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October 14, 1998


The opinion of the court was delivered by: ZIEGLER

ZIEGLER, Chief Judge.

 Pending before this court is the motion of defendant, Hitachi Magnetics Corporation ("Hitachi"), for summary judgment pursuant to Fed.R.Civ.P. 56(c). Plaintiff Kalumetals, Inc. ("Kalumetals") commenced this civil action alleging that, as a result of an explosion which occurred in a drying furnace while Kalumetals was processing a shipment of cobalt samarium grinding sludge for Hitachi, Kalumetals suffered property damage and loss of business income. Plaintiffs' Amended Complaint adds the allegation that Tribometics, Inc. ("Tribometics"), a tenant in Kalumetals' building at the time that the alleged damage occurred, suffered business loss as a result of the explosion.

 Plaintiffs' Second Amended Complaint asserts three counts: Count I, Negligence; Count II, Breach of Contract; and Count Three, Strict Liability. Defendant specifically seeks judgment as to counts II and III. Defendant specifically seeks judgment, apparently with regard to the case in full, as a sanction for plaintiffs' failure to preserve evidence related to the case. For the reasons that follow, Hitachi's motion for summary judgment will be denied.

 I. The Facts

 Kalumetals was retained by Hitachi in May, 1993, January, 1994 and June, 1994, to dry a grinding swarf comprised of fine metallic grindings and grinding fluid. On each of these occasions, Kalumetals dried the swarf, known as "Hicorex swarf," without incident.

 In May, 1995, Hitachi again requested that Kalumetals dry a shipment of Hicorex swarf. Up until this time, Kalumetals had dried the swarf in an open furnace system. On this occasion, however, Kalumetals intended to dry the swarf in a closed retort system. In or around May, 1995, Kalumetals successfully dried a test amount of the Hicorex swarf in the closed system furnace, allegedly without incident.

 On or around June 6, 1995, Hitachi sent Kalumetals the balance of the shipment of what Kalumetals believed to be Hicorex swarf. At least one of Hitachi's earlier shipments of the Hicorex swarf had been accompanied by a material safety data sheet ("MSDS"), in which Hitachi described the product as "CoSm" *fn1" and cautioned users/handlers to "minimize contact with air and moisture" to avoid spontaneous reaction. The drums in which the June 1995 product was shipped were not labeled in such a way as to indicate that their contents may have been flammable or otherwise hazardous.

 On or around June 9, 1995, Kalumetals began the drying process by loading fifteen retort tubes with the product that it believed was Hicorex swarf. Approximately eight hours later, one of the retort tubes exploded, destroying the furnace and propelling the tube across Kalumetals' plant.

 Kalumetals alleges that particles of wax and Neodymium-Iron-Boron ("NdFeB"), another product manufactured by Hitachi, contaminated the CoSm, and that Hitachi failed to properly notify Kalumetals of the content of the swarf for to processing. Hitachi counters by asserting that the MSDS properly stated that other rare earth minerals were present in the swarf, and that such labeling accounted for the possibility that NdFeB could be present in the swarf.

 Kalumetals further alleges that the MSDS was erroneous and gave incorrect safety instructions, recommending that the processor keep it away from moisture when the better course of action would have been to keep the swarf underwater until the NdFeB oxidized the contained hydrogen.

 II. Analysis

 A. Standard for Summary Judgment

 Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. V. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). In considering a motion for summary judgment, we must examine the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).

 B. Choice of Law

 The instant action was initiated pursuant to the court's diversity jurisdiction. "In diversity cases, federal courts must apply the choice of law principles of the forum state in determining which state's law will govern the substantive issues in the case." Snyder v. ISC Alloys, Ltd., 772 F. Supp. 244, 249 (W.D.Pa. 1991), citing Klaxon Co. v. Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941); Blakesley v. Wolford, 789 F.2d 236, 238 (3d Cir. 1986). Accordingly, we must follow Pennsylvania choice of law principles.

 The Pennsylvania flexible interest analysis allows the court to determine which jurisdiction is "most intimately concerned with the outcome of [the] particular litigation." Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796, 806 (Pa. 1964)(citations omitted). The court is then required to apply the law of that jurisdiction. Id. See also Cipolla v. Shaposka, 439 Pa. 563, 267 A.2d 854 (Pa. 1970), Blakesley, 789 F.2d at 238.

 As all of the parties have relied principally on Pennsylvania law in their papers, it appears that they have determined that Pennsylvania law controls the outcome of the substantive issues. We agree. Kalumetals is a Pennsylvania corporation with a principal place of business in Pennsylvania. Tribometics also has a principal place of business in Pennsylvania. The injury to plaintiffs which lead to the commencement of this suit arose in Pennsylvania. The Commonwealth of Pennsylvania has a significant interest in the welfare of plaintiffs. We will therefore apply the substantive law of Pennsylvania to our analysis.

 C. Strict Liability Claim

 We will first address Hitachi's motion for summary judgment with respect to plaintiffs' strict liability claim. In Webb v. Zern, 422 Pa. 424, 220 A.2d 853 (Pa. 1966), Pennsylvania adopted the doctrine of strict products liability as set forth in section 402A of the Restatement (Second) of Torts. Section 402A provides that a manufacturer who sells a product in a defective condition unreasonably dangerous to the user will be held liable for any damages that result from the consumer's possession of that product, even if the manufacturer/seller has used all possible care in the manufacture and sale of the product. See Snyder, 772 F. Supp. at 249.

 1. Plaintiff Tribometics' Claim Under Section 388

 Initially, we note that plaintiff Tribometics offers an argument for strict liability under Restatement (Second) of Torts § 388. Tribometics bases this argument on a reading of Binder v. Jones & Laughlin Steel Corp., 360 Pa. Super. 390, 520 A.2d 863 (Pa.Super.), appeal denied, 516 Pa. 631, 533 A.2d 90, and appeal denied, 516 Pa. 634, 533 A.2d 92 (Pa. 1987). We disagree with Tribometics' interpretation of Binder, and find instead that that case involved a negligence claim and makes no mention of strict liability.

 Section 388, which concerns chattels known to be dangerous for intended use, presents negligence rules. See, e.g., Incollingo v. Ewing, 444 Pa. 263, 299, 282 A.2d 206, 444 Pa. 299 (Pa. 1971)(negligence principles as set forth in section 388, rather than strict liability principles, are applicable to a case which turned upon the adequacy of a warning as to the dangerous side effects of a drug). Pennsylvania courts have found that a claim under section 388 charges improper conduct, rather than the existence of a defective product. See, e.g., Harford Mut. Ins. Co. v. Moorhead, 396 Pa. Super. 234, 578 A.2d 492, 501 (Pa.Super. 1990)("Pennsylvania courts consistently analyze the negligence/failure to warn and strict liability/failure to warn causes of action separately, treating conduct-related counts apart from product-related counts."), appeal denied, 527 Pa. 617, 590 A.2d 757 (Pa. 1991). *fn2" Thus, the proper place for plaintiffs to offer an analysis under section 388 is through their negligence claim. The argument is not applicable here.

 2. Defendant's 402A Summary Judgment Arguments

 We do not believe that defendant is entitled to summary judgment with regard to plaintiffs' claim of strict liability under Restatement (Second) of ...

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