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N.D. District Suffers Setback in Asbestos-Removal Suit

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A federal appeals court has set aside a damage award of $831,000 to a North Dakota school district for asbestos removal, citing the improper submission of a legal claim to the jury.

A panel of the U.S. Court of Appeals for the Eighth Circuit voted 2 to 1 to return the case, Tioga Public School District v. United States Gypsum Company, to the federal district court in North Dakota for a new trial.

The Tioga district had sued U.S. Gypsum for the costs of removing acoustical tiles produced by the company that were installed in two schools built in the late 1950's and early 1960's. The tiles contained asbestos, which federal officials later determined could pose a health risk.

Due to the high costs of removing asbestos, the district initially painted over the tiles to prevent the release of asbestos fibers. But some of the tiles eventually became "friable,'' or deteriorated to the point of posing a risk of releasing fibers, the district said.

The district sued U.S. Gypsum in state court, asserting five theories of liability for the costs of removing the asbestos. As an out-of-state company, U.S. Gypsum exercised its right to remove the case to federal court.

A jury decided in favor of the district without saying on which theory of liability it relied. It awarded the district $756,000 in compensatory damages and $75,000 in punitive damages. The firm appealed.

In the majority opinion for the appellate panel, Judge Pasco M. Bowman 2nd applied North Dakota law and found that one of the school district's legal claims was improperly submitted to the jury, thus requiring a new trial.

The district claimed, among other theories, that the firm's installation of asbestos tiles violated the state's nuisance law, which bars any action that "renders other persons insecure in life or in the use of property.''

"One issue on which the courts appear to agree,'' Judge Bowman wrote in the Jan. 28 opinion, "is that nuisance law does not afford a remedy against the manufacturer of an asbestos-containing product to an owner whose building has been contaminated by asbestos.''

However, the majority rejected a separate argument by U.S. Gypsum that the so-called doctrine of economic loss should also bar the district from recovering damages. Stated simply, that doctrine holds that purchasers may not recover damages when defective products cause merely an economic loss, as opposed to an injury.

The judge held that the firm could not escape liability under that theory because the district is seeking to remove its asbestos tiles based on their potential health risk, not because they were defective as acoustical tiles.

In dissent, Judge Earl R. Larson said that the nuisance claim was properly submitted to the jury.

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