Jones & Laughlin Steel Corp. v. Johns-Manville Sales Corp., JOHNS-MANVILLE

Citation626 F.2d 280
Decision Date09 July 1980
Docket Number79-1434,JOHNS-MANVILLE,Nos. 79-1433,s. 79-1433
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Parties29 UCC Rep.Serv. 1184 JONES & LAUGHLIN STEEL CORPORATION, a corporation, Appellant v.SALES CORPORATION, a corporation, (Defendant and Third-PartyPlaintiff), Appellant v. BROWN & KERR, INC., J. M. Foster Company, Inc., Western Contracting Corporationand S. M. Wilson Company d/b/a Hennepin Contractors v. PULLMAN, INC. (Third-Party Defendant).

David B. Fawcett, Jr. (argued), Richard S. Dorfzaun, Christine W. Caprio, Dickie, McCamey & Chilcote, Pittsburgh, Pa., for Jones & Laughlin Steel Corp.

Frederick J. Francis (argued), Alexander Unkovic, Ronald D. Morelli, Meyer, Unkovic & Scott, Pittsburgh, Pa., for Johns-Manville Sales Corp.

Before ADAMS, van DUSEN and GARTH, Circuit Judges.


ADAMS, Circuit Judge.

This diversity case presents an interesting question regarding the interface between tort law and contract law. Specifically, we are asked to decide inter alia whether, under Illinois law, a purchaser of a product pursuant to a contract may recover damages under tort theories of liability for the failure of the property to perform satisfactorily. The district court, in declining to grant the defendant's motion for judgment notwithstanding the verdict, answered this question in the affirmative. As to this point, we reverse; in all other respects, we affirm the judgment of the district court.


In the early 1960s, the plaintiff, Jones & Laughlin Steel Corporation, developed plans to build a steel finishing plant on a 6,000 acre tract of land in Hennepin, Illinois. The roof of the building was of particular concern to Jones & Laughlin inasmuch as the size of the roof 1.3 million square feet was extraordinarily large, and the weather in the Hennepin area is harsh winds of high velocities are common and the temperature fluctuation is extreme. Both factors were expected to subject the roof to vigorous, and potentially destructive, wear-and-tear. In addition, it was anticipated that the plant would contain electrical equipment and finished steel products, valued at millions of dollars, that had to be protected from the elements. As a result of these concerns, Jones & Laughlin decided to retain Johns-Manville Sales Corporation, a well-known manufacturer and installer of roofing products, to recommend and supply suitable roofing materials. After being briefed on the design of the roof and informed of the weather conditions in the area surrounding Hennepin, a senior sales representative of Johns-Manville recommended a smooth-surfaced roof with a built-up asbestos felt membrane. The type of roof was chosen for its durability and ease of repair. The sales representative also suggested Fesco Board insulation because it could withstand the uplift caused by extremely high winds, was virtually waterproof, and had outstanding dimensional stability.

Jones & Laughlin reviewed Johns-Manville's recommendations and, on March 7, 1966, decided to include the Johns-Manville roofing system in the architectural plans for the plant. Construction of the roof began on November 14, 1966, and was completed on August 30, 1967. During this period, Johns-Manville supervised the installation work, which was performed by several roofing contractors.

Shortly after the roof was completed, several problems developed. The roof began to blister, wrinkle, and crack. The cracks permitted water to enter the steel mill, which in turn damaged some of the steel products under construction and caused electrical outages as well. Then, in December 1968, portions of the asbestos felt and Fesco Board began to tear away from the deck of the roof. Although the maximum wind speed recorded in the Hennepin area at the time in question was only eighty miles per hour, and the roof was designed to withstand winds in excess of one hundred-twenty miles per hour, fourteen portions of the roof, totaling 93,800 square feet, were blown off between January 1969 and December 1971. The remaining area of the roof continued to blister and crack.

Jones & Laughlin employed Edward T. Schreiber, a roofing consultant, to analyze the causes of the defects that developed in the roof. Schreiber subsequently testified at trial on behalf of Jones & Laughlin. He concluded that Fesco Board was not water resistant, but instead actually absorbed water and became spongy. According to Schreiber, Fesco Board also lacked internal strength and the absorption of moisture caused severe dimensional distortion in the board. He stated further that the glue recommended by Johns-Manville was sensitive to water vapor, which caused the glue to deteriorate and fail. This resulted, Schreiber asserted, in the cracking and tearing away of the roof. Schreiber recommended that the entire roof be removed and replaced. Jones & Laughlin declined to proceed with such a large undertaking, however, and instead repaired and replaced portions of the roof.

On August 7, 1972, Jones & Laughlin filed suit against Johns-Manville in the Court of Common Pleas of Allegheny County, Pennsylvania. The complaint was premised on a number of legal theories: (1) strict tort liability for defects in the roofing products; (2) strict tort liability for the faulty design of the roofing system; (3) strict tort liability for public misrepresentations regarding the roofing products; (4) fraudulent misrepresentation; (5) negligent misrepresentation; (6) negligent performance of an undertaking to render services; (7) breach of express and implied warranties; and (8) breach of contract. On September 14, 1972, Johns-Manville removed the case to the United States District Court for the Western District of Pennsylvania. 1

Accompanying its answer, Johns-Manville named as third-party defendants the general contractor, the roofing subcontractor responsible for installation of the roof, and the engineering firm that Jones & Laughlin retained as the architect for the plant. A number of cross-claims were filed among the original parties and the third-party defendants. Inasmuch as the claims involving the third-party defendants are not pertinent to the issues before us, and because the third-party defendants are not parties to these appeals, the cross-claims will not be discussed further.

On June 30, 1976, Johns-Manville moved for summary judgment. The district court concluded that the case was governed by Illinois law and granted partial summary judgment in favor of Johns-Manville on the claims asserted by Jones & Laughlin based on express and implied warranties. 2 The court held that the contract between Jones & Laughlin and Johns-Manville was not for a "sale of goods" within the meaning of § 2-106 of the Uniform Commercial Code (UCC), Ill.Rev.Stat. ch. 26 § 2-106 (1973), and that consequently there was no authority for Jones & Laughlin's warranty claims. In the alternative the court went on to hold that, even if the UCC did apply, Jones & Laughlin's warranty claims were time-barred. Johns-Manville's motion for summary judgment with respect to the remaining claims was denied. 3

Trial before a jury commenced on November 27, 1978. At the close of the testimony, the district court denied a motion by Johns-Manville for a directed verdict on the tort claims. Johns-Manville had argued that, under Illinois law, a supplier of a product may not be held liable under tort principles for damages incurred as a result of the failure of the product to perform satisfactorily. Prior to the submission to the jury of the liability phase of the case, Jones & Laughlin withdrew its claim based on fraudulent misrepresentation.

In response to a series of special interrogatories, the jury found Johns-Manville liable on four of the remaining tort theories: (1) strict liability for defects in the roofing products; (2) strict liability for defects in the design of the roof; (3) strict liability for public misrepresentations regarding the roofing products; and (4) negligent performance of an undertaking to render services. In respect to one portion of the roof the valleys the jury attributed the injuries solely to the design defects and to Johns-Manville's negligence. No deterioration of the valleys was found to have been caused by the defective products or by Johns-Manville's public misrepresentations. The jury absolved Johns-Manville of liability for negligent misrepresentation and found that there was no breach of contract. In addition, the jury found Jones & Laughlin contributorily negligent in causing the injuries to the roof. In sum, the jury premised liability solely on Jones & Laughlin's tort claims, which were in turn predicated on strict liability, and rejected any contractual basis for recovery.

Trial then resumed on the question of damages. Jones & Laughlin claimed that it had expended over $1.7 million for repairs and would be required to spend between $2.9 million and.$3.2 million to repair and replace defective portions of the roof. The company did not seek damages for any injuries that may have occurred to its steel products, electrical equipment, or any property other than the roof itself. Because the damage to the valleys of the roof was found to have been caused only as a result of the design defects and Johns-Manville's negligence, the jury was instructed to make separate findings regarding the cost of valley repairs. The jury set the cost of the valley repairs at $625,000, and returned a verdict in favor of Jones & Laughlin in the total amount of $2 million.

Following entry of judgment by the district court, Johns-Manville moved for judgment notwithstanding the verdict and, alternatively, for a new trial. The district court denied both motions. Johns-Manville filed a timely appeal on February 5, 1979, and on February 16, 1979, Jones & Laughlin filed a timely cross-appeal. 4

A. Choice of Law

A federal district court sitting pursuant to diversity...

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