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PORT AUTH. OF NEW YORK & NEW JERSEY v. ARCADIAN CO

December 19, 1997

PORT AUTHORITY OF NEW YORK AND NEW JERSEY, Plaintiff,
v.
ARCADIAN CORPORATION, HYDRO AGRI NORTH AMERICA, INC., DYNO NOBEL INC. f/k/a IRECO INCORPORATED, ET AL., Defendants.



The opinion of the court was delivered by: BASSLER

 BASSLER, DISTRICT JUDGE:

 On February 26, 1993, terrorists detonated an explosive device (the "Device") under the World Trade Center, killing six, injuring many, and causing massive property damage. Alleging that the terrorists used Defendants' fertilizer products to construct the Device, Plaintiff Port Authority of New York and New Jersey, the owner of the World Trade Center, seeks to recover damages from Defendants on theories of negligence and products liability.

 Defendants now move to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). The Court's jurisdiction is pursuant to 28 U.S.C. § 1332 (diversity). For the following reasons, the Court grants Defendants' motion.

 I. BACKGROUND

 A. The Parties

 1. Plaintiff

 Plaintiff is a body corporate and politic created and regulated by agreement between New York and New Jersey. (Amended Complaint P 1.)

 2. Defendant Arcadian Corporation ("Arcadian")

 Arcadian is incorporated in Delaware, with its principal place of business in Memphis, Tennessee. (Id. P 2.) Plaintiff alleges that Arcadian is in the business of designing, manufacturing, marketing, distributing, and/or selling nitrogen chemicals and fertilizers, including urea prills *fn1" that are used as fertilizer. (Id.) Arcadian allegedly designed, manufactured, marketed, distributed, and/or sold the urea prills used by the terrorists to construct the Device. (Id. P 17.)

 3. Defendant Dyno Nobel, Inc., f/k/a Ireco, Inc. ("Dyno")

 Dyno's state of incorporation is Delaware and its principal place of business is Salt Lake City, Utah. (Id. P 4.) Plaintiff alleges that Dyno is engaged in the business of designing, manufacturing, marketing, distributing, and/or selling ammonium nitrate slurry and nitroglycerin-based explosives, as well as agricultural chemicals and fertilizers, including ammonium nitrate prills used as fertilizer. (Id.) Dyno allegedly designed, manufactured, marketed, distributed, and/or sold the ammonium nitrate allegedly used by the terrorists to construct the Device. (Id.)

 4. Defendant Hydro Agri North America, Inc. ("HANA")

 HANA is incorporated in the state of Florida, with its principal place of business in Tampa, Florida. (Id. P 5.) Plaintiff alleges that HANA's business is the designing, manufacturing, marketing, distributing, and/or selling of agricultural chemicals and fertilizers, including ammonium nitrate prills used as fertilizer. (Id.) Hanna allegedly manufactured, designed, marketed, distributed, and/or sold the ammonium nitrate used to construct the Device. (Id.)

 B. The Construction of the Device

 In order to construct the Device, the terrorists allegedly purchased Defendants' ammonium nitrate and urea. (Id. P 24, 27.) The terrorists purchased these products in New Jersey. (Id. P 18.) The terrorist allegedly purchased these products in prill form for use as fertilizer. (Id. PP 2, 4, 5, 23, 26.) Plaintiff alleges that Defendants' products were rendered explosive by mixing them with other substances such as fuel oil, "sensitizing substances," water, and/or nitric acid. (Id. PP 22, 23, 26.) The terrorists allegedly added fuel oil or other sensitizing substances to the ammonium nitrate, (id. P 23,) and nitric acid and water to the urea. (Id. P 26.) Notably, Plaintiff never alleges that Defendants' products were explosive in and of themselves without alteration or combination with these other substances.

 Plaintiff alleges that the assembly of the Device then occurred in New Jersey by New Jersey residents. (Id. PP 19-20.) After the required assembly, the terrorists allegedly transported the Device from New Jersey to the World Trade Center using a vehicle rented in New Jersey. (Id. P 21.)

 Plaintiff also alleges that Defendants knew or should have known of the explosive capability of their products. (Id. PP 25, 28). Plaintiff asserts that two infamous explosions occurred in the United States involving fertilizer. Fifty years ago, two ships, the S.S. Grandcamp and the S.S. High Flyer, are alleged to have been destroyed while docked at Texas City, Texas by explosions when fire spread to their ammonium nitrate cargoes. (Id. P 39.) In addition to the loss of the two ships, 468 people died in that tragic event. (Id.)

 The second incident occurring in this country was an alleged act of terrorism involving the use of a fertilizer bomb. In 1970, anti-Vietnam War protesters used ammonium nitrate to bomb the Mathematics Research Building at the University of Wisconsin. (Id. P 40.) The explosion caused deaths, injuries, and property damage.

 Plaintiff alleges that in response to the University of Wisconsin bombing, several states introduced legislation that would have required ammonium fertilizers to be desensitized to reduce if not eliminate the risk that the fertilizer could be turned into an explosive. (Id. P 41.) Plaintiff alleges that this legislation received substantial publicity without and within the fertilizer industry. (Id.) After alleged resistance by various fertilizer manufacturers, however, the legislation failed. (Id.)

 Plaintiff also alleges that the use of fertilizer as an explosive was not simply a national problem, but an international one. In the early 1970s, Plaintiff alleges that there were terrorist bombings in Northern Ireland and the Republic of Ireland involving devices made from fertilizer. (Id. P 46.) Additionally, explosives made from nitrated urea prills were allegedly used by terrorists in the Middle East, South America, and Pakistan. Finally, the Shining Path terrorists allegedly extensively used ammonium nitrate fertilizer prills in explosive charges. (Id. PP 54-56.)

 Plaintiff alleges that the widespread use of ammonium nitrate and urea in international terrorism has led to its regulation and ban elsewhere. (Id. PP 45, 46, 56.) As a result of the use of fertilizer bombs in Northern Ireland and the Republic of Ireland, those countries allegedly limited the amount of nitrate that could be used in fertilizer products and required the addition of calcium, sulfates, and other substances to reduce their detonability. (Id. P 46.) As a result of the Shining Path terrorists' activities, Peru is alleged to have imposed an outright ban on the sale of urea and ammonium nitrate fertilizers in 1992. (Id. P 56.) Moreover, in 1975, the European Community Council allegedly issued strict standards regarding detonation tests and for the formulation of all solid ammonium nitrate. (Id. P 45.) These standards could be adopted by member countries and were designed to ensure that there was an extremely low risk that fertilizer sold in countries adopting the standards could be used as an explosive. (Id.) As a result of these standards, France required that all ammonium nitrate fertilizers were tested by detonation. (Id.) Furthermore, four European nations banned the sale of certain ammonium nitrate fertilizers outright. (Id.)

 In addition to allegations of Defendants' knowledge of the explosive capabilities of their fertilizer products, Plaintiff also alleges that Defendants knew or should have known that they could have rendered their products less dangerous, but failed to do so. (Id. PP 33, 34, 49, 50.) In 1968, Samuel Porter obtained a patent for a process that rendered ammonium nitrate fertilizer non-detonable. (Id. P 36.) Porter's process involved the blending of 5-10% of diammonium phosphate, a high grade fertilizer, with ammonium nitrate. (Id.) This process could be accomplished at a nominal cost. (Id.) One of the stated purposes of the patented process was to deter the criminal use of ammonium nitrate fertilizer in bombs. (Id.) The patent owners made the process available to ammonium nitrate fertilizer manufacturers. (Id.) In 1985, the process entered the public domain and could have been used by any and all ammonium nitrate manufacturers, including Defendants, without having to pay licensing fees or royalties. Plaintiff also alleges that "the addition of phosphate or other additives to urea prills would [have] decreased or eliminated their use as explosive and energetic materials." (Id. P 52.)

 C. Plaintiff's Claims

 Plaintiff asserts three claims against Defendants. Count 1 states that Defendants "negligently failed to design, manufacture, market, distribute and/or sell [ammonium nitrate or urea prills] with a formulation" that would "either render them less detonable or non-detonable" or "decrease or eliminate their explosive properties." (Id. PP 34, 50.) Count II is based on a products liability design defect theory. (Id. Count II.) Specifically, Plaintiff alleges that Defendants' ammonium nitrate and urea prills were "unreasonably dangerous and defective when they left the respective control of each of the defendants" for basically the same reasons that Defendants were allegedly negligent. (Id. P 63, 66.) Finally, Count III asserts a failure to warn claim. In Plaintiff's own words, Defendants "failed to provide guidelines, instructions and/or warnings to their distributors, retailers, dealers or other suppliers to confirm that buyers in the general and unrestricted public market have legitimate and lawful purposes for use of defendants' products." ( Id. P 71.)

 II. DISCUSSION

 A. Standards Governing a Rule 12(b)(6) Motion

 In deciding a motion to dismiss for failure to state a claim, all allegations in the pleadings must be accepted as true and the plaintiff must be given the benefit of every favorable inference that can be drawn from those allegations. Conley v. Gibson, 355 U.S. 41, 48, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 83 n.1 (3d Cir. 1987). "All the rules require is a short and plain statement of the claim that gives the defendant fair notice of the plaintiff's claim and the grounds upon which it rests." Conley, 355 U.S. at 47.

 Rule 12(b)(6) does not countenance "dismissals based on a judge's disbelief of a complaint's factual allegations." Neitzke v. Williams, 490 U.S. 319, 326-27, 104 L. Ed. 2d 338, 109 S. Ct. 1827 (1989). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974), overruled, not in relevant part, by, Davis v. Scherer, 468 U.S. 183, 82 L. Ed. 2d 139, 104 S. Ct. 3012 (1984).

 Accepting the facts in the pleadings as true and giving them all reasonable inferences, a court must dismiss under Rule 12(b)(6) "if as a matter of law 'it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Neitzke, 490 U.S. at 326-27.

 B. Choice of Law

 Because the materiality of a factual dispute is determined by the applicable substantive law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242 at 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505, the Court must generally determine as a threshold matter whether New Jersey or New York law applies. A federal court sitting in diversity determines the substantive law to be applied by looking to the choice of law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941); Shields v. Consolidated Rail Corp., 810 F.2d 397 (3d Cir. 1987).

 Defendants claim that a dismissal of Plaintiff's claims is warranted under either New York or New Jersey law, the only two possible choices of law in light of the Amended Complaint. (Memorandum in Support of Defendants' Motion to Dismiss Plaintiff's Amended Complaint for Failure to State a Claim ("Moving Br.") at 6 n.3.) Defendants also suggest that since discovery has not begun it is premature to determine the applicable substantive law. (Defendants' Reply in Support of Motion to Dismiss Plaintiff's Amended Complaint for Failure to State a Claim ("Rep. Br.") at 2 n.1.) In contrast, Plaintiff argues that New Jersey law clearly governs this dispute. (Plaintiff's Brief in Opposition to the Defendants' Rule 12(b)(6) Motion to Dismiss the Complaint ("Opp. Br.") at 8-12.)

 Some New Jersey courts have held that they did not possess sufficient facts prior to discovery to make choice of law evaluations. See, e.g., D'Agostino v. Johnson & Johnson, Inc., 115 N.J. 491, 497, 559 A.2d 420 (1989); El-Maksoud v. El-Maksoud, 237 N.J. Super. 483, 491, 568 A.2d 140 (1989). Other courts, however, have performed detailed choice of law analyses on motions to dismiss made prior to discovery. See, e.g., Aetna Sur. & Cas. Co. v. Sacchetti, 956 F. Supp. 1163, 1168-71 (D.N.J. 1996) (Rule 12(b)(6) motion); Yglesias v. Simmons Market Research Bureau, 1991 U.S. Dist. LEXIS 4167, No. 90-3898 (CSF), 1991 WL 49744, at *2 (D.N.J. Apr. 1, 1991) (same); Mowrey v. Duriron Co., Inc., 260 N.J. Super. 402, 413-16, 616 A.2d 1300 (App. Div. 1992) (motion to dismiss on forum non conveniens grounds); see also Heavner v. Uniroyal, Inc., 63 N.J. 130, 135-141, 305 A.2d 412 (motion to dismiss due to expiration of the statute of limitations).

 Even if it is not premature to make a choice of law determination, this Court finds no need to do so because Plaintiff fails to state a claim under either New Jersey or New York law. See Rohm and Haas Co. v. Adco Chem. Co., 689 F.2d 424, 429 (3d Cir. 1982) ("[When] application of the law of each state to the facts . . . leads to the same outcome. . . . a 'false conflict' exists, [and] New Jersey conflicts of law rules permit the resolution of the case without a choice between the laws of the two states.") (citations omitted); Mueller by Mueller v. Parke Davis, 252 N.J. Super. 347, 355, 599 A.2d 950 (App. Div. 1991).

 C. Duty

 Defendants' first series of arguments assert that they owed no duty to prevent the alleged harms. Under both New Jersey and New York law, the existence of a duty is a question for the court. Strachan v. John F. Kennedy Mem'l Hosp., 109 N.J. 523, 538 A.2d 346 ("The question of whether a duty exists is a matter of law properly decided by the court . . . and is largely a question of fairness or policy."); Purdy v. Public Adm'r, 72 N.Y.2d 1, 526 N.E.2d 4, 6-7, 530 N.Y.S.2d 513 (N.Y. 1988) ("The question of whether a member or group of society owes a duty of care to reasonably avoid injury to another is of course a question of law for the courts.") (citations omitted). When no duty exists, dismissal for failure to state a claim is proper. See Griesenbeck v. Walker, 199 N.J. Super. 132, 141-42, 488 A.2d 1038 (App. Div. 1985); McCarthy v. Sturm, Ruger and Co., Inc., 916 F. Supp. 366, 369 (S.D.N.Y. 1996) (applying New York law), aff'd, 119 F.3d 148 (2d Cir. 1997).

 Under New Jersey products liability law, negligence is no longer viable as a separate claim for harm caused by a defective product. Oquendo v. Bettcher Indus., Inc., 939 F. Supp. 357, 361 (D.N.J. 1996) (citing N.J.S.A. § 2A:58C-1; Tirrell v. Navistar Int'l, Inc., 248 N.J. Super. 390, 398, 591 A.2d 643 (App. Div. 1991)). Because Plaintiff's negligence count is based on harm caused by Defendant's allegedly defective products, it falls squarely within New Jersey's Product Liability Act (the "Act"), codified at N.J.S.A. ...


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