## Facts

- Interstate Properties developed a shopping center in Windsor, New Jersey, acting through its wholly owned subsidiary, I.P. Construction Corp., as general contractor.
- I.P. hired Wood-Pine Constructors; Wood-Pine hired Windsor Contracting Corp. as a subcontractor.
- On August 31, 1972, Gary R. Becker, a 19-year-old Wood-Pine employee, was severely injured when a truck driven by Windsor’s employee drove over his pelvis at the jobsite.
- Becker incurred substantial medical expenses and alleged permanent injuries.
- Becker asserted Windsor was inadequately insured and marginally capitalized, making full recovery for his injuries unlikely.
- Becker claimed Interstate/I.P. had a duty to avoid employing (or allowing the use of) a financially irresponsible independent contractor whose insolvency would foreseeably leave tort victims uncompensated.

## Issues

1. Under New Jersey law, may an owner/developer or general contractor be liable for an independent contractor’s negligence when the contractor is financially irresponsible and cannot fully compensate the injured victim?
2. In a diversity case, how should a federal court treat a state supreme court’s dictum suggesting such liability in predicting state law?

## Decision

- The Third Circuit reversed the district court’s grant of summary judgment for Interstate/I.P.
- The court held that New Jersey law, as reasonably predicted, recognizes (or is moving toward) a rule that an employer of an independent contractor may be liable to uncompensated victims if it fails to insist on a financially responsible contractor.
- The court treated relevant New Jersey Supreme Court dictum as a strong indicator of how the state court would decide the question, particularly in an area of developing tort doctrine.
- The case was remanded for further proceedings.

## Legal Principles

- A federal court sitting in diversity must predict and apply the forum state’s law, including giving appropriate weight to state high-court statements that signal developing doctrine.
- Under New Jersey law as predicted, an employer of an independent contractor may owe a duty not to select or permit the use of a financially irresponsible contractor when foreseeable insolvency or inadequate insurance would leave tort victims without adequate compensation.
- State supreme court dicta may be persuasive for Erie prediction when it is clear, policy-driven, and consistent with broader trends in the state’s tort law.

## Conclusion

The Third Circuit allowed the injured worker’s claim to proceed, concluding that New Jersey would likely impose liability on a developer/general contractor that fails to require a financially responsible independent contractor, and that state supreme court dictum supporting that rule warranted substantial predictive weight in diversity.


Becker v. Interstate Props., 569 F.2d 1203 (3d Cir. 1978)