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City of Philadelphia and Philadelphia Housing Authority v. Lead Industries Association Inc.

argued: January 21, 1993.

CITY OF PHILADELPHIA AND PHILADELPHIA HOUSING AUTHORITY
v.
LEAD INDUSTRIES ASSOCIATION, INC. NL INDUSTRIES, INC., ATLANTIC RICHFIELD COMPANY, SHERWIN-WILLIAMS COMPANY, SCM CORPORATION, GLIDDEN COMPANY AND FULLER-O'BRIEN COMPANY PHILADELPHIA HOUSING AUTHORITY, APPELLANT (APPELLANT IN NO. 92-1419) CITY OF PHILADELPHIA, APPELLANT (APPELLANT IN NO. 92-1420) ATLANTIC RICHFIELD COMPANY, NL INDUSTRIES, INC., THE SHERWIN-WILLIAMS COMPANY, THE GLIDDEN COMPANY, SCM CORPORATION, LEAD INDUSTRIES ASSOCIATION, INC. AND FULLER-O'BRIEN CORPORATION, APPELLANTS (APPELLANTS IN NO. 92-1463)



On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civ. No. 90-07064).

Before: Stapleton and Cowen, Circuit Judges and Barry, District Judge*fn*

Author: Cowen

Opinion OF THE COURT

Cowen, Circuit Judge.

The City of Philadelphia ("City") and the Philadelphia Housing Authority ("PHA") brought this action against manufacturers of lead pigment and their trade association to recover the costs of abating hazardous lead-based paint which plaintiffs must incur pursuant to newly promulgated federal regulations. Plaintiffs allege that for decades defendants knew their product, lead pigment, caused lead poisoning in children. Nevertheless, defendants marketed lead pigment for use in paint intended for residential buildings and refused to warn consumers of the potential harm.

We hold that the statute of limitations bars the City, but not PHA, from asserting claims for negligence, strict products liability, breach of warranty and fraud. As an agency of the Commonwealth of Pennsylvania, PHA is exempt from the statute of limitations under the doctrine of nullum tempus. Because plaintiffs concede they are unable to link a specific manufacturer to the lead pigment in any particular property, they propose three theories of collective liability -- alternative liability, market share liability and enterprise liability -- to establish the causation element of each of their causes of action. We hold that plaintiffs may not proceed under these theories because Pennsylvania law has not adopted any of them in products liability cases or sent an authoritative signal that it would do so. As a federal court in a diversity case, we may not significantly expand state law without a clear indication that the Pennsylvania Supreme Court would do the same. We therefore will affirm the district court's order dismissing the plaintiffs' amended complaint.

I. FACTUAL AND PROCEDURAL BACKGROUND

According to the Department of Health and Human Services, lead poisoning is a serious threat to the health of American children. See U.S. Dep't of Health and Human Services, The Nature and Extent of Lead Poisoning in Children in the United States: A Report to Congress 1 (July 1988). Children may ingest lead by chewing on surfaces covered with lead-based paint or by breathing air that contains dust from crumbling paint. Exposure to lead paint occurs in homes, schools and day care centers. Inner city residents are the highest risk population segment because older city buildings, which predominate in the inner city, are most likely to have unremoved lead paint on the walls. At low levels, lead poisoning causes IQ reduction, shortened attention span, hyperactivity, aggressive behavior, loss of appetite, vomiting and abdominal pain. Ingestion of lead in higher quantities may cause convulsions, brain damage and eventually death. Currently, fifteen percent of all preschoolers, approximately 3,000,000 children, have elevated lead levels sufficient to impair their neurological development. See U.S. Environmental Protection Agency, Strategy for Reducing Lead Exposures 1 (February 21, 1991). A study estimates that sixty-two percent of all Philadelphia children between the ages of six months and five years have lead levels in their blood capable of causing learning and central nervous disorders. See Environmental Defense Fund, Legacy of Lead: America's Continuing Epidemic of Childhood Lead Poisoning A-5 (March 1990). The damage caused by lead is irreversible. Therefore, the sole cure for lead poisoning is prevention of exposure to lead. See Centers for Disease Control, Preventing Lead Poisoning in Young Children: A Statement by the Centers for Disease Control 39 (Oct. 1991).

Preventing future injury through lead-based paint abatement is critical, but also enormously expensive. United States Department of Housing and Urban Development ("HUD") regulations, promulgated pursuant to the Lead-Based Paint Poisoning Prevention Act, 42 U.S.C. §§ 4821-48 (1988 & Supp. II 1990), require the City and PHA to notify all tenants of residential HUD-associated housing constructed prior to 1978 about the dangers of lead poisoning and the appropriate precautions to be taken, see 24 C.F.R. § 35.5(a) (1992), and to cover or remove lead-based paint from HUD housing units built before 1978, see 24 C.F.R. § 35.24(b) (1992). HUD provides no funding to aid compliance with the regulations.

To shift their large financial burden to the parties alleged to be primarily responsible for the lead poisoning public health crisis, the City and PHA brought this lawsuit.*fn1 Plaintiffs seek damages from NL Industries, Inc., Atlantic Richfield Company, The Sherwin-Williams Company, The Glidden Company and Fuller-O'Brien Corporation, all of which are lead pigment manufacturers, and the Lead Industries Association ("LIA").*fn2 Plaintiffs seek compensatory damages in excess of $100,000,000 for the costs of (1) inspecting HUD and privately owned housing; (2) removing lead paint from public and private residential properties built or painted prior to 1950; (3) testing individuals to detect elevated lead blood levels; (4) treating city residents for exposure to lead paint; (5) educating the public about the hazards of lead paint; and (6) recovering liability imposed on plaintiffs in their capacity as property owners for personal injury arising from the ingestion of lead paint. Plaintiffs also seek punitive damages and injunctive relief to require the defendants to eliminate the hazards caused by lead paint on the walls of City properties.

Plaintiffs' amended complaint asserts claims for negligent product design, strict product liability, negligent failure to warn, breach of warranty, fraud and misrepresentation, indemnification, restitution and punitive damages. Because the procedural context of this appeal is a motion to dismiss, we assume that plaintiffs' allegations are true. The amended complaint alleges the following. Defendants knew of the severe hazards of lead paint since the early 1900s, long before this information was widely circulated to the public. Defendants also were aware that non-toxic pigments, such as zinc-oxide pigment, were available as substitutes for lead pigments in paint. Despite this knowledge, defendants continued to promote their product for use in paint intended for residential interior surfaces and refused to warn potential consumers of the known hazards.

The LIA, organized by some of the defendants in 1928, collected literature addressing the toxicity of lead pigment and attempted to discredit studies documenting the hazards of lead paint. The LIA also funded its own medical research to refute scientific evidence concerning the dangers of lead. Through expensive advertising campaigns, the LIA misrepresented the safety of lead paint to the consumer public. Through vigorous lobbying, it also misled legislative bodies considering regulating or banning lead paint. All of the defendants were members of the LIA at some point, though at different times and for different lengths of time.

Plaintiffs concede they have been aware for years that lead paint is dangerous to children. In the 1940s and 1950s, plaintiffs "began to be aware of the hazards of lead paint to young children . . . ." Amended Complaint P 73, App. at 290-91. Philadelphia made lead poisoning a reportable disease in 1950, and throughout the 1950s and 1960s, it operated programs to determine the extent to which lead paint caused lead poisoning in children. In 1966, Philadelphia enacted an ordinance that prohibited the use of lead paint on residential walls, regulated the labeling of lead paint, and required property owners to remove lead paint from buildings posing a health hazard to children. See Philadelphia, Pa., Code § 6-403(2)(a), (3), (4)(b) (1966). Following the LIA's suggested standard, the City defined lead paint as paint containing more than one percent lead. See Philadelphia Dep't of Public Health, Regulations Relating to Labeling, Application and Removal of Lead Paint § 6-403(1)(d) (June 27, 1966).*fn3 To conform city buildings to the standards set forth in the 1966 ordinance, the City has paid to inspect and, when appropriate, abate lead paint hazards in public and some private buildings.

In 1976, Congress amended the Lead-Based Paint Poisoning Prevention Act to define hazardous lead paint as paint containing more than .06 percent lead. See Pub. L. No. 94-317, § 204(c)(1), 90 Stat. 706 (1976). This is the current definition of lead paint under federal law. See 42 U.S.C. § 4841(3)(B)(ii). In 1977, the Consumer Products Safety Commission enacted regulations banning the sale in interstate commerce of paint for residential use with more than .06 percent lead. See 16 C.F.R. § 1303 (1992). The new HUD regulations, 24 C.F.R. §§ 35.1-35.70 (1992) incorporate the .06 percent standard and therefore require significantly more extensive abatement actions than Philadelphia's 1966 ordinance.

Defendants filed a motion to dismiss the amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). The district court held that the statute of limitations barred the City, but not PHA, from asserting claims for negligent product design, strict product liability, negligent failure to warn, breach of warranty, and fraud and misrepresentation. See City of Philadelphia v. Lead Indus. Ass'n, No. 90-7064 (E.D. Pa. Feb. 4, 1992).*fn4 The district court noted that the doctrine of nullum tempus grants the Commonwealth and its agencies immunity from the statute of limitations absent an explicit legislative directive to the contrary. Finding that PHA is a Commonwealth agency, the court held that nullum tempus exempts PHA from the statute of limitations. The district court also noted that the City, a political subdivision of the Commonwealth, may invoke nullum tempus only when enforcing a duty imposed by law. Finding that defendants' potential liability to the City in tort arose from the defendants' voluntary decision to sell lead pigment to paint manufacturers, the court held that the City was subject to the statute of limitations.

The City's claims accrued, for purposes of statutes of limitations analysis, when it knew or should have known of its right to file a lawsuit. The district court concluded that the City's claims accrued no later than 1976, when Congress expanded the definition of hazardous lead paint to include paint with a lead content of .06 percent. At that time, plaintiffs were put on notice that the prior application of paint containing that amount of lead had inflicted injury. The district court therefore held that the City's claims were time-barred under all applicable statutes of limitations.

In a later opinion, the district court dismissed the entire amended complaint with prejudice. See City of Philadelphia v. Lead Indus. Ass'n, No. 90-7064 (E.D. Pa. April 23, 1992). The design defect claims were dismissed because although the end product, lead paint, could be made safer, lead pigment could not. The district court dismissed plaintiffs' breach of warranty claims because the defendants did not sell the dangerous end product, lead paint. The fraud and misrepresentation claims were dismissed on the merits for failure to adequately plead justifiable reliance. Specifically, plaintiffs did not aver that they were unaware of the medical information in the public domain concerning the hazards of lead paint at the time they purchased lead paint. The claim for indemnification was dismissed because plaintiffs failed to allege that a judgment of liability was entered pursuant to which it paid an award of damages.

Finally, the district court dismissed the remaining restitution and failure to warn claims for insufficient pleading of proximate causation. Plaintiffs conceded that they could not prove that the lead pigment of a particular manufacturer was applied to the walls of a given housing unit. They thus advanced five theories of collective liability to hold defendants jointly and severally liable: (1) alternative liability, (2) market share liability, (3) enterprise liability, (4) concert of action, and (5) conspiracy. The district court rejected each collective liability theory suggested by plaintiffs.*fn5 Characterizing the collective liability theories as radical and noting that the Pennsylvania Supreme Court has not embraced any of them in the context of toxic torts, the district court concluded that a federal court sitting in diversity was not the appropriate tribunal to drastically expand state tort law.

The City and PHA filed a motion for reconsideration, which was denied. They appeal the February 4, 1992 and the April 23, 1992 decisions of the district court as well as the denial of their motion for a rehearing. The defendants filed a cross-appeal challenging the district court's ruling that PHA's claims were not time-barred, and the court's failure to dismiss the restitution claim on grounds other than causation.

II. Discussion

The district court had jurisdiction pursuant to 28 U.S.C. § 1332 (1988) and this court has appellate jurisdiction pursuant to 28 U.S.C. § 1291 (1988). We exercise plenary review over an order dismissing a complaint for failure to state a claim. Marshall-Silver Constr. Co. v. Mendel, 894 F.2d 593, 595 (3d Cir. 1990). In the procedural context of a motion to dismiss, we accept the factual allegations contained in the amended complaint as true and plaintiff receives the benefit of all reasonable inferences to be drawn therefrom. See Angelastro v. Prudential-Bache Sec., Inc., 764 F.2d 939, 944 (3d Cir.), cert. denied , 474 U.S. 935, 106 S. Ct. 267 (1985). We may not affirm the dismissal of the complaint unless plaintiffs can prove no set of facts that would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957).

A. STATUTE OF LIMITATIONS

In its opinion and order dated February 4, 1992, the district court held that PHA is an agency of the Commonwealth of Pennsylvania and therefore immune from a statute of limitations defense under the doctrine of nullum tempus occurit regi ("time does not run against the king"). The court, however, held that the City is not entitled to nullum tempus immunity, and that its claims in Counts I to V of the complaint all accrued by 1976. The court therefore dismissed those claims as time-barred because the applicable limitations periods had expired before this action was filed in 1990. The City appeals the dismissal of its claims on timeliness grounds. Defendants, in turn, cross-appeal the district court's refusal to dismiss PHA's claims as time-barred.

1. Nullum Tempus

a. Plaintiff PHA

Under the doctrine of nullum tempus , statutes of limitations are not applicable to actions brought by the Commonwealth or its agencies unless a statute expressly so

provides. Commonwealth, Dep't of Transp. v. Rockland Constr. Co., 498 Pa. 531, 448 A.2d 1047, 1047 (Pa. 1982); Commonwealth, Dep't of Transp. v. J.W. Bishop & Co., 497 Pa. 58, 439 A.2d 101, 101 (Pa. 1981). The rationale of this rule is that the Commonwealth, as a plaintiff, seeks the vindication of public rights and the protection of public property. J.W. Bishop & Co., 439 A.2d at 104. None of the statutes of limitations applicable in this case expressly apply to the Commonwealth. Therefore, if PHA is an agency of the Commonwealth, none of its claims is time-barred.

PHA was created under the Housing Authorities Law, which provides, in pertinent part: "An Authority shall constitute a public body, corporate and politic, exercising public powers of the Commonwealth as an agency thereof. . . ." Pa. Stat. Ann. tit. 35, ยง 1550 (1977) (emphasis added). By its clear ...


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