Prudential Ins. Co. of America v. U.S. Gypsum Co.

359 F.3d 226

PRUDENTIAL INSURANCE COMPANY OF AMERICA; PIC Realty Corp; 745 Property INV v. UNITED STATES GYPSUM COMPANY; W.R. Grace & Company; The Celotex Corporation; United States Mineral Products Company; Keene Corporation; Pfizer, Inc.; Asbestospray Corporation; John Doe Companies, fictitious names for presently unidentified entities (District of New Jersey Civil No. 87-cv-4227)

The Prudential Insurance Company v. National Gypsum Company (District of New Jersey Civil No. 87-cv-4238)

The Prudential Insurance Company of America, PIC Realty Corporation and 745 Property Investments, Appellants.

No. 02-3837.

United States Court of Appeals, Third Circuit.

Argued September 3, 2003.

Filed: February 20, 2004.

Robert J. Gilson (Argued), Khaled J. Klele, Riker, Danzig, Scherer, Hyland & Perretti, Morristown, David Boies, Robin A. Henry, Boies, Schiller & Flexner, Armonk, for Appellants.

Kell M. Damsgaard, Kevin M. Donovan (Argued), Morgan, Lewis & Bockius, Philadelphia, for Appellee U.S. Gypsum Company.

Nancy McDonald, Meredith Walling, McElroy, Deutsch & Mulvaney, Morristown, for Appellee U.S. Mineral Products.

Before SLOVITER, NYGAARD and ROTH, Circuit Judges.

OPINION OF THE COURT

SLOVITER, Circuit Judge.

This case, one of the myriad asbestos cases that have besieged the courts, both state and federal, comes to us from a somewhat different perspective than most of the others. The plaintiffs, The Prudential Insurance Company of America, PIC Realty Corporation, and 745 Property Investments (hereinafter referred to collectively as "Prudential"), are owners and operators of buildings that installed asbestos-containing materials ("ACMs") that sued asbestos manufacturers to recover the costs of monitoring and remediation. Prudential appeals the District Court's orders granting the motions of defendants United States Gypsum Company ("Gypsum") and United States Mining Company ("USMP") for summary judgment dismissing Prudential's claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., as time-barred by the statute of limitations. Prudential argues that the District Court erred in applying the "injury discovery rule" in ascertaining when Prudential's RICO claims began to accrue, that there exist disputed issues of material fact concerning when Prudential knew or should have know of its injuries from ACMs in its properties, and that the statute of limitations for Prudential's RICO claims should have been tolled due to Gypsum's active and fraudulent concealment of known health risks associated with ACMs. We will affirm.

INTRODUCTION

Prudential, a mutual insurance company, is one of the largest life, property, and casualty insurance underwriters in the world. It is also one of the largest real estate investors in North America, maintaining from the 1970s to the early 1980s "the largest real estate portfolio of any company in the world" with hundreds of commercial real estate properties. App. at 394a. Gypsum and USMP previously engaged in the manufacturing and sale of ACMs. Their products were widely used as construction materials throughout the United States.

Prudential contends that ACMs manufactured by both Gypsum and USMP, as well as other defendants not parties to this appeal, were used for fireproofing in at least eighteen of its buildings.¹ According to Prudential, it only began to appreciate the hazards associated with in-place asbestos in 1984 at the time it had to remove ACMs from one of its properties, the Chubb Building in Short Hills, New Jersey, before its demolition. The ACMs were removed at a cost of approximately one million dollars. In late 1984, Prudential established a task force to investigate the in-place ACMs in its buildings. A Prudential internal survey conducted between 1985 and 1986 discovered that most of the buildings involved in this litigation, as well as approximately 100 others, contained ACMs. As a result, Prudential incurred hundreds of millions of dollars in expenses relating to the maintenance, testing, and removal of ACMs in its buildings. It has refused to acquire or mortgage properties containing ACMs since 1986.

Asbestos had, however, already become a well-known and important public health and safety issue in the United States prior to 1984. In April 1973, the Environmental Protection Agency ("EPA") established a National Emission Standard for Asbestos that severely restricted the manufacturing and application of ACMs, as well as the demolition of buildings containing fireproofing and insulation ACMs. 38 Fed. Reg. 8829 (Apr. 6, 1973). That standard regulated spray-on ACMs by limiting the concentration of asbestos in such ACMs and forbidding the visible emission of such materials to the outside air during the spraying process. Id. at 8830. It also required that "[a]ny owner or operator of a demolition operation who intends to demolish any institutional, commercial, or industrial building ... which contains any boiler, pipe, or lead-supporting structural member that is insulated or fireproofed with friable asbestos material" shall notify the EPA in advance of the demolition and follow proper ACM-removal procedures set forth in the standard. Id. at 8829. In 1975, the EPA expanded this National Emission Standard to cover renovation activities involving buildings containing ACMs by mandating specific notification and removal procedures for such in-place ACMs. 40 Fed.Reg. 48,299-,300 (Oct. 14 1975). It further amended the standard in 1978 to "extend coverage of the demolition and renovation provisions ... to all friable asbestos materials and extend the scope of the asbestos spraying provisions ... to all materials that contain more than 1 percent asbestos." 43 Fed.Reg. 28,372 (June 19, 1978).

The EPA also published various guidelines and regulations on asbestos management. One such EPA document from 1978, titled "Hazard Abatement from Sprayed Asbestos-Containing Materials in Buildings: A Guidance Document" that was prepared "for those involved in the use, removal, and disposal of asbestos materials in the building trades," states that "[a]sbestos in all its forms is considered a serious respiratory hazard.... Unlike most chemical carcinogens, the mineral fibers persist in the environment almost indefinitely and, when present in a building space open to its occupants, represent a continuous source of exposure." App. at 439a. The document also includes information on asbestos exposure, control, containment, and removal. App. at 480a-500a. The EPA issued a similar "guidance document" for ACMs in school buildings in 1979 and another report on controlling friable ACMs in buildings in March 1983. App. at 556a-626a, 736a-817a.

In addition, the Occupational Safety and Health Administration ("OSHA") had issued regulations on construction workers' exposure to asbestos. The imposition of these regulations and the increasing public debate regarding the health hazards of asbestos led various asbestos manufacturers, including Gypsum, to disseminate additional information regarding the use and risks of ACMs.

As Gypsum correctly states in its brief: In sum, before October 20, 1983, not only had the federal government (OSHA and EPA) issued mandatory regulations regarding asbestos products in buildings, but the EPA had issued numerous guidance documents detailing for building owners the widespread use of asbestos-containing building materials, the association between asbestos exposure and disease, the potential risks of in-place asbestos-containing products, methods to detect asbestos, and recommendations for proper actions to be taken once asbestos-containing products are identified.

Appellee Gypsum's Br. at 13.

There is record evidence that various Prudential employees were aware of the existence of ACMs in at least some of Prudential's properties prior to 1984. Arcadius E. Zielinski, an architect formerly in Prudential's Corporate Services and Building Department, testified in a deposition that he surveyed filed specifications of Prudential's home office buildings to determine whether they contained ACMs. He stated that he told the Vice President of Prudential's Corporate Services and Building Department in May 1981 that such ACMs would not be hazardous so long as they were firm and remained in-place. An affidavit of David Holick, Jr., the director of architecture at Prudential's real estate investment department in Houston from 1979 to 1984, states that ACMs were a topic discussed among some of Prudential's employees. In addition, asbestos testings were conducted, either by or at the request of local tenants, in several of Prudential's buildings prior to 1984. For example, in 1979 IBM Corporation, as tenant, tested the airborne asbestos levels at Prudential's Jacksonville, Florida building and forwarded the results to Prudential. App. at 48a-49a, 1053a-1151a. Asbestos testing was also conducted at least twice on the premises of Five Penn Center in Philadelphia prior to 1981. Similar asbestos testings were also conducted in several Prudential buildings not at issue in this litigation.

Prudential initiated this action on October 20, 1987 in the United States District Court for the District of New Jersey, asserting a claim under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq., and state claims under theories of absolute liability, strict liability, negligence, breach of express and implied warranties, fraud, misrepresentation, fraudulent concealment, unfair and deceptive trade practices, civil conspiracy, restitution, and indemnification. App. at 11,097a-11,153a. The District Court, upon motions by defendants, dismissed Prudential's CERCLA claim, but granted Prudential's motion for leave to amend its complaint to add claims under the RICO statute. Prudential Ins. Co. of Am. v. U.S. Gypsum Co., 711 F.Supp. 1244 (D.N.J.1989). Prudential's RICO claims thus form the sole basis for...