Prudential Insurance Co. of America v. United States Gypsum Co. , 359 F.3d 226 ( 2004 )

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
2-20-2004
Prudential Ins Co v. US Gypsum Co
Precedential or Non-Precedential: Precedential
Docket No. 02-3837
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PRECEDENTIAL The Prudential Insurance
Company of America,
UNITED STATES COURT OF PIC Realty Corporation and
APPEALS FOR THE THIRD CIRCUIT 745 Property Investments,
Appellants
NO. 02-3837
On Appeal from the United States
PRUDENTIAL INSURANCE District Court for the District
COMPANY OF AMERICA; of New Jersey
PIC REALTY CORP; (D.C. Civil Nos. 87-cv-04227
745 PROPERTY INV and 87-cv-04238)
District Judge: Hon. Harold A.
v. Ackerman
UNITED STATES GYPSUM
COMPANY; W.R. GRACE & Argued September 3, 2003
COMPANY; THE CELOTEX
CORPORATION; UNITED STATES Before: SLOVITER, NYGAARD and
MINERAL PRODUCTS COMPANY; ROTH, Circuit Judges
KEENE CORPORATION; PFIZER,
INC.; ASBESTOSPRAY (Filed: February 20, 2004)
CORPORATION; JOHN DOE
COM PANIES, fictitious names for
presently unidentified entities
Robert J. Gilson (Argued)
(District of New Jersey Civil No. Khaled J. Klele
87-cv-4227) Riker, Danzig, Scherer, Hyland &
Perretti
Morristown, NJ 07962
THE PRUDENTIAL INSURANCE
COMPANY David Boies
Robin A. Henry
v. Boies, Schiller & Flexner
Armonk, NY 10504
NATIONAL GYPSUM COMPANY
Attorneys for Appellants
(District of New Jersey Civil No.
87-cv-4238)
Kell M. Damsgaard claims under the Racketeer Influenced and
Kevin M. Donovan (Argued) Corrupt Organizations Act (“RICO”), 18
Morgan, Lewis & Bockius U.S.C. § 1961 et seq., as time-barred by
Philadelphia, PA 19103 the statute of limitations. Prudential
argues that the District Court erred in
Attorneys for Appellee applying the “injury discovery rule” in
US Gypsum Company ascertaining when Prudential’s RICO
claims began to accrue, that there exist
Nancy McDonald disputed issues of material fact concerning
Meredith Walling when Prudential knew or should have
McElroy, Deutsch & Mulvaney know of its injuries from ACMs in its
Morristown, NJ 07962 properties, and that the statute of
limitations for Prudential’s RICO claims
Attorneys for Appellee should have been tolled due to Gypsum’s
US Mineral Products active and fraudulent concealment of
known health risks associated with ACMs.
OPINION OF THE COURT We will affirm.
INTRODUCTION
SLOVITER, Circuit Judge.
Prudential, a mutual insurance
This case, one of the myriad company, is one of the largest life,
asbestos cases that have besieged the pr op er ty, a nd c a sualty insurance
courts, both state and federal, comes to us underwriters in the world. It is also one of
from a somewhat different perspective the largest real estate investors in North
than most of the others. The plaintiffs, America, maintaining from the 1970s to
The Prudential Insurance Company of the early 1980s “the largest real estate
America, PIC Realty Corporation, and 745 portfolio of any company in the world”
Property Investments (hereinafter referred with hundreds of commercial real estate
to collectively as “Prudential”), are owners properties. App. at 394a. Gypsum and
and operators of buildings that installed USMP previously engaged in the
asbestos-containing materials (“ACM s”) manufacturing and sale of ACMs. Their
that sued asbestos manufacturers to products were widely used as construction
recover the costs of monitoring and materials throughout the United States.
remediation. Prudential appeals the
District Court’s orders granting the Prudential contends that ACMs
motions of defendants United States manufactured by both Gypsum and USMP,
Gypsum Company (“Gypsum”) and United as well as other defendants not parties to
States Mining Company (“USMP”) for this appeal, were used for fireproofing in
summary judgment dismissing Prudential’s
2
at least eighteen of its buildings.1 demolition of buildings containing
According to Prudential, it only began to fireproofing and insulation ACMs. 38
appreciate the hazards associated with in- Fed. Reg. 8829 (Apr. 6, 1973). That
place asbestos in 1984 at the time it had to standard regulated spray-on ACMs by
remove ACM s from one of its properties, limiting the concentration of asbestos in
the Chubb Building in Short Hills, New such ACM s and forbidding the visible
Jersey, before its demolition. The ACMs emission of such materials to the outside
were removed at a cost of approximately air during the spraying process. Id. at
one million dollars. In late 1984, 8830. It also required that “[a]ny owner or
Prudential established a task force to operator of a demolition operation who
investigate the in-place ACMs in its intends to demolish any institutional,
buildings. A Prudential internal survey commercial, or industrial building . . .
conducted between 1985 and 1986 which contains any boiler, pipe, or lead-
discovered that most of the buildings supporting structural member that is
involved in this litigation, as well as insulated or fireproofed with friable
approximately 100 others, contained asbestos material” shall notify the EPA in
ACM s. As a result, Prudential incurred advance of the demolition and follow
hundreds of millions of dollars in expenses proper ACM -removal procedures set forth
relating to the maintenance, testing, and in the standard. Id. at 8829. In 1975, the
removal of ACMs in its buildings. It has EPA expanded this National Emission
refused to acquire or mortgage properties Standard to cover renovation activities
containing ACMs since 1986. involving buildings containing ACMs by
mandating specific notification and
Asbestos had, however, already removal procedures for such in-place
become a well-known and important ACM s. 40 Fed. Reg. 48,299-,300 (Oct.
public health and safety issue in the United 14, 1975). It further amended the standard
States prior to 1984. In April 1973, the in 1978 to “extend coverage of the
E nvironmental Protection A ge ncy demolition and renovation provisions . . .
(“EPA”) established a National Emission to all friable asbestos materials and extend
Standard for Asbestos that severely the scope of the asbestos spraying
restricted the manufacturing and provisions . . . to all materials that contain
application of ACMs, as well as the more than 1 percent asbestos.” 43 Fed.
Reg. 28,372 (June 19, 1978).
1 The EPA also published various
Although Prudential’s initial claims
guidelines and regulations on asbestos
c o v e r e d a p p r o x i m a t e l y s i x ty -o n e
management. One such EPA document
buildings, that number was reduced to
from 1978, titled “Hazard Abatement from
eighteen buildings by the time the District
Sprayed Asbestos-Containing Materials in
Court entered a Final Pretrial Order in
Buildings: A Guidance Document” that
1996.
3
was prepared “for those involved in the asbestos products in
use, removal, and disposal of asbestos buildings, but the EPA had
materials in the building trades,” states that issued numerous guidance
“[a]sbestos in all its forms is considered a documents detailing for
serious respiratory hazard. . . . Unlike most b u i l d in g o w n e r s t h e
chemical carcinogens, the mineral fibers widespread use of asbestos-
persist in the environment almost containing building
indefinitely and, when present in a materials, the association
building space open to its occupants, between asbestos exposure
represent a continuous source of and disease, the potential
exposure.” App. at 439a. The document risks of in-place asbestos-
also includes information on asbestos c o n t a in i n g p r o d u c t s ,
exposure, control, containment, and methods to detect asbestos,
removal. App. at 480a-500a. The EPA and recommendations for
issued a similar “guidance document” for proper actions to be taken
ACMs in school buildings in 1979 and once asbestos-containing
another report on controlling friable ACMs products are identified.
in buildings in March 1983. App. at 556a-
626a, 736a-817a. Appellee Gypsum’s Br. at 13.
In addition, the Occupational Safety There is record evidence that
and Health Administration (“OSHA”) had various Prudential employees were aware
issued regulations on construction of the existence of ACMs in at least some
workers’ exposure to asbestos. The of Prudential’s properties prior to 1984.
imposition of these regulations and the Arcadius E. Zielinski, an architect
increasing public debate regarding the formerly in Prudential’s Corporate
health hazards of asbestos led various Services and Building Department,
asbesto s manufacturers, in cludin g testified in a deposition that he surveyed
Gypsum, to disseminate additional filed specifications of Prudential’s home
information regarding the use and risks of office buildings to determine whether they
ACM s. contained ACM s. He stated that he told
the Vice President of Prudential’s
As Gypsum correctly states in its Co rpora te Services and B uildin g
brief: Department in May 1981 that such ACMs
would not be hazardous so long as they
In sum, before October 20, were firm and remained in-place. An
1983, not only had the affidavit of David Holick, Jr., the director
federal government (OSHA of architecture at Prudential’s real estate
and EPA) issued mandatory investment department in Houston from
r e g u l a ti o n s r e g a r d i n g 1979 to 1984, states that ACM s were a
4
topic discussed among some of jurisdiction in this case.
Prudential’s employees. In addition,
asbestos testings were conducted, either by In its First Amended Complaint,
or at the request of local tenants, in several P r u d e n t ia l a l l e g e d t h a t A C M s
of Prudential’s buildings prior to 1984. manufactured by defendants and used in its
For example, in 1979 IBM Corporation, as properties pose a potential health risk, and
tenant, tested the airborne asbestos levels that it has expended and will continue to
at Prudential’s Jacksonville, Florida expend resources to inspect, monitor,
building and forwarded the results to maintain, and abate any problems caused
Prudential. App. at 48a-49a, 1053a-1151a. by the presence of ACM s. It also asserted
Asbestos testing was also conducted at past and future damages resulting from
least twice on the premises of Five Penn actual property damages, diminution of
Center in Philadelphia prior to 1981. property values, loss of rental income, and
Similar asbestos testings were also disruption to tenants’ businesses. App. at
conducted in several Prudential buildings 11,107a-08a.
not at issue in this litigation.
After several years of discovery,
Prudential initiated this action on Gypsum and W.R. Grace, another
October 20, 1987 in the United States defendant, filed a motion for summary
District Court for the District of New judgment in October 1991 to dismiss
Jersey, asserting a claim under the Prudential’s RICO claims on both
Comprehensive Environmental Response, substantive and statutes of limitations
Compensation, and L iability A ct grounds. They also sought to dismiss
(“CERCLA”), 42 U.S.C. § 9601 et seq., Prudential’s state law claims based on
and state claims under theories of absolute statutes of limitations. Prudential, in turn,
liability, strict liability, negligence, breach filed a motion to strike defendants’ statute
of express and implied warranties, fraud, of limitations defenses. The District
misrepresentation, fraudulent concealment, Court, in a published opinion dated July
unfair and deceptive trade practices, civil 21, 1993, denied defendants’ motion for
c o ns pi ra cy, r e s t it u t io n , a nd summary judgment to dismiss Prudential’s
indemnification. App. at 11,097a-11,153a. RICO claims on substantive grounds and
The District Court, upon motions by also denied Prudential’s motion to strike
defendants, dismissed Prudential’ s defendants’ statute of limitations defenses.
CERCLA claim, but granted Prudential’s Prudential Ins. Co. of Am. v. U.S. Gypsum
motion for leave to amend its complaint to Co., 828 F. Supp. 287 (D.N.J. 1993).
add claims under the RICO statute. Focusing on the causation requirement of
Prudential Ins. Co. of Am. v. U.S. Gypsum a RICO claim, the District Court stated
Co., 711 F. Supp. 1244 (D.N.J. 1989). that it “cannot rule as a matter of law” that
Prudential’s RICO claims thus form the causation did not exist between
sole basis for federal subject matter defendants’ alleged violations and
5
Prudential’s injuries. Id. at 296. It also After oral argument, the District Court on
ruled that “there are disputed issues of fact June 20, 2001 granted Gypsum’s motion
as to whether Prudential actually knew of for sum mary jud gment dismissing
its injury prior to 1984; and . . . the Prudential’s RICO claims as barred by the
defendants are entitled to argue to a jury statute of limitations. It also granted the
that Prudential should have known of its motion with respect to USMP on July 12,
injury prior to 1984.” Id. at 297. 2001. Noting developments subsequent to
its 1993 and 1994 opinions in both the
On June 9, 1994, the District Court Supreme Court and this court regarding
denied the motion for summary judgment when a civil RICO claim accrues, the
by Gypsum and another defendant, District Court held that Prudential “should
Asbestospray Corporation, to dismiss have known” of its injury before October
Prudential’s RICO claims on statute of 20, 1983, the relevant date for purposes of
limitations grounds, finding that disputed the four-year RICO statute of limitations.
issues of material fact existed as to Prudential Ins. Co. of Am. v. U.S. Gypsum
whether Prudential had knowledge of the Co., Nos. 87-4227, 87-4238 (D.N.J. June
elements of its RICO claims more than 20, 2001). In stating that “it should not
four years prior to filing the suit. have reserved the issue of what Prudential
Prudential Ins. Co. of Am. v. U.S. Gypsum should have known [regarding its RICO
Co., No. 87-4238 (D.N.J. June 9, 1994). claims] for trial” in its 1994 opinion, the
Based on its 1993 ruling, the District Court District Court explained:
also reserved the issue of what Prudential
should have known for trial. The District While Prudential’s 1993
Court then denied defendants’ summary mo tion for summary
judgment motions dismissing Prudential’s judgment raised the issue of
state law claims, although it did dismiss whether Grace and Gypsum
Prudential’s breach of warranty claims. could provide evidence
sufficient to show that
The parties proceeded to complete Prudential should have
pretrial discovery, and the District Court known of its injuries, Grace
entered its Final Pretrial Order in 1996. and Gypsum’s 1994 motion
Thereafter Gypsum, joined by W.R. Grace, for summary judgment
filed summary judgment motions to asked a different question:
dismiss Prudential’s RICO claims on
statute of limitations and substantive
grounds. 2 USMP joined in these motions.
voluntary relief pursuant to Chapter 11 of
the United States Bankruptcy Code. This
action therefore was automatically stayed
2
Subsequent to the filing of these as to W.R. Grace pursuant to 11 U.S.C. §
motions, W.R. Grace filed a petition for 362(a).
6
whether Prudential could The District Court also had supplemental
provide evidence sufficient jurisdiction over Prudential’s state law
to refute the claim that it claims pursuant to 28 U.S.C. § 1367. We
should have known of its have jurisdiction over the District Court’s
injuries. final judgment pursuant to 28 U.S.C. §
1291.
App. at 34a (emphasis in original).
We exercise plenary review of a
The District Court then concluded district court’s grant of summary
that based on its reconsideration of the judgment. SEC v. Hughes Capital Corp.,
record and facts before it, and in light of 124 F.3d 449, 452 (3d Cir. 1997).
changes in the law regarding the accrual Summary judgment may be granted “if the
period under RICO, Prudential did not pleadings, depositions, answers to
satisfy its summary judgment burden with interrogatories, and admissions on file,
respect to that latter question. App. at 53a. together with the affidavits, if any, show
Having thus dismissed Prudential’s only there is no genuine issue as to any material
federal claim, the District Court declined fact and that the moving party is entitled to
to exercise supplemental jurisdiction and a judgment as a matter of law.” Fed. R.
dismissed Prudential’s remaining state law Civ. P. 56(c).
claims against Gypsum and USM P without
prejudice. Shortly thereafter, both DISCUSSION
Gypsum and USM P filed for bankruptcy.
Although the RICO statute does not
Prudential timely appealed the June expressly provide a statute of limitations,
20, 2001 order after securing a stay of the Supreme Court, by analogy to the
Gypsum’s and USMP’s federal bankruptcy Clayton Act, has established a four-year
proceedings as well as certification by the limitations period for civil RICO claims.
District Court under Federal Rule of Civil Agency Holding Corp. v. Malley-Duff &
Procedure 54(b). The only issue on appeal Assoc. Inc., 483 U.S. 143, 156 (1987).
is whether the District Court erred in Prudential filed this action on October 20,
dismissing, on summary judgment, 1987. Therefore, we may uphold the
Prudential’s RICO claims as time-barred. District Court’s summary judgment order
only if the statute of limitations for
JURISDICTION AND Prudential’s RICO claims did not begin to
STANDARD OF REVIEW accrue before October 20, 1983.
The District Court properly A. Test for Accrual of Civil RICO
exercised jurisdiction over this action Claims
under 28 U.S.C. § 1331 based on
Prudential’s claims arising under RICO. In Malley-Duff, the Supreme Court
7
left open the question of when the statute statute of limitations begins to run when
of limitations for civil RICO claims begins the plaintiff knew or should have known
to accrue. It has not resolved that issue but that each element of a civil RICO claim
it has rejected several standards this court existed: the injury, the source of the injury,
had used to determine when the RICO and the pattern of activities prohibited
statute of limitations period accrues. under RICO causing the injury. Id. at 554.
Although most of the Courts of Appeals at However, the Court did not “settle upon a
that time applied forms of an “injury and final rule,” noting that among available
pattern discovery rule” for determining the remaining alternatives were the injury
accrual of RICO claims, this court applied discovery rule and the injury occurrence
a “last predicate act” exception under rule. Id. at 554 n.2.
which “[if], as a part of the same pattern of
racketeering activity, there is further injury After Rotella, we adopted the injury
to the plaintiff or further predicate acts discovery rule in Forbes v. Eagleson, 228
occur, . . . the accrual period shall run from F.3d 471 (3d Cir. 2000), holding that in
the time when the plaintiff knew or should determining statute of limitations issues in
have known of the last injury or the last civil RICO claims “we must determine
predicate act which is part of the same when the plaintiffs knew or should have
pattern of racketeering activity. The last known of their injury.” Id. at 484. In
predicate act need not have resulted in addition to the injury, the plaintiffs must
injury to the plaintiff but must be part of also have known or should have known of
the same ‘pattern.’” Keystone Ins. Co. v. the source of their injury. Id. at 485. As
Houghton, 863 F.2d 1125, 1126 (3d Cir. we explained in Forbes, “nothing more”
1988). In Klehr v. A.O. Smith Corp., 521 than these two requirements “was required
U.S. 179 (1997), the Supreme Court to trigger the running of the four-year
rejected the Third Circuit exception. The limitations period [of a civil RICO
Court reasoned that such a test would claim].” Id. (citations omitted).
result in a limitations period longer than
that which Congress could have Prudential does not dispute that the
contemplated, as well as would improperly injury discovery rule is the governing legal
allow claimants to recover for injuries standard in this case. It quarrels, rather,
outside of the limitations period by with that rule’s application in this case.
“bootstrapping” them onto a later and Specifically, Prudential argues that, based
independent predicate act. Klehr, 521 U.S. on the record of this case, it could not have
at 187-90. known its injuries prior to October 20,
1983, and that in any event, the injury it
A few years later, in Rotella v. suffered must be an “actual” injury before
Wood, 528 U.S. 549 (2000), the Supreme the statute of limitations is triggered.
Court also rejected the “injury and pattern
discovery rule” itself, under which the B. Whether Prudential Should Have
8
Known of Its Injuries Prior to that included both past and future harm to
October 20, 1983 Prudential. More specifically, the
complaint alleges injuries that include
To evaluate Prudential’s argument, prospective damages for complying with
we start by looking to the injury it alleged federal regulations concerning the
in its amended complaint. App. at renovation, alteration, or demolition of
11,097a-11,153a. In that complaint, buildings containing ACMs:
Prudential alleges injuries:
Because of the potential
relating to abatement and health and contamination
building monitoring actions, dangers, plaintiffs have been
building survey and testing compelled to determine the
costs, tenant relocation extent to which asbestos-
c o s t s , opera t i o n s a n d containing materials are
maintenance program costs present in their buildings
for asbesto s-con tainin g and the extent to which the
m a terials before their buildings and their contents
removal from buildings, have been or may be
substantial disruption to contaminated with asbestos
their business, substantial fibers. Where such materials
property damage to their or contamination have been
property (such as carpeting, or are found, plaintiffs have
ceilings, curtains, etc.), and adopted or will have to
other costs associated with adopt, pursuan t to
t h e c o n t a m i n a ti o n o r governmental regulations
potential contamination of and common-law duties,
the buildings. Plaintiffs costly abatement measures
have also suffered and will to remove and replace,
suffer, among other enclose, encapsulate, or
damages, the loss of rental repair such materials in
income from the buildings order to eliminate the
during abatement potential asbestos health
procedures or due to hazard created by such
premature tenant departures, c o n t a mi n a t io n o f th e
and the diminution in the buildings.
commercial value of the
properties. App. at 11,107a. Prudential’s amended
complaint thus seeks recovery for both
App. at 11,108a (emphasis added). This past and future injuries caused by the
language explicitly states broad injuries presence of ACMs in Prudential’s
9
properties. incidents and tenant complaints in
Prudential’s own buildings should have
In holding that Prudential has not, also provided Prudential notice of the
and could not, produce evidence sufficient ACM -related injuries it alleges in the
to refute the defendants’ claims that amended complaint. At Five Penn Center
Prudential should have known of the injury in Philadelphia, Prudential knew that the
it alleged in its amended complaint prior to ACMs were used for fireproofing, and that
October 20, 1983, the District Court the ACMs were sources of potential future
reviewed government regulations and hazards; it sent a letter on September 29,
publications as well as evidence pertinent 1976 to the building’s seller, giving formal
to Prudential’s own buildings and notice that the seller was in breach of the
employees regarding the hazards of ACMs Agreement of Sale because, among other
and related precautions. Some of the things, “it appears that the building was in
evidence examined by the District Court is v i o l a ti o n of law pertain in g t o
recited in the introductory section of this concentration of air-borne asbestos on and
opinion. In reviewing the effect of prior to the date of settlement under said
government information regard ing Agreement of Sale.” App. at 936a.
asbestos on Prudential’s awareness of Colonial Penn, a major tenant in the
ACM hazards, it is important to note that building, complained in 1981that ACMs
Prudential is a very sophisticated company fell from ceiling in one of its offices, and
that operates a large casualty insurance Prudential incurred cleaning and
business and an extensive estate encapsulating expenses related to the
investment business. Such a sizable incident.
business operation not only provided
Prudential with more opportunities than an Similarly, Prudential was aware of
average plaintiff to access ACM-related the presence of ACMs in the IBM
information, but it should have also given Building in Jacksonville, Florida as early
Prudential a greater incentive to diligently as 1979, when tenant IBM requested
research and investigate any potential Prudential’s assistance in surveying the
injuries it may suffer through the presence fireproofing material in the building.
of ACM s in its own properties. As the Based on its own testing, IBM informed
District Court correctly pointed out, Prudential in January 1980 that a sample
because Prudential’s liability exposure was of the fireproofing material contained six
magnified by the large size of its real percent of Chrysotile asbestos. App. at
estate portfolio, “prudence dictates that 1055a. At Prudential’s own request, IBM
Prudential should have remained informed forwarded a copy of its asbestos and air
of its legal responsibilities.” App. at 43a. sample analyses to Prudential in March
1980. These incidents and tenant
Nor was Prudential obliged to rely complaints, combined with government
solely on government warnings. Multiple information, should therefore have
10
provided Prudential inquiry notice We note, however, that the injury
regarding the potential hazards of ACMs discovery rule in Forbes allows the
in its properties.3 limitations period of civil RICO claims to
accrue not only if Prudential actually knew
Despite the facts supporting the of its injuries, but also if Prudential should
District Court’s legal conclusion, have known of its injuries. Forbes, 228
Prudential argues that because these F.3d at 484. As the District Court
i n cidents did not reflect a c tual explained in its opinion, because Gypsum
contamination prior to 1984, they do not and USMP in support of their motions for
show the same type of injuries for which summary judgment provided sufficient
Prudential currently seeks damages. It evidence that Prudential “should have
contends that pre-1984 government known” before October 20, 1983 of the
regulations and information were not injuries it alleged in the amended
directly related to in-place ACMs, and that complaint, Prudential was required to
its actions with respect to building tenants provide sufficient evidence to refute that
merely demonstrated business decisions to claim in order to defeat summary
placate tenants rather than actual judgment. Given the above facts, we agree
awareness of potential hazards related to with the District Court that:
ACM s. These contentions are to support
Prudential’s principal argument that it had Prudential’s show ing
no reason to know of its ACM-related reg arding its actual
injuries until it took on the demolition of knowledge falls far short . .
the Chubb Building in 1984, when ACMs . of demonstrating why
in that building released sufficient asbestos P r u d e n t ia l r em ai n ed
fibers so as to contaminate its building. unaware of the potential
hazard asbestos posed in its
holdings. While the court
3 may accept for the purposes
As the proprietor of a large real estate
o f t h i s m o t i o n th a t
portfolio, Prudential should have also
Prudential was not aware of
become aware of ACM-related hazards
the EPA’s repea ted
through the existence of ACMs in other
warnings about the potential
Prudential properties not at issue in this
hazards of in-place asbestos
litigation. Evidence show, for example,
. . . such events should have
that Prudential was aware of the presence
triggered Prudential’s
of ACM s in Prudential Center, Boston as
inquiry into the hazards
early as 1978; it received multiple
posed by asbestos.
inquiries and from tenants, OSHA, and the
Massachusetts Office of Occupational
App. at 37a. For example, the EPA
Hygiene regarding ACM -related issues.
regulations on the removal of asbestos
App. at 50a-51a, 1006a-25a.
11
during building d emo litions were regarding the timing of its awareness of
promulgated in the 1970s. Therefore even ACM -related hazards, Prudential argues
if the demolition of the Chubb Building in that the Forbes standard requires actual,
1984 was the first demolition of any of rather than potential, harm to a civil RICO
Prudential’s buildings, it should have had plaintiff. It asserts that it suffered no
prior awareness, as a major real estate injuries either from its knowledge of the
investor, of the regulations and the ACM- existence of in-place ACMs in its
related danger to which they were aimed. properties or from the risk of injuries
As stated in an EPA training document stemming from those ACMs. Prudential
from February 1983: asserts that ACMs only cause injury when
they deteriorate and begin releasing
A building owner might hazardous levels of asbestos fibers that
choose to believe there is no contaminate buildings, and therefore it
problem in his/her building, suffered injury only when actual
but, as we have seen, it is contamination required it to address or
clearly prudent to find out remedy the hazards such contaminations
the facts. With the rising posed. Appellants’ Br. at 21-22.
public awareness of asbestos
hazards, most any building A s we prev iously no ted,
owner would be hard Prudential’s amended complaint clearly
pressed to justify n o seeks damages for both past and future
reasonable knowledge of the injuries. Consequently, Prudential cannot
hazard. also argue that the statute of limitations for
its RICO claims should not have begun to
App. at 46a. run until those injuries became “actual”
injuries and it needed to take remedial
Prudential also admits that some of measures and incurred expenses for
its own employees “had some awareness remediation. Such a legal rule would
of asbestos as an issue in certain of place too much discretion in the plaintiff’s
Prudential’s buildings during the late hands, and would be antithetical to the
1970s and early 1980s.” Appellants’ Br. “basic policies of all limitations
at 34. We therefore agree with the District provisions: repose, elimination of stale
Court that Prudential should have known claims, and certainty about a plaintiff’s
of the injuries alleged in its complaint opportunity for recovery and a defendant’s
prior to October 20, 1983. potential liabilities.” Rotella, 528 U.S. at
550. RICO’s provision of a civil remedy
C. Pruden tial’s “Actual Injury” was enacted to “turn [plaintiffs] into
Argument prosecutors, ‘private attorneys general,’
dedicated to eliminating racketeering
In addition to its factual contentions activity. . . . It would, accordingly, be
12
strange to provide an unusually long basic conjunction with the abatement of
limitations period that could only have the asbestos-containing materials in their
effect of postponing whatever public structures . . . .” Id. at 230. The injury
benefit civil RICO might realize.” Id. at analysis in that case, therefore, turned on
557-58. Prudential’s proposed “actual the interpretation of contract provisions
injury” standard would allow a civil RICO rather than on any statute of limitations.
plaintiff to control when the relevant
limitations periods accrue through its Similarly, the plaintiff in MDU
timing of the assessment, investigation, Resources Group v. W.R. Grace and Co.,
and correction of its injuries, thereby 14 F.3d 1274 (8th Cir. 1994), filed claims
producing precisely the long limitations under North Dakota state-law theories of
periods frowned upon in Rotella. negligence, strict liability, failure to warn,
and breach of warranty, and only sought
Prudential cites, as support for the recovery for the costs of removing ACMs
“actual injury” standard it puts forth, from one of its buildings. Id. at 1276. The
several federal and state cases supporting MDU court, therefore, focused on actual
its argument that in-place ACMs only asbestos contamination as the point when
cause injuries when they release hazardous injury occurs, because under North
levels of asbestos fibers into buildings. Dakota’s economic-loss doctrine MDU
Appellants’ Br. at 20-22. We note, could not have brought suit until the only
however, that it is Prudential itself that injury it asserted – the ACM-removal costs
chose to pursue redress under RICO for it already incurred – materialized. See id.
both monitoring and testing costs at 1279 n.8 (suggesting that the statute of
associated with potential contamination as limitations could have begun to run earlier
well as costs for abatement and repair in had MDU claimed different injuries).
its amended complaint. In contrast, the
plaintiffs in the cases cited by Prudential The different legal principles
confined their claims to costs of governing the claims and the limited
remediation, and pursued their redress scopes of injury involved in these cases
through state-law claims that require required different considerations for
different accrual analyses than used in calculating statute of limitations periods
RICO cases. The plaintiffs in Port that are not applicable to Prudential’s
Authority of New York and New Jersey v. broad RICO claims here. We therefore
Affiliated FM Insurance Co., 311 F.3d 226 join the District Court in rejecting
(3d Cir. 2002), for example, pursued their Prudential’s “actual injury” concept as it
asbestos claims under New Jersey state relates to the accrual of the statute of
law based on first-party insurance limitations for Prudential’s civil RICO
contracts rather than on RICO or tort claims.
liability grounds. They also sought
recovery only “for expenses incurred in D. Fraudulent Concealment
13
Finally, Prudential contends that the ( 3) whe the r ther e is
statute of limitations should have been sufficient evidence to
equitably tolled because defendants support a finding that
fraudulently concealed from Prudential plaintiffs were not aware,
that it could be or had been injured by in- nor should they have been
place ACMs manufactured by defendants. a w a r e , o f t h e f a c ts
It argues that despite long-standing supporting their claim until
knowledge of the adverse health effects of a time within the limitations
asbestos, defendants did not publicly period measured backwards
disclose these risks and instead advertised from when the plaintiffs
their products as safe in pamphlets, filed their complaint.
brochures, direct mailing catalogs, and
other forms of advertisement. Prudential Id. at 487 (emphasis in original).
contends that because of these efforts by
defendants to conceal hazards associated The Supreme Court has stated that
with ACM s, there exists a genuine issue of to equitably toll the running of a
material fact regarding fraudulent limitations period in the civil-RICO
concealment that is sufficient to toll the c o n t e x t b y c la i m i n g f ra u d u le n t
limitations period for its RICO claims. conce alme nt, plaintiff s mu st have
Appellants’ Br. at 9-14. exercised “reasonable diligence” to
discover their claim. Klehr, 521 U.S. at
In Forbes, we held that fraudulent 194. We also stated in Mathews v. Kidder,
concealment could be a basis for equitably Peabody & Co., Inc., 260 F.3d 239 (3d Cir.
tolling the RICO limitations period. 228 2001), where we rejected an equitable
F.3d at 486-88. At the summary judgment tolling claim after finding that the plaintiff
stage, a court must determine: should have known of its injuries, that
“[i]n order to avoid summary judgment,
(1) whether there is there must be a genuine issue of material
sufficient evidence to fact as to whether the Appellants exercised
support a finding that reasonable due diligence in investigating
defenda nts engaged in their claim.” Id. at 257.
a f f i r m a t iv e a c t s of
concealment designed to We conclude that Prudential has
m i slead the pla intiffs failed to satisfy the Forbes standard for
regarding facts supporting tolling the limitations period for its RICO
their. . .claim, (2) whether claims. Even assuming, as the District
there is sufficient evidence Court did, that Gypsum engaged in
to support a finding that fraudulent concealment, Prudential had not
p l a i n ti f f s e x e r c i s ed demonstrated that it exercised reasonable
reasonable diligence, and diligence in discovering or investigating its
14
injuries. As the discussion above shows, statute of limitations grounds and
irrespective of defendants’ attempts to dismissing Prudential’s remaining state
conceal from Prudential the hazards posed law claims without prejudice.
by ACM s in Prudential’s buildings,
Prudential had many other sources of
information sufficient to place it on
inquiry notice of such ACM-related
injuries. Prudential should have, for
example, given heed to government
warnings and regulations to undertake
surveys and testing of its buildings.
Moreover, as we noted in Mathews, “to
determine what constitutes ‘reasonable’
due diligence [for determining if a plaintiff
should have known of its injury], we must
consider the magnitude of the existing
storm warnings. The more ominous the
warnings, the more extensive the expected
inquiry.” 260 F.3d at 255. Here, given the
magnitude of Prudential’s commercial real
estate investments and the significance of
the threat ACMs posed to that investment,
a substantial and diligent investigation by
Prudential was called for prior to October
20, 1983. Its failure to have undertaken
such an investigation regarding ACM-
related hazards was, as a matter of law, the
failure to exercise due diligence. We
therefore conclude that the limitations
period for Prudential’s RICO claims was
not tolled under a fraudulent concealment
theory.
CONCLUSION
For the foregoing reasons, we will
affirm the District Court’s orders granting
Gypsum and USMP summary judgment on
15