oral argument on plaintiff's motion for a determination that the law of Wisconsin applied to the liability issues. Trane argued that the law of Alberta, Canada applied. The significance of the application of Wisconsin or Alberta law was that Wisconsin recognizes the doctrine of strict liability in tort while Alberta does not. Both parties argued that the choice of law issue was outcome determinative. The district court, however, determined that no outcome determinative conflict of law between Wisconsin and Alberta existed because in its view Wisconsin would not recognize the plaintiff's strict liability claims. The court having determined that strict liability was not available, and plaintiff having acknowledged that the thrust of its case rested upon the theory of strict liability, plaintiff moved for an order permitting an immediate appeal pursuant to Title 28 U.S.C. Sec. 1292(b). The court denied that application. Plaintiff, faced with the prospect of trying a lengthy case on the issue of negligence alone, voluntarily dismissed its negligence claims with prejudice. Defendant moved for summary judgment on the strict liability claims and the district court granted its motion with prejudice and costs. Plaintiff now appeals. Defendant appeals the denial of its motion for dismissal based upon forum non conveniens.

II.

Affiliated argues that we should anticipate how the Wisconsin court would rule on the question of law presented here: whether Trane, a non-manufacturer product designer, can be held strictly liable for a product manufactured and sold by its independent foreign subsidiary. It relies on our decision in Bowen v. United States, 570 F.2d 1311 (7th Cir.1978), in which we stated that "[i]n the absence of controlling Indiana decision, we are to decide the question as we believe the Indiana courts would decide it." 570 F.2d at 1320. Affiliated also relies on our decision in Huff v. White Motor Corp., 565 F.2d 104 (7th Cir.1977), in which we resolved a question of law not previously addressed by the Indiana Supreme Court, observing that we "must decide what rule the Indiana Supreme Court would adopt." With these cases in mind, the plaintiff urges us to consider what law the Wisconsin Supreme Court would adopt. Under the principles of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), a federal court must apply the state law as declared by the highest state court or otherwise by the intermediate appellate court of the state. It has limited discretion to adopt untested legal theories brought under the rubric of state law. A.W. Huss Co. v. Continental Casualty Co., 735 F.2d 246, 253 (7th Cir.1984); Hartzler v. Chesapeake & Ohio Railway Co., 433 F.2d 104, 107 (7th Cir.1970). Notwithstanding our limited discretion, plaintiff urges us to extend the scope of products liability law in Wisconsin beyond what the legislature and the Supreme Court of Wisconsin have adopted. We find no compelling reason to do this. Plaintiff is not without a remedy. Affiliated may still sue Trane-Canada. In Leannais v. Cincinnati, Inc., 565 F.2d 437, 441 (7th Cir.1977) we refused to adopt, for the State of Wisconsin, California's "products line" doctrine as a means for holding a successor corporation strictly liable for its predecessor's defective products. There, we said that "[a]bsent compelling necessity, therefore, a Federal Court should not impose the policy pronouncements of the Supreme Court of one state upon the citizens of another. Nor are we at liberty to impose our own view as to what the law of Wisconsin should be. As the Wisconsin Supreme Court has recognized, such broad...