Petition for Writ of Certiorari — W. R. Grace & Company-Conn v. State Farm Mutual Automobile Insurance

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1) 94 281 art 5 1994,

No. ___perice OF THE CLERK ;

Iu the

Supreme Court of the United States

October Term, 1994

W.R. GRACE AND COMPANY-CONN.,

Petitioner,

STATE FARM MUTUAL

AUTOMOBILE INSURANCE COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

Hugh V. Plunkett III

J. Michael Schwartz

Jeffrey J. Weill*

POPHAM, HAIK, SCHNOBRICH

& KAUFMAN, LTD.

3300 Piper Jaffray Tower

222 South Ninth Street

Minneapolis, Minnesota 55402

(612) 333-4800

*Counsel of Record

Counsel for Petitioner

1994 — Bachman Legal Printing @ (612) 339-9518 @ FAX (612) 337-8053

QUESTIONS PRESENTED

This Petition arises from an appeal following a lengthy

jury trial of multiple claims and affirmative defenses involving

allegations of property damage caused by asbestos-containing

fireproofing installed in buildings Respondent constructed nearly

two decades before commencing suit. The Illinois construction

statute of repose would bar suit if applied. Petitioner seeks a

Writ of Certiorari to review the decision of the Seventh Circuit

Court of Appeals affirming judgment against Petitioner on one

theory of liability despite the jury’s co-equal special verdict that

Petitioner engaged in the precise activity which qualifies a party

as a member of the class immunized by the repose statute from

any and all claims brought ten years after construction. The

following Questions would be raised:

1. Does the Seventh Amendment’s right to trial by jury and

its prohibition on reexamination of facts tried by a jury

prohibit a federal court of appeals from disregarding a

jury’s special verdict findings in toto, reexamining the

same disputed dispositive facts, and reaching an opposite

conclusion from that of the jury?

y 3 Do the Fifth and Fourteenth Amendment guarantees of

equal protection and due process under the law prohibit

a federal court of appeals from construing or applying a

State improvement to real property statute of repose to

exclude certain classes of parties on the basis of trade

status, while protecting all other like-situated parties to

the improvement project, when the highest court in the

forum state has declared that the statute meets

constitutional scrutiny only if, and precisely because, it

equally protects all parties to the improvement from all

stale claims of liability?

PARTIES TO THE PROCEEDING

AND RULE 29.1 STATEMENT

The parties to the proceedings below are those listed in

the caption on the cover of this petition.

W.R. Grace & Company is the parent corporation of

W.R. Grace & Company-Conn. Grace’s subsidiaries or

partnerships, other than wholly owned operations, are: A-O

Grace Kaustik, Boodin Partnership, Carbon Dioxide Slurry

Systems LP, Grace Cocoa Associates LP, Grace Offshore

Turnkey, Grace Ventures Partnership I & II, Healthcare Medical,

Immunecare of Hollywood, Immunecare of Key West, Infusion

Systems, New Bedford Infusioncare, Nippon Dearborn

Kabushiki Kisha, North Suburban Dialysis, OB One & IVtoo,

Palm Springs I.V. Care II, Paramount Coal Company, Pharmacy

Direct, Primecare Home Health Services, Grace Specialty

Chemicals Indonesia P.T., Pursue Gas Processing and

Petrochemical Company, Quality Home Care Services of

Watertown, NY, Sleep Diagnostic Associates, Sisters of Charity

Home Health Care, and VNA-NMC Homecare Partnership.

ili

TABLE OF CONTENTS

PAGE

Ai AMAUMIES....... sk... vi

I os ss so 2

poh oe ag Le OPE ae ene ean 2

CONSTITUTIONAL PROVISIONS INVOLVED ..... 3

STATUTORY PROVISION INVOLVED ........... 3

STATEMENT OP THECASE .................. 4

I. ete 4

Il. chitin, de. i rte 6

Ill. Seventh Circuit’s RR ae ene 9

REASONS FOR GRANTING THE WRIT .......... 1]

I. The Court Should Grant Certiorari To

Reaffirm The Seventh Amendment’s

Protection Of The Right To Trial By Jury And

Its Prohibition On Courts Reexamining Facts

‘epeecitiee: cn. Gere Ore Oe ee 12

Il. The Court Should Grant Certiorari To Affirm

The Equal Protection And Due Process

Guarantees Of The Fifth And Fourteenth

Amendments In Federal Courts’ Application

esipaiinie: oie, o,. eet me eee 19

TABLE OF AUTHORITES

CASES PAGE

United States Supreme Court Cases:

Anderson v. City of Besemer City,

SP Be i CN rab oe Sie A 14

Atlantic & Gulf Stevedores v. Ellerman Lines, Ltd.,

SAG ee RR ska a SE Sicko Sarees 13, 18

Ballard v. United States,

Se eR CREE BG & wie KA a eee ss Oe TK Wh 15

Bandini Petroleum Co. v. Superior Ct.,

Be Oe OES Fie Cea 20

Felder v. Casey,

SE IE i ose bse Cae a ce ba Ee eee 21

Gallick v. Baltimore & Ohio R. Co.,

See Gre SO Cee oe wh os CV OSCR oe 14, 17

Justices, Etc. v. United States Ex. Rel. Murray,

Fe ee EE ca 6 wh er eek wk ue xe 13

Lavender v. Kurn,

er ee es ioe lek RUNG 0 ae ike 17

Lindsley v. Natural Carbonic Gas. Co.,

ee Be CEE eb. 6 we RARE E46 ON SOK 20-21

Lumberman’s Mut. Cas. Co. v. Elbert,

ee Whe Oe CE oes beh ee eases bane ss 13

Maine v. Taylor,

We OE NU 6 ie on cw oo wl Ek LU ee oe rae

Parklane Hosiery Co. v. Shore,

Bias fs egerm seston Oe Te ee ee 13

Parsons v. Bedford,

oe Wit 19 OU) 43 (1826). 8 ss oi eo os 13

Tennant v. Peoria & Pekin Union R. Coa.,

FOR IO Ae eos s os coc chee. 14

United States v. Kubrick,

Wr er en GS) FO ee a 5

Warner v. Kewanee Machinery & Conveyor Co.,

ssribecesesp te syn, rains, EC 17

Weinberger v. Wiesenfeld,

WO WENO ee oc’, Vas Sook by A 20

Wilkerson v. McCarthy,

ify Sg. toon! cnc, « dL Ee CL 12

Yick Wo v. Hopkins,

nes ce any eo ee eer era 25

inoi

Continental Ins. Co. v. Walsh Const. Co.,

524 N.E.2d 1131 (Il. NN 680355065 6 Sie cs 24

Kleist v. Metrick Electric Co.,

571 N.E.2d 819 (Il. MN he oe: 16, 27

St. Louis v. Rockwell Graphic Systems,

GOS N.EB.36 SSS. IDBZ). 2c ccc nc ccw ere vsenete 26

Skinner v. Anderson,

231 N.E.2d S88 (iil. 1967)... nec cccccrccces 21-23, 26

Skinner v. Hellmuth, Obata and Kasabau, Inc.,

482 N.E.2d 155 (Ill. App. 1985) ......- ee eee eee 23-24

SOD 00:36 SOC. ISGG) oo ccc ccc wececes 21, 24

Other Cases:

Appletree Square Ltd. Partnership v. W.R.Grace & Co.,

__ F.3d __, 1994 WL 372036 (8th Cir., July 19, 1994)... . 6

Kailas Millwork Corp. v. Square D. Corp.,

225 N.W.2d 454 (Wis. 1975)... . 2... cece cece ceees 23

Nelson v. Production Credit Ass'n of the Midlands, 930 F.2d

599 (8th Cir.), cert. denied (1991) ..........502 ees 15

Pacific Indemnity Co. v. Thompson- Yaeger, Inc.,

260 N.W.2d 548 (Minn. 1977)... 2... 2. ee eee eee 22

Philips v. ABC Builders, Inc.,

611 P.2d 821 (Wyo. 1980) ..... 2... cece eee eeees 23

Tabler v. Wallace,

704 S.W.2d 179 (Ky. 1985) ......- cece eee eens 22

Whiting-Turner Contracting Co. v. Coupard,

499 A.2d 178 (Md. App. 1985) .........--- eens 23

Zapata v. Burns,

~ i P & by + a. | 23

" ‘ioe,

CONSTITUTIONAL PROVISIONS

I a he bon 6 oo eo vedic 3, 20

vise nis ester oe kg, EE ee een 3, 3

Wale WH PS OEE as Siese'y Cd sk oc vk cas: 3, 20

Me NS ON 06 ook ie bo ko eo rey 20

STATIS

Ill. Rev. Stat., 735 ILCS 5/13-214(b) ........... passim

RULES

I nk Ce ack ok oo ck 29

rr A i i oe he ek 29

MISCELLANEOUS

S. Breyer, Breaking the Vicious Circle:

Toward Effective Risk Regulation

(Harvard University Press 1993) ................. 7

G. Christie, Judicial Review of Findings of Fact,

87 Northwestern L. Rev. 14, 15 & 56 (Fall 1992) ... 15-16

NESHAP, Clarification of Intent,

58 F.R. 51784-01 (October 5, 1993) ............... 7

E. Schnapper, Judges Against Juries -- Appellate Review

of Federal Jury Verdicts,

Wome We me OO COD soc vc eee ke 15

Vili

in The

Supreme Court of the United States

October Term, 1994

W.R. GRACE AND COMPANY-CONN.,

Petitioner,

Vv.

STATE FARM MUTUAL AUTOMOBILE INSURANCE

COMPANY

Respondent.

Petition For a Writ of Certiorari

To the United States Court of Appeals

For the Seventh Circuit

PETITION FOR A WRIT OF CERTIORARI

W.R. Grace & Company-Conn. respectfully petitions for

a writ of certiorari to review the judgment of the United States

Court of Appeals for the Seventh Circuit in this case.

OPINIONS BELOW

The Opinion of the United States District Court for the

Central District of Illinois denying Grace’s motion for summary

judgment was issued on December 30, 1992. It is reported at

834 F. Supp. 1046 and reprinted in the Appendix ["A-_"] A-53-

64. The District Court’s Opinion during trial, taking under

advisement Grace’s motion for judgment as a matier of law on

repose immunity issued on April 22, 1993 is unreported, and is

reprinted in A-40-52. The District Court Opinion denying

Grace’s post-trial motions issued on October 26, 1993 is

reported at 834 F. Supp. 1052, and reprinted at A-9-39. A panel

of the Seventh Circuit issued its Opinion on May 17, 1994.

That Opinion is reported at 24 F.3d 955 and reprinted at A-1-7.

The jury’s special verdict on State Farm’s liability claims

and Grace’s statute of repose affirmative defense was filed on

May 11, 1993. These are reprinted in the Lodging [hereinafter

cited "L-_"] accompanying this petition. The citations to the

trial transcript are designated herein as "Tr-_."

JURISDICTION

The jurisdiction of this Court to review the judgment of

the Seventh Circuit is invoked under 28 U.S.C. § 1254(1), which

provides for review of cases in the courts of appeals "{b]y writ

of certiorari granted upon the petition of any party to any civil

or criminal case, before or after rendition of judgment or decree.

Under 28 U.S.C. § 2101(c), the writ of certiorari to the Supreme

Court must be “taken or applied for within ninety days after the

entry of the such judgment or decree." See also Sup. Ct. R.

13.1. The 90 day period commences from the date of a denial

of petition for rehearing, or the entry of the subsequent

judgment. Id. at 13.4. In this case, Grace filed a petition for

rehearing which was denied on June 16, 1994. [A-3]. The 90

day period would expire on September 14, 1994.

CONSTITUTIONAL PROVISIONS INVOLVED

U.S. Const. Amend. VII.

In suits at common law, where the value in controversy

Shall exceed twenty dollars, the right of a trial by jury shall be

preserved, and no fact tried by a jury shall be otherwise

re-examined in any Court of the United States, than according

to the rules of the common law.

U.S. Const. Amend. XIV.

Section 1. ... No State shall make or enforce any law

which shall abridge the privileges or immunities of citizens of

the United States; nor shall any State deprive any person of life,

liberty, or property, without due process of law; nor deny to any

person within its jurisdiction the equal protection of the laws.

U.S. Const. Amend. V. .

No person shall be ... deprived of life, liberty, or property

without due process of law.

Ill. Const., Article I, section 2.

No person shall be ... denied equal protection of the laws.

STATUTORY PROVISION INVOLVED

Ill. Rev. Stat., 735 ILCS 5/13-214. Construction -- Design

management and supervision. As used in this Section "person"

means any individual, any business or legal entity, or any body

politic.

(b) No action based upon tort, contract or otherwise may be

brought against any person for an act or omission of such person

in the design, planning, supervision, observation or management

of construction, or construction of an improvement to real

property after 10 years have elapsed from the time of such act

or Omission.

STATEMENT OF THE CASE

This Petition seeks review of a federal appellate court’s

cursory disregard of specific jury findings of fact that a

manufacturer/supplier of fireproofing building material engaged

in the precise activities that qualified it for immunity from stale

claims under the Illinois improvement to real property

construction statute of repose. The appellate court reexamined

those same disputed facts and reached opposite findings from

that of the jury. Review is also sought of the federal appellate

court’s application of the state statute of repose to exclude

manufacturers/suppliers of constituent elements of improvements

to real property from protection under that statute protecting all

other parties involved in the construction project from stale

claims. The appellate court’s analytical process, factual

findings, and conclusion violate the constitutional guarantees of

the Fifth, Seventh, and Fourteenth Amendments.

I. BACKGROUND

In 1963, Petitioner W.R. Grace & Co.-Conn. ("Grace")

purchased the assets of the Zonolite Company, a manufacturer

of various building and construction materials including a brand

of fireproofing called Monokote.' In addition to its

manufacturing activities, Grace’s personnel routinely worked

with architects, builders and installers on major construction

projects regarding the design, planning, specifications,

' Monokote was a cementitous building material designed to

prevent structural steel from buckling and collapsing in a fire.

When properly applied to structural steel in thicknesses specified

by Grace’s and UL tests, it provided fireproofing protection for the

useful life of the building. Monokote-3 fireproofing contained

vermiculite, a gypsum binder, and chrysotile asbestos. Grace

explained the content of Monokote-3 to State Farm’s national

architectural firm. [Eg. Def. Tr. Ex. 368].

installation, and testing of its fireproofing so as to meet building

code requirements and specific building needs. [Eg. Tr. 672-73,

3202; see also note 4, infra]. In 1970-73, Respondent State

Farm Mutual Automobile Insurance Company ("State Farm")

had Monokote-3 installed in several office buildings during their

original construction. State Farm commenced this suit against

Grace in January 1989 asserting property damage due to the

fireproofing allegedly releasing asbestos fibers. Jurisdiction of

the Illinois federal district court was premised on diversity of

citizenship pursuant to 28 U.S.C. § 1332.

Before trial, Grace moved for summary judgment that,

like other parties to the original construction, it too was

immunized from State Farm’s stale claims under the [Illinois

construction statute of repose. The statute provides that:

No action based upon tort, contract or otherwise may be

brought against any person for an act or omission of

such person in the design, planning, supervision,

observation or management of construction, or

construction of an improvement to real property after 10

years have elapsed from the time of such act or

omission.

Ill. Rev. Stat. 735 ILCS 5/13-214(b)2 Despite the undisputed

* This Court has affirmed the import and validity of statutes of

repose which provide all members of a protected class with vested

right to immunity from claims of liability after a certain number of

years. See, ¢.g., United States v. Kubrick, 444 U.S. 111, 117 (1979)

(statutes of repose afford to “plaintiffs what the legislature deems a

reasonable time to present their claims [and] protect defendants and

the courts from having to deal with cases in which the search for

truth may be seriously impaired by the loss of evidence, whether by

death or disappearance of witnesses, fading memories,

disappearance of documents, or otherwise").

facts that Grace designed, manufactured and supplied the

fireproofing material for the original construction of State

Farm’s buildings, and the statutory immunity for claims arising

out of "construction of an improvement to real property,” the

district court denied the summary judgment motion. [A-61-63].

Grace again moved during the trial for judgment as a matter of

law on repose immunity. The district court took that motion

under advisement, stating that the issue was "extremely close”.

[A-14; A-41]. It held that Grace’s entitlement to the repose

defense would be determined "by the extent to which W.R.

Grace’s involvement met the statutory threshold of ’design,

planning, supervision or observation.’" [A-14; A-41-42].

II. SUMMARY OF TRIAL

The case was tried to a jury over the course of seven

months (a total of 50 trial days) on State Farm’s liablity claims

as well as Grace’s defense of statute of repose immunity. State

Farm tried to persuade the jury that Grace’s fireproofing was

defective and unreasonably dangerous when it left Grace’s

manufacturing plant, that Grace was fraudulent in its warnings

regarding its fireproofing, and that Grace’s conduct was willful

and wanton so as to impose punitive damages. The jury

specifically rejected each one of those claims.’ [L-1]. It found

Because asbestos-in-building property damage claims may

be barred by various statutes of repose and limitations, many siates

have passed so-called "revival" statutes. See, e.g., Minn. Rev. Stat.

§ 541.22, discussed in Appletree Square Ltd. Partnership v.

W. R. Grace, __ F.3d. __, 1994 WL 372036 (8th Cir., July 19,

1994). Illinois had not instituted such legislation; the application or

constitutionality of such revival statutes is not at issue here.

> Grace offered evidence, inter alia, to show that allegations

of hazards associated with in-place asbestos are greatly overstated

and that the fireproofing in State Farm’s buildings should not be

Grace liable on the single count of negligence, and it also found

that State Farm was 30 percent contributorily negligent. [L-1-2].

On the dispositive defense of statute of repose immunity,

Grace presented evidence that its personnel consulted with State

Farm’s architects about the design and planning of the

fireproofing needs of this construction project. Grace further

Showed that it met and consulted with State Farm on

construction-related problems, inspected the fireproofing on the

job site, and conducted additional on-site testing of the

fireproofing. Although State Farm argued to the jury that

liability should be imposed on Grace for construction-related

activities, it argued that those same activities were of no

significance to the jury’s resolution of the repose question.* The

removed. State Farm’s own air testing showed that the levels of

asbestos fibers in the ambient air in its buildings were well under

OSHA and EPA standards. [Tr. at 6760-65]. See also NESHAP,

Clarification of Intent, 58 F.R. 51784-01 (October 5, 1993)

(clarifying previous misunderstanding of EPA’s position as

“encouraging unnecessary and unwise (from a health standpoint)

removals" of asbestos materials); S. Breyer, Breaking the Vicious

Circle: Toward Effective Risk Regulation, at 12-13 (Harvard

University Press 1993) (leaving asbestos-containing material in

buildings poses no appreciable risk: "Most experts believe that

white asbestos [the kind in Monokote] left in place is virtually

harmless ... The risk is so small as to be virtually meaningless.").

* State Farm argued to the jury on liability that: "While our job

is going on, we’ve got a problem. This powdery falloff already

with Monokote. This is October 1972. This is a memo

concerning the problem written by Grace individuals about our job.

Hard to read. Monokote has powdery falloff found on top of

ceiling tile. Well, that’s the same thing we had 20 years later.

Mr. Egan [Grace representative] comes down to our job, Exhibit

1228, and we'll talk about Mr. Egan’s letter. He assures us that

we're going to have a problem-free future with respect to dusting

jury was asked to answer a special verdict question on the

repose defense taken directly from the repose statute and tailored

by the court to fit this case:

Did W.R. Grace provide design, planning, supervision,

observation or management of construction services

related to installation of fireproofing to State Farm

Mutual Automobile Insurance Company in addition to

supplying bags of Mono-Kote 3 and Mono-Kote 4

fireproofing?

[L-3].° After hearing the evidence and weighing conflicting

arguments on Grace’s repose defense, the jury returned its

verdict. Despite State Farm’s arguments that the jury should

answer "No", the jury agreed with Grace and answered, "Yes."

and no continuing maintenance problem for Monokote. And we’ll

see, ladies and gentlemen, that just hasn’t turned out to be true."

(Tr. at 6698).

On the other hand, State Farm argued to the jury on repose

immunity that: "There’s a question, did Grace provide design

planning, supervision, observation, or management of construction

services related to the installation in addition to selling the product.

They did not. The only thing they did was come down when there

was a problem just like any manufacturer would. And that’s very

important because we are suing them as the manufacturer. We ask

on that question whether they provided these additional services,

you check no, because they did not. They had no contract to do

so. The only time they came is like any other manufacturer would

come if there was a problem. Of course, they didn’t tell us the

truth about the problem but they came.” [Tr. at 6863].

* The aspect of the Ilinois repose statute which immunizes

parties that engaged in the “construction of an improvement” per se

was not asked of the jury inasmuch as Grace’s manufacture and

supply of the fireproofing material was an undisputed fact.

[/d.}. Thus, in addition to designing, testing, manufacturing and

supplying the Monokote fireproofing to State Farm, the jury

found that Grace provided the enumerated job-specific services

which immunize it from State Farm's claims under the repose

Statute.

Following trial, Grace moved the district court to dismiss

the sole remaining claim of negligence consistent with the jury’s

verdict on the repose defense and its rejection of all other State

Farm liability claims. The court refused to grant Grace Statutory

immunity from the negligence claim despite its earlier ruling

that the jury would determine whether Grace’s activities, beyond

construction of the fireproofing, met the statute’s requirements

and the jury’s verdict that it did. The court did not hold (nor

did State Farm argue) that the jury’s repose verdict was

unsupported by the evidence. Rather, it rejected the jury’s

findings as non-binding. [A-25]. It entered judgment against

Grace for $12.5 million on the negligence finding. [A-38].

Grace appealed on the sole issue of its repose immunity.

Til. THE COURT OF APPEALS’ OPINION

A three-judge panel of the Seventh Circuit Court of

Appeals affirmed the judgment against Grace in a terse, three

page reported opinion that ignored the jury’s verdict in its

entirety® and cursorily disregarded the jury’s special verdict on

* The Seventh Circuit never acknowledged the jury’s verdict

explicitly rejecting three of State Farm’s liability claims and

instead adopted lop-sided versions of the facts which the verdict,

in its entirety, does not support. As one example, the court wrote

that Grace’s motivation in selling Monokote-3 was to "unload its

inventory” on State Farm and to circumvent price controls. [A-2].

These characterizations are contrary to the jury’s finding that

Grace was neither fraudulent nor willful and wanton in any of its

conduct. [L-1]. The court also recited allegations of Grace’s

the statute of repose as a "red herring" [A-3]. The court

reexamined the evidence and reached the contrary factual

conclusion that Grace did not engage in the construction

activities found by the jury (again, on appeal, State Farm did not

assert that the jury verdict was without support in the evidence).

The Seventh Circuit made its own findings on this dispositive

defense without any support in the record, much less the verdict,

Stating that Grace "merely sold bags of Monokote" to State

Farm. [A-4; emphasis in original]. Although the jury had

expressly found that Grace provided "design, planning,

supervision, observation or management of construction services

related to installation ... in addition to supplying bags of

Monokote,” the court ignored that finding. Instead, it made

findings that, in its opinion:

the activities in which [Grace] engaged in relation to the

Monokote 3 used in the construction of State Farm’s

three buildings are not reasonably interpreted as design,

supervision, observation, planning, etc.

[A-4]. Thus, contrary to construing facts to support the verdict,

the Seventh Circuit gave no deference to the findings of the ten-

person jury. It reexamined the evidence and reached its own

conclusions that Grace did not engage in the precise activities

set forth in the repose statute despite the jury’s explicit verdict

to the contrary.

The court made its own further factual findings that the

jury’s verdict on negligence could only have been based on

“gratuitous” use of asbestos in its Monokote-3 without mention of

the jury’s rejection of State Farm’s strict liability claim and

finding the product was not "defective and unsafe” when it left

Grace’s control. [L-1; L-10-13].

manufacturing activity unrelated to the construction project. It

wrote sweepingly that:

[Grace’s} negligence had nothing to do with the

installation or application of the MonoKote... The

problem was in the design of the Mono-Kote (to include

asbestos), the failure to test the product, and the failure

to warn about it... [Grace’s] negligent acts or omissions

[were] remote from building construction...

[A-5]. The court concluded that the statute "protects none of the

activities that the jury could have found to be tortious." [Id.}.

Yet, in drawing those inferences from the Single negligence

finding, the court did not even consider the substantial support

in the rest of jury’s verdict, the evidentiary record, or the

arguments of counsel which makes the jury’s Single negligence

finding consistent with the job-specific construction activities

that the jury found Grace had performed in relation to State

. Farm when answering the repose question.

The Seventh Circuit also wrote that, in enacting the

current version of the statute, the Illinois General Assembly :

evidently intended "to circumscribe its protection far more

narrowly [i,e. to not protect suppliers of building materials]- in

fact as narrowly as the Supreme Court of Illinois would permit"

[A-4] -- without even looking at the legislative history or Illinois

Supreme Court pronouncements about the constitutionally-

required scope of the construction statute of repose to protect

exactly such parties.’ The court then held that Grace was not

” As explained, infra at p. 21-24, the current version of the

Illinois construction statute of repose was rewritten and passed to

broaden its scope so as to avoid discriminatory application, meet

Constitutional mandates, and conform to requirements established by

the Illinois Supreme Court’s criticisms of the former Statute’s overly

entitled to the benefit of the jury’s verdict on the statute of

repose defense because Grace’s activities, as the court described

them, did not turn Grace into a "designer or builder.” [A-4-5.].

Finally, ignoring extensive case law in Illinois applying the

statute to constituent parts or components of overall

improvements, the court concluded that "construction" of the

building’s fireproofing would not itself qualify Grace for

immunity because, the court decided, the allegedly defective

fireproofing in State Farm’s buildings did not constitute an

improvement to real property as a mere "spray." [A-6-7].

REASONS FOR GRANTING THE WRIT

The Court has traditionally held that "the criterion

governing the exercise of our discretion in granting or denying

certiorari is not who loses below but whether the jury function

in passing on disputed questions of fact and in drawing

inferences from proven fact has been respected." Wilkerson v.

McCarthy, 336 U.S. 53, 70-71 (1949) (Douglas, J., concurring).

This case warrants the Court’s review because it raises important

issues of fundamental Constitutional rights and the related

constraints placed on the authority of the federal appellate

courts. This Opinion, if left to stand, jeopardizes the guarantees

of the Seventh Amendment’s protection of the right to have a

jury’s resolution of disputed material fact issues given effect and

its prohibition against courts’ reexamining facts that have been

tried by a jury. The Opinion also erodes important equal

protection and due process guarantees which preclude a federal

court from construing a state statute contrary to what the highest

court of the forum state has declared would render it

unconstitutional.

narrow protections excluding owners, tenants, manufacturers, and

suppliers of building materials.

I. THE COURT SHOULD GRANT CERTIORARI TO

REAFFIRM THE SEVENTH AMENDMENT’S

PROTECTION OF THE RIGHT TO TRIAL BY JURY -

AND ITS PROHIBITION ON COURTS

REEXAMINING FACTS TRIED BY A JURY.

The Seventh Amendment was adopted because the right

to have facts determined by a jury in civil cases was considered

“a safeguard too precious to be left to the whim of the

sovereign, or it might be added, to that of the judiciary."

Parklane Hosiery Co. v. Shore, 439 U.S. 322, 343 (1979)

(Rehnquist, J. dissenting; emphasis added). The Amendment

provides that:

[T]he right of a trial by jury shall be preserved, and no

fact tried by a jury shall be otherwise re-examined in any

Court of the United States, than according to the rules of

the common law.

U.S. Const., Amend. VII.* Thirty years ago, this Court enforced

the Seventh Amendment proscriptions on appellate court

reexamination of facts tried by a jury in Atlantic & Gulf

Stevedores v. Ellerman Lines, Ltd., 369 U.S. 355 (1962). The

Court reversed a federal appellate court that had ignored special

jury verdict findings, and emphatically held:

* In its early years, the Court stated that the Seventh

Amendment was principally passed out of "the fear and alarm in

respect to the appellate jurisdiction of this court over cases tried by

a jury". Justices, Etc. v. United States Ex. Rel. Murray, 76 U.S.

658, 661 (1870); citing Parsons v. Bedford, 28 U.S. (3 Pet.) 443,

446 (1824). As such, the Court has noted that "[a]ppellate review

in the federal courts is, of course, limited ultimately by the Seventh

Amendment"). Lumberman’s Mut. Cas. Co. v. Elbert, 348 U.S. 48,

53 n.5 (1954).

We might agree with the Court of Appeals had the

questions of fact been left to us. But neither we nor the

Court of Appeals can redetermine facts found by the jury

any more than the District Court can predetermine them.

Id. at 359-60. See also Gallick v. Baltimore & Ohio R. Co., 372

U.S. 108, 112-14 (1963) (appellate court improperly invaded the

jury’s function and province by holding that the evidence at trial

of a causal connection fell short of that required for

consideration of a jury). Likewise, in Tennant v. Peoria &

Pekin Union R. Co., 321 U.S. 29 (1943), an appellate court

concluded that insufficient proof existed to support a jury’s

finding of proximate cause and then substituted its own view of

the evidence for that of the jury. In reversing, this Court

narrowly prescribed the limits of appellate review of facts tried

to a jury as follows:

{The jury’s] conclusion, whether it relates to negligence,

causation, or any other factual matter, cannot be ignored.

Courts are not free to reweigh the evidence and set aside

the jury verdict merely because the jury could have

| drawn different inferences or conclusions or because

judges feel that other results are more reasonable.

Id. at 35.° When reviewing courts disregard jury verdicts and

engage in de novo fact finding contrary to clear findings by

juries, the consequences fail to serve either the public or the

* In the context of reviewing district courts’ findings of fact

under Federal Rule of Civil Procedure 52(a), the Court in Maine v.

Taylor, 477 U.S. 131, 145 n.17 (1986) emphasized that appellate

courts are not "free to examine the record and draw [their] own

conclusions.". See also Anderson v. City of Besemer City, 470 U.S.

564, 574-75 (1985) ("the trial on the merits should be the main

event rather than a tryout on the road”).

courts: “the injury is not limited to the defendant, there is injury

to the jury system, to the law as an institution, to the community

at large, and to the democratic ideal reflected in the process of

our courts." Ballard v. United States, 329 U.S. 187, 195 (1946).

Commentators have pointed out that for the past few

decades this Court has not granted review in a Seventh

Amendment case to restrain the reviewing courts from

reexamining facts tried by a jury. They note a growing trend

among reviewing courts to involve themselves in the fact-finding

process and substitute their own interpretations of evidence for

that of the jury:

In the absence of Supreme Court scrutiny or intervention,

the circuit courts have been free to work their will on

civil jury verdicts. This protracted Suspension of

enforcement of the seventh amendment has tested the

extent of the inherent self-restraint on the part of judges

given the raw power to overrule any jury verdict with

which they happened to disagree... The evisceration of

the right to trial by jury which has become commonplace

in the circuit courts is now entirely perceptible: the need

for Supreme Court action to restore the vitality of the

seventh amendment is equally clear.

E. Schnapper, Judges Against Juries -- Appellate Review of

Federal Jury Verdicts, 1989 Wis. L. Rev. 237, 353-54 (1989);

cited in Nelson v. Production Credit Ass’n of the Midlands, 930

F.2d 599, 607-8, n.9 (8th Cir.), rehearing en banc denied, cert.

denied, 112 S.Ct. 417 (1991) (Heaney, J. dissenting) (noting an

“unfortunate trend that is eroding the protection of the seventh

amendment. Appellate reversals of jury fact-finding, once

relatively rare, are now occurring more frequently."); G.

Christie, Judicial Review of Findings of Fact, 87 N.W.U.L. Rev.

14, 56 (Fall 1992) ("There would be no point in having a trial

if the conclusions arrived at can be overturned merely because

a subsequent reviewer disagrees with them."). Given these

warnings from numerous sources, the guidance of this Court is

now required to stem the tide of arbitrary judicial discretion in

reviewing special jury verdict findings in civil cases.

In this case, the Seventh Circuit summarily rejected

specific jury findings that Grace engaged in activities entitling

it to statutory immunity from stale claims and then reexamined

the same disputed facts to reach a contrary conclusion in

violation of the Seventh Amendment guarantees. The jury, after

hearing the evidence and weighing the conflicting arguments,

found that Grace (in addition to manufacturing and supplying

the fireproofing material) provided "design, planning,

Supervision, observation or management of construction

services" with respect to this particular building construction.

The jury’s verdict confirmed that Grace’s involvement met

precise job-specific activities enumerated in the Illinois statute

of repose which qualify it as a member of the protected class of

defendants.° Yet, without so much as articulating a standard of

review, the Seventh Circuit perfunctorily disregarded those

findings as a "red herring" and reached its own contrary findings

of fact. It posited that Grace "merely supplied bags of

Monokote" to State Farm and decided, in its view, that Grace’s

activities could not be "reasonably interpreted" as those set forth

in the statute or found by the jury. [A-4].

Consistent with the Seventh Amendment’s right to trial

by jury, Grace spent fifty trial days rebutting State Farm’s case

and presenting its own, to obtain a jury verdict in its favor on

the dispositive statute of repose defense and on three of four

1° See, e.g., Kleist v. Metrick Electric Co., 571 N.E.2d 819, 822

(il. App. 1991) ("[The statute] protects on its face anyone who

engages in enumerated activities. [Defendant] engaged in the

protected activities and, thus, is within the protected class.").

liability claims. Such effort and the jury’s resulting verdict

cannot be blithely set aside as a "red herring" or ignored

completely by the courts of appeal without raising serious

questions about the Seventh Amendment’s vitality. The

precedents of this Court and principles underlying the Seventh

Amendment’s right to trial by jury require that reviewing courts

defer and zive effect to the jury’s special verdict findings of fact

if supported by the evidence. See Lavender y. Kurn, 327 U.S.

645, 653 (1946) (where there is an evidentiary basis for the

jury’s verdict, the reviewing court’s function "is exhausted ... it

being immaterial that the court might draw a contrary inference

or feel that another conclusion is more reasonable"); see also

Warner v. Kewanee Machinery & Conveyor Co., 398 U.S. 906

(1970) (Black, J., dissenting) ("questions of the sufficiency of

the evidence are for the jury -- not the trial judge or the

appellate court").

Despite the Court’s pronouncements that appellate courts

must construe the evidence to favor the jury’s verdict, the

appellate court here did just the opposite. By engaging in de

novo determination of ultimate facts, the Seventh Circuit ignored

black-letter standards of appellate review and rendered hollow

the Seventh Amendment’s protections of right to trial by jury

without reexamination of the facts tried by the jury. The Court

Should grant certiorari in this case to reaffirm the constitutional

Proscriptions on appellate court fact-finding in derogation of jury

verdicts and to set forth clear guidelines for reviewing jury

verdicts consistently with the Seventh Amendment.

Moreover, in addition to reexamining the facts decided

by the jury and reaching contrary fact conclusions with respect

to Grace’s affirmative defense of repose immunity, the Seventh

Circuit nullified the majority of the jury’s verdict. In finding

that none of the activities of Grace in relation to this

construction project were of the kind that would warrant the

protection of the statute, the court drew inferences from the

jury’s single negligence finding against Grace without

acknowledging or harmonizing its analysis with the rest of the

verdict or the record as a whole. The court simply speculated

that the negligence finding could not have been based on

Grace’s construction-related activities. [A-5]. In Gallick, supra,

372 U.S. 108 at 119, this Court held that the appellate courts

have a duty under the Seventh Amendment to attempt to

harmonize special verdict interrogatories for consistency. See

also Atlantic & Gulf Stevedores, Inc., supra, 369 U.S. 355 at

364 ("Where there is a view of the case that makes the jury’s

answers to special interrogatories consistent, they must be

resolved that way. For a search for one possible view of the

case which will make the jury’s findings inconsistent results in

a collision with the Seventh Amendment").

When it inferred that the negligence finding could not

have been related to Grace’s job-specific activities, the Seventh

Circuit chose to ignore the jury’s verdict in its entirety. The jury

found in its verdict that Grace did engage in “design, planning,

supervision or observation of construction services related to

installation ... in addition to supplying bags of ... fireproofing."

In addition, the jury rejected State Farm’s strict liability claim,

finding that the Monokote fireproofing was not defective nor

unreasonably dangerous. [L-2; L-10-14]."' The jury also found

'' The appellate court’s failure to even acknowledge the jury’s

finding absolving Grace from liability under State Farm’s strict

liability theory results in a Catch-22: had Grace been found liable

for the manufacture of a defective and unreasonably dangerous

product, it is certain that the Seventh Circuit would have pointed to

that jury finding as evidence that the negligence finding was

premised on Grace’s manufacturing activity which, in the courts

view, would not warrant repose immunity. The jury’s finding that

Grace was not strictly liable in the design and manufacture of

Monokote is more consistent with the jury’s finding of negligence

as based on job-specific activities.

that State Farm was negligent and responsible for part of its own

damages. [L-1]. State Farm argued that Grace should be held

liable for its construction activities, see n.4, supra; and, on its

negligence claim, State Farm received a continuing duty to warn

instruction covering those activities.» Any attempt on the part

of the Seventh Circuit to harmonize the entire verdict and record

would have prevented the court from concluding, as it did, that

the jury’s negligence verdict could only have been related to

Grace’s “remote” manufacturing activity. The verdict as a

whole is consistent with the opposite conclusion. The Seventh

Circuit’s disregard of co-equal findings of fact for Grace and its

sole focus, albeit speculative, on the presumed evidentiary basis

for the jury’s negligence finding rendered the vast majority of

jury’s verdict in this case to be a complete nullity.

In short, this Court should not permit erosion of the

Seventh Amendment through the avenue of appellate court

selective reexamination of facts and speculative forays into the

jury’s thinking process. As the only court with authority to

review and remedy infringements of Constitutional rights and

principles flowing from opinions by federal courts of appeals,

the Court should grant certiorari to ensure that federal courts

respect and follow a jury’s determination of disputed issues of

material fact. Absent review, courts of appeal may continue to

disregard jury’s verdicts as distractions, construe the facts

regardless of the jury’s verdict to comport with their own

characterization of the evidence, and speculate as to jury thought

Processes by recognizing and respecting only selected portions

of the verdict and record.

The district court, over Grace’s Objection, instructed in its

negligence charge that: "If W.R. Grace knew or should have

known at the time it sold Monokote-3 to State Farm that its

product was hazardous, then W.R. Grace was under a continuing

duty to communicate such knowledge to State Farm." [L-6].

II, THE COURT SHOULD GRANT CERTIORARI TO

AFFIRM THE EQUAL PROTECTION AND DUE

PROCESS GUARANTEES OF THE FIFTH AND

FOURTEENTH AMENDMENTS IN FEDERAL

COURT APPLICATION OF STATE STATUTES.

The Equal Protection Clause of the Fourteenth

Amendment guarantees that similar-situated individuals will be

treated similarly by the government. It provides:

[Nor shall any State deprive any person of life, liberty,

or property, without due process of law; nor deny to any

person within its jurisdiction the equal protection of the

laws.

U.S. Const., Amend. XIV." In applying a state statute, this

Court has often stated that the federal courts must abide by the

"construction placed upon it by the state court." Bandini

Petroleum Co. v. Superior Ct., 284 U.S. 8, 18 (1931); citing

Lindsley v. Natural Carbonic Gas Company, 220 U.S. 61, 73

(1911) ("it is necessary to inquire what construction has been

put upon [the state statute] by the highest court of the state, for

that construction must be accepted by the courts of the United

States, and be regarded by them as a part of the provision when

'? The Equal Protection Clause of the Fourteenth Amendment

applies to the federal government through the Fifth Amendment

Due Process Clause which provides that "No person shall ... be

deprived of life, liberty, or property without due process of law."

U.S. Const. Amend. V. The Court’s "approach to Fifth Amendment

equal protection claims" is "the same as to equal protection claims

under the Fourteenth Amendment." Weinberger v. Wiesenfeld, 420

U.S. 636, 638 n.2 (1975). The Illinois Constitution provides, in like

measure, that "No person shall be deprived of life, liberty or

property without due process of law nor be denied equal protection

of the laws.” Ill. Const., Art. I, § 2.

they are called upon to determine whether it violates any right

secured by the Federal Constitution"); see also Felder v. Casey,

487 U.S. 131, 151 (1988), citing Erie R. Co. v. Tompkins, 304

U.S. 64, 78-79 (1938) ("federal courts are constitutionally

obligated to apply state law to state claims"). In this case, the

Seventh Circuit ignored the dispositive pronouncements of the

Illinois appellate courts with regard to the necessary scope of the

Illinois construction statute of repose to meet the fundamental

Constitutional requirements of equal protection.

Two years after the passage of the original Illinois statute

of repose in 1965, the Illinois Supreme Court in Skinner v.

Anderson, 231 N.E.2d 588 (Ill. 1967) declared the statute

unconstitutionally narrow because of its "discriminatory"

protections. Id., at 591. The court provided a simple, clear

mandate to the Illinois legislature: to pass constitutional scrutiny

in Illinois, the construction statute of repose may not protect

only architects and contractors involved in improving real

property; it must also extend equal protection to owners,

manufacturers and suppliers of the building materials who might

also be subject to claims of liability arising from defective

improvements to real property:

‘* The Illinois Supreme Court declared the original statute

unconstitutional under the prohibition against special legislation:

"The General Assembly shall not pass local or special laws ...

granting to any corporation, association, or individual any special or

exclusive privilege, immunity or franchise whatever.” Il. Const.,

Art. IV, § 23 (revised in Ml. Const., Art. IV, § 13). Since Skinner v.

Anderson, the court has confirmed that a special legislation defect

under Illinois law equates to a violation of equal protection.

Skinner v. Hellmuth, Obata & Kassabaum, Inc., 500 N.E.2d 34, 36

(1986) ("the standards used to evaluate the special legislation under

the Illinois Constitution are the same standards applicable to equal

protection claims”).

—— ea a sao” a ee

[O}f all those whose negligence in connection with the

construction of an improvement to real property might

result in damage to property or injury to persons ... the

[original] statute singles out the architect and contractor

and grants them immunity...

The arbitrary quality of the [original] statute clearly

appears when we consider that architects and contractors

are not the only persons whose negligence in the

construction of a building or other improvement may

cause damage to property or injury to persons. If, for

example, four years after a building is completed a

cornice should fall because the adhesive used was

defective, the manufacturer of the adhesive is granted no

ore cornice fell because of | defective | design or

construction for which an architect or contractor was

responsible, immunity is granted.

Id. at 591 (emphasis added).'* The Seventh Circuit never

1S Other non-binding state Supreme Courts have followed

Skinner v. Anderson and held that their state statutes of repose may

not constitutionally exclude designers, manufacturers, or suppliers

of building materials to construction projects while protecting other

construction trades. E.g., Pacific Indemnity Co. v. Thompson-

Yaeger, Inc., 260 N.W.2d 548, 558 (Minn. 1977) ("we too can see

no_ basis for including within the protection of the statute persons

who construct or design improvements to real estate, and excluding

other persons against whom third parties might bring claims should

they incur injury, such as owners and material suppliers"); Tabler v.

Wallace, 704 S.W.2d 179, 182 (Ky. 1985), cert. denied 479 U.S.

822 (1986) ("no rational basis exists” under a construction statute of

repose that conferred "special privileges and immunities upon

architects, engineers, and builders" only); Philips v. ABC Builders,

considered this mandate directed specifically to manufacturers

and suppliers of building materials.

To remedy the unconstitutionally discriminatory "trade-

status" defect identified by the Illinois Supreme Court in Skinner

v. Anderson, the Illinois General Assembly revised the language

and passed the current construction statute of repose. See Il.

Rev. Stat. Chapter 110, { 13-214(b) (set forth in full, supra at

p. 5). Rather than impermissibly protect only some potentially

liable persons by trade status, the legislature passed a new

Statute that immunizes any person engaged in “design, planning,

Supervision, observation or management of construction, or

construction of an improvment to real property..." from any

claim brought in “tort, contract, or otherwise" after ten years

from the allegedly wrongful act. Id. Since the passage of the

revised statute, the Illinois appellate courts have soundly rejected

attempts to construe the revised statute to exclude manufacturers

and suppliers of building materials on the basis of trade status.

Rather, those courts have made it clear that the Illinois statute

is broad and inclusive so as to withstand Constitutional scrutiny.

Pointedly, in Skinner v. Hellmuth, Obata and Kasabau,

Inc., 135 Ill. App. 3d 765, 482 N.E.2d 155 (1985), the Illinois

Court of Appeals specifically addressed whether the new statute

covered manufacturers or suppliers of building materials. That

court determined that the revised _ statute remained

Inc., 611 P.2d 821 (Wyo. 1980) ("no rational or reasonable

justification for granting this immunity to this limited class of

persons"); Kallas Millwork Corp. v. Square D Corp., 225 N.W.2d

454, 459 (Wis. 1975) (same). Other courts have not followed the

Illinois Supreme Court's decision in Skinner v. Anderson. See, e.g.

Zapata v. Burns, 542 A.2d 700, 709 (Conn. 1988); Whiting-Turner

Contracting Co. v. Coupard, 499 A.2d 178, 186 (Md. App. 1985).

unconstitutional because the new statute on its face does not

explicitly include suppliers of building materials:

The former statute singled out the architect and

contractor from those categories of persons whose

negligence in the construction of an improvement to real

property may cause injury or damage to others; it gave

no similar immunity to suit ... to the owners or person in

control or to those who may furnish materials used in

constructing the improvements. In the present statute,

the only additions to the classes of persons who will be

immune from suit ... are those who engaged in the

"observation or management of construction." Again, the

snenniial wnkeebatal ; ;

or dam has no immunity as in the former

Statute.

Id. at 159-60 (emphasis added). However, rejecting that narrow

reading on review, the Illinois Supreme Court reversed the Court

of Appeals’ ruling and held the revised statute comported with

its earlier mandate and does not deny equal protection because:

"the current statute does not exclude persons based upon their

status. It protects, on its face, anyone who engages in the

enumerated activites." Jd., 500 N.E.2d 34, 37 (Ill. 1986). See

also Continental Ins. Co. v. Walsh Const. Co., 171 Ill. App. 3d

135, 139, 524 N.E.2d 1131, 1135-36 (1988) (rejecting argument

that the construction statute of repose "limits the liability of

builders" but does not give "protection to owners and suppliers

pee

Thus, the Illinois statute of repose has been thorougly

critiqued, amended, construed, and applied by the [Illinois

appellate courts to require and provide broad repose protection

to all persons whose acts or omissions might subject them to

claims of liability for damages or injury arising out of

improvements to real property. Manufacturers and suppliers of

prototypical building products (such as code-required and

extensively applied fireproofing materials) are necessary

members of the protected class under the edicts of the Illinois

courts. Yet, in this case, the Seventh Circuit never addressed or

considered the Illinois courts’ explicit discussions of contractors,

material manufacturers or suppliers as being necessarily

protected like-situated parties - especially when engaged in job-

specific activities beyond construction and supply of building

materials themselves. Despite extensive briefing on the subject,

the court simply chose not to address or consider any of the

equal protection concerns at all.’

The facts were undisputed that Grace designed,

constructed, and supplied the fireproofing used throughout the

construction of the buildings at issue. Moreover, the jury

specifically found that Grace did, in fact, engage in the

additional job-specific activities which the district court had

determined to be the genuine issue of material fact for trial on

the repose defense. The Seventh Circuit ignored those facts and

refused to give Grace the protections of like-situated parties - as

required by the Illinois Supreme Court’s pronouncements and as

due Grace under the jury’s verdict clearly showing Grace to be

a member of the intended protected class.

Instead, the court held that Grace was not entitled to the

immunity of the construction statute of repose because Grace’s

unconstitutional - nor did Grace. However, to narrowly construe it

to exclude the very parties the Supreme Court of Mlinois had

discussed as being necessarily included - i.e. manufacturers and

suppliers of building materials - renders the statute unconstitutional

in its application. See Yick Wo v. Hopkins, 118 U.S. 356, 373-74

(1886) (neutral law may violate equal protection guarantees if

applied in a discriminatory manner). No Illinois appellate court has

SO applied the statute.

construction-related activities did not elevate it to the status of

"designer or builder." [A-4-5]. In imposing such a test to be

protected under the repose statute, the court skirted - three

decades of judicial and legislative history which has rejected as

unconstitutional a trade-status standard for application of the

Illinois repose statute and which has construed the current

statute as necessarily protecting manufacturers and suppliers of

building materials. The Seventh Circuit further eroded the

protections of the Illinois statute of repose by concluding that

even if Grace was akin to a “designer or builder,” the statute

would not extend to product liability claims arising out of acts

"remote from building construction". [A-5]. Under its view, the

suppliers’ and manufacturers’ mandated right to equal protection

from liability, as explicitly directed by the Illinois Supreme

Court in Skinner v. Anderson, has now been eliminated by a

"remoteness" exception created without state precedent by the

federal court of appeals.

Finally, confronting the undisputed fact that Grace

designed, tested, manufactured and supplied the fireproofing for

this construction project, the court acknowledged: "[if] the

Monokote itself is an improvement it unquestionably was an

improvement designed and constructed by Grace, so Grace

would be home free." [A-5-6]. The court also recognized that

the Illinois Supreme Court "has defined improvement so broadly

in terms of a list of criteria ... as to bring the Monokote sprayed

onto the structural steel within the semantic, if not necessarily

intended, reach of the definition.” [A-6]. Yet, remarkably, the

Seventh Circuit flatly refused to apply the Illinois Supreme

Court’s already established criteria for "improvement" under the

Statute. Instead, the fireproofing is simply characterized as a

"spray" - a "standard product incorporated into the improvement,

or into the underlying building being improved" - which, the

court decided, does not qualify as an improvement. [A-6-7]. Its

characterization of the Monokote fireproofing as a mere "spray"

and, thus, not an improvement, is not only factually unsound and

not grounded in the record;’’ it is contrary to the well-settled

Illinois law that the repose statute encompasses components and

constituent elements of improvements to real property.’®

Had the court had employed, as it must, the criteria

established by the Illinois highest court (ie. permanency,

integral component, enhancement of value and of use), there

could be no doubt that the thousands of pounds of fireproofing

bonded to the internal building structures over two decades ago

'’ The Monokote fireproofing was applied by trained specialists

to permanently bond to steel surfaces throughout the commercial

Office buildings’ structural framework of girders, columns, and

decking. The building codes required fireproofing systems, and

building permits and occupancy certificates would not be issued

without receiving inspection of the fireproofing. The fireproofing

material was supplied to fill direct orders for each construction

project and Grace consulted with the architect and contractor on the

job site regarding installation and performance problems during

construction - as the jury explicitly found. Finally, all of State

Farm's claims arose from and depend on its allegations of property

damage and resulting building rehabilitation expenses due to the

Suggested defective and unsafe condition of the fireproofing as an

integral and extensive improvement to its real estate.

'* See St. Louis v. Rockwell Graphic Systems, 605 N.E.2d 555

(Ill. 1992) (relevant criteria for what constitutes an "improvement to

real property" include: whether meant to be permanent or

temporary, became integral component of overall system, value of

property increased, and use of property enhanced"); see also Kleist

v. Metrick Electric Co., 571 N.E.2d 819 (Ill. App. 1991) ("to

artificially extract each component from an improvement to real

property and view it in isolation would be an unrealistic and

impractical method of determining what is an improvement to real

property ... if a component is an essential or integral part of the

improvement to which it belongs, then it is itself an improvement to

real property").

during initial construction to meet code requirements qualifies

the fireproofing as an improvement. The Seventh Circuit’s

idiosyncratic analysis again renders the statute’s application

unconstitutional and the Illinois Supreme Court’s own analysis

of its broad and nondiscriminatory scope a nulllity in federal

diversity cases.

If the Seventh Circuit’s radical reconstruction of Illinois

law to avoid application of repose immunity to Grace in this

case is permitted to stand without Supreme Court scrutiny, then

the equal protection guarantees of the Federal Constitution, as

already enunciated and applied to the subject statute by the

highest court of Illinois, will have been rendered expendable to

the caprice of judicial legislation. Under the facts brought out

in fifty days of trial, if the repose protections of the Illinois

statute are denied this defendant, then Illinois statutory and

appellate court law has been set back twenty-five years and no

manufacturer or supplier can qualify for protection.

In short, the court’s adoption of trade-status tests that

only architects or builders can meet directly contradicts the

Illinois Supreme Court’s pronouncements that, to be consistent

with the guarantees of equal protection, the statute must (and

does) protect any defendant that engaged in any of the

enumerated activities associated with improving real property

and that constituent parts of an improvement are encompassed

within the statute’s immunity protection of all those whose

efforts have contributed to the improvement. The Seventh

Circuit’s unequal treatment denied Grace the equal statutory

immunity protections consistently afforded similarly-situated

parties and required by the forum state’s highest court to extend

to all those potentially subject to liability for allegedly defective

and unsafe real property improvements. This Opinion simply

reinstates, through federal appellate court construction, the

original trade-status-based statute declared unconstitutionally

discriminatory by the Illinois Supreme Court two decades ago."

Judicial legislation by federal courts should not be

encouraged in diversity matters but it must be prohibited where

the judicially created state law has already been rejected by the

forum state’s highest court. The Court should grant review to

fulfill the promises of equal protection and due process

guaranteed by the Constitution in the application in diversity

actions of state law. Absent review, courts of appeal may

continue to ignore state appellate court pronouncements on the

construction of their own state’s statutes so as to exclude classes

of parties which must be included to apply the statute consistent

with the Constitution.

CONCLUSION

The message of the Seventh Circuit’s Opinion in this

case sounds numerous Constitutional alarms. Federal district

and appellate courts should not be permitted to discard

unchallenged jury verdicts with which they disagree and re-

examine the same facts de novo. Jury trials mean little if the

Seventh Amendment so allows. Appellate courts should

consider the entire record, respect and harmonize the entire

verdict, and avoid speculative and one-sided excursions into

their own view of the rationale for the jury’s verdict. The

Seventh Amendment’s mandate so demands. In addition, the

federal appellate courts must follow the constructions and

Constitutional mandates of the forum state’s highest court when

'° Rather than base an entire statutory construction on

unsupported presumptions of the Illinois state legislature’s "evident

intent" and the intent of the Illinois Supreme Court’s parameters for

the sweep of the statute [A-4], the federal appellate court should

have certified the issue to the state’s highest court. Ill. Sup. Ct.

Rule 20; Seventh Circuit App. R. 52.

applying state statutes and must avoid presumptions of

legislative intent, especially where inconsistent with the state

appellate courts’ pronouncements. Otherwise, fashioning of

state legisiation by federal appellate courts exercising their —

reviewing authority threatens principles of sovereignty and due —

process - and, in this case, violates equal protection guarantees

of the Fourteenth Amendment.

Accordingly, Grace respectfully requests the Supreme

Court issue a Writ of Certiorari to review the critical

Constitutional issues raised by this case. Ultimately, Grace

seeks reversal of the Seventh Circuit with an order for entry of

judgment dismissing State Farm’s negligence claim under the

immunity of Illinois’ construction statute of repose consistent

with the jury’s verdict on that issue and with the Illinois

Supreme Court’s pronouncements of the Constitutionally-

mandated scope of the statute’s protections.

Respectfully submitted,

Dated: 8/12/94 Hugh V. Plunkett III

J. Michael Schwartz

Jeffrey J. Weill*

POPHAM, HAIK, SCHNOBRICH

& KAUFMAN, LTD.

3300 Piper Jaffray Tower

222 South Ninth Street

Minneapolis, Minnesota 55402

(612) 333-4800

Counsel for Petitioners

* Counsel of Record

INDEX TO APPENDIX

PAGE

Opinion of the United States Court

of Appeals for the Seventh Circuit

een BONNE i ee ae A-1-7

Order of the Seventh Circuit Denying

Petition for Rehearing With Suggestion

For Rehearing En Banc (June 16, 1994) .......... A-8

Opinion of the United States District

Court for the Central District of Illinois

on Motion for Judgment After Trial

We ee en cee ceiae A-9-39

Opinion of the United States District

Court for the Central District of Illinois

on Motion for Judgment as a Matter of Law

Pursuant to Fed. R. Civ. P. 50(a)(1)

I I it ero ccs cc cases A-40-52

Opinion of the United States District

Court for the Central District of

Illinois on Motion for Summary Judgment

Pursuant to Fed. R. Civ. P. 56(c)

Ge ee ees A-53-64

INDEX TO LODGING

Jury Verdict and Answers to Special

RI SA ea a L-1-7

Jury Instructions As Offered By

WUD is bovis nc cc vcccoccecue L-8-16

In the

UNITED STATES COURT OF APPEALS

For the Seventh Circuit

No. 93-3685

STATE FARM MUTUAL AUTOMOBILE

INSURANCE COMPANY,

Plaintiff-Appellee,

W.R. GRACE & COMPANY-CONN.,

Defendant-Appellant.

Appeal from the United States District Court

for the Central District of Illinois, Springfield Division.

No. 89-3022-Richard Mills, Judge.

ARGUED APRIL 5, 1994-DECIDED MAY 17, 1994

Before POSNER, Chief Judge, BAUER, Circuit Judge, and

ASPEN, District Judge.*

*Hon. Marvin E. Aspen of the Northern District of Illinois.

POSNER, Chief Judge. In 1963 W.R. Grace &

Company became the manufacturer of "Mono-Kote",

fireproofing material, a dry mixture of vermiculite, gypsum,

and asbestos packed and sold in 50-pound bags to

construction companies. At the construction site a contractor

or subcontractor would mix the Mono-Kote with water and

spray the mixture on structural steel to fireproof it. In the

early 1970s, State Farm Insurance Company built a corporate

head-quarters and two other buildings. The architect’s plans

specified "cementitious" fireproofing, of which Mono-Kote

was a prominent brand. The contractors bought and used

Mono-Kote for the fireproofing of the buildings. Ten years

later State Farm discovered large quantities of airborne

asbestos fibers in the three buildings and undertook a costly

program to remove the Mono-Kote. Later State Farm brought

this diversity tort action against Grace, charging that Grace

had failed to warn State Farm that Mono-Kote contained

asbestos and had not tested the product adequately before

sale. The very use of asbestos in Mono-Kote, State Farm

charged, was gratuitous because Grace had developed an

asbestos-free variant (Mono-Kote 4) that worked just as well

and cost only a little more. Grace had failed to sell State

Farm Mono-Kote 4 only because it was trying to unload its

inventory of the old Mono-Kote (Mono-Kote 3) and because

the price of Mono Kote 4 was limited by price controls.

(Eventually Grace did begin supplying Mono-Kote 4 for the

State Farm building projects.) The suit charged negligence

and breach of warranty. The district judge held the warranty

claim time barred but allowed the negligence claim to go to

the jury, the Supreme Court of Illinois having relaxed the

"economic loss" rule in asbestos cases. Board of Education

v. A, C & S, Inc., 546 N.E.2d 580, 585-90 (Ill. 1989). The

jury found that Grace had been negligent, and, after a

reduction in the verdict by reason of State Farm’s

A-2

contributory negligence, judgment was entered for $12.5

million.

The only issue raised on appeal is whether State

Farm’s suit is barred by the Illinois Design and Construction

Statute of Repose, which bars any tort suit "brought against

any person for any act or omission of such person in the

design, planning, supervision, observation or management of

construction, or construction of an improvement to real

property[,] after 10 years have elapsed from the time of such

act or omission." 735 IL CS 5113-214(b). If that is the

character of Grace’s act or omission, the suit is indeed barred.

The judge thought not, 834 F. Supp. 1052, 1056-61 (C.D. Ill.

1993), but propounded the following special interrogatory,

which the jury answered "Yes": "Did W.R. Grace provide

design, planning, supervision, observation or management of

construction services related to installation of fireproofing to

State Farm Mutual Automobile Insurance Company in

addition to supplying bags of Monokote 3 and Monokote 4

fireproofing?"

The special interrogatory is a red herring. (Why it

was asked eludes us.) It embellishes the Statute with the

expansive term "services" and brings in Grace’s activities

with regard to Mono-Kote 4, which is not the product on

which the suit is based. The few visits that employees of

Grace made to the building sites occurred, with one possible

exception, after the Mono-Kote 3, the product in suit, had

been sprayed on. Grace did not Supervise the spraying.

The original version of the statute was invalidated as

"special legislation,” mainly because it excluded from its

protection owners or occupiers of the property on which the

building was being built or the improvement being made.

Skinner v. Anderson, 231 N.E.2d 588 (Ill. 1967). So the

A-3

legislature amended the statute to knock out the exclusion.

The revised statute was upheld in People ex rel. Skinner v.

Hellmuth, Obata & Kassabaum, Inc., 500 N.E.2d 34 (IIL

1986), where the court remarked that the revised statute "does

not exclude persons based upon their status” but instead

protects anyone who engages in the enumerated activities.” Jd.

at 37 (emphasis in original). Grace fastens on this language,

arguing that the fact that it is a manufacturer rather than a

designer, builder, etc. does not exclude it from the statute’s

protection. That is true but the activities in which it engaged

in relation to the Mono-Kote 3 used in the construction of

State Farm’s three buildings are not reasonably interpreted as

design, supervision, observation, planning, etc. Grace did not

spray the structural steel in the buildings with a mixture of

Mono-Kote and water. It merely sold bags of Mono-Kote for

application by a contractor or subcontractor at the building

Site.

The bags came with instructions. Most products do.

If including instructions with the delivered product makes a

supplier a designer or builder, then virtually every supplier of

building materials is protected by the statute of repose despite

the legislature’s evident intent to circumscribe its protection

far more narrowly-in fact as narrowly as the Supreme Court

of Illinois would permit. Grace points us to a letter from a

subcontractor to the contractor for one of the buildings

requesting approval for the use of Mono-Kote as the material

for fireproofing the building. Enclosed are a "To Whom It

May Concern” letter from Grace certifying that the Mono-

Kote to be supplied to the subcontractor complies with

Underwriters’ Laboratories specifications and a printed

brochure describing Mono-Kote, explaining how it should be

installed, and reciting its Underwriters’ Laboratories ratings.

Grace argues that the subcontractor followed these directions

to a T and we may assume that it did, but we do not see how

A-4

that turned Grace into a designer or builder. Every product

used in the construction of a building has attributes that

constrain its use, hence "specifications" express or implied for

that use. If this is enough to make the supplier of the product

a delegate of the architect, furnishing design specifications

that otherwise the architect himself would have to furnish, the

Statute will embrace every supplier of building materials.

Surely that was not intended.

Even if all this is wrong and the printed brochure

made Grace a designer or builder of State Farm’s buildings,

Grace would still lose. Its negligence had nothing to do with

the installation or application of the Mono-Kote. So far as

appears, the directions for the installation of the product were

perfectly adequate and it could not have been installed better.

The problem was in the design of the Mono-Kote (to include

asbestos), the failure to test the product, and the failure to

warn about it. These negligent acts or omissions being

remote from building construction were not the sort of

activities that the statute was intended to shield from late-filed

products liability suits, as the California courts have held in

interpreting a materially identical statute. Baker v. Walker &

Walker, Inc., 184 Cal. Rptr. 245,251 (App. 1982). Grace

itself emphasizes that the statute protects activities rather than

particular persons. People v. Asbestospray Corp., 616 N.E.2d

652,657 (Ill. App. 1993); C.S. Johnson Co. v. Champaign

National Bank, 467 N.E.2d 363, 365 (Il. App. 1984). It

protects none of the activities that the jury could have found

to be tortious.

But our analysis is incomplete. We have been

focusing on the meaning of designing, planning, constructing,

etc. the building, but the statute also embraces the designing,

planning, constructing, etc. of improvements to the building.

If the Mono-Kote itself is an improvement it unquestionably

A-5

was an improvement designed and constructed by Grace, so

Grace would be home free. Of course calling a spray an

"improvement" would do violence to the ordinary meaning of —

the word when it is used in the context of construction, as

well as impart a breathtaking scope to the statute. An

extension to a kitchen is an improvement; the paint on the

extension is not. But the Supreme Court of Illinois, whose

interpretation of the statute’s meaning we are trying to

predict, has defined improvement so broadly in terms of a list

of criteria such as whether "the addition was meant to be

permanent or temporary" and "whether it became an integral

component of the overall system,” rare ner epg

Graphic Systems, Inc., 605 N.E.2d 555,556 (Ill. 1992) --

to bring the Mono-Kote sprayed onto the structural at te in

State Farm’s buildings within the semantic, if not necessarily

the intended, reach of the definition.

The St. Louis case involved a printing press, and the

court remanded for a determination whether, given the cost of

the press, its size, and the building modifications if any

required for its installation, it was an improvement. Our

decision in Hausman v. Monarch Machine Tool Co., 997 F.2d

351,354-55(7th Cir. 1993), interpreting the Illinois statute,

found that a 150-foot-long machine for annealing steel, the

installation of which had required raising the roof of the

factory, was an improvement to the factory building. Witham

v. Whiting Co., 975 F.2d 1342, 134~7 (7th Cir. 1992), reached

the same conclusion with regard to a stationary crane that had

been custom-designed to fit into the building where the

accident occurred. Each of these cases involved a palpable

improvement; it does not follow that a standard product

incorporated into the improvement, or into the underlying

building being improved, is also an improvement. Peopie v.

Asbestospray Comp., supra, 616 N.E.2d at 657-58, holds,

correctly in our view, that it is not. See also Hilliard v.

A -6

Lummus Co., 834 F.2d 1352, 1357(7th Cir. 1987); Corbally

v. W.R. Grace & Co., 993 F.2d 492(Sth Cir. 1993); Baker v.

Walker & Walker, Inc., supra, 184 Cal. Rptr. at 250; Sevilla

v. Steams-Roger, Inc., 161 Cal. Rptr. 700, 702 (App. 1980).

No case extends the concept of improvement to a spray.

The judgment for State Farm is

AFFIRMED.

UNITED STATES COURT OF APPEALS

For the Seventh Circuit

Chicago, Illinois 60604

June 16, 1994

Before

Hon. Richard A. Posner, Chief Circuit Judge

Hon. William J. Bauer, Circuit Judge

Hon. Marvin E. Aspen, District Judge*

STATE FARM MUTUAL ) Appeal from the United

AUTOMOBILE ) from the Central District

INSURANCE COMPANY, ) of Illinois,

Plaintiff-Appellee, )

)

v. ) Springfield Division

) No. 89-3022

W.R. GRACE & COMPANY - ) No. 93-3685

CONN., ) Richard Mills, Judge

)

Defendant-Appellant. )

)

ORDER

On May 31, 1994, defendant-appellant filed a petition

for rehearing with suggestion for rehearing en banc. All of the

judges on the original panel have voted to deny the petition,

and none of the active judges has requested a vote on the

suggestion for rehearing en banc. The petition is therefore

DENIED.

* Hon. Marvin E. Aspen of the Northern District of Illinois,

sitting by designation.

A-8

STATE FARM MUTUAL AUTOMOBILE

INSURANCE CO., Plaintiff,

W.R. GRACE & CO., Defendant

No. 89-3022.

United States District Court,

C.D. Illinois,

Springfield Division.

Oct. 26,1993.

OPINION

RICHARD MILLS, District Judge:

Asbestos property-damage litigation.

Fifty day trial conducted piecemeal from January to

August 1993.

End result: jury awards State Farm $17,889,632.47

damages, but also finds State Farm thirty percent negligent.

Now before the Court, W.R. Grace’s motions:

(1) to dismiss all claims as untimely filed under the

Illinois Construction Statute of Repose;

(2) for new trial;

(3) for judgment after trial.

A-9

I. Background

State Farm brought this action to recover the costs of

management, removal, and replacement of W.R. Grace’s

asbestos containing fireproofing, Monokote-3 (MK3), from

State Farm’s corporate headquarters in Bloomington, Illinois,

and its regional office buildings in Tempe, Arizona and

Austin, Texas. Construction of the three buildings took place

between 1970 and 1973. State Farm originally sought

damages based on the legal theories of strict liability,

negligence, fraudulent misrepresentation, and willful and

wanton misconduct. State Farm’s total prayer for

compensatory damages for the three buildings was

$34,494,483.23. State Farm also sought punitive damages

from W.R. Grace.

State Farm’s negligence Count averred that asbestos

was not necessary in MK3 and that when W.R. Grace was

forced to discontinue sales of MK3 in light of regulations

promulgated by the Environmental Protection Agency, it

replaced the asbestos with shredded paper fiber. State Farm

also alleges negligence because W.R. Grace never placed any

warnings on MR3, despite the fact that W.R. Grace had

knowledge of the harms of asbestos from: (a) its operation of

an asbestos-contaminated vermiculite mine and MR3

production facilities (where workers were getting sick); and

(b) its involvement in the late 1960’s with the public health

debate on asbestos. Despite this knowledge, State Farm

alleges that W.R. Grace continued to sell MK3 until the

federal ban in July 1973, even though W.R. Grace had

developed a non-asbestos Monokote in 1970 and was selling

it elsewhere.

W.R. Grace denied liability under any legal theory. In

addition, W.R. Grace raised the following affirmative

A- 10

defenses: statute of limitation, Illinois Statute of Repose, state

of the art, misuse, comparative negligence, and assumption of

the risk.

W.R. Grace took the position that the harms from in-

place asbestos are greatly overstated. Specifically, W.R.

Grace alleged that documents produced by State Farm

revealed that airborne asbestos fiber levels in their buildings

were well within and below any applicable government

standard, demonstrating that W.R. Grace’s fireproofing should

not be removed and could be managed with an effective

Operation and maintenance program.

Jurisdiction of this Court was invoked under 28 U.S.C.

§ 1332.

The trial was bifurcated. On May 11, 1993, the jury

returned a verdict on the liability phase of the trial. The jury

returned a verdict of guilty on State Farm’s Count of

negligence and not guilty on State Farm’s Counts of fraud,

Strict liability, and willful and wanton conduct. In addition,

the jury found that State Farm was 30 percent contributorily

negligent.

On August 26, 1993, the jury returned a verdict on the

damages phase of the trial. The jury assessed State Farm’s

damages to be $17,889,632.47.

After the verdict, W.R. Grace moved for judgment as

a matter of law claiming that this suit should be barred

because of the Illinois Statute of Repose and the fact that the

jury verdicts were inconsistent. W.R. Grace also seeks a new

trial for a host of procedural and substantive issues.

II. Motion for Judgment

as a Matter of Law

(A). Statute of Repose

The Illinois Construction Statute of Repose states that:

No action based upon tort, contract, or

otherwise may be brought against any person

for an act or omission of such person in the

design, planning, supervision, observation, or

management of construction, or construction of

an improvement to real property after 10 years

have elapsed from the time of such act or

omission.

Ill.Rev.Stat, ch. 110, ¥13-214(b).

Because State Farm’s buildings were constructed

between 1970 and 1972 and this suit was not brought until

1989, W.R. Grace claims that the ten-year repose limit in this

Statute has expired and the suit should be barred.

1. Procedural History

This marks the fifth time that the Court has considered

whether W.R. Grace is protected by this-statute. On January

3,1993, the Court denied W.R. Grace’s motion for summary

judgment on this issue. At that time, the uncontested

evidence present in the record supported the finding that W.R.

Grace was a "mere manufacturer” of asbestos materials. This

distinction was important, we noted, because of the dicta in

Witham v Whiting Corp., 975 F.2d 1342, 1346-47(7th

Cir.1992). Witham was the only Seventh Circuit opinion at

that time which addressed the issue.

A-12

ee ag

In Witham, the plaintiff sued under theories of strict

products liability and negligence when he was struck by a

girder attached to a 40-ton main hoist crane manufactured by

the defendant. The Court noted that "[t}here may be a

problem with applying the improvement to real property

Statute of repose to a manufacturer of a product used in the

improvement who was otherwise uninvolved with the

particular construction project." Jd. at 1346. In addition, the

court stated that the applicable legislative history did not

extend the statute to protect the manufacturer of products.'

However, this dicta was not dispositive-- by its own terms.”

Witham conceded that the Illinois Supreme Court must

eventually resolve the issue. However, despite the disclaimer,

the court found that defendant was not a mere manufacturer

(“It did not simply pluck the crane from its inventory and ship

it to Allied. Instead, it specially manufactured the crane for

Allied based on information Allied provided about its plant."

Id. at 1347.) and extended the statute of repose to protect the

defendant.

Despite the forecast in Witham, Illinois Supreme Court

did not resolve the issue. As a result, on January 15, 1993,

this Court denied W.R. Grace’s motion for interlocutory

' "We note that Section 13-214 is titled ‘Construction-Design

management and supervision,’ and the legislative history of that

section indicates that its purpose is to protect architects,

construction companies, engineers, and the like." (citing 81st

Ill.Gen. Assem., House Proceedings. May 25, 1979. at 34).

* Witham found that the Appellate Court of Ilinois rejected an

argument that a manufacturer does not fall within the class of

defendants intended to be protected by the statute of repose. St.

Louis v. Rockwell Graphic Systems, Inc., 220 Mi.App.3d 704, 710,

163 Til.Dec. 142, 148, 581 N.E.2d 93, 99 (1991).

A- 13

appeal. At issue was whether the Illinois Supreme Court

opinion in St. Louis v. Rockwell Graphic Systems, 153 1.2d

1, 178 Ill.Dec. 761, 605 N.E.2d 555 (1992), superseded the

analysis of Witham. With the question of whether

manufacturers are included within the statute of repose before

it, the Illinois Supreme Court remanded the case back to the

trial court for a determination of whether the equipment in

question (a printing press) was an improvement to real

property. As a result, this Court denied W.R. Grace’s motion

for interlocutory appeal because neither party submitted

evidence on the issue of whether the asbestos was an

improvement to property.

On April 22,1993, the Court denied W.R. Grace’s

motion for judgment as a matter of law. The court found that

the statute of repose issue was extremely close and would be

determined by the extent to which W.R. Grace’s involvement

met the statutory threshold of "design, planning, supervision

or observation." We noted that at least one federal court in

our circuit had excluded asbestos manufacturers from

protection under the statute of repose.’ Nevertheless, we

waited for a definitive ruling from the Seventh Circuit or the

Illinois Supreme Court.

Finally, on May 26, 1993, we denied W.R. Grace’s

motion for judgment as a matter of law after the liability

portion of the trial on this issue. We invited the parties to

address two issues in post-trial motions: (1) the legislative

history behind the statute of repose (was the statute intended

to protect only those who perform professional design and

construction activities?); and (2) statutory construction (does

the statute of repose protect only claims arising out of

> Heider v. W.A. Grace, 815 F.Supp. 1137 (N.D.I1.1993).

A- 14

"design, planning, supervision, or observation,” of the

defendant, or all claims?).

2. Legislative and Judicial History

[1] Contrary to Whitham’s suggestion that the

legislative history of the statute of repose protects a class of

defendants (architects, engineers, and the like) and excludes

another class (manufacturers of products), we find that the

statute of repose does not exclude persons based upon their

status. Rather, the pivotal issue is whether the defendant

engages in the enumerated activities (i.e., was the defendant

engaged in the "design, planning, supervision, observation, or

management of construction,” Ill.Rev.Stat. ch. 110, 13-214);

Hausman v. Monarch Machine Tool Co., 997 F.2d 351, 353-

54 (7th Cir. 1993) (""[mJere labels are not dispositive’ and

section 13-214 protects, on its face, anyone who engages in

the enumerated activities." (citations omitted)).

Originally, the statute of repose was drafted’to protect

only certain design professionals or contractors.‘ Ill.Rev.Stat.

ch. 83, § 24f (1965). This statute was struck down as

unconstitutional in 1967. Skinner v. Anderson, 38 I1l.2d 455,

231 N.E.2d 588 (1967). In Skinner, the court held that

section 29 of the Limitations Act (the predecessor to § 13-

214) was unconstitutional as special legislation because it

protected architects and contractors from untimely lawsuits,

but not others, such as owners, tenants or manufacturers of

materials used in construction:

The arbitrary quality of the statute clearly appears

when we consider the architects and contractors are

not the only persons whose negligence in the

construction of a building or other improvement may

cause damage to property or injury to persons. /f for

example, four years after a building is completed a

cornice should fall because the adhesive used was

* The original statute of repose stated:

No action to recover damages for any injury to property,

real or personal, or injury to the person, or for bodily injury

or wrongful death, arising out of the defective or unsafe

condition of an improvement to real estate, nor any action

for contribution or indemnity for damages sustained on

account of such injury, shall be brought against any person

performing or furnishing the design, planning, supervision

of construction, or construction of such improvement to

real property, unless such cause of action shall have

accrued within four years after the performance or

furnishing of such services and construction. This

limitation shall not be available to any owner, tenant or

person in actual possession and control of the improvement

at the time such cause of action accrues.

A - 16

TERE SERS ETE RT AES ety TTA Ae

i : ss

defective, the manufacturer of the adhesive is granted

no immunity. And so it is with all others who furnish

materials used in the constructing the improvement.

But if the cornice fell because of defective design or

construction for which an architect or contractor was

responsible, immunity is granted.

Id. at 38 Ill.2d at 459-60, 231 N.E.2d at 590-91. (Court’s

emphasis).

[2] W.R. Grace argues that the above quotation

demonstrates that the Illinois Supreme Court intended a

manufacturer of a basic construction material (adhesive) to be

protected under the statute of repose. The Court does not

agree. The Court’s conclusion is evident from the subsequent

history of the statute. In 1979, the Illinois legislature passed

a new statute of repose. The legislature eliminated the

exclusivity language of the original statute and expanded the

protection from untimely lawsuits to "any person, who, ten

years or later, is accused of wrongful acts or omissions

related to an improvement to real property.

This statute was again struck down by the Illinois

Appellate Court in People ex rel. Skinner v. Hellmuth, Obata

& Kassabaum, Inc., 135 Ill.App.3d 765, 90 Ill.Dec. 448, 482

N.E.2d 155 (1985) (Hellmuth I). After citing the language of

§ 13-214 which protects “design, planning, supervision,

observation or management of construction or construction of

an improvement to real property" (90 Ill. Dec. at 450, 482

N.E.2d at 157), the panel recognized "again, the material

provider whose product was defective causing injury or

damages has no immunity .. ." Jd. at 452-53, 482 N.E.2d at

159-60. The court believed that the exclusion of materialmen

(and owners of property) from protection was

unconstitutional.

A-17

However, on appeal, the Illinois Supreme Court held

that the legislative classification which concerned the

appellate panel (exclusion of owners and materialmen) was

not unconstitutional. People ex rel. Skinner v. Hellmuth,

Obata & Kassabaum, Inc., 114 M11.2d 252, 102 Ill.Dec. 412,

500 N.E.2d 34 (1986) (Hellmuth II). The court deferred to

the legislature which it said could constitutionally classify

"construction activities separately from other activities." Jd.

102 Ill.Dec. at 417, 500 N.E.2d at 38. More importantly for

our application, Hellmuth II stated that the statute of repose

did not include or exclude persons "based upon their status

(e.g. architect, contractor, materialmen)." Jd. 102 [ll.Dec. at

415, 500 N.E.2d at 37. Rather, the court ruled that the statute

of repose protects only those who engage in the enumerated

activities protected by the statute: design, planning,

supervision, observation or management of construction." In

this way, the court reasoned that a surety’s issuance of a bond

"cannot be deemed to be engaging in the ‘design, planning,

supervision, observation or management of construction, or

construction .. ." Jd. 102 Ill.Dec. at 417, 500 N.E.2d at 39.

The legislative history surrounding the statute of

repose also supports the interpretation that only those

"persons" engaged in the "enumerated" activities are

protected. In the legislative debates on the House floor,

Representative John Dunn stated that the legislation was

intended to protect those who exercise individual judgment

(with concomitant individual responsibility) during

construction projects:

This is a Bill that would provide a statute of

limitations for claims against architects, engineers,

consulting engineers, contractors and builders.

A- 18

The purpose of this Bill is to provide some relief for

professionals, who are trying to exercise their sound

judgment in the design and _ construction of

improvements to real property . . . so that they and

their families are not liable all their lives and beyond

lives and into the graves.

Eighty-First Illinois General Assembly, House Proceedings,

May 25, 1979 at 10, 32.

However, when asked if the statute of repose "would

apply to architects and contractors only," Mr. Dunn replied,

"No. It would apply to the architect, the engineer, the

contractor, anyone who was involved in the planning,

supervision, operation or management of construction or the

construction of an improvement to real property." Jd. at 31

(emphasis added). At no time did the legislative history

indicate that the statutory protections would specifically

include or exclude the manufacturers of building products.

3. Analysis

[3] Thus, to be protected by the statute of repose,

W.R. Grace must have participated in the "design, planning,

supervision, observation or management of construction, or

construction” and the construction that W.R. Grace took part

in must constitute an "improvement to real property."

Herriott v. Allied Signal, Inc., 998 F.2d 487, 489 (7th Cir.

1993) (citing Ill.Rev.Stat. ch. 110, | 13- 214(b)).

;

(a). "Enumerated activities"

The threshold level of construction-related activities

that satisfy the statute of repose is not yet clear in Illinois

law, or the law of our circuit. One Illinois Appellate Court

recently stated that:

To be included within the statute, a manufacturer must

perform some role related to the construction site

beyond provision of standard products generally

available to the public and not custom designed for

the project.

People v. Asbestospray Corporation, 247 Ill. App.3d 258, 186

Ill.Dec. 462, 467-68, 616 N.E.2d 652, 657-58 (1993).

However, Asbestospray does not assist this Court’s

analysis. In Asbestospray, the record was absent any

evidence that the defendant had a role in the construction of

plaintiff's building. Accordingly, the panel found that

defendant was not entitled to the protection of the statute of

repose. Therefore, without any evidence in the record, it is

impossible to determine what threshold of construction-related

activities would have satisfied the panel in Asbestospray.

[4] The Court finds the "activity analysis” formulated

by the Missouri Supreme Court in Blaske v. Smith &

Entzeroth, Inc., 821 S.W.2d 822 (Mo. 1991) (cited with

approval in Herriott v. Allied Signal, Inc., 998 F.2d 487 (7th

Cir.1993); Witham v. Whiting Corp., 975 F.2d 1342 (7th

Cir.1992); Herriott v. Allied Signal, Inc., 801 F.Supp. 52

(N.D.I11.1992)) is more helpful to this Court on this issue.

Using the "activity analysis," manufacturers of products are

protected by the statute of repose when they engage in

“substantial participation at the construction site in significant

A - 20

activities in installing or incorporating” their product into the

real property or, alternatively, if they custom make their

product away from the construction site specifically for a

particular project and then install this product at the site.

Allied Signal, 801 F.Supp. at 57-8 (quoting Blaske, 821

S.W.2d at 837-38) (Emphasis ours).

[5] The Court finds that W.R. Grace did not "custom

design" and "install" the Monokote, nor "substantially

participate" in the construction of State Farm’s buildings.

The evidence showed that the Monokote product was sold in

bags to the contractor. The chemical composition of a bag of

Monokote fireproofing did not change from job to job. The

contractor (not representatives of W.R. Grace) then mixed the

Monokote with water in the contractor’s own equipment, and

then applied the mixture to State Farm’s buildings--again

using the contractor’s own equipment. At no stage in the

construction process did W.R. Grace provide any equipment

to the contractors installing the Monokote.

In addition, W.R. Grace’s involvement in the

construction process was minimal. The total cost of the

Monokote product ($13,000) was minuscule when compared

to the $23 million dollar cost of the construction project.

W.R. Grace stated that it was their general policy to routinely

meet with contractors to discuss mixing instructions, to check

yields, and to assist in the proper application of the

fireproofing. These types of services were expected by the

customer. W.R. Grace also advised architects, based upon

W.R. Grace’s expertise in performing “blue-print takeoffs," on

how to determine the fireproofing required to obtain a desired

fire rating. However, W.R. Grace offered no evidence which

quantified the amount of these services which were provided

to State Farm. Indeed, no W.R. Grace representative ever

attended the weekly State Farm construction progress

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meetings. Mr. Egan, Manager of W.R. Grace’s Mid-West

Region, did visit the construction site (for one day) at State

Farm’s headquarters in Bloomington, Illinois to troubleshoot

a problem with the building’s curtain wall.* Aside from the

visit of Mr. Egan, there is no other evidence that a

representatIve of W.R. Grace assisted in the construction of

State Farm’s buildings.© | Overall, the headquarters

construction project was a 3 1/2 year job. At best, W.R.

Grace representatives visited the job on a few isolated

occasions (perhaps 4-5 days). This Court cannot find that

such minuscule activities amount to "substantial participation.”

(b). “Act or Omission"

[6] Second, this suit does not allege W.R. Grace was

negligent in any of the "enumerated" activities (the "design,

planning supervision, observation or management of

construction, or construction of an improvement to real

property...." Ill.Rev.Stat. ch. 110, { 13- 214) of the statute

of repose. Instead, State Farm claimed W.R. Grace was

negligent because: (1) asbestos was unnecessary in the

manufacture and sale of Monokote; (2) W.R. Grace put no

warning label on Monokote packaging or literature concerning

the health hazards of asbestos; and (3) W.R. Grace conducted

inadequate testing on the Monokote before sale. Because

State Farm claims that W.R. Grace was negligent in its

manufacturing-related activities, rather than its construction-

> It is undisputed that W.R. Grace representatives did not visit

the construction of the S.. + Farm regional headquarters buildings

in Tempe, Arizona and Austin, Texas.

° The visits of Mr. Bourke and Mr. Lyons (other agents of

W.R. Grace) were not related to the construction or application of

the Monokote.

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related activities, State Farm argues that W.R. Grace is

exempt from the statute of repose.

The Court agrees.

The proposition that manufacturers receive protection

from the statute of repose only if they are sued for on-site

construction activities appears in both Illinois judicial

precedent and the legislative history of the statute of repose.

In Delta Verwaltungs Raf Gesellschaft Mit Beschrankter

Hafung v. Kenneth Rowe, 1985 W.L. 2055 at *1 (N.D.II1. July

5, 1985), the plaintiff employed an architect to inspect a

building that plaintiff intended to buy. The architect’s

inspection was negligent, resulting in plaintiff incurring

additional expenses to fix damage that the architect missed.

The architect moved for summary judgment arguing that he

was protected by the statute of repose. Delta rejected this

view, holding that even though defendant was an architect,

plaintiff's cause of action did not arise out of the architect's

failure to perform any of the enumerated acts of the statute of

repose:

There is no indication in the legislative history that

Section 13-214(A) was to apply to all activities of the

architects. Rather, the legislative history indicates that

Section 13-214(A) applies only to those actions

involving the planning, supervision, operation or

management of construction, or construction of

improvements to real property, and not to actions such

as those described herein which are unrelated to

construction.

Id., McIntosh v. A. & M Insulation Co., 244 Ill.App.3d 247,

185 Ill.Dec. 69, 614 N.E.2d 203 (1993) (plaintiff with

asbestos was not allowed to proceed against defendants on the

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theory that defendants were sellers and distributors of asbestos

containing products); Asbestospray, 247 Ill.App.3d at 262,

616 N.E.2d at 657 ("Other courts have determined that

Section 13-214 of the Code would not apply to a landowner

where the action is founded solely on the defendant’s status

as landowner . . . but would apply to a landowner being sued

for his own act or omission in one of the specified

construction-related activities"); Hellmuth IT, 114 I11.2d at 256,

102 Ml.Dec. at 416, 500 N.E.3d at 38 (surety not protected by

statute of repose because plaintiff's claim arises out of breach

of contract).

In addition, as mentioned above, Representative Dunn,

a sponsor of the Illinois Statute of Repose Bill stated that the

bill was intended to protect only suits against construction-

related activities: "It [the bill] would apply to the architect,

the engineer, the contractor, anyone who is involved in the

planning supervision, operation or management of

construction, or the construction of improvements to real

property:" Transcript of House Debates, May 25, 1979, at 29-

32.

(c). Special Jury Question

[7] Following the liability portion of this trial, at the

request of W.R. Grace, the following special question was

submitted to the jury:

Did W.R. Grace provide design, planning, supervision,

observation or management of construction services

related to the installation of fireproofing to State Farm

Mutual Automobile Insurance Company in addition to

supplying bags of Monokote 3 and Monokote 4

fireproofing?

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The jury returned an answer of "YES."

Nevertheless, the Court finds that this special question

is without legal relevance. In St. Louis v. Rockwell Graphic

Systems, Inc., 153 T1.2d 1, 178 Ill.Dec. 761, 762, 605 N.E.2d

555, 556 (1992), the court ruled that what constitutes the term

"improvement" within the statute of repose is a question of

law. This decision is tantamount to ruling that the

interpretation of the statute of repose is a matter of law.

Accordingly, for the above reasons, the Court DENIES

W.R. Grace’s motion for judgment as a matter of law under

the Illinois Statute of Repose.

(B). Inconsistent Jury Verdicts

[8] W.R. Grace also argues that judgment after trial

is warranted because the jury verdict was inconsistent. First,

at the end of the liability phase of the trial, the jury returned

a partial verdict for State Farm on the issue of negligence. At

this time, the jury also found W.R. Grace not guilty on the

Strict products liability Count. W.R. Grace argues that

because State Farm’s cause of action focused solely, on the

manufacturing activities of W.R. Grace, the jury cannot find

negligence without also finding against W.R. Grace on strict

liability.

{9, 10] This argument is without merit. To begin

with, W.R. Grace specifically waived any objections to the

facial invalidity of the jury instructions at the jury instructions

conference.’ In addition, the jury could find that while the

7 Upon receiving the verdict in the liability phase, the

following exchange between the Court and counsel transpired:

The Court: [djo either of you see any conflict

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product was not unreasonably dangerous, the manufacturer’s

conduct failed to meet the appropriate standard of care. This

is because the negligence theory measures the reasonableness

of the manufacturer’s conduct, while strict liability measures

whether the product was defective. Davis v. FMC Corp.,

Food Processing Machinery Div., 771 F.2d 224, 230 (7th Cir.

1985) (citing Kossifos v. Louden Machinery Company, 22

Ill.App.3d 587, 591, 317 N.E.2d 749 (1974)).

[11] Second, W.R. Grace argues that the jury verdict

was inconsistent because the finding that State Farm was 30

percent contributorily negligent is inconsistent with the jury’s

finding that State Farm did not know about its cause of action

until 1986. In other words, W.R. Grace argues that the jury

must have found State Farm negligent at the time of sale and

therefore knew of its claim at the time of sale. W.R. Grace

offers no authority to support this position. Moreover, as

stated above, this argument was waived by counsel for W.R.

Grace at trial. In addition, the jury could well have found

State Farm’s negligence occurred much later than at the time

of sale of the fireproofing.

III. Motion for New Trial

(A). Standard for New Trial

W.R. Grace next moves for a new trial. The

discretion and authority to grant a new trial is delegated to

this Court and involves this Court determining whether the

"verdict is against the weight of the evidence, . . . the

damages are excessive, or . . . for other reasons, the trial was

between the verdict form and/or any of the special

question answers?

Mr. Plunkett: I do not see a direct conflict. Tr. 6941.

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not fair to the party moving." Selle v. Gibb, 567 F.Supp.

1173, 1183 (N.D.II. 1983) (quoting Montgomery Ward & Co.

v. Duncan, 311 U.S. 243, 251, 61 S.Ct 189, 194, 85 L.Ed.

147 (1940)). "Rule 59 gives the trial judge ample power to

prevent what he considers to be a nviscarriage of justice. It

is his right, and indeed his duty, to order a new trial if he

deems it in the interest of justice to do so." Juneau Square

Corp. v. First Wisconsin National Bank, 624 F.2d 798, 806-7

(7th Cir. 1980).

(B). Analysis

I. Testimony of Dr. Corn

and Dr. Craighead

[12] Throughout this trial, the Court sought to ensure

both parties were allowed full discovery into their opponent’s

expert witnesses. On February 5, 1993, the Court precluded

State Farm’s expert witness Dr. Anderson from testifying

about his mesothelioma study. The data for this Study was

based on confidential (and undiscoverable) health records

from the State of Wisconsin. The Court concluded that

though Dr. Anderson could testify about his opinions in other

matters, we would restrict his testimony concerning the

mesothelioma study.

W.R. Grace now objects to the application of this rule

to its Own experts Dr. Corn and Dr. Craighead. During the

depositions of Dr. Corn and Dr. Craighead, each was

specifically asked if they had formed any opinions as to State

Farm’s asbestos cross-contamination problem, State Farm’s

asbestos operation and maintenance program, the reports and

opinions of State Farm’s experts, and the reasonableness of

State Farm’s abatement costs. Each expert had no opinions

on any of these areas. Later, before trial, counsel for W.R.

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Grace gave information to these experts that allowed them to

formulate opinions on these areas. This strategy by W.R.

Grace effectively prevented State Farm from fully discovering

the opinions of W.R. Grace’s experts before trial. Therefore,

to preserve fairness of the discovery process, the Court

determined that Dr. Corn and Dr. Craighead would not be

allowed to testify into areas which they expressed no opinion

during their depositions.

2. Testimony of Kevin Boles and Gerald Karches

[13] On May 27,1993, W.R. Grace disclosed its

intention to call Kevin Boles and Gerald Karches as fact

witnesses during the damages phase of this trial. These

witnesses had personal knowledge of State Farm’s asbestos

removal costs, specifically, the alleged inflated fees of State

Farm’s asbestos consultant Hall-Kimbrell. Plaintiff moved to

exclude the adding of these witnesses to the witness list. On

July 30,1993, the Court, by written order, refused to add these

witnesses to the witness list.

The Court reconfirms its July 30, 1993 ruling.

To begin with, these witnesses were added four

months after the final pre-trial conference (held on January

19, 1993) in this case. At that conference both sides were

required to list their witnesses or be precluded from calling

them at trial. Eight days after the conference, State Farm

moved to add an additional witness who had just testified

against W.R. Grace in another case. The Court refused to

allow the addition of this witness citing: "The Court has no

desire to open the flood gates and allow this trial to be

prolonged ad nauseam. No additional witnesses will be

allowed after the final pretrial conference." Order, February

17, 1993, at p. 1. Throughout the trial, the Court enforced

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this even-handed approach to both parties-- no witness

testified who was not identified at the time of the final

pretrial conference.

Finally, W.R. Grace had at least constructive

knowledge of the J & S and Southwest Hazard problems (the

areas that these witnesses would have testified to at trial) long

before the final pre-trial conference in this case. Indeed,

W.R. Grace included some of the correspondence between

State Farm and J & S on their original exhibit list. Therefore,

W.R. Grace’s claim of prejudice or surprise about the J & S

and Southwest Hazard issue, or the claim that these witnesses

could not be identified at an earlier date, lacks merit.

3. American Insurance Association

[14] On April 28,1993, three months, after the pre-

trial cutoff, W.R. Grace sought to add witnesses and

documents pertaining to the American Insurance Association

(AIA). Many of these documents were available to W.R.

Grace before the final pre-trial conference in this case.

Nevertheless, W.R. Grace sought to add witnesses and

evidence purporting to show that State Farm had knowledge

about AIA published information regarding asbestos-

containing products when State Farm constructed its

buildings.

At that time, the Court deferred ruling on whether to

allow evidence of State Farm’s connection with the AIA.

The Court granted W.R. Grace leave to obtain additional

foundational evidence on this issue. However, the Court

warned W.R. Grace that it would strike all reference to the

AIA if W.R. Grace failed to link State Farm to the AIA.

Finally, on May 4, 1993, the Court instructed the jury

to disregard any information concerning the AIA. A jury

instruction was submitted to the jury during the liability

portion of the trial with the same guidance.

The Court adheres to its previous position because

W.R. Grace failed to establish any foundation or connection

between State Farm and the AIA. Indeed, State Farm

produced an affidavit from the Executive Vice President of

the AIA showing that State Farm was not-- nor had ever

been--a member of the AIA. Moreover, W.R. Grace had

knowledge of the AIA before final pre-trial conference. This

issue should have been investigated long before trial began-

instead of during the middle of the trial.

In addition, the jury instruction submitted on the AIA

was not prejudicial to W.R. Grace. The Court rejected a

more strongly worded instruction proposed by State Farm.

The instruction given to the jury merely required the jury to

disregard information concerning the AIA.

4. John Walsh

[15] During the damages phase of trial, W.R. Grace

introduced (over objection of State Farm) the testimony of its

expert witness John Walsh. Mr. Walsh’s testimony was

limited to projects which he had "personally bid." W.R.

Grace moves for a new trial on this limitation.

W.R. Grace’s position is frivolous. On June 4, 1993,

the Court denied State Farm’s motion in limine to exclude the

testimony of John P. Walsh during the damages phase of this

trial. It was a close call. State Farm had twice deposed Mr.

Walsh (October 28, 1992 and January 15, 1993). Before both

depositions, Mr. Walsh had been presented with State Farm’s

A - 30

"damage summary" indicating what State Farm would include

or exclude from its claim. Nevertheless, at both depositions,

Mr. Walsh was unable to form an opinion on State Farm’s

documents comprising its "damages summary." See e.g.

Walsh Depo. 10/28/92 at p. 90.

At trial, State Farm moved to exclude the testimony of

Mr. Walsh because now, after having been unprepared at two

depositions to offer opinions, he now had opinions as to State

Farm’s damages. The Court reluctantly denied State Farm’s

motion with the caveat that State Farm would be allowed full

_ discovery during trial of Mr. Walsh’s newly formed opinions.

State Farm then sought to depose Mr. Walsh’s former

employer Mr. Kynoch. At the behest of W.R. Grace’s motion

for a protective order, the Court limited State Farm’s

discovery of Mr. Kynoch to jobs that Mr. Walsh "bid

personally." Indeed, W.R. Grace’s counsel at the deposition

of Mr. Kynoch took the position that Mr. Walsh’s opinions

were based on jobs that Mr. Walsh "bid personally." Based

on this position, W.R. Grace’s counsel refused to produce any

documents on projects other than those which Mr. Walsh had

"bid personally." Accordingly, the Court limited Mr. Walsh’s

expert opinion at trial to jobs in which he "bid personally."

Now, contrary to its position at the deposition of Mr.

Kynoch, W.R. Grace claims it was prejudiced when the Court

precluded Mr. Walsh from testifying about his experience

from other jobs. The Court finds that no prejudice existed.

Though Mr. Walsh was supposed to be limited to jobs in

which he "bid personally," his testimony was much more

expansive and included his experience while working on other

A - 31

nie it

jobs.* More importantly, W.R. Grace cannot now claim

prejudice when the limitation on the scope of Mr. Walsh’s

testimony was created by: (1) its own motion for protective

order; (2) the position of W.R. Grace’s counsel during the

deposition of Mr. Kynoch; (3) Mr. Walsh’s lack of

preparation at his first two depositions.

5. Mr. Walsh’s Damage Notebooks

[16] During the damages phase of trial, State Farm

outlined its damages in a series of 15 three-ring notebooks.

These exhibits were compilations of invoices incurred by

State Farm as a result of abatement activities.

To rebut State Farm’s claim that abatement of asbestos

was necessary, W.R. Grace called Mr. Walsh as a damages

expert witness. As part of Mr. Walsh’s trial preparation, he

went through the 15 notebooks and marked which invoices he

thought were not related to the State Farm’s abatement

project. Mr. Walsh’s notebooks were identical to State

Farm’s with the exception that: (1) the invoices were printed

on pink paper (as opposed to white); (2) the invoices were

flagged with a red post-it sticker. Mr. Walsh’s series of

notebooks were marked as defense exhibits 1949.1-1949.15.

The Court ruled that these exhibits could be used as

demonstrative evidence only and would not be allowed to go

to the jury.

The Court properly treated these exhibits at trial. To

begin with, these exhibits were never timely listed by W.R.

Grace on any exhibit list as part of the pretrial order. Indeed,

Mr. Walsh admitted during cross-examination that his

* Tr. 8284, 8286, 8557, 8558, 8567, 8695, 8707, 8764.

A - 32

notebooks were not prepared until trial. Accordingly, these

notebooks violated the Court’s pre-trial order and were

properly excluded. Second, during the liability portion of the

trial, the Court prevented State Farm from introducing

evidence that was highlighted and evidence with tabs from

reaching the jury. The Court insisted that all highlighting be

removed from the evidence (if the highlighting did not

accompany the original production of the evidence to the

opposing party). The Court excluded the highlighted exhibits

of Mr. Walsh under the same principle.

1. Duty to Warn

[17] The Court charged the jury with the following

instruction:

If W.R. Grace knew or should have known at the time

it sold the MK3 to State Farm that its product was

hazardous, then W.R. Grace was under a continuing

duty to communicate such knowledge to State Farm.

(Emphasis ours).

W.R. Grace objects to this instruction citing Carrizales

v. Rheem Manufacturing Co., 226 Ill.App.3d 20, 168 Ill.Dec.

169, 179, 589 N.E.2d 569, 579 (1991), app. denied, 146 Ill.2d

623, 176 Ill.Dec. 794, 602 N.E.2d 448 (1992). However,

Carrizales actually supports the Court’s position:

Illinois law has been reluctant to impose a duty to

warn beyond the time when the product leaves the

manufacturer’s control unless the manufacturer knew

or should have known at that time that the product

was defective.

A - 33

Id. 168 Tll.Dec. at 179, 589 N.E.2d at 579 (Emphasis ours).

Here, the Court did not impose a duty to warn on the

manufacturer where a manufacturer learns of a hazard

subsequent to the time the product left its control. Rather,

consistent with Illinois law, the instruction imposed a duty on

the manufacturer to warn if the manufacturer had knowledge

of the defective product at the time of the sale.

2. Assumption of Risk

[18] Next, W.R. Grace frivolously argues that the

Court’s assumption of risk special interrogatory was in error.

This instruction properly instructed the jury to consider the

assumption of risk defense if it found against W.R. Grace on

the basis of strict liability or negligence. The special

interrogatory also told the jury only to consider the

assumption of risk defense with regard to strict liability in

tort.

Ironically, it was W.R. Grace who suggested the

necessity of this instruction. Originally, the Court submitted

its Own assumption of risk instruction because neither party

submitted this requisite instruction as part of their proposed

jury instructions.’ Then, at the behest of both parties, the

Court amended the assumption of risk instruction to the form

that was submitted to the jury:

* Indeed, W.R. Grace, then, and now, cites no authority for

their proposition. Now, in their brief for new trial, they neither cite

the specific jury instruction which they claim was in error (the

Court is left to guess which assumption of risk instruction W.R.

Grace refers to), nor is there a direct citation to the transcript.

A - 34

If you find that State Farm assumed the risks relating

to the hazards of the fireproofing in its building, enter

the percent of fault, if any, on Special Question No. 6.

Special Question No. 6 states:

As to Count I (Strict Liability), if you find Plaintiff,

State Farm assumed the risk, what percentage. if any,

was State Farm at fault?

[19] Counsel for W.R. Grace assisted in the crafting

of the language of these instructions which both parties

specifically agreed was proper. W.R. Grace cannot now

object to the validity of this instruction.

3. Choice of Repair

[20] State Farm’s position at trial was that it should

be able to choose the appropriate method to repair the

asbestos-contamination. State Farm removed much of the

asbestos in its buildings. Therefore, State Farm took the

position that damages should be largely based on removal

costs. W.R. Grace took the position that State Farm should

not have removed the asbestos, but instead should have

managed the asbestos with an operation and maintenance

program until demolition of the building. Hence, according

to W.R. Grace, the measure of damages should only be the

cost of the operation and maintenance program. However,

both choices require the eventual removal of asbestos.

Federal regulations (NESHAPS) require the removal of all

asbestos at the demolition of the building.

The Court submitted the following instruction to the

jury:

In this case, the proper measure of damages is the cost

of repair, which is the cost of removing the asbestos

fireproofing and its damage from State Farm’s

buildings and the costs associated therewith. Although

you have heard evidence that all of the asbestos has

not yet been removed, that does not change the

measure of damages. The future cost of removal of

the remaining asbestos should be calculated as well.

It is for you to decide when the fireproofing should

have been or should be removed.

The owner of damaged property has discretion to

decide how to fix the damage to the property. He

may choose the repair method which he deems to be

best suited to the restoration of its property to its pre-

damaged state....

This instruction was crafted from two parts. The

second paragraph of the instruction was proposed by State

Farm. The first paragraph was drafted by the Court over the

strenuous objection of State Farm at trial. W.R. Grace never

proposed any instruction on this issue. Nevertheless, W.R.

Grace now objects to the second paragraph of this instruction.

The Court’s instruction was proper. First, the

instruction is firmly grounded in Illinois law." Northwest

Commerce Bank v. Continental Data Forms, Inc., 233

Ill.App.3d 124, 174 Ill.Dec. 249, 251, 598 N.E.2d 446, 448

(1992); United States v. Peavey Barge Line, 590 F.Supp. 319,

323 (C.D.Il. 1984) aff'd 748 F.2d 395 (7th Cir.1984).

10 W.R. Grace offers no authority for their position that the

victim of a tort does not have a choice of repair.

A - 36

Second, W.R. Grace suffered no prejudice. The Court

gave W.R. Grace wide latitude to argue that a building owner

such as State Farm should have managed the asbestos in place

instead of promptly removing the fireproofing. Even though

W.R. Grace never offered a jury instruction, the Court added

the last sentence to the first paragraph of the instruction in

light of W.R. Grace’s position at trial. In any event, there is

nothing inconsistent with the two paragraphs. Paragraph two

addresses the method of repair (removal vs. operation and

maintenance). Paragraph one deals with the timing of the

repair (e.g. must the asbestos be removed now or at

demolition?). W.R. Grace took every opportunity to argue to

the jury that State Farm should have managed its asbestos in

place until some later date in the future when the building is

inevitably demolished. The jury simply disagreed.

4. Nominal Damages

{21} The Court also refused to submit a nominal

damage instruction to the jury. This refusal was appropriate.

First, the jury did not consider any evidence in the

damages phase of the trial that nominal damages are

appropriate. Unlike the one case W.R. Grace cites in support

of its proposition,” the position of W.R. Grace throughout the

trial had been that the measure of damages should be the

Operation and maintenance costs of containing the asbestos.

At a minimum, the expert witnesses for W.R. Grace testified

that this cost would run into the millions of dollars. Given

W.R. Grace’s position, and the fact that W.R. Grace never

submitted any evidence to the jury that damages would be

'! 'W.R. Grace cites no authority for its position in its motion

for new trial.

A - 37

nominal, the Court properly refused the nominal damages

instruction.

[22] Second, during the liability portion of the trial,

the jury found that: (1) State Farm’s properties were

damaged; and (2) that the negligence of W.R. Grace was a

proximate cause of the damage to State Farm’s properties.

Where property "damage" is proved, compensatory--not

nominal--damages are inferred. See Rosario v. Livaditis, 963

F.2d 1013, 1021(7th Cir. 1992) ("A finding of liability for

violatidns of RICO is conspicuously inconsistent with an

assessment of zero damages for those violations since the jury

was required to find that the class suffered an injury to

business or property before finding the debtor liable.");

Gavceus v. Potts, 808 F.2d 596, 97-99 (7th Cir. 1986)

("Nominal damages can be awarded when no actual or

substantial injury has been alleged or proved, since the law

infers some damage from the unlawful entry of land.... To

allow only nominal damages under the circumstances

presented because of lack of physical harm would permit the

trespasser to enjoy the benefits of his tort without fully

compensating Plaintiff for his loss."); Stirs, Inc. v. Chicago,

24 Ill.App.3d 118, 320 N.£.2d 216 (1974).

Third, the Court took judicial notice of the NESHAPS

regulations in our January 14, 1993 Order. In that Order, the

Court stated that the NESHAPS regulations would serve to

establish the guidelines for assessing damages. Because the

jury found W.R. Grace negligent in supplying asbestos, it

necessarily follows from NESHAPS that State Farm must

eventually remove the asbestos prior to demolition. This

removal cost will warrant more than a nominal damages

award.

Ergo, for the above reasons, W.R. Grace’s motion for

judgment after trial, and alternatively, motion for new trial is

DENIED. The Clerk is directed to tax costs in this case with

the entry of this order.

IN THE UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF ILLINOIS--SPRINGFIELD

DIVISION

STATE FARM MUTUAL AUTOMOBILE

INSURANCE CoO.,

Plaintiff,

W.R. GRACE & COMPANY,

Defendant.

ORDER

RICHARD MILLS, District Judge:

This cause is before the Court on Grace’s motion for

judgment as a matter of law pursuant to Fed. R. Civ. P. 50(a)

(1).

I. Standard of Review

Federal Rule of Civil Procedure 50 states that

judgment as a matter of law shall be granted when "a party

has been fully heard with respect to an issue and there is no

legally sufficient evidentiary basis for a reasonable jury to

have found for that party with respect to that issue." Fed. R.

Civ. P. 50(a) (1) (1992); Brooktree Corp. v. Advanced Micro

Devices, Inc., 977 F.2d 1555, 1569 (Fed. Cir. 1992). This

standard posits that a reasonable jury would have assessed the

A- 40

credibility of witnesses, considered and weighed the evidence

presented by both sides, and applied the law in accordan

with the court’s instructions. Id. at 1569. |

Il. Analysis

A. Statute of Repose (Il. Rev. Stat. ch. 110, q13-

214).

The Court finds this issue extremely close. On one

hand, the Court notes that recent decisions have excluded

asbestos manufacturers from protection under {13-214

because the asbestos manufacturer’s role in supplying asbestos

did not fall within any of the statute’s ({13-214) specifically

enumerated activities. Heider v. Grace, 1993 WL 75039

(N.D. Ill. March 3, 1993); Landry v. Keene Corp., 81! F.

Supp. 367, 371 (N.D. Ill. 1993). In addition, dicta from

Witham v. Whiting Corp., 975 F.2d 1342, 1347 (7th Cir.

1992), interpreted the legislative history of {13-214 to protect

only architects, construction companies, engineers, and the

like.

On the other hand, Grace’s "activities" and

involvement in the construction of the State Farm building

appears to be more substantial than the activities of a

supplier--perhaps distinguishing this situation from the cases

cited above. In addition, in i

Systems, Inc., 605 N.E.2d 555, 557 (1992), the Illinois

Supreme Court arguably did not recognize the distinction

between "mere manufacturers" and architects, engineers, etc.,

which was recognized in the dicta of Witham.

However, because neither the Illinois Supreme Court

nor the Seventh Circuit has set a clear threshold as to how

much involvement on the part of a manufacturer will

constitute "design, planning, supervision, or observation" (per

A- 41

413-214), the Court will take this motion under advisement at

this time--at least until the close of the liability portion of this

trial.

B. Fraudulent Concealment (Ill. Rev. Stat. ch.

110, 413-215)

Grace next argues that State Farm failed to establish

fraudulent concealment to toll the product liability statute of

repose. Ill. Rev. Stat. ch. 110, 413-215.

Paragraph 13-215 provides:

If a person liable to an action fraudulently

conceals the cause of such action from the

knowledge of the person entitled thereto, the

action may be commenced at any time within

5 years after the person entitled to bring the

same discovers that he or she has such cause

of action, and not afterwards.

To state a case for fraudulent concealment to toll the

Statute of repose, State Farm must prove that Grace made

affirmative acts or representations which were calculated to

prevent and did in fact prevent the discovery of the cause of

action. Landry, 811 F. Supp. at 372. Even if this standard is

met, paragraph 13-215 does not apply if State Farm would

have discovered the action with ordinary diligence. Id.

The question of whether Grace affirmatively concealed

State Farm’s cause of action is extremely close. Grace

presents an impressive list of evidence showing that State

Farm had knowledge that asbestos was being used in State

Farm’s buildings. First, the Sweet's Catalogue (Def. Ex. 357)

stated that MK-3 did contain minimal amounts of asbestos

"locked-in" during the mixing process. The Catalogue also

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advises that there are potential problems in the "changing

conditions involving fireproofing and its relation to

fireproofing and health, we recommend that you contact your"

Zonolite sales office for the latest data on these subjects."

This Catalogue was approved by State Farm’s architect and

became part of the permanent shop construction drawings in

State Farm’s record department. Tr. 3227:22-25.

Second, State Farm received notice of potential

asbestos problems from a 12/1/71 letter from State Farm’s

architect, Mr. Wesley, to Mr. Frankenberger, a State Farm

construction executive. Tr. 3168:4-3170:9. This letter

incorporated an earlier inter-office memorandum (of the

architect) which stated that the architect was "obtaining

supplementary information on asbestos problems." PI’s Ex.

1125. The memorandum also stated that the architects were

looking critically at the asbestos containing component of

MK-3 and that MK-3 was not approved for use in "New York

and Philadelphia and W.R. Grace [had] begun a limited

production (in 2 or 3 plants) of Monokote IV to meet the

criteria of [those] two cities and the Chicago area.” Id.

Third, Grace represents that two State Farm

executives, Mr. Solomon and Mr. Aldridge, were former

asbestos industry executives at UNARCO. Tr. 3216:22-

3217:17. Grace represents, though does not support this

representation with a citation to the transcript, that these

former asbestos industry executives were aware of the

pollution problem and health issues raised by the Sweet's

Catalogue and the "asbestos problem" referred to by architect

Wesley in his letter to State Farm.

Fourth, Grace argues that State Farm received

information about the dangers of asbestos from a variety of

other sources: (1) medical professionals (e.g. Dr. Frisch)

A-43

working at State Farm were aware of and had access to all

medical knowledge related to asbestos health questions in the

1960’s and 1970’s; (2) governmental regulations passed: by

the EPA, 36 Fed. Reg. 5931 (1971), and the City of Chicago

(Pl’s. Ex. G100.06), declared asbestos a hazardous air

pollutant and banned the spray application of asbestos-

containing materials; (3) State Farm’s own underwriting

policies had already assessed the risk of asbestos exposure

and asbestos-containing building materials. Tr. 4359; (4)

Information about asbestos risks from the American Insurance

Association from which State Farm was a subscriber. Def’s

Exhs. 922-24. The upshot of all these arguments is that State

Farm either knew about the risks of asbestos, or should have

known based on the information it actually received and

reviewed.

However, at this time, the Court finds that none of

Grace’s evidence prevents a jury from finding that Grace’s

affirmative misrepresentations prevented State Farm from

discovering its cause of action. The Sweet’s Catalogue states

that MK-3 contains "minimal" amounts of asbestos which are

"locked in."’ In fact, MK-3 may contain as much as 15%

asbestos. Further, the Court is troubled by the ambiguous

representation that the asbestos fibers are "locked-in." State

Farm presented two different types of evidence which could

be interpreted as disputing this fact. Settled Dust Sample

' Grace made this representation on numerous other occasions

as well: "[oJur research data on air erosion, cohesive and adhesive

bond, plus the many years of experience on fireproofing of

buildings with curtain walls add up to a problem free future with

respect to dusting.” Tr. 198; see also Tr. 3049-51; 3033-38. Grace

also told Ellerbe architects that the asbestos fibers were within

OSHA limits and "were locked into place and not a concern.”

Tr. 590-91; P. Ex. 1120.

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‘

reports show that numerous asbestos fibers have been released

from State Farm’s buildings? Tr. 421. In addition, State

Farm’s evidence of the Boyle test (conducted before the

Sweet’s Catalogue was compiled) also ostensibly found that

dusting and erosion did occur with Monokote under an air

erosion test. Tr. 185. Other tests and applications also

indicated that Monokote had problems with dusting.

Tr. 1007-09, 203-212.

State Farm also produced evidence that Grace misled

it about the composition of MK-3 and the availability of non-

asbestos fireproofing. Grace did not refute State Farm’s

evidence that Grace plant superintendents and sales personnel

were advised not to tell customers of the change in the

Monokote formula to non-asbestos containing materials.’

Tr. 164, 175, 178, 196, 472, 526, 606. Further, given the

context that MK-3 was more expensive than MK-4, (Tr. 162

and 164), and that an EPA ban would leave Grace with

unsold MK-4, (Tr. 179), the Court (based on Only this

evidence) rules that a reasonable jury could find that Grace

concealed the true nature of MK-3 (and hence, prevented

State Farm from discovering its cause of action).

Second, the 12/1/71 letter from Mr. Wesley to

Mr. Frankenberger is ambiguous. True, the letter raises the

issue of the potential dangers of MK-3 (the fact that it was

* Of course, this finding is disputed by Grace’s asbestos air

monitoring tests.

> The McDougall testimony contradicts this interpretation of

Grace’s misrepresentations. However, the Court found his

testimony on the subject was unclear. Further, Grace has not

refuted State Farm's interpretation of this misrepresentation in its

memorandum.

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banned on the east coast). Nevertheless, the letter refers to

the dangers of sprayed asbestos fireproofing (as opposed to

cementitious fireproofing MK-3). One of the attached

memorandum to the 12/1/71 letter (a 3/23/71 letter from

Grace’s Mr. Egan to Mr. Bechtolt at the Fire Insurance

Research and Actuarial Association) also distinguished MK-3

from "the sprayed mineral fiber types which have caused so

much controversy not only in the area of improper application

but in pollution.” Pl. Ex. 1120. A reasonable jury could

therefore find that this letter gave State Farm the impression

that there was either no asbestos in MK-3 or there was no

danger from any of the ingredients because of MK’s

“cementitious” nature (e.g. the asbestos fibers were “locked

in"). Tr. 3039-41.

However, the more difficult question posed by Grace’s

evidence is whether State Farm would have discovered the

action with ordinary diligence. Again, as the Court elucidated

in its 1/5/92 Order on Grace’s Summary Judgment Motion,

the asbestos cause of action arises when State Farm had

knowledge of asbestos contamination. Therefore, the relevant

inquiry for the Court is to determine if State Farm presented

evidence that it was diligent in its discovery of an asbestos

contamination problem--not that it had mere “knowledge of

asbestos."

At this time, the Court finds that State Farm has

submitted sufficient evidence to avoid judgment as a matter

of law on this issue. As mentioned above in the 12/1/71

letter from Mr. Wesley, State Farm made an active inquiry

into the potential MK-3 asbestos problem. Pl. Ex. 1125.

They were told by Mr. Wesley (who apparently, as State

Farm represents, based his information on a letter received

from Grace) that Monokote is less apt to cause asbestos

related problems than sprayed fiber asbestos. The evidence

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also showed that State Farm’s Mr. Solomon asked W.R.

Grace if State Farm’s buildings contained asbestos. PI.

Ex. 1282; Tr. 3044-47. In response, Grace representatives

informed State Farm that their fireproofing product is

formulated without asbestos (referring not to MK-3, but later

Monokote formulations). Thus, it is possible that State Farm

could be misled (albeit innocently) into believing there was

no asbestos contamination at that time. There is also

evidence that State Farm and Ellerbe relied upon Grace to

properly test and warn about the dangers of MK-3. Wesley

Dep. at 50.

Finally, Grace maintains that the State Farm buildings

are noi Contaminated with asbestos--even to this day. Def.

Dir. Verdict Motion at 11-12. Thus, it is difficult for Grace

to argue that this action should be dismissed because State

Farm should have brought this lawsuit earlier, or should have

been more diligent in discovering the asbestos contamination

problem, when the fact of whether or not State Farm’s

buildings are contaminated is disputed in both the legal and

scientific communities.

Gas trict Liabili f Re

The Illinois Strict Liability Statute of Repose bars any

product liability action based on the doctrine of strict liability

in tort which is not brought within 12 years from the date of

first sale of the product. Ill. Rev. Stat. ch. 110, 413-213(b).

Grace’s product was sold to State Farm in 1973 at the latest.

Jan. 5 Order at 7. Therefore, Grace argues, because there is

no evidence of fraudulent concealment sufficient to toll this

period, State Farm’s strict liability claim was time barred as

a matter of law no later than 1985. See Landry v. Keene, 811

F. Supp. 367, 372 (N.D. Ill. 1993).

However, unlike Landry, State Farm has alleged and

presented evidence by which a reasonable jury could find

fraudulent concealment. See supra discussion at B.

Therefore, the Court denies Grace’s directed verdict motion

on this point.

D. f Limitation

The Illinois statute of limitations applicable to actions

for the recovery of damages for injury done to property

requires that such actions be commenced within five years of

the accrual of the cause of action. Ill. Rev. Stat. ch. 110,

413-205. This Court has held that State Farm’s cause of

action accrued when State Farm had sufficient knowledge of

contamination from the asbestos that it knew was in the

building. January 5 Order at 3-4. As discussed above, Grace

argues that State Farm had knowledge of the presence of

asbestos in their buildings in 1971 and that the spraying of

MK-3 had been banned in New York, Philadelphia, and

Chicago. Pl’s Ex. 1125. Thus, Grace now charges that State

Farm had knowledge of asbestos contamination in the 1970’s

(and hence State Farm’s claim should be barred by 413-205).

The Court again finds Grace’s evidence inconclusive.

Plaintiff's Ex. 1125, as mentioned above, could be interpreted

as representing that MK-3 does not present a contamination

problem. (Again, Grace would not refute this statement).

Similarly, although Grace cites the testimony of Mr. Strong

(Tr. 1634-35) for the proposition that State Farm was actively

investigating asbestos in the early 1980’s, the answer State

Farm received from these inquiries was that asbestos

fireproofing was not used. Tr. 1635. Therefore, the Court

denies this portion of Grace’s directed verdict motion.

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E. — Fraud

The issues presented here were essentially the same as

outlined in the Court’s discussion of the fraudulent

concealment statute of repose. The Court finds that State

Farm’s evidence that asbestos fibers were not "locked in" to

Monokote and that Monokote had problems with respect to

dusting when it was sold is sufficient to form a jury question.

Again, the Court will likely re-examine this issue Closely at

the close of Defendant’s case.

F, Wilf Wanton Conduct

State Farm’s wilful and wanton misconduct claim must

be evaluated at the time that Grace manufactured and sold the

fireproofing incorporated in State Farm’s buildings. To

prevail under a willful and wanton misconduct theory, State

Farm must prove that Grace had actual or constructive

knowledge that its conduct, ie., the sale of asbestos

containing Monokote fireproofing to State Farm, presented a

high probability of serious physical harm to others. Bark v.

i i 593 N.E.2d 522, 530-31

(1992). Moreover, a recovery under willful and wanton

misconduct theory is appropriate Only in those instances

where a party’s actions are so Outrageous as to merit:

[T]he degree of moral blame attached to

intentional harm the defendant deliberately

inflicts a highly unreasonable risk of harm

upon the other in conscious disregard of it.

Id. at 530 (citation omitted). Here, Grace argues that State

Farm failed to prove that the MK-3 installed in State Farm’s

buildings presented a high probability of serious physical

harm to the occupants of the building. Indeed, Grace offers

A- 49

evidence which confirms that MK-3 did not contaminate the

air in State Farm’s buildings. Def’s Exs. 470, 541, 498, 499.

State Farm did not directly refute Grace’s argument.

In its response to Grace’s motion for judgment as a matter of

law, State Farm focused on Grace’s profit motive, government

lobbying efforts, and policy of not informing its customers

that it was supplying asbestos. Pl’s Response to Dir. Verd.

Motion at 35-40. State Farm did present some evidence of

the general harms of asbestos under the heading of Grace’s —

negligent conduct, see id. at 15-18 (Tr. 430-32, 475, 477, 479,

483, 487). But it is not clear if any of this evidence proves

that the asbestos in State Farm’s buildings is an unreasonably

dangerous condition necessary to support a wilful and wanton

conduct claim.

Therefore, State Farm will be granted leave to respond

to Grace’s specific objections until May 7, 1993. Failure to

respond to Grace’s objection may result in the Court deeming

this part of Grace’s motion confessed.

G. ict Liabilit

State Farm must prove three elements to recover for

Strict liability: (1) that the alleged injury resulted from a

condition of the product; (2) that the condition was an

unreasonably dangerous one; and (3) that the condition

existed when the product left the manufacturer’s control.

Broussard v. Houdaille Indus., Inc., 539 N.E.2d 360, 362

(1989). Again, State Farm did not directly respond to this

portion of Grace’s motion for a Directed Verdict.

Accordingly, State Farm will be granted leave to file a

response to Crace’s specific objections until] May 7, 1993.

Failure to respond to Grace’s objection may result in the

Court deeming the motion confessed.

A - 50

H. Negligence

Grace argues that State Farm has not presented

sufficient evidence that Grace was negligent because it sold

asbestos-containing products while knowing that asbestos was

hazardous to persons who used the buildings in which the

products were included. Specifically, Grace contends that no

evidence supports any breach of alleged duties on the part of

Grace. In addition, Grace argues that State Farm had

knowledge of asbestos and asbestos-containing products, as

well as the impact of that knowledge on its negligence claim.

In deciding whether a duty of reasonable care exists,

the Court must consider: (1) the foreseeability of the injury,

(2) the magnitude of the burden of guarding against the

injury, and (3) the consequences of placing that burden on the

defendant. Champs v. Chicago Housing Authority, 491

N.E.2d 20, 141 Ill. App. 3d 881 (1986).

State Farm provided evidence on all three elements.

First, evidence was produced that a non-asbestos substitute

was available (MK-4) at the time of the State Farm’s building

construction. Tr. 622-23. Second, evidence was produced

that the cost of switching to MK-4 would be minimal.

Tr. 1423-25, 622-23. Third, evidence was produced that the

harms of using asbestos fireproofing were foreseeable.

Tr. 430-32, 479.

Next, State Farm produced sufficient evidence that this

duty was breached. To begin with, State Farm produced

evidence that Grace failed to warn State Farm about the

dangers of asbestos. Tr. 144, 148, 149, 150. Evidence was

also submitted that Grace failed to adequately test Monokote,

(Tr. 540-41, 573, 578-79, 888-90), failed to instruct State

Farm in the safe use of Monokote, (Tr. 198, 3049-51), and

A- 51

failed to meet its continuing duty to warn State Farm of the

hazards of Monokote. Tr. 1731-32, 441, 2336-37.

Finally, State Farm produced sufficient evidence that

Grace’s Monokote is the proximate cause of damages suffered

by State Farm. Tr. 227-28, 1147-49, 1161-63, 477, 1258-59,

1178.

As a result, the Court finds that State Farm submitted

sufficient evidence to state a jury question on the issue of

negligence.

Ergo, Defendant’s oral motion for judgment as a

matter of law is DENIED. With respect to the construction

statute of repose, the court will take the matter under

advisement. The Court denies Defendant’s motion with

respect to the fraudulent concealment tolling statute,

negligence claim, fraud claim, strict liability statute of repose,

and property damage statute of limitation. The Court directs

Plaintiff to file a response with additional information by May

7, 1993, concerning the strict liability and wilful and wanton

conduct claims. Failure of Plaintiff to respond to the two

specific issues raised by the Defendant may result in the

Court deeming the two issues confessed.

ENTER: 22 April, 1993.

FOR THE COURT:

ls/__

Richard Mills

United States District Judge

STATE FARM MUTUAL AUTOMOBILE

INSURANCE CO., Plaintiff

v. W.R. GRACE & COMPANY, Defendant.

No. 89-3022.

United States District Court, C.D. Illinois,

Springfield Division

Dec. 30, 1992

ORDER

RICHARD MILLS, District Judge:

This cause is before the Court on Grace’s motion for

summary judgment pursuant to Fed.R.Civ.P.56(c). Because

the overwhelming majority of court decisions favor the

position of the State Farm, the Court denies this motion

except as to Count III of State Farm’s complaint (breach of

express watranties).

State Farm filed its original complaint on January 30,

1989. Pursuant to Grace’s motion to dismiss and State

Farm’s withdrawal of certain claims, State Farm filed an

amended complaint on December 12, 1991. In the amended

complaint, State Farm relies on five different theories of

recovery, including strict liability, negligence, breach of

express warranties, fraud and misrepresentation, and willful

and wanton misconduct. All claims seek compensation for

property damage allegedly caused by the incorporation of

asbestos-containing fireproofing in State Farm’s corporate

headquarters in Bloomington, Illinois, and its regional office

buildings in Austin, Texas, and Tempe, Arizona [hereinafter

"Buildings".

I. Standard for Summary Judgment

[1-3] Under Fed.R.Civ.P.56(c), summary judgment

shall be granted if the record shows that "there is no genuine

issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law." Black v. Henry

Pratt Co., 778 F.2d 1278, 1281 (7th Cir. 1985). The moving

party has the burden of providing proper documentary

evidence to show the absence of a genuine issue of material

fact. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548,

91 L.Ed.2d 265 (1986). A genuine issue of material fact

exists when "there is sufficient evidence favoring the

nonmoving party for a jury to return a verdict for that party."

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct.

2505, 2510, 91 L.Ed.2d 202 (1986). Unquestionably, in

determining whether a genuine issue of material fact exists,

the evidence is to be taken in the light most favorable to the

non-moving party. Adickes v. S.H. Kress & Co., 398 U.S.

144, 90 S.Ct. 1598 (1970). Once the moving party has met

its burden, the opposing party must come forward with

specific evidence, not mere allegations or denials of the

pleadings, which demonstrates that there is a genuine issue for

trial. Howland v. Kilquist, 833 F.2d 639 (7th Cir. 1987).

II. Analysis

Grace argues that State Farm’s claim is time barred

because of various Illinois statutes of limitation.

(a) Personal Injury Statute of Limitation

[4] | Grace has asserted correctly that Illinois statute

of limitations apply to State Farm’s claims. A federal court

Sitting in diversity follows the choice of law rules of the

forum state. Klaxon v. Stentor, 313 U.S. 487, 61 S.Ct. 1020,

A - 54

85 L.Ed. 1477 (1941). Grace first argues that Ill. Rev. Stat.,

ch. 110, | 13-205 (1989), establishes a five year limit on

actions "to recover damages for an injury done to property,

real or personal ...." This period began to run as soon as

the alleged asbestos product was installed in the buildings in

1970-73. Because State. Farm. did not file this action until

1989, Grace argues that the five year statute of limitation

precludes this action.

Defendant also argues that this limitation period

should not be tolled because of any "fraudulent concealment."

A statute of limitation may be tolled pursuant to Ill. Rev.

Stat., ch. 110, J 13-215 (1989), if a person liable for the

action fraudulently conceals the cause of the action.

However, in this case, the architect of the buildings knew the

composition of the fireproofing material that was installed in

the buildings as early as 1971. Because the architect was an

agent of State Farm, and because an agent’s knowledge is

imputed to its principal, Defendant argues that there is no

fraudulent concealment because State Farm had knowledge

through its architect of the alleged asbestos materials.

[5,6] Grace’s argument has not withstood judicial

scrutiny. First, as State Farm points out, the mere presence

or knowledge of asbestos is insufficient to trigger the personal

injury statute of limitation. Rather, the statute of limitation

did not begin to run until State Farm had sufficient

knowledge of asbestos contamination. AFM Insurance Co. v.

Board of Education, No. 90 C 6040, Slip op. at 37, 39, 1992

WL 409442 (N.D. Ill., October 5, 1992); Heider v. W.R.

Grace & Co., No. 89 C 9067, 1992 WL 189254 (N_D. Il.,

July 15, 1992); In re: School Asbestos Litigation, No. 83-

0268, Pre-Trial Order No. 268 (E.D. Pa. April 12, 1990);

Plaza 600 Corporation v. W.R. Grace & Co., No. C89-1562D

(W.D.Wa., June 19, 1991); County of San Diego v. W.R.

A - 55

Grace & Co., No. 208188 (Cal.Super.Ct., Riverside City, Jan.

31, 1992); Board of Education v. AC & S, Inc. 131 111.2d 428,

137 Ill.Dec. 635, 546 N.E.2d 580 (1989). Therefore,’ the

relevant factual inquiry for this Court is not whether State

Farm had knowledge that asbestos was being used, but

whether State Farm had knowledge that asbestos was being

released from the fireproofing material and that it presented

a hazard.

[7] Drawing all reasonable inferences from the

evidence presented by State Farm, as this Court must in this

summary judgment proceeding, the Court finds that State

Farin has met the requisite showing of a material fact to

preclude summary judgment. The statute of limitation statute

begins to run "when a party knows or reasonably should

know that an injury has occurred and that it was wrongfully

caused." Nolan v. Johns-Manville Asbestos, 85 [1l.2d 161, 52

Ill.Dec. 1, 5, 421 N.E.2d 864, 868 (1981). State Farm’s

evidence indicates that it was not until June of 1986 that State

Farm was aware of the presence of asbestos in the buildings.

(Pl’s exhibit 14, Strong Aff., at JJ 5-8) (Pl’s exhibit 15,

Aldridge Aff., at {{ 2-8). It was not until December of 1988

that dust sample analysis test resrlts were available which

indicated that the buildings were contaminated with an

asbestos. (Pl’s Exhibit 16). Therefore, the Court finds there

is sufficient evidence for a jury to find that State Farm acted

reasonably in filing its claim within the statute of limitations

period.

The Court makes this finding despite Grace’s evidence

that there was some awareness on the part of State Farm,

prior to 1986, of the presence of asbestos in the buildings.

Nevertheless, Defendant failed to show that State Farm was

aware of an asbestos contamination problem. For example,

even if Defendant’s architect was are of the usage of asbestos

A - 56

in the building (a fact disputed by State Farm), and if the

architect was an agent of State Farm (disputed by State Farm

and the holding of Blue Cross & Blue Shield v. W.R. Grace

& Co., 781 F. Supp. 420, 423-24 (D.S.C. 1991)), and an

agent's knowledge of the asbestos could be imputed to State

Farm (again disputed by State Farm and the holding of

Cheshire Medical Center v. W.R. Grace & Co., No. 85-516D,

1992 WL 544949 (D.N.H., Feb. 18, 1992)), this knowledge

still does not prove that State Farm was aware of any asbestos

contamination problem before 1986.

[8] Second, the Court finds that State Farm

submitted sufficient evidence to toll the five year statute of

limitations provision pursuant to Ill.Rev.Stat. ch. 110, 13-

215 (1989). For a plaintiff to avail itself of { 13-215, it must

Show that "defendant . . . made representations or performed

acts which were known by it to be false, with the intent to

deceive the plaintiff, and upon which plaintiff detrimentally

relied." Harvey v. Harris Trust & Savings Bank, 73

Ill. App.3d 280, 287, 29 Ill.Dec. 198, 391 N.E.2d 461 (1979).

Though this issue is close, the Court finds that a jury could

find for the State Farm on each of these elements of

fraudulent concealment.

State Farm’s evidence shows that in November of

1972, a Grace official visited State Farm’s buildings and

assured Plaintiff that it would have "a problem free future

with respect to dusting." (PI's Ex. 11). By this time,

however, Grace was aware that the fireproofing material used

had a chronic cracking problem (Pl’s Ex. 19), knew that the

product was being forced off the market in some areas of the

country because of health concerns (Pl’s Ex. 20), and had

developed a non-asbestos substitute product because of the

asbestos-containing product’s problems (P1’s Ex. 20). Perhaps

even more damaging is the evidence that Grace adopted a

A - 57

policy of intentionally withholding information about whether

their fireproofing products contained asbestos in 1972. (Pl’s

Ex. 8). Grace also sent information to State Farm in ‘1986

which was found by a Federal Court’ to be misleading or

incomplete at best. The Court finds that this evidence, taken

as a whole, presents a question of material fact from which a

jury could find fraudulent concealment.

(b). | Fraud and Misrepresentation

[9] | Grace also moves for summary judgment on

Count IV of Plaintiff's complaint labeled "Fraud and

Misrepresentation." Because the Court has already found that

material issues of fact exist concerning whether there was

"fraudulent concealment," the Court finds there is also a

factual dispute as to whether there was "Fraud and

Misrepresentation." Motion denied.

(c). Statute of Repose

Count I of State Farm’s amended complaint

seeks relief under the doctrine of strict liability in tort. Grace

moves for summary judgment on this Count pursuant to III.

Rev. Stat., ch. 110, 413-213 (1989). Paragraph 13-213 bars

any product liability action based on the doctrine of strict

liability in tort which is not brought within twelve years from

the date of first sale of the product. State Farm alleges that

the buildings were constructed between 1970 and 1973,

during which time Grace’s product was installed. Therefore,

because State Farm did not file its claim until 1989, Grace

' In re: School Asbestos Litigation, 115 F.R.D. 22, vacated,

842 F.2d 671 (3d Cir. 1988).

A - 58

argues that its claim is time-barred by {13-213 (the statute of

repose).

Grace also strenuously argues that {13-213 should not

be tolled for fraudulent concealment (Ill.Rev.Stat., ch. 110,

{13-215 (1989)) because 413-213 does not expressly provide

for the fraudulent concealment tolling exception. For

example, Ill.Rev.Stat., ch. 110, 413-214(e) (repose statute for —

construction) states that repose statute for construction does

not apply to cases arising out of fraudulent concealment. No

similar provision is found in {13-213. Thus, Grace argues that

the tolling statute for fraudulent concealment should not

supersede the repose statute for product liability ({13-213).

(10, 11] However, the only. Illinois Appellate

Court to consider the issue stated that the tolling statute for

fraudulent concealment does apply to product liability statute

of repose (or at least to {13-213(d)). Tate v. Beverly Chrysler

Plymouth, 182 Tll.App.3d 830, 131 Ill.Dec. 288, 291, 538

N.E.2d 663, 666 (1989). Therefore, regardless of the merits

of Grace’s argument, it is apparently not the current state of

Illinois law. As a result, because the Court finds State Farm

has submitted a sufficient case of fraudulent concealment, the

Court denies Grace’s motion for summary judgment on Count

I of State Farm’s complaint.

(e). Breach of Express Warranties

[12] In Count III, State Farm alleges that Grace

"expressly warrant[ed] ... that Monokote could be safely used

in buildings, would not dust, that said product would require

no attention or special precautions, and furthermore, said

Defendant expressly warranted said products as being safe

and suitable for use in the building in the future." State Farm

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then contends tiat Grace breached those warranties because

its representations were not true.

Grace argues that 92-725 of the Dlinois Uniform

Commercial Code provides that an action for breach of any

contract for sale must be commenced within four years after

the cause of action is accrued. Ill.Rev.Stat., ch. 26, 2-725(1).

Paragraph 2-725 further provides that a cause of action

accrues when the breach occurs, regardless of the agreed

parties’ lack of knowledge of the breach. Paragraph 2-725

also provides that a breach of warranty occurs when tender of

delivery is made. [ll.Rev.Stat., ch. 26, 2-725(2). Therefore,

Grace argues, that breach of warranty occurs at the time of

delivery of goods.

In the case of State Farm, Grace argues that tender of

the product took place at the latest in 1973. Accordingly, any

purported breach of warranty occurred at that time and State

Farm had four years thereafter to file its claim. Because State

Farm did not file this action until 1989, its claim for breach

of warranty is time-barred. The Court agrees.

State Farm argues that {2-725 does not preclude this

action because Grace "explicitly" extended the warranty to

future performance of the goods. Ill.Rev.Stat., ch. 26, (2-725.

However, this exception to 42-725 has been narrowly

construed. Jones & Laughlin Steel Corp. v. Johns-Manville

Sales, 626 F.2d 280, 290-91 (3d Cir.1980) (interpreting

Illinois law); Beckmire v. Ristokrat Clay Products Company,

36 Ill.App.3d 411, 412-13, 343 N.E.2d 530, 532 (1976) The

Court finds that the alleged express warranties contained in

Plaintiff's exhibits 11, 22, and 31 do not rise to the level of

an "explicit" extension of a Warranty as required by 42-725.

See Johns-Manville Sales, 626 F.2d at 291. Therefore, the

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Court grants Defendant summary judgment on Count III of

Plaintiffs complaint.

(f). Construction Statute of Repose

[13] Grace next argues that State Farm’s entire claim

is barred by the construction statute of repose (IIl.Rev.Stat.,

ch. 110, ¥13-214(b) (1989)). Paragraph 13-214(b) provides

that no action may be brought for any act or omission in "the

design, planning, supervision, observation or management of

- » . construction of an improvement to real property after 10

years have elapsed from such act or omission." Because

Grace allegedly designed and manufactured the asbestos fire-

proofing, Grace argues that it is entitled to protection under

413-214. See St. Louis v. Rockwell Graphic Systems, Inc.,

220 Ill. App.3d 704,707-10, 163 Ill.Dec. 142, 143-46, 581

N.E.2d 93, 94-97 (1991) (Paragraph 13-214 "expressly applies

to the design and planning of the construction of an

improvement to real property.").

However, in this case, Grace is a mere manufacturer

of asbestos materials. It did not participate in any way in the

construction of the buildings. The Court finds that the

Monokote asbestos product manufactured by Grace was

simply a "bag of minerals" which must be installed by a

contractor. (Pl’s Ex. 40, at p. 55). Grace did not furnish any

equipment for the application of the asbestos materials. (Pl’s

Ex, 42). Nor did Grace approve of or direct the application

of the asbestos materials by the contractor. (PI’s Ex. 4

This text is long and has been trimmed here. Open the source document for the complete record.

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