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East Bay Municipal Utility Dist. v. FMC Corp.2/18/2003
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.
I. INTRODUCTION
Defendants and appellants Shell Oil Company and FMC Corporation challenge a jury verdict holding appellants strictly liable and liable in negligence for failed cold-water service pipes. These pipes were made out of a polybutylene resin manufactured by appellants. Plaintiff and respondent East Bay Municipal Utility District installed the pipes throughout its system. The jury awarded the District $7,397,250 and $2,033,944 against Shell and FMC respectively, a number reduced by 25% because of the District's comparative fault.
Shell argues that substantial evidence does not support the jury's strict liability and negligence findings. Shell also argues that, because the District was a "sophisticated commercial user" of the Shell resin, the District cannot recover in strict liability. Along similar lines, FMC argues that under the "raw material component part" doctrine, it cannot be held strictly liable for the use of its resin. Shell also attacks the trial court's decision to admit evidence of pipe failures in other water districts and in refusing to allow Shell to show the successful use of these same pipes elsewhere. Finally, Shell and FMC take issue with the jury's damages award, contending that, under the economic loss rule, damages were precluded and Shell argues that the judgment was excessive in any event.
On cross-appeal the District contends the trial court should have granted its request for prejudgment interest. With the exception of the decision denying the District post-verdict, prejudgment interest, which we reverse, we affirm the judgment.
II. FACTUAL AND PROCEDURAL BACKGROUND
Beginning in 1992, the District experienced a rash of burst polybutylene "service lateral" pipes throughout the East Bay. These pipes are small -- no more than 3/4 to 1 inch in diameter -- and are used to connect a customer's house to water mains located in the street. Beginning in the 1930's, and continuing to this day, most of the service laterals in the District's system are copper. Copper consistently lasts at least fifty or sixty years and seldom fails. In the late 1960's, the District began to install some service laterals made out of polybutylene resin. Today, about 70,000 of the District's 350,000-360,000 service lateral pipes are made out of polybutylene. In 1999, when this case went to trial, two-thirds of the service laterals in use throughout the District were still copper. A relatively small number are galvanized iron and polyethylene.
In the late 1960's, and intermittently until 1973, Wesflex, a small company in Richmond, California, bought polybutylene resin called PB 2110 from Petrotex, a company partly owned by FMC. In 1977, Wesflex began to purchase resin from Shell, which, by that time, had became the only polybutylene resin manufacturer in the country. The Shell resin is a black resin called PB 4101, which is similar to PB 2110. Wesflex extruded these resins into service laterals and then sold the finished pipes to the District. Both the FMC and Shell resins are "compounded," that is, FMC and Shell added antioxidants and other ingredients to the resin in order to make it appropriate for manufacture into service laterals.
In 1992, and increasing with each passing year, polybutylene pipes made out of the Shell and FMC resins began to fail. When the pipes
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