East Prairie R-2 School Dist. v. US Gypsum Co.

• Decision Date: 16 February 1993
• Docket Number: No. S88-0122-C.,S88-0122-C.
• Citation: 813 F. Supp. 1396
• Court: U.S. District Court — Eastern District of Missouri
• Parties: EAST PRAIRIE R-2 SCHOOL DISTRICT, Plaintiff, v. U.S. GYPSUM COMPANY and W.R. Grace & Company, Defendants.

813 F. Supp. 1396

EAST PRAIRIE R-2 SCHOOL DISTRICT, Plaintiff, v. U.S. GYPSUM COMPANY and W.R. Grace & Company, Defendants.

No. S88-0122-C.

United States District Court, E.D. Missouri, Southeastern Division.

February 16, 1993.

Hence Winchester, III, Drumm, Winchester & Gleason, Sikeston, MO, John J. Frank, The John J. Frank Partnership, St. Louis, MO, for plaintiff.

Lawrence C. Friedman, Thompson and Mitchell, St. Louis, MO, Keith A. Cary, Deacy & Deacy, Kansas City, MO, Thomas C. Walsh, Bryan Cave, St. Louis, MO, for defendants.

MEMORANDUM

LIMBAUGH, District Judge.

This matter is before the Court upon a Motion for Partial Summary Judgment filed by defendant W.R. Grace & Co.-Conn. (hereinafter "Grace"). Plaintiff filed a First Amended Complaint on June 26, 1990, based upon diversity subject matter jurisdiction, alleging that defendants were liable to plaintiff based upon defendants': (1) strict liability for product defect; (2) strict liability for failure to warn; (3) negligent manufacture and design; and (4) negligent failure to warn. Defendant Grace moves for partial summary judgment as to plaintiff's claims regarding the East Prairie High School (hereinafter "High School"). Defendant Grace argues that there are no genuine issues of material fact as to Grace's liability for any product in the high school and, therefore, Grace is entitled to partial summary judgment as a matter of law.

I. Standard for Summary Judgment

Courts have repeatedly recognized that summary judgment is a harsh remedy that should be granted only when the moving party has established his right to judgment with such clarity as not to give rise to controversy. New England Life Mut. Ins. Co. v. Null, 554 F.2d 896, 901 (8th Cir. 1977). Summary judgment motions, however, "can be a tool of great utility in removing factually insubstantial cases from crowded dockets, freeing courts' trial time for those that really do raise genuine issues of material fact." Mt. Pleasant v. Associated Elec. Coop. Inc., 838 F.2d 268, 273 (8th Cir.1988).

Pursuant to Fed.R.Civ.P. 56(c), a district court may grant a motion for summary judgment if all of the information before the court demonstrates that "there is no genuine issue as to material fact and the moving party is entitled to judgment as a matter of law." Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 467, 82 S.Ct. 486, 488, 7 L.Ed.2d 458 (1962). The burden is on the moving party. Mt. Pleasant, 838 F.2d at 273. After the moving party discharges this burden, the nonmoving party must do more than show that there is some doubt as to the facts. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986). Instead, the nonmoving party bears the burden of setting forth specific facts showing that there is sufficient evidence in its favor to allow a jury to return a verdict for it. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).

In passing on a motion for summary judgment, the court must review the facts in a light most favorable to the party opposing the motion and give that party the benefit of any inferences that logically can be drawn from those facts. Buller v. Buechler, 706 F.2d 844, 846 (8th Cir.1983). The court is required to resolve all conflicts of evidence in favor of the nonmoving party. Robert Johnson Grain Co. v. Chem. Interchange Co., 541 F.2d 207, 210 (8th Cir. 1976). With these principles in mind, the Court turns to an examination of the facts.

II. Facts

In plaintiff's First Amended Complaint, the School District did not identify any particular school building as allegedly containing a Grace product. In response to Grace's interrogatories, plaintiff stated that it believed that defendant Grace's product were in its schools, but awaited further analysis by McCrone Laboratories. In plaintiff's supplemental report containing further analysis referred to in the interrogatory answer, plaintiff's claim that samples from the Doyle Elementary School and Martin Elementary School "have the same constituents" as certain alleged Grace products. The plaintiff's experts were as yet unable to identify the manufacturer of the plaster in the High School.

Defendant Grace avers that the part of the High School involving the alleged asbestos-containing acoustical plaster was constructed in 1957. Grace further alleges that it did not manufacture or sell asbestos-containing products of any kind whatsoever in 1957. Grace alleges that it did not enter the business of making the kind of acoustical plaster product found in the high school until 1963. The High School Annex was built in 1964, after Grace entered the business, and, therefore, any claims of plaintiff regarding the annex will not be addressed in this memorandum.

On January 17, 1963, Grace and Zonolite Company (hereinafter "Zonolite") signed a contract entitled "Agreement and Plan of Reorganization between W.R. Grace & Co. and Zonolite Company." Until 1963, Zonolite was a Montana corporation with its headquarters in Chicago. It was in the business of manufacturing and selling a number of vermiculite-based acoustical plaster and fireproofing products which also contained varying proportions of commercial asbestos. Grace was a chemical company incorporated in Connecticut and headquartered in New York. Grace purchased substantially all of Zonolite's assets, pursuant to the contract, on April 16, 1963. Pursuant to the contract, Grace also agreed to assume:

All debts and liabilities of Zonolite existing on the Closing whether absolute, contingent or otherwise, and whether or not set forth on, reserved against or reflected in Zonolite's Balance Sheet....

Defendant W.R. Grace & Co.-Conn.'s Motion for Partial Summary Judgment, Exhibit A, p. 2, ¶ 3. The agreement further provides for:

The dissolution of Zonolite and the distribution of said Grace common stock to the stockholders of Zonolite according to their respective interests, in complete liquidation and complete cancellation and redemption of the outstanding common stock of Zonolite....

Exhibit A, p. 1, ¶ 1. The agreement further states that Grace was purchasing:

all of the assets and properties of Zonolite of every type and description, real, personal and mixed, tangible and intangible, and its business as a going concern, including, without limitation, all cash on hand and in banks, stocks, bonds, and other securities, good will, the corporate name "Zonolite" and any variants thereof, trade-marks, trade names, brand names, patents and patent applications and interests thereunder, inventions, processes, know-how, formulae, real estate and interests therein (including leaseholds and all other interests), buildings, machinery, equipment, notes and accounts receivables, books and records, inventories of raw materials, work in process, finished products and supplies, fixtures, contracts, agreements, franchises, funds of whatever nature including unemployment compensation, retirement, industrial accident, pension, and savings bond funds and all other property and rights of every kind and nature owned or held by Zonolite on the date of the Closing or then used by in its business whether or not specifically referred to in this agreement.

Exhibit A, p. 1, ¶ 2. Finally, the agreement states that pending closing Zonolite would:

use its best efforts to preserve the business organizations of Zonolite, each Wholly Owned Subsidiary and each Subsidiary intact, and to keep available to Grace the services of the present officers, employees, and agents of Zonolite, the Wholly Owned Subsidiaries and the Subsidiaries.

Exhibit A, p. 13, ¶ 11(e).

Prior to the transaction, Zonolite and Grace had no shared officers, directors, debts credits or business assets. Grace did not add any Zonolite representatives to its board of directors nor did it make any change in its corporate officers. After the transaction, the Zonolite shareholders held 2.27 percent of the total Grace common stock. Finally, Zonolite had no control over whether its employees were retained by Grace.

Following the transaction, Zonolite changed its name to Montana Vermiculite Company and remained in existence for over 17 months, retaining certain assets including over $200,000.00 in cash. As already noted, the contract provided for the dissolution of Zonolite and allowed Zonolite to retain only enough cash as Zonolite would need to close the agreement. The agreement further provides that "if the amount of cash retained by Zonolite as aforesaid is in excess of the amount of cash required to pay said expenses, the excess shall be paid over by Zonolite to Grace." Exhibit A, pp. 2-3, ¶ 2. The Contract also provides that Zonolite would have a meeting of stockholders for the purpose of authorizing "the voluntary dissolution of Zonolite following the distribution of its stockholders of shares of Grace common stock in complete liquidation of Zonolite...." Exhibit A, p. 12, ¶ 10. After the agreement was executed in 1963, Grace inserted the "Zonolite Division" and the "Zonolite Company" as named insureds under its liability policies.

III. Analysis

Defendant Grace moves for summary judgment with respect to any claims of plaintiff regarding the High School. Grace argues that since it neither manufactured nor sold the material allegedly installed in that building, it cannot be held directly liable. It further argues that it could not be held liable indirectly as a successor of the original manufacturer or seller. It should be noted that both parties agree that Missouri law is to be used to determine liability. There is some dispute between Grace and plaintiff as to what law should govern the interpretation of any provisions of the agreement between Grace and Zonolite, but this will be addressed later.

Missouri law recognizes four situations in which a...