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SJC Limits Individual Liability Under Massachusetts Wage Act for Investors and Board Members

Posted in Employment Litigation, Massachusetts Courts

In a recent decision, the Massachusetts Supreme Judicial Court (SJC) clarified the scope of personal liability for investors and board members under the Commonwealth’s Wage Act, as codified at G.L. c. 149, §§148-150.  The SJC held that investors and board members could not be held personally liable solely by virtue of their investment activity or acts performed in their official capacity as board members.  While the case involved a nuanced set of facts aptly described as “unusual and removed from the core concerns of the Wage Act,” its holding is nonetheless significant, and provides guidance for personal liability under the Wage Act for individuals other than a company’s president or treasurer.

In Segal v. Genitrix, LLC, 478 Mass. 551 (2017), H. Fisk Johnson and Stephen Rose, two former board members of Genitrix, LLC, sought direct appellate review of an adverse jury verdict that found them personally liable for failing to pay wages owed to the company’s former president and CEO, Andrew Segal.  Johnson, Rose, and Segal founded the biotech company, originally a Maryland LLC, in 1997.  Johnson briefly served as a board member during Genitrix’s opening year, but continued to invest in the company until its dissolution in 2007.  Johnson designated Rose as his appointee to the board and advised Segal that Rose was to be his contact for any financial matters.

As a condition to Johnson’s initial investment, he required Segal to execute an employment agreement with Genitrix.  The agreement stipulated that Segal would receive a fixed salary in consideration for his service as the company’s president and CEO, including managing the day-to-day financial and administrative affairs of the company.  Segal, the company’s sole officer, supervised the laboratory, managed all human resource functions, including payroll, and was the only individual authorized to issue wage checks.

The company began to experience financial difficulties in 2006, which led to Segal’s recommendation that the company lay off its at-will employees in order to meet payroll obligations.  In turn, the two defendants invested additional money in the company; however, they earmarked the investment for specific purposes such as funding payroll and replacing lab equipment.  The company’s financial condition worsened in 2007, and Segal unilaterally decided to stop taking his salary.  By mid-2007, the company was unable to make payroll and its board voted to lay off the other remaining employee.  The defendants made a final investment to pay off that employee’s remaining salary obligations and then shuttered the company’s doors.

The company ultimately filed a petition for judicial dissolution.  During those proceedings, Segal filed an array of claims against the company, and also attempted unsuccessfully to block the dissolution of Genitrix, a Delaware LLC.  See Fisk Ventures, LLC v. Segal, et al., C.A. No. 3017-CC (Del. Ch. Jan. 13, 2009).However, Segal did not assert a claim under the Massachusetts Wage Act.  Notably, Segal continued in his role as president while the dissolution proceedings were ongoing, despite continuing to decline a salary.  Segal’s belief that he eventually would get paid for the work did not come to fruition, and he filed a Wage Act claim in 2009.

The defendants were awarded summary judgment on the grounds that they did not “have the management” of the company, as required by the Wage Act.  That victory was fleeting, as the Massachusetts Appeals Court  reversed summary judgment on the grounds that a genuine issue of material fact existed as to whether the defendants managed the company.

On remand, the case went to trial, where the judge instructed the jury, in part, that “a person qualifies as an agent having the management of such corporation if he…controls, directs, and participates to a substantial degree in formulating and determining policy of the corporation.”  The jury went on to find both defendants personally liable based upon the given instruction.  The defendants then moved for direct appellate review on the grounds that there was insufficient evidence at trial to find personal liability, and that the above-referenced jury instruction was erroneous.

In a straightforward reading of the Wage Act, the SJC noted that the omission of investors and board members from the statute was significant.  Thus, the defendants could be personally liable only if they were deemed “agents having management of the company.”  This was the first time the SJC had been tasked with interpreting that language.

In doing so, the Court looked at whether the defendants were agents as a result of their board participation, and whether the restrictions placed on new investments constituted “management” activities.

Segal argued that the defendants exercised sufficient agency authority through their investment influence and board voting rights.  The SJC rejected this argument, and concluded that while “boards are regularly required to make difficult decisions that have an impact on the company’s finances,” such decisions are not acts of individual board members as “agents.”  The SJC also disagreed with Segal’s argument that placing conditions and other restrictions on incoming investments constituted management of the company.  On that point, the SJC held “[i]nvestment restrictions limited to the use of new monies are not management direction and control over existing resources,” and “exercising one’s rights and leverage over infusions of new money are separate and distinct from being an agent have the management of the corporation.”  The SJC also noted that as the only officer of Genitrix, Segal was “the only person expressly identified by virtue of his title as responsible for Wage Act violations,” and that Segal “made the decision not to pay himself.”

Segal is significant as it limits the circumstances in which a corporate director, board member or investor can be found individually liable under the Wage Act.  While personal liability for directors and investors is not entirely foreclosed, it cannot result solely on account of an individual’s position as board member or investor.  According to the SJC, the Wage Act continues to impose personal liability on those assuming individual responsibility as an officer or agent of a company, but it “does not impose individual liability on board members, acting as board members, or outside investors overseeing their investments.”  Given the rapidly expanding startup industry in Massachusetts, Segal provides some comfort that board members and investors will not face exposure to the draconian consequences of the Wage Act, provided that they do not participate in the management of a company to a greater extent than the defendants in Segal.

Florida Court of Appeal’s Recent Reversal of $21M Asbestos Verdict Highlights the Inherently Speculative Nature of Asbestos Claims

Posted in Asbestos Litigation, Florida Courts, Premises Liability

On August 30, 2016, a Miami-Dade jury awarded Richard Batchelor and his wife more than $21 million after finding that his mesothelioma arose, in part, from asbestos exposure during overhaul work at a Florida Power & Light Co. (FP+L) power plant. On December 27, 2017, the Third District Court of Appeal erased the verdict against defendant Bechtel Corporation (Bechtel), finding that the jury should never have considered claims against that defendant because of plaintiffs’ insufficient evidence.  The appellate court also found reversible error in an adverse inference instruction, and concluded that Bechtel’s efforts to locate discoverable information were reasonable under the circumstances.

Between 1974 and 1980, Richard Batchelor worked for FP&L as an electrical technician at two power plants including the Turkey Point power plants. At that time, Turkey Point was a sprawling and complex facility – occupying over three thousand acres and containing 12 nuclear-fueled units and two oil and natural gas fueled units – and provided power for all of South Florida. On any given day, four hundred FP&L employees and numerous contractors worked at Turkey Point. Mr. Batchelor was responsible for repairing and maintaining gauges and equipment at the site, including four of the nuclear and gas units. Insulation, an indeterminate amount of which contained asbestos, covered the various pipes, wires, and equipment at the plant. Mr. Batchelor never removed insulation from any equipment and never worked on equipment while the insulation was being removed. Instead, insulation removal was performed by independent contractors who specialized in insulation removal, and other FP&L workers. Mr. Batchelor did work in the vicinity of other workers removing insulation, but it is unclear how close Mr. Batchelor worked to those removing asbestos, how often this occurred, or the duration of the occurrences. When asked by his attorney if the dust he breathed in was from insulation, Mr. Batchelor responded, “It could be from anywhere. It’s just dust.”

One of the contractors retained to provide ongoing maintenance services of the equipment on site was defendant Bechtel. The contracts provided that FP&L would issue work orders at its discretion to Bechtel, which would do the work requested on a cost-plus basis. FP&L decided whether FP&L or Bechtel would provide needed supplies, equipment, and ancillary services. During the relevant time period, Bechtel provided 1,050,070 man hours of services at Turkey Point.

FP&L periodically shut down the units for repair and maintenance. During these shutdowns, FP&L had Bechtel perform major overhauls on the units. FP&L also had another contractor, Foster Wheeler, perform maintenance on the unit’s giant boilers, which were lined with insulation. Although other contractors were present most of the time, Bechtel received work instructions only from FP&L.

In 2015, Mr. Batchelor was diagnosed with terminal mesothelioma caused by asbestos exposure. On January 2, 2016, he filed suit against twenty-six defendants, including Bechtel Corporation, for negligently causing his mesothelioma. Mr. Batchelor’s medical causation expert never examined Mr. Batchelor and never visited Turkey Point. He based his opinion solely on a review of Mr. Batchelor’s deposition and published medical studies.

Mr. Batchelor’s claim against defendant Bechtel was based on premises liability, and contended that Bechtel was liable for any asbestos exposure he sustained from any source at Turkey Point that was under Bechtel’s possession or control. More specifically, Mr. Batchelor alleged that Bechtel was liable for the dangers of asbestos dust created by Bechtel “or by others in the areas of Turkey Point that were being controlled by Bechtel while Bechtel performed its work at the time Mr. Batchelor was exposed.”

In early August 2016, Mr. Batchelor’s attorney deposed Bechtel’s corporate representatives. Immediately after the depositions, Mr. Batchelor moved for sanctions, arguing that Bechtel failed to adequately search for documents and information from thirty-six to forty-two years ago that might have been provided by retired former employees. In opposition, Bechtel argued that it had no obligation to find former employees from so long ago and that attempts to locate past employees in similar lawsuits had proved futile due to the passage of time. Ultimately, the trial court granted the motion for an adverse inference based on Bechtel’s failure to attempt to locate former employees.

Several weeks later, the jury entered a verdict for Mr. Batchelor for $15,381,724.12 and $6 million for his wife. It attributed fault as follows:  Foster Wheeler 5%, FP&L 35%, and Bechtel 60%. The Third District Court of Appeal considered two points on appeal:  (1) the trial court should have directed a verdict because there was insufficient proof of Bechtel’s possession and control of the premise, and (2) the trial court should have granted a new trial because the adverse inference jury instruction was reversible error.

 

Premises Liability

The primary focus of the Third District Court of Appeal’s opinion was on whether Mr. Batchelor met his burden in proving a premises liability claim. Interestingly, Mr. Batchelor chose not to sue Defendant Bechtel under a products liability theory for manufacturing products containing asbestos. Nor did Mr. Batchelor sue Bechtel for removing asbestos in a manner that negligently exposed Mr. Batchelor to a dangerous level of asbestos.

Mr. Batchelor’s premises liability theory was that Bechtel, as the party in control of the premises, had a duty to warn Mr. Batchelor of the dangers of asbestos created by FP&L and by FP&L’s other contractors. To prove this theory, Mr. Batchelor was obligated to show that Bechtel had a right to control access to or exclude others from the Turkey Point power plant. In support, Mr. Batchelor offered no direct evidence that FP&L surrendered, and Bechtel took possession of, all or any part of Turkey Point. Instead, Mr. Batchelor relied on the following points:

(1)        Bechtel was a huge contractor at Turkey Point during the relevant time period and provided more than one million man hours of services during that time;

(2)        The service contracts provided that FP&L would issue future work orders and Bechtel would fill the work orders on a cost-plus basis;

(3)        The service contracts required Bechtel to maintain liability insurance “with respect to the scope of the Bechtel Services;” and

(4)        FP&L directed Bechtel to perform maintenance on the power units when they were down.

The Third District Court of Appeal was not persuaded by Mr. Batchelor’s arguments. Although Bechtel provided significant hours of services during the relevant time period, the plant itself was also serviced by four hundred FP&L employees per day, plus contractors – rendering Bechtel’s presence a “fraction of the presence of FPL’s own work force…” Mr. Batchelor also could not produce any language in the service contracts discussing Bechtel’s assumption of possession or control of all or any part of the plant, and a contractual provision requiring insurance coverage was not found to support an inference that FP&L surrendered possession. Finally, Bechtel was not the only entity performing maintenance on the power units, and therefore did not have the authority to exclude other contractors or FP&L employees from the areas. The appellate court concluded, “In the absence of direct or circumstantial evidence sufficient to support a logical inference, the conclusion that Bechtel exercised control and possession is no more than conjecture, speculation, and surmise.” Due to the lack of evidence, the court reversed the trial court’s ruling and held that the trial court should have granted Bechtel’s motion for directed verdict.

 

The Adverse Inference Jury Instruction

In granting Mr. Batchelor’s motion for sanctions against Bechtel for failing to properly prepare its corporate representatives, the trial judge instructed the jury as follows:

If you find that Bechtel’s failure to produce persons employed at Turkey Point between 1974 and 1980 to testify regarding Mr. Batchelor’s work at Turkey Point is unreasonable, and that their testimony would have been relevant to Mr. Batchelor’s work activities, you are permitted to infer that the evidence would have been unfavorable to Bechtel.

The trial court’s rationale for the sanction was that Bechtel failed to attempt to locate retired employees from 1974 to 1980 by mailing postcards to the last-known addresses of employees.

The Third District Court of Appeal thoroughly disagreed with the trial court’s decision, citing Rule 1.310(b)(6) of the Florida Rules of Civil Procedure. Under that rule, a corporation can be required to produce a representative to testify “about matters known or reasonably available to the organization.” The Court of Appeal explained that this rule places a duty on the corporation to affirmatively prepare its representative “to the extent matters are reasonably available, whether from documents, past employees, or other sources.”      The appellate court found that it was unreasonable to expect Bechtel to locate retirees who had worked at the plant over thirty years ago and then interview them to prepare a corporate witness with no guarantee of success. “Absent a specific court order to do so, we would not interpret a party’s responsibilities to prepare a representative to extend so far, particularly here, where the deposition is noticed to take place only a few weeks before trial when there is reduced time for such a large effort.” Without such a court order, the appellate court found that the trial court harmfully erred in imposing the sanction of an adverse inference jury instruction.  The appellate court cautioned that such an instruction should be rarely given as it is an extreme sanction, “reserved for circumstances where the normal discovery procedures have gone seriously awry.”

 

Speculative Nature of Asbestos Claims

Batchelor v. Bechtel Corp. underscores the broader problems of proof that tend to be inherent in asbestos claims as a result of the creeping nature of asbestos-related diseases. Plaintiffs typically do not develop symptoms of an asbestos-related disease until ten to forty years after asbestos exposure. After the extensive passage of time, documentary evidence is difficult to obtain and witnesses are difficult to locate. More importantly, basic memories from so long ago are vague and highly prone to inaccuracies. This situation can make it very difficult for defendants to defend themselves, but very simple for plaintiffs to get their cases to a jury.

The generally asymmetric nature of asbestos litigation can be explained as follows. In nearly every asbestos lawsuit, the plaintiff sues scores of defendants, sometimes a hundred, alleging that they manufactured asbestos-related products that exposed the plaintiff to asbestos many years ago and caused asbestos-related disease. As long as the plaintiff testifies that he used a specific manufacturer’s product, even in conclusory fashion and without any documentary support, that manufacturer often is unable to escape summary judgment. In other words, although the plaintiff has a very limited memory of his exposure many years ago, and no documentary evidence that he was exposed to a specific manufacturer’s product, that the product contained asbestos, or that he was exposed to a particular amount of asbestos from that specific product, the plaintiff still can maintain an action against that manufacturer and force it to defend itself against millions of dollars in exposure. Although plaintiffs are entitled to compensation for asbestos-related diseases, defendants should not be forced to incur these expenses without greater certainty that they manufactured the products the plaintiff was exposed to and that those products likely caused the plaintiff’s asbestos-related disease.

Age-Targeted Facebook Ads Challenged by Proposed CA Class Action

Posted in California Courts, Class Action Litigation, Employment Litigation, Litigation Trends

A group of companies that advertised job opportunities through Facebook’s ad-serving platform discriminated against older members of the applicant pool, claims a proposed class action filed in the U.S. District Court for the Northern District of California. This filing suggests potential liability for any employer that posts jobs via ads that target recipients based on demographic metadata.

 

As Facebook’s roughly two-billion active users view, like, and share content, they give Facebook concrete information about their preferences and behaviors. Facebook’s ad platform leverages this data by allowing advertisers to reach the users most likely to find their ads relevant. Because Facebook also collects information on its users’ demographic factors, such as  age, race, and gender, critics note a potential for discriminatory ad targeting. In a December 20th filing, a proposed class of older job-seekers on Facebook argued that this discriminatory potential came to fruition when a group of employers (including Amazon, Cox, and T-Mobile) used an age filtering feature for their job postings to target younger cohorts and screen out older ones in violation of the Age Discrimination Employment Act (ADEA).

 

Largely in response to concerns about the opacity of Facebook’s ad-targeting, Facebook offers a feature on each ad that allows users to determine “Why am I seeing this ad?” Based on job postings like the one above, class members claim they were screened off from job postings that reached younger Facebook users. Since this filing, Facebook, which was not named a defendant, commented in response to this suit that its ads could be part of a broader media campaign by hiring employers, and that targeting is a permissible part of a diversified hiring strategy. Facebook further noted that its ads are no different from TV and magazine ads, which inherently reach different demographics by virtue of their viewer and subscriber bases.

 

Several important implications from this filing:

 

  • Targeting may not equal discrimination, but it can get you sued.

 

The defendant employers likely share Facebook’s view—that targeting is not per se discrimination. Whether or not this argument prevails, this filing shows that applicants scrutinize potential discrimination in posting criteria as well as in the hiring decision. The plaintiffs argue that Facebook ads are so ubiquitous and pervasive that being screened off from those ads is to be effectively eliminated from the pool. Courts will have to decide whether or not targeting gives rise to ADEA liability, but before the question can be settled, employers accused of targeting will be dragged into expensive, broad-ranging suits like this one if their postings facially preference a certain age.

 

  • This is bigger than Facebook postings.

 

Facebook is not the only platform with targeted ads. A 12/20/17 ProPublica and New York Times report highlighting potentially discriminatory employment ads found that Google’s AdSense and LinkedIn ads had the same age-filtering capability (LinkedIn since eliminated this function). Going forward, postings through these and other, smaller ad-serving platforms can expect the same scrutiny by potential plaintiffs and their lawyers. The proposed class presently includes the Communications Workers of America, an international union representing 700,000 workers in telecom, cable, IT, media, education, and public service sectors, but the groups affected by these targeted online ads putatively include job seekers and employers in every conceivable industry.

 

  • This age filter was just the one the plaintiffs could see—the next frontiers of litigation are the ones we can’t yet see.

 

This suit focuses on an overt age filter, one that is visible to the applicant-user. The direct connection between the targeting factor and the impermissible criteria (age) presents an ideal argument for the plaintiffs’ lawyers, i.e.: where the defendants chose to click on an age range to target, their intent to discriminate based on age can be inferred. The immediate result of this filing will likely be the removal of age-filtering options (following LinkedIn’s example), but this will not end the inquiry into targeted job postings. Ad-serving platforms have a wealth of data that gives them a subtler capacity to discriminate, and plaintiffs will dig deeper into the nuances of Facebook’s and other algorithms to uncover more sophisticated discrimination, like using permissible targeting factors as a proxy for impermissible ones.

 

The diversity of the data collected by Facebook creates the ability to use other factors as a proxy for age. For example, if a tech company sought to preference millennial applicants and exclude older ones, it might target users who liked, viewed, and shared content about fidget spinners, vape pens, and avocado toast (or any number of factors that correlate strongly with millennial status), rather than flagging its intent by selecting the 18-38 age range. The age-filtering effect on who receives the ads might be the same, but the intent would be harder to discern. Ads could use proxies to target factors other than age, such as race, gender, or sexual orientation, which by their nature would be more likely to use coded methods than overt ones. The basis for these “proxy-factor” claims requires an understanding of an ad-serving platform’s targeting algorithm. If this class action proceeds to discovery, the key struggle will be between the plaintiffs’ press to lay bare the criteria of this algorithm and Facebook’s push to protect its and its advertisers’ proprietary information. The stakes in this struggle are the viability of future claims along these lines.

 

In the meantime, employers posting jobs online should avoid applying overt age filters to targeted ads on platforms like Facebook. Other sites with embedded ads may use similar functionalities, so be sure to double check what you’ve selected before posting.

Eastern District of Louisiana Rejects Attempt to Defeat Federal Subject Matter Jurisdiction After Removal

Posted in Asbestos Litigation, Louisiana Courts, Products Liability, Uncategorized

A federal district court in the Eastern District of Louisiana recently held that it continued to have federal jurisdiction under the federal officer removal statute, even after the plaintiffs amended their petition to delete claims that gave rise to federal subject matter jurisdiction. The court reasoned that the original removal satisfied the proper requirements to invoke federal subject matter jurisdiction and exercised its discretion to retain the case.

This case, Pitre v. Huntington Ingalls, et al,[i]  arose out of lung cancer allegedly caused by asbestos exposure while the decedent was employed at Avondale Shipyard in Avondale, Louisiana. The initial petition named numerous defendants and included, among other causes of action, failure to warn and other negligence claims against Avondale, as well as strict products liability and failure to warn claims against Foster Wheeler. The plaintiffs filed a first amended petition adding an additional defendant, Occidental Chemical, and asserting strict liability claims against the new defendant and against Avondale.

In discovery, a former coworker of the decedent testified that the decedent worked on U.S. navy ships built by Avondale, Destroyer Escorts. Within 30 days of this testimony, defendants Avondale and Lamorak removed the case to federal court and asserted that they were entitled to removal under the federal officer removal statute, 28 U.S.C. 1442(a)(1), as the plaintiffs’ claims were related to acts performed under color of federal office. After a federal magistrate judge granted the plaintiff’s motion for leave to file an amended complaint deleting their strict liability claims against Avondale, the defendants appealed the ruling to the district court. In their response to the appeal, plaintiffs moved to remand the action to state court.

The defendants argued that the effort to amend the original petition by deleting strict liability claims was a bad faith attempt to defeat federal jurisdiction. The district court denied defendants’ appeal and concluded that there was no error in granting the plaintiffs leave to amend, as courts are freely permitted to give leave to amend when justice so requires. However, that still left open the issue of the plaintiffs’ motion to remand.

The court cited Fifth Circuit opinions, IMFC Prof. Servs. of Fla. v. Inc. v. Latin Am. Home Health, Inc.[ii] and Bartel v. Alcoa S.S. Co., Inc.,[iii] in support of the principle that jurisdiction “is based on notice of removal, not the amended complaint.” Therefore, “although an amended complaint deleting federal claims may permit a discretionary remand, it does not destroy federal jurisdiction over a validly removed case.” The appellants’ original removal to federal court was properly supported by a colorable defense of federal contractor immunity. The plaintiffs did not seriously contest that their original claims were removable, arguing only that their strict liability claims were brought in error. The court held that though “a good faith error may justify granting leave to amend,” in this matter “plaintiffs’ error does not create a jurisdictional defect in notice of removal.” Furthermore, the court held that Foster Wheeler, a boiler manufacturer defendant, also had a colorable defense under the federal contractor defense, and that therefore there was proper federal officer removal jurisdiction based on the plaintiffs’ design defect claims.  For these reasons, the court denied the plaintiffs’ motion to remand.

The holding in this case demonstrates a federal court’s use of its discretion to retain jurisdiction over properly removed cases, even after the deletion of removal of claims giving rise to federal jurisdiction. The court’s refusal to interpret the amendment of a complaint as hindering proper removal is the type of ruling that should deter plaintiffs from forum shopping by amending their original petitions. The decision also is consistent with language of the Fifth Circuit, which stated that, “policy favors the retention of jurisdiction.”[iv]

[i]  Pitre v. Huntington Ingalls, Inc. 2017 WL 6033032, (E.D. La. Dec. 6, 2017).

[ii] IMFC Prof. Servs. of Florida, Inc. v. Latin Am. Home Health, Inc., 676 F.2d 152, 159 (5th Cir.1982).

[iii] Bartel v. Alcoa S.S. Co., Inc., 805 F.3d 169, 172 (5th Cir.2015)

[iv] IMFC Prof. Servs. of Fla,,676 F.2d at 159.

Florida Plaintiff Receives $6.9 Million Judgment After Florida Appellate Courts Require Jury To Be Instructed With A More Consumer Friendly Test

Posted in Asbestos Litigation, Florida Courts

In 2015, the Florida Supreme Court issued a decision in Aubin v. Union Carbide, which mandated that juries be instructed on the “consumer expectations test.” On November 28, 2017, seven years after initially filing her lawsuit, a plaintiff in  Miami-Dade County won a $6.9 million asbestos verdict in a retrial based on the Aubin decision, in Font v. Union Carbide, Case No. 2010-041578-CA-01, This was the plaintiff’s second “bite at the apple,” as the first trial had resulted in a defense verdict for Union Carbide.

 

In the case underlying the Font appeal, Aubin, the Florida Supreme Court rejected sole reliance on the Third Restatement of Torts’ “risk utility test,” under which a plaintiff must demonstrate that “the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the alternative design renders the product not reasonably safe.” Aubin v. Union Carbide Corp., 177 So.3d 489, 505 (Fla. 2015). Instead, the Florida Supreme Court required courts to use the Second Restatement of Torts’ consumer expectations test, which asks whether a product is unreasonably dangerous in design because it failed to perform as safely as an ordinary consumer would expect when used as intended or in a reasonably foreseeable manner. Id. at 503. As described by the Florida Supreme Court in Aubin, “[t]he critical difference regarding design defects between the Second Restatement and the Third Restatement is that the Third Restatement not only replaces the consumer expectations test with the risk utility test but also requires the plaintiff to demonstrate the existence of a ‘reasonable alternative design.’ Id. at 505.

 

In rejecting sole reliance on the Third Restatement’s risk utility test, the Florida Supreme Court in Aubin explained that the original reason for imposing strict liability for defective and unreasonably dangerous products was to relieve injured consumers from the difficulties of proving negligence by the product manufacturer. Id. at 506-507. However, the Third Restatement eliminates consideration of consumer expectations, and, in fact, “imposes a higher burden on consumers to prove design defect than exists in negligence cases” by adding the additional requirement that an injured consumer “prove that there was a ‘reasonable alternative design’ available to the product’s manufacturer.” Id. at 506.

 

Two years later, the potential impact of the Aubin decision on asbestos litigation in Florida has become apparent in cases such as  Font v. Union Carbide. In Font, the plaintiff, individually and on behalf of her father’s estate, filed a wrongful death action against Union Carbide and other asbestos manufacturers and distributors for negligence and strict liability based on an alleged failure to warn, and for the manufacture of an allegedly defective product. The plaintiff alleged that her father died of malignant pleural mesothelioma as a result of exposure to joint compound products and texture sprays designed, manufactured, and supplied by the defendants that contained Union Carbide’s asbestos.

 

At trial, the plaintiff requested that the standard jury instruction provided by the Supreme Court Committee on Standard Jury Instruction in Civil Cases be given to the jury verbatim. That instruction defined “unreasonably dangerous” under both the risk utility and consumer expectations tests and states in pertinent part: “A product is unreasonably dangerous because of its design if the product fails to perform as safely as an ordinary consumer would expect when used as intended or in a manner reasonably foreseeable by the manufacturer or the risk of danger in the design outweighs the benefits.” The plaintiff argued that she was entitled to submit her case to the jury on both theories of strict liability; however, Union Carbide argued that the Third District had previously rejected the consumer expectations test and determined that the appropriate standard was the risk utility test. Therefore, Union Carbide requested that the case be submitted to the jury only on the risk utility theory. The trial court denied the plaintiff’s request to include the consumer expectations instruction, and the jury returned a verdict in favor of Union Carbide, which the plaintiff appealed.

 

On appeal, the plaintiff sought reversal because the trial court did not instruct the jury on the consumer expectations test. The Third District affirmed the lower court’s decision, and the plaintiff petitioned the Florida Supreme Court for review. The Florida Supreme Court accepted jurisdiction of the matter, quashed the lower court’s decision, and remanded to the Third District for reconsideration in accordance with Aubin. Ultimately, on July 27, 2016, the Third District reversed the judgment in favor of Union Carbide and remanded to the trial court, with directions that the plaintiff’s strict liability claim be retried before a jury instructed on both the consumer expectations test and the risk utility test as alternative definitions of design defect.

 

The second trial was interrupted by the Thanksgiving holiday which, significantly, allowed for long closing arguments to refresh the jury’s memory after an 11-day break between the majority of the trial and closings.  On retrial, the jury returned a verdict for the plaintiff to the tune of $6.9 million ($2.8 million of which was assigned to Union Carbide).

 

In Aubin, the Florida Supreme Court discussed the premise that the “consumer expectations test does not inherently favor either party.” Based on the outcome in Font, that may not necessarily be true, and the Aubin decision could have far-reaching effects on asbestos litigation.  Nevertheless, at this juncture, the full impact of Aubin remains to be seen.