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PRUDENTIAL INS. CO. OF AMERICA v. UNITED STATES GY

July 21, 1993

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, et al., Plaintiffs
v.
UNITED STATES GYPSUM COMPANY et al., Defendants.



The opinion of the court was delivered by: HAROLD A. ACKERMAN

 Ackerman, D.J.

 As amended July 21, 1993

 This case involves a dispute between plaintiff, The Prudential Insurance Company of America ("Prudential"), and a number of companies that once manufactured products containing asbestos and installed these products in buildings built or subsequently bought by Prudential. Alleging that the hazards of the in-place asbestos caused it to suffer serious economic injury, Prudential claims that defendants violated the Racketeering Influenced and Corrupt Organizations Act, as well as a number of its common law rights.

 The defendant group is comprised of the following: W.R. Grace and Company-Conn. ("Grace"), United States Gypsum Company ("Gypsum"), The Celotex Corporation ("Celotex"), United States Mineral Products Company ("Mineral"), the Keene Corporation ("Keene"), Asbestospray Corporation ("Asbestospray") and National Gypsum Company ("National Gypsum"). After several years of discovery, the defendants have made a number of motions. *fn1"

 This opinion covers the following motions: (1) a motion by defendants Grace and U.S. Gypsum for summary judgment pursuant to Fed. R. Civ. P. 56(b) dismissing Prudential's RICO claims; (2) a motion by Prudential to strike the defenses of statute of limitations pursuant to the doctrine of discovery rule, fraudulent concealment and/or equitable estoppel.

 I will discuss these motions in turn.

 First, though, I will describe the factual background as plaintiff offers it. When appropriate, I mention instances where particular defendants have explicitly contested certain facts. While some defendants have not contested the facts for the purposes of these motions, many of plaintiff's factual allegations are in dispute.

 I. Factual Background

 Prudential is both a property and casualty insurance underwriter and one of the largest real estate investors within the insurance industry. Throughout the relevant time period, Prudential has been a major participant in the development, purchase and financing of major commercial properties throughout the United States. Defendants are or were various companies engaged in the sale of materials, including asbestos, to developers and builders.

 In 1965, defendants Asbestospray, Mineral, Keene and Celotex began the Sprayed Mineral Fiber Manufactuers Association ("SMFMA"). The SMFMA conducted its own testing program regarding exposure to asbestos during its application. Although the results showed health problems associated with asbestos application, the group declined to release the test results. Asbestospray denies any concealment and instead characterizes the SMFMA's work as follows: "[The SMFMA is] a trade association [established] to work on methods which would minimize the hazards of exposure and yet allow the continued use of sprayed-on asbestos-containing products." Asbestospray further contends that SMFMA asked its technical committee to recommend industry standards for applying sprayed products so as to prevent health hazards.

 At about the same time, defendants U.S. Gypsum, Celotex and National Gypsum organized as a group called the Gypsum Association. This group also allegedly performed tests and declined to disclose the results.

 Until the 1960s, the defendants provided no warning labels to those that came in contact with their asbestos products. Eventually, U.S. Mineral crafted a warning that read as follows, and which was placed only on the company's disposable product bags:

 
This product contains asbestos. Inhalation of asbestos dust over long periods may be harmful. If employees are exposed to dust during use in application, these employees should be equiped with adequate personal protective devices.

 The warning did not mention hazards associated with the release of asbestos fibers from in-place asbestos products, and no warnings of any kind appeared in advertisements. For economic reasons, U.S. Mineral Products kept asbestos in its products despite the fact that "it is possible to remove the dust." In 1968, Asbestospray, Keene and Celotex began using U.S. Mineral's warning. Beginning in 1968, defendant U.S. Gypsum began putting warnings on packages containing fireproofing, joint treatment, texture, and plaster products containing asbestos.

 Also in the late 1960's tests performed by defendants revealed the possibility of release of asbestos fiber during the application process. These test results were not released. Instead, certain defendants would assure fireproofing installers or building tenants that their asbestos was "locked in" and would not release, or that there is no health hazard associated with the proper spraying of asbestos on buildings. Moreover, through their lobbying activities, members of the asbestos industry assured the public that asbestos products in their buildings posed no health hazard. Yet a memorandum from Grace's manager of fireproofing products to senior management stated that "we have an ethical obligation to get [asbestos] out." An internal Keene memorandum stated:

 
Asbestos has long been known as a health hazard. It has been chiefly associated with asbestosis, a debilitating but not usually fatal lung disease. It was thought to threaten a relatively limited number of people who had heavy occupational or environmental exposure. Awareness of the danger led to a number of occupational safeguards which helped to reduce the known incidence of the disease.
 
More recent research has implicated asbestos as a cause, or important contributing factor in lung cancer. It has also shown that asbestos-related diseases can occur 20 to 40 years after exposure. There is some evidence that asbestos is involved in the death of people with little or no known exposure. Since asbestos use in the United States has increased at an extremely rapid rate in the last generation, there is a real possibility that asbestos may be a far more serious health hazard than previously suspected, and that it could affects far larger number of people.

 According to plaintiff, Grace, Keene and other defendants had by this time developed asbestos-free products yet continued to market their sprayed-on asbestos products.

 In 1973, the Environmental Protection Agency ("EPA") banned the spraying of certain asbestos-containing materials. Prudential contends that the EPA at this time did not address in-place asbestos-containing materials. In the wake of this decision, the asbestos industry attempted to persuade the public that in-place asbestos products were safe -- that asbestos fibers were locked in and would not release into the air.

 Some of the advertisements were taken out in Sweets Catalog, an industry publication distributed nationally that architects and subcontractors refer to in selecting products for buildings. In the publication, the defendants represented that their asbestos was locked in and would not release, that the asbestos-containing building materials were locked in, would not dust or flake and would last for the life of the building. Grace and U.S. Gypsum also advertised in Sweets.

 Plaintiffs also allege that the defendants contacted health experts and architects with the specific intent to persuade them that asbestos building products posed no danger since they were locked in.

 Prudential's evidence shows that while defendants were making these assurances, they knew them to be false. Defendants allegedly knew that asbestos fibers are continually released over time under normal conditions, and that there is a greater propensity for release if in-place asbestos is disturbed. Some defendants also were allegedly aware of particular problems with their products that belied their representations. For example, a test run by U.S. Mineral showed that its fireproofing product "failed completely" in that the product has "the least resistance to vibration and flaking." The results were never revealed.

 Prudential contends that Asbestospray, Keene, U.S. Mineral and Celotex also suppressed the results of tests showing that their products released asbestos fibers while in place in buildings. The SMFMA's tactics included the following: they contacted an expert, who studied the problem and concluded that "asbestos fibers are being added to the air stream passing over sprayed mineral fiber fireproofing." The SMFMA wrote to the expert that the conclusion was "unnecessarily damaging" and asked him to rewrite it. When the report was rewritten to include the same substantive charges, the defendants declined to disclose the results. Instead, the SMFMA cited to two other tests allegedly showing that their products posed no health hazard.

 Results of tests done on in-place asbestos by Grace were publicly disclosed, but the methodology and scope of the tests were limited. An internal Grace memorandum stated the following:

 
Our fireproofing position will become desperate if we are not successful with our upcoming fire test at UL. Accordingly, we should formalize our position with respect to asbestos and be prepared to both submit written comments and appear at the public hearings. We have air sampling data . . . reporting the concentrations of airborne asbestos during and after Monokote III spraying. What we do not have is any evidence that these concentrations are or are not hazardous.

 Still, Grace publicly proclaimed that its asbestos-materials were safe.

 In 1970, defendant National Gypsum, Jim Walter Corporation (the parent company of Celotex), together with other corporations, formed the Asbestos Information Association of North America (AIA/NA). The purpose of the group was "to propagandize asbestos' good points and attempt to explain away the hazards associated with that substance." U.S. Gypsum and Grace sent representatives to AIA/NA meetings.

 During the course of its operations, AIA/NA placed stories about asbestos in newspapers and magazines, distributed copies of medical papers and speeches purporting to represent the dangers of asbestos, and, all around, attempted to persuade the relevant public that asbestos was not the dangerous material that others said it was. Prudential contends that the work of the AIA/NA convinced people that in-place asbestos-containing products were safe.

 Finally, Prudential alleges the following acts by defendants:

 (1) Throughout the 1970s, when contacted by architects, installers, building owners and government agencies, defendants represented that in-place asbestos posed no health risk.

 (2) In 1979, Arcadius Zielinski, an employee of the Architects and Engineering Department for Prudential's home office properties, reviewed the state of Prudential's buildings to ensure that Prudential would comply with regulations if and when Prudential had to remove any asbestos. He wrote defendant U.S. Gypsum requesting technical information about a few specific products, but raising no questions about potential health problems. U.S. Gypsum responded with unsolicited assurances about its products:

 
The small amount of asbestos fibers is securely embedded in the mortar matrix and should not be released to the air unless it is forcefuly pulverized or abraded.
 
I am not aware of, nor can I conceive of, a hazardous exposure resulting from properly installed and maintained [asbestos containing material].

 (3) In 1983, the EPA mentioned in a guidance document called the Blue Book that commercial buildings should consider operations and maintenance programs to monitor in-place asbestos. In response to the Blue Book, in 1984, defendants Grace, U.S. Gypsum, National Gypsum, Celotex and Keene joined with AIA/NA's special counsel and formed the Safe Buildings Alliance ("SBA"), which focused on problems associated with asbestos in buildings. In 1984 the SBA published and distributed a booklet called "What You Should know About Asbestos in Buildings." The booklet stated that "experts believe that removing asbestos-containing materials in buildings often does more harm than good" and that proper removal does not pose a potential health hazard. In 1986, the booklet was revised and targeted towards building owners and managers.

 I. Standard for Summary Judgment

 Federal Rule of Civil Procedure 56 provides that summary judgment may be granted only if the pleadings, supporting papers, affidavits, and admissions on file, when viewed with all inferences in favor of the nonmoving party, demonstrate that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. See also Todaro v. Bowman, 872 F.2d 43, 46 (3d Cir. 1989); Chipollini v. Spencer Gifts, Inc., 814 F.2d 893, 896 (3d Cir.), cert. dism'd 483 U.S. 1052 (1987). Put differently, "summary judgment may be granted if the movant shows that there exists no genuine issues of material fact that would permit a reasonable jury to find for the nonmoving party." Miller v. Indiana Hospital, 843 F.2d 139, 143 (3d Cir.), cert. denied, 488 U.S. 870, 102 L. Ed. 2d 147, 109 S. Ct. 178 (1988). An issue is "genuine" if a reasonable jury could possibly hold in the nonmovant's favor with regard to that issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). A fact is material if it influences the outcome under the governing law. Id. at 248.

 Within the framework set out above, the moving party essentially bears two burdens: First, there is the burden of production, of making a prima facie showing that it is entitled to summary judgment. This may be done either by demonstrating there is no genuine issue of fact and that as a matter of law, the moving party must prevail or by demonstrating the nonmoving party has not shown facts relating to an essential element of the issue for which it bears the burden. Once either showing is made, this burden shifts to the nonmoving party who must demonstrate facts supporting each element for which it bears the burden as well as establish the existence of genuine issues of material fact. Second, there is the burden of persuasion. This burden is a stringent one which always remains with the moving party. If there remains any doubt as to whether a trial is necessary, summary judgment should not be granted. Celotex Corp. v. Catrett, 477 U.S. 317, 330-33, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Adickes v. ...


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