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Filed 11/30/04; pub. & mod. order 12/30/04 (see end of opn.)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

ANTHONY CADLO et al.,

Plaintiffs and Appellants,

A105444
v.

OWENS-ILLINOIS, INC.,

(San Francisco County

Super. Ct. No. 412325)
Defendant
and
Respondent.

Plaintiffs Anthony and Maxlyn Cadlo appeal a summary judgment in favor of
defendant Owens-Illinois, Inc., in their action for personal injuries and loss of consortium
based on Anthony Cadlo's exposure to Kaylo, an insulation product containing asbestos
once made by Owens-Illinois. The Cadlos contend the trial court erred in sustaining
Owens-Illinois's demurrer to their causes of action for fraud, deceit, and concert of
action. They also contend there are triable issues of fact regarding design defects in
Kaylo.
BACKGROUND

Facts
Owens-Illinois
began
developing Kaylo in the 1930s and placed it on the market
in 1943. In 1958 Owens-Illinois sold its Kaylo division to Owens-Corning Fiberglas
Corporation (OCF). With the sale Owens-Illinois ceased all manufacture, sale, and
distribution of Kaylo.

Anthony Cadlo was born in December 1944. He served as a machinists mate in
the United States Navy aboard the USS Black from January 1965 to June 1968. While
working on the USS Black he was exposed to asbestos insulation, some of which may

1

have been Kaylo. It is undisputed that any Kaylo to which he was exposed was
manufactured only by OCF, not by Owens-Illinois.

The Cadlos married in May 1999. Anthony Cadlo was diagnosed with
mesothelioma in July 2002, and stopped working in August 2002 because of his disease.

Procedural History

The Cadlos' original complaint, filed in September 2002 against, inter alia,
Owens-Illinois, alleged negligence, strict liability, multiple intentional torts, and loss of
consortium.

As the Cadlos' complaint was ultimately amended, their 14th cause of action for
fraud and deceit (concealment) alleged: Owens-Illinois knew of and intentionally
concealed the hazardous nature of Kaylo throughout the period it manufactured Kaylo,
and approved and assisted Kaylo's purchaser, OCF, in continuing to conceal Kaylo's
hazards. OCF began placing inadequate cautionary labels on Kaylo products in 1966.
Owens-Illinois had an obligation to disclose the hazardous nature of Kaylo to the
consuming public. Anthony Cadlo reasonably relied on Owens-Illinois's concealment of
Kaylo's hazardous nature and its representations that Kaylo was safe and therefore took
no precautions to avoid Kaylo dust.

The Cadlos' 15th cause of action for fraud and deceit/negligent misrepresentation
alleged: After OCF purchased Kaylo, OCF continued to publish in its advertising and
promotional literature the same false and misleading representations concerning the
safety and nontoxic nature of Kaylo as used by Owens-Illinois before it sold Kaylo.
Owens-Illinois knew the representations were false and intended the public to rely on
them to purchase and use Kaylo products. Anthony Cadlo did so rely on these false
representations.

The Cadlos' 16th cause of action for concert of action alleged: Between 1953 and
1958 Owens-Illinois and OCF had a contract whereby OCF sold and distributed Kaylo
made by Owens-Illinois. Both companies were aware during this period that exposure to
insulation products containing asbestos posed a serious health risk. Owens-Illinois
approved OCF's misrepresentations that Kaylo was nontoxic and safe to use without

2

precautionary measures. It approved OCF's failure to warn of the known hazards of
Kaylo when put to its intended use. Owens-Illinois and OCF agreed to the fraudulent
concealment of Kaylo's hazardous qualities and agreed not to warn purchasers during the
course of their distribution agreement. The concealment and misrepresentation of
Kaylo's hazards and the failure to warn about its hazards resulted in the sale of Kaylo
products, and the perpetuation of unsafe installation, handling and use of Kaylo, all of
which caused Anthony Cadlo to be exposed to and injured from his exposure to Kaylo
dust.

Owens-Illinois demurred to the 14th, 15th, and 16th causes of action on the
grounds they stated legal conclusions and failed to state facts sufficient and with requisite
particularity to create causes of action. Its demurrer was sustained without leave to
amend. The trial court noted that the Cadlos had twice failed to plead facts sufficient to
constitute these three causes of action with the required specificity for pleading
misrepresentation and had not demonstrated an ability to plead the elements of these
causes of action if granted leave to amend.

After ruling on the demurrer, the trial court heard Owens-Illinois earlier-filed
motion for summary judgment on the remaining causes of action asserting liability under
theories of negligence and product defect. The motion was made on the grounds there
were no triable issues of fact to support Anthony Cadlo's claim that he was exposed to a
product for which Owens-Illinois was responsible, or that any Owens-Illinois product
was any factor in contributing to his injuries.

The Cadlos opposed the motion on the grounds Owens-Illinois failed to meet its
burden of negating strict liability for design defect, negligence for failure to warn, and
fraud based on "fraud on the market" or "privity." Alternatively, they opposed the
motion on the grounds there were triable issues of fact regarding Owens-Illinois's
cooperative work with OCF to market Kaylo, its failure to warn, and its fraudulent
misrepresentations and concealment.

The trial court concluded there were no disputed issues of material fact and
Owens-Illinois was entitled to judgment as a matter of law.

3

DISCUSSION
I.
Demurrer

The Cadlos contend the trial court erred in sustaining Owens-Illinois's demurrer to
their 14th, 15th, and 16th causes of action for fraud, negligent misrepresentation, and
concert of action because the facts pled do not preclude these causes of action, and fraud
was pled with adequate particularity.
a.
Standard of Review

In reviewing the sustaining of a demurrer, an appellate court treats the demurrer as
admitting all material facts properly pled and matters subject to judicial notice, but not
deductions, contentions, or conclusions of law or fact. (Zelig v. County of Los Angeles
(2002) 27 Cal.4th 1112, 1126.) We also read the complaint as a whole and its parts in
context, giving it a reasonable interpretation. (Ibid.) When a demurrer is sustained, we
determine if the complaint states facts sufficient to constitute a cause of action. When it
is sustained without leave to amend, we decide if there is a reasonable possibility that the
defect can be cured by amendment. If so, the trial court abused its discretion, and the
judgment is reversed. The plaintiff bears the burden of proving the reasonable possibility
of cure. (Ibid.)
b.
Fraud and Negligent Misrepresentation

The well-known elements of a cause of action for fraud are: (1) a
misrepresentation, which includes a concealment or nondisclosure; (2) knowledge of the
falsity of the misrepresentation, i.e., scienter; (3) intent to induce reliance on the
misrepresentation; (4) justifiable reliance; and (5) resulting damages. (Small v. Fritz
Companies, Inc. (2003) 30 Cal.4th 167, 173 (Small).) The same elements comprise a
cause of action for negligent misrepresentation, except there is no requirement of intent to
induce reliance. (Ibid.) In both causes of action, the plaintiff must plead that he or she
actually relied on the misrepresentation. (Mirkin v. Wasserman (1993) 5 Cal.4th 1082,
1088-1089 & fn. 2 (Mirkin).)

Each element in a cause of action for fraud or negligent misrepresentation must be
factually and specifically alleged. (Small, supra, 30 Cal.4th at p. 184.) The policy of

4

liberal construction of pleadings is not generally invoked to sustain a misrepresentation
pleading defective in any material respect. (Ibid.) Thus, the mere assertion of "reliance"
is insufficient. The plaintiff must allege the specifics of his or her reliance on the
misrepresentation to show a bona fide claim of actual reliance. (Ibid.)

Actual reliance occurs when the defendant's misrepresentation is an immediate
cause of the plaintiff's conduct, altering his legal relations, and when, absent such
representation, the plaintiff would not, in all reasonable probability, have entered into the
transaction. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 976.)
For pleading purposes, the Cadlos satisfactorily alleged that Owens-Illinois knowingly
misrepresented that Kaylo was a safe product both by promoting it as "non-irritating to
the skin and non-toxic" and concealing its hazardous nature. However, the Cadlos have
not alleged that Anthony Cadlo permitted himself to be exposed to Kaylo on board the
USS Black only because he was actually aware of and relied on this misrepresentation
that implied Kaylo was not hazardous.

Furthermore, the Cadlos have not demonstrated how they could make such a
showing were they granted leave to amend. According to the undisputed evidence
discovered prior to the summary judgment motion in this case, Owens-Illinois ended all
association with Kaylo when it sold its Kaylo division in 1958. Anthony Cadlo was 13
1/2 years old at the time, and, as the Cadlos themselves acknowledge, they have never
alleged that, as a boy, Anthony Cadlo saw ads for Owens-Illinois's Kaylo and then "went
out and bought some." After 1958, Owens-Illinois made no representations about Kaylo,
false or otherwise. Cadlo's first exposure to Kaylo was in 1965, and the Kaylo to which
he was exposed was manufactured by OCF. Consequently, any misrepresentations about
Kaylo's safety on which he might have relied would have been made by OCF.

The Cadlos rely on the Restatement Second of Torts, section 533, to support their
argument that they have alleged sufficient causes of action for fraud and negligent
misrepresentation under the indirect communication doctrine. This section states: "The
maker of a fraudulent misrepresentation is subject to liability for pecuniary loss to
another who acts in justifiable reliance upon it if the misrepresentation, although not

5

made directly to the other, is made to a third person and the maker intends or has reason
to expect that its terms will be repeated or its substance communicated to the other, and
that it will influence his conduct in the transaction or type of transaction involved."
As
Mirkin, supra, 5 Cal.4th at page 1096 observes, a plaintiff who hears a
misrepresentation indirectly must still show justifiable reliance on it. The Cadlos have
not alleged that Owens-Illinois made a misrepresentation about Kaylo's safety to a third
party, who then communicated the misrepresentation to Anthony Cadlo, let alone alleged
that Cadlo relied on that indirect communication.

Mirkin also makes clear that the cases used by the Cadlos as examples of
actionable indirect communication are distinguishable. In those cases the maker of the
misrepresentation reasonably foresaw that the intermediary would repeat the
misrepresentation to another person, e.g., car dealer to used car dealer to car buyer, or the
intermediary acted in an agency capacity, e.g., pharmaceutical company to doctor to
patient. (Mirkin, supra, 5 Cal.4th at pp. 1096-1098; see Barnhouse v. City of Pinole
(1982) 133 Cal.App.3d 171, 191; Varwig v. Anderson-Behel Porsche/Audi, Inc. (1977)
74 Cal.App.3d 578, 581; Toole v. Richardson-Merrell Inc. (1967) 251 Cal.App.2d 689,
707.) The Cadlos pleaded no facts to show that Owens-Illinois made a misrepresentation
about OCF's Kaylo (the only Kaylo to which Anthony Cadlo was exposed) to any third
party, and reasonably foresaw that the third party would repeat the misrepresentation to
Anthony Cadlo's employer, the Navy, thereby exposing Mr. Cadlo to OCF's Kaylo.
c.
Concert of Action

Concert of action is a theory of group liability. (Chavers v. Gatke Corp. (2003)
107 Cal.App.4th 606, 616 (Chavers).) It may be used to impose liability on a person who
did not personally cause the harm to plaintiff, but whose "`advice or encouragement to
act operates as a moral support to a tortfeasor[,] and if the act encouraged is known to be
tortious[,] it has the same effect upon the liability of the adviser as participation or
physical assistance. If the encouragement or assistance is a substantial factor in causing
the resulting tort, the one giving it is himself a tortfeasor and is responsible for the

6

consequences of the other's act.'" (Id. at p. 617, quoting Rest.2d Torts, � 876, com. to cl.
b.)
In
Chavers, an auto mechanic sought damages for mesothelioma caused by
inhalation of asbestos fibers in brake shoes. (Chavers, supra, 107 Cal.App.4th at p. 609.)
He conceded he could not prove that he had ever used or worked with brake shoes
manufactured by defendant brake shoe manufacturer Gatke Corporation. (Id. at p. 610.)
Nevertheless, he argued that Gatke Corporation should be liable because it was one of
numerous manufacturers of asbestos-containing products who had contributed in the
1930s to financing a private research laboratory to study the health effects of asbestos on
people who worked on or with it. (Ibid.) The laboratory eventually reported to the
contributing manufacturers that asbestos exposure could be seriously harmful, but this
information was not made public for many years. (Id. at p. 610.)

Chavers held, as a matter of law, that the trial court did not err in refusing to
instruct on such a participation theory. (Chavers, supra, 107 Cal.App.4th at p. 609.) It
relied in large part on Sindell v. Abbott Laboratories (1980) 26 Cal.3d 588, which
rejected a "concert of action" theory of liability for producers of the synthetic hormone
DES when the plaintiff could not identify the manufacturer of the specific DES that
caused her injury. (Chavers, supra, at pp. 616-617.) "Applying a concert of action
theory of collective liability in such industrywide circumstances `would expand the
[concert of action] doctrine far beyond its intended scope and would render virtually any
manufacturer liable for the defective products of an entire industry, even if it could be
demonstrated that the product which caused the injury was not made by the
defendant.'[]" (Id. at p. 617, quoting Sindell, supra, 26 Cal.3d at p. 605.)

The Cadlos allege that during the period 1953 to 1958 when the advertising and
promotion of Kaylo was done pursuant to the Owens-Illinois/OCF 1953-1958 sales and
distribution agreement, OCF, with Owens-Illinois's approval and assistance, marketed
Kaylo by falsely representing its safe use and concealing its hazards. These allegations
would arguably state a "concert of action" cause of action had Anthony Cadlo been

7

injured by the Kaylo manufactured by Owens-Illinois during those years.1 However, like
the Chavers plaintiff who conceded he could not prove that brake shoes manufactured by
the named defendant caused his injury, the Cadlos acknowledge that Kaylo manufactured
by Owens-Illinois did not cause Anthony Cadlo's injuries. Nor have the Cadlos alleged
any facts that Owens-Illinois continued to encourage and advise OCF to make false
representations about Kaylo after Owens-Illinois sold its Kaylo division to OCF in 1958.
After 1958 it was OCF which engaged in the alleged concealment and misrepresentation
regarding a product OCF manufactured. That the methods of doing so were the same as
those originally developed by Owens-Illinois does not support a "concert of action"
cause of action as to Owens-Illinois.
II. Summary Judgment

The Cadlos contend the court erred in granting summary judgment on the
remaining causes of action because Owens-Illinois's separate statement of undisputed
material facts did not assert any facts tending to negate design defect liability.
Alternatively, they contend there are triable issues of fact regarding design defect.
a.
Standard of Review

Motions for summary judgment are properly granted if all papers submitted show
there is no triable issue as to any material fact and the moving party is entitled to
judgment as a matter of law. (Code Civ. Proc., � 437c, subd. (c).) A defendant moving
for summary judgment must negate a necessary element of each of the plaintiff's causes
of action or establish a complete defense thereto. (Code Civ. Proc., � 437c, subd. (n);
McManis v. San Diego Postal Credit Union (1998) 61 Cal.App.4th 547, 555.) Once the
defendant makes such a prima facie showing, the burden shifts to the plaintiff to show
that a triable issue of material fact exists within the framework of the issues as fixed by
the pleading. (Code Civ. Proc., � 437c, subd. (o)(2); Lowe v. California League of Prof.
Baseball (1997) 56 Cal.App.4th 112, 122 (Lowe).)

1 Of course, in such a factual scenario a cause of action for "concert of action" would be
essentially superfluous, because such facts would support standard product liability
causes of action, e.g., negligence, strict liability, against Owens-Illinois as manufacturer
and OCF as distributor of Kaylo.

8

Summary judgments are reviewed de novo, pursuant to the same statutory
procedure followed in the trial court. (Lowe, supra, 56 Cal.App.4th at p. 121; Camp v.
Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App.4th 620, 629.)
b.
Separate Statement Requirement

A party moving for summary judgment is required to support its motion with a
separate statement that sets forth plainly and concisely the material facts the moving
party contends are undisputed. (Code Civ. Proc., � 437c, subd. (b)(1).) Each material
fact must refer to the supporting evidence. A court has discretion to deny the motion for
failure to comply with the separate statement requirement. (Code Civ. Proc., � 437c,
subd. (b)(1).)

Owens-Illinois's statement complied with the statutory requirement. It based its
motion on the absence of any connection between it and the Kaylo that allegedly injured
Anthony Cadlo, and its statement referred to the evidence to support its lack of any
connection. In so doing it met its burden of showing that the Cadlos could not establish
at least one element of their causes of action, i.e., that Owens-Illinois's product caused
Anthony Cadlo's injury. (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826,
853.) Owens-Illinois was not required at that stage of the proceedings to assert as well
facts specifically negating liability for design defects. Rather, the burden then shifted to
the Cadlos to present evidence that Owens-Illinois was liable under a design defect
theory. The trial court did not abuse its discretion by not denying the motion due to an
inadequate separate statement.
c.
Product Liability

To establish a defendant's liability for injuries caused by a product, the plaintiff
must show, at least, that he was exposed to the defendant's product. (Dumin v. Owens-
Corning Fiberglas Corp. (1994) 28 Cal.App.4th 650, 655.) Here, it is undisputed that
Anthony Cadlo could not have come into contact with Owens-Illinois's product, Kaylo,
because his first exposure to Kaylo was 1965, seven years after Owens-Illinois had
ceased all affiliation with Kaylo.

9

The Cadlos argue that there are nevertheless triable issues of fact as to Owens-
Illinois's liability for the defective design of Kaylo. Their argument relies on Fortman v.
Hemco, Inc. (1989) 211 Cal.App.3d 241 (Fortman). The Fortman plaintiff was injured
when she was ejected from a jeep after inadvertently unlatching its passenger door while
the car was in motion. (Id. at p. 246.) The door was part of a fiberglass jeep top sold to
jeep owners as an after-market product. (Id. at pp. 246-247.) Alleging the door was
defectively designed, she brought a strict liability action against, inter alia, defendant
Hemco, the company that made the fiberglass mold used to cast the jeep top. (Id. at p.
249.) Hemco made the mold from a wooden prototype built by the company that actually
manufactured the fiberglass jeep tops. It sold the mold for $2,500 to that manufacturing
company before the accident that was the subject of the lawsuit. (Id. at pp. 247, 248.) A
jury found Hemco 25 percent liable for the plaintiff's injuries. (Id. at p. 250.)

On appeal Hemco contended that its role in the manufacturing process that
resulted in the defective door was insufficient to warrant imposition of strict liability.
(Fortman, supra, 211 Cal.App.3d at p. 250.) The Court of Appeal concluded Hemco
could be liable because it was part of the overall manufacturing enterprise, a "`link in the
chain'" by which the defectively designed door reached the ultimate consumer. As it
elaborated, the fiberglass jeep top could not be made without a fiberglass mold. Hemco
was in the business of manufacturing fiberglass molds; it agreed to make the mold for the
jeep top manufacturer; and it took an active part in the design of the wooden prototype
from which the mold was made. The door in the wooden prototype contained the design
defect that caused the plaintiff's injury, and Hemco incorporated that design defect into
the mold. (Id. at p. 252.) Thus, its role was not random or incidental. Without Hemco's
participation, the company that manufactured the fiberglass jeep top could not have
turned its concept of a fiberglass jeep top into a product. (Id. at p. 253.)

Fortman is not factually analogous to the present case. Owens-Illinois may have
designed the original Kaylo, but the Cadlos offered no proof that Owens-Illinois was the
designer of the Kaylo sold by OCF during the time of Anthony Cadlo's exposure. Nor
was there evidence that Owens-Illinois was the designer of an integral element in the

10

manufacture of another product, by a different company, without which OCF's Kaylo
could have been produced. The Cadlos presented no evidence that after OCF bought
Kaylo, Owens-Illinois played any role in the design, manufacture, distribution, or
marketing of OCF's Kaylo.

The purpose of imposing strict liability "`is to insure that the costs of injuries
resulting from defective products are borne by the manufacturers that put such products
on the market. . . .'" (Price v. Shell Oil Co. (1970) 2 Cal.3d 245, 251.) Therefore, a
continuous course of business is a necessary condition for application of the rule. (Id. at
p. 253; see also Peterson v. Superior Court (1995) 10 Cal.4th 1185, 1207.) Owens-
Illinois had had no business association with, direct or indirect financial interest in, or
control over Kaylo for seven years by the time Anthony Cadlo was exposed to OCF's
Kaylo. (See Bay Summit Community Assn. v. Shell Oil Co. (1996) 51 Cal.App.4th 762,
776.) Because Owens-Illinois was not "an integral part of the overall producing and
marketing enterprise" of OCF's Kaylo (Vandermark v. Ford Motor Co. (1964) 61 Cal.2d
256, 262), it was not strictly liable to plaintiffs as a matter of law and was entitled to
summary judgment.
DISPOSITION

The judgment is affirmed.

_________________________

Jones, P.J.
We concur:

________________________
Simons, J.

________________________
Gemello, J.

11

Filed 12/30/04
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

ANTHONY CADLO et al.,

Plaintiffs and Appellants,

A105444
v.

OWENS-ILLINOIS, INC.,

(San Francisco County

Super. Ct. No. 412325)
Defendant
and
Respondent.

ORDER MODIFYING OPINION AND CERTIFYING
FOR PUBLICATION

BY THE COURT:

The opinion in the above-entitled matter filed on November 30, 2004, was not
certified for publication in the Official Reports. For good cause it now appears that the
opinion should be published in the Official Reports, and it is so ordered. Pursuant to
California Rules of Court, rules 976(b) and 976.1, this opinion is certified for publication.

It is further ordered that the opinion be modified as follows:

1. Insert the following sentence at the end of the first paragraph on page 1:

We conclude that Owens-Illinois' historic role in the design, manufacture and
marketing of Kaylo will not support plaintiffs' liability claims against Owens-Illinois in
the absence of any allegation or evidence that Owens-Illinois had actual connection with
the design, manufacture or distribution of the asbestos to which Anthony Cadlo was
exposed.

2. Delete the last sentence of the second paragraph on page 5 and insert the
following:

1

However, the Cadlos have not alleged that Anthony Cadlo was actually aware of,
or was reassured by and relied on this misrepresentation when undertaking work in the
presence of Kaylo dust.

3. In the third paragraph, second sentence, on page 10, beginning "Owens-Illinois
may have designed . . ." delete the word proof and insert the word evidence.

This modification does not effect a change in the judgment.

Dated
____________ ____________________________ P.J.

2

Trial
court:
San
Francisco
Superior
Court

Trial
judge:
Hon.
James
L.
Warren

Counsel for plaintiffs
and
appellants: ALAN
R.
BRAYTON

GILBERT L. PURCELL

LLOYD F. LEROY

DAVID POLIN

Brayton & Purcell

Counsel for defendant
and
respondent:
JEAN
L.
BERTRAND

SHAWN D. PARRISH

ALEX P. CATALONA

Morgenstein & Jubelirer LLP

3