Lead Opinion
United States Gypsum Co. (USG) appeals from a final judgment entered in the District Court upon a jury verdict in favor of Tioga Public School District No. 15 (Tioga). For the reasons set forth below, we reverse the judgment of the District Court and remand the case for a new trial.
I.
During the 1950s and 1960s, USG manufactured an acoustical plaster known as Audicote that contained asbestos. Tioga constructed two of the three schools that it currently operates between 1957 and 1961. Tioga specified that plaster be used on the ceilings of the two schools, and the architect in charge of the construction selected Audicote from the various acoustical plasters available. Some of the acoustical plasters available at that time contained asbestos although others did not. Tioga does not appear to have known that the architect selected Audicote, or that Audicote contained asbestos. Tioga paid approximately $1,600.00 for the Audicote.
In the early 1980s, the Environmental Protection Agency (EPA) sent schools notices requiring them to identify asbestos-containing materials in the schools and warning them of the potential risks associated with asbestos. The Audicote ceilings were still in place in the two Tioga schools, although certain portions of the plaster had crumbled and there were a number of spots where contact with the ceilings had gouged the plaster. Following receipt of the EPA notices, Tioga determined that the plaster contained asbestos and that it was friable. A friable material is one that, “when dry,
Upon discovering that the ceilings in the two schools contained asbestos and that the plaster was friable, Tioga spent approximately $15,000.00 “encapsulating” the Au-dicote. Essentially, this involved painting the ceilings with latex paint to prevent the release of asbestos fibers from the plaster. Tioga introduced evidence at trial that it encapsulated the Audicote as an interim measure, since it lacks the funds to pay for removal of the asbestos.
Removal of asbestos-containing materials is extremely costly because of the complicated procedures that must be followed to avoid contamination of the building from which the materials are being removed and to prevent the removal workers from being exposed to asbestos fibers. USG’s evidence at trial tended to show that the cost of removal would be in the neighborhood of $400,000.00, while Tioga’s evidence suggested a cost of approximately $1,100,-000.00. Although current regulations do not require immediate removal of asbestos-containing materials in schools, they do require that such materials be removed when a building is renovated or demolished. 40 C.F.R. § 61.145 (1992).
Encapsulation of the Audicote ceilings has not completely contained the asbestos. Tioga introduced evidence that tended to show that the Audicote remained friable, that contact with encapsulated ceilings can result in the release of asbestos fibers, and that in some instances fissures had developed in the latex paint and in other instances the encapsulant had been punctured to repair leaks or by accident. Tioga also introduced evidence that dust samples collected in the schools a number of years after the encapsulation was completed contained higher than background levels of asbestos and that this asbestos had come from the Audicote ceilings. Finally, although the issue was hotly disputed, Tioga presented evidence that even low level exposure to asbestos presents health risks.
II.
Tioga originally brought this suit in North Dakota state court seeking to recover the cost of removing the Audicote. Tio-ga asserted theories of negligence, strict liability, fraud and misrepresentation, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, breach of express warranty, nuisance, restitution, and indemnity. USG removed the case to the District Court pursuant to 28 U.S.C. § 1441(a) (1988).
USG moved for a directed verdict at the close of plaintiffs case and again at the close of all evidence. The District Court dismissed several of Tioga’s claims, and submitted the case to the jury on five theories: negligence, strict liability, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, and nuisance. The District Court denied USG’s request to submit special verdict forms to the jury. The jury returned a general verdict for Tioga and awarded Tioga compensatory damages in the amount of $756,906.22. After the parties were given an opportunity to introduce additional evidence on the issue of punitive damages, the jury also awarded Tioga punitive damages of $75,000.00.
USG moved for a judgment notwithstanding the verdict or for a new trial. The District Court denied the motion. On appeal, USG argues that the District Court erred in: 1) allowing Tioga to recover in tort for economic loss; 2) submitting to the jury Tioga’s nuisance claim; 3) improperly charging the jury with respect to Tioga’s implied warranty claims; 4) refusing to charge the jury regarding USG’s state-of-the-art defense and excluding evidence relevant to that defense; and 5) improperly charging the jury regarding punitive damages.
III.
USG first argues that the economic loss doctrine bars Tioga from recovering the damages it seeks in tort. The economic loss doctrine was adopted by the North Dakota Supreme Court in Hagert v. Hatton Commodities, Inc.,
The premise of the economic loss doctrine is that, although tort law is an appropriate vehicle for providing a recovery for physical injury to persons or to other property caused by defective goods, tort law should not be held to undermine the law of sales’ balancing of the relationship between buyers and sellers regarding whether or not, and how well, products work. Recovery in tort is allowed for physical injuries caused by defective products because such injuries are unexpected and can be overwhelming to consumers, and because the risk of such injuries is best insured and distributed by manufacturers. The risk of losses not attributable to physical injury to persons or to other property, however, is better contractually allocated between sellers and particular purchasers through bargaining for desired warranties. Thus, purchasers may not recover in tort when defective products cause purely economic loss. Seely,
Although the North Dakota Supreme Court has adopted the economic loss doctrine, we do not believe that that court would hold that the doctrine precludes Tioga from recovering in this case. The asserted injury here is the presence of Audi-cote in Tioga’s schools and the contamination of the schools by asbestos. The asbestos poses a risk of devastating injury to those whose health may ultimately be harmed by it, a risk best distributed by the seller or manufacturer. Moreover, the presence of asbestos in Audicote and the resulting danger have nothing to do with the level of performance of the product. In fact, the evidence suggests that the Audicote, although encapsulated, is still functioning well as acoustical plaster. Cf. Miller,
USG calls to our attention the recent decision of the North Dakota Supreme Court in Cooperative Power Ass’n v. Westinghouse Electric Corp.,
That the overwhelming majority of courts deciding the issue under the law of other states have held that the economic loss doctrine does not bar tort recovery for the cost of removing asbestos-containing building materials supports our conclusion that the North Dakota Supreme Court would not find that the economic loss doctrine bars tort recovery in this case. In City of Greenville v. W.R. Grace & Co.,
The only reported decision of which we are aware that bars recovery in tort for the costs of asbestos abatement is the recent decision of the Tenth Circuit in Adams-Arayahoe School District No. 28-J v. GAF Cory.,
In sum, Tioga is not seeking to recover the lost benefit of its bargain based on a claim that the plaster is deficient as acoustical plaster; such a claim would clearly be barred by the economic loss doctrine. Instead, Tioga is seeking to recover the cost of removing the asbestos-containing plaster from its schools on the ground that the asbestos poses a risk of injury to those exposed to it. We believe the North Dakota Supreme Court would find this case distinguishable on its facts from the Adams-Arayahoe case, and would in any case follow the strong majority of reported eases
IV.
USG next argues that Tioga’s nuisance claim was improperly submitted to the jury. Tioga’s nuisance claim was based on North Dakota’s nuisance statute, which provides:
A nuisance consists in unlawfully doing an act or omitting to perform a duty, which act or omission:
1. Annoys, injures, or endangers the comfort, repose, health, or safety of others;
2. Offends decency;
3. Unlawfully interferes with, obstructs or tends to obstruct, or renders dangerous for passage, any lake, navigable river, bay, stream, canal, basin, public park, square, street, or highway; or
4. In any way renders other persons insecure in life or in the use of property.
N.D.Cent.Code § 42-01-01 (1983). The trial court’s instruction to the jury on this claim was a verbatim statement of subsections 1. and 4. of the statute.
It has been stated that there is “perhaps no more impenetrable jungle in the entire law than that which surrounds the word ‘nuisance.’ It has meant all things to all people.” W. Keeton, Prosser and Keeton on Torts § 86, at 616 (5th ed. 1984). One issue on which the courts appear to agree, however, is that nuisance law does not afford a remedy against the manufacturer of an asbestos-containing product to an owner whose building has been contaminated by asbestos following the installation of that product in the building. All of the courts that have considered the issue have rejected nuisance as a theory of recovery in such cases. City of Manchester v. National Gypsum Co.,
Tioga argues that, regardless of the limitations of traditional common law nuisance doctrine, North Dakota’s nuisance statute is directly applicable by its terms to the facts of the present case, and that the trial judge therefore properly submitted Tioga’s nuisance claim to the jury. Tioga has not presented us with any North Dakota cases extending the application of the nuisance statute to situations where one party has sold to the other a product that later is alleged to constitute a nuisance, nor has our research disclosed any such cases. North Dakota cases applying the state’s nuisance statute all appear to arise in the classic context of a landowner or other person in control of property conducting an activity on his land in such a manner as to interfere with the property rights of a neighbor. See, e.g., City of Minot v. Freelander,
In addition to the lack of case law extending North Dakota’s nuisance doctrine to cases involving the sale of goods, we draw support for the idea that the statute was not intended to extend to such a situation from a recent nuisance case decided by
Moreover, to interpret the nuisance statute in the manner espoused by Tioga would in effect totally rewrite North Dakota tort law. Under Tioga’s theory, any injury suffered in North Dakota would give rise to a cause of action under section 43-02-01 regardless of the defendant’s degree of culpability or of the availability of other traditional tort law theories of recovery. Nuisance thus would become a monster that would devour in one gulp the entire law of tort, a development we cannot imagine the North Dakota legislature intended when it enacted the nuisance statute. In short, we do not believe that the North Dakota Supreme Court, under the facts of this case, would hold that Tioga has a cause of action for nuisance against USG, and we therefore hold that the trial court erred in submitting Tioga’s nuisance claim to the jury.
We reject Tioga’s contention that our consideration of the nuisance issue is foreclosed by the decision of this Court in Hebron Public School District No. 13 v. U.S. Gypsum,
Five of Tioga’s claims were submitted to the jury, which returned a general verdict for Tioga. Because the nuisance claim was improperly submitted, the judgment rendered in favor of Tioga must be set aside and the case remanded for a new trial. Dudley v. Dittmer,
Tioga also seeks to escape the holding of Dudley by arguing that the jury’s award of punitive damages shows that the jury must have found that USG was negligent. Tio-ga points out that its only fault-based theory of recovery was the negligence theory and argues that counsel for both parties characterized the negligence theory as being the only theory for which USG’s conduct was relevant. Tioga argues that, be-' cause the jury must have found that USG was negligent, and because USG does not challenge the propriety of the trial court’s submission of the negligence theory to the jury, the judgment appealed from should be affirmed. See Mueller v. Hubbard
This argument also fails. The jury instruction on punitive damages did not restrict the jury to awarding punitive damages on Tioga’s negligence theory. Authority exists for the proposition that punitive damages may be awarded in a strict liability case. See, e.g., Ferren v. Richards Mfg. Co.,
To conclude, we hold that Tioga’s nuisance theory was improperly submitted to the jury and that it might have been the theory on which the jury returned its verdict for Tioga. This case falls squarely within the rule of Dudley; hence the judgment of the trial court must be set aside and the case remanded for a new trial. Because we are remanding, we think it may be helpful to the trial court and to the parties for us to address some of the other issues raised in this appeal that are likely to arise again in the context of a new trial. We turn now to these issues.
V.
USG argues that the trial judge erred in improperly charging the jury with respect to Tioga’s implied warranty claims. Although there seems to have been some confusion during the course of the trial, the parties agree that Tioga ultimately sought to assert its implied warranty theories in tort. In other words, because the statute of limitations barred all contractual warranty actions, Tioga asserted a claim for implied warranty of merchantability in tort, and a claim for implied warranty of fitness for a particular purpose in tort.
We are somewhat perplexed by the idea of asserting these implied warranty theories in tort, and we note that Tioga presented no North Dakota authority other than an unpublished transcript of a state trial judge’s ruling on a motion to dismiss a multi-count complaint to support its argument that North Dakota recognizes such implied warranty theories as causes of action in tort. Such unpublished authority may not be cited under the rules of this Court. 8th Cir.R. 28A(k). A panel of this Court, however, recently recognized the propriety of these same implied warranty theories in tort, Hebron Pub. Sch. Dist. No. 13 v. U.S. Gypsum,
We note that, while the authorities cited in Hebron do indeed support the parallel between the strict liability in tort theory and contractual implied warranty theories, they do not go so far as to suggest that one may assert implied warranty theories in tort. Rather, they simply address the parallels between the elements of the strict liability in tort theory and the contractual implied warranty theories. See, e.g., Herman v. General Irrigation Co.,
Because we have severe doubts as to whether the North Dakota Supreme Court would recognize the implied warranty of merchantability and implied warranty of fitness for a particular purpose as tort theories, we would give strong consideration to certifying the issue to the North Dakota Supreme Court if this case came
VI.
USG also argues that the trial judge erred in refusing to charge the jury regarding USG's state-of-the-art defense and in excluding evidence relevant to that defense. USG sought a jury instruction under § 28-01.1-01 of the North Dakota Centennial Code, basing its claim of entitlement to the instruction on Audicote’s compliance with General Services Administration (GSA) specifications, existing at the time Tioga’s schools were constructed, that guided federal agencies in making procurement decisions. Section 28-01.1-01, which is part of North Dakota’s Products Liability Act, provides that:
There is a rebuttable presumption that a product is free from any defect or defective condition where the alleged defect in the plans or designs for the product or the methods and techniques of manufacturing, inspecting, and testing the product were in conformity with government standards established for that industry which were in existence at the time the plans or designs for the product or the methods and techniques of manufacturing, inspecting, and testing the product were adopted.
N.D. Cent.Code § 28-01.1-05(3) (Supp. 1989).
We do not believe that the North Dakota Supreme Court would hold that the “government standards” referred to in this section include mere GSA specifications. If the North Dakota legislature had intended to include government specifications within the reach of the statute it could have expressly done so. See, e.g., Wash.Rev.Code § 7.72.050(2) (1992) (“When the injury-causing aspect of the product was, at the time of manufacture, in compliance with a specific mandatory government contract specification relating to design or warnings, this compliance shall be an absolute defense.”). “Government standards” more likely refers to standards established by statute or regulation that govern an industry. We note that the GSA specifications at issue would not even have applied to the Tioga school construction, since Tioga is not a federal agency. Because we believe that the North Dakota Supreme Court would hold that the “government standards” referred to in the statute do not include the GSA specifications, we hold that the trial judge did not err in refusing to give USG’s requested jury instruction.
USG also argues that the trial judge erred in refusing to admit into evidence not only the GSA specifications but also a slew of other documents showing the federal government’s use of asbestos in building construction at the time the Tioga school buildings were constructed. We may reverse a trial judge’s rulings on the admissibility of evidence only if there is an abuse of discretion. Northside Mercury Sales & Serv., Inc. v. Ford Motor Co.,
VII.
The last argument that USG raises concerns the punitive damages instruction given to the jury. In reviewing jury instructions, we decide whether, taken as a whole, they fairly and adequately state the
Because we are remanding this case for a new trial, we decline to address the arguments made by USG against the constitutionality of North Dakota’s punitive damages law. We note that in Stoner, which was decided before the United States Supreme Court’s decision in Pacific Mutual Life Insurance Co. v. Haslip, — U.S. -,
For the reasons stated above, we reverse the judgment of the District Court and remand the case for further proceedings consistent with this opinion.
Notes
. In addition to these assertions of error, USG originally argued that Tioga’s claims were barred by North Dakota’s statute of limitations, N.D.Cent.Code § 28-01-16 (Supp.1989), and by
Dissenting Opinion
dissenting.
I dissent to the granting of a new trial to USG on the ground that the nuisance theory was improperly submitted to the jury. After an eight day trial, the district judge submitted five theories of liability to the jury. The jury returned a general verdict in favor of Tioga, including a modest punitive damage recovery.
The district court, in an extensive and thorough memorandum and order, denied the motion of USG for judgment n.o.v. or for a new trial. The district court reviewed the North Dakota nuisance statute and concluded that Tioga’s nuisance claim was properly submitted to the jury. I agree with the district judge that North Dakota broadly defines nuisance by statute and does not require the control that USG and the majority would like to engraft on the statute. The district court concluded that, because all claims were properly submitted to the jury, a new trial was unnecessary.
I do agree with the majority opinion that, if it was error to submit the nuisance theory, there should be a new trial because the general verdict does not allow the court to determine on what theory the jury found for the plaintiff. I believe, however, that the nuisance theory was an acceptable interpretation of North Dakota law. Accordingly, I would affirm the judgment of the district court in all respects.