Garret Murai | California Construction Law Blog | February 9, 2016<\/p>\n
It was the Age of Aquarius.<\/p>\n
And everything<\/em> was changing. Politically, socially . . . andlegally<\/em>.<\/p>\n Through the 19th Century the doctrine of caveat emptor<\/em>, literally \u201clet the buyer beware,\u201d was the rule of law. Under the doctrine a buyer was expected to protect him or herself against both obvious and hidden defects in a product.<\/p>\n It wasn\u2019t until the late 1800s that U.S. courts began to impose\u00a0implied warranties \u2013 for merchantability and fitness for a particular purpose \u2013 to protect consumers. But\u00a0implied warranties were premised on their being a contract between the manufacturer and the user of a defective product, and by the mid 20th Century it was increasingly uncommon\u00a0for consumers to purchase products\u00a0directly from a manufacturer.<\/p>\n Then, in 1963, the California Supreme Court decided\u00a0Greenman v. Yuba Power Products, Inc.<\/em>\u00a0(1963) 59 Cal.2d 57, and California became one of the first states to recognize strict products liability, based not on contract but imposed by law. Under the strict products liability<\/a> doctrine a manufacturer could be held \u201cstrictly\u201d (i.e.<\/em>, without fault) liable for defects in its products even though the manufacturer didn\u2019t sell the product directly to the injured consumer.<\/p>\n Less than a\u00a0year later, in Vandermark v. Ford Motor Company<\/em> (1964) 61 Cal.2d 256, the California Supreme Court extended the strict liability doctrine to other parties involved in the distribution of products such as wholesalers and retailers \u2013 who, while not involved in the design or manufacture of products, were found liable for public policy reasons because they \u201cplaye[ed] a substantial part in insuring that the product was [safe] or . . . [were] in a position to exert pressure on the manufacturer to that end\u201d and were \u201cable to bear the cost of compensating for injuries\u201d \u2013 and\u00a0the\u00a0current \u201cstream-of-commerce\u201d approach to strict products liability<\/a> was born.<\/p>\n By 1969 strict products liability was applied to food manufacturers, car manufacturers, and manufacturers of other consumer items such as soap, hair dye and clothing, but it had yet to be applied to construction. But in then, in\u00a0Kriegler v. Eichler Homes, Inc. <\/em>(1969) 269 Cal.App.2d 224, the California Court of Appeals for the First District applied the strict products liability doctrine for the first time to sellers of mass-produced homes, finding no \u201cmeaningful distinctions between . . . [the] mass production and sale of homes and the production and sale of automobiles.\u201d<\/p>\n In the forty plus years since then, while strict products liability<\/a> has been applied to developers of mass produced homes and manufacturers of construction components such as windows and doors, it has yet to be applied\u00a0to be applied to contractors generally. That is until now.<\/p>\n In Hernandezcueva v. E.F. Brady Company, Inc.<\/em>, California Court of Appeals for the Second District, Case No. B251933 (December 22, 2015), the Court of Appeals has held for the first time that a contractor who installed drywall using a joint compound \u2013 both of which contained asbestos \u2013 which the contractor was not aware of \u2013 could be found liable for strict products liability.<\/p>\n In the early 1970s, Fluor Corporation (\u201cFluor\u201d) began construction of a complex of buildings in Irvine, California to house the engineering facilities of its southern California division. C.L. Peck was hired as the general contractor, and it in turn subcontracted with E.F. Brady Company, Inc. (\u201cE.F. Brady\u201d) to serve as the drywall subcontractor.<\/p>\n E.F. Brady\u2019s bid, like most bids, included both labor and material. E.F. Brady\u2019s profit arose primarily from the labor portion of its bid, although E.F. Brady included a \u201cone to two percent\u201d change for \u201cescalation of cost[s] of the material[s].\u201d<\/p>\n E.F. Brady\u2019s contract provided that E.F. Brady would select the drywall and materials in accordance with the general contractor\u2019s plans and specifications. The specifications called for asbestos-free fireproofing and insulation, but contained no analogous requirement for drywall material and taping mud.<\/p>\n The drywall installed by E.F. Brady\u00a0was manufactured by Kaiser Gypsum Company (\u201cKaiser\u201d). E.F. Brady also used a joint compound (also known as \u201ctaping mud\u201d) manufactured by Kaiser, but when the joint compound proved to be ineffective, E.F. Brady substituted a joint compound made by Hamilton Drywall Products (\u201cHamilton\u201d). Unknown to E.F. Brady, however, both the drywall manufactured by Kaiser and the taping mud manufactured by Hamilton contained asbestos<\/a>.<\/p>\n Joel Hernandezcueva worked at the Fluor complex from 1992 or 1993 to 1995. He worked as a janitor. During that time, certain areas of the complex were remodeled, and certain walls within the complex were continuously under repair. Hernandezcueva\u2019s duties included cleaning up drywall debris. While performing those duties he inhaled dust. In or about 2011, he was diagnosed with mesothelioma which his medical experts attributed to his exposure to asbestos<\/a>-containing products installed by E.F. Brady.<\/p>\n At trial, following Hernandezcueva\u2019s\u00a0case-in-chief, E.F. Brady successfully moved for nonsuit on Hernandezcueva\u2019s cause of action for strict products liability, and the jury later found that while Hernandezcueva had been exposed to asbestos from products installed by E.F. Brady that E.F. Brady was not negligent regarding that exposure.<\/p>\n Hernandezcueva appealed.<\/p>\n On appeal, the California Court of Appeals explained that under the \u201cstream-of-commerce\u201d theory of strict products liability the imposition of strict liability hinges on the extent to which a party was \u201cresponsible for placing products in the stream of commerce.\u201d \u00a0And, it is there, that there are two distinctions between: (1) parties whose primary objective or essence of the transaction is the sale\u00a0of a product, as in the case of retailers, in which case strict products liability applies; and (2) parties whose primary objective or essence of the transaction is a service in which the \u201cservice aspect predominates and any product sale is merely incidental to the provision of the service,\u201d in which case strict products liability does not apply.<\/p>\n Here, E.F. Brady\u2019s bid on the Fluor project \u2013 as was the case with all of its bids \u2013 involved both the furnishing of labor and materials. According to E.F. Brady\u2019s operations manager at the time, generally seventy-five percent (75%) of the amount of E.F Brady\u2019s\u00a0bids was allocated to labor and twenty-five percent (25%) was allocated to materials. Thus, a large portion of E.F. Brady\u2019s work included the furnishing of materials in the \u2018stream-of-commerce\u201d even if it\u2019s profits were not derived from the furnishing of those materials. For those same reasons, E.F. Brady was capable of bearing the costs of compensating for injuries due to the products they installed, and because of their sizable purchase of defective products, was in a position to exert pressure on the manufacturer, which it did by calling Kaiser to the project when Kaiser\u2019s joint compound failed to work.<\/p>\n In response to E.F. Brady\u2019s argument that it was an \u201cend user\u201d \u2013 not a \u201cseller\u201d of the products \u2013 because it paid sales tax on the products \u2013 the Court of Appeals explained that strict products liability turns on a party\u2019s \u201cparticipatory connection\u201d to the stream of commerce not a party\u2019s \u201cprecise legal relationship\u201d to members of that stream. Thus, explained the Court, other courts have held that a party that buys a defective product and leases it to others, or offers its use for payment, may be subject to strict liability.<\/p>\n The Court of Appeals also rejected E.F. Brady\u2019s argument that contractors should not be subject to strict liability when they provide products complying with an architect\u2019s specifications. Rather, the Court held, strict products liability dictates a \u201cfact-sensitive inquiry into [a] party\u2019s activities relating to the defective product, with due attention to the policies underlying the doctrine of strict liability.\u201d<\/p>\n And, finally, the Court of Appeals rejected E.F. Brady\u2019s argument that Hernandezcueva had an alternative source of compensation through the asbestos bankruptcy trust system established by manufacturers of asbestos-containing products, which under the collateral source rule, bars a defendant from shielding itself from liability for injuries by identifying a source of compensation that is wholly independent of the defendant.<\/p>\n The Hernandezcueva<\/em>\u00a0decision marks a new age\u00a0for\u00a0both subcontractors and generals alike. Not only is the\u00a0decision…<\/p>\n To finish reading this article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Enter Hernandezcueva v. E.F. Brady Company, Inc.<\/em><\/h2>\n
The Court of Appeals Decision<\/h2>\n
Conclusion<\/h2>\n