## Facts

- MDU Resources Group (MDU) owned a five-story office building completed in 1967–1968 in Bismarck, North Dakota.
- In 1968, Monokote fireproofing manufactured by W.R. Grace & Co. (Grace) was sprayed on the building’s structural steel and decking.
- Monokote contained asbestos; Grace knew this at installation, and MDU did not.
- In September 1980, a state health department test reported the fireproofing contained 15–25% asbestos, appeared intact, found no employee overexposure hazard, and advised investigating removal because deterioration could later create a hazard.
- Testing in 1985 produced conflicting information; testing in 1987 corroborated the 1980 results.
- The parties agreed MDU knew of the asbestos condition no later than 1980.
- In 1990, MDU sued Grace seeking asbestos abatement costs and related damages under negligence, strict liability, failure to warn, and warranty theories.
- After an eight-week jury trial, the jury returned a special verdict for Grace on all liability theories, and judgment was entered for Grace.

## Issues

1. Under North Dakota’s discovery rule, did the limitations period begin when MDU learned asbestos was present, or when MDU knew or reasonably should have known of a legally cognizable injury and its probable cause?
2. Did the district court abuse its discretion by excluding evidence relevant to Grace’s knowledge, warnings, product characteristics, and causation in a manner that prejudiced MDU?
3. Did the strict-liability instructions improperly suggest “state of the art” functioned as a defense, rather than as evidence relevant to defect and warning adequacy?
4. Did the cumulative effect of the court’s rulings and conduct deprive MDU of a fair trial requiring reversal?

## Decision

- The Eighth Circuit reversed the judgment for Grace and remanded for a new trial.
- The court held the statute-of-limitations/discovery-rule framework presented to the jury was legally flawed and could have misled the jury on accrual.
- The court concluded the strict-liability instructions risked treating “state of the art” as an absolute defense, misstating North Dakota law.
- The court determined certain evidentiary rulings, viewed with the instructional errors, materially impaired MDU’s ability to present its case and affected substantial rights.
- The court did not rest reversal on general claims of bias, but found the identified legal errors warranted a new trial.

## Legal Principles

- Under North Dakota’s discovery rule, accrual occurs when a plaintiff knows, or with reasonable diligence should know, of an injury and its probable cause; awareness of a hazardous condition alone does not necessarily establish knowledge of actionable injury.
- In North Dakota strict products liability, “state of the art” is admissible as evidence bearing on unreasonable danger or warning adequacy, but it is not a categorical defense that bars liability as a matter of law.
- Evidentiary exclusions that significantly restrict proof of defect, causation, or failure to warn may constitute reversible error when they affect substantial rights, particularly in complex products-liability trials.

## Conclusion

The Eighth Circuit set aside the defense verdict and ordered a new trial because the jury was given an incorrect limitations accrual framework under the discovery rule and was exposed to strict-liability instructions that could be understood as creating a state-of-the-art defense, compounded by prejudicial restrictions on proof central to MDU’s theories.


MDU Res. Grp. v. W.R. Grace & Co., 14 F.3d 1274 (8th Cir. 1994)