State Supreme Court Reverses Dangerous Expansion of Product Liability

Posted on January 18, 2012 by Sean Wajert
The California Supreme Court held last week that the law does not impose liability on manufacturers of equipment used in conjunction with asbestos-containing parts made by others.  See O'Neil v. Crane Co., Cal., No. S177401 (Cal. 1/12/12).
 
Readers may recall that we posted on this case before. The Restatement of Torts (Third): Products Liability says that in the context of a final, finished product that injures a user and which is made up of components from different manufacturers, if a given component is itself defective and the defect causes the harm, then the supplier of that component is of course liable. In addition, the supplier can be liable even if the component by itself is not defective, but only if the seller substantially participates in the integration of the component into the design of the product (and the defect causes the harm). See Restatement 3d, Section 5. In essence, the doctrine holds that an entity supplying a non-defective raw material or a non-defective component part is not strictly liable for defects in the final product over which it had no control. In this respect, the Third Restatement of Torts simply codified the doctrine of various states’ common law.
 
Nevertheless, a split had existed among the lower courts in California about whether to
extend liability for asbestos-related disease beyond the manufacturers of the asbestos insulation, gaskets, and packing to which many ship workers were exposed (and which makers are now bankrupt) to the makers of the products the asbestos was used with (to find a solvent target).  So the state supreme court confronted the limits of a manufacturer’s duty to prevent foreseeable harm related to its product: When is a product manufacturer liable for injuries caused by adjacent products or replacement parts that were made by others and used in conjunction with the defendant’s product?   It held that a product manufacturer may not be held liable in strict liability or negligence for harm caused by another manufacturer’s product unless the defendant’s own product contributed substantially to the harm, or the defendant participated substantially in creating a harmful combined use of the products.
 
Defendants made valves and pumps used in Navy warships. They were sued here for a wrongful death allegedly caused by asbestos released from external insulation and internal gaskets and packing, all of which were made by third parties and added to the pumps and valves post-sale. It is undisputed that defendants never manufactured or sold any of the asbestos-containing materials to which plaintiffs’ decedent was exposed. That is, no evidence was presented that any of the asbestos-containing dust came from a product made by defendants. Neither company manufactured or sold the external insulation or flange gaskets that the repairmen like plaintiff removed. Although the valves and pumps contained internal asbestos-containing gaskets and packing, these original components had been replaced long before plaintiff encountered them years later. There was no evidence that any of these replacement parts were made by defendants.  The Court of Appeal asserted defendants’ products were defectively designed “because they required asbestos packing and insulation.” But this factual assertion was unsupported by the record. The evidence established that the requirement for asbestos derived from military specifications, not from any inherent aspect of defendants’ pump and valve designs

Nevertheless, plaintiff claimed that defendants should be held strictly liable and found negligent because it was foreseeable that workers would be exposed to and harmed by the asbestos in replacement parts and products used in conjunction with their pumps and valves. The Court of Appeals held that the component parts defense applied only to manufacturers of “multi-use or fungible products” designed to be altered and incorporated into another product. It then concluded defendants’ products did not meet these requirements. The Court of Appeal also rejected defendants’ argument that they could not be found strictly liable because they did not manufacture or supply the asbestos-containing products that caused plaintiffs' disease. The lower court announced a broad definition of strict products liability: a manufacturer is liable in strict liability for the dangerous components of its products, and for dangerous products with which its product will necessarily be used. Even though it was replacement gaskets and packing that allegedly caused disease, the lower appeals court concluded these replacement parts were “no different” from the asbestos-containing components originally included in defendants’ products.
 

Plaintiff's claims would represent an unprecedented expansion of strict products liability, which the supreme court declined to do.  California law, like most states, has long provided that manufacturers, distributors, and retailers have a duty to see to the safety of their products, and will be held strictly liable for injuries caused by a defect in their products. Yet, the state has never held that these responsibilities extend to preventing injuries caused by other products that might foreseeably be used in conjunction with a defendant’s product. Nor has the state's high court ever held that manufacturers must warn about potential hazards in replacement parts made by others when, as here, the dangerous feature of these parts was not integral to the product’s design.  From the outset, strict products liability in California has always been premised on harm caused by deficiencies in the defendant’s own product.  The reach of strict liability is not limitless; strict liability does not extend to harm from entirely distinct products that the consumer can be expected to use with, or in, the defendant’s non-defective product. Instead, the courts require proof that the plaintiff suffered injury caused by a defect in the defendant’s own product.
 
In this case, it was undisputed that plaintiff was exposed to no asbestos from a product made by the defendants. Although he was allegedly exposed to potentially high levels of asbestos dust released from insulation the Navy had applied to the exterior of the pumps and valves, defendants did not manufacture or sell this external insulation. They did not mandate or advise that it be used with their products. It is fundamental that the imposition of liability requires a showing that the plaintiff’s injuries were caused by an act of the defendant or an instrumentality under the defendant’s control.
 
Generally speaking, manufacturers have a duty to warn consumers about the hazards inherent in their products. The requirement’s purpose is to inform consumers about a product’s hazards and faults of which they are unaware, so that they can refrain from using the product altogether or evade the danger by careful use. Typically, under California law, manufacturers are strictly liable for injuries caused by their failure to warn of dangers that were known to the scientific community at the time they manufactured and distributed their product. The supreme court has never held that a manufacturer’s duty to warn extends to hazards arising exclusively from other manufacturers’ products. Plaintiff's alleged exposure to asbestos came from replacement gaskets and packing and external insulation added to defendants’ products long after their installation; there was no dispute that these external and replacement products were made by other manufacturers.
 
So the supreme court reaffirmed that a product manufacturer generally may not be held strictly liable for harm caused by another manufacturer’s product. The only exceptions to this rule arise when the defendant bears some direct responsibility for the harm, either because the defendant’s own product contributed substantially to the harm or because the defendant participated substantially in creating a harmful combined use of the products.   Plaintiffs sought to expand these exceptions to make manufacturers strictly liable when it is foreseeable that their products will be used in conjunction with defective products or even replacement parts made or sold by someone else. However, the mere foreseeability of harm, standing alone, is not a sufficient basis for imposing strict liability on the manufacturer of a non-defective product, or one whose arguably defective product does not actually cause harm.
 
The decision was supported by common sense. A manufacturer cannot be expected to exert pressure on other manufacturers to make their products safe and is not able to share the costs of ensuring product safety with these other manufacturers. It would be unfair to require  manufacturers of non-defective products to shoulder a burden of liability when they derived no economic benefit from the sale of the products that injured the plaintiff.  And a contrary rule would require manufacturers to investigate the potential risks of all other products and replacement parts that might foreseeably be used with their own product and warn about all of these risks. Such a duty would impose an excessive and unrealistic burden on manufacturers. Such an expanded duty could also undermine consumer safety by inundating users with excessive warnings. “To warn of all potential dangers would warn of nothing.”
 
 
 
 

 

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Huge Asbestos Verdict Vacated After Judge Recusal

Posted on January 9, 2012 by Sean Wajert

A Mississippi state court late last month vacated the huge $322 million jury verdict in an asbestos case against Union Carbide Corp. See Union Carbide Corp. et al. v. Brown, No. 2006-196(Circuit Court of Smith County, Ms. 12/27/11).

The asbestos lawsuit in Smith County was filed by plaintiff Thomas Brown Jr., who alleged he worked in the state’s oil fields from 1979 to the mid-1980s and was diagnosed with asbestosis. He claimed that he had been exposed to asbestos when mixing drilling products manufactured by Union Carbide.

A state court jury found the defendants liable under defective design and failure to warn claims, awarding $22 million in compensatory damages and $300 million in punitives, probably the largest asbestos verdict for a single plaintiff in the history of the grandfather of mass torts. Later, the state Supreme Court disqualified the trial judge after information surfaced that the judge's parents had brought asbestos lawsuits.

As profiled by the U.S. Chamber of Commerce's Institute for Legal Reform, the new judge appointed to handle the matter granted the defendant's motions to set aside the verdict.  Plaintiff's counsel had argued that the recusal didn’t justify throwing out the verdict.

 

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Substantial Cause Explored in Case of Multiple Exposures

Posted on October 3, 2011 by Sean Wajert

The Sixth Circuit issues and interesting opinion last week, exploring plaintiff's burden to prove that exposure to defendant's product caused his injury in the context in which plaintiff was exposed to numerous other similar products. See Moeller v. Garlock Sealing Technologies LLC, No. 09-5670, (6th Cir., 9/28/11).

Plaintiff was a pipefitter who worked with asbestos-containing gaskets made by Garlock from about 1962 until about 1970. But from 1962 until about 1975, he also sustained significant exposure to asbestos insulation. He contracted mesothelioma and sued, alleging that his exposure to Garlock’s asbestos-containing gaskets was a substantial factor in causing his injuries.

At trial, plaintiff's expert testified that exposure to asbestos from Garlock gaskets, along with his other exposures, contributed to the mesothelioma. And one of the treating oncologists opined  that if plaintiff had worked for many years (as he did) scraping and grinding asbestos gaskets, and if plaintiff breathed those fibers, then that exposure would have caused his cancer. In rebuttal, Garlock presented evidence that plaintiff had sustained substantial exposure to asbestos insulation products for 13 years. It also presented evidence that whereas asbestos insulation was banned in the 1970s, leading asbestos safety authorities believed that gaskets, such as those sold by Garlock, posed “no health hazard,” and were sold lawfully in the United States. Garlock also suggested that the plaintiff had only installed Garlock gaskets (an activity that both parties agree did not create a risk of injury), and had not ever removed them (the activity that the plaintiff alleges caused the injuries).

The jury returned a verdict for plaintiff, and defendant appealed.

To prevail on a negligence claim, Kentucky law requires a plaintiff to prove that a defendant’s conduct was a substantial factor in bringing about the harm. Deutsch v. Shein, 597 S.W.2d 141, 144 (Ky. 1980). Causation requires a link between the specific defendant’s conduct and the plaintiff’s injuries. See Estes v. Gibson, 257 S.W.2d 604, 607 (Ky. 1953) . Substantial causation refers to the probable cause, as opposed to a possible cause. One measure of whether an action is a substantial factor is the number of other factors which contribute in producing the harm and the extent of the effect which they have in producing it.

The appeals court concluded that the plaintiff failed to prove that Garlock’s product was a substantial factor in bringing about the harm. The plaintiff presented various witnesses to support the claim that the mesothelioma was caused by his exposure to Garlock gaskets. But one expert never actually said that the exposure to Garlock gaskets was a substantial factor in causing the  cancer; the others testified that all types of asbestos can cause mesothelioma and that any asbestos exposure counts as a “contributing factor.”  That testimony does not establish that exposure to Garlock gaskets in and of itself was a substantial factor.

Moreover, the evidence presented was insufficient to allow a jury to infer that exposure to Garlock gaskets was a substantial cause of the cancer. Plaintiff here presented no evidence quantifying  exposure to asbestos from Garlock gaskets. There was testimony that he removed gaskets for several years, and that some of those gaskets were Garlock’s. But the plaintiff failed to establish how many Garlock gaskets he removed, or how frequently he removed—as opposed to installed—them. The record also shows that plaintiff regularly tore out asbestos insulation during the relevant years, and that his exposure to asbestos from insulation would have been thousands of times greater than his exposure from removing gaskets.

Thus, while his exposure to Garlock gaskets may have contributed to his mesothelioma, the record simply does not support an inference that it was a substantial cause of his mesothelioma. Given that the Plaintiff failed to quantify his exposure to asbestos from Garlock gaskets and that the Plaintiff concedes that he sustained massive exposure to asbestos from non-Garlock sources, there is simply insufficient evidence to infer that Garlock gaskets probably, as opposed to possibly, were a substantial cause of the injury.

The court summed it up: saying that exposure to Garlock gaskets was a substantial cause of plaintiff’s mesothelioma would be akin to saying that one who pours a bucket of water into the
ocean has substantially contributed to the ocean’s volume.

 

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State Court Finds No Duty to Spouse of Exposed Worker

Posted on August 4, 2011 by Sean Wajert

Delaware's supreme court held last month that an employer owes no duty of care to an employee's spouse, who allegedly contracted asbestos-related disease from exposure to her spouse's work clothes. Price v. E.I. du Pont de Nemours & Co., No. 719, 2009 (Del. 7/11/11).

Bobby Price worked as a maintenance technician in defendant's facility from 1957 until 1991. During his employment, Mr. Price allegedly worked with and around products containing asbestos. Allegedly, Mr. Price transported asbestos fibers home on his clothing, vehicle, and skin. Patricia Price, his wife, alleged that years of living with her husband, and handling and washing his work clothes, exposed her to the fibers. Mrs. Price claimed to suffer from bilateral interstitial fibrosis and bilateral pleural thickening of the lungs. These maladies, she claimed, stemmed directly from her exposure to the asbestos dust and fibers her husband brought home from work.

Plaintiff sued, alleging that the company wrongfully released asbestos from its plant and that she was a reasonably foreseeable victim of its asserted misconduct. 

To prevail on a negligence claim under Delaware law, a plaintiff must prove that a defendant owed her a duty of care, the respondent breached that duty, and the breach proximately caused an injury. Whether a duty exists is a question of law, typically. To determine whether one party owed another a duty of care, Delaware courts look to the Restatement (Second) of Torts for guidance.  Negligent conduct involves either (1) an act which the actor as a reasonable person should recognize as involving an unreasonable risk of causing an invasion of an interest of another (described in some cases as misfeasance), or (2) a failure to do an act which is necessary for the protection or assistance of another and which the actor is under a duty to do (sometimes described as nonfeasance).

Plaintiffs moved to amend the complaint to state a claim based on an asserted theory of misfeasance—that the release of asbestos was carried into a worker's home — rather than a claim of nonfeasance based on a failure to warn. The Delaware court noted that in the case of misfeasance, the party who does an affirmative act owes a general duty to others to exercise reasonable care, but, in the case of nonfeasance, the party who merely omits to act owes no general duty to others unless there is a "special relationship" between the actor and the other which gives rise to the duty.

DuPont contended that as a matter of substance the amended complaint really alleged  nonfeasance—not misfeasance. Again, in order to recover for nonfeasance, a plaintiff must specifically allege a “special relationship” between herself and the defendant. Having not alleged any “special relationship” in this case, DuPont argued, Price’s amendments were futile because they failed to state a claim as a matter of law.

The court noted that Price’s allegations, stripped of all reformatory re-characterization, were that: (1) Mr. Price, an employee of defendant, worked with and around products containing asbestos for 34 years, (2) asbestos fibers settled on his skin, clothing, and vehicle, (3) defendant allegedly did not provide locker rooms, uniforms, or warnings to the Prices regarding the dangers of asbestos, (4) defendant did not prevent Mr. Price from transporting the asbestos fibers home on his skin, clothing, and vehicle, and (5) Mrs. Price, because she lived with Mr. Price and washed his clothes, developed disease. These alleged acts were pure nonfeasance—nothing more. Dupont’s alleged failures to prevent Mr. Price from taking asbestos fibers home or to warn the Prices about the dangers of asbestos did not rise to the level of affirmative misconduct required to allege a claim of misfeasance. No amount of semantics can turn nonfeasance into misfeasance or
vice versa.

Having alleged only nonfeasance, Price needed to allege that a “special relationship” existed between her and DuPont in order for DuPont to owe her a duty of care. But the relationship between Mrs. Price and DuPont did not fit any of the recognized “special relationships”
giving rise to a duty to aid or protect. Just because her husband worked for DuPont for over thirty years, or DuPont provided health insurance to her as Mr. Price’s spouse, or DuPont sponsored company picnics and participated in programs promoting a "family friendly" workplace, a special relationship did not exist. 

The plaintiff's bar has been aggressive in efforts to create new methods of recovery from asbestos exposures -- new defendants, new legal theories, new injuries, new plaintiffs. For once, a court has put the brakes on this seemingly endless expansion. 

 


 

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New Report on Asbestos and Silica Litigation in Texas

Posted on February 17, 2011 by Sean Wajert

The Texas Civil Justice League has released a new report, "A Texas Success Story: Asbestos and Silica Lawsuit Reform."

Established in 1986, the Texas Civil Justice League is a non-partisan, statewide business coalition committed to legal reform and public policy research. The League makes legislative recommendations in vital issue areas, such as administration of the courts, general business liability, mass torts, and products liability.

The purpose of this special report is to document the current state of asbestos and silica litigation in Texas state courts. Part one provides a brief history of asbestos and silica litigation in the United States and an overview of the legislative efforts in Texas to address abuses in asbestos and silica litigation.  The report then offers a description of asbestos and silica litigation in Texas’s two multidistrict litigation courts handling asbestos and silica cases, and the impact of reform legislation (S.B. 15) on the state MDLs.

The report then turns to recent issues in asbestos litigation, specifically to the science-based evidentiary standards required by the Texas Supreme Court’s decision in Borg-Warner Corp. v. Flores.

Next are the issues relating to asbestos claimant compensation, starting with the role of bankruptcy trusts in compensating asbestos claimants; the bankruptcy trust payment system can provide substantial compensation to asbestos victims, but is a “black box” system that remains hidden from public scrutiny.

Lots of good info, worth a read.

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New Report on Asbestos and Silica Litigation in Texas

Posted on February 17, 2011 by Sean Wajert

The Texas Civil Justice League has released a new report, "A Texas Success Story: Asbestos and Silica Lawsuit Reform."

Established in 1986, the Texas Civil Justice League is a non-partisan, statewide business coalition committed to legal reform and public policy research. The League makes legislative recommendations in vital issue areas, such as administration of the courts, general business liability, mass torts, and products liability.

The purpose of this special report is to document the current state of asbestos and silica litigation in Texas state courts. Part one provides a brief history of asbestos and silica litigation in the United States and an overview of the legislative efforts in Texas to address abuses in asbestos and silica litigation.  The report then offers a description of asbestos and silica litigation in Texas’s two multidistrict litigation courts handling asbestos and silica cases, and the impact of reform legislation (S.B. 15) on the state MDLs.

The report then turns to recent issues in asbestos litigation, specifically to the science-based evidentiary standards required by the Texas Supreme Court’s decision in Borg-Warner Corp. v. Flores.

Next are the issues relating to asbestos claimant compensation, starting with the role of bankruptcy trusts in compensating asbestos claimants; the bankruptcy trust payment system can provide substantial compensation to asbestos victims, but is a “black box” system that remains hidden from public scrutiny.

Lots of good info, worth a read.

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State Court Allows Double-Dipping Asbestos Claim

Posted on August 31, 2010 by Sean Wajert

A state appeals court has ruled that an employer may face liability under New Jersey law for allegedly exposing a plaintiff to asbestos through contact with her husband's work clothes, even if she also had worked for the employer as a direct employee herself. See Anderson v. A.J. Friedman Supply, et al., No. A-5892-07T1, 2010 WL 3289061 (N.J. Super. Ct. App. Div.,  8/20/10).

Plaintiffs alleged that Bonnie Anderson contracted mesothelioma from one or both exposures to asbestos at the Linden Bayway Refinery owned by defendant Exxon Mobil Corporation (and home of the state's largest Christmas tree apparently).  The first was bystander exposure from laundering her husband John's asbestos-laden work clothes during his employment with Exxon from 1969 to 2003. (In Olivo v. Owens-Illinois Inc., 186 N.J. 394 (2006), the court had found that an employer could be liable for indirectly exposing family members to the asbestos fibers found on an employee's work clothes.)  The second was alleged direct exposure during Bonnie's own employment with Exxon from 1974 to 1986.

At trial, plaintiffs focused on the bystander exposure, and tried to downplay any significant exposure at work.  A defense expert agreed that the only epidemiologically established cause of mesothelioma is asbestos exposure; it is commonly accepted today that it's possible that women can get mesothelioma from asbestos dust brought home on the clothing of a husband or parent; and that mesothelioma has an average latency period of thirty-two years.

The trial court charged the jury that asbestos brought home by John need not have been the sole cause of plaintiff's asbestos-related injuries, but it must be a substantial contributing factor, and if the jury were to find that Bonnie's exposure occurring during the course of her employment was the sole cause of her injury or disease, it should return a verdict for Exxon.

Exxon appealed  from a judgment in favor of plaintiffs, awarding more than $7 million to the Andersons in compensatory damages.

The appellate court noted that this case presented a novel scenario of a single injury arising after a long latency period caused by one of two, or both, asbestos exposures.  The court of appeals framed the question as whether Mrs. Anderson could continue to assert a claim against Exxon if she was exposed as a result of washing the clothes but she was also an employee with possible direct exposure at that time. 

As to that question, the court turned to the "dual persona doctrine," which under New Jersey law generally provides that an employer may become like a third person, vulnerable to tort suit by an employee, outside the normal bar of the exclusivity of the workers compensation system, if and only if it possesses a second persona so completely independent from and unrelated to its status as employer that by established standards the law recognizes that persona as a separate legal person.

The court could find no close precedents, but one might think that the role of the defendant as employer of husband and wife and its supposedly distinct role in the alleged exposure due to the husband's work-related clothing do not rise to the the level of separate legal persons.  But the court affirmed the trial court's reasoning that Exxon had such a dual persona, having an employer capacity for an eight year period, but then having a separate "relationship" to Mrs. Anderson as a bystander for 20 years. It was thought unfair to the plaintiff not to let her pursue her claim based on her bystander exposure, which had "absolutely nothing" to do with her employment relationship with Exxon. That is, although Exxon could not be held liable based on her direct occupational exposure, it could be held liable pursuant to her separate exposure to the asbestos brought home by John from his Exxon job.

One might assume that if the employer was a "separate legal person" who was not protected by the workers comp scheme for purposes of the alleged bystander exposure, then at least the defendant could get some recognition on the verdict form of this separate legal entity/status.  But even though the trial judge viewed Exxon as "standing in two different pairs of shoes," the court refused Exxon's request to have the two legal persons listed on the verdict sheet, and declined to direct the jury to allocate fault between Bonnie's direct asbestos exposure as an Exxon employee and any bystander exposure from washing John's work clothes.

The court of appeals agreed, reasoning that the jury could not allocate any fault to Exxon as Bonnie's employer, because Exxon was immune from suit pursuant to the Workers Comp Act. The state's comparative fault doctrine provides that fault shall be allocated among each "party" in the case. The workers' compensation bar precluded Exxon from being a "party" in this litigation in its status as Bonnie's employer.

Thus, defendants like Exxon get the worst of both worlds: no safe haven under workers' compensation for having been the plaintiff's employer, and no allocation of fault to the "distinct" exposure because it was the employer under the workers comp scheme!

 

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Case of Successor Liability for Asbestos Exposure Claims

Posted on April 22, 2010 by Sean Wajert

New York's highest court has ruled that a buyer assumed the liability for certain asbestos-related claims under a sale contract when it bought the boiler business of plaintiff American Standard Inc. back in 1970. American Standard Inc. v. Oakfabco Inc., 2010 WL 1286394 (N.Y., 4/6/10).

The court said that the issue here was whether the buyer of a boiler business assumed the seller's liabilities for tort claims based on boilers sold before the business was acquired, even where the tort claimants were not exposed/injured until after the acquisition. In 1970, American Standard, Inc. sold its Kewanee Boiler division to OakFabco, Inc. The parties entered an asset purchase and sale agreement in which the buyer assumed certain liabilities. The boilers manufactured by Kewanee had been insulated with asbestos, and as a result many tort claims were brought in the years and decades following the purchase of the business.

Some of those claims were brought by plaintiffs who had suffered injuries after the closing of the transaction, allegedly attributable to boilers manufactured and sold before the closing. In this declaratory judgment action brought by American Standard against OakFabco, the issue was whether liabilities for such injuries were among the liabilities that OakFabco assumed.  OakFabco argued that the definition of the liabilities OakFabco assumed was limited to "existing and outstanding” liabilities as of the Closing Date. According to OakFabco, a tort claim cannot be “existing and outstanding” before the tort plaintiff has been exposed and injured, because until then it is not possible for a tort lawsuit to be brought.

The court found, however, that the overall contract language meant that the buyer would deal with any problems customers had after the closing date with boilers that had been installed previously. It would have been absurd for OakFabco, said the court, to tell a customer whose boiler failed after the closing that, since the customer's claim was not “existing and outstanding” on the closing date, it was not OakFabco's problem. By including warranty, service, repair and return claims in the definition of liabilities, the parties demonstrated that they were not reading the words “existing and outstanding” as OakFabco now did.

The court therefore concluded that the liabilities assumed by OakFabco included claims brought by tort claimants injured after the closing date by boilers installed before that date.

The case is a timely reminder that an important aspect of evaluating the possible acquisition of a target company is the potential litigation liability that may be acquired simultaneously. If a target company is involved, or could potentially become involved, in mass tort litigation, it presents both risk and opportunity to the acquirer. The threat of this type of litigation may result in the opportunity to acquire a target at a below-market valuation multiple, and the uncertainty caused by mass tort exposure can result in valuation discounts that make the attendant risk acceptable. There are potentially significant risks, however, associated with mass tort litigation exposure, such as in asbestos, and thus buyers must proceed carefully. In the private equity context, in particular, mass tort litigation exposure can adversely impact the ability to secure third-party debt financing and can have an adverse impact on investment exit. Private equity purchasers may have shorter investment time frames than strategic buyers, and mass tort litigation often takes a substantial amount of time to resolve itself.

The general rule of law, and the typical structure of an asset purchase agreement, is that an acquirer of the assets of another corporation for cash does not acquire the liability for prior injuries caused by products sold by the target company prior to closing. It is crucial that the language be clearly drafted to reflect the parties' agreement on the allocation of such liability.

Even when the parties purport to allocate such liability to the target, however, the buyer may find itself responsible for the litigation through the operation of various legal doctrines that are exceptions to the general rule. The Restatement (Third) of Product Liability Law notes that a business entity that acquires assets of a predecessor business entity is subject to liability for harm caused by a defective product sold by the predecessor if the acquisition results from a fraudulent conveyance to escape liability for the liabilities of the predecessor, or results in the successor becoming a mere continuation of the predecessor. A few states also add the so-called “product line” exception, which allows a plaintiff to recover for injuries caused by a defective product sold by the predecessor in cases in which the successor corporation has continued the predecessor’s product line.

Thus, even in the absence of an actual merger or stock acquisition, or contract language assuming liability, it may be that a buyer of corporate assets will still face exposure to product litigation liability risks. Attempting to structure the deal to try to minimize the possible application of such theories will often be the first line of defense. In an asset sale, the buyer may also want to seek a provision that the seller shall not dissolve for some set period of time, so that the mass tort plaintiffs’ other remedies seemingly are not destroyed. Special indemnification by the seller for the underlying exposure is another alternative. This indemnification should survive for a sufficient period of time, and ideally would not be subject to a special cap higher than is typical for representations made by a “clean” company. The use of a special escrow to set aside funds for the litigation indemnification may be important.
 

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How Much Did They Pay? I Need to Know

Posted on January 15, 2010 by Sean Wajert

Many mass torts involve multiple defendants, and many of our readers have been in the position of hearing that co-defendants had settled out of the case.  It is natural to wonder, and could be quite useful to know, what co-defendants paid to settle their part of the case.  Typically, the agreements are subject to confidentiality agreements, and the protections of Fed. R. Evid. 408, which recognizes the strong public policy promoting settlement. See Block Drug Co. v. Sedona Labs., Inc., 2007 WL 1183828, at *1 (D.Del. Apr.19, 2007); Fidelity Fed. Sav. & Loan Assn. v. Felicetti, 148 F.R.D. 532, 534 (E.D.Pa.1993).

A recent federal case tested these boundaries.  Dent v. Westinghouse, et al., 2010 WL 56054 (E.D.Pa. Jan. 4, 2010).  Warren Pumps, a defendant in multi-party asbestos litigation, filed a motion to compel the plaintiff to respond to certain interrogatories and requests for production of documents regarding the settlement of any claim asserted in the complaint. Plaintiff objected.  The thrust of Warren Pumps' argument was that the discovery about each additional asbestos-containing product which plaintiff claims caused his mesothelioma made it that much less likely that his mesothelioma was caused by exposure to any Warren Pump product.  And it allegedly made plaintiff's assertions to the contrary less and less credible.

Warren Pumps pointed out that on its face Rule 408 pertains to the admissibility of evidence, and argued it was inapplicable to a discovery dispute. (citing DirecTV, Inc. v. Puccinelli, 224 F.R.D. 677, 685 (D.Kan.2004)).  Although Rule 408 speaks in terms of admissibility, several courts have concluded that a heightened showing is required for even the discovery of settlement information. That is, they have required a more particularized showing that the evidence of settlement sought is relevant and calculated to lead to the discovery of admissible evidence. Block Drug, 2007 WL 1183828, at *1; Lesal Interiors, Inc. v. Resolution Trust Corp., 153 F.R.D. 561, 562 (D.N.J.1994)). 

Warren Pumps also argued that it was not seeking the information for any purpose prohibited by the rule.  Rule 408 bars the use of settlement information “to prove liability for, invalidity of, or amount of a claim....” F.R.E. 408(a). Among other purposes, Rule 408 specifically permits settlement evidence to show a witness's bias or prejudice. F.R.E. 408(b).  The defendant contended that it was merely seeking the settlement information to test the credibility of plaintiff's claims.

The court found this was merely "repackaging" the motives forbidden by Rule 408 by placing them under the guise of credibility.  To the extent the defendant was seeking the information to determine whether the dismissed co-defendants were dismissed for lack of evidence, Warren Pumps wanted to impugn the credibility of plaintiff's claims against Warren Pumps by virtue of his apparently merit-less claims against the dismissed co-defendants. Thus, Warren Pumps sought the information to prove the invalidity of the claims against it, a use which Rule 408 prohibits, said the court.  To the extent defendant sought the settlement information, and the amounts of those settlements, it was trying to show that if plaintiff had settled with a co-defendant more or less equivalent in culpability to Warren for a certain sum of money, and thus established the value of his damages with regard to that co-defendant, it would not be credible for plaintiff to seek a higher sum from Warren.   But, said the court, this would be using the settlement information to establish the amount of plaintiff's claim against Warren Pumps. Again, this is forbidden by Rule 408.

Bottom line, the discovery was denied because while disclosure of the settlement agreements would reveal the amount of money plaintiff received from other asbestos manufacturers, the settlement amounts could not then be used to prove the extent of plaintiff's exposure to, or damages from, asbestos from another manufacturer's product.

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Component Part Seller Liability At Issue In Asbestos Case

Posted on January 14, 2010 by Sean Wajert

California's high court is preparing to address a split among the state's lower courts on what seems to be a straightforward issue of product liability law governing component parts.

The Restatement of Torts (Third): Products Liability says that in the context of a final, finished product that injures a user and which is made up of components from different manufacturers, if a given component is itself defective and the defect causes the harm, then the supplier of that component is of course liable. In addition, the supplier can be liable even if the component by itself is not defective, but only if the seller substantially participates in the integration of the component into the design of the product (and the defect causes the harm). Restatement 3d, Section 5.

In essence, the doctrine holds that an entity supplying a non-defective raw material or a non-defective component part is not strictly liable for defects in the final product over which it had no control.  In this respect the Third Restatement of Torts simply codified the doctrine of various states’ common law. E.g., TMJ Implants Products Liability Litigation, 872 F. Supp. 1019 (D. Minn. 1995), aff’d, 97 F.3d 1050 (8th Cir. 1996) (applying Minnesota law)); Kealoha v. E.I. Du Pont de Nemours & Co., 844 F. Supp. 590 (D. Hawaii 1994), aff’d, Kealoha v. E.I. Du Pont de Nemours & Co., et al., 82 F.3d 894 (9th Cir. 1996) (applying Hawaii law); Jacobs v. E.I. Du Pont de Nemours & Co., 67 F.3d 1219 (6th Cir. 1995) (applying Ohio law); Apperson v. E.I. Du Pont de Nemours & Co., 41 F.3d 1103 (7th Cir. 1994) (applying Illinois law); Crossfield v. Quality Control Equip. Co., Inc., 1 F.3d 701 (8th Cir. 1993) (applying Missouri law); Childress v. Gresen Mfg. Co., 888 F.2d 45 (6th Cir. 1989) (applying Michigan law); In Re: Silicone Gel Breast Implants Products, 996 F. Supp. 1110 (N.D. Ala. 1997); Travelers Ins. Co. v. Chrysler Corp., 845 F. Supp. 1122 (M.D.N.C. 1994); Sperry v. Bauermeister, 786 F. Supp. 1512 (E.D. Mo.1992); Estate of Carey v. Hy-Temp Mfg., Inc., 702 F. Supp. 666 (N.D. Ill. 1988); Orion Ins. Co., Ltd. v. United Tech. Corp., 502 F. Supp. 173 (E.D. Pa. 1980); Mayberry v. Akron Rubber Machinery Corp., 483 F. Supp. 407 (N.D. Okla. 1979); Artiglio v. General Electric Co., 61 Cal.App.4th 830 (Cal. Ct. App. 1998); Bond v. E.I. Du Pont de Nemours & Co., 868 P.2d 1114 (Colo. Ct. App. 1993); Shaw v. General Motors Corp., 727 P.2d 387 (Colo. Ct. App. 1986); Castaldo v. Pittsburgh-Des Moines Steel Co., Inc., 376 A.2d 88 (Del. 1977); Depre v. Power Climber, Inc., 263 Ill.App.3d 116 (Ill. App. Ct. 1994); Curry v. Louis Allis Co.,
Inc., 100 Ill.App.3d 910 (Ill. App. Ct. 1981); Murray v. Goodrich Eng’g Corp., 30 Mass. App. Ct. 918 (Mass. App. Ct. 1991); Welsh v. Bowling Electric Machinery, Inc., 875 S.W.2d 569 (Mo. Ct. App. 1994); Zaza v. Marquess & Nell, Inc., 144 N.J. 34 (N.J. 1996); Parker v. E.I. Du Pont de Nemours & Co., Inc., 121 N.M. 120 (N.M. Ct. App. 1995); Munger v. Heider Mfg. Corp., 90 A.D.2d 645 (N.Y. App.
Div. 1982); Hoyt v. Vitek, Inc., 134 Ore. App. 271 (Or. Ct. App. 1995); Moor v. Iowa Mfg. Co., 320 N.W.2d 927 (S.D. 1982); Davis v. Dresser Indus., Inc., 800 S.W.2d 369 (Tex. App. 1990); Bennett v. Span Indus., Inc., 628 S.W.2d 470 (Tex. App. 1982); Westphal v. E.I. Du Pont de Nemours & Co., 192 Wis. 2d 347 (Wis. Ct. App. 1995); Noonan v. Texaco, Inc., 713 P.2d 160 (Wyo. 1986).

Sometimes the issue is analyzed as one of no duty on the part of the component seller; other courts view it as an absence if causation.  The policy reasons behind the component parts doctrine are well established. Multi-use component and raw material suppliers should not have to assure the safety of their materials as used in other companies' finished products. That would require suppliers to retain experts in a huge variety of areas in order to determine the possible risks associated with each potential use. And finished product manufacturers know exactly what they intend to do with a component or raw material and therefore are in a better position to guarantee that the component or raw material is suitable for their particular applications.  In the drug and device area, liability is inconsistent with the FDA regulatory scheme because suppliers cannot warn consumers of dangers created by the design of the finished product; the FDA controls who warns and what the warning says.

But when a component manufacturer sufficiently participates in designing a defective and unreasonably dangerous final product, the component manufacturer may be held liable for injuries caused by the final product even though the component itself was not defective or unreasonably  dangerous.  Which raises the question what is ‘‘substantial participation.’’ The Restatement suggests the courts look at whether: (1) the manufacturer or assembler of the integrated product invited the component manufacturer to design a component that would perform specifically as a part of the integrated product;  (2) the component part manufacturer assisted the seller in modifying the design of the integrated product so that it would accept the component part, or (3) the component part manufacturer played a substantial role in deciding which component best serves the requirements of the seller’s integrated product.

A common mass tort battleground for these issues is asbestos.  In O'Neil v. Crane Co., 177 Cal.App.4th 1019, 99 Cal.Rptr.3d 533 (2009)(review granted 12/23/09), the plaintiffs, the widow and children of a naval officer who died of mesothelioma, sued the manufacturers of shipboard pumps and valves, alleging that asbestos insulation used with those components caused the injury.  The trial court dismissed the claims under the component part make doctrine, but last Fall, a panel of the Second Appellate District overturned the trial court's dismissal and said the pump and valve makers could be liable for the officer's death.

The court found that the defendants did not supply a “building block” material, dangerous only when incorporated into a final product over which they had no control. Rather, they sold finished valves and pumps, which needed insulation of some kind. That analysis did not give sufficient attention to the notion that the steam system of the ship ought to be viewed as the finished product, as that term is used in the context of the component parts defense. And it gave insufficient weight to the basic policy underlying the compnent part doctrine.

The panel disagreed with the trial court and with two other appellate decisions going the other way. The state's First Appellate District in Taylor v. Elliott Turbomachinery Co., 171 Cal. App. 4th 564 (2009), found  that pump and valve manufacturers were not liable —as manufacturers of non-defective component parts of a greater whole, and as manufacturers of separate products from those (asbestos) that actually caused the alleged harm. And a different panel of the Second District, Merrill v. Leslie Controls Inc. (Cal. Ct. App., 2d App. Dist., No. B200006, 11/17/09), had also declined to find liability in similar circumstances. See generally Lindstrom v. A-C Product Liability Trust, 424 F.3d 488 (6th Cir.2005)(no liability; causation focus). 

That a component seller knew or should have known that the product maker might use potentially hazardous materials in its design should never be sufficient to impose liability for the design that is the responsibility of the finished product seller.  It makes no sense to have suppliers act as "design police" for every possible item their non-defective part could possibly be combined with in a finished product. 

Under a proper analysis, a warning claim should fare no differently. See Braaten v. Saberhagen Holdings, 198 P.3d 493 (Wash. 2008); Simonetta v. Viad Corp., 197 P.3d 127 (Wash. 2008)(no liability for failure to warn of the hazards of exposure to another manufacturer's asbestos insulation).  The Washington court found the duty to warn under common law negligence was limited to those in the chain of distribution of the hazardous product. Because the defendants did not manufacture, sell, or supply the asbestos insulation, the defendants could not be found liable for breaching a duty to warn. The defendants were not strictly liable because only a product's manufacturer, seller, or marketer is in the position of knowing its dangerous aspects.  To hold a defendant strictly liable for another party's product would be manifestly unfair.

The California Supreme Court has recently agreed to review the issue. O'Neil v. Crane Co., Cal., No. S177401, (petition for review granted 12/23/09).  Here's hoping the doctrine is applied correctly, and this does not become another "asbestos" law exception to common sense rules.

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Supreme Court Issues Opinion in Much-Watched Manville Insurer Asbestos Case

Posted on June 22, 2009 by Sean Wajert

The U.S. Supreme Court has ruled that an injunction against lawsuits in the landmark bankruptcy case of asbestos manufacturer Johns-Manville does in fact bar claims now asserted by asbestos plaintiffs against the company’s insurer, Travelers Indemnity Co.  In a 7-2 decision, the Supreme Court reversed an opinion by the U.S. Court of Appeals for the Second Circuit, ruling that a bankruptcy judge properly interpreted the 1986 injunction to apply to the later claims.

MassTortDefense alerted readers to this case late last year. The case arises from the now-decades old Manville bankruptcy. From the 1920s until the 1970s, Johns-Manville was the largest manufacturer of asbestos-containing products and the largest supplier of raw asbestos in the United States. As a result, in the 1960s and 1970s, Johns-Manville became the target of many product liability suits. Johns-Manville filed for Chapter 11 protection under the federal bankruptcy law on Aug. 26, 1982. On that date, Johns-Manville was a defendant in more than 12,500 asbestos-related suits. To fund its reorganization plan, the bankruptcy court allowed Johns-Manville to settle its insurance claims for about $850 million.

Travelers, Johns-Manville's primary insurer from 1947 to 1976, paid about $100 million into the bankruptcy estate in exchange for a full and final release of Manville-related claims. In 1986, Bankruptcy Judge Lifland entered a series of confirmation orders, inter alia barring any person from commencing any actions based upon, arising out of, or related to insurance policies that Travelers issued to Manville. In 2004, Judge Lifland found that his injunction was being violated by a new species of asbestos-related lawsuits (referred to by some as “direct action” claims) against insurers. These new asbestos claims were part of a global strategy developed by the plaintiffs' bar to put insurers in Manville's shoes and thereby hold them liable on account of their insurance relationship with Manville. The injunction in the meantime had become the model for a statutory change adopted as part of the Bankruptcy Reform Act of 1994, establishing Section 524(g) of the Bankruptcy Code, which expressly authorized the Manville approach to be used in future asbestos bankruptcies.  So the attacks had potentially widespread significance.

The Second Circuit, rather than enforce the confirmation order as it was originally written, which had been affirmed on a prior appeal, ruled that Judge Lifland had exceeded the “subject matter jurisdiction” granted by the bankruptcy code. In re: Johns-Manville Corp., 517 F.3d 52 (2d Cir. 2008). The Second Circuit concluded that the bankruptcy court in 1986 was without power to enjoin all claims that literally arise out of the insurance policies that Manville purchased from Travelers. Thus, the bankruptcy court had also exceeded its authority in approving a multi–million dollar settlement of asbestos claims filed against Travelers. The appeals court said the bedrock issue in this case required a determination as to whether the bankruptcy court had jurisdiction over the disputed statutory and common law claims. While the bankruptcy court repeatedly used the terms “arising out of” and “related to,”  global finality for Travelers is only as global as the bankruptcy court's jurisdiction.

The Supreme Court, however, held "that the terms of the injunction bar the actions and that the finality of the bankruptcy court’s orders following the conclusion of direct review generally stands in the way of challenging the enforceability of the injunction.” Justice David Souter wrote for the majority. The 1986 Orders became final on direct review over two decades ago, and whether the Bankruptcy Court had jurisdiction and authority to enter the injunction in 1986 was not properly before the Court of Appeals in 2008. 

The respondents' position that the 1986 Orders only bar actions against insurers when those actions seek to recover derivatively for Manville’s wrongdoing, but not actions to recover for Travelers’ own alleged misconduct, simply is not what the 1986 Orders say. There is no language limiting it to derivative claims.  The Bankruptcy Court in this case plainly had jurisdiction to interpret and enforce its own prior orders, in part because it explicitly retained jurisdiction to enforce its injunctions.  Once the 1986 Orders became final on direct review (whether or not proper exercises of bankruptcy court jurisdiction and power), they became res judicata to the parties and those in privity with them, not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose. Those orders are not any the less preclusive because the attack is on the Bankruptcy Court’s conformity with its subject-matter jurisdiction, for even subject-matter jurisdiction generally may not be attacked collaterally.

The Court stated that "our holding is narrow."  They did not resolve whether a bankruptcy court, in 1986 or today, could properly enjoin claims against non-debtor insurers that are not derivative of the debtor’s wrongdoing. Still an important issue in a mass tort driven bankruptcy.  Nor did the Court decide whether any particular respondent is bound by the 1986 Orders.   Thus, the Court appeared to be making an effort not to address the actual underlying issue here.

In a dissenting opinion, however, Justices John Paul Stevens and Ruth Bader Ginsburg
sided with the Second Circuit, arguing that the bankruptcy court had exceeded its jurisdiction by barring the suits. 

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Bills Pending To Overturn Important Causation Decision

Posted on April 20, 2009 by Sean Wajert

Two bills are pending in the Texas legislature to overturn a significant toxic tort decision made by the state's highest court. In Borg-Warner Corp. v. Arturo Flores, 232 S.W.3d 765 (Tex.2007), the court required plaintiffs to prove they had a sufficient level of exposure to the toxic substance, asbestos.

Earlier in April, a committee of the Texas Senate approved by a 6-2 vote a bill relating to the
standard of causation in claims involving mesothelioma caused by exposure to asbestos
fibers. The bill, S.B. 1123, introduced by Sen. Robert Duncan, R-Lubbock, would require a plaintiff to prove that a defendant ’s product or conduct was a substantial factor in causing the exposed claimant ’s injury by presenting qualitative proof that the asbestos exposure attributed to the defendant was substantial, and not merely de minimis, when considering (1) the frequency of the exposure;  (2) the regularity of the exposure; and (3) the proximity of the claimant to the source of the asbestos fibers.  A plaintiff would not be required to prove numerically the dose, approximate or otherwise, of asbestos fibers to which the claimant was exposed that are attributable to the defendant.

A House bill, introduced by Rep. Craig Eiland, D-Texas City, is still pending in committee. H.B. 1811 would require proof that the defendant ’s product or conduct was a substantial factor in causing the exposed person ’s injury, by showing that the exposure to the asbestos fibers for which that defendant is alleged to be responsible contributed to the cumulative exposure of the exposed person and was more than purely trivial when considering the following (same) qualitative factors: (1) the frequency of exposure; (2) the regularity of exposure; and (3) the proximity of the exposed person to the source of the asbestos fibers. Plaintiff need not prove, for any purpose, a quantitative dose, approximate quantitative dose, or estimated quantitative dose of asbestos fibers to which the exposed person was exposed.

Such language would significantly lower the standard for providing causation in mesothelioma litigation. Perhaps the most widely cited standard for proving causation in asbestos cases is the Lohrmann “frequency, regularity, and proximity” test. Lohrmann v. Pittsburgh Corning Corp., 782 F.2d 1156 (4th Cir.1986). The court there rejected a standard that if the plaintiff can present any evidence that a company's asbestos-containing product was at the workplace while the plaintiff was at the workplace, a jury question has been established as to whether that product proximately caused the plaintiff's disease. Instead, the court concluded that to support a reasonable inference of substantial causation from circumstantial evidence, there must be evidence of exposure to a specific product on a regular basis over some extended period of time in proximity to where the plaintiff actually worked.

While the test seemed to be tighter standard than the plaintiffs’ proposed test, since a plaintiff must prove more than a casual or minimum contact with the product, in reality the test has loosened the traditional standards for substantial factor causation. In Borg-Warner, the court held that a “frequency, regularity, and proximity” test does not, in itself, capture the role of causation as an essential predicate to liability. As in many jurisdictions, the word “substantial” in substantial factor is used to denote the fact that the defendant's conduct has such an effect in producing the harm as to lead reasonable people to regard it as a cause, using that word in the popular sense, in which there always lurks the idea of responsibility, rather than in the so-called philosophic sense, which includes every one of the great number of events without which any happening would not have occurred.

Substantial factor in a toxic tort case cannot be analyzed without recognizing that one of toxicology's central tenets is that “the dose makes the poison.” This notion was first attributed to sixteenth century philosopher-physician Paracelsus, who stated that all substances are poisonous-there is none which is not; the dose differentiates a poison from a remedy. Even water, in sufficient doses, can be toxic. Dose refers to the amount of chemical that enters the body, and, is probably the single most important factor to consider in evaluating whether an alleged exposure caused a specific adverse effect. Not all asbestos exposures cause cancer, and the scientific literature shows that more exposure leads to more disease (dose-response).

Plaintiffs showed nothing about how much asbestos Flores might have inhaled. He was exposed to “some asbestos” on a fairly regular basis for an extended period of time. Nevertheless, absent any evidence of dose, the jury could not evaluate the quantity of respirable asbestos to which Flores might have been exposed or whether those amounts were sufficient to cause his disease. Nor did Flores introduce evidence regarding what percentage of that indeterminate amount may have originated in defendant Borg-Warner products. Plaintiffs did not prove the asbestos content of other brands of brake pads or how much of Flores's exposure came from grinding new pads as opposed to blowing out old ones. Plaintiff need not show dose with mathematical precision.  But in a case like this, proof of mere frequency, regularity, and proximity is necessary but not sufficient, said the court, as it provides none of the quantitative information necessary to support causation under Texas law.
 

The proposed legislation would overturn that clear and compelling logic.

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Appeals Court Rejects Bystander Injury Claims

Posted on February 6, 2009 by Sean Wajert

The Sixth Circuit has affirmed the dismissal of claims that a child contracted mesothelioma from exposure to his father's asbestos-laden clothes, finding no evidence that such a “bystander” injury was foreseeable at the time of the alleged exposure. Martin v. Cincinnati Gas and Electric Co., 2009 WL 188051 (6th Cir. 1/27/09).

Claims were brought against the father's old utility company employer and a company that allegedly manufactured asbestos-fireproofing for the utility. The claims were based on asbestos that Martin's father allegedly brought home on his work clothes while working for the utility, CG & E. The district court granted summary judgment for defendants because neither had a legal duty to the plaintiff.

Under applicable Kentucky law, as in most jurisdictions, duty presents a question of law for the judge to decide. Typically, there is a universal duty of care which requires every person to exercise ordinary care in his activities to prevent foreseeable injury. The most important factor in determining whether a duty exists is foreseeability. And foreseeability, in turn, is determined based on what the defendant knew or should have known at the time of the alleged negligence. There was no evidence that either defendant had actual knowledge of the danger of bystander exposure, so the question is whether they should have known: that is, was such a risk foreseeable to them based on “common knowledge at the time and in the community?”

Plaintiff’s expert report did not indicate that the risk was knowable, but in any event, it is insufficient that the danger was merely knowable: the knowledge has to have been available to the defendant. There was an insufficient showing of any general knowledge of bystander exposure in the industry. Plaintiff's expert report concedes that the first studies of bystander exposure were not published until 1965. (Martin's father's exposure to asbestos materials stopped in 1963).

The court rejected the plaintiff’s reliance on several cases from other states where bystander asbestos exposure liability has been upheld; the Sixth Circuit agreed with a number of other cases in which courts have found no duty for secondary asbestos exposure. E.g., CSX Transp. Inc. v. Williams, 608 S.E.2d 208, 210 (Ga. 2005); Adams v. Owens-Illinois Inc., 705 A.2d 58, 66 (Md. Ct. App. 1998); In re Certified Question from Fourteenth Dist. Ct. of Appeals of Tex., 740 N.W.2d at 218-20; In re New York City Asbestos Litig., 840 N.E.2d 115, 121 (N.Y. 2005); and Alcoa Inc. v. Behringer, 235 S.W.3d 456, 462 (Tex. Ct. App. 2007).
 

Summary judgment affirmed.

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Supreme Court Agrees To Hear Manville-Related Asbestos Insurance Issues

Posted on December 26, 2008 by Sean Wajert

The U.S. Supreme Court has agreed to review a federal appeals court decision rejecting the resolution of asbestos claims against an insurer, and to decide whether thousands of personal injury plaintiffs may directly sue the insurer. Travelers Indem. Co. v. Bailey, 2008 WL 4106796 (U.S., December 12, 2008).

The case arises from the now-decades old Manville bankruptcy. From the 1920s until the 1970s, Johns-Manville was the largest manufacturer of asbestos-containing products and the largest supplier of raw asbestos in the United States. As a result, in the 1960s and 1970s, Johns-Manville became the target of product liability suits. Johns-Manville filed for Chapter 11 protection under the federal bankruptcy law on Aug. 26, 1982. On that date, Johns-Manville was a defendant in more than 12,500 asbestos-related suits. To fund its reorganization plan, the bankruptcy court allowed Johns-Manville to settle its insurance claims for about $850 million.

Travelers, Johns-Manville's primary insurer from 1947 to 1976, paid about $100 million into the bankruptcy estate in exchange for a full and final release of Manville-related claims. In 1986, Bankruptcy Judge Lifland entered a confirmation order, inter alia barring any person from commencing any actions based upon, arising out of or related to insurance policies that Travelers issued to Manville. In 2004, Judge Lifland found that his injunction was being violated by a new species of asbestos-related lawsuits (referred to by some as “direct action” claims) against insurers. These new asbestos claims were part of a global strategy developed by the plaintiffs' bar to put insurers in Manville's shoes and thereby hold them liable on account of their insurance relationship with Manville.

The Second Circuit, rather than enforce the confirmation order as it was originally written, entered and affirmed on a prior appeal, ruled that Judge Lifland had exceeded the “subject matter jurisdiction” granted by the Judicial Code. In re: Johns-Manville Corp., 517 F.3d 52 (2d Cir. 2008). The Second Circuit concluded that the bankruptcy court in 1986 was without power to enjoin all claims that literally arise out of the insurance policies that Manville purchased from Travelers. Thus, the bankruptcy court had exceeded its authority in approving a multi–million dollar settlement of asbestos–related claims filed against Travelers. The court said the bedrock issue in this case requires a determination as to whether the bankruptcy court had jurisdiction over the disputed statutory and common law claims. While the bankruptcy court repeatedly used the terms “arising out of” and “related to,” global finality for Travelers is only as global as the bankruptcy court's jurisdiction.

Travelers filed a petition for writ of certiorari, as did a group of plaintiff attorneys. Travelers argued that “decades of bankruptcy practice in the lower federal courts” are at risk, and that the Second Circuit opinion is inconsistent with “the carefully crafted legislative scheme Congress constructed.” The plaintiffs petitioner group asserted that the Second Circuit obscured the distinction between jurisdiction and statutory authority and that as a result of the Second Circuit decision, the finality of certain Chapter 11 reorganization plans in federal bankruptcy would be rendered uncertain.

One may wonder whether mass tort reorganization plans might be in jeopardy, under the Second Circuit opinion. Some tens of billions of dollars have been committed to asbestos trusts in cases that relied at least in part on the finality of the Johns-Manville bankruptcy. And the Second Circuit noted that Travelers had alleged that all underlying asbestos settlements were dependent upon the continued validity of the settlement scheme utilized over the past 20 years.

 

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State Supreme Court Upholds Asbestos Reform Statute

Posted on October 23, 2008 by Sean Wajert

The Supreme Court of Ohio ruled last week that a 2004 state law imposing limits on asbestos litigation should be applied retroactively. Ackison v. Anchor Packing Co., et al., 2008 WL 4601676 (Ohio Oct. 15, 2008). The ruling could affect the 40,000 claims pending in that state, as well as provide a possible precedent for other states considering the same kind of tort reform.

The 2004 Ohio statute extensively revised state laws governing asbestos litigation and was in response to a legislative finding that the current asbestos personal injury litigation system is unfair and inefficient, imposing a severe burden on litigants and taxpayers alike. The bill established certain threshold requirements, including that no person shall bring or maintain certain kinds of asbestos claims (including claims alleging a nonmalignant condition) without filing with the court certain qualifying medical evidence of physical impairment; further, such evidence must be supported by the written opinion of a competent medical authority stating that the claimant's exposure to asbestos was a substantial contributing factor to his medical condition. The claim of any plaintiff who does not file the required preliminary medical evidence and physician's statement is to be administratively dismissed “without prejudice” with the court retaining jurisdiction, meaning that a plaintiff would not be barred from reinstating the claim in the future when and if the plaintiff could meet the threshold evidentiary requirements.

The court of appeals found the statute could not constitutionally be applied to any suit that had been filed prior to the effective date of the statutory changes, as such plaintiffs had a vested substantive right to pursue recovery for injury under the statutes that were in effect at the time their complaint was filed.

The supreme court disagreed. In this case, the Ohio General Assembly expressly directed that the prima facie filing requirements at issue apply to cases pending on -and thus filed before- the effective date of the legislation. Because the General Assembly so specified, the issue becomes “whether the statute is substantive, rendering it unconstitutionally retroactive, as opposed to merely remedial.” Under Ohio law, and this is fairly  typical, a statute is substantive if it impairs or takes away vested rights, affects an accrued substantive right, imposes new or additional burdens, duties, obligations, or liabilities as to a past transaction, or creates a new right. Conversely, remedial laws are those affecting only the remedy provided, and include laws that merely substitute a new or more appropriate remedy for the enforcement of an existing right.

The court found that the new law is remedial and procedural in nature and, therefore, not unconstitutionally retroactive. The reform established “a procedural prioritization” of asbestos-related cases, a procedure to prioritize the administration and resolution of a cause of action that already exists. No new substantive burdens are placed on claimants.

Clearly, the types of asbestos claims most impacted by the reform statute are the non-malignant claims, short of true asbestosis which is rare anymore, where some radiographic minor finding is alleged to be an injury. While some lower courts in Ohio had stated that pleural plaque or pleural thickening meets the definition of bodily harm which is a subspecies of physical harm and thus satisfies the injury requirements of Sections 388 and 402A of the Restatement of the Law 2d, Torts. E.g., Verbryke v. Owens-Corning Fiberglas Corp., 84 Ohio App.3d 388, 616 N.E.2d 1162 (1992). The supreme court determined that the Maryland court's approach is the better reasoned one: in Owens-Illinois, Inc. v. Armstrong, 87 Md.App. 699, 591 A.2d 544 (Md.App.1991), reversed in part on other grounds 326 Md. 107, 604 A.2d 47 (1992), the Court of Special Appeals of Maryland held that the Restatement did not support the conclusion that pleural plaques and pleural thickening alone were sufficient to constitute harm.

Plaintiffs also attacked the statute’s definition of “competent medical authority” which previously had not been defined by either statute or Ohio case law. By choosing to define that term, said the court, the legislature did not take away Ackison's right to pursue a claim. Nor did the definition alter the quantum of proof necessary for a plaintiff to prevail in an asbestos-related claim. Rather, it merely defined the procedural framework by which trial courts are to adjudicate such claims. The definition of competent medical authority pertains to the witness's competency to testify and is, in essence, more akin to a rule of evidence. As such, it is procedural in nature.
 

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Mass Tort Litigation Screenings Exposed

Posted on September 1, 2008 by Sean Wajert

Professor Lester Brickman, of Cardozo School of Law, has published a fascinating article entitled, "The Use of Litigation Screenings in Mass Torts: A Formula for Fraud?"

At MassTortDefense, we would simply remove the question mark.

Plaintiff lawyers obtain the "mass" for some mass tort litigation by conducting screenings to sign-up potential litigants. These "litigation screenings" have no intended medical benefit, and thus this entrepreneurial response to highly profitable opportunities that arise in certain mass tort litigation should not be confused with true medical screening. In a litigation screening, potential litigants are solicited by lawyers or their agents by use of mass mailings, television and newspaper advertisements providing “800” telephone numbers, and by use of web sites purporting to provide medical information about toxic exposures, drugs, devices, or specific diseases but which are, in fact, “fronts” for law firms to whom the web site visitor is referred.

Screenings can be held in motels, shopping center parking lots, local union offices, and even lawyers' offices. There, an occupational history is taken by persons typically with no medical training, a doctor may do a cursory physical exam, and non-doctor technicians administer tests, such as X-rays, pulmonary function tests, echocardiograms and blood tests. The sole purpose of screenings is to generate "medical" evidence of the existence of an injury to be attributed to exposure to or ingestion of defendants' products – all pre-planned. Usually a handful of doctors ("litigation doctors") provide the vast majority of the thousands of medical reports prepared for that litigation.

By the good professor’s count, at least 1,500,000 potential litigants have been screened in the asbestos, silica, fen-phen (diet drugs), silicone breast implant, and welding fume litigation. Litigation doctors found that approximately 1,000,000 of those screened had the requisite condition that could qualify for compensation under plaintiffs’ legal theory, such as asbestosis, silicosis, moderate mitral or mild aortic value regurgitation or a neurological disorder. He further estimates that litigation doctors and screening companies have been paid well in excess of $250 million – huge number, but a tiny fraction of the contingency fees earned well in excess of $13 billion by his estimates.

The professor concludes that approximately 90% claims generated from the screenings were based on "diagnoses" of the type that U.S. District Court Judge Janis Jack, in the silica MDL, found were "manufactured for money."

He also presents the case that bankruptcy courts adjudicating asbestos related bankruptcies have effectively legitimized the use of these litigation screenings.

Professor Brickman's areas of expertise include legal ethics, contingency fees, mass torts, and asbestos litigation. He notes the significant volume of literature about the use of junk science in the court, even today, especially to try to prove general causation in mass torts. But his analysis is particularly valuable because it turns an empirical light on the use of litigation screenings to try to prove specific causation.
 

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State Supreme Court Fails To Correct Causation Error in Asbestos Case

Posted on July 14, 2008 by Sean Wajert

Typically, MassTortDefense will post about significant opinions issued on product liability issues. A recent decision, without opinion, by the California Supreme Court is worth a mention. Just recently, the court declined to review the intermediate appellate court’s affirmance of a $3.9 million asbestos verdict. It thus left standing the appellate court’s view on the important issue whether so-called de minimis exposures are sufficient to satisfy the substantial factor test. Norris v. Crane Co., 2008 WL 638361 (Cal.App. 2d Dist. 2008). The California rule raises significant issues for asbestos and potentially other toxic tort defendants, and stands in contrast to the better view in many other jurisdictions.

Background
The plaintiff, former Naval worker Joseph Norris, had been awarded $3.9 million by the jury, 50% liability assigned to defendant Crane Co. The company appealed the verdict, arguing that plaintiff failed to present substantial evidence linking asbestos in the Crane valves to the decedent's mesothelioma. The Second District Court of Appeal disagreed, and affirmed the verdict. On June 25th, the state Supreme Court denied the petition for review.

The court of appeals found sufficient the evidence that the U.S. Navy purchased several types of Crane Co. valves, and that the defendant was aware that parts of these valves would have to be replaced at some point. Norris was allegedly "within a few feet" of other workers who were grinding Crane valves and replacing gaskets on the product. The jury could infer that this process released fibers that contributed to the dust in the air plaintiff breathed as he waited. Also, Norris slept in quarters with two small Crane valves, and when the valves were overhauled, dust was released and was not cleaned up.

Expert testimony was offered to the effect that every exposure to asbestos fibers increased the total dose in his lung that led to the development of his disease. Each dose added more fibers that could stay in the lung. There was substantial evidence plaintiff’s “exposure to asbestos from materials in Crane valves increased his risk of developing mesothelioma and, therefore, was a substantial factor in causing his injury." Thus, the plaintiff successfully proved a causal link between the Crane Co. valves and Norris' mesothelioma, said the court.

 
What’s Wrong With This Picture?
Tort law requires that the allegedly defective product have caused the injury. In the toxic substance context, plaintiff must have been exposed to defendant’s product, and exposed to a sufficient dose that is capable of causing the disease, and actually did cause the disease in plaintiff. Dose refers to the amount of chemical that enters the body, and is arguably the single most important factor to consider in evaluating whether an alleged exposure caused a specific adverse effect. Indeed, a founding principle of toxicology is that the “dose makes the poison.”

The problem with the California opinion is that the plaintiff had improperly been allowed to submit evidence of "any exposure," which rule would allow exposed persons to sue thousands of new defendants whose supposed “contribution” to the disease is trivial at best, and certainly far below the type of doses actually known to cause or increase the risk of disease in any meaningful way.

It is common for plaintiffs to submit expert affidavits attesting that any exposure to asbestos, no matter how minimal, is a substantial contributing factor in asbestos disease. Such generalized opinions ought not suffice to create a jury question in a case where exposure to the defendant's product is de minimis, particularly in the absence of evidence excluding other possible sources of exposure (or in the face of evidence of substantial exposure from other sources). See generally Borg-Warner Corp. v. Flores, 232 S.W.3d 765 (Tex. 2007)(rejecting view that if plaintiff can present any evidence that a company's asbestos-containing product was at the workplace while plaintiff was at the workplace, jury question has been established as to whether that product proximately caused plaintiff's disease).

A far different take on this issue is seen in other jurisdictions. The Pennsylvania Supreme Court, for example, reached conclusions contrary to the California appellate court's ruling in Gregg v. V.J. Auto Parts Inc., 943 A.2d 216, 226-227 (2007). That court concluded that it is not a viable solution to indulge in a fiction that each and every exposure to asbestos, no matter how minimal in relation to other exposures, raises a fact issue concerning substantial-factor causation. The result of that approach would be to subject defendants to full joint-and-several liability for injuries and fatalities in the absence of any reasonably developed scientific reasoning that would support the conclusion that the product sold by the defendant was a substantial factor in causing the harm.

Other courts will thus apply the frequency, regularity, proximity factors in asbestos litigation, Lohrmann v. Pittsburgh Corning Corp., 782 F.2d 1156 (4th Cir.1986), if not as a rigid standard with an absolute threshold necessary to support liability, then at least as an aid in distinguishing cases in which the plaintiff can adduce evidence that there is a sufficiently significant likelihood that the defendant's product caused his harm, from those in which such likelihood is absent on account of only casual or minimal exposure to the defendant's product. The California court missed this opportunity.

(Any readers interested in a copy of the Amicus brief on this issue in the court of appeals can email me and I will send you a copy.)

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State Supreme Court Adopts And Applies Forum Non Conveniens

Posted on June 15, 2008 by Sean Wajert

Rhode Island's Supreme Court recently adopted the forum non conveniens doctrine and dismissed multiple asbestos suits filed there by Canadian residents. Kedy v. A.W. Chesterton Co., 946 A.2d 1171 (R.I. 2008).


Rhode Island becomes one of the last states to recognize the doctrine, which is an increasingly important procedural aspect of many mass torts. Large numbers of nonresidents will often file suit in the so-called “magic” jurisdictions -- judicial hellholes for defendants as coined by the American Tort Reform Association -- even though these plaintiffs and the facts of their cases may have no significant relationship with the chosen jurisdiction. The state may be attractive to plaintiffs because of perception of the jury pool, or because of procedural advantages such as when its trial courts employ mass consolidations of multiple individual claims that pressure defendants to settle and limit the ability of courts and defendants to focus on the individual claims. E.g., State ex rel. Mobil Corp. v. Gaughan, 563 S.E.2d 419 (W.Va. 2002). And foreign plaintiffs in general may be attracted to U.S.-style remedies, damages, and procedures.


The forum non conveniens doctrine has been employed by courts to dismiss claims by foreign and out of state plaintiffs in mass torts. The principle allows a court to decline to exercise jurisdiction when the plaintiff's chosen forum is significantly inconvenient and the ends of justice would be better served if the action were brought and tried in another forum. For example, in the In re Vioxx Products Liability Litigation, MDL No. 1657, 2006 WL 2504353 (E.D. La. Aug. 30, 2006), former Vioxx users from 11 foreign countries were dismissed from the MDL. Merck argued that the cases involve the prescription and use of Vioxx in foreign countries, and the drug was distributed under each nation's unique regulatory and legal structure. The plaintiffs were injured abroad and the injury-causing conduct occurred abroad. The foreign courts offered adequate alternative forums; American courts would not have easy access to the foreign documents and witnesses related to the claims. Finally, trying the plaintiffs' claims here in the U.S. risked disrupting the judgments of foreign regulatory bodies by imposing an American jury's view of the appropriate standards of safety and labeling on companies marketing and selling drugs in those nations.


In recent years, tort reform efforts in some states have made an impact on filing of suits by nonresidents that would otherwise swamp their courts. Mississippi has undertaken a series of legislative and judicial reforms to limit the number of out-of-state asbestos claims. For example, the Mississippi Tort Reform Act of 2004 tightened venue provisions and joinder rules and expanded the ability of courts to transfer or dismiss claims under the doctrine of forum non conveniens. Miss. Code Ann. § 11-11-3. As a result of the reforms, the "courts of Mississippi will not become the default forum for plaintiffs seeking to consolidate mass-tort actions." 3M Co. v. Johnson, 926 So. 2d 860, 18–19 (Miss. 2006). Similarly, Texas has expanded the power of courts to dismiss actions on forum non conveniens grounds. See Tex. Civ. Prac. & Rem. Code Ann. § 71.051.

Rhode Island
Several Canadian residents sued in a Rhode Island court, seeking damages for injuries associated with workplace exposure to asbestos in Canada. Several defendants sought dismissal under the doctrine of forum non conveniens. The trial court denied the motion, noting that Rhode Island had not recognized forum non conveniens outside in the tort context, and accepting plaintiffs’ arguments that forum non conveniens has led to confusion and inconsistency in federal and state courts, and that the legislature is the appropriate body to adopt the doctrine.

The state supreme court noted that the doctrine of forum non conveniens is founded in considerations of fundamental fairness and sensible and effective judicial administration. The doctrine has been recognized by common law, statute or rule of civil procedure in most states. Legal commentators are in general agreement that most states follow the federal forum non conveniens test. See Davies, Time to Change the Federal Forum Non Conveniens Analysis, 77 Tul. L.Rev. 309, 315 (2002) (thirty states have “effectively identical” analyses to the federal test, and thirteen other states employ a “very similar” test); Robinson & Speck, Access to State Courts in Transnational Personal Injury Cases: Forum Non Conveniens and Antisuit Injunctions, 68 Tex. L.Rev. 937, 950 (1990) (thirty-two states recognized “something very closely resembling” the federal doctrine, and four other states indicated they would follow the federal doctrine).

The first prong of the forum non conveniens analysis requires a determination of the existence of an available and adequate alternative forum. Second, the court must determine the inconvenience of continuing in the plaintiff's chosen forum by weighing private- and public-interest factors. The private interests of the litigants include the following factors: relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive. (Citing Gulf Oil Corp., 330 U.S. at 508.)

Other factors that may be relevant to the private-interest assessment include the enforceability of a judgment in the alternative forum, and the advantages and obstacles to a fair trial. A plaintiff may not, by choice of an inconvenient forum, vex, harass, or oppress the defendant by inflicting upon him expense or trouble not necessary to his own right to pursue his remedy. The private interest of a plaintiff should be afforded more weight when the forum choice appears to be based on legally valid reasons such as convenience and expense. Conversely, the private interest of a defendant should be afforded more weight when a plaintiff's choice of forum seems motivated by forum-shopping objectives such as tactical attempts to harness more favorable laws and damages remedies, taking advantage of jurisdictions with generous jury verdicts, or causing inconvenience and expense to a defendant.

Public interest factors include administrative difficulties for courts, that jury duty is a burden that ought not be imposed upon the people of a community which has no relation to the litigation; the local interest in having localized controversies decided at home; and the court in some other forum dealing with problems in conflicts of laws, and in law foreign to itself.

Application of the New Test
Applied here, the court noted that differences in discovery standards are not enough to establish the inadequacy of the forum. Although damages may be smaller in Canada, it was important that neither plaintiffs nor defendants in the underlying cases were residents of Rhode Island or domiciled there. Much of the evidence necessarily is in Canada; the injuries and treatment alleged occurred in Canada, where plaintiffs are residents. No witnesses, workplace sites, or any other relevant evidence appear to be situated in the state. Access to proof is clearly less convenient. Only Canadian courts have the legal power to compel the testimony of Canadian potential witnesses who are not under the control of any party. Furthermore, the likelihood that Canadian law would apply in these cases would place additional burdens upon the state court. Accordingly the foreign claims were dismissed.

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Florida Appeals Court Rejects Retroactive Application of Asbestos and Silica Compensation Fairness Act

Posted on May 28, 2008 by Sean Wajert

The Florida court of appeals earlier today rejected retroactive application of the state’s Asbestos and Silica Compensation Fairness Act, finding that the many claimants who filed claims prior to the statute’s enactment need not plead or prove that they developed a malignancy or impairment as a result of their exposure. Williams, et al. v. American Optical Corp., et al., No. 4D07-143 (Fla. Ct. App., 4th DCA, May 28, 2008). 

The decision conflicts with the opinion of another Florida court a few months ago, DaimlerChrysler Corp. v. Hurst, 949 So.2d 279 (Fla. 3d DCA 2007), and is of potential significance because of the wave of reform statutes passed in various states recently in an attempt to bring some fairness and justice to the grandfather of all mass torts, asbestos, and its lurking dust cousin, silica. E.g., Ohio Rev. Code Ann. §§ 2307.71-80; 2307.84-90; 2307.901 (including a requirement that claimants meet certain medical criteria establishing impairment before proceeding with their claims); Kansas (Silica & Asbestos Claims Act, S.B. 512); South Carolina (Asbestos & Silica Claim Procedures Act, S.C. Code Ann. § 44-135-10 et seq.); Tennessee (Silica Compensation Fairness Act, Tenn. Code Ann. § 29-34-301 et seq.).

In the spring of 2005, the Florida Legislature passed the Asbestos and Silica Compensation Fairness Act, which not only requires plaintiffs to show they meet certain medical criteria before proceeding with their claims but also requires that plaintiffs be Florida residents before filing claims in Florida courts. See Fla. Stat. Ann. § 774.201-774.209. The Fourth DCA consolidated several appeals from plaintiffs whose claims were dismissed for not complying with the Act. The issue was stated: Can the Florida Asbestos and Silica Compensation Fairness Act be retroactively applied to prejudice or defeat causes of action already accrued and in litigation? And the court held that the Act cannot constitutionally be so applied.

Asbestos Reform

The long and persistent asbestos litigation led the Florida Legislature to enact the Florida Asbestos and Silica Compensation Fairness Act, which became effective in 2005. The Legislature found that the number of asbestos-related claims has increased significantly in recent years. The true victims of asbestos, the truly injured, were in danger of not receiving compensation, as those who were exposed and could point to some minimal indication of impact without any impairment or disability, soaked up all the resources. The Act made significant changes to the cause of action for damages resulting from an exposure to asbestos. Before the Act was adopted, it was not necessary for any plaintiff to establish that any malignancy or physical impairment had resulted from their exposure and their “asbestosis.” Under the Act, however, a claimant bringing an action for damages from exposure to asbestos must now, as an indispensable element, plead and prove an existing malignancy or actual physical impairment for which asbestos exposure was a substantial contributing factor. Plaintiffs’ asbestosis claims were dismissed for failing to meet these requirements.

Retroactive Analysis

Under Florida’s Constitution, one form of intangible property is a cause of action. This is a right grounded in tort, property or contract law to recover a judgment for money or property from another person whose conduct or activity is deemed by applicable law to have caused the claimant to suffer damage or a loss. Retroactive provisions of a legislative act are invalid when they destroy vested rights. When a cause of action accrues it becomes a substantive vested right. In contrast, said the court, when a right to sue is inchoate, a mere prospect, it is merely an expectation that if another person does someday engage in specific conduct or activity causing some injury, and a specific cause of action has then accrued, the person so aggrieved may then be able to bring an action in court to vindicate the claim in money damages. It is well established that the right to sue on an inchoate cause of action — one that has not yet accrued — is not a vested right because no one has a vested right in the common law.

The question therefore became whether before the statute was enacted Florida law recognized a cause of action for damages arising from the disease of “asbestosis” without any permanent impairment or the presence of cancer. The 4th DCA thought the answer was yes, citing Eagle-Picher Industries Inc. v. Cox, 481 So.2d 517 (Fla. 3d DCA 1985), although that was really a negligent infliction of emotional distress case, and Zell v. Meek, 665 So.2d 1048 (Fla. 1995), although in that case the allegation was of serious lung damage, and Willis v. Gami Golden Glades LLC, 967 So.2d 846 (Fla. 2007), which again seemed to focus on alleged emotional effects from exposures.

The appeals court disagreed, implicitly, with the Legislature’s statement that the Act was intended to simply change the form of asbestos claimants' remedies without impairing their substantive rights. And rejected defendants’ argument that plaintiffs can have no vested right in their claimed cause of action because, in the absence of a true injury in the form of malignancy or impairment, it is a mere expectancy. The right to pursue a cause of action is generally considered to have become vested when the cause of action has accrued. A cause of action accrues when “the last element constituting the cause of action occurs.” § 95.031(1), Fla. Stat. (2007). Constitutionally, a new statute becoming effective after a cause of action has already accrued may not be applied to eliminate or curtail the cause of action. In the appealed cases, plaintiffs alleged a previous exposure to asbestos resulting in what they called the disease of asbestosis, which in turn had manifested itself in some way. Thus, for each, the cause of action had passed from an expectation to the accrual of the right to sue for damages.

Conflict With the 3rd DCA

The opinion attempts to distinguish the decision of the Third District in DaimlerChrysler Corporation v. Hurst, 949 So.2d 279 (Fla. 3d DCA 2007), on the grounds that even under the law existing before the Act the result in Hurst might have been sustained because of the lack of any proof that asbestos was a proximate or even concurring cause of lung cancer. However, the court recognized that in the trial courts in the state, Hurst is being applied to dismiss asbestosis cases like the ones on appeal in which there is no cancer injury or any failure to link asbestos to the injury. Accordingly, the 4th DCA certified that a circuit conflict exists with Hurst to the extent that it does stand for a holding that the Act may be validly applied to asbestosis claimants with accrued causes of action for damages but without permanent impairments or any malignancy.

The 4th DCA did not address in any real depth the reasoning of the 3rd DCA, which noted that the legislature in enacting the Act claimed that the Act does not impair vested rights because the Act expressly preserves the right of all injured persons to recover full compensatory damages for their loss. When the plaintiffs filed their asbestos claims, they were pursuing a common law tort theory. A person has no property, no vested interest, in any rule of the common law. Prior to the enactment of the Act, the plaintiffs had, at most, a “mere expectation” that the common law would not be altered by legislation. See generally Wilson v. AC&S, Inc., 169 Ohio App.3d 720, 864 N.E.2d 682 (Ohio App. 12 Dist. 2006)(retroactive application of Ohio reform statute).



This circuit split means the issue will likely wind up before the Florida Supreme Court at some time.

Severability

Finally, the court noted that after giving the entire text of the Act — especially its preamble of purpose — a careful reading in light of these considerations, it is not intellectually possible to disconnect the several provisions of the Act. Thus, the Act, in its entirety, may not constitutionally be applied to deprive asbestos claimants of an accrued cause of action for damages resulting from exposure to asbestos. Tellingly, the language used by the opinion to describe the legislative purpose betrays the court’s view of the legislation: “whose singular purpose is to end litigation by claimants who have been damaged by asbestos exposure without resulting malignancy or physical impairment.”

What the legislature actually said, was that it wanted to give priority to true victims of asbestos and silica, claimants who can demonstrate actual physical impairment caused by exposure to asbestos or silica, while fully preserving the rights of claimants who were merely exposed to asbestos or silica to pursue compensation if they become impaired in the future as a result of the exposure. The Act would also enhance the ability of the judicial system to supervise and control asbestos and silica litigation; and conserve the scarce resources of the defendants to permit compensation to cancer victims and others who are physically impaired by exposure to asbestos or silica while securing the right to similar compensation for those who may suffer physical impairment in the future.

Nevertheless, the court ruled that plaintiff need only show that they suffered an injury from an asbestos-related, non-malignant disease. The trial court decisions to the contrary were reversed.

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