Hardy v. Johns-Manville Sales Corp.

• Decision Date: 26 July 1982
• Docket Number: JOHNS-MANVILLE,No. 81-2204,81-2204
• Citation: 681 F.2d 334
• Parties: 11 Fed. R. Evid. Serv. 99 C. A. HARDY, et al., Plaintiffs-Appellees, v.SALES CORPORATION, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 334

681 F.2d 334

11 Fed. R. Evid. Serv. 99

C. A. HARDY, et al., Plaintiffs-Appellees, v. JOHNS-MANVILLE SALES CORPORATION, et al., Defendants-Appellants.

No. 81-2204.

United States Court of Appeals Fifth Circuit.

July 26, 1982.

Rex Houston, Henderson, Tex., F. Scott Baldwin, Marshall, Tex., for plaintiffs-appellees.

Royal H. Brin, Jr., Dallas, Tex., for GAF Corp. and Ruberoid Co.

Stephen R. Patterson, Longview, Tex., for Eagle-Picher Industries, Inc.

Otto A. Ritter, Longview, Tex., for URARCO Ind., Inc.

J. Carlisle DeHay, Jr., Dallas, Tex., for Armstrong Cork Co.

Mike Hatchell, Tyler, Tex., for Nicolet.

Jeffrey S. Lynch, Dallas, Tex., for Raybestos-Manhattan, Inc.

T. John Ward, Longview, Tex., for Forty-Eight Insulations, Inc.

James W. Wray, Jr., Corpus Christi, Tex., for Garlock, Inc.

Clyde Bracken, Dallas, Tex., for Grefco, Inc.

James T. Foley, Tyler, Tex., for Crown Cork & Seal Co., Inc. and Mundet Cork Corp.

Howard Waldrop, Texarkana, Tex., for Keene Corp.

Richard L. Josephson, Larry D. Carlson, Houston, Tex., for Ownes-Illinois.

George A. Weller, William J. McCarthy, Beaumont, Tex., for Firbreboard.

Don W. Kent, Tyler, Tex., for Celotex.

Frank Finn, Jr., Dallas, Tex., for Johns-Manville Sales Corp.

Appeal from the United States District Court for the Eastern District of Texas.

Before GEE and JOHNSON, Circuit Judges, and VAN PELT ^*, District Judge.

GEE, Circuit Judge:

This appeal arises out of a diversity action brought by various plaintiffs-insulators, pipefitters, carpenters, and other factory workers-against various manufacturers sellers, and distributors of asbestos-containing products. The plaintiffs, alleging exposure to the products and consequent disease, assert various causes of action, including negligence, breach of implied warranty, and strict liability. The pleadings in each of the cases are substantially the same. No plaintiff names a particular defendant on a case-by-case basis but, instead, includes several-often as many as twenty asbestos manufacturers-in his individual complaint. The rationale offered for this unusual pleading practice is that, given the long latent period of the diseases in question, it is impossible for plaintiffs to isolate the precise exposure period or to identify the particular manufacturer's product responsible. The trial court accepted this rationale and opted for a theory of enterprise- or industry-wide liability used in, for example, Sindell v. Abott Laboratories, 26 Cal.3d 588, 163 Cal.Rptr. 132, 607 P.2d 924 (1980), cert. denied, 449 U.S. 912, 101 S.Ct. 286, 66 L.Ed.2d 140 (1980) (on proof that plaintiffs contracted a DES-related cancer and that their mothers took DES during pregnancy, market share apportionment determines a manufacturer's liability unless a given manufacturer exculpates itself by proving that its product could not have caused the injury). The trial court held that Texas courts, faced with the impossibility of identifying a precise causative agent in these asbestos cases, would adopt a form of Sindell liability, described as a "hybrid, drawing from concepts of alternative and/or concurrent liability and the law of products liability to form a type of absolute liability." The trial court ruled that "discovery on percentage share of a relevant market may lead to admissible evidence in the trials of some, and perhaps all, of these cases" and therefore granted leave to consolidate them for discovery purposes. This ruling is not on appeal here.

Defendants' interlocutory appeal under 28 U.S.C. § 1292(b) is directed instead at the district court's amended omnibus order dated March 13, 1981, which applies collateral estoppel to this mass tort. 509 F.Supp. 1353. The omnibus order is, in effect, a partial summary judgment for plaintiffs based on nonmutual offensive collateral estoppel and judicial notice derived from this court's opinion in Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076 (5th Cir. 1973), cert. denied, 419 U.S. 869, 95 S.Ct. 127, 42 L.Ed.2d 107 (1974) (henceforth Borel ). Borel was a diversity lawsuit in which manufacturers of insulation products containing asbestos were held strictly liable to an insulation worker who developed asbestosis and mesothelioma and ultimately died. The trial court construed Borel as establishing as a matter of law and/or of fact that: (1) insulation products containing asbestos as a generic ingredient are "unavoidably unsafe products," (2) asbestos is a competent producing cause of mesothelioma and asbestosis, (3) no warnings were issued by any asbestos insulation manufacturers prior to 1964, and (4) the "warning standard" was not met by the Borel defendants in the period from 1964 through 1969. ¹ Insofar as the trial court based its omnibus order on the res judicata effect of Borel, this aspect of the order is no longer valid. Migues v. Fibreboard Corp., 662 F.2d 1183 (5th Cir. 1981). The sole issue on appeal is the validity of the order on grounds of collateral estoppel or judicial notice.

In Flatt v. Johns-Manville Sales Corp., 488 F.Supp. 836 (E.D.Tex.1980), the same court outlined the elements of proof for plaintiffs in asbestos-related cases. There the court stated that the plaintiff must prove by a preponderance of the evidence that

1. Defendants manufactured, marketed, sold, distributed, or placed in the stream of commerce products containing asbestos.

2. Products containing asbestos are unreasonably dangerous.

3. Asbestos dust is a competent producing cause of mesothelioma.

4. Decedent was exposed to defendant's products.

5. The exposure was sufficient to be a producing cause of mesothelioma.

6. Decedent contracted mesothelioma.

7. Plaintiffs suffered damages.

Id. at 838, citing Restatement (Second) of Torts § 402A(1) (1965). The parties agree that the effect of the trial court's collateral estoppel order in this case is to foreclose elements 2 and 3 above. Under the terms of the omnibus order, both parties are precluded from presenting evidence on the "state of the art"-evidence that, under Texas law of strict liability, is considered by a jury along with other evidence in order to determine whether as of a given time warning should have been given of the dangers associated with a product placed in the stream of commerce. Under the terms of the order, the plaintiffs need not prove that the defendants either knew or should have known of the dangerous propensities of their products and therefore should have warned consumers of these dangers, defendants being precluded from showing otherwise. On appeal, the defendants contend that the order violates their rights to due process and to trial by jury. Because we conclude that the trial court abused its discretion in applying collateral estoppel and judicial notice, we reverse.

CHOICE OF LAW

An initial question presented on appeal is what law governs the application of collateral estoppel in a diversity suit involving a prior federal judgment. Appellants argue that the trial court's choice of federal law was incorrect. According to appellants, these cases, couched in terms of Texas law of strict liability and negligence, should be governed by Texas rules of collateral estoppel. The choice of law question is supposedly of significance because, according to appellants, Texas strictly adheres to the doctrine of mutuality, i.e., neither party can use a prior judgment to estop another unless both parties were bound by the prior judgment. If this view of Texas law is correct, the plaintiffs here, none of whom were parties to Borel, would of course be unable to invoke collateral estoppel.

We need not resolve the question of whether appellants' view of Texas law of collateral estoppel is correct, however, since the district court was bound under the law of our circuit to apply federal law. In Johnson v. United States, 576 F.2d 606, 613 (5th Cir. 1978), cert. denied, 451 U.S. 1018, 101 S.Ct. 3007, 69 L.Ed.2d 389 (1981), we stated that federal res judicata principles apply in federal tort claim actions in order to preserve the integrity of federal court judgments and that this rationale applies equally to diversity cases. Accord, Southern Pacific Transportation Co. v. Smith Materials Corp., 616 F.2d 111, 115 (5th Cir. 1980); Aerojet-General Corp. v. Askew, 511 F.2d 710, 716-17 (5th Cir.), cert. denied, 423 U.S. 908, 96 S.Ct. 210, 46 L.Ed.2d 137 (1975). While appellants try valiantly to distinguish these cases, essentially on the grounds that these involved instances in which "the very issue involved in the first case was the subject of attempted litigation in the second," the distinction is one without significance. As the authors of the Restatement (Second)-Judgments conclude, the principle of finality essential to a court's authority demands that "federal law determine the effects under the rules of res judicata of a judgment of a federal court." Restatement (Second)-Judgments § 87 (1982). ²

Having determined that federal law of collateral estoppel governs, we next turn to an examination of just what that law is. In Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979), the Supreme Court was asked to determine "whether a party who has had issues of fact adjudicated adversely to it in an equitable action may be collaterally estopped from relitigating the same issues before a jury in a subsequent legal action brought against it by a new party." Id. at 324, 99 S.Ct. at 648. The Court responded affirmatively, noting offensive collateral estoppel's "dual purpose of protecting litigants from the burden of relitigating an identical issue with the same party or his privy and of promoting judicial economy by preventing needless litigation." Id. at 326, 99 S.Ct. at 649. The Court reiterated that mutuality is not necessary to proper invocation of collateral estoppel under federal law, citing Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434...