Prudential Ins. Co. of America v. US Gypsum Co.

• Decision Date: 21 July 1993
• Docket Number: Civ. A. No. 87-4227 (HAA).
• Citation: 828 F. Supp. 287
• Parties: The PRUDENTIAL INSURANCE COMPANY OF AMERICA, et al., Plaintiffs, v. UNITED STATES GYPSUM COMPANY, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

828 F. Supp. 287

The PRUDENTIAL INSURANCE COMPANY OF AMERICA, et al., Plaintiffs, v. UNITED STATES GYPSUM COMPANY, et al., Defendants.

Civ. A. No. 87-4227 (HAA).

United States District Court, D. New Jersey.

July 21, 1993.

Edward A. Zunz, Jr., Riker, Danzig, Scherer, Hyland & Perretti, Morristown, NJ, for plaintiffs.

Michael F. Moriarty, Robinson, St. John & Wayne, Newark, NJ and Kell M. Damsgaard, Morgan, Lewis & Bockius, Philadelphia, PA, for U.S. Gypsum Co.

Anthony J. Marchetta and Hannoch Weisman, Roseland, NJ, for W.R. Grace & Co. — Conn.

Richard Koehler, Stich, Angell, Kreidler and Muth, P.A., Minneapolis, MN, and Granville D. Magee, Magee & Graham, Wall Township, NJ, for Asbestospray Corp.

Stephen J. Imbriglia, Hecker Brown Sherry & Johnson, Philadelphia, PA, for U.S. Mineral Products Co.

Stephen N. Dermer, Lowenstein, Sandler, Kohl, Fisher & Boyland, Roseland, NJ, for Keene Corp.

OPINION

HAROLD A. ACKERMAN, District Judge.

This case involves a dispute between plaintiff, The Prudential Insurance Company of America ("Prudential"), and a number of companies that once manufactured products containing asbestos and installed these products in buildings built or subsequently bought by Prudential. Alleging that the hazards of the in-place asbestos caused it to suffer serious economic injury, Prudential claims that defendants violated the Racketeering Influenced and Corrupt Organizations Act, as well as a number of its common law rights.

The defendant group is comprised of the following: W.R. Grace and Company-Conn. ("Grace"), United States Gypsum Company ("Gypsum"), The Celotex Corporation ("Celotex"), United States Mineral Products Company ("Mineral"), the Keene Corporation ("Keene"), Asbestospray Corporation ("Asbestospray"), and National Gypsum Company ("National Gypsum"). After several years of discovery, the defendants have made a number of motions.¹

This opinion covers the following motions: (1) a motion by defendants Grace and U.S. Gypsum for summary judgment pursuant to Fed.R.Civ.P. 56(b) dismissing Prudential's RICO claims; (2) a motion by Prudential to strike the defenses of statute of limitations pursuant to the doctrine of discovery rule, fraudulent concealment and/or equitable estoppel.

I will discuss these motions in turn.

First, though, I will describe the factual background as plaintiff offers it. When appropriate, I mention instances where particular defendants have explicitly contested certain facts. While some defendants have not contested the facts for the purposes of these motions, many of plaintiff's factual allegations are in dispute.

I. Factual Background

Prudential is both a property and casualty insurance underwriter and one of the largest real estate investors within the insurance industry. Throughout the relevant time period, Prudential has been a major participant in the development, purchase and financing of major commercial properties throughout the United States. Defendants are or were various companies engaged in the sale of materials, including asbestos, to developers and builders.

In the 1930s and 1940s, some of the defendants as well as others in the asbestos industry began to study the health risks arising from asbestos. The initial studies were prompted by concern about employee exposure and occupational safety generally. Thus, in 1936, U.S. Gypsum, along with the corporate predecessor to defendant Grace, and other asbestos companies had experiments performed at the Saranac Laboratory at Saranac Lake, New York. The Saranac Lake results showed that tumors developed in white mice exposed to high levels of asbestos. The reports also showed that no threshold limit for asbestos contamination existed. The Saranac studies, and the possible link of asbestos to cancer, were discussed at proceedings of the National Cancer Institute in January 1944, but the ultimate report was published only in 1951. The published report omitted references to human asbestosis and cancer, as well as the finding that there was no safe level of exposure to asbestos.²

In 1965, defendants Asbestospray, Mineral, Keene and Celotex began the Sprayed Mineral Fiber Manufacturers Association ("SMFMA"). The SMFMA conducted its own testing program regarding exposure to asbestos during its application. Although the results showed health problems associated with asbestos application, the group declined to release the test results. Asbestospray denies any concealment and instead characterizes the SMFMA's work as follows: "The SMFMA is a trade association established to work on methods which would minimize the hazards of exposure and yet allow the continued use of sprayed-on asbestos-containing products." Asbestospray further contends that SMFMA asked its technical committee to recommend industry standards for applying sprayed products so as to prevent health hazards.

At about the same time, defendants U.S. Gypsum, Celotex and National Gypsum organized as a group called the Gypsum Association. This group also allegedly performed tests and declined to disclose the results.

Until the 1960s, the defendants provided no warning labels to those that came in contact with their asbestos products. Eventually, U.S. Mineral crafted a warning that read as follows, and which was placed only on the company's disposable product bags:

This product contains asbestos. Inhalation of asbestos dust over long periods may be harmful. If employees are exposed to dust during use in application, these employees should be equipped with adequate personal protective devices.

The warning did not mention hazards associated with the release of asbestos fibers from in-place asbestos products, and no warnings of any kind appeared in advertisements. For economic reasons, U.S. Mineral Products kept asbestos in its products despite the fact that "it is possible to remove the dust." In 1968, Asbestospray, Keene and Celotex began using U.S. Mineral's warning. Beginning in 1968, defendant U.S. Gypsum began putting warnings on packages containing fireproofing, joint treatment, texture, and plaster products containing asbestos.

Also in the late 1960s, tests performed by defendants revealed the possibility of release of asbestos fiber during the application process. These test results were not released. Instead, certain defendants would assure fireproofing installers or building tenants that their asbestos was "locked in" and would not release, or that there is no health hazard associated with the proper spraying of asbestos on buildings. Moreover, through their lobbying activities, members of the asbestos industry assured the public that asbestos products in their buildings posed no health hazard. Yet a memorandum from Grace's manager of fireproofing products to senior management stated that "we have an ethical obligation to get asbestos out." An internal Keene memorandum stated:

Asbestos has long been known as a health hazard. It has been chiefly associated with asbestosis, a debilitating but not usually fatal lung disease. It was thought to threaten a relatively limited number of people who had heavy occupational or environmental exposure. Awareness of the danger led to a number of occupational safeguards which helped to reduce the known incidence of the disease.

More recent research has implicated asbestos as a cause, or important contributing factor in lung cancer. It has also shown that asbestos-related diseases can occur 20 to 40 years after exposure. There is some evidence that asbestos is involved in the death of people with little or no known exposure. Since asbestos use in the United States has increased at an extremely rapid rate in the last generation, there is a real possibility that asbestos may be a far more serious health hazard than previously suspected, and that it could affect a far larger number of people.

According to plaintiff, Grace, Keene and other defendants had by this time developed asbestos-free products yet continued to market their sprayed-on asbestos products.

In 1973, the Environmental Protection Agency ("EPA") banned the spraying of certain asbestos-containing materials. Prudential contends that the EPA at this time did not address in-place asbestos-containing materials. In the wake of this decision, the asbestos industry attempted to persuade the public that in-place asbestos products were safe — that asbestos fibers were locked in and would not release into the air.

Some of the advertisements were taken out in Sweets Catalog, an industry publication distributed nationally that architects and subcontractors refer to in selecting products for buildings. In the publication, the defendants represented that their asbestos was locked in and would not release, that the asbestos-containing building materials were locked in, would not dust or flake and would last for the life of the building. Grace and U.S. Gypsum also advertised in Sweets.

Plaintiffs also allege that the defendants contacted health experts and architects with the specific intent to persuade them that asbestos building products posed no danger since they were locked in.

Prudential's evidence shows that while defendants were making these assurances, they knew them to be false. Defendants allegedly knew that asbestos fibers are continually released over time under normal conditions, and that there is a greater propensity for release if in-place asbestos is disturbed. Some defendants also were allegedly aware of particular problems with their products that belied their representations. For example, a test run by U.S. Mineral showed that its fireproofing product "failed completely" in that the product has "the least resistance to vibration and flaking." The results were never revealed.

Prudential contends that Asbestospray, Keene, U.S. Mineral and Celotex also suppressed the results of tests showing that their products released asbestos fibers while in place in buildings. The SMFMA's tactics included the following: they contacted an...