Independent School Dist. No. 197 v. WR Grace

• Decision Date: 07 November 1990
• Docket Number: Civ. No. 4-89-594.
• Citation: 752 F. Supp. 286
• Parties: INDEPENDENT SCHOOL DISTRICT NO. 197, Plaintiff, v. W.R. GRACE & CO., individually, and as successor-in-interest to Zonolite Company and Western Mineral Products Company; John B. Sander & Company, Inc.; Sander & Company, Inc. (successor-in-interest to John B. Sander & Company), Defendants.
• Court: U.S. District Court — District of Minnesota

752 F. Supp. 286

INDEPENDENT SCHOOL DISTRICT NO. 197, Plaintiff, v. W.R. GRACE & CO., individually, and as successor-in-interest to Zonolite Company and Western Mineral Products Company; John B. Sander & Company, Inc.; Sander & Company, Inc. (successor-in-interest to John B. Sander & Company), Defendants.

Civ. No. 4-89-594.

United States District Court, D. Minnesota, Fourth Division.

November 7, 1990.

COPYRIGHT MATERIAL OMITTED

Richard A. LaVerdiere, Hertogs, Fluegel Sieben, Polk, Jones & LaVerdiere, P.A., Hastings, Minn., (Edward Westbrook, Ness, Motley, Loadholt, Richardson & Poole, of counsel), Charleston, S.C., for plaintiff.

John C. Childs, J. Michael Schwartz, Popham, Haik, Schnobrich & Kaufman, Ltd., Minneapolis, Minn., (Goodwin, Procter & Hoar, of counsel), Boston, Mass., for defendants.

MEMORANDUM AND ORDER

MacLAUGHLIN, District Judge.

This matter is before the Court on defendant W.R. Grace's motion for summary judgment and for certification of questions of law to the Minnesota Supreme Court.

FACTS

This is an action for recovery of costs associated with removal of asbestos-containing fireproofing from Henry Sibley High School in Mendota Heights, Minnesota. Defendant W.R. Grace & Co.—Connecticut (Grace), a Connecticut corporation, is the manufacturer of Monokote, a fireproofing material applied to the school's beams and steel decks. Plaintiff is a body politic charged with the operation and management of public schools in Independent School District No. 197, located in Dakota County, State of Minnesota. Because asbestos has been identified as a potential carcinogen, federal regulations require that asbestos-containing material such as that present in Sibley High School must be removed during renovation or demolition at the latest. See 40 C.F.R. § 61.147. At the present time, the school district's asbestos-removal program for Henry Sibley High School is partially completed. Affidavit of Richard A. LaVerdiere.

On January 17, 1983, a class action was commenced in the United States District Court for the Eastern District of Pennsylvania on behalf of all school districts nationwide seeking recovery of removal costs associated with asbestos products. Plaintiff remained in that class until opting out on December 1, 1987.

On November 30, 1987, plaintiff commenced the present action in Dakota County District Court against defendant W.R. Grace & Co., as well as Switzer Construction Co., John B. Sander & Co. and Sander & Co., Inc. Defendant Switzer Construction Co. was dismissed with prejudice on October 17, 1988. On July 12, 1989, Grace removed the case from Dakota County District Court to the United States District Court for the District of Minnesota.

Plaintiff's complaint states nine claims for relief: (1) restitution, (2) negligence, (3) strict liability, (4) breach of express warranty, (5) breach of implied warranties of merchantability and fitness, (6) fraud and misrepresentation, (7) costs of monitoring the building for release of asbestos fibers, (8) conspiracy and (9) unfair trade practices pursuant to the Minnesota Unlawful Trade Practices Act, Minn.Stat. §§ 325D.09-D.16.

Defendant Grace now moves for summary judgment on the following grounds: (1) plaintiff's suit is time-barred by Minn.Stat. § 541.051; (2) plaintiff's time-barred action was not revived by Minn.Stat. § 541.22 because that statute is unconstitutional; (3) plaintiff's claims are preempted by federal regulation; (4) plaintiff's tort claims are barred by Superwood Corp. v. Siempelkamp Corp., 311 N.W.2d 159 (Minn.1981) and progeny; (5) plaintiff's claims for breach of implied warranties of merchantability and fitness are unsupported by fact; (6) plaintiff's restitution count does not state a claim for relief; and (7) the Unlawful Trade Practices Act is inapplicable either on the law or the facts of this case. Each of these issues will be discussed below.¹

DISCUSSION

I. Whether Plaintiff's Claims are Time Barred by Minn.Stat. § 541.051

It is undisputed that the Minnesota statute of limitations for improvements to real property applies to this case, Minn.Stat. § 541.051. That statute contains multiple time restrictions, including a two-year from discovery limitations period and a "statute of repose" which runs ten years from substantial completion of the construction. Defendant argues that both of these time limitations bar plaintiff's action on the grounds that plaintiff commenced this action on November 30, 1987, more than two years after discovering its injury, and more than ten years after the construction of the school was substantially completed in 1971. Plaintiff argues that the two-year limitations period was tolled during the pendency of the class action in the United States District Court for the Eastern District of Pennsylvania of which it was a part until opting out December 1, 1987, and that there is a genuine issue of fact precluding summary judgment on the issue of whether it discovered its injury more than two years prior to the commencement of the class action on January 17, 1983. Plaintiff also argues that the ten-years-from-substantial-completion time limit does not apply because it falls within the exception contained in that statute for actions "where fraud is involved."

A. Whether Plaintiff's Action is Time-Barred

There is no dispute that Sibley High School was substantially completed within the meaning of section 541.051 on September 12, 1971, and that neither the instant action, nor the class action was filed within ten years of that date. Nor does plaintiff argue that it discovered its injury in the ninth or tenth year following substantial completion, 1980 or 1981, to permit extension of the time limit to twelve years pursuant to Minn.Stat. § 541.051, subd. 2.

Rather, plaintiff argues that the ten-year time limit does not apply because of defendant's fraud. Plaintiff argues that it need merely establish an issue of fact concerning whether defendant fraudulently concealed knowledge of the defective and hazardous nature of asbestos to except itself from operation of the ten-year time limit.² In Wittmer v. Ruegemer, 419 N.W.2d 493 (Minn.1988), the Minnesota Supreme Court held that pursuant to the fraud exception to Minn.Stat. § 541.051, if the defendant:

has by fraud prevented the plaintiff from discovering the defective and unsafe condition within fifteen now ten years after substantial completion of construction, the statute is tolled until the plaintiff could, by reasonable diligence, have discovered the defective condition.

Wittmer, 419 N.W.2d at 497. The Court continued:

In such circumstances, the party claiming fraudulent concealment has the burden of showing that the concealment could not have been discovered sooner by reasonable diligence on his part and was not the result of his own negligence.

Id. at 498 n. 4. Thus, contrary to plaintiff's assertion, fraud is relevant in section 541.051 only to the extent that defendant's fraud may have prevented plaintiff from discovering the defective condition. See also O'Brien v. UOP, Inc., 701 F.Supp. 714, 716-17 (D.Minn.1988) (fraudulent conduct of defendants did not prevent accrual of cause of action where plaintiff aware of product defect).

Thus, the first issue is whether Grace's allegedly fraudulent conduct prevented plaintiff from discovering the defective condition of the asbestos within ten years from substantial completion of the building in September of 1971. To resolve this question, the Court must first address whether there is a genuine issue of material fact concerning whether Grace fraudulently concealed knowledge of the hazardous nature of the asbestos during the pertinent time period. Plaintiff has alleged that defendant both knew of the presence of the asbestos in plaintiff's building and of the hazards thereof and fraudulently concealed that knowledge from plaintiff. In support of its allegations, plaintiff incorporates by reference the affidavits and exhibits filed in support of its motion to amend its complaint to add punitive damages. Taken together, the Court finds that these exhibits create a genuine issue concerning whether defendant knew that Sibley High School contained asbestos products, and that asbestos may be linked to serious health effects, and whether that knowledge was fraudulently concealed from the public, including plaintiff.

The next issue under Wittmer is whether defendant's alleged fraudulent concealment of these facts prevented plaintiff from discovering its injury. Under Wittmer, if plaintiff was aware of the hazard posed by the asbestos notwithstanding Grace's alleged concealment, plaintiff is not saved from operation of the ten-year statute of repose set forth in section 541.051.

Minnesota courts have identified the following factors to assist in the determination of when a plaintiff discovers, or in the exercise of reasonable diligence should have discovered, the injury for which relief is sought and the causal connection between the injury and a defendant's conduct. Essentially, this is the same determination required by Wittmer in relation to the fraud exception to the statute of repose. In Independent School District No. 622 v. Bor-Son Construction, Inc., CIVIL C5-84-1701 (Minn.Dist.Ct. Mar. 25, 1987), the court held that a cause of action for asbestos removal accrued when plaintiff learned the type and amount of asbestos used in the particular building, and that the presence of asbestos constituted a hazard requiring abatement. Slip op. at 15. See also Federal Reserve Bank v. Carey-Canada, et al., CIVIL 3-86-185, 1988 WL 220489 (D.Minn. Aug. 31, 1988) (applying Independent School Dist. 622).

Here, defendant argues that the school district should have known of the presence of asbestos in its building inasmuch as the architect's specifications for the building specified use of an asbestos-containing fireproofing material. Defendant argues that this knowledge, coupled with information contained in...