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PEARL v. ALLIED CORP.

April 8, 1983

RAYMOND PEARL, WARREN BERG, BRUCE W. ECKE, RANDY STOLTZ, JAMES FISCHER, DR. JAMES M. MILLER, CHARLES DEAR and DOUGLAS E. WALLER, individually and as Class Representatives of all individuals who have suffered property damage as the result of the installation of urea formaldehyde foam insulation. RAYMOND PEARL, WARREN BERG, BRUCE W. ECKE, JAMES FISCHER and DR. JAMES M. MILLER, individually and as Class Representatives of all individuals who have suffered certain physical harm and who can be foreseeably expected to suffer future additional injuries as a result of exposure to urea formaldehyde foam insulation
v.
ALLIED CORPORATION, BORDEN, INC., CELANESE CORPORATION, CIBA-GEIGY CORPORATION, MONSANTO CO., GETTY REFINING & MARKETING CO., GEORGIA-PACIFIC CORPORATION, GAF CORPORATION, UNIVAR CORPORATION, INTERNATIONAL MINERALS & CHEMICALS CORPORATION, OCCIDENTAL CHEMICAL CORPORATION, REICHHOLD CHEMICALS, INC., BASF WYANDOTTE, WRIGHT CHEMICAL CO., TENNECO CHEMICALS, INC.



The opinion of the court was delivered by: TROUTMAN

 TROUTMAN, J.

 Defendants, moving to dismiss, *fn1" argue that Class I plaintiffs have suffered no tort injury and Class II plaintiffs have failed to properly allege that they suffer from any presently detectable physical injury.

 A brief procedural background is required to fully understand the position of the parties. This action was initially commenced in the Court of Common Pleas of Philadelphia County and, after the filing of an amended complaint, removed to this Court. Defendants then filed a motion to dismiss and, contemporaneously therewith, a motion to stay discovery pending our ruling on the former motion. Responding, plaintiffs moved to file a second amended complaint which, they assert, will moot out any perceived defect which may exist in the first amended complaint. Defendants, recognizing the liberal policy which favors amendment, argue that the proposed second amended complaint fails to cure the above described legal deficiencies. As such, our attention is directed to plaintiffs' proposed second amended complaint; our inquiry centers upon whether it states a claim upon which relief may be granted.

 The gist of defendants' motion, as it relates to the Class I plaintiffs, is simply stated: the expressed damages for the diminution in the quality and value of plaintiffs' homes and the various costs associated with retrofitting their residences, fail to state tort claims. Therefore, defendants assert, Class I plaintiffs may not properly seek tort damages for defendants' "willful, deliberate, outrageous and reckless" conduct.

 Plaintiffs, countering, argue that the damages which their homes sustained resulted from defendants' tortious conduct and that the motion should be denied.

 The parties, although bitterly contesting the application of relevant law, do not dispute that our inquiry as to Class I plaintiffs is guided by Pennsylvania Glass Sand v. Caterpillar Tractor Co., 652 F.2d 1165 (3d Cir. 1981). There, the Third Circuit predicted how the Pennsylvania courts would view a claim somewhat analogous to the one at bar. Plaintiff in Pennsylvania Glass Sand purchased from defendant a front-end loader which, after four years of operation, suddenly burst into flames. The operator quickly abandoned the machine but failed to turn off the motor. As a result, hydraulic fluid fueled the spreading fire which consumed the machine. Plaintiff sought recompense under ┬ž 402A of the Restatement of Torts (Second) and contended that the defendant's failure to equip the machine with automatic fire suppression equipment constituted a defect.

 The District Court concluded that plaintiff's claim amounted to one for economic loss for breach of contract and granted defendant's motion for summary judgment. Reversing, the Circuit explored the intersection between contract and tort law and instructed that the proper delineation thereof "must" be determined by "analyzing interrelated factors such as the nature of the defect, the type of risk and the manner in which the injury arose." Id. at 1173.

 Continuing, Pennsylvania Glass Sand observed that "on the other hand", contract theory is "ill-suited" to correct problems of hazardous products which "cause physical injury". As such, tort law obligates manufacturers to produce safe items "regardless of whether the ultimate impact of the hazard is on people, other property, or the product itself." 652 F.2d at 117-273.

 Defendants, asserting that the case at bar falls squarely within the "qualitative defect", breach of contract category, argue that Class I plaintiffs may not seek recovery in tort for either the "reduced value" of their homes or the costs associated with the "repair and replacement" of the insulation. Countering, plaintiffs urge that the product's proffered defect caused "physical injury" to "other property", their homes, and that tort recovery is permissible. *fn2" This latter argument follows Pennsylvania Glass Sand's observation that "economic loss frequently involves only damage to the defective product itself, with no attendant injury to persons or other property." 652 F.2d at 1171.

 An analysis of the "interrelated factors", as revealed by the proposed complaint with regard to the nature and type of risk involved and the manner in which the injury arose, convinces us that Class I plaintiffs have stated a colorable tort claim. Pennsylvania Glass Sand v. Caterpillar Tractor Co., 652 F.2d at 1173. See also, E.J. Stewart, Inc. v. Astken Products, Inc., 81-3192 (E.D. Pa. October 19, 1982).

 Specifically, the proposed amended complaint alleges that defendants placed formaldehyde into the stream of commerce with the knowledge that it would be mixed with other resins and sold as urea formaldehyde insulation. Plaintiffs also assert that once installed, the product emits carcinogenic toxic fumes which require its prompt removal. Plaintiffs also claim that defendants failed to exercise reasonable care in the sale of their product. Worse, defendants purportedly failed to warn plaintiffs of the dangerous ...


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