GAF CORPORATION, Plaintiff-Appellant, v. the UNITED STATES, Defendant-Appellee

932 F.2d 947, 1991 WL 71975

• Court: Court of Appeals for the Federal Circuit
• Decided: July 30, 1991
• Docket: 90-5079
• Status: Published

Opinions

RADER, Circuit Judge.

In 1944, GAF Corporation’s (GAF) predecessor, the Ruberoid Company (Ruberoid), entered contracts with the United States Navy (Navy) to insulate ships with asbestos products. Ruberoid’s shipyard workers contracted asbestosis. GAF incurred substantial liability for injuries and death due to these workers’ exposure to asbestos.

GAF sued in the United States Claims Court seeking indemnification from the Government for its liabilities. GAF contended that the Navy knew in the 1940s of the health risks of asbestos and deliberately withheld that information from Ruber-oid. The Claims Court granted summary judgment dismissing GAF’s claims. GAF Corp. v. United States, 19 Cl.Ct. 490 (1990) (GAF Corp.). The Claims Court determined that the Navy had no contractual duty to warn an asbestos producer of hazards in its product. GAF appealed. This court affirms.

Background

In 1930, Ruberoid acquired controlling interest in Eternit, a firm which manufactured asbestos building materials. At the time of the acquisition, Eternit’s employees had sued the company for injuries caused by exposure to a variety of dusts, including asbestos dust. Ruberoid settled several of these suits. Due to these suits, Ruberoid took steps to protect its workplaces against occupational hazards. From 1930 until the mid-1960s, Ruberoid experienced only two similar worker claims. In 1967, GAF acquired Ruberoid by merger.

In the early 1940s, Ruberoid developed a product called Calsilite to insulate Navy ships. Calsilite contained asbestos. Beginning in 1944 and stretching over two more decades, the Navy bought Calsilite from Ruberoid. Over this period, shipyard workers installed, repaired, and replaced Ruber-oid’s Calsilite.

From June to August 1947, Ruberoid purchased raw asbestos fiber from the Reconstruction Finance Corporation, a Government entity. The purchase contracts contained no express warranties nor disclaimers of warranties. In 1951, the Defense Minerals Exploration Administration (DMEA) subsidized Ruberoid’s exploration for raw asbestos fiber. The exploration subsidy contract contained no warranties about the safety of asbestos products.

Due to prolonged contact with the asbestos, many shipyard workers contracted deadly diseases. These workers filed wrongful death and personal injury tort claims against GAF. GAF incurred substantial costs in judgments, settlements, and legal fees.

In 1983, GAF filed a Tucker Act claim (28 U.S.C. § 1491 (1982)) against the United States in the Claims Court. At the same time, several other asbestos producers filed suits. The Claims Court tried another company’s action ahead of GAF’s claim. Johns-Manville v. United States, 13 Cl.Ct. 72 (1987). This court vacated that judgment on jurisdictional grounds. Johns-Manville v. United States, 855 F.2d 1571 (Fed.Cir.1988). On the same day, this court affirmed a district court’s dismissal of a similar Little Tucker Act claim (28 U.S.C. § 1346(a)(2) (1982)). Lopez v. A.C. & S. Inc., 858 F.2d 712 (Fed.Cir.1988), cert. denied sub. nom. Eagle-Picher Ind., Inc. v. United States, 491 U.S. 904, 109 S.Ct. 3185, 105 L.Ed.2d 694 (1989).

Arguing that GAF’s complaint raised the same questions resolved by this court in Lopez, the Government moved for summary judgment. The Claims Court granted the Government’s motion and dismissed GAF’s complaint. The Claims Court presents a complete recitation of the facts of this case. GAF Corp., 19 Cl.Ct. at 494-96.

Discussion

GAF contends that the Claims Court committed three reversible errors. First, GAF faults the Claims Court for denying a trial on whether the Government breached a duty to disclose “superior knowledge” of asbestos hazards. GAF also criticizes the Claims Court for denying a trial on whether the Government, breached an implied warranty of specifications for Calsilite insulation. Finally, GAF contends that the Claims Court wrongly dismissed for lack of jurisdiction its claim that the Government breached an implied warranty on the raw asbestos sold by the Government to Ruber-oid.

Superior Knowledge

This court has set forth principles governing claims that the Government knew of asbestos hazards but withheld that knowledge from an unwary asbestos producer. Lopez, 858 F.2d at 717.¹ This “superior knowledge” doctrine can, in limited circumstances, supply the basis for a breach of contract. To show a breach under the superior knowledge doctrine, a contractor claiming a breach by non-disclosure must produce specific evidence that it

(1) undertook] to perform without vital knowledge of a fact that affects performance costs or direction, (2) the government was aware the contractor had no knowledge of and had no reason to obtain such information, (3) any contract specification supplied misled the contractor, or did not put it on notice to inquire, and (4) the government failed to provide the relevant information.

Lopez, 858 F.2d at 717 (citing American Ship Bldg. Co. v. United States, 228 Ct.Cl. 220, 654 F.2d 75 (1981)).

In a prior asbestos case, a five-judge panel of this court assumed “the government did know things it did not reveal, and that it used a defective product in ways that added to the hazard, but were not known to suppliers.” Lopez, 858 F.2d at 717. Nonetheless in Lopez this court discerned no reason the trial court should have applied the superior knowledge doctrine. This court determined that the asbestos producers could not satisfy the second element of the superior knowledge doctrine. The Government had no reason to believe experienced asbestos producers lacked knowledge of the product’s risks.

This court in Lopez reasoned that the superior knowledge doctrine does not impose on a customer the duty to inform an experienced producer that its products are hazardous. Lopez, 858 F.2d at 717-18. In Lopez the court noted that the “caselaw dealing with a government breach of a contract by non-disclosure of superior knowledge cannot be made to support the claims here in suit without so drastic a restructuring that we would be engaging in judicial legislation.” Lopez, 858 F.2d at 718. GAF, like the asbestos producers in Lopez, in effect asserted “not only a duty of the customer to inform the supplier that his product is defective, but a duty to find out what he [the supplier] does not already know.” Id. This additional duty does not “fit” the superior knowledge doctrine. Id. at 717-18. Indeed the doctrine does not impose on a buyer an affirmative duty to inquire into the knowledge of an experienced seller.

The Claims Court found that the Government had no reason to believe that Ruberoid lacked knowledge about asbestos hazards. GAF Corp., 19 Cl.Ct. at 497. Ruberoid was an experienced asbestos supplier. Moreover, Ruberoid supplied its asbestos products to commercial as well as Government customers. Under those circumstances, the Government had no reason to believe that Ruberoid needed to learn more about asbestos hazards from its customer. GAF stumbles on the same hurdles in the superior knowledge doctrine that the producers in Lopez could not surmount. Construing factual inferences in GAF’s favor, the Claims Court correctly determined that GAF’s showings did not create a triable issue. GAF Corp., 19 Cl.Ct. at 497, 498-99 n. 2.

Implied Warranty of Specifications

This court has also set forth principles governing implied warranties of specifications under the Tucker Act. This court acknowledged that an implied warranty requires “circumstances strongly supporting] a factual inference that a warranty was implied.” Lopez, 858 F.2d at 715. This inference may arise only when the Government’s specifications tell a contractor “just how to do the job.” Id. at 716. An implied-in-fact warranty does not arise when the Government merely “specified any characteristic at all in the merchandise it purchased.” Id. at 715. In Lopez, this court did not detect any signs of extensive Government intrusion into the asbestos production process which might suggest that the Government intended to warrant the product’s safety. This court stated, “[i]t would be just as reasonable for the parties to the sale to have implied a warranty by the seller, that apart from dangers the seller warned of, the insulation would not endanger the buyer or its employees. Either way it would be a warranty implied in law, not fact.” Lopez, 858 F.2d at 716.

Under Claims Court summary judgment rules, the Government provisionally conceded that Ruberoid’s contracts contained design specifications. According to GAF, the Government’s use of design specifications would suggest sufficient Government control to support an implied warranty-

The Claims Court, however, found that GAF showed no differences between specifications on Ruberoid’s commercial products and specifications on its products sold to the Government. In Lopez, this court noted the significance of that showing to an inference of an implied warranty. Id. at 715-16.

The Claims Court found that GAF did not show that Ruberoid’s Government products differed in any material respect from its commercial products. GAF Corp., 19 Cl.Ct. at 497. The Government contract specifications requested the type of asbestos products Ruberoid supplied to the public in general. Under those circumstances, the Government had no reason to suppose it needed to provide Ruberoid with a warranty on Ruberoid’s own commercial products. The factual circumstances at the time of contracting do not support an inference that the Government intended— though not in writing — to indemnify Ruber-oid for any injuries from Ruberoid’s own products.

GAF relies on three cases to suggest buyers may extend implied warranties to sellers. United States v. Spearin, 248 U.S. 132, 39 S.Ct. 59, 63 L.Ed. 166 (1918); Ordnance Research, Inc. v. United States, 221 Ct.Cl. 641, 609 F.2d 462 (1979); and Blount Bros. Corp. v. United States, 872 F.2d 1003 (Fed.Cir.1989). In Lopez, this court distinguished a “mere supply contract,” like Ruberoid’s, from a “construction contract with its massive detail all prescribed by the owner,” like Spearin’s. Lopez, 858 F.2d at 715.

These cases, however, bolster the Claims Court’s holding that the parties implied no warranty of specifications. In each of these three cases, the contractor could do nothing short of violating the specifications to avoid its losses. The specifications themselves caused the losses. Those unique specifications and circumstances warranted the inference that the Government in fact intended to provide a warranty. Ruberoid, on the other hand, incurred liability for failure to place warnings on its products. GAF Corp., 19 Cl.Ct. at 503. Nothing in the contract specifications prevented Ruberoid from putting warnings on its products. These asbestos supply contract specifications, whether design or performance, did not cause Ruberoid’s tort losses. Thus, this case differs from Spea-rin, Ordnance, and Blount Bros.

Thus, the specifications in Ruberoid’s contract, whether design or not, do not alter the reasoning of Lopez. GAF did not distinguish Ruberoid’s commercial from its Government products. The case law invoked by GAF does not support an implied warranty in this case. As noted by the Claims Court, the circumstances of Ruber-oid’s transactions with the Government do not create a triable issue on the implied warranty question. GAF Corp., 19 Cl.Ct. at 497.

Warranty of Merchantability and Fitness

The Government sold Ruberoid raw asbestos fiber from Government stockpiles in 1947. These sales were simple transactions containing no express warranties. GAF faults the Claims Court for refusing to incorporate into these contracts the Uniform Commercial Code’s warranties of merchantability and fitness.

Congress has not applied the Uniform Commercial Code to federal contracts. Hawkland, UCC Series § 1-101:01, pp. 3-4. The Claims Court may not do by judicial fiat what Congress has not done by legislation. The trial court may not enforce a warranty implied-in-law. The Tucker Act does not grant the Claims Court jurisdiction to enforce contracts implied-in-law. Hatzlachh Supply Co. v. United States, 444 U.S. 460, 465 & n. 5, 100 S.Ct. 647, 650 & n. 5, 62 L.Ed.2d 614 (1980); Lopez, 858 F.2d at 714-15. The Claims Court correctly dismissed this claim.

Conclusion

Based on Lopez, the Claims Court dismissed GAF’s case. GAF did not show that the Claims Court committed any reversible error. Therefore, the judgment of the Claims Court is

AFFIRMED.

1 . GAF participated in Lopez v. A.C. & S. Inc., 858 F.2d 712 (Fed.Cir.1988) as an amicus curiae.