Eastern Refractories v. Forty-Eight Insulations

• Decision Date: 13 April 1987
• Docket Number: No. 86 Civ. 1585 (WCC).,86 Civ. 1585 (WCC).
• Citation: 658 F. Supp. 197
• Parties: EASTERN REFRACTORIES COMPANY, INC., Plaintiff, v. FORTY EIGHT INSULATIONS, INC., Fibrex, Inc., Minnesota Mining and Manufacturing Company and Aycock, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

658 F. Supp. 197

EASTERN REFRACTORIES COMPANY, INC., Plaintiff, v. FORTY EIGHT INSULATIONS, INC., Fibrex, Inc., Minnesota Mining and Manufacturing Company and Aycock, Inc., Defendants.

No. 86 Civ. 1585 (WCC).

United States District Court, S.D. New York.

April 13, 1987.

Parker Chapin Flattau & Klimpl, New York City (Martin G. Bunin, of counsel), Degonge, Garrity & Fitzpatrick, Bloomfield, N.J., for plaintiff.

McDermott, Will & Emery, Chicago, Ill. (James E. Betke, of counsel), MacCartney & MacCartney, Nyack, N.Y. (Harold MacCartney, of counsel), Burke and Smith Chartered, Chicago, Ill. (Ellen G. Robinson, of counsel), for defendant Fibrex, Inc.

Cowan, Liebowitz & Latman, P.C., New York City, for defendant Minnesota Mining and Mfg. Co.; Michael F. Maschio, Elliot M. Schachner, of counsel.

Belair Klein Groman & Evans, New York City, for defendant Aycock, Inc.; Paul I. Klein, of counsel.

OPINION AND ORDER

WILLIAM C. CONNER, District Judge.

Defendant Minnesota Mining and Manufacturing Company ("3M") has moved pursuant to Rule 12, Fed.R.Civ.P., for an order dismissing the complaint of plaintiff Eastern Refractories Company, Inc. For the reasons outlined below, defendant's motion to dismiss is granted with respect to plaintiff's claim for breach of warranty, but is denied with respect to the remaining four claims.

Background

On October 1, 1981, Eastern Refractories Company, Inc. ("ERCO") contracted with BBC-Brown Boveri Inc. ("BBC") to provide thermal insulation material to insulate certain piping at a steam turbine generating station at the Seminole Electric Power Station under construction by BBC in Palatka, Florida. The insulation was ordered by ERCO from Forty-Eight (whose successor is Fibrex), which manufactured it using an adhesive known as Scotch Grip Brand Industrial Adhesive No. 871 (the "adhesive"). Following manufacture, Forty-Eight delivered the product to Palatka, Florida. The adhesive was manufactured and marketed by 3M and sold to West Side Industrial Supply, Inc. ("West") for resale to the public. The adhesive used by Forty-Eight in the manufacture of the insulation was purchased from West and supplied by it to Forty-Eight. The insulation manufactured by Forty-Eight was installed at the construction site in Florida by defendant Aycock, its agents, servants and employees.

In March 1983, upon the start-up of the steam turbine, the insulation failed, resulting in fires causing extensive damage and giving rise to a claim by BBC against ERCO. Pursuant to the contract between ERCO and BBC, all claims and controversies were to be resolved by arbitration in New York. In 1983, BBC commenced an arbitration proceeding against ERCO and on November 18, 1985 the arbitrators issued an award against ERCO which was confirmed by this Court in the sum of $687,088.30 plus interest and costs.

The judgment was entered on December 23, 1985. On February 5, 1986, ERCO and BBC entered into an agreement pusuant to which ERCO paid BBC $702,437.58 in full satisfaction of the judgment in exchange for an assignment of all of BBC's rights against defendants to recover damages arising from the manufacture, sale, distribution and installation of the insulation, including its component adhesive and parts.

Plaintiff in this action, in a five-count complaint, alleges that the adhesive manufactured by 3M and supplied to Forty-Eight (whose successor is Fibrex) and installed by Aycock was defective and dangerous, and resulted in product failure and fires, causing extensive damages to BBC. Three of the five counts of plaintiff's complaint are based on the claims assigned by BBC to plaintiff. These claims are based on (1) strict liability; (2) negligence; and (3) breach of warranty. The fourth count of the complaint seeks indemnification from defendants for the sum paid by plaintiff to BBC in satisfaction of the judgment, and the fifth count seeks contribution from defendants for this sum. Defendant 3M has moved to dismiss, pursuant to Rule 12(b)(6) on the grounds that each of the five counts of plaintiff's complaint fails to state a claim against 3M upon which relief can be granted.

Discussion

Choice of Law

Historically, choice-of-law conflicts in tort actions have been resolved by applying the law of the place of the wrong. In Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 191 N.E.2d 279 (Ct.App. 1963), the New York Court of Appeals departed from the traditional doctrine and refused to apply the rule of lex loci delicti to determine the availability of relief for commission of a tort. In doing so, the Court applied New York law to an action involving New York parties in which recovery was sought for injuries received in an automobile accident in Ontario, Canada. Ontario's guest statute would have barred recovery by the plaintiff passenger but the court refused to apply Ontario law in the New York action, holding that "controlling effect" must be given "to the law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties, has the greatest concern with the specific issue raised in the litigation" Babcock v. Jackson, 12 N.Y.2d at 481, 240 N.Y.S.2d 743, 191 N.E.2d 279.

Subsequent cases in New York have followed the decision in Babcock and held that "the law of the jurisdiction having the greatest interest in the litigation will be applied and ... the only facts or contacts which obtain significance in defining State interests are those which relate to the purpose of the particular law in conflict." Miller v. Miller, 22 N.Y.2d 12, at pp. 15-16, 290 N.Y.S.2d 734, 237 N.E.2d 877 (1968); see also Tooker v. Lopez, 24 N.Y.2d 569, at 576-77, 301 N.Y.S.2d 519, 249 N.E.2d 394 (1969); Macey v. Rozbicki, 18 N.Y.2d 289, at pp. 296-97, 274 N.Y.S.2d 591, 221 N.E.2d 380 (1966). "Under this formulation, the significant contacts are, almost exclusively, the parties' domiciles and the locus of the tort." Schultz v. Boy Scouts of America, Inc. 65 N.Y.2d 189, 491 N.Y.S.2d 90, 95, 480 N.E.2d 679 (Ct.App.1985) citing Tooker v. Lopez, supra, and Neumeier v. Kuehner supra.

In the present case, the tort took place in Florida, which has a very substantial interest in assuring that all victims of accidents occurring in that state are treated equally by having Florida law apply to their claims. Moreover, there are no contacts between this case and the State of New York which would justify applying New York law. Plaintiff is a Massachusetts corporation and has its principal place of business there. Forty-Eight is an Illinois corporation with its principal place of business in that state. Fibrex is a Delaware corporation having its principal place of business in Illinois. 3M is a Delaware corporation whose principal place of business is in Minnesota. Aycock is a Pennsylvania corporation with its principal place of business in that state. BBC, the assignor of plaintiff's claims, is a Delaware corporation having its principal place of business in New Jersey.

The only contact this case has with New York is that New York is the forum for this claim and for a prior, related action. Yet these contacts, by themselves, are an insufficient basis for applying New York law, as seen in Tokio Marine & Fire Insurance Company, Ltd., 465 F.Supp. 790 (S.D.N.Y.1978), aff'd on other grounds 617 F.2d 936 (2d Cir.1980). In Tokio, the representative of a passenger killed in an airline accident brought a wrongful death action in the Southern District of New York against an airplane manufacturer, who impleaded the airline, seeking contribution for any monies paid by the manufacturer to the passenger's representative. The manufacturer then settled with the passenger's representative in New York, but continued its action for contribution, seeking part of the monies it paid pursuant to the settlement agreement. The court refused to apply New York law to the contribution claim, holding that the contacts with New York — as the forum for the litigation and the place where some of the settlement negotiations and payments were made — did not constitute a sufficient basis for applying New York law. Id. 465 F.Supp. at 799-800. In reaching this holding the court described New York's contact as the forum for the litigation as "fortuitous." Id. at 799.

Accordingly, under choice-of-law principles articulated by New York courts in Babcock through, most recently, Tokio and Schultz, the laws of the state of Florida apply to all of the claims in this action.

Res Judicata Issue

Defendant 3M has argued that plaintiff is barred from receiving relief for the first three counts of the complaint under the doctrine of res judicata. According to 3M, since BBC has already obtained a judgment for the damages it sustained as a result of the incident, under the doctrine of res judicata BBC's claims merged into the judgment, thereby precluding BBC and plaintiff, as BBC's assignee, from bringing additional claims against 3M for damages arising from the March 1983 incident.

Under the doctrine of res judicata, "a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Allen v. McCurry, 449 U.S. 90, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980). In this case, the final judgment which 3M seeks to use was the result of an arbitration proceeding at which the impleading of 3M and other defendants was not possible.

Accordingly, the claims against 3M could not have been raised in that action, and so are not barred by the doctrine of res judicata in this action.

Breach of Warranty

Defendant 3M asserts that plaintiff's breach of warranty claim must be dismissed since 3M was not in privity with BBC, plaintiff's assignor, as required under Florida law. The Florida Supreme Court had announced in the leading products liability case of West v. Caterpillar Tractor Co., 336 So.2d 80 (Fla.1976) that breach of implied warranty is "an action in contract," Id. at 88, which...