Case Note: Raw Materials Suppliers Are Not Liable When Their Product is Altered

WDC Journal Edition: Winter 2004
By: Michael Cohen & Catherine Grogan - Meissner Tierney Fisher & Nichols S.C.

Silicosis cases have been brought around the country, Wisconsin included. Wisconsin’s high court is among the first to decide the issue of the liability of a raw material supplier in Haase v. Badger Mining Corp.i

Badger Mining Corporation ("Badger") supplied raw silica sand to Neenah Foundry ("Neenah"), which was used in various foundry processes. The plaintiff, Laverne Haase ("Haase"), worked at Neenah for 41 years and contracted silicosis, a lung disease. He alleged his silicosis was caused by sand supplied by Badger. Haase asserted theories of negligence as well as strict liability. Haase also brought claims against several respirator manufacturers, all of whom settled prior to trial. The case was tried in Winnebago County before the Honorable Bruce K. Schmidt.

At the close of the plaintiff’s evidence, the trial court granted Badger’s motion for a directed verdict based on insufficiency of the evidence. The trial court found, with respect to Haase's negligence claims, that Badger had no duty to warn of silica hazards because it legitimately expected that Neenah, a sophisticated user of the sand, would institute necessary safety precautions based on its specific uses of the sand. Specifically, subsection (b) of the Restatement (Second) of Torts § 388 (1965) provides for liability only where the supplier "has no reason to believe that those for whose use the chattel is supplied will realize its dangerous condition." In this case, testimony by plaintiff's own experts demonstrated that Neenah was well aware of the risks associated with silica exposure, and had itself taken steps to minimize those risks for many years. Moreover, prior Wisconsin case law stated that "there is no duty to warn members of a trade or profession about dangers generally known to that profession." The trial court ultimately adopted what has been termed the "sophisticated user defense" articulated in the analogous case of Bergfeld v. Unimin Corp.iii

The trial court also dismissed Haase's strict liability claim, applying the Restatement (Third) of Torts § 5 and holding that sand is a raw material and as such cannot be defectively designed. Comment (c) to that section states that "raw materials sellers are not subject to liability for harm caused by defective design of the end product." Plaintiff's expert testified that, when Badger delivered the sand to Neenah, it was not in a respirable form and it was only through the foundry processes that it became potentially harmful.

The Court of Appeals upheld the dismissal of the negligence and strict liability claims on the same grounds. Haase argued that the trial court should not have applied Restatement (Third) of Torts § 5 because the Supreme Court of Wisconsin had rejected the Restatement (Third) of Torts in Green v. Smith & Nephew AHP, Inc.iv Haase argued that the trial court should have instead applied Restatement (Second) of Torts § 402A. The Court of Appeals held that the trial court's adoption of Restatement (Third) of Torts § 5 was proper, but noted that even application of § 402A could not save Haase's strict liability claim because he failed to prove that the sand was in a defective condition unreasonably dangerous to the user at the time it left Badger's control. Again, the foundry processes changed the nature of the sand to create the risk of harm, rather than the risk being present at the time of delivery of the product.

Haase then sought Supreme Court review of the dismissal of the strict liability claims only. The Court held that Restatement (Third) of Torts § 5 was inapplicable to the facts of the case because it related only to component parts which were integrated into a finished product, and Badger's sand was not actually a part of Neenah's finished product, metal castings. Rather, the sand was simply used in the course of the process of making the castings. However, the Court made clear that it was "neither adopt[ing] nor reject[ing]" Restatement (Third) of Torts § 5vi. The Court then went on to analyze plaintiff's strict liability claim under Restatement (Second) of Torts § 402A. The Court focused on the fifth prong of the analysis under Section 402A, which requires that the plaintiff prove that "the product was one which the seller expected to and did reach the user or consumer without substantial change in the condition it was when he sold it" (emphasis added). Comment (p) to Section 402A provides: Further Processing or Substantial Change: “The question is essentially one of whether the responsibility for discovery and prevention of the dangerous defect is shifted to the intermediate party who is to make the changes. No doubt there will be some situations, and some defects, as to which the responsibility will be shifted, and others in which it will not.” The Court cited to its prior decision in Glassey v. Continental Ins. Co.vii (manufacturer or seller is “not the one who creates the risk when alterations are made to a product by third parties”). Since Badger’s sand underwent a material and substantial change after leaving its possession, the Court concluded that Badger could not be held strictly liable. Haase relied on Whitehead v. St. Joe Lead Co., Inc.viii, in which the court had held that, under New Jersey law, the manufacturer may be held liable if the alterations to the product are foreseeable. Citing Glassey, the Supreme Court noted that, under Wisconsin law, foreseeability is not an element of strict liability claims, but is instead an element of negligence.

The Haase decision effectively ended a series of silicosis cases brought against Badger throughout Wisconsin. Both appellate decisions are positive for raw material suppliers generally, both with respect to the Court of Appeals' adoption of the sophisticated user defense, and the Supreme Court's analysis of Section 402A.

Michael J. Cohen is a shareholder in Meissner Tierney Fisher & Nichols S.C. He practices in the areas of commercial and environmental litigation, including complex insurance coverage disputes. He received his B.A. degree from the University of Wisconsin and law degree from Marquette University Law School.

Catherine R. Grogan has been an associate with Meissner Tierney Fisher & Nichols S.C. since 2000. Catherine practices in the area of general commercial litigation, with emphases in employment law and environmental law. She completed her B.A. (magna cum laude) and J.D. (cum laude) at Marquette.

i2004 WI 97, 266 Wis. 2d 970, 682 N.W.2d 389
iShawver v. Roberts Corp., 90 Wis. 2d 672, 686, 280 N.W.2d 226 (1979).
ii226 F. Supp.2d 970 (N.D. Iowa 2002), aff'd, 319 F.3d 350 (8th Cir. 2003).
iii2001 WI 109, 245 Wis. 2d 772, 629 N.W.2d 727.
iVHaase v. Badger Mining Corp., 2004 WI 97, 266 Wis. 2d 970, 682 N.W.2d 389
vId., 2004 WI 97 at 23
vi176 Wis. 2d 587, 604, 500 N.W.2d 295 (1993)
vii729 F.2d 238 (3d Cir. 1984).