May 26, 2016
Products Litigation Alert
Author(s): Ross M. Petty
On May 23, 2016, the California Supreme Court issued its long-awaited decision in Webb v. Special Electric Co, Inc., formally adopting the sophisticated intermediary doctrine as a defense to failure to warn claims. The question confronted was the extent of a raw material supplier’s duty to warn ultimate users when the material is incorporated into a finished product by the intermediate purchaser. The court noted that the supplier of a hazardous raw material, in this instance asbestos fiber, has a general duty to warn all downstream users. However, when the raw material is incorporated into a finished product by the purchaser, the supplier’s duty to warn an end user can be discharged if the purchaser is adequately warned or sufficiently sophisticated, and the supplier reasonably relies on the purchaser to provide appropriate warnings to the ultimate user.
In Webb, plaintiff was employed as a warehouseman and truck driver by a pipe and plumbing supply company. Over a ten year period he handled and delivered cement pipe manufactured by Johns-Manville. He claimed that the pipe bore no warning label. He also claimed that he was never told to use respiratory protection when handling the product, or told that inhaling dust from the pipe could cause cancer. Decades later, plaintiff developed mesothelioma, an incurable cancer associated with asbestos exposure.
Defendant Special Electric brokered the sale of crocidolite asbestos fiber mined in South Africa to Johns-Manville. Special Electric arranged for the raw asbestos fiber to be shipped to the customer, but never took possession of it. Johns-Manville was the largest manufacturer of asbestos products in the United States. It manufactured a wide array of products, including cement pipe that incorporated crocidolite asbestos fiber in the finished product.
After being diagnosed with cancer, plaintiff sued Special Electric under several theories, including failure to warn claims based on strict liability and negligence. At trial the jury returned a verdict finding Special Electric liable under the failure to warn and negligence theories, but found no strict liability based on defective design. The jury assigned 18 percent fault to Special Electric, 49 percent to Johns-Manville and the remainder to other entities.
Ruling on post-trial motions filed by the defendant, the trial court concluded that Special Electric was not liable under the failure to warn claims, and judgment notwithstanding the verdict was entered in its favor. The court of appeal, in a split decision, reversed the judgment in favor of Special Electric, finding the post-trial motions procedurally defective and “substantial evidence demonstrated that Special Electric breached a duty to warn Johns-Manville and foreseeable downstream users like Webb about the risks of asbestos exposure.”[i] The California Supreme Court granted review.
The court framed the issue as “when a company supplies a hazardous raw material for use in a finished product, what is the scope of the supplier’s duty to warn ultimate users of the finished product about risks related to the raw material?”[ii] After reviewing similar defenses to failure to warn claims already recognized under California law, including the component part and bulk supplier doctrines, the court confirmed that the sophisticated intermediary doctrine was a viable affirmative defense to failure to warn claims based on strict liability and negligence. “Under this rule, a supplier may discharge its duty to warn end users about known or knowable risks in the use of the product if it: (1) provides adequate warnings to the product’s immediate purchaser, or sells to a sophisticated purchaser that it knows is aware or should be aware of the specific danger, and (2) reasonably relies on the purchaser to convey appropriate warnings to downstream users who will encounter the product.”[iii]
The court emphasized that the defendant supplier bears the burden of proving this defense, including the adequacy of the warning to the purchaser, or the sufficiency of the purchaser’s sophistication to obviate the need for any warning. Further, proof of the reasonableness of the supplier’s reliance on the intermediary to convey warnings to end users would “typically raise questions of fact for the jury to resolve unless critical facts establishing reasonableness are undisputed.”[iv] Whether a supplier reasonably relied on the purchaser to provide warnings to end users would depend on several factors, including the gravity of the risks posed by the raw material, the likelihood the purchaser would convey that information to the end user and the feasibility and effectiveness of a direct warning from the supplier to the end user.
Applying the doctrine to the facts of the Webb case, the court found that Special Electric had not proven that its duty to warn was discharged. The evidence was disputed that the supplier had provided adequate warnings to intermediate purchaser, Johns-Manville. Further, the court concluded that Special Electric failed to establish that Johns-Manville was sufficiently sophisticated. “Although the record clearly shows Johns-Manville was aware of the risks of asbestos in general, no evidence established it knew about the particularly acute risks posed by the crocidolite asbestos Special Electric supplied.”[v] Finally, the court found the evidentiary record insufficient to prove that Special Electric reasonably relied on Johns-Manville to warn end users about asbestos dangers.
The Webb decision provides some good news to companies that supply raw materials to finished product manufacturers and face failure to warn claims from end users of those products. The case formally adopts the sophisticated intermediary doctrine as an affirmative defense in California. However, the hurdles set by the California Supreme Court to prevail on the defense are substantial. A supplier must prove it provided adequate and precise warnings about the dangers associated with a raw material to the intermediate purchaser, or that the purchaser was already knowledgeable about the particular dangers. Further, the supplier must also prove it reasonably relied on the intermediate purchaser to convey appropriate warnings to the end users. Since almost any application of the sophisticated intermediary doctrine will likely involve disputed questions of fact on one or more of these elements, it will be a challenge for defendants to establish the defense at the summary judgment stage.
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