Based on a recent Court of Appeal decision, subcontractors should exercise considerable care in selecting their products that are incorporated into a home, commercial building, and most likely, any work of improvement.  In Hernandezcueva v. E.F. Brady Co., Inc., the Court of Appeal, Second District, held that a subcontractor who bought and installed defective drywall and joint compound was liable for damages under a strict liability theory.  This holding undercuts what generally had been characterized as the “per se immunity” rule afforded to subcontractors articulated in the decision of La Jolla Village Homeowners’ Assn. v. Superior Court (1989) 212 Cal.App.3d 1131 that held that subcontractors could not be liable under a strict liability theory.

In Hernandezcueva, Plaintiff sued E. F. Brady, a plastering and drywall installer, among other defendants, for asbestos related injuries sustained during his work as a janitor at a building owned by Fluor.  E.F. Brady was a subcontractor on the Fluor complex and was paid under the contract for labor and materials.  Initially, E.F. Brady used Kaiser “all purpose” joint compound and later changed to a joint compound made by Hamilton because concerns arose about the effectiveness of the Kaiser compound.

At trial, Plaintiff presented expert testimony that the Hamilton compound contained asbestos and that his exposure, as a result of E.F. Brady’s use of the product in the Fluor building, caused mesothelioma. E. F. Brady presented evidence that during the pertinent period, the building code did not prohibit the use of drywall compound that contained asbestos and that asbestos did not become a “hot topic” until the 1980’s.  E.F. Brady’s motion for nonsuit on the strict liability, misrepresentation and intentional failure to warn claims was granted and Plaintiff appealed the trial court’s order on the strict liability claim.

In evaluating whether the doctrine of strict liability should apply to a subcontractor, the Court noted that the doctrine makes manufacturers strictly liable for injuries caused by their defective products.  The doctrine was later extended to those parties “passing the product down the line to the consumer” as the rationale was that retailers, wholesalers and developers could bear the cost of the risk.  However, the “stream of commerce” theory was not limitless and required that a party “play more than a random and accidental role in the overall marketing enterprise of the product.”  Thus, the Court in LaJolla Village, supra, had previously held that a subcontractor was not liable under a strict liability theory.

In rejecting a blanket prohibition against applying the theory to subcontractors, the Court noted that imposing liability under a “stream of commerce” theory requires a fact intensive analysis.  Because E.F. Brady bought and installed the defective product, the Court focused its inquiry on the fact that it was providing a service which passed along the defective asbestos products to the ultimate user.

Finding that the trial court erred in granting the motion for nonsuit on the strict liability theory, the Court found persuasive the fact that by the mid-1970’s, E.F. Brady was doing heavy commercial projects for Fluor in excess of $2 million per job and this was a “common job” for E. F. Brady.  Further, E.F. Brady’s bids for these projects included materials and the bids included the costs of materials, along with sales tax and markups for the product.  While E.F. Brady’s use of the particular brand of drywall was regulated by the architect’s specifications, E.F. Brady was the party who originally selected the Kaiser compound and changed to the Hamilton compound after performance issues arose.  Given the size of the contracts and E.F. Brady’s bids, the Court found that a trier of fact could find that E.F. Brady derived a considerable benefit from supplying the products, was in a position to bear the costs of compensating for the injuries and to create change if necessary.

In remanding the matter back to the trial court, the Court found that the “per se” prohibition against strict liability being imposed upon subcontractors by complying with the architect’s specifications was not applicable as the fact-sensitive inquiry required by the “stream of commerce” theory dictated that E.F. Brady was more akin to that of a dealer than a subcontractor following specifications.

Mandy L. Jeffcoach is a partner in the Fresno office of McCormick Barstow LLP. She regularly represents public entities, contractors or subcontractors in construction litigation and handles commercial litigation and business dispute cases for a variety of clients throughout the San Joaquin Valley.  Mrs. Jeffcoach can be reached at (559) 433-1300.