Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_06-cv-01020/USCOURTS-caed-1_06-cv-01020-2/pdf.json

Nature of Suit Code: 150
Nature of Suit: Overpayments &amp; Enforcement of Judgments
Cause of Action: 28:1441 Petition for Removal- Contract Dispute

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

PENNY NEWMAN GRAIN COMPANY, )

)

)

)

Plaintiff, )

)

vs. )

)

)

MIDWEST PAINT SERVICES, INC., )

et al., )

)

)

Defendant. )

)

)

No. CV-F-06-1020 OWW/DLB

ORDER DENYING DEFENDANT THE

GLIDDEN COMPANY DBA ICI

PAINT'S MOTION TO DISMISS

FOURTH CAUSE OF ACTION OF

FIRST AMENDED COMPLAINT

(Doc. 11) 

Plaintiff Penny Newman Grain Co., Inc. (Penny Newman) has

filed a First Amended Complaint for Breach of Contract, 

Negligence and Breach of Express Warranty (FAC). Named as

defendants are Midwest Paint Service, Inc. (Midwest), ICI Paints

(ICI), and Does 1-100. The FAC alleges that Penny Newman and

Midwest entered into a Painting Contract in June 2003 under which

Midwest agreed to provide the labor, supplies, insurance,

equipment and tools necessary to prepare, patch and paint a

storage facility consisting of concrete silos in Stockton,

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California (the Stockton Facility) for the sum of $336,500; that

Midwest began the process of preparing and repainting the

Stockton Facility in August 2003; that Midwest finished working

on the Stockton Facility in January 2004. The FAC further

alleges:

10. MIDWEST has at all times failed, refused

and neglected to perform according to the

terms of the Painting Contract, including the

specifications and provisions therein. More

specifically, MIDWEST negligently prepared

the surface of the Stockton Facility, painted

the Stockton Facility and/or selected a paint

wholly unsuitable for the purposes for which

it was used and which MIDWEST knew or should

have known was unsuitable for said

application. As a result of the foregoing

conduct of MIDWEST, large sections of the

paint applied to the Stockton Facility failed

to adhere to its surface, resulting in

blistering, flaking and in many instances,

the complete stripping of paint from the

surface of the Stockton Facility, exposing it

to the elements.

The Fourth Cause of Action is for negligence against defendant

ICI Paints and Does 51-100. The Fourth Cause of Action alleges

in pertinent part:

27. PENNY NEWMAN is informed and believes

that, prior to undertaking the painting of

the Stockton Facility, MIDWEST consulted with

a representative or representatives of ICI

PAINTS regarding its intent to use Devoe

Hydrosealer and High Build Acrylic Enamel in

the course of that project. PENNY NEWMAN is

further informed and believes, and thereupon

alleges that a representative or

representatives of ICI PAINTS specifically

advised MIDWEST that the foregoing Devoe

products were not suitable for the

application which MIDWEST intended to use

them for, e.g. the painting of the Stockton

Facility.

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28. Despite ICI PAINTS specific knowledge of

MIDWEST’s intention to use the foregoing

Devoe products in the repainting of the

Stockton Facility, and the fact that the

Devoe products were not suitable for such an

application, ICI PAINTS nevertheless sold the

foregoing Devoe products to MIDWEST for use

in the repainting of the Stockton Facility,

failed to provide any notice to PENNY NEWMAN

of the inappropriateness of the Devoe

products being used by MIDWEST, and failed to

take any other precaution in order to protect

PENNY NEWMAN from the foreseeable damages

resulting from the inappropriate Devoe sealer

and paint in the painting of its Stockton

Facility.

29. By virtue of ICI PAINTS’ having

manufactured the above-referenced Devoe

products, having been advised by MIDWEST of

the intended use for such products, and

selling the foregoing Devoe sealer and paint

products to MIDWEST with knowledge of their

intended use in the repainting of PENNY

NEWMAN’S Stockton Facility, ICI Paints owed a

duty of care to PENNY NEWMAN with respect to

such activities.

30. In acting as alleged hereinabove, ICI

PAINTS was careless, and negligent in

violation of its duties and obligations to

PENNY NEWMAN, as the owner of the Stockton

Facility. As a direct and proximate result

of the carelessness and the negligence of ICI

PAINTS, PENNY NEWMAN has been damaged as

alleged hereinabove. 

The FAC prays for “the costs of hiring experts to investigate and

analyze the damages in an amount according to proof at the time

of trial” and “the costs of restoration and repair to the

Stockton Facility according to proof at the time of trial”.

Defendant The Glidden Company dba ICI Paints moves to

dismiss the Fourth Cause of Action pursuant to Rule 12(b)(6),

Federal Rules of Civil Procedure, for failure to state a claim

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upon which relief can be granted.

A. Governing Standards. 

A motion to dismiss under Rule 12(b)(6) tests the

sufficiency of the complaint. Novarro v. Black, 250 F.3d 729,

732 (9 Cir.2001). Dismissal of a claim under Rule 12(b)(6) is th

appropriate only where “it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which

would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-

46 (1957). Dismissal is warranted under Rule 12(b)(6) where the

complaint lacks a cognizable legal theory or where the complaint

presents a cognizable legal theory yet fails to plead essential

facts under that theory. Robertson v. Dean Witter Reynolds,

Inc., 749 F.2d 530, 534 (9 Cir.1984). In reviewing a motion to th

dismiss under Rule 12(b)(6), the court must assume the truth of

all factual allegations and must construe all inferences from

them in the light most favorable to the nonmoving party. 

Thompson v. Davis, 295 F.3d 890, 895 (9 Cir.2002). However, th

legal conclusions need not be taken as true merely because they

are cast in the form of factual allegations. Ileto v. Glock,

Inc., 349 F.3d 1191, 1200 (9 Cir.2003). Immunities and other th

affirmative defenses may be upheld on a motion to dismiss only

when they are established on the face of the complaint. See

Morley v. Walker, 175 F.3d 756, 759 (9 Cir.1999); Jablon v. th

Dean Witter & Co., 614 F.2d 677, 682 (9 Cir. 1980) When ruling th

on a motion to dismiss, the court may consider the facts alleged

in the complaint, documents attached to the complaint, documents

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relied upon but not attached to the complaint when authenticity

is not contested, and matters of which the court takes judicial

notice. Parrino v. FHP, Inc., 146 F.3d 699, 705-706 (9th

Cir.1988).

B. Request for Judicial Notice.

In its reply brief, ICI requests that judicial notice under

Rule 201, Federal Rules of Evidence, be taken of the Third Party

Complaint of Midwest Paint Service, Inc. Against Norberg Paints,

Inc. filed in this action. (Doc. 15) In the Third Party

Complaint, Midwest alleges that Norberg Paints, Inc., an

authorized retailer of Devoe paint products, misrepresented to

Midwest that the Devoe paint products were appropriate for the

Stockton Facility, and alleges causes of action for negligent

misrepresentation and indemnity/contribution.

Judicial notice may be taken of a pleading filed in an

action as a matter of public record. Lee v. City of Los Angeles,

250 F.3d 668, 689 (9 Cir.2001). However, because a court may th

not take judicial notice of a fact that is “subject to reasonable

dispute”, Rule 201(b), Federal Rules of Evidence, judicial notice

will be limited to the fact of the allegations in the Third Party

Complaint and will not be considered for the truth of those

allegations in resolving this motion to dismiss. Lee, id. at

689-690.

C. Legal Duty/Duty to Warn. 

ICI argues that dismissal is appropriate because the FAC

does not articulate any legal duty ICI supposedly owed to Penny

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Newman. ICI contends the allegations that ICI “owed a duty of

care” and was “careless and negligent in violation of its duties

and obligations” to Penny Newman do not suffice because they fail

to identify any basis for a legal duty upon which Penny Newman

purports to sue ICI.

“‘Whether a duty of care exists is a question of law for the

court ... The existence of a duty ‘must be decided by the court

on a case-by-case basis.’” Briano v. Conseco Life Ins. Co., 126

F.Supp.2d 1293, 1297 (C.D.Cal.2000). “Whether a duty will be

imposed depends upon a number of factors, including: (1) the

extent to which the transaction was intended to affect the

plaintiff, (2) the foreseeability of the injury suffered, (3) the

degree of certainty the plaintiff was injured, (4) the connection

between the defendant’s conduct and the injury, (5) the moral

blame attached to the conduct, and (6) the policy of preventing

future harm.” Lincoln Alameda Creek v. Cooper Industries, Inc.,

829 F.Supp. 325, 328 (N.D.Cal.1992), citing Biakanja v. Irving,

49 Cal.2d 647, 650 (1958). In Ileto v. Glock, Inc., 349 F.3d

1191 (9 Cir.2003), rehearing en banc denied, 370 F.3d 860 (9 th th

Cir.2004), cert. denied sub nom. China North Industries Corp. v.

Ileto, 543 U.S. 1050 (2005), the Ninth Circuit explained:

Whether a legal duty arises ‘is a question of

law which is simply an expression of the sum

total of the policy considerations that lead

a court to conclude that a particular

plaintiff is entitled to protection.’ ... A

critical part of the determination of whether

a particular plaintiff is entitled to

protection is whether she is ‘foreseeably

endangered by defendant’s conduct.’ ... The

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California Supreme Court has explained that

the legal duty to exercise due care so as not

to create an ‘unreasonable risk of injury to

others’ extends to the ‘class of persons who

it is reasonably foreseeable may be injured

as the result of the actor’s conduct[.]’ ... 

The court continued, ‘[i]t is well

established, moreover, that one’s general

duty to exercise due care includes the duty

not to place another person in a situation in

which the other person is exposed to an

unreasonable risk of harm through the

reasonably foreseeable conduct (including the

reasonably foreseeable negligent conduct) of

a third person.’

Penny Newman notes the allegations in the FAC that Midwest

consulted with representatives of ICI regarding the use of the

Devoe products to paint the Stockton Facility and that ICI knew 

prior to the painting of the Stockton Facility that the use of

the Devoe products was inappropriate for that specific

application and so advised Midwest. Despite ICI’s alleged

knowledge of both the specific project to be painted and the

unsuitability of the Devoe products for that job, ICI proceeded

to sell those products to Midwest, without taking any precaution

to prevent Penny Newman from being harmed. Penny Newman asserts

that the factors upon which California law bases the existence of

a duty of care are clearly present in the allegations of the FAC:

The transaction between MIDWEST and [ICI],

the sale of paint products despite an

improper application, was clearly intended to

effect PENNY NEWMAN as an owner of the

facility to be painted. Moreover, the

transaction between MIDWEST and [ICI] did not

take place in the abstract. [ICI] was fully

aware of MIDWEST’s intent to use

inappropriate paint products in conjunction

of the painting of the Stockton Facility. In

short, [ICI] knew both the specific project

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in which the paint products were to be

utilized and the owner of that project at the

time of their sale to MIDWEST.

... Despite having advised MIDWEST of the

fact that the paint products MIDWEST proposed

to use in painting the Stockton facility

[sic] was wrong for such an application,

[ICI] sold that same paint to MIDWEST without

apparent hesitation. As a result, injury to

PENNY NEWMAN was ... foreseeable ....

That PENNY NEWMAN has been injured [because]

under the allegations of the [FAC], it has

spent well in excess of $300,000 repainting

its Stockton Facility with paint which should

never have been used for that application. 

In addition, PENNY NEWMAN is faced with the

process of stripping the improperly utilized

paint products sold by [ICI] to the extent

that the paint has not already fallen off,

and incurring additional expense to repeat

the entire painting process. That injury ...

would not have taken place had [ICI] taken

either of two courses of action, neither of

which would have significantly burdened it. 

[ICI] could have either refrained from

selling paint products which it knew were

going to be improperly utilized. 

Alternatively, since it was aware that the

project at issue was the painting of [the]

Stockton Facility, it could have contacted

PENNY NEWMAN and advised them that they did

not approve the use of Devoe Hydrosealer and

Hi-Build Acrylic Enamel for the repainting of

the Stockton Facility.

The conduct of [ICI] as alleged in the [FAC]

is unquestionably blameworthy. [ICI] knew of

MIDWEST’s intention to proceed to use their

paint products improperly, facilitated the

improper use of those products, reaped the

profit from the sale of its paint products

and then apparently sat idly by while its

paint products were applied to the Stockton

Facility and, inevitably, failed.

Finally, Penny Newman argues, imposition of a duty of care in

this case will further the policy of preventing future harm:

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The case before this Court involves a seller

with specific knowledge of the

inappropriateness of its product for a

planned application, the buyer of the

product’s intention to use that product in an

inappropriate manner, and the identity of the

entity that would be harmed by the third

party’s misconduct. Under those

circumstances, a product manufacturer should

be deterred from selling a product for an

application as to which the product is

unsuitable.

ICI further argues that it did not owe a duty to warn Penny

Newman. In so arguing, ICI relies on Persons v. Salomon North

America, Inc., 217 Cal.App.3d 168 (1990). 

Persons involved an action by a skier against the

manufacturer of rented ski bindings that were incompatible with

the thermoplastic ski boots plaintiff owned, causing her injury

when she fell. The trial court denied plaintiff’s motion for a

partial directed verdict on the issue of the manufacturer’s duty

to warn the plaintiff. The Court of Appeal affirmed and noted

“in failure to warn cases where the product is both flawlessly

designed and manufactured, the defect is not inherent in the

product; rather, the product is rendered defective because of the

actions of the manufacturer in failing to adequately warn of the

dangerous condition.” 217 Cal.App.3d at 174-175. The Court of

Appeal explained in pertinent part:

[C]ourts have recognized that the test for

failure to warn under strict liability

contains a standard of reasonableness ...

Factors such as ‘the normal expectations of

the consumer as to how the product will

perform, degrees of simplicity or

complication in the operation or use of the

product, the nature and magnitude of the

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danger to which the user is exposed, the

likelihood of injury, and the feasibility and

beneficial effect of including a warning’

must be considered to determine whether a

warning is necessary ....

Another circumstance which should be

considered is the reliability of a third

party, e.g., a business intermediary, to

convey the warning to the ultimate user. 

This factor is contained in comment n to

section 388 of the Restatement Second of

Torts. Although comment n relates to a

product liability cause of action for

negligent failure to warn where the

manufacturer alerted only the intermediate

distributors, we conclude that its factors

make it clear that the touchstone of

liability under a strict liability cause of

action for failure to warn is reasonableness

and relied on concepts common to those found

in negligence ....

217 Cal.App.3d at 175. The Court of Appeal concluded:

[T]he evidence in this case sufficiently

established that a direct warning to

plaintiff would have been ineffective, and

thus unnecessary, because of the ultimate

user’s lack of ability to make an informed

judgment from such notice and the fact that

the skier necessarily relies on the knowledge

and technical expertise of the ski shop in

selecting rental skis and bindings and making

proper adjustments to set the bindings at an

appropriate release level based on the

skier’s height, weight and skiing ability.

When a manufacturer or distributor has no

effective way to convey a product warning to

the ultimate consumer, the manufacturer

should be permitted to rely on downstream

suppliers to provide the warning. ‘Modern

life would be intolerable unless one were

permitted to rely to a certain extent on

others doing what they normally do,

particularly if it is their duty to do so.’

....

Here, Cornice was in the business of renting

skis and bindings. It had an independent

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duty to exercise reasonable care in supplying

this equipment and was itself subject to

strict liability for failure to warn its

customers of the dangerous propensities of

articles it rented ....

The evidence establishes that Salomon 444

bindings do not pose a danger unless used

with nonstandard or untreated thermoplastic

boots. Once it has distributed its bindings

to rental shops such as Cornice, Salomon has

no practical way, other than warning and

educating the rental shops of the danger, to

control its product to see that the bindings

are not used with untreated thermoplastic

boots. Moreover, issuance of an effective

warning depends upon proper identification of

the skier’s boots. Salomon cannot be

expected to know the identity of the ultimate

user of its rental bindings, much less the

type of boot the consumer is using. However,

the ski shop technician has direct contact

with such customer and has the ability,

applying Salomon’s technical manual with

seminar training, to identify a customer’s

boot, assess its compatibility with Salomon

bindings, lubricate the boot if necessary and

set a safe release level.

Having provided a warning to Salomon dealers,

defendant had a reasonable basis to believe

Cornice would pass along the product warning

and was justified in relying upon Cornice to

perform its independent duty to warn as

required by law ....

In sum, we find that the evidence is

sufficient to establish that Salomon did not

have a duty, as a matter of law, to warn

plaintiff ....

217 Cal.App.3d at 177-178.

ICI argues that the facts of Persons are similar to those

alleged in the FAC and that its reasoning applies:

Here, Plaintiff alleges without equivocation

that ICI warned Midwest - an admittedly

sophisticated intermediary - that its paint

was unsuitable for use on the Stockton

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Facility ... In providing this statement to

Midwest, ICI discharged its duty to warn

under California law and no additional duty

to warn Plaintiff exists.

Penny Newman responds that the Fourth Cause of Action is not

premised solely on a duty to warn:

Such a warning only became necessary because

[ICI] chose to proceed with the sale of its

paint products to MIDWEST, despite its

knowledge of the fact that MIDWEST intended

to use them on an inappropriate application. 

As a result, [ICI] could have avoided

breaching its duty to PENNY NEWMAN by either

refraining from selling the product in the

first place, or in the alternative, at least

providing PENNY NEWMAN with the same warning

which it provided to MIDWEST, so that PENNY

NEWMAN could take whatever cautions it deemed

appropriate.

Penny Newman further argues that Persons is distinguishable

because ICI was aware that the Devoe products were to be used by

Midwest to paint Penny Newman’s Stockton Facility. Therefore,

ICI, unlike Salomon, had multiple, simple, and practical methods

by which it could have warned Penny Newman which do not involve

product labeling or packaging. Furthermore, Penny Newman notes,

the Fourth Cause of Action is not based on strict liability for 

failure to warn:

The paint products sold by [ICI] to MIDWEST

were not, per se, defective with or without a

warning. They were simply unsuitable for the

application as to which [ICI] knew MIDWEST

intended to use its paint products. The

purpose of notice to MIDWEST in this case

would not ameliorate any defects or any

particular qualities in [ICI’s] paint

products. Rather, notice to PENNY NEWMAN

would have prevented their usage altogether

by alerting PENNY NEWMAN to the unsuitability

of the paint being sold to MIDWEST. 

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Moreover, while Salomon may have been able to

reasonably rely on the assumption that an

installer/renter would follow the warnings

and instructions provided with its ski

bindings, [ICI], at the time that it sold the

paint products to MIDWEST, knew that MIDWEST

was disregarding its warning and proceeding

to utilize the paint products for an improper

application.

ICI replies that the two primary factors in evaluating

whether a product manufacturer owes a duty to warn the ultimate

consumer when the manufacturer has already conveyed an adequate

warning to a sophisticated intermediary compels a finding that

ICI discharged its duty to warn when it allegedly advised Midwest

that the selected paint was unsuitable for the Stockton Facility.

Looking to the likelihood that Midwest would convey that

information to Penny Newman, ICI argues:

Plaintiff alleges that it hired Midwest to

select and use ‘suitable’ paint for the job

... It did not hire ICI for either of these

tasks. Nor is there any allegation that

Plaintiff ever sought ICI’s advice or

guidance with regard to such paint selection. 

Thus, not only is it likely that Midwest

would heed or convey ICI’s alleged warning,

Midwest was contractually-obligated [sic] to

Plaintiff to do so. Midwest also is alleged

to be a highly-skilled [sic] painting

contractor ‘who specializes in the painting

of grain elevators and mills’ and, as such,

it warranted to Plaintiff its ‘work will be

completed in a good and workmanship like

manner [sic].’ ... ICI, thus, was entitled to

rely on Midwest to exercise its skill and

judgment and perform the job, for which it

was hired, in a competent and workmanlike

manner ....

ICI refers to Carmichael v. Reitz, 17 Cal.App.3d 958 (1971),

wherein a drug manufacturer did not have a duty to warn the

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patient in part because a sophisticated intermediary, i.e., the

physician, constituted an “intervening party” for purposes of

conveying a manufacturer’s warning to the ultimate consumer:

The doctor is intended to be an intervening

party in the full sense of the word. Medical

ethics as well as medical practice dictate

independent judgment, unaffected by the

manufacturer’s control, on the part of the

doctor.

17 Cal.App.3d at 988. ICI also refers to Stevens v. Cessna

Aircraft Company, 115 Cal.App.3d 431 (1981), holding that the

aircraft manufacturer did not have a duty to warn passengers

directly about an airplane’s weight restrictions, concluding that

“[i]n the airplane situation the passenger necessarily depends

upon the skill and judgment of the pilot to determine the load

capacity of the airplane in light of the flying conditions to be

encountered”, 115 Cal.App.3d at 434, and that “[i]t is the pilot

who has control of the airplane and the responsibility under

federal regulations to determine aircraft weight prior to

takeoff.” Id. at 433. ICI argues that the rationale of these

cases applies to the allegations of the FAC:

Midwest’s contractual obligations to

Plaintiff, combined with its alleged

expertise in painting grain mills, makes it

the intended ‘intervening party in the full

sense of the word.’ It is Midwest ‘who has

control’ of the job and the contractual

responsibility, commensurate with its

professional skill, to select the suitable

paint in light of the conditions that existed

at Plaintiff’s facility. ICI is not a

painting contractor; nor did Plaintiff hire

it to paint its facility or to select

suitable paint for the job. When ICI

allegedly ‘advised’ Midwest that its paint

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selection was ‘unsuitable’ for this job, ICI

rightfully was entitled to rely on Midwest to

perform its obligations in accordance with

its alleged expertise.

With regard to the feasibility and effectiveness of warning

the consumer directly, ICI argues:

Just like the doctor in Carmichael and the

pilot in Stevens, the ‘ordinary consumer’ of

ICI’s paint is not Plaintiff, but rather

Midwest. Just like the doctor and the pilot,

Midwest is alleged to possess a high degree

of sophistication and experience in painting

grain elevators and mills ... The judgment

about which paint is most suitable for

Plaintiff’s grain silos is thus best left to

the ‘skill and judgment’ of Midwest, the

specialized painting contractor who Plaintiff

hired specifically for this purpose.

In particular, the judgment about which paint

is most suitable for a certain job must be

based on many factors which typically are

unique to that job - e.g. environmental

conditions, conditions of surfaces to be

painted, etc. - and cannot be made by a

remote manufacturer. Instead, that judgment

must be made by the on-site contractor who is

in the best position and has the expertise to

evaluate these factors. It would impose an

unfeasible and onerous burden on a paint

manufacturer to be familiar with the numerous

conditions that may exist at each jobsite

throughout the country where its products

ultimately may be used. Thus, like

determining appropriate loads for an airplane

or prescribing medicine for a particular

patient, evaluating the factors relevant to

selecting the appropriate paint for

Plaintiff’s silos is better left to Midwest,

the skilled profession contractor who

Plaintiff hired to perform precisely that

job.

The fact that a manufacturer may know the

identity of the end-user does not operate to

create the duty Plaintiff seeks to enforce

here. Otherwise, the manufacturer would find

itself in the untenable situation Plaintiff

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proposes where it must substitute its

judgment for that of the contractor hired to

do the job so as to avoid potential liability

to an ultimate consumer. Such an

intervention would not be effective or

desirable. Interjecting itself into the

contractual relationship between Plaintiff

and Midwest ... could create potential

liability for ICI. If ICI had done as

Plaintiff advocates, thereby undermining

Midwest’s recommendations and expertise,

Midwest could take the position that ICI

interfered with its contractual relationship

and impugned its reputation as a specialty

painting contractor. 

ICI further argues that Penny Newman’s assertion that ICI

should have enforced its alleged advice to Midwest by withholding

the sale of the Devoe products to Midwest is not a viable

alternative. ICI refers to Groll v. Shell Oil Company, 148

Cal.App.3d 444 (1983). In Groll, a boy who used stove and

lantern fuel to light a fireplace, resulting in personal injury,

brought a products liability action against the manufacturer of

the fuel. The manufacturer sold the fuel in bulk, accompanied by

a data sheet which adequately warned of the fuel’s dangerous

propensities. The fuel was resold to a distributor who packaged

it in individual containers and provided a warning on the

container that the fuel was extremely flammable and should be

kept away from heat and open flame. The trial court granted the

manufacturer’s motion for nonsuit on the ground that the

manufacturer did not owe or breach a duty to the plaintiff. In

affirming, the Court of Appeals cited Carmichael v. Reitz and

Stevens v. Cessna Aircraft Co. as well as Walker v. Stauffer

Chemical Corp., 19 Cal.App.3d 669 (1971) in holding that the

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manufacturer did not have a duty to warn the consumer directly:

Since respondent manufactured and sold BT-67

in bulk, its responsibility must be absolved

at such time as it provides adequate warnings

to the distributor who subsequently packages,

labels and markets the product. To hold

otherwise, would impose an onerous burden on

the bulk sales manufacturer to inspect the

subsequent labeling of the packaged product. 

In addition the manufacturer would have

severe enforcement problems if the bulk

product purchaser failed to adhere to the

recommended warnings.

148 Cal.App.3d at 449. ICI argues that the same situation is

presented here:

First, the [Third Party Complaint]

demonstrates that ICI did not sell directly

to Midwest but rather Midwest purchased the

paint from an authorized retailer, Norberg. 

Thus, under Plaintiff’s theory, ICI would

have been required to withhold sales of its

paint to one of its authorized retailers - a

clearly improper and likely illegal action. 

Second, to recognize such an obligation would

confer on ICI authority over Midwest which it

does not have. Simply put, the law does not

authorize a manufacturer like ICI to refuse

to sell its product to a painting contractor.

ICI further contends that cases which have imposed a duty to

warn the ultimate consumer typically involve tangible items that

could bear a warning the ultimate consumer could read and heed. 

See Groll, supra, 148 Cal.App.3d at 449. Here, ICI argues:

The ultimate consumer who, like here, hires

an experienced painting contractor, will not

see the paint can and is in no position to

read any warnings. This consideration

applies even more forcefully in this case

where the alleged ‘advice’ appears to have

been an oral statement made directly to

Midwest and not an alleged deficiency in

written warning language on the paint can.

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Whether or not a legal duty running from ICI to Penny Newman

existed may well depend upon the actual facts as established at

summary judgment or trial. Penny Newman alleges that ICI did

warn Midwest that the Devoe products were unsuitable for the

Stockton Facility but nonetheless sold those products to Midwest

without taking any additional action. However, Midwest alleges

that ICI, through its authorized retailer, Norberg, did not

advise or warn Midwest that the Devoe products were unsuitable

for the Stockton Facility. Until this factual dispute is

resolved, the existence of a legal duty running from ICI to Penny

Newman to warn Penny Newman or to desist from the sale of the

Devoe products to Midwest cannot be determined. Even if ICI

advised Midwest that the Devoe products were not suitable to the

Stockton Facility, Midwest, in the exercise of its professional

judgment and experience, could have disagreed. Does a legal duty

of care run from ICI to Penny Newman under that circumstance? 

How specific does the advice have to be before such a duty

arises? Does imposition of a legal duty essentially make ICI the

insurer of the performance of the contract between Penny Newman

and Midwest? If such a legal duty is determined to exist, the

scope of that duty is problematic and may well depend upon the

actual underlying facts. Arguably, imposition of a duty on ICI

to warn Penny Newman could result in potential liability to ICI

for, as an example, interference with the contract between Penny

Newman and Midwest. In addition, whether or not ICI had any

legal duty to Penny Newman to refrain from selling the Devoe

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products to Midwest may well depend upon the actual facts. 

Therefore, although ICI’s arguments raise serious reservations

about the imposition of a duty of care running from ICI to

Midwest, it cannot be concluded at the pleading stage that such a

duty of care does or does not exist as a matter of law. 

D. Economic Loss Rule.

As noted, the FAC prays for “the costs of hiring experts to

investigate and analyze the damages in an amount according to

proof at the time of trial” and “the costs of restoration and

repair to the Stockton Facility according to proof at the time of

trial”.

ICI moves for dismissal of the Fourth Cause of Action on the

ground that California’s “economic loss rule” bars this claim.

In Seely v. White Motor Co., 63 Cal.2d 9, 18 (1965), the

California Supreme Court held that the plaintiff could not

recover in strict liability or negligence for the cost of

repairing the defective truck or for business income lost because

the truck could not make deliveries. “Even in actions for

negligence, a manufacturer’s liability is limited to damages for

physical injuries and there is no recovery for economic loss

alone.” Id. “‘”Economic” loss or harm has been defined as

“damages for inadequate value, costs of repair and replacement of

the defective product or consequent loss of profits - without any

claim of personal injury or damages to other property ....”’”

Sacramento Regional Transit Dist. v. Grumman Flxible, 158

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Penny Newman asserts that the damages sought by the FAC are 1

not solely “economic damages”, because the FAC alleges that the

Stockton Facility has been exposed to the elements and will have to

be stripped of the Devoe products resulting in additional costs and

wear and tear on the Stockton Facility. Although ICI replies that

wear and tear to the Stockton Facility is not alleged in the FAC

and that, even if it were, “that allegation would fail for wont

[sic] of any meaningful specificity or alleged causal relationship

to the alleged paint failure”, resolution of this issue is not

necessary at this juncture given denial of this aspect of the

motion to dismiss. 

20

Cal.App.3d 289, 294 (1984).1

Penny Newman argues that, under the circumstances presented

by this case, California law allows the recovery of economic

damages under negligence. 

In Biakanja v. Irving, supra, 49 Cal.2d 647, the California

Supreme Court held that a defendant’s negligent performance of a

contractual obligation resulting in damage to the property or

economic interests of a person not in privity could support

recovery if the defendant was under a duty to protect those

interests. The factors looked to in determining the existence of

such a duty are identical to those set forth above, i.e., (1) the

extent to which the transaction was intended to affect the

plaintiff, (2) the foreseeability of the injury suffered, (3) the

degree of certainty the plaintiff was injured, (4) the connection

between the defendant’s conduct and the injury, (5) the moral

blame attached to the conduct, and (6) the policy of preventing

future harm. In Biakanja, the Supreme Court concluded that the

defendant notary owed a duty to an intended beneficiary not to

mishandle the will’s drafting and solemnization, attaching

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particular importance to the fact that the end and aim of the

notary’s services to the testator was to provide for the passing

of the estate to the plaintiff and to the high impropriety and

need to prevent the unlicensed practice of law. Aas v. Superior

Court, 24 Cal.4th 627, 644 (2000). 

In J’Aire Corporation v. Gregory, 24 Cal.3d 799 (1979), the

Supreme Court applied the Biakanja factors to conclude that the

tenant of a building used as a restaurant could state a cause of

action for negligence against a renovation contractor hired by

the building’s owner for business income lost when the contractor

failed to complete the project with due diligence. Applying the

Biakanja factors, the Supreme Court held that a “special

relationship” permitting recovery of economic losses existed

between the contractor and the tenant. The Supreme Court held

that the Biakanja factors, in combination with “ordinary

principles of tort law such as proximate cause”, were “fully

adequate to limit recovery” of purely economic damages “without

the drastic consequence of an absolute rule which bars recovery

in all such cases.” Id., 24 Cal.3d at 808. In Platte Anchor

Bolt, Inc. v. IHI, Inc., 352 F.Supp.2d 1048, 1052-1053

(N.D.Cal.2004), the District Court explained:

Despite the general rule regarding economic

loss, California law recognizes a limited

exception. The California Supreme Court has

‘held that a defendant’s negligent

performance of a contractual obligation

resulting in damage to the property or

economic interests of a person not in privity

[can] support recovery if the defendant was

under a duty to protect those interests.’ ...

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This exception was first articulated in

Biakanja, a case in which the state supreme

court held that a notary public was under a

duty to exercise due care to protect a will’s

devisee, despite the absence of privity

between the notary public and the devisee ...

The exception was further clarified in J’Aire

Corp. v. Gregory ..., which articulated a

six-factor test to determine whether such an

extra-contractual duty exists. When the

J’Aire test is met, the defendant is deemed

to have a ‘special relationship’ with the

plaintiff and may be liable to the plaintiff

in negligence for economic damages ....

Penny Newman contends that the same factors that establish a

duty of care on the part of ICI, see discussion supra, also

support a finding that a “special relationship” exists which

gives Penny Newman the right to recover economic damages:

[A]s alleged in the [FAC], [ICI] knew the use

to which its paint products was to be made,

knew that its customer, MIDWEST, was aware of

the unsuitability of the paint products it

was purchasing for the intended application,

and knew that its customer despite having

been warned of the unsuitability intended to

proceed with the painting of PENNY NEWMAN’s

facility with the unsuitable [ICI] paint

products. Nevertheless, [ICI] proceeded to

supply MIDWEST with inappropriate paint

products, and made no effort to provide PENNY

NEWMAN with an opportunity to protect itself. 

Under such circumstances, a ‘special

relationship’ exists sufficient to justify an

award of economic damages as a result of

[ICI’s] negligence.

ICI replies that existence of a “special relationship”

between Penny Newman and ICI need not be reached because “the

condition precedent to the application of this exception - i.e.

that ICI tortuously breached a contract with Midwest - is

entirely absent in this case.” Relying on the allegations of 

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Midwest’s Third Party Complaint against Norberg, ICI contends

that it is not in contractual privity with Midwest and,

therefore, could not have tortuously breached a contract with

Midwest. 

ICI cites no authority specifically requiring a contractual

relationship between parties such as ICI and Midwest as a

prerequisite to the recovery of economic loss damages by a party

such as Penny Newman and no such authority has been discovered. 

Given the absence of this authority and the legal standards

governing resolution of a motion to dismiss under Rule 12(b)(6),

dismissal on this ground as a matter of law is not appropriate.

E. Conclusion.

For the reasons set forth above, Defendant The Glidden

Company dba ICI Paint’s motion to dismiss the Fourth Cause of

Action is DENIED at the pleading stage.

IT IS SO ORDERED.

Dated: November 8, 2006 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

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