Asbestos Supplier’s Duty To Warn Is Not Automatically Discharged by Sophisticated Intermediary Doctrine.
In Webb v. Special Elec. Co. (2016) __ C.4th __, __ C.R.3d __, __ P.3d __, 2016 WL 2956882, defendant supplier brokered the sale of asbestos from a South African company to J-M Corporation, which manufactured many asbestos-containing products, including pipes. These pipes were sold, though a third party, to plaintiff’s employer, where plaintiff, who worked as a warehouseman and truck driver, handled the pipes as part of his job. After plaintiff was diagnosed with mesothelioma, he sued defendant and other entities under theories of negligence and strict liability. The jury returned a verdict finding defendant liable for negligence and failure to warn. However, the trial court, accepting defendant’s argument that it had no duty to warn a sophisticated purchaser like J-M about the health risks of asbestos, granted defendant’s motion for judgment notwithstanding the verdict and entered judgment in its favor. In reversing, the Court of Appeal held that substantial evidence demonstrated that defendant breached a duty to warn J-M and foreseeable downstream users like plaintiff about the risks of asbestos exposure. Held, judgment of the Court of Appeal affirmed.
(a) Sophisticated intermediary doctrine.
(1) The sophisticated intermediary doctrine, articulated in Rest.3d, Torts: Products Liability §2, Comment i, provides that a supplier may discharge its duty to warn end users about known or knowable risks in the use of its 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 that purchaser to convey appropriate warnings to downstream users who will encounter the product. Because the sophisticated intermediary doctrine is an affirmative defense, the supplier bears the burden of proving that it adequately warned the intermediary, or knew that the intermediary was aware or should have been aware of the specific hazard, and reasonably relied on the intermediary to transmit warnings. Like the sophisticated user defense (see 6 Summary (10th), Torts, §1174A), the sophisticated intermediary doctrine applies to failure to warn claims sounding in either strict liability or negligence. “We now formally adopt the sophisticated intermediary doctrine as it has been expressed in the Restatement.” (2016 WL 2956882, p. 9.)
(2) To establish a defense under the sophisticated intermediary doctrine, a product supplier must show not only that it warned or sold to a knowledgeable intermediary, but also that it actually and reasonably relied on the intermediary to convey warnings to end users. This inquiry will typically raise questions of fact for the jury to resolve unless critical facts establishing reasonableness are undisputed. Several factors are relevant in deciding whether it is reasonable for a supplier to rely on an intermediary to provide a warning: (a) the gravity of the risks posed by the product, (b) the likelihood that the intermediary will convey the information to the ultimate user, and (c) the feasibility and effectiveness of giving a warning directly to the user. (2016 WL 2956882, p. 11.)
(3) The gravity-of-risk-factor encompasses both the serious or trivial character of the harm that is possible and the likelihood that this harm will result. This factor focuses on the nature of the material supplied. For example, if the substance is extremely dangerous, the supplier may need to take additional steps, such as inquiring about the intermediary's warning practices, to ensure that warnings are communicated. The overarching question is the reasonableness of the supplier's conduct given the potential severity of the harm. (2016 WL 2956882, p. 11.)
(4) The second factor, the likelihood that the intermediary will convey the information to the ultimate user, focuses on the reliability of the intermediary. The supplier's knowledge about the intermediary's reliability is judged by an objective standard, based on what a reasonable supplier would have known under the circumstances. Relevant concerns include, for example, the intermediary's level of knowledge about the hazard, its reputation for carefulness or consideration, and its willingness and ability to communicate adequate warnings to end users. Economic motivations may also be important. For example, an intermediary manufacturer may have an incentive to withhold necessary information about a component material if warnings would make its product less attractive. (2016 WL 2956882, p 11.) Finally, it is also significant if, under the circumstances giving rise to the plaintiff's claim, the intermediary itself has a legal duty to warn end users about the particular hazard in question. (2016 WL 2956882, p 12.)
(5) The third factor explores whether it was feasible for the supplier to convey effective warnings directly to end users. Whereas the first two factors focus on the product and the intermediary, this factor focuses on what the supplier can realistically accomplish. For example, when raw materials are supplied in bulk for the manufacture of a finished product, it may be difficult for the supplier to convey warnings to the product's ultimate consumers, because bulk suppliers likely have no way to identify ultimate product users and no ready means to communicate with them. In other words, a raw material supplier's ability to warn end users may differ significantly from that of a product manufacturer or distributor that sells packaged commodities or deals directly with consumers and that, in addition to including cautionary labels or packaging inserts, may sometimes be able to affix a warning to the product itself. (2016 WL 2956882, p 12.)
(b) Application of doctrine.
(1) Here, the record does not establish as a matter of law that defendant discharged its duty to warn by reasonably relying on a sophisticated intermediary. Although the record clearly shows that J-M was aware of the risks of asbestos in general, no evidence established that it knew about the particularly acute risks posed by the crocidolite asbestos that defendant supplied. In fact, plaintiff presented evidence that at least one of defendant’s salespersons incorrectly told customers that crocidolite was safer than other types of asbestos fiber. If the jury credited this evidence, it may have found it unreasonable for defendant to believe that J-M was so sophisticated that a warning about the particular dangers of crocidolite asbestos was not called for. (2016 WL 2956882, p 13.)
(2) Moreover, the record does not establish as a matter of law that defendant actually relied on J-M to warn end users like plaintiff about the dangers of asbestos. Although direct proof of actual reliance may be difficult to obtain in the case of latent disease, actual reliance is an inference that the factfinder should be able to draw from circumstantial evidence about the parties' dealings. The trial record here is devoid of evidence supporting such an inference. In addition, the jury could have reasonably determined that any reliance on J-M would have been unjustified. Plaintiff presented testimony from a former J-M employee criticizing the company's handling of asbestos warnings and asserting that it had failed to warn its own workers about the hazards of asbestos during the relevant time period. (2016 WL 2956882, p 13.)
On supplier’s duty to warn generally, see 6 Summary (10th), Torts, §1171 et seq.
On sophisticated user defense, see 6 Summary (10th), Torts, §1174A.
On persons liable under products liability generally, see 6 Summary (10th), Torts, §1480 et seq.
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