City of Manchester v. National Gypsum Co.

• Decision Date: 30 May 1986
• Docket Number: Civ. A. No. 84-0443 P.
• Citation: 637 F. Supp. 646
• Parties: CITY OF MANCHESTER v. NATIONAL GYPSUM COMPANY, United States Mineral Products Company, United States Gypsum Company and John Doe.
• Court: U.S. District Court — District of Rhode Island

637 F. Supp. 646

CITY OF MANCHESTER v. NATIONAL GYPSUM COMPANY, United States Mineral Products Company, United States Gypsum Company and John Doe.

Civ. A. No. 84-0443 P.

United States District Court, D. Rhode Island.

May 30, 1986.

Stanley M. Brown, Michael Hall, Brown & Nixon, Manchester, N.H., Edward Westbrook, Blatt & Fales, Barnwell, S.C., Edward J. Westbrook, Blatt & Fales, Charleston, S.C., Daniel A. Speights, Hampton, S.C., for City of Manchester.

John A. Graf, McLane, Graf, Raulerson & Middleton, P.A., Manchester, N.H., Lawrence T. Hoyle, Jr., Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for Nat. Gypsum Co.

William Tocchi, Manchester, N.H., for Fibreboard Corp.

Alan Rindler, Morrison, Mahoney & Miller, Boston, Mass., for W.R. Grace Co.

Michael Callahan, Gallagher, Callahan & Gartrell, Concord, N.H., for Empire Ace Insulation Mfg.

John Peltonen, Stark & Peltonen, Manchester, N.H., for H.K. Porter Co., Inc.

John T. Broderick, Jr., Devine, Millimet, Stahl & Branch, Manchester, N.H., for U.S. Mineral Products Co.

Stephen G. Herman, Holland, Donovan, Beckett & Welch, Exeter, N.H., for U.S. Gypsum Co.

Rebecca Schafer-Mills, Hall, Morse, Gallagher & Anderson, Concord, N.H., for W.R. Grace Co.

OPINION AND ORDER

PETTINE, Senior District Judge.

This case is a diversity action brought by the City of Manchester against defendants, National Gypsum Company, United States Mineral Products Company, United States Gypsum Company, and John Doe for damages associated with the placement, removal and replacement of asbestos products from sixteen schools and other public buildings within the city. The action was instituted by a writ of summons filed in the Superior Court of Hillsborough County, New Hampshire, on February 22, 1983. It was removed to the United States District Court for the District of New Hampshire pursuant to 28 U.S.C. § 1441 on March 17, 1983. The case was then transferred to the United States District Court for the District of Rhode Island, the United States District Court judges for the District of New Hampshire having recused themselves.

The plaintiff is a resident of New Hampshire. Defendant National Gypsum Company is a Delaware corporation with its principal place of business in Dallas, Texas. Defendant U.S. Mineral Products Company is a New Jersey corporation with its principal place of business in Stanhope, New Jersey. Defendant U.S. Gypsum is a foreign corporation with its principal place of business in Wilmington, Delaware. All the defendant corporations do business in New Hampshire. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332.

Currently before the Court are the Motions to Dismiss of defendants National Gypsum, U.S. Mineral Products and U.S. Gypsum, the Motion to Amend Complaint of the plaintiff, and the plaintiff's Motion to Add W.R. Grace & Co. as a party defendant. Because the substance of these pleadings is intertwined, I will address the merits of the motions together.

Facts

In its Complaint, the plaintiff alleges as follows: From 1946 to 1975, the City of Manchester arranged for the construction of and subsequent additions and modifications to a number of elementary, junior high, and high schools and other public buildings. As part of this construction, plaster products containing high levels of asbestos were placed on the ceilings of classrooms, halls, laboratories, administrative offices, and other rooms located throughout the schools and buildings.

The City of Manchester claims these asbestos products, placed throughout the schools and public buildings, were "mined, milled, manufactured, fabricated, supplied and/or sold by the defendant corporations through their authorized agents, servants, and employees acting in the course of and in furtherance of the business of the defendant corporations." It also claims that the presence of these asbestos products in the various buildings posed an imminent and serious health danger to all those who normally come into contact with the buildings, e.g., school children, teachers, administrative and maintenance personnel.

In a series of counts stating different legal theories, the City of Manchester seeks recovery of damages totalling 6 million dollars plus interest and costs. These damages were allegedly incurred because the City was forced to and has instituted a costly program to remove and abate the dangers of the asbestos products in the buildings resulting in "various consequential expenses, serious disruptions in the operation of said schools and public buildings, and the investment of considerable time by administrative personnel."

Legal Standards

A complaint should not be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibbons, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); see also Harper v. Cserr, 544 F.2d 1121, 1122 (1st Cir.1976). The question must be resolved in the light most favorable to the plaintiff with any doubt resolved in his behalf. Jenkins v. McKeithen, 395 U.S. 411, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969). Accordingly, the Court must deny a motion to dismiss if the allegations of the complaint permit relief to be granted on any theory, even one not expressly stated therein. Adams v. Bell, 711 F.2d 161, 187 (D.C.Cir.1983), cert. denied, 465 U.S. 1021, 104 S.Ct. 1272, 79 L.Ed.2d 678 (1984).

The second sentence of Fed.R.Civ.P. 15(a) encourages courts to look favorably on a party's request to amend: "leave shall be freely given when justice requires." See also e.g., Forster Manufacturing Co. v. FTC, 335 F.2d 47 (1st Cir.1964), cert. denied, 380 U.S. 906, 85 S.Ct. 887, 13 L.Ed.2d 794 (1965). The grant or denial of leave to amend is a matter that is within the discretion of the trial court, Johnston v. Holiday Inns, Inc., 595 F.2d 890, 896 (1st Cir.1979), and involves the balancing of several factors including delay, bad faith, dilatory motive, repeated failure to cure deficiencies by previously allowed amendments, futility, and most importantly, prejudice to the opposing party. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962); see also Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971). If no prejudice is found, leave to amend in most cases should be allowed. See, e.g., Bamm, Inc. v. GAF Corp., 651 F.2d 389, 391 (5th Cir.1981); Corey v. Look, 641 F.2d 32, 38 (1st Cir.1981).

Discussion

Negligence and Strict Liability Claims

Defendants National Gypsum, U.S. Mineral Products, and U.S. Gypsum have moved to dismiss Counts I, II, and VIII of the Complaint on the grounds that the plaintiff seeks recovery in tort only for economic losses associated with the removal and abatement of asbestos products in the City's schools and public buildings. The defendants claim that the City has failed to allege the necessary tortious or accidental occurrence resulting in physical harm to person or property that is required by New Hampshire law. Additionally, the defendant United States Gypsum Co. argues that these counts are barred by the statute of limitations.

The plaintiff responds that the Complaint implicitly alleges physical harm to property because it claims the contamination of plaintiff's schools and public buildings with "unreasonably dangerous" asbestos products, which made the buildings unsafe, thereby damaging the buildings and requiring the costly removal of the asbestos so as to restore the structures to their prior safe condition, and so as to discharge the City's duty to protect its citizens from the risk of unreasonable harm. In an abundance of caution, the plaintiff seeks to amend its Complaint to make explicit this claim. The proposed amendment is set out in relevant part in the margin.¹ The plaintiff also asserts that the running of the statute of limitations was tolled by the defendants' fraudulent concealment and by the fact that the plaintiff is a municipality.

I will assume, for purposes of argument, that New Hampshire law, as the defendants argue, does not allow recovery in tort for purely "economic" damages, but relegates recovery for those damages to contract law. My inquiry then becomes whether the plaintiff has made a sufficient allegation of "property" damage so as to state tort claims and withstand the motions to dismiss.

I would note at the outset of this discussion that it is at best, somewhat artificial to try to characterize the damage plaintiff claims as either one or the other, as either physical damage to its property or economic damage. Such pigeon holes may have been useful when tort and contract suits were less complex, but today in situations where dangers are discovered only after many years and where the harm caused or to be caused comes from allegedly dangerously defective materials which must be removed so as to avoid further dangers, the reasons for such divisions are less clear and the ability to make such distinctions is questionable.

Indeed, the cases which have dealt with this same question, either in the asbestos situation or in that of other hazardous or toxic chemicals, reflect this dilemma. There are courts which have characterized the type of damage which has been claimed here as economic damage, see, e.g., Arizona v. Cook Paint & Varnish Co., 391 F.Supp. 962 (D.Ariz.1975), aff'd, 541 F.2d 226 (9th Cir.1976), cert. denied, 430 U.S. 915, 97 S.Ct. 1327, 51 L.Ed.2d 593 (1977), as property damage, see, e.g., Pearl v. Allied Corp., 566 F.Supp. 400 (E.D.Pa.1983), and as a hybrid of the two, see, e.g., Cinnaminson Township Board of Education v. U.S. Gypsum, 552 F.Supp. 855 (D.N.J.1982).

For these reasons, defendants' reliance on the Restatement of Torts 2d § 7(3)(1965) and comment e is not dispositive of the matter, nor, in truth, very helpful. The...