                                   United States Court of Appeals,

                                             Fifth Circuit.

                                            No. 92-4435.

                   Bennie Ray FOLKS and Ernestine Folks, Plaintiffs-Appellees,

                                                  and

                           Liberty Mutual Ins. Co., Intervenor-Appellee,

                                                   v.

   KIRBY FOREST IND. INC., Defendant-Third Party Plaintiff and Third Party Defendant-
Appellant,

                                                   v.

   HOOD INDUSTRIES INC., Defendant-Third Party Plaintiff and Third Party Defendant-
Appellee,

                                                   v.

      Johnny KNIGHT, dba, Knight's Machinery Removal, Third Party Defendant-Appellee.

                                            Jan. 11, 1994.

Appeal from the United States District Court for the Eastern District of Texas.

Before JOHNSON, SMITH, and EMILIO M. GARZA, Circuit Judges.

       EMILIO M. GARZA, Circuit Judge:

       This is an appeal from a jury verdict for the plaintiff in a personal injury case. The jury

awarded Bennie Ray Folks $1,076,000 in damages, finding that he was injured in an industrial

accident as a result of the negligence of Kirby Forest Industries, Inc. ("Kirby"). Kirby appeals, and

we vacate and remand on account of an erroneous jury instruction and the erroneous exclusion of

evidence.

                                                   I

       Kirby operated a plywood plant in Silsbee, Texas. When the plant closed, Kirby held an "as

is, where is" auction sale to liquidate the plant equipment. According to the terms of the "as is, where

is" sale, purchasers took property without any warranties or representations of quality. Purchasers

were also responsible for transporting their purchases away from the Silsbee site.
        Representatives of Hood Industries, Inc. ("Hood") attended the auction sale and purchased

a machine o r set of machines known as a glue line. Thereafter Hood hired Knight's Machinery

Removal ("Knight") to cut the glue line into pieces at the Silsbee plant, load it onto a truck, and carry

it to Hood's sawmill in another city. During the disassembly of the glue line, Bennie Ray Folks, an

employee of Knight, was injured when the accumulator forks—a part of the glue line—fell from a

raised position and landed on top of him. The forks were normally supported in the raised position

by a hydraulic lift system, but that system was inoperative because of lack of hydraulic fluid. Folks

suffered permanent and disabling injuries as a result of being crushed under the accumulator forks.

        Folks and his wife, Ernestine Folks, filed suit against Kirby, alleging negligence under a theory

of premises liability.1 The Folkses sued Hood and Knight as well, alleging that they negligently

caused Bennie Folks' injuries. Bo th Kirby and Hood filed claims for contribution and indemnity

against each other and against Knight. Liberty Mutual Fire Insurance Company intervened to recover

its workers' compensation lien, but it was later dismissed for failure to appear. At trial Knight was

granted an instructed verdict, because it was statutorily immune as Folks' employer.2 A take-nothing

judgment was entered in favor of Hood and Knight. The jury found Kirby 957 negligent, Hood 07

negligent, and Folks 57 negligent. It awarded damages to Folks of $1,076,000.00, and to his wife

in the amount of $30,000.00. Kirby appeals.

                                                   II

                                                   A

        Kirby argues that the district court erred by failing to give a requested jury instruction.

According to Kirby, the district court was required by Texas law to instruct the jury not to find Kirby

liable unless (1) Kirby knew or should have known about a dangerous condition on its premises, and

(2) Kirby should have realized that the condition posed an unreasonable risk of harm to its invitees.

   1
    Folks' first amended complaint alleged that "Kirby is liable to Bennie Ray Folks for its failure
to provide a safe place to work. Specifically, Kirby had a non-delegable duty to inspect its
premises to discover dangerous conditions and to warn invitees of hidden dangers." Record on
Appeal, vol. 1, at 249.
   2
   Neither the instructed verdict in favor of Knight nor the dismissal of intervenor Liberty
Mutual Fire Insurance Company is challenged on appeal.
           "In diversity actions, federal court jury instructions must accurately describe the applicable

state substantive law."3 Turlington v. Phillips Petroleum Co., 795 F.2d 434, 441-42 (5th Cir.1986).

We review de novo a district court's determination of a question of state law. City Pub. Serv. Bd.

v. Gen. Elec. Co., 935 F.2d 78, 80 (5th Cir.1991) (citing Salve Regina College v. Russell, 499 U.S.

225, 238, 111 S.Ct. 1217, 1225, 113 L.Ed.2d 190 (1991)), modified on other grounds, 947 F.2d 747,

748 (5th Cir.1991). " "A party is entitled to reversal for a district court's failure to give a particularly

requested instruction only if the jury was misled by the instructions that were actually given.' " Pierce

v. Ramsey Winch Co., 753 F.2d 416, 425 (5th Cir.1985). "[W]e afford our district courts latitude

in presenting state law as long as that presentation is substantively correct." Turlington, 795 F.2d

at 442 (emphasis added).

           At trial Kirby requested that the jury be given the following instruction:

                   You are instructed that with regard to the liability of the premises owner, Kirby Forest
          Industries, Inc., for the Plaintiff to establish negligence, the Plaintiff must prove that there was
          a condition on the property and that Kirby Forest Industries, Inc., either created or discovered
          the condition or by reasonable care should have discovered the condition, and should realize
          that it involved an unreasonable risk of harm to invitees, and that Kirby Forest Industries,
          Inc., failed to exercise reasonable care to protect the invitees against the danger.

Record on Appeal, vol. 2, at 680. The district court refused Kirby's request and did not instruct the

jury that Folks was required to prove Kirby's actual or constructi ve knowledge of a dangerous

condition on its premises.4

   3
    Federal courts sitting in diversity, such as the district court in this case, apply the substantive
law of the forum state. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188
(1938).
   4
       The district court instructed the jury as follows:

                          [T]he claim being asserted by the plaintiff is based on what we call
                  negligence.... Negligence is the doing of some act which a reasonably prudent
                  person would not do or the failure to do something which a reasonably prudent
                  person would do when prompted by considerations which ordinarily regulate the
                  conduct of human affairs. It is, in other words, failure to use ordinary care under
                  the circumstances in the management of one's person or property or of agencies
                  under one's control.

                          Plaintiff alleges that the conduct of Kirby Forest Industries, Incorporated at
                  the time and place in question was negligent in the following particulars. One, by
                  Kirby Forest Industries, Incorporated['s] failure to provide a safe place to work for
                  the plaintiff Bennie Ray Folks. Two, in failing to warn the plaintiff Bennie Ray
       Kirby's requested instruction is based on § 343(a) of the Restatement of Torts. See

Restatement (Second) of Torts § 343 (1965). Section 343 states:

       A possessor of land is subject to liability for physical harm caused to his invitees by a
       condition on the land if, but only if, he

              (a) knows or by the exercise of reasonable care would discover the condition, and
       should realize that it involves an unreasonable risk of harm to such invitees, and

               (b) should expect that they will not discover or realize t he danger, or will fail to
       protect themselves against it, and

               (c) fails to exercise reasonable care to protect them against the danger.

In Adam Dante Corp. v. Sharpe, 483 S.W.2d 452 (Tex.1972), the Supreme Court of Texas adopted

§ 343 as a summary of the duty which an occupier of premises owes to its invitees.5 See id. at 454-

55.6 Later, in Corbin v. Safeway Stores, Inc., 648 S.W.2d 292 (Tex.1983), the Texas Supreme Court

rearticulated the duty described in § 343 in terms of four elements which an invitee must prove in

order to establish liability on the part of an occupier of premises: (1) the occupier had actual or

constructive knowledge of some condition on the premises; (2) the condition posed an unreasonable

risk of harm to the invitee; (3) the occupier did not exercise reasonable care to reduce or to eliminate

the risk; and (4) the occupier's failure to use such care proximately caused the invitee's injuries. See

id., 648 S.W.2d at 296. "[A]ppropriate instructions in a premises liability case must incorporate the


               Folks of the dangerous condition of the accumulator; and failing to place the
               accumulator in zero mechanical state when the plywood plant ceased operations.

                       In order to prove the essential elements of plaintiff's claim the burden is on
               the plaintiff to establish by a preponderance of the evidence in the case the
               following facts. First, that the defendants were negligent in one or more of the
               particulars alleged. Second, that the defendant's negligence was a proximate cause
               of the injuries and consequent damages sustained by the plaintiff.

       Record on Appeal, vol. 2, at 528-30.
   5
    The Supreme Court of Texas has since held that subsection (b) of § 343 is no longer
applicable in Texas. See Parker v. Highland Park, Inc., 565 S.W.2d 512, 517 (Tex.1978)
(expressly abolishing "no duty" doctrine); see also Corbin v. Safeway Stores, Inc., 648 S.W.2d
292, 295 n. 1 (Tex.1983) (stating that subsection (b) "is no longer applicable in Texas" (citing
Parker )).
   6
     See also Corbin v. Safeway Stores, Inc., 648 S.W.2d 292, 295 (Tex.1983) (quoting § 343 and
citing Adam Dante Corp.); Rosas v. Buddie's Food Store, 518 S.W.2d 534, 536-37 (Tex.1975)
(same).
four Corbin elements." Keetch v. Kroger Co., 845 S.W.2d 262, 266 (Tex.1992).

        We conclude that Kirby owed Folks the duty which an occupier of premises owes to its

invitees, as articulated in Corbin. It is undisputed that Kirby was the possessor of the premises at the

Silsbee plant when Folks was injured, and we hold that Folks was Kirby's invitee.7 Furthermore,

Kirby's liability in this case was premised on the existence of a dangerous condition on its premises.8

Therefore, the district court was required to instruct the jury on the duty owed by an occupier of

premises to its invitee, as described in Corbin. See Keetch, 845 S.W.2d at 266 ("[A]ppropriate

instructions in a premises liability case must incorporate the four Corbin elements.").

       Folks and Hood contend, nonetheless, that "premises liability principles need not apply" to

this case because Kirby could have been found liable alternatively on the basis of simple negligence.

We disagree. Although Corbin states that "an invitee's suit against a store owner is a simple

negligence action," it also states that § 343 of the Restatement "tailors the traditional test of the

conduct of a reasonably prudent person to a specific category of defendants, namely, premises

occupiers. Consequently, an occupier's liability to an invitee depends on whether he acted reasonably

in light of what he knew or should have known about the risks accompanying a premises condition."




   7
    "An invitee has been described as one who enters on another's land with the owner's
knowledge and for the mutual benefit of both." Rosas v. Buddie's Food Store, 518 S.W.2d at
536. Texas courts have treated employees of independent contractors as invitees. See Smith v.
Henger, 148 Tex. 456, 464, 226 S.W.2d 425, 431 (Tex.1950) ("The law places upon the owner
or occupant of land the duty to use reasonable care to make and keep the premises safe for the
use of persons invited to use the premises for business purposes. Included within the class of
persons to whom this duty is owed are the employees of contractors performing construction or
other work on the premises."). It is undisputed that Kirby knew about Folks' entry onto the
premises. Furthermore, Folks' entry onto the premises was of mutual benefit to him and Kirby:
Kirby benefited from the sale of the glue line to Hood; the terms of the sale required that the
machinery be removed from the premises; and Folks was on Kirby's premises to help remove the
glue line.
   8
    Folks was injured because the accumulator forks of the glue line were in a dangerous
condition—raised, but unsupported by the hydraulic system. The fact that the dangerous
condition resulted from some negligent conduct does not mean that Folks was injured by the
negligent conduct rather than the dangerous condition. See Keetch, 845 S.W.2d at 264 ("At some
point, almost every artificial condition can be said to have been created by an activity.... Recovery
on a negligent activity theory requires that the person have been injured by or as a
contemporaneous result of the activity itself rather than by a condition created by the activity.").
See Corbin, 648 S.W.2d at 295 (emphasis added).9

          Folks' and Hood's argument is also foreclosed by the Texas Supreme Court's recent decision

in H.E. Butt Grocery Co. v. Warner, 845 S.W.2d 258 (Tex.1992). Warner was shopping at an

H.E.B. grocery store when she slipped in a puddle of blood and water which had formed near the

"bag your own chicken" counter. See id. at 258. Warner sued H.E.B. to recover damages for her

injuries, and the trial court entered a take-nothing judgment. See id. at 258-59. The court of appeals

reversed, because the trial court had submitted only a premises liability question to the jury, and had

not submitted Warner's simple negligence theory—that H.E.B. negligently failed to bag chickens for

its customers. See id. The Supreme Court of Texas reversed the decision of the court of appeals,

holding that "it [was] undisputed that [Warner] was injured by a condition of the premises," and

"[t]hus, Warner's only potential cause of action [was] limited to a premises liability theory." Id.

(citing Keetch ). Likewise in this case, Folks was injured by a dangerous condition on Kirby's

premises.10 Therefore, under Warner Folks' only basis for recovery is premises liability.11 See id;

see also Stanley Stores, Inc. v. Veazey, 838 S.W.2d 884, 886 (Tex.App.—Beaumont 1992)

(reversing judgment for defendant where plaintiff's injury resulted from dangerous condition of


   9
    Folks contends that Corbin is distinguishable because it is a slip and fall case and this case is
not. However, the holding in Corbin was not limited to slip and fall cases. See id., 648 S.W.2d
at 295. Corbin stated that § 343 of the Restatement describes "the duty of reasonable care that an
occupier of premises owes to invitees." Id. On its face this holding applies to all occupiers of
premises and their invitees, regardless of the type of injury which may occur. Furthermore, Texas
courts have applied Corbin outside the slip and fall context. See Wal-Mart Stores, Inc. v. Berry,
833 S.W.2d 587, 592 & n. 2 (Tex.App.—Texarkana 1992, writ requested) (stack of canned
drinks fell on shopper); EDCO Prod., Inc. v. Hernandez, 794 S.W.2d 69, 72 (Tex.App.—San
Antonio 1990, writ denied) (oil storage tank explosion); see also Hathaway v. Tascosa Country
Club, Inc., 846 S.W.2d 614, 617 (Tex.App.—Amarillo 1993, no writ) (citing Adam Dante Corp.
and applying Rest. § 343 to case involving golfing accident). Consequently, it is of no
consequence that this is not a slip and fall case.
   10
        See supra note 8.
   11
     Neither Exxon Corp. v. Quinn, 726 S.W.2d 17 (Tex.1987), nor City of Denton v. Van Page,
701 S.W.2d 831 (Tex.1986), nor Phelan v. Lopez, 701 S.W.2d 327 (Tex.App.—Beaumont 1985,
no writ), upon which Hood and Folks rely, is to the contrary. The trial courts' instructions
regarding the actual or constructive knowledge of the defendants was not an issue in any of those
cases. As a result, it is not clear from those opinions whether a premises liability instruction
complying with Corbin was given or not, and those decisions offer no support for the proposition
that an instruction on Kirby's actual or constructive knowledge was not required here.
premises and trial court failed to instruct jury as required by Corbin (citing Keetch )).

        Hood also contends that "there was no need to instruct the jury that it must be proved that

Kirby created or discovered or should have discovered the condition [of the accumulator forks],

because it was indisputable that Kirby [created] the condition." Hood is mistaken. Even assuming

arguendo that Kirby indisputably created the dangerous condition of the forks, we would not be

persuaded that an instruction on actual or constructive knowledge was unnecessary here. In Keetch,

the Supreme Court of Texas rejected the argument that "if [the premises occupier] created the

condition then [it] is charged with knowledge of the condition as a matter of law." See id., 845

S.W.2d at 265. The court stated:

        The fact that the owner or occupier of a premises created a condition that posed an
        unreasonable risk of harm may support an inference of knowledge. However, the jury still
        must find that the owner or occupier knew or should have known of the condition. Making
        the inference as a matter of law is improper unless knowledge is uncontroverted.

Id. (footnote and citation omitted). In light of this holding, Hood's argument is without merit.

        We therefore conclude that the district court's instruction was incorrect and entitles Kirby to

reversal. Kirby should not have been held liable for Folks' injury unless it knew or should have known

that a dangerous condition existed on its premises. Because the district court failed to instruct the

jury to that effect, the judgment of the district court must be vacated and this case remanded for a

new trial. See Pierce, 753 F.2d at 425 (" "A party is entitled to reversal for a district court's failure

to give a particularly requested instruction ... if the jury was misled by the instructions that were

actually given.' ").

                                                   B

        Kirby further argues that the district court erred by failing to instruct the jury to consider the

terms of the equipment sale. Although the district court admitted into evidence several documents

which showed that Kirby sold the glue line "as is," as well as testimony regarding the meaning of that

term, the district court refused Kirby's request for the following jury instructions:

        You are instructed that in considering the liability of Kirby Forest Industries, Inc. you may
        take into consideration the fact that the machinery was sold "as is" to Hood Industries, Inc.

Record on Appeal, vol. 2, at 713.
              You are instructed that the hydraulic accumulator, the machinery involved in this case, was
              sold "as is" in an auction on November 14, 1989, by Kirby Forest Industries, Inc. The term
              "as is" as used at the auction means that Kirby made no representations as to the condition
              of the equipment. The machinery could have been in a new or used condition. The machinery
              could have been in a safe or unsafe condition. The machinery could have been in a working
              or nonworking condition.

Id. at 731.

              The district court did not err in refusing to give these instructions. Si nce the terms of the

sale—that Kirby sold the machinery "as is"—were admitted into evidence, the first requested

instruction would have been superfluous. That instruction merely states what is implicit in the

admission of the sale terms into evidence—that the terms may be considered by the jury in reaching

a verdict.12 The second requested instruction was unnecessary as well, because it merely stated the

meaning of the term "as is," which was already substantially established by the evidence.13 Because

       12
      The district court instructed the jury to "find the facts in accordance with a preponderance of
all the evidence in the case...."
       13
            John Galloway, president of Hood Industries, testified as to his understanding of the term "as
is":

                              Q That meant to you what?

                              A That you were buying a piece of machinery ... and you didn't know if it
                      ran or didn't run. There was no way to test it or try it because there was no power
                      to it. We were never able to run it, so we didn't know if the pipes were plugged or
                      if the motors would operate or whatever.

                             Q As far as the structural integrity of the thing what all was good or what
                      all would have to be replaced you didn't know that.

                              A No.

                              Q That, of course, was why you were able to buy it at a price much lower
                      than the price of new equipment.

                              A Right. Plus it was used. It had wear and tear.

                             Q And among other things [as is] meant to you that even if you found out
                      or your engineers when they looked at the [glue] line, if you found out that some
                      motors weren't working or steel structure was weak and going to have to be
                      braced up or replaced or the hydraulic weren't working or stuff was bent no matter
                      what you found and how bad it was, that was a chance that you all were taking?

                              A That's exactly right.

              Record on Appeal, vol. 4, at 465, 470.
the requested instructions were unnecessary, the district court did not err by denying them.

        However, Kirby also contends that the district court erred in responding to a question from

the jury regarding the terms of the equipment sale. During deliberations the jurors inquired whether

"the terms of sale [were] legal and binding in the State of Texas." See id. The jurors specifically

referred to item number six in the auction catalog, which stated:

        Everything will be sold on an as-is basis without any warranty or representation whatsoever....
        Purchaser agrees to pay all costs of removal and purchaser does hereby indemnify and hold
        harmless auctioneers and seller for any and all damage, claim, or liability for injuries to
        persons or property caused by the removal of items purchased.

The district court responded:

        The terms of the auction sale should not concern the Jury and is not an issue for the Jury to
        decide. The Terms of Sale (Item 6) is an agreement between Kirby and Hood and does not
        involve the Plaintiff, Folks, and the Defendants.

Kirby contends that the district court, by so instructing the jury, forbade the jury to consider the "as

is" term of the sale, effectively excluding it from evidence. Kirby contends that this was error,

entitling it to reversal and a new trial on the issue of apportionment of negligence between it and

Hood.

        Hood responds initially that the district court did not exclude the "as is" term of the sale from

evidence. According to Hood, Kirby's argument "misconstrues the district court's action.... The jury

was told, in effect, that it was not to decide whether the terms of the contract were legal and binding.

It was also told, in effect, that the contract terms did not affect the question before the jury, which

was whose conduct was negligent in causing Folks's injury." Hood's argument virtually concedes

Kirby's point, as there is little if any practical difference between excluding the "as is" term from

evidence and telling the jury that that evidence does not affect the question before it. The district

court instructed the jury that the "terms of the auction sale should not concern [it]," and the jury

reasonably could have understood, and probably did understand, that instruction to mean that the "as

is" term of the sale should be disregarded. As a result, we view the district court's instruction to the

jury as a ruling excluding evidence.

        "The trial court's discretion to admit or exclude evidence is generally broad, but competent

evidence cannot be excluded without a sound and acceptable reason." Davidson Oil Country Supply
v. Klockner, Inc., 908 F.2d 1238, 1245 (5th Cir.1990), on rehearing, 917 F.2d 185 (5th Cir.1990).

"All relevant evidence is admissible in a jury trial, unless its probative value is outweighed by, for

example, the danger of unfair prejudice or confusion of the issues...." Id. (citing Fed.R.Evid. 402,

403).

        Kirby contends that the terms of the sale tend to establish Hood's liability, and therefore

Kirby's non-liability, for some percentage of Folks' damages. According to Kirby, "[t]he jury

rationally might expect Kirby to do less by way of pre-sale inspection or preparation in an "as is' sale."

Furthermore, "[t]he jury could expect that Hood would take certain action in inspecting and preparing

the equipment for dismantling," since Hood purchased the equipment "as is" and had received neither

warranties nor representations of quality from Kirby.14 In essence Kirby contends that the terms of

the sale were circumstances which the jury should have considered in deciding what degree of care

an ordinarily prudent person would have exercised "under the circumstances."15 Cf. Levrie v. Dep't

of Army, 810 F.2d 1311, 1316 (5th Cir.1987) ("Because the contract required Williams to provide

trained employees and to clean up hazardous spills, the government employee was not negligent in

looking to the Williams employees to alleviate the problem.").

        We agree. The fact that the glue line was sold "as is" is probative of the parties' knowledge

of the condition of the equipment. As a result, evidence of those terms has a "tendency to make the

existence of [a] fact that is of consequence to the determination of the action"—the negligence of

Kirby or Hood—"more probable ... than it would be without the evidence." Fed.R.Evid. 401

(defining relevant evidence). We therefore conclude that the "as is" terms of the sale constituted

relevant, admissible evidence.16 See Fed.R.Evid. 402 ("All relevant evidence is admissible, except as

   14
     Kirby does not contend that its liability for Folks' injuries is contractually limited by virtue of
the aforementioned sale terms.
   15
     See Vargas v. City of San Antonio, 650 S.W.2d 177, 179 (Tex.App.—San Antonio 1983,
writ dism'd) (defining negligence as "failure to do that which a person of ordinary prudence would
have done under the same or similar circumstances, or doing that which a person of ordinary
prudence would not have done under the same or similar circumstances").
   16
     According to the dissent, we "hold[ ] today that, in the presence of an "as is' clause, a
prudent buyer is obligated to exercise greater care concerning the product's safety[,] and the seller
is excused when the buyer fails to exercise that greater amount of care." We respectfully disagree
otherwise provided by the Constitution of the United States, by Act of Congress, by these rules, or

by other rules prescribed by the Supreme Court pursuant to statutory authority.").

        Hood contends, however, that the district court's action was proper because otherwise the

jury might have mistakenly treated the terms of the sale as a binding indemnification agreement.17 The

Supreme Court of Texas has held that "parties seeking t o indemnify the indemnitee from the

consequences of its own negligence must express that intent in specific terms." Ethyl Corp. v. Daniel

Constr. Co., 725 S.W.2d 705, 707 (Tex.1987). Item six of the auction catalog stated that the

"purchaser does hereby indemnify and hold harmless auctioneers and seller for any and all damage,

claim, or liability for injuries to persons or property caused by the removal of items purchased."

Although it appears from this language that Hood agreed to indemnify Kirby for any injuries caused

by the removal of the glue line, Ethyl Corp. held that an agreement such as this one, which does not

explicitly mention negligence, is not effective as to negligence. See id. Hood argues that, in the

absence of the district court's instruction, the jury might have treated the language in item six as a

binding indemnification agreement, in direct violation of the rule set out in Ethyl Corp. Therefore,

Hood argues, the district court did not err in instructing the jury that the sale terms did not concern

them.

        First of all, the record does not indicate that the district court responded to the jury's question

as it did because of the concerns raised by Hood. More importantly, however, those concerns would

not have justified the district court in excluding from the jury's consideration all of the terms of the

sale. The district court could have simply instructed the jury that the indemnification clause was not

enforceable under Texas law,18 which still would have permitted the jury to consider the "as is" term


with this characterization of our holding, since we do not hold that the duty of care owed by a
buyer necessarily changes in the presence of an "as is" clause. We simply hold that an "as is"
clause is a probative fact which the jury is entitled to consider when deciding whether a party
acted as a reasonable person would act under the circumstances.
   17
     See Fed.R.Evid. 403 ("Although relevant, evidence may be excluded if its probative value is
substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading
the jury....").
   18
    Contrary to Hood's argument, a lengthy and confusing legal instruction was not necessary to
prevent the jury from enforcing the indemnification clause.
of the sale.19 Because that alternative, among others, was available to the district court, we conclude

that the district court abused its discretion by instructing the jury to disregard the terms of the

equipment sale. See Klockner, 908 F.2d at 1245 ("The trial court's discretion to admit or exclude

evidence is generally broad, but competent evidence cannot be excluded without a sound and

acceptable reason.").

        Kirby emphasized the "as is" nature o f the sale in its defense at trial; and, as we already

stated, we agree with Kirby's argument that evidence of the "as is" nature of the sale might persuade

the jury to apportion some liability for Folks' injuries to Hood. The erroneous exclusion of evidence

of the sale terms therefore also requires reversal and a new trial. See Fed.R.Evid. 103(a) ("Error may

not be predicated upon a ruling which admits or excludes evidence unless a substantial right of the

party is affected...."); Klockner, 908 F.2d at 1245 (reversing and remanding where "exclusion [of

relevant evidence] seriously hindered the presentation of [a party's] case") (citing Fed.R.Evid.

103(a)).20

                                                  C

        Kirby also contends that the district court erred by denying its motion for judgment as a

matter of law. Kirby contends that it is entitled to judgment as a matter of law because the evidence

presented at trial was insufficient to prove that (1) the condition of the accumulator forks was a

hidden dangerous condition, which Kirby knew or should have known Hood would not discover; and

(2) the hidden condition existed at the time the glue line was sold to Hood.

        Kirby's argument is derived from the rules governing liability of sellers of land for dangerous

   19
     We respectfully disagree with the dissent's assertion that we are attempting to evade the
requirements of Ethyl Corp. v. Daniel by giving the "as is" clause the effect of an indemnification
agreement. See Dissenting Opinion at n. 4. As we have indicated, the jury must be instructed not
to give the sale terms any effect which, as a matter of Texas law, they do not have. The jury
should, however, be permitted to consider the terms of the sale as evidence of the events leading
up to, and the circumstances surrounding, Folks' accident.
   20
     Because we reverse on other grounds, we need not address the following arguments: (a) that
Kirby is entitled to a new trial because the jury's verdict apportioning 07 negligence to Hood is
against the great weight of the evidence; (b) that Kirby is entitled to either a new trial or a
remittitur because the evidence was insufficient to support the jury's award of $876,000 in future
damages; and (c) that Kirby is entitled to a new trial because the district court failed to instruct
the jury properly concerning the duty Kirby owed to an employee of an independent contractor.
conditions on the land. Texas courts have held that "a vendor of land is not subject to liability for

physical harm caused[,] ... after the vendee has taken possession [of the land,] by any dangerous

condition ... which existed at the time that the vendee took possession." Beall v. Lo-Vaca Gathering

Co., 532 S.W.2d 362, 365 (Tex.Civ.App.—Corpus Christi 1975, writ ref'd n.r.e.) (quoting

Restatement (Second) of Torts § 352 (1965)). However,

        A vendor of land who conceals or fails to disclose to his vendee any condition ... which
        involves unreasonable risk to persons on the land, is subject to liability to the vendee and
        others upon the land with the consent of the vendee or his subvendee for physical harm
        caused by the condition after the vendee has taken possession, if

               (a) the vendee does not know or have reason to know of the condition or the risk
        involved, and

                (b) the vendor knows or has reason to know of the condition, and realizes or should
        realize the risk involved, and has reaso n to believe that the vendee will not discover the
        condition or realize the risk.

Id. (quoting Rest. (2d) Torts § 353(1)); see also First Fin. Dev. Corp. v. Hughston, 797 S.W.2d

286, 293 (Tex.App.—Corpus Christi 1990, writ denied) (noting that transferor of land is not liable

for dangerous condition on land "where the transferee discovers or should have discovered the

dangerous condition" (citing Beall; Rest. (2d) Torts §§ 351-53)); Moeller v. Fort Worth Capital

Corp., 610 S.W.2d 857, 861 (Tex.App.—Fort Worth 1981, writ ref'd n.r.e.) (citing Beall; Rest. (2d)

Torts § 353). Kirby argues that it should be held to the same duty which a seller of land owes, since

it sold the glue line to Hood before Folks was injured.

        It is undisputed that this case did not involve a sale of land—Kirby concedes that it was the

owner of the premises where Folks was injured—and Kirby does not argue that the rules governing

vendors of land are directly controlling here. Kirby merely draws an analogy between sales of land

and sales of personal propert y, such as the glue line, and argues that "a prior owner of personal

propert y should be treated similarly to a prior landowner." Kirby does not point to any autho
                                                                                             rity

which supports its position,21 but merely contends that, "[a]s a matter of logic," the rules which

   21
     Kirby relies on Beall v. Lo-Vaca Gathering Co., United States v. Inmon, 205 F.2d 681, 684
(5th Cir.1953), Graham v. United States, 441 F.Supp. 741 (N.D.Tex.1977), and Devers v. Mobil
Chem. Corp., 488 F.2d 258, 260 (5th Cir.), cert. denied, 417 U.S. 947, 94 S.Ct. 3073, 41
L.Ed.2d 667 (1974), but none of these supports Kirby's argument. Beall, Inmon, and Graham all
clearly dealt with sales of realty. While Devers involved personal property, the defendant
govern vendors of realty should govern vendors of personalty.

        Because federal jurisdiction in this case is premised on diversity, the district court was

required to rule as the Texas courts most likely would rule if presented with Kirby's argument. See

Mozeke v. Int'l Paper Co., 856 F.2d 722, 724 (5th Cir.1988) ("Since this case was removed to a

federal forum on the basis of diversity of citizenship, we sit as an Erie court, and must apply

Louisiana law, attempting to rule as a Louisiana court would if presented with the same issues.").

We review de novo a district court's determination of a question of state law. See Salve Regina

College v. Russell, 499 U.S. at 238, 111 S.Ct. at 1225 (holding that "courts of appeals [must] review

the state-law determinations of district courts de novo"). We are not aware of any decision of a

Texas court which has considered Kirby's argument or one similar to it,22 and a federal court sitting

in diversity cannot expand or make innovations in the laws of the State of Texas. See City Pub. Serv.

Bd. v. Gen. Elec. Co., 947 F.2d 747, 748 (5th Cir.1991) ("[I]t is not for this court—Erie-bound to

apply state law as st ate courts would do—to incorporate ... innovative theories of recovery into

Texas law." (citing Mayo v. Hyatt Corp., 898 F.2d 47, 49 (5th Cir.1990))); Mitchell v. Random

House, Inc., 865 F.2d 664, 672 (5th Cir.1989) ("We will not create this tort for Mississippi.");

Devers v. Mobil Chem. Corp., 488 F.2d 258, 260 (5th Cir.1974) ("While Devers' interpretation of



remained in possession of the personalty at the time of the plaintiff's injury. See Devers, 488 F.2d
at 259.
   22
      In several Texas cases premises owners have been sued because of the dangerous condition
of personal property which was located on the premises but which did not belong to the premises
owner. See Bryant v. Gulf Oil Corp., 694 S.W.2d 443 (Tex.App.—Amarillo 1985, writ ref'd
n.r.e.) (where plaintiff's injury resulted from contact with utility company's power lines on
defendant's premises); J.A. Robinson Sons, Inc. v. Ellis, 412 S.W.2d 728
(Tex.Civ.App.—Amarillo 1967, writ ref'd n.r.e.) (where plaintiff's decedent was killed when
independent contractor's chain and cable broke during unloading of equipment at premises
occupied by defendant); Perez v. Hernandez, 317 S.W.2d 81 (Tex.Civ.App.—San Antonio 1958,
writ ref'd n.r.e.) (where plaintiff was injured by independent contractor's tire repair machine,
which was operated on defendant's premises). However, none of those decisions relied on the
fact that the occupier of the premises did not own the personal property. All three cases were
decided on the basis of the rule that a possessor of premises has no duty to protect independent
contractors from dangers arising from the performance of their work. See Bryant, 694 S.W.2d at
446; Ellis, 412 S.W.2d at 736; Perez, 317 S.W.2d at 83. The Bryant court also relied upon the
fact that the defendant had no control or supervision over the dangerous personal property. See
Bryant, 694 S.W.2d at 447. Therefore, we do not regard those cases as either supporting or
foreclosing Kirby's argument.
Texas law is not completely foreclosed by the cases, it would most cert ainly be an expansion of

established principles. It is not our function to expand t he law of Texas."). To apply the rules

governing vendors of realty to cases involving vendors of personalty—which the Texas courts

apparently have not chosen to do—would amount to an expansion of Texas law. Because it is not

the place of federal courts sitting in diversity to impose such alterations on the laws of the State of

Texas, the district court properly denied Kirby's motion for judgment as a matter of law.23

                                                  III

        For the reasons stated supra in Parts II.A. and B., we vacate the judgment of the district court

and remand for a new trial.



        JOHNSON, Circuit Judge, concurring in part and dissenting in part:

        The majority herein is correct in holding that this case must be reversed and remanded because

the jury was not properly instructed as to the elements of recovery under a premises liability theory.

This writer also agrees that a federal court sitting in diversity should not adopt the novel defense

presented by Kirby that would apply the law governing vendors of real estate to vendors of personal

propert y. Accordingly, this writer concurs with Parts IIA and IIC of the majority's opinion.

However, in my view, the majority goes astray in Part IIB by allowing a disclaimer of warranties to

affect the respective tort duties between the defendants. Hence, I respectfully dissent from this

portion of the majority's opinion.

                                            DISCUSSION

                                        THE AS IS CLAUSE



   23
      Kirby also contends that the district court should have instructed the jury not to find Kirby
negligent unless (1) the condition of the accumulator forks was a hidden dangerous condition,
which Kirby knew or should have known Hood would not discover; and (2) the hidden condition
existed at the time the glue line was sold to Hood. Because these requested instructions are based
on the law governing vendors of realty, see Beall, 532 S.W.2d at 365, which we refuse to
transplant into an area of Texas law where it has not been applied before, we find no fault with the
district court's decision to refuse Kirby's requested instructions. See Pierce, 753 F.2d at 425
("When an objection is made to the failure to give a requested instruction, the correctness of the
proposed instruction must ... be shown as a threshold matter.").
        Without considering the "as is" nature of the sale of this equipment,1 the jury found that Kirby,

the seller and premises owner, was 957 negligent; that Hood, the buyer, was 07 negligent; and that

Folks, the plaintiff, was 57 negligent. The issue to be decided herein is whether consideration of the

"as is" provision in the sale of this equipment from Kirby to Hood can affect that apportionment of

tort liability. In Part IIB of its opinion, the majority concludes that it does.

        In the majority's view, an "as is" provision acts not only to disclaim any implied warranties

under the sales contract, but it also spills over into the tort realm by changing the relative standards

of care owed by the defendants. The majority reaches this conclusion because it believes that selling

a product "as is" makes a negative comment about that product's safety. Hence, the majority holds

today that, in the presence of an "as is" clause, a prudent buyer is obligated to exercise greater care

concerning the product's safety and the seller is excused when the buyer fails to exercise that greater

amount of care.2

        This holding not only has no support whatsoever in Texas law, but it is also completely

wrong. The product's safety is a tort concern. Contrary to the majority's holding, warranties, and

more specifically here, "as is" clauses, have always been focused on the product's value and not the

product's safety. See East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 872, 106

S.Ct. 2295, 2303, 90 L.Ed.2d 865 (1986).

        Under the Commercial Code, warranties are designed to provide a remedy when a product

fails to measure up to the seller's representations of quality. Mid-Continent Aircraft Corp. v. Curry

County Spraying Service, Inc., 572 S.W.2d 308, 313 (Tex.1978); Nobility Homes of Texas, Inc. v.




   1
    The majority contends that the trial judge's actions effectively removed from the jury's
consideration evidence as to the "as is" nature of the sale. For purposes of this dissent, this will
be taken as true.
   2
     The majority takes issue with this characterization of its holding. Specifically, the majority
states that it is not holding that the duty of care "owed by a buyer necessarily changes in the
presence of an "as is' clause." Maj. op. at n. 16 (emphasis added). This equivocal statement is
unlikely to ease a buyer's fears because the only possible effect of this evidence is for juries to
raise the buyer's duty and lessen the seller's. The only comfort that the majority offers buyers is
that the majority does not mandate that juries do so.
Shivers, 557 S.W.2d 77, 80 (Tex.1977). Disclaiming warranties by an "as is" clause3 only indicates

that the seller makes no implied representation that the product will perform satisfactorily thus

shifting the economic risk of product quality from the seller to the buyer. Tex.Bus. & Com.Code

Ann. § 2.316(c)(1) (Tex. UCC) (Vernon 1968); See also Mid-Continent, 572 S.W.2d at 313.

Indeed, this Court has recognized that a disclaimer of contractual warranties does not affect claims

based on negligence. Illinois C.G.R. Co. v. Pargas, Inc., 722 F.2d 253, 255 (5th Cir.1984).4

        In short, when a seller sells a product "as is," he negates implied warranties. The seller does

not avoid liability for his own negligence. In order for the seller to shift liability for the consequences

of his own negligence, in Texas he must express that intent in specific terms in the contract. Ethyl

Corp., 725 S.W.2d at 708.5

        Lastly, to allow an "as is" disclaimer of warranties to affect tort duties under Texas law would

improperly blend tort and contract in the products area. Texas courts have consistently attempted

to keep these theories distinct. Garcia v. Texas Instruments, Inc., 610 S.W.2d 456, 451 (Tex.1980);

Nobility Homes, 557 S.W.2d at 80; Mid-Continent, 572 S.W.2d at 312. Sitting in diversity, this

Court has no authority to do that which the Texas courts have determined to be inappropriate. This

Court should not mix apples and oranges of tort law and warranty law. Thus, in this writer's view,

the district court did not err at all in instructing the jury that the contract provisions were not relevant.

                                             CONCLUSION

   3
    Absent an "as is" or similar clause, the seller of a product impliedly warrants that the product
is merchantable, Tex.Bus. & Com.Code Ann. § 2.314 (Tex. UCC) (Vernon 1968), and that the
product is fit for the particular purpose for which it is sold, Id. at § 2.315.
   4
    Even though the Court in Pargas recognized that, as a general rule, disclaimers of contractual
warranties do not affect negligence claims, the Court found that Illinois, whose law it was
construing, would not follow that rule. This is because, unlike most states, Illinois did not require
a specific reference to negligence for a valid contractual disclaimer of a party's own negligence.
Id.

               By contrast, Texas does specifically require an express reference to negligence in a
        contractual disclaimer. Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708
        (Tex.1987).
   5
    The majority recognizes in Part IIB of its opinion that the contract did not meet the standards
outlined in Ethyl Corp. However, it attempts an end run around these requirements seeking to
reach the same result through the "as is" clause.
       The majority is correct that this case must be reversed and remanded as the jury was not

properly instructed as to the elements of premises liability. However, in my view, the district court

did not err in limiting the relevance of the "as is" clause. Under Texas law, which we must follow,

that clause did not affect the percentage of liability assigned to each defendant in this negligence

action. For this reason, this writer is compelled to dissent from Part IIB of the majority's opinion.

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