Raw Material Suppliers Not Liable for Worker Injuries

A California appeals court ruled last week that several raw material suppliers could not be held liable for injuries allegedly sustained by a worker as a result of using their raw materials. See John Maxton v. Western States Metals, et al., No. B227000 (Cal. Ct. App., 2d Dist., 2/1/12).

Plaintiff alleged he sustained personal injuries as a result of working with metal products manufactured by defendants and supplied to Maxton‘s employer. The metal products were essentially raw materials that could be used in innumerable ways. The products at issue consisted of steel and aluminum ingots, sheets, rolls, tubes and the like. Plaintiff alleged he
worked with and around each of these metal products in cutting, grinding, sandblasting, welding, brazing, and other activities. This allegedly resulted in the generation and release of toxicologically significant amounts of toxic airborne fumes and dusts. As a direct result of this exposure, Maxton claimed he developed lung disease. 

Generally, suppliers of raw materials to manufacturers cannot be liable for negligence, or under a strict products liability theory, to the manufacturers‘ employees who sustain personal injuries as a result of using the raw materials in the manufacturing process. Only in extraordinary circumstances —such as when the raw materials are contaminated, the supplier exercises substantial control of the manufacturing process, or the supplier provides inherently dangerous raw materials— can suppliers be held liable. So the first issue was whether such circumstances existed here.

A few courts have imposed liability on suppliers of raw asbestos materials under negligence and strict liability causes of action.  The second issue was whether asbestos is unique in that it is inherently dangerous, and thus whether the holdings of those asbestos cases would be extended here.

Defendants mounted two kinds of challenges to the complaint. Some defendants filed demurrers; others filed motions for judgment on the pleadings. The trial court sustained the demurrers and granted the motions.  Plaintiff appealed.

The court of appeals noted that the component parts doctrine is set forth in section 5 of the Restatement Third of Torts, Products Liability, which provides:
―One engaged in the business of selling or otherwise distributing product components who sells or distributes a component is subject to liability for harm to persons or property caused by a product into which the component is integrated if:
―(a) the component is defective in itself, and the defect causes the harm; or
―(b)(1) the seller or distributor of the component substantially participates in the integration of the component into the design of the product; and (2) the integration of the component causes the product to be defective, and  (3) the defect in the product causes harm.

Product components include raw materials, bulk products, and other constituent products sold for integration into other products. The metal products at issue here were clearly raw materials because they could be used in innumerable ways, and they were not sold directly to consumers in the market place. Rather, they were sold to plaintiff‘s employer for the purpose of using them to manufacture other products. The metal products in this case were closer to raw materials like kerosene than they were to more developed components of finished products, such as airbags in cars, because they can be used in innumerable ways.

Under California law, component and raw material suppliers are not liable to ultimate consumers when the goods or material they supply are not inherently dangerous, they sell goods or material in bulk to a sophisticated buyer, the material is substantially changed during the manufacturing process, and the supplier has a limited role in developing and designing the end product. When these factors exist, the social cost of imposing a duty to the ultimate consumers far exceeds any additional protection provided to consumers. The rationale for not imposing liability on a supplier of product components is a matter of equity and public policy. Such suppliers ordinarily do not participate in developing the product components into finished products for consumers. Imposing liability on suppliers of product components would force them to scrutinize the buyer-manufacturer‘s manufacturing process and end-products in order reduce their exposure to lawsuits. This would require many suppliers to retain experts in a huge variety of areas, especially if the product components are versatile raw materials. Courts generally do not impose this onerous burden on suppliers of product components because the buyer- manufacturer is in a better position to ensure safety.

Although the complaint stated the legal conclusion that the metal products were inherently hazardous, the facts alleged indicated otherwise. Maxton was not injured by simply handling the metal itself, or even the final product containing the metal. Instead, Maxton was injured as a result of the manufacturing process, which altered the form and risks of the products. 

As for the contention that the metal products involved here were analogous to asbestos, the court disagreed. Asbestos itself is dangerous when handled in any form even if it is unchanged by the manufacturer. Indeed, asbestos is dangerous when it leaves the supplier‘s control. By contrast, the metal products in this case were not dangerous when they left defendants‘ control. They only became allegedly dangerous because of the manufacturing process controlled by the employer. (Nothing in the complaint indicated that defendants played any role whatsoever in developing or designing the end products.) 

The court of appeals declined to impose the social cost, meaning the practical burdens that liability would place on defendants as suppliers of the ubiquitous metal products involved in this case. Defendants would be required to assess the risks of using their metal products to manufacture other products. In order to make such assessments, defendants would need to retain experts on the countless ways their customers used their metal products. Defendants would also be placed in the untenable position of second-guessing their customers whenever they received information regarding potential safety problems. Courts generally do not impose this onerous burden on suppliers of product components because the buyer-manufacturers are in a better position to guarantee the safety of the manufacturing process and the end product.

Dismissal affirmed. 

 

Component Part Seller Liability At Issue In Asbestos Case

California's high court is preparing to address a split among the state's lower courts on what seems to be a straightforward issue of product liability law governing component parts.

The Restatement of Torts (Third): Products Liability says that in the context of a final, finished product that injures a user and which is made up of components from different manufacturers, if a given component is itself defective and the defect causes the harm, then the supplier of that component is of course liable. In addition, the supplier can be liable even if the component by itself is not defective, but only if the seller substantially participates in the integration of the component into the design of the product (and the defect causes the harm). Restatement 3d, Section 5.

In essence, the doctrine holds that an entity supplying a non-defective raw material or a non-defective component part is not strictly liable for defects in the final product over which it had no control.  In this respect the Third Restatement of Torts simply codified the doctrine of various states’ common law. E.g., TMJ Implants Products Liability Litigation, 872 F. Supp. 1019 (D. Minn. 1995), aff’d, 97 F.3d 1050 (8th Cir. 1996) (applying Minnesota law)); Kealoha v. E.I. Du Pont de Nemours & Co., 844 F. Supp. 590 (D. Hawaii 1994), aff’d, Kealoha v. E.I. Du Pont de Nemours & Co., et al., 82 F.3d 894 (9th Cir. 1996) (applying Hawaii law); Jacobs v. E.I. Du Pont de Nemours & Co., 67 F.3d 1219 (6th Cir. 1995) (applying Ohio law); Apperson v. E.I. Du Pont de Nemours & Co., 41 F.3d 1103 (7th Cir. 1994) (applying Illinois law); Crossfield v. Quality Control Equip. Co., Inc., 1 F.3d 701 (8th Cir. 1993) (applying Missouri law); Childress v. Gresen Mfg. Co., 888 F.2d 45 (6th Cir. 1989) (applying Michigan law); In Re: Silicone Gel Breast Implants Products, 996 F. Supp. 1110 (N.D. Ala. 1997); Travelers Ins. Co. v. Chrysler Corp., 845 F. Supp. 1122 (M.D.N.C. 1994); Sperry v. Bauermeister, 786 F. Supp. 1512 (E.D. Mo.1992); Estate of Carey v. Hy-Temp Mfg., Inc., 702 F. Supp. 666 (N.D. Ill. 1988); Orion Ins. Co., Ltd. v. United Tech. Corp., 502 F. Supp. 173 (E.D. Pa. 1980); Mayberry v. Akron Rubber Machinery Corp., 483 F. Supp. 407 (N.D. Okla. 1979); Artiglio v. General Electric Co., 61 Cal.App.4th 830 (Cal. Ct. App. 1998); Bond v. E.I. Du Pont de Nemours & Co., 868 P.2d 1114 (Colo. Ct. App. 1993); Shaw v. General Motors Corp., 727 P.2d 387 (Colo. Ct. App. 1986); Castaldo v. Pittsburgh-Des Moines Steel Co., Inc., 376 A.2d 88 (Del. 1977); Depre v. Power Climber, Inc., 263 Ill.App.3d 116 (Ill. App. Ct. 1994); Curry v. Louis Allis Co.,
Inc., 100 Ill.App.3d 910 (Ill. App. Ct. 1981); Murray v. Goodrich Eng’g Corp., 30 Mass. App. Ct. 918 (Mass. App. Ct. 1991); Welsh v. Bowling Electric Machinery, Inc., 875 S.W.2d 569 (Mo. Ct. App. 1994); Zaza v. Marquess & Nell, Inc., 144 N.J. 34 (N.J. 1996); Parker v. E.I. Du Pont de Nemours & Co., Inc., 121 N.M. 120 (N.M. Ct. App. 1995); Munger v. Heider Mfg. Corp., 90 A.D.2d 645 (N.Y. App.
Div. 1982); Hoyt v. Vitek, Inc., 134 Ore. App. 271 (Or. Ct. App. 1995); Moor v. Iowa Mfg. Co., 320 N.W.2d 927 (S.D. 1982); Davis v. Dresser Indus., Inc., 800 S.W.2d 369 (Tex. App. 1990); Bennett v. Span Indus., Inc., 628 S.W.2d 470 (Tex. App. 1982); Westphal v. E.I. Du Pont de Nemours & Co., 192 Wis. 2d 347 (Wis. Ct. App. 1995); Noonan v. Texaco, Inc., 713 P.2d 160 (Wyo. 1986).

Sometimes the issue is analyzed as one of no duty on the part of the component seller; other courts view it as an absence if causation.  The policy reasons behind the component parts doctrine are well established. Multi-use component and raw material suppliers should not have to assure the safety of their materials as used in other companies' finished products. That would require suppliers to retain experts in a huge variety of areas in order to determine the possible risks associated with each potential use. And finished product manufacturers know exactly what they intend to do with a component or raw material and therefore are in a better position to guarantee that the component or raw material is suitable for their particular applications.  In the drug and device area, liability is inconsistent with the FDA regulatory scheme because suppliers cannot warn consumers of dangers created by the design of the finished product; the FDA controls who warns and what the warning says.

But when a component manufacturer sufficiently participates in designing a defective and unreasonably dangerous final product, the component manufacturer may be held liable for injuries caused by the final product even though the component itself was not defective or unreasonably  dangerous.  Which raises the question what is ‘‘substantial participation.’’ The Restatement suggests the courts look at whether: (1) the manufacturer or assembler of the integrated product invited the component manufacturer to design a component that would perform specifically as a part of the integrated product;  (2) the component part manufacturer assisted the seller in modifying the design of the integrated product so that it would accept the component part, or (3) the component part manufacturer played a substantial role in deciding which component best serves the requirements of the seller’s integrated product.

A common mass tort battleground for these issues is asbestos.  In O'Neil v. Crane Co., 177 Cal.App.4th 1019, 99 Cal.Rptr.3d 533 (2009)(review granted 12/23/09), the plaintiffs, the widow and children of a naval officer who died of mesothelioma, sued the manufacturers of shipboard pumps and valves, alleging that asbestos insulation used with those components caused the injury.  The trial court dismissed the claims under the component part make doctrine, but last Fall, a panel of the Second Appellate District overturned the trial court's dismissal and said the pump and valve makers could be liable for the officer's death.

The court found that the defendants did not supply a “building block” material, dangerous only when incorporated into a final product over which they had no control. Rather, they sold finished valves and pumps, which needed insulation of some kind. That analysis did not give sufficient attention to the notion that the steam system of the ship ought to be viewed as the finished product, as that term is used in the context of the component parts defense. And it gave insufficient weight to the basic policy underlying the compnent part doctrine.

The panel disagreed with the trial court and with two other appellate decisions going the other way. The state's First Appellate District in Taylor v. Elliott Turbomachinery Co., 171 Cal. App. 4th 564 (2009), found  that pump and valve manufacturers were not liable —as manufacturers of non-defective component parts of a greater whole, and as manufacturers of separate products from those (asbestos) that actually caused the alleged harm. And a different panel of the Second District, Merrill v. Leslie Controls Inc. (Cal. Ct. App., 2d App. Dist., No. B200006, 11/17/09), had also declined to find liability in similar circumstances. See generally Lindstrom v. A-C Product Liability Trust, 424 F.3d 488 (6th Cir.2005)(no liability; causation focus). 

That a component seller knew or should have known that the product maker might use potentially hazardous materials in its design should never be sufficient to impose liability for the design that is the responsibility of the finished product seller.  It makes no sense to have suppliers act as "design police" for every possible item their non-defective part could possibly be combined with in a finished product. 

Under a proper analysis, a warning claim should fare no differently. See Braaten v. Saberhagen Holdings, 198 P.3d 493 (Wash. 2008); Simonetta v. Viad Corp., 197 P.3d 127 (Wash. 2008)(no liability for failure to warn of the hazards of exposure to another manufacturer's asbestos insulation).  The Washington court found the duty to warn under common law negligence was limited to those in the chain of distribution of the hazardous product. Because the defendants did not manufacture, sell, or supply the asbestos insulation, the defendants could not be found liable for breaching a duty to warn. The defendants were not strictly liable because only a product's manufacturer, seller, or marketer is in the position of knowing its dangerous aspects.  To hold a defendant strictly liable for another party's product would be manifestly unfair.

The California Supreme Court has recently agreed to review the issue. O'Neil v. Crane Co., Cal., No. S177401, (petition for review granted 12/23/09).  Here's hoping the doctrine is applied correctly, and this does not become another "asbestos" law exception to common sense rules.