(Original opinion filed December 22, 2015; modified opinion filed January 15, 2016; review by California Supreme Court denied March 9, 2016)
The doctrine of strict liability is ordinarily inapplicable to transactions whose primary objective is obtaining services and to transactions in which the service aspect predominates and any product sale is merely incidental to the provision of the service. An exception was found to that general rule in this case where a drywall installer and plasterer subcontractor supplied and installed asbestos-containing products, not to the person who claims to have been injured by exposure to those products, but to an entity where the injured person worked as a janitor.
E. F. Brady is a subcontractor engaged in drywall installation and plastering. During the mid-1970’s, E. F. Brady participated in constructing a complex of buildings in Irvine for the Fluor Corporation (“Fluor”). In the 1990’s, Joel Hernandezcueva (“Hernandezcueva”) worked as a janitor in the Fluor complex. During that period, areas of the complex were remodeled, and certain walls within the complex were continuously under repair. E. F. Brady did not participate in those activities. Hernandezcueva’s duties included cleaning up drywall debris and other rubbish from areas where E. F. Brady had installed the original drywall and fireproofing. While performing those duties, he inhaled dust. In or about 2011, he was diagnosed as suffering from mesothelioma.
Plaintiff’s expert William Longo, a material scientist, testified that Kaiser drywall and the Hamilton joint compound installed by E. F. Brady in the Fluor complex contained asbestos. Neither the drywall nor the joint compounds were labeled as containing asbestos. Warren Bozzo, who supervised E. F. Brady’s work on the Fluor complex, testified he was unaware that the drywall and joint compounds used in the project contained asbestos.
The Hernandezcuevas’ experts testified that Joel Hernandezcueva’s exposure to asbestos released from the products installed by E. F. Brady caused his mesothelioma, which was well advanced during trial.
Following the completion of the Hernandezcuevas’ case-in-chief, E. F. Brady moved for partial nonsuit on their claims for strict liability, among other claims, which was granted, leaving only a negligence claim.
At trial, E. F. Brady presented evidence that during the period, the uniform building code did not prohibit the use of drywall and joint compounds containing asbestos. The jury found that although Joel Hernandezcueva had been exposed to asbestos from a product installed by E. F. Brady, the company was not negligent regarding that exposure. The Hernandezcuevas moved for a new trial predicated on judicial misconduct, which the trial court denied.
On appeal, Hernandezcuevas challenged the grant of nonsuit regarding the claim for strict liability and the denial of the motion for a new trial. The Appellate Court concluded that the trial court erred in granting the nonsuit, but not in denying a new trial.
The Court looked to the Restatement on Torts principles for the proposition that when injury arises from a component integrated in another product, imposing strict liability on a party hinges on its role in the transaction. Manufacturers and suppliers of a component to be integrated into a final product may be subject to strict liability when the component itself causes harm. In contrast, parties involved in passing a defective component to the ultimate user or consumer are not subject to strict products liability when their sole contribution to the transaction was a service, the installation of the component into the final product.
The Court assessed E. F. Brady’s role in providing the products in light of the policy considerations underlying the imposition of strict liability, namely, whether E. F. Brady could enhance product safety or exert pressure on the manufacturer to promote that end, and bear the costs of compensating for injuries. The Court concluded that, in view of the evidence concerning E. F. Brady’s practices in submitting bids, a jury could reasonably find that E. F. Brady was more than an “occasional seller” of drywall and joint compounds whose provision of those products was merely incidental to its services.
The Court found that E. F. Brady’s contract for the Fluor project was structured to recoup or defray the costs of the materials — without ensuring a profit regarding those costs — while providing for payment for the installation services. For E. F. Brady, however, those costs were substantial, as they ordinarily constituted 25 percent of the amount of a bid. In the case of E. F. Brady’s $2,024,272 Fluor project contract, the costs of the materials passed through to Fluor approximated $500,000. Although E. F. Brady had no dealership contract with Kaiser and Hamilton, E. F. Brady used their products when necessary to fulfill its contracts. That ongoing relationship was sufficient to command the personal attention of Kaiser’s and Hamilton’s representatives to E. F. Brady’s concerns regarding the products. Due to E. F. Brady’s relationship with Kaiser and Hamilton, it could exert pressure on the manufacturer to improve product safety.
E. F. Brady and amici curiae contended that E. F. Brady was the “end user” — not the seller — of the defective products used in the Fluor project, arguing that E. F. Brady paid sales tax in buying the products from Expo. The Court disagreed. The drywall and joint compound, after installation, passed into the possession of Fluor, which paid for the project.
Pointing to La Jolla Village Homeowners’ Assn. v. Superior Court (1989) 212 Cal.App.3d 1131, Amici Curiae contended that considerations of public policy dictate that subcontractors involved in construction projects should not be subject to strict liability when they provide products complying with the architect’s specifications. The Court declined to follow La Jolla Village, noting that imposing strict liability on E. F. Brady arose from its role as a supplier of mass-produced products, not from the work it performed in installing those products in the Fluor complex.
In Monte Vista Development Corp. v. Superior Court (1991) 226 Cal.App.3d, the appellate court reached a contrary conclusion regarding imposing strict liability on a subcontractor that has supplied and installed a defective product. There, a developer accepted a tiling firm’s bid to install tiles in a residential housing project. Under the bid, the tiling firm was to install soap dishes and other tile fixtures it bought in bulk from a building supply company. As the bid specified no type or brand of soap dish, in fulfilling the contract the tiling firm bought what it characterized as “generic” soap dishes. To obtain payment for work performed, the tiling firm submitted invoices that did not set out separate charges for material or fixtures.
After a purchaser of one of the homes was injured when a soap dish broke, she asserted a strict liability claim against the tiling firm; the court granted summary adjudication on the claim.
The appellate court affirmed, concluding that the tiling firm was not a “seller” of the soap dishes for purposes of section 402A. The court stated: “[The tiling firm] was not in the business of selling soap dishes or any other fixtures. It purchased the soap dish that injured plaintiff, as well as other fixtures, in order to complete its subcontract…. Obviously, it mattered not to [the tiling firm] whether [the developer] or someone else supplied the tile fixtures. [The tiling firm’s] job was to do the tile work.”
Finally, the Court denied a public policy argument of Amicus Curiae that there is an alternative source of compensation potentially available to the Hernandezcuevas the asbestos bankruptcy trust system created under federal bankruptcy law (11 U.S.C. § 524(g)). The Court found this contention failed under the collateral source rule.
The judgment was reversed solely regarding Hernandezcueva’s claim for strict products liability against E. F. Brady and affirmed in all other respects. The matter was remanded for further proceedings, i.e. trial of the strict liability claim only.
In addition, the Court’s analogy of Bankruptcy Trust payments to a collateral source insurance payment is suspect. The Bankruptcy Trust funds are paid by other potential tortfeasors who have elected the Bankruptcy system in lieu of litigating with plaintiffs in asbestos cases. Therefore, the more precise analogy for such payments would be settlement amounts by joint tortfeasors for which the litigating defendant should be entitled to a settlement offset. Either Monte Vista and Hernandezcueva will both stand as templates for and against subcontractor liability or the California Supreme Court will determine there is a conflict among the Districts which it needs to resolve.
*On January 15, 2016, the Court modified its opinion to delete the reference to the collateral source rule in the context of Bankruptcy Trust payments. Instead it noted that the record is devoid of any evidence that Hernandezcueva received compensation from any bankruptcy trust. The modification does not change the judgment. By removing the reference to “collateral source”, the court removed the implied suggestion that payments from a bankruptcy trust received by a plaintiff are not partial offsets of liability for the litigating defendant.
*On March 9, 2016, the California Supreme Court denied E.F. Brady’s petition for review. Parties wishing to argue in favor of imposing strict liability against a contractor will likely claim the denial of the petition should be seen as tacit approval of the decision by the Supreme Court. However, legally the denial of a petition for review by the Supreme Court imparts no suggestion of approval or disapproval of the opinion.