In Re: School Asbestos Lit.

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit

6-6-1995

In Re: School Asbestos Lit.
Precedential or Non-Precedential:

Docket 94-1820

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Recommended Citation
"In Re: School Asbestos Lit." (1995). 1995 Decisions. Paper 156.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/156

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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_________________________

No. 94-1820
_________________________

IN RE: SCHOOL ASBESTOS LITIGATION

SCHOOL DISTRICT OF LANCASTER;
MANHEIM TOWNSHIP SCHOOL DISTRICT;
LAMPETER-STRASBURG SCHOOL DISTRICT;
and
NORTHEASTERN SCHOOL DISTRICT

vs.

LAKE ASBESTOS OF QUEBEC, LTD.;
THE CELOTEX CORPORATION;
RAYMARK INDUSTRIES, INC.; UNION CARBIDE CORP.;
ASBESTOSPRAY CORP.; SPRAYO-FLAKE COMPANY;
NATIONAL GYPSUM CO.; SPRAYED INSULATION, INC.;
ASBESTOS FIBRES INC.; DANA CORPORATION;
U.S. GYPSUM; U.S. MINERAL PRODUCTS COMPANY;
SPRAYON INSULATION & ACOUSTICS, INC.;
SPRAYON RESEARCH CORP.; KEENE CORP.;
WORBEN CO., INC.; WILKIN INSULATION COMPANY;
W.R. GRACE & CO.;
OWENS-CORNING FIBER-GLAS CORPORATION;
STANDARD INSULATION, INC.;
NORTH AMERICAN ASBESTOS CORPORATION;
CASSIAR RESOURCES LTD.; BELL ASBESTOS MINES, LTD.;
ASBESTOS CORPORATION LIMITED;
SOUTHERN TEXTILE CORP.;
OWENS-ILLINOIS, INC.; TURNER & NEWALL LIMITED;
THE FLINTKOTE CO.; FIBREBOARD CORPORATION;
GAF CORP.;
UNIROYAL, INC., CAPE ASBESTOS; PFIZER, INC.;
KAISER CEMENT CORPORATION; BES-TEX, INC.;
GEORGIA-PACIFIC CORP.; KAISER GYPSUM COMPANY

Board of Directors of City Trusts,

Appellant

______________________________________

On Appeal from the United States District Court
For the Eastern District of Pennsylvania
(No. 83-CV-00268)
 _____________________

ARGUED: March 6, 1995

Before: BECKER, SCIRICA and WOOD, Jr.,* Circuit Judges.

(Filed June 6, l995)

DAVID A. GRADWOHL, ESQUIRE (ARGUED)
JAMES E. MILLER, ESQUIRE
One Liberty Place
Thirty-Second Floor
Philadelphia, PA 19103

Attorneys for Appellant

BARRY H. BOISE, ESQUIRE (ARGUED)
ALAN KLEIN, ESQUIRE
2200 PSFS Building
12 S. 12th Street
Philadelphia, PA 19107

Attorneys for Appellee

___________________________________

OPINION OF THE COURT
___________________________________

WOOD, Jr., Circuit Judge.

The Board of Directors of City Trusts [Board] appeals the

district court's order finding that the Board and Girard College

[College] were included in a certified class involving a

nationwide class action suit against Uniroyal and numerous other

defendants in regard to the presence of asbestos in public and

private schools. Because the district court found the appellants

*. The Honorable Harlington Wood, Jr., United States

Circuit Judge for the Seventh Circuit, sitting by designation.
were members of the class, the Board was enjoined from pursuing

its own state asbestos lawsuit against Uniroyal. The district

court held that the Board, as a member of the class, was bound by

the Uniroyal settlement, and under the Anti-Injunction Act, 28

U.S.C. § 2283, it was necessary in aid of the court's

jurisdiction to enjoin the appellant's state court action. The

Board appeals.

I.

The Board was created by a Pennsylvania statute in June 1869

to act as a trustee in administering a number of estates and

trusts for the benefit of the City of Philadelphia.1 The estate

involved here is the Estate of Stephen Girard, which came into

existence in 1831. The Girard Estate is the largest estate and

1
The Board's powers are statutorily defined as follows:

All and singular the duties, rights and powers of the
city of Philadelphia, concerning all property and
estate whatsoever, dedicated to charitable uses
or trusts, the charge or administration of which is now
or shall hereafter become vested in or confined to the
city of Philadelphia, shall be discharged by the said
city through the instrumentality of a board composed of
fifteen persons, including the mayor of said city,
the presidents of the select and common councils for
the time being, and twelve other citizens appointed as
hereinafter provided, to be called directors of city
trusts, who shall exercise and discharge all the duties
and powers of said city, however acquired, concerning
any such property appropriated to charitable uses, as well
as the control and management of the persons of any orphans or
others, the objects of such charity, to the extent that the same
have been or hereafter may be, by statute law or otherwise,
vested in or delegated to the said city for the officers thereof.

Act of June 30, 1869, P.L. 1276, 53 P.S. § 16365, repealed
in part, Act of November 19, 1959, P.L. 1526.
trust owned and administered by the Board. After making numerous

gifts to various institutions and individuals, Mr. Girard devised

and bequeathed his entire residuary estate to the City of

Philadelphia in trust for the creation of an "orphan

establishment." In furtherance of the deceased's wishes, Girard

College was established as an institution for orphan children in

Philadelphia. The Board acts as trustee in managing the Girard

Estate and the College. The Board also manages approximately 110

other estates and trusts, which it administers according to the

wishes of its benefactors.

Girard College initially admitted only white male orphans,

but has since expanded its admission criteria to include all

minorities and children not considered orphans in the traditional

sense (only one absent parent).2 The primary mission of Girard

College is to act as a guardian to orphaned children by providing

for their full development and nurturing needs. Pursuant to this

mission, the orphans not only receive food, clothing, health care

and a caring place to live, but in addition, the Board provides

them with an education at the College through grade twelve. Most

children live on the school grounds only through the school year,

while some remain all year. Except for Girard College, the Board

2
The Philadelphia Orphans' Court oversees certain aspects of

Girard College. Only children who qualify as orphans under the

definition established by the Orphans' Court may be admitted to

Girard College. See e.g., 20 Pa. Stat. §§ 711, 712, 722, 7142.
does not own or operate any estate or trust which requires the

Board to provide educational services to children incident to its

primary mission of administering estates and trusts pursuant to

its statutory and fiduciary duties.

Therefore, due to the Board's unique status in reference to

Girard College, many regulatory statutes do not apply, including

the Pennsylvania Public School Code. The Board in the past,

however, has voluntarily chosen to follow various regulatory

standards to protect and benefit the orphan children. In 1988,

and in compliance with the Asbestos Hazard Emergency Response Act

[AHERA], 15 U.S.C. § 2641 et seq., the Board voluntarily

submitted an "Asbestos Management Plan." The Board submitted the

Plan on AHERA forms and listed Girard College as an "LEA."3

In 1983, the first case was filed in regard to asbestos in

public and private schools. In 1984, under the Federal Rules of

3
"LEA" stands for local educational agency, which is defined

as "a public board of education or other public authority legally

constituted within a State for either administrative control or

direction of, or to perform a service function for public

elementary or secondary schools in a city, county, township,

school district, or other public subdivision of a State, or such

combination of school districts or counties as recognized in a

State as an administrative agency for its public elementary or

secondary schools." 20 U.S.C. § 2891(12).
Civil Procedure Rule 23(b)(3), the district court certified, and

the Third Circuit affirmed, the following class:
All entities which own or operate in whole or in part
any public educational facilities, as defined in
Section 198(a)(10) of the Elementary and Secondary
Education Act of 1965, 20 U.S.C. § 2854, throughout the
United States; and all entities which own or operate in
whole or in part any non-public, non-profit elementary
or secondary educational facilities, including entities
with religious affiliations, in the United States, to
the extent that such non-profit entities are owned or
operated by one or more non-profit corporations or
associations no part of the net earnings of which
inures, or may lawfully inure, to the benefit of any
private shareholder or individual.

Pretrial Order 20. See also In re Asbestos Litigation, 104
F.R.D. 422 (E.D. Pa. 1984), aff'd, 789 F.2d 996 (3d Cir.), cert.
denied, 479 U.S. 852 (1986).

In 1988, the class definition was amended and limited to

exclude certain schools which were operated by the states:
The definition of the litigation class certified in
this matter is limited and excludes any elementary or
secondary facilities owned or operated by Ohio or
Maryland or any other state as a service incidental to
the provision by the state of other substantial
services.

Pretrial Order 110.

Shortly after the class was certified, a "Notice of Class

Action Relating to School Asbestos Claims" was mailed nationwide

to all schools included on a list generated by a market data

retrieval organization. The list was not modified to include

only the schools that were members of the certified class.

Girard College appeared on the list as a "private school." The

Board has no records indicating it received this notice or opted

out of the class. The Notice provided that if you did not opt
out of the class by December 1, 1987, you would be bound by any

class judgment.

In September 1991, plaintiff members of the class and

Uniroyal entered into a Settlement Agreement releasing Uniroyal.

This notice was also sent to Girard College. In December 1991,

the district court entered final judgment approving the Uniroyal

Settlement.

In February 1994, the Board instituted a state court action

against Uniroyal as well as various architects, contractors and

engineers. The Board of Directors of City Trusts v. Ballinger &

Associates et al., January Term, 1994, No. 3346. The Board

sought recovery for property damages to certain buildings and

other structures it owns and operates caused by the presence of

asbestos products and materials. The buildings in the state

action include Girard College and other commercial buildings

located in Girard Square, a city block in Philadelphia. Uniroyal

moved for an order restraining the Board from litigating its

claims on the basis that the Board is bound by the Uniroyal

settlement. In a pretrial order, the district court granted the

motion and held that Girard College was a member of the certified

class and therefore enjoined under the Anti-Injunction Act, 28

U.S.C. § 2283,4 from maintaining a state action against Uniroyal.

The district court held:

4
Section 2283 provides:

A court of the United States may not grant an
injunction to stay proceedings in a State except as
expressly authorized by Act of Congress, or where
 In this Court's opinion, the Board of City Trusts
is a local education agency. It is both public and
private. By statute of the Commonwealth of
Pennsylvania, it has been created as a City agency.
The delegation of the supervision of the Board of City
Trusts rests with the Orphans' Court. It is through
the City of Philadelphia that that Trust was to be
administered.
. . .

It is public in the sense that its actions are
actions of the -- are state action[s]. It is private
in the sense that it was private money that caused
the college or other charitable functions to be
established and maintained. But it was through the
public arm that that intent was to be carried out. So,
it is a -- as private money going through a state-
created agency for the education and the associated
growth of young people into adulthood.

The Board of City Trusts has identified itself as
a local education agency in the AHERA compliance
document. It has identified itself in various briefs
as an arm of the City. That statute which created the
Board of City Trusts shows that it is -- it was created
as an agency of Philadelphia. It has all the character
of a local education agency.

The Board appeals the district court's finding that it is a

member of the certified class and is thereby enjoined from

pursuing its state court asbestos action against Uniroyal et al.

II.

The district court's application of the class certification

to the Board requires plenary review since it involves the

application of the law to the facts. Levendos v. Stern

Entertainment, 909 F.2d 747, 749 (3d Cir. 1990). Similarly, the

review of the district court's decision to enjoin the Board's

(..continued)
necessary in the aid of its jurisdiction, or to protect
or effectuate its judgments.
state court action under the Anti-Injunction Act, 28 U.S.C. §

2283, is also a question of law that requires plenary review.

1975 Salary Retirement Plan v. Nobers, 968 F.2d 401, 405 (3d Cir.

1992); see also Carey v. Pennsylvania Enterprises, Inc., 876 F.2d

333, 337 (3d Cir. 1989); Ortiz v. Eichler, 794 F.2d 889, 891-92

(3d Cir. 1986).

III.

A class must be clearly defined and only members can be

legally bound by settlements or judgments in the class action.

In re School Asbestos Litigation, 789 F.2d 996, 1005 (3d Cir.),

cert. denied, 479 U.S. 852 (1986). The parties agree that the

initial class certification by the district court can be further

divided into two subclasses. Sub-section [1] of the

certification order includes all public educational facilities as

defined by Section 198(a)(10) of the Elementary and Secondary

Education Act of 1965; and Sub-section [2] includes non-public,

non-profit elementary or secondary facilities to the extent they

are owned or operated by one or more non-profit corporations or

associations.5 The district court found that Girard College was

5
As mentioned, Pretrial Order 110 amended the initial class

certification. The 1988 amendment excludes any "elementary or

secondary school facilities owned or operated by any state as a

service incidental to the provision by the state of other

substantial service." Because we find Sub-section [2] is the

relevant section, whether or not the Board is excluded under

Pretrial Order 110 need not be reached.
a quasi-public and quasi-private educational facility because it

was created by the state but funded with private money. It is

not disputed, however, that Girard College is excluded from Sub-

section [1] of the class certification because it is not a public

school as defined by Section 198(a)(1) of the Elementary and

Secondary Education Act of 1965. Appellees argue that the Board

is a non-profit association that owns and operates Girard

College, a private educational facility within the definition of

Sub-section [2]. The Board contends, however, it is not a non-

profit association, but a state-created agency and Girard College

is a charitable trust created by the residuary estate of Stephen

Girard's Will. If the Board is a non-profit association, the

Board is within the class certification and enjoined from

pursuing its state court action. If, however, the Board is a

state-agency or at least not a non-profit "association", it is

not within the class and the Board may maintain its state court

action against Uniroyal. Both sides competently argued their

positions and attempted to aid this court in its determination of

this complicated issue.

The relevant part of the class certification, Sub-section

[2], states:
[A]ll entities which own or operate in whole or in part
any non-public, non-profit elementary or secondary
educational facilities, including entities with
religious affiliations, in the United States, to the
extent that such non-profit entities are owned or
operated by one or more non-profit corporations or
associations no part of the net earnings of which
inures, or may lawfully inure, to the benefit of any
private shareholder or individual.

Pretrial Order 20 (emphasis added).
 The center of the dispute focuses on the common usage of the

term "association." The Board argues it is a state agency

because it was created by a Pennsylvania statute in 1869.

Further, the Board contends that the United States Supreme Court

in Pennsylvania v. The Board of Directors, 353 U.S. 230, 231

(1957), previously found the Board to be a "state agency." That

case was a race discrimination claim brought against Girard

College. The Court held that for purposes of the Fourteenth

Amendment, the actions of the Board were state actions. Id. at

231. The appellees counter that the finding by the Supreme Court

that the Board is a state agency for state action purposes is

different from finding that the Board is an agent of the state in

the present asbestos litigation. The appellees also point out

that in the Board's briefs in previous cases, the Board has

labeled itself as an "arm of the City." The district court also

labeled the Board as a "City Agency" because it was created for

the City of Philadelphia and it is through the city that the

trust is to be administered. As a preliminary matter, we doubt

that the Board is a city agency. The Board was created by the

state for the purpose of administering charitable bequests left

to and for the benefit of Philadelphia. Although the Board

performs this function for the city, it is neither a part of the

city nor responsible to the city. The Board was designed merely

to independently carry out this service for the city whenever the

city is left sizable estates that require management. The

Philadelphia Home Rule Charter Section A-100(a)(3) also
explicitly exempts the Board from any relationship with the

city.6 The Board of Directors of City Trusts appears, therefore,

not to be a city agency.

The issue then turns on whether the Board is a state agency

and if not, whether it can be labeled a non-profit association.

The appellees argue that the term "association" is broad enough

to include the Board of Directors of City Trusts. As defined by
Black's Law Dictionary, association means "[t]he act of a number

of persons in uniting together for some special purpose."
Black's Law Dictionary 121 (6th ed. 1990). The appellees view

the Board as a group of fifteen members united for the special

purpose of administering trusts bequeathed to the City. The

appellees contend that to find the Board is not an association

would be to contort the common usage of the term. The appellants

maintain it can not be an association because it is an agency of

the state. The composition of the Board is too unique to resolve

the issue by merely labeling it as an association.

We must look to state law in defining the structures and

powers of non-profit corporations. Federal Election Comm'n v.

National Right to Work Comm., 459 U.S. 197, 204 (1982). Under

Pennsylvania law, it remains unclear as to the meaning of a non-

6
Section A-100(a)(3) of the Philadelphia Home Rule Charter

provides that "[e]xcept as otherwise specifically provided, this

charter shall not apply to the Board of Directors of City Trusts

and to any institutions operated by it."
profit association. The only statute that comes close to

defining the term is 42 Pa. Cons. Stat. Ann. § 8332.1, which

concerns non-profit associations in relation to a manager, coach,

umpire or referee negligence standard.7 The Board of Directors

of City Trusts would not seem to fit within this definition. At

all events, we find that for another reason the Board of

Directors of City Trusts cannot be an association. The appellees

want to label the Board an association while acknowledging that

Girard College is a charitable trust. However, in reality, the

two are not distinct legal entities. It is stretching the

contours of the framework in which the Board was established to

label the Board as an association when the Board is acting as a

trustee on behalf of a charitable trust. To call the Board an

association, would be really calling Girard College an

association, which it clearly is not. As is demonstrated in this

suit, to sue Girard College, you must sue the Board of Directors

7
The statute defines "nonprofit association" as:

An entity which is organized as a nonprofit corporation
or nonprofit unincorporated association under the laws
of this Commonwealth or the United States or any entity
which is authorized to do business in this Commonwealth
as a nonprofit corporation or unincorporated
association under the laws of this Commonwealth,
including, but not limited to, youth or athletic
associations, volunteer fire, ambulance, religious,
charitable, fraternal, veterans, civic, county fair or
agricultural associations, or any separately chartered
auxiliary of the foregoing, if organized and operated
on a nonprofit basis.

42 Pa. Cons. Stat. Ann. § 8332.1(d).
as its trustee. The Supreme Court appeared to use a similar

analysis when it found the Board to be a state agency. Although

it was Girard College which had discriminated against the

African-Americans in refusing to admit them to the orphanage, the

Court found the Board was acting as a trustee based on the power

and authority given to it by state law, and therefore responsible

under the Fourteenth Amendment for the College's action. Here

the Board is bringing the suit (rather than defending against

one), but it is still acting only as a trustee on behalf of

Girard College. The Board has the authority to sue and may be

sued pursuant to the state statute which created the Board.

Although the context of the present litigation is different from

the context of the previous Supreme Court suit, the Board acts

only as a trustee of Girard College and therefore the same

analysis is applicable. Finding that the Board is not an

association, it is not included within the certified class and

the appellants may proceed with their state court asbestos

litigation along with the many others who are also not included

in the class against Uniroyal et al. Therefore, the district

court must be REVERSED.

______________________________