Grenada Steel Industries, Inc. v. Alabama Oxygen Co., Inc.

• Decision Date: 17 January 1983
• Docket Number: No. 82-4022,82-4022
• Citation: 695 F.2d 883
• Parties: 12 Fed. R. Evid. Serv. 940 GRENADA STEEL INDUSTRIES, INC., Plaintiff-Appellant, v. ALABAMA OXYGEN COMPANY, INC. and Sherwood-Selpac Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 883

695 F.2d 883

12 Fed. R. Evid. Serv. 940

GRENADA STEEL INDUSTRIES, INC., Plaintiff-Appellant, v. ALABAMA OXYGEN COMPANY, INC. and Sherwood-Selpac

Corporation, Defendants-Appellees.

No. 82-4022.

United States Court of Appeals,

Fifth Circuit.

Jan. 17, 1983.

Benjamin E. Griffith, L. Ellis Griffith, Cleveland, Miss., for plaintiff-appellant.

John L. Low, IV, Jackson, Miss., for Alabama Oxygen Co., Inc.

Lawrence D. Wade, Fred C. DeLong, Jr., Greenville, Miss., for Sherwood-Selpac Corp.

Appeal from the United States District Court for the Northern District of Mississippi.

Before CLARK, Chief Judge, RUBIN and WILLIAMS, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

This appeal raises two issues: whether, in this products liability suit, the exclusion of evidence of post-accident design changes was prejudicial error and, if not, whether the evidence as a whole was sufficient to support both the jury verdict for defendants and the trial judge's denial of post-judgment relief. Finding that the district judge erred neither in excluding the proffered testimony nor in finding the evidence sufficient, we affirm.

I.

On June 2, 1977, a fire, followed by an explosion, occurred in a plant owned by Grenada Steel Industries, Inc. (Grenada Steel). In this diversity-based suit, Grenada contends that the fire was caused by a leak of acetylene gas through a valve on the cylinder that contained the gas. Alabama Oxygen Company, Inc., (Alabama Oxygen) sold acetylene gas to Grenada Steel. The gas was delivered in a metal cylinder, which was to be returned when the gas was consumed. The cylinder was equipped with a valve manufactured by Sherwood-Selpac Corporation (SSC) in December, 1972, utilizing a rubber o-ring seal around the valve plug to prevent leakage of acetylene gas. The valve's design was based on a patent issued in 1965. The cylinder, with its SSC valve, was supplied to Alabama Oxygen in 1973. One year later, in 1974, SSC halted production of this type of valve. It was no longer being marketed when the fire occurred in 1977.

Liberty Mutual Insurance Company insured Grenada Steel. It paid $608,990.38 to Grenada Steel for losses resulting from the fire. It then filed this suit, as subrogee, to recover from Alabama Oxygen and SSC the amount paid to Grenada Steel. Grenada Steel later joined in the suit to assert its own claim for damages not covered by its insurance. Since their interests are in most respects identical, we refer to both claimants jointly as Grenada Steel.

In the six-day jury trial, Grenada Steel proffered evidence that, following the fire, Rego, a competitive valve manufacturer, manufactured and designed an acetylene valve based on an alternative design and that SSC had itself manufactured a differently designed model. The district court excluded this evidence. Grenada Steel also introduced the testimony of an expert witness that the valve was defective. SSC countered with testimony that the valve's design had a good reputation in the industry, its valves had been approved by Underwriters Laboratories, and the same design had been used in the industry for a number of years. Each side also presented contradictory factual and expert evidence concerning where the fire originated.

The district court, with counsel's assistance, formulated both special interrogatories and a general verdict. In response to the special interrogatories, the jury found that the valve was not defective or unreasonably dangerous, had undergone substantial changes in condition after it was sold by the manufacturer and before the fire, and was not unfit for ordinary use for the purpose intended. It rendered a general verdict for the defendants. Grenada Steel does not assert that the answers to the special interrogatories were either inconsistent with each other or with the general verdict but only that they are "incorrect and do not square with the facts." (Emphasis in Grenada Steel's brief.)

II.

We start with an elementary proposition: in diversity cases, state substantive law applies. Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Therefore, in determining the sufficiency of the evidence we follow Mississippi courts, which have adopted the American Law Institute's Restatement (Second) of Torts Sec. 402A as the appropriate standard of strict liability for product manufacturers. Page v. Barko Hydraulics, 673 F.2d 134, 136 n. 1 (5th Cir.1982); State Stove Mfg. Co. v. Hodges, 189 So.2d 113, 118 (Miss.1966), cert. denied, 386 U.S. 912, 87 S.Ct. 860, 17 L.Ed.2d 784 (1967). In matters of procedure, however, such as the admissibility of evidence, federal rules apply. Fed.R.Evid. 1101(b); Rabon v. Automatic Fasteners, Inc., 672 F.2d 1231, 1238 n. 14 (5th Cir.1982); Johnson v. C. Ellis & Sons Iron Works, Inc., 604 F.2d 950, 957 (5th Cir.1979).

The district court relied on Rule 407 of the Federal Rules of Evidence to exclude evidence that, after the accident, SSC and Rego marketed valves that were designed differently from the one patented in 1965. That rule provides:

When, after an event, measures are taken which, if taken previously, would have made the event less likely to occur, evidence of the subsequent measures is not admissible to prove negligence or culpable conduct in connection with the event. This rule does not require the exclusion of evidence of subsequent measures when offered for another purpose, such as proving ... feasibility of precautionary measures, if controverted ....

In excluding the testimony, the district judge held that the rule applies not only to claims of negligence but also to those based on strict liability. He also found that the feasibility of a different design had not been challenged by SSC, and, therefore, ruled that evidence of the new design was inadmissible on that issue.

The initial question is whether Rule 407 applies to product liability cases. This is a question on which we have not yet passed. See Foster v. Ford Motor Co., 616 F.2d 1304, 1309 n. 11 (5th Cir.1980). ¹ We examine first its applicability to the evidence concerning changes by SSC because the rule on its face, as discussed more fully below, does not deal with alternative designs or products introduced by third parties.

The Eighth Circuit has held repeatedly that Rule 407 is simply inapplicable to products liability cases. Unterburger v. Snow Co., 630 F.2d 599, 603 (8th Cir.1980); Farner v. Paccar, Inc., 562 F.2d 518, 528 n. 20 (8th Cir.1977); Robbins v. Farmer's Union Grain Terminal Ass'n, 552 F.2d 788, 793 (8th Cir.1977); Abel v. J.C. Penney Co., 488 F.Supp. 891 (D.Minn.1980), aff'd, 660 F.2d 720 (8th Cir.1981). This view rests on two arguments. First, the rule is limited by its terms to efforts to prove negligence or culpable conduct. Yet in strict liability cases, the Eighth Circuit reasons, the focus is not on negligence or culpable conduct. Instead, liability stems from the unreasonably dangerous nature of the product. Second, its decisions rely heavily upon the policy considerations set forth in Ault v. International Harvester Co., 13 Cal.3d 113, 117 Cal.Rptr. 812, 528 P.2d 1148 (1974).

In Ault, decided before the adoption of the Federal Rules of Evidence, the court concluded that the blanket exclusionary rule was inapplicable to strict liability cases for economic reasons. The court asserted that it is "manifestly unrealistic to suggest that ... a producer will forego making improvements in its product, and risk innumerable additional lawsuits and the attendant adverse effect upon its public image, simply because evidence of the adoption may be admitted in an action founded on strict liability." Id. at 121, 117 Cal.Rptr. at 815, 528 P.2d at 1151. ²

Other circuits have taken a different path and held that Rule 407 applies with equal force in strict liability cases. Hall v. American Steamship Co., 688 F.2d 1062 (6th Cir.1982); Josephs v. Harris Corp., 677 F.2d 985, 990-91 (3d Cir.1982); Cann v. Ford Motor Co., 658 F.2d 54 (2d Cir.1981), cert. denied, --- U.S. ----, 102 S.Ct. 2036, 72 L.Ed.2d 484 (1982); Werner v. Upjohn Co., 628 F.2d 848 (4th Cir.1980); cert. denied, 449 U.S. 1080, 101 S.Ct. 862, 66 L.Ed.2d 804 (1981). In Bauman v. Volkswagenwerk Aktiengesellschaft, 621 F.2d 230 (6th Cir.1980), and Roy v. Star Chopper Co., 584 F.2d 1124, 1134 (1st Cir.1978), the courts applied Rule 407 in product liability cases without discussing the issue. In Oberst v. International Harvester Co., 640 F.2d 863 (7th Cir.1980), the court held evidence of subsequent repairs inadmissible. It is not clear, however, whether this decision was based on Rule 407 or on Illinois law. ³

In Werner the Fourth Circuit noted that one of the basic concerns underlying Rule 407 was the encouragement of voluntary repairs by manufacturers. The court questioned "why this policy should apply any differently where the complaint is based on strict liability as well as negligence." 628 F.2d at 848. The Werner opinion further notes that the Ault approach would admit subsequent repairs as evidence that the product was defective even in cases where the manufacturer was simply making further improvements to an already safe product. Id. See also Hall v. American Steamship Co., 688 F.2d at 1067 (following Werner ).

Voluntary change to improve a product and reduce the possible hazard to a user should be encouraged. While there is no evidence concerning whether admission of evidence of change would deter such action by manufacturers, the assumption in the rule that it might have a deterrent effect is not demonstrably inapplicable to manufacturers upon whom strict liability is imposed. But our decision does not rest only on theses about the influence of possible tort liability on human conduct. It rests more firmly on the proposition that evidence of subsequent repair or change has little relevance to whether the product in question was defective at some previous time.

It has been suggested that evidence of a change in the...