In Webb v. Special Electric Co., the Supreme Court of California formally adopted the Sophisticated Intermediary Doctrine, clarifying what circumstances may permit a raw materials supplier to discharge its duty to warn consumers.
This case stems from an employee who was diagnosed with mesothelioma, after being exposed to asbestos through his job with Pyramid Pipe & Supply Co. (“Pyramid”). Pyramid had bought the materials containing asbestos from Johns-Manville and Special Electric Company, Inc. (“Special Electric”) brokered the sale. The employee brought suit against multiple defendants related to the asbestos exposure, including Special Electric. At trial, Special Electric argued that it had no duty to warn a sophisticated purchaser like Johns-Manville about the health risks posed by asbestos. Despite the jury returning a verdict in favor of the employee and apportioning fault to both Johns-Manville and Special Electric, the court granted Special Electric’s motions for a directed verdict and nonsuit, finding that Special Electric was not liable for failure to warn.
The California Court of Appeals held the ruling was improper because substantial evidence supported the employee’s claims that Special Electric breached its duty to warn JohnsManville and other foreseeable downstream users about the risks of asbestos exposure. The Supreme Court of California affirmed, holding that the record did not establish as a matter of law that Special Electric discharged its duty to warn by relying on a sophisticated intermediary.
The decision allows suppliers of raw materials to discharge their duty to warn by relying on intermediaries to warn downstream users. However, this defense is only available if the supplier conveys adequate warnings to the intermediary or if the intermediary is a sufficiently sophisticated purchaser. The supplier can then reasonably rely on the purchaser to convey adequate warnings to others, including those who encounter the material in a finished product.
Although Webb involved hazardous raw materials, the holding could apply broadly to many types of component suppliers. For shipments in California and any jurisdiction that follows the Sophisticated Intermediary Doctrine in accordance with the Third Restatement of Torts, a company may discharge its duty to warn end users about known or knowable risks in the use of its product if it provides adequate warning to the products’ immediate purchaser, or sells to a sophisticated purchaser that it knows is aware or should be aware of the specific danger, and further reasonably relies on the purchaser to convey appropriate warnings to downstream users who will encounter the product. Reasonable reliance will depend on the totality of circumstances, including the degree of risk posed by the material, the likelihood the intermediary will convey the warnings, and the feasibility of directly warning end users.