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The Third Circuit Strips Some of the Protections of the “Bare-Metal Defense”

Posted in Asbestos Litigation, Maritime Law, Products Liability

Imagine this scenario:  Company X manufactures a “bare-metal” product. After the product is sold, the buyer adds defective asbestos-containing insulation manufactured by Company Y to the product, which is sold for its proper function. Unfortunately, an end-user is then injured by the insulation manufactured by Company Y.  The “bare-metal defense” suggests that the bare-metal manufacturer, Company X, would not be liable for this injury.  In practice, the intuitive logic of the bare-metal defense is not always followed.  Thus, the short answer to the question of the bare-metal manufacturer’s liability is, “it depends.”

Some courts apply a bright-line rule, holding that a bare-metal product manufacturer is never liable for asbestos-related injuries, while other courts assess the foreseeability that hazardous asbestos materials would be added to the manufacturer’s bare-metal product. The Supreme Court has not yet addressed this issue, and neither had the United States Court of Appeals for the Third Circuit, until October 3, 2017, in In re:  Asbestos Products Liability Litigation (No. VI).

 

What is the “Bare-metal Defense”?

In simplest terms, the “bare-metal defense” contends that equipment manufacturers are not liable for the potential hazards of asbestos-related injuries, when the source of the asbestos exposure comes from aftermarket replacement component parts or insulation that the equipment manufacturer neither manufactured nor placed into the stream of commerce. Some courts have applied the defense when considering causation, concluding that the bare-metal manufacturer was not the proximate cause of an asbestos-related injury.  Others courts have analyzed similar issues when evaluating whether a bare-metal manufacturer had a duty to act with reasonable care with respect to reasonably foreseeable asbestos-related risks. Although slightly different, both analyses hinge upon foreseeability.

The Third Circuit addressed the application of the “bare-metal defense,” and in particular, whether to use a bright-line rule or a fact-specific standard, in a maritime negligence claim.

 

The Third Circuit’s Decision in In re: Asbestos Products Liability Litigation (No. VI)

            Two widows of former Navy servicemen alleged that their husbands were exposed to asbestos from insulation and other components that were added onto engines, pumps, boilers, and other equipment manufactured by defendants. Many of the defendants made their products “bare-metal” and without any asbestos-containing insulation, which was later added. These same defendants asserted the “bare-metal defense” and were granted summary judgment by the Eastern District of Pennsylvania, because they shipped their products without asbestos-containing insulation and therefore could not be liable for asbestos-related injuries.

Both widows appealed the summary judgment to the Third Circuit. In tackling this issue, the Court reviewed the four main tenets of maritime law:

  • Maritime law is deeply concerned with the protection of sailors;
  • Maritime law is built on “traditions of simplicity and practicality;”
  • Maritime law has a “fundamental interest” in “the protection of maritime commerce;” and
  • Maritime law seeks out “uniform rules to govern conduct and liability.”

The Third Circuit found only the first tenet to be dispositive of the “bare-metal defense,” and stated that none of the other tenets weigh heavily in either direction. Maritime law has deep concern for the safety of sailors due to a “special solicitude for the welfare of those men who undertook to venture upon hazardous and unpredictable sea voyages.” Moragne v. States Marine Lines, Inc., 398 U.S. 375, 387 (1970). Thus, maritime law is often far more lenient towards sailors than is common law. Courts have stated that maritime law prefers to “give [rather] than to withhold the remedy” whenever “established and inflexible rules” do not require otherwise. Id.

The Court concluded that this guiding principle calls for a fact-based standard, as opposed to a bright-line rule, which will offer a greater number of sailors an opportunity to receive compensation for their alleged injuries. The Court therefore applied the following standard:  A manufacturer of a bare-metal product may be held liable for injuries suffered from later-added asbestos-containing materials, if the injuries were a reasonably foreseeable consequence of the manufacturer’s failure to provide a reasonable and adequate warning. In making this factual determination, important factors to consider are whether the bare-metal manufacturer reasonably could have known, at the time it placed its product into the stream of commerce, that

  • asbestos is hazardous, and
  • its product will be used with an asbestos-containing part, because
  • the product was originally equipped with an asbestos containing part that could reasonably be expected to be replaced over the product’s lifetime,
  • the manufacturer specifically directed that the product be used with an asbestos-containing part, or
  • the product required an asbestos-containing part to function properly.

 

The Decision’s Impact

            Within the Third Circuit, bare-metal manufacturers should no longer expect claims against them to be dismissed under a “bare-metal defense,” unless they can show that they could not reasonably have known that harmful asbestos parts would be added to their products.  A potential defense would prove:

  • the bare-metal manufacturer did not originally equip the product with any asbestos-containing parts;
  • the bare-metal manufacturer did not specifically direct that the product be used with an asbestos-containing part; and
  • the product could have been used properly without an asbestos-containing part.

At least until the Supreme Court provides its own guidance, the Third Circuit’s decision may also be viewed as persuasive by courts in other jurisdictions.

Medical Marijuana and Workers’ Compensation Coverage

Posted in Employment Litigation

This article is Part Four of our Medical Marijuana and the Workplace: Recent Decisions from New England Courts Provide Significant Protections to Medical Marijuana Patient Employees Five-Part Series. See Parts One, Two, and Three for reference.

As the qualified use of medical marijuana to treat illnesses becomes more common and courts become more willing to extend legal protections to medical marijuana patient/employees, workers’ compensation is likely to become another focus of litigation.  One potential argument would be that if an employees’ healthcare provider certifies, recommends, or prescribes (depending on the character of the medical marijuana act at issue) the use of medical marijuana as part of a course of treatment, the treatment is reasonable and necessary, and employers and their respective workers’ compensation insurer are therefore responsible for providing it.

Few courts have addressed this issue, but those opinions that exist have tended to require employers to reimburse employees who have incurred workplace injuries and seek reimbursement for medical marijuana that is purchased to treat the underlying injury (as long as they are qualified patients and a workers’ compensation court determines that the treatment is reasonable and necessary).  In one of the few cases on the subject, the New Mexico Court of Appeals held that marijuana may be a “reasonable and necessary” medical treatment for a workplace injury, and if a treatment is reasonable and necessary, the employer and its insurer are responsible for paying the bill.  See Vialpando v. Ben’s Automotive Services, 2014-NMCA-084, 331 P.3d 975 (N.M. Ct. App.), cert. denied331 P.3d 924 (N.M. 2014); see also Lewis v. American Gen. Media, 355 P.3d 850, 856-58 (N.M. App. 2015) (rejecting challenge to reimbursement for medical marijuana under Workers’ Compensation Act based on federal preemption); cf. Maez v. Riley Indus., 347 P.3d 732, 735-37 (N.M. App. 2015) (finding sufficient evidence that medical marijuana was medically necessary).

In Vialpando, the claimant, George Vialpando, injured his back in a work-related accident in 2000 while employed by Ben’s Automotive Services (“Ben’s Automotive”), and was not able to find relief through traditional drugs and treatment. His doctor opined that Mr. Vialpando had “some of the most extremely high intensity, frequency and duration of pain, out of all of the thousands of patients I’ve treated within my seven years practicing medicine.”  Thereafter, in 2013, Vialpando was certified by his healthcare providers to become a patient in the New Mexico medical marijuana program. The program allows a qualifying patient to purchase marijuana after having secured a certification from a New Mexico licensed health practitioner that the subject individual is suffering from a debilitating medical condition and that the potential health benefits of the medical use of marijuana would likely outweigh the health risks posed by its use.

Vialpando then applied for approval from the workers’ compensation court to have the medical marijuana paid for by his former employer.  The Court approved his application, determined that the treatment was, in fact, reasonable and necessary, and ordered Ben’s Automotive to pay for the marijuana.  Ben’s Automotive appealed the Workers’ Compensation Court decision to the New Mexico Court of Appeals.

In its appeal, Ben’s Automotive argued that New Mexico’s Workers’ Compensation Act did not expressly authorize reimbursement for the cost of purchasing medical marijuana.  The appellant also contended that the Workers’ Compensation Judge’s determination violated federal law (due to marijuana’s classification as a Schedule I controlled substance).  The Court was not persuaded by either argument.

First, the Court of Appeals found that New Mexico’s Workers’ Compensation Act does not prohibit a healthcare provider from certifying that an injured worker should receive medical marijuana in the course of the treatment for his workplace injury. As long as the treatment is “reasonable and necessary” and approved by a workers’ compensation judge, the employer is responsible for paying for it under the Act.

Second, the Court found that federal law does not preclude repayment for medical marijuana under New Mexico’s Workers’ Compensation Act.  Ben’s Automotive had argued that in requiring a former employer to reimburse Mr. Vialpando for the purchase of his medical marijuana, the Worker’s Compensation Court’s order was forcing Ben’s Automotive to violate federal law, which (respondent argued) should preempt New Mexico law.  The Court of Appeals disagreed and determined that there was no direct conflict between federal law and New Mexico’s medical marijuana act.

Outside of New Mexico, administrative actions taken in California and Minnesota have also facilitated reimbursement for medical marijuana under workers’ compensation law.  First, in Cockrell v. Farmers Insurance and Liberty Mutual Insurance Company2012 Cal. Wrk. Comp. P.D. LEXIS 456, a California workers’ compensation court held that the use of medical marijuana was reasonable and necessary under the state workers’ comp law, and that the Compassionate Use Act of 1996, which legalized medical marijuana in California, did not bar reimbursement.  In 2015, the workers’ compensation insurance carrier appealed this decision to the California Workers’ Compensation Appeals Board, contending that certain sections of California Code excused “health insurance providers” and “health care service plans” from having to pay for medical marijuana. The Appeals Board ruled that a workers’ compensation insurance carrier is not a “health care service plan” but sent the case back to the court below to analyze whether a workers’ compensation carrier insurer is a “health insurance provider.”   According to the Appeals Board, the workers’ compensation court will need to analyze whether there is any rational basis to treat occupational and non-occupational insurers differently with regard to reimbursement for medical marijuana under California’s medical marijuana law.  The case has yet to return to the Appeals Board; however, it is likely that this case will end up in the California Court of Appeal, and eventually the Supreme Court of California.

In Minnesota, regulations promulgated by the Department of Labor and Industry (“DLI”) address the criteria for treatment of the most common work-related injuries, and do not permit the use of “illegal substances” as part of workplace injury treatment.  In July 2015, the DLI issued new rules that redefine “illegal substance” and specifically exclude from the definition medical marijuana prescribed under state law.  Thus, medical marijuana is now a permissible and reimbursable form of medical treatment for workers’ comp claims in Minnesota.

In Rhode Island and Massachusetts, state legislatures or administrative agencies may address whether medical marijuana is reimbursable under workers’ compensation, as the DLI did in Minnesota.  Regardless, we expect to see the issue litigated.  Based on the Massachusetts Supreme Judicial Court’s opinion in Barbuto, see Parts 1 and 2, and the Rhode Island Superior Court’s decision in Callaghan, see Part 3, it is hard to imagine that workers compensation courts in either of these jurisdictions would deviate materially from the opinion of the New Mexico Court of Appeals in Vialpando.  In other words, if a licensed physician certifies that the treatment is reasonable and necessary; employers may be required to reimburse employees for the expense of medical marijuana.  Again, employers will want to consult with counsel on how to adapt their practices to this changing environment.

Interestingly, the medical marijuana industry is facing a different workers’ compensation-related challenge in Hawaii.  Hawaiian Employers Mutual Insurance Co., the largest workers’ compensation insurer in Hawaii, announced in June that on the advice of counsel, it would soon be canceling its workers’ compensation insurance policies with marijuana growers.  The Company explained that “a strict interpretation of the conflicting state and federal laws would expose companies doing business with medical marijuana dispensaries to criminal prosecution under federal law.”  Hawaiian Employers Mutual initially wrote workers’ compensation policies to the dispensaries in 2016, after the state began approving licenses for medical marijuana dispensaries, apparently because of what the insurer characterized as a lack of clarity in federal and state law concerning the legality of medical marijuana. Hawaii first legalized the use of medical marijuana in 2000, but no marijuana dispensary has presently commenced operations in Hawaii.  Because Hawaii state law requires employers to provide minimum levels of workers’ compensation coverage for all employees, cancellation of workers’ compensation policies could significantly impair the ability of medical marijuana dispensaries to begin operations.  Similar actions in other states could effectively neuter the medical marijuana industry, regardless of whether state law favors reimbursing prescribed marijuana as a reasonable and necessary expense.

California Appeals Court Reverses Summary Judgment in Favor of Defendant Employer on PAGA Cause of Action

Posted in California Courts, Employment Litigation, Litigation Trends

In a recent decision, Lopez v. Friant., 2017 WL 2451126, the California First District Court of Appeal provided guidance as to the meaning of the Private Attorneys General Act, or PAGA.  The Lopez ruling reversed an Alameda County trial court’s ruling, which had granted summary judgment in favor of defendant-employer Friant & Associates on the grounds that plaintiff had failed to establish a knowing or intentional failure to include required information on itemized wage statements. The Court found that when a cause of action is brought under PAGA for civil penalties based on an underlying Labor Code violation requiring “injury” and “intent,” the plaintiff is not required to make a showing of those requirements. Rather, the Court found that a plaintiff may prevail merely by showing that the employer failed to make the required disclosure. By raising this disclosure omission under PAGA, rather than through a cause of action under the underlying statute, the plaintiff effectively circumvented the requirements of proving “injury” and a “knowing and intentional” violation. The Court’s opinion includes a discussion of the plain language of each statute, as well as their legislative histories. The decision exemplifies California courts’ willingness to allow wage and hour violation claims to proceed past the summary judgment stage, which could make it difficult for employers to dispose of cases early through dispositive motions.

 

In Lopez, plaintiff Eduardo Lopez  brought a lawsuit against employer Friant & Associates raising a single cause of action: a PAGA cause of action based on an alleged underlying Labor Code violation under Section 226(a)(7), which requires an employer to provide itemized wage statements that include the last four digits of an employee’s social security number. Section 226 independently authorizes a civil cause of action for aggrieved employees, and Section 226(e)(1) stipulates that the prerequisites for prevailing under this section include a showing of injury arising from a “knowing and intentional” violation of the Section.

 

At the summary judgment stage, employer Friant argued that plaintiff had failed to present a triable issue of material fact as to the requirements of injury and intent. The Alameda County trial court agreed and granted summary judgment in favor of Friant. On appeal, however, the First District Court of Appeal found that, while the civil cause of action authorized under Section 226 requires a showing of injury and knowing and intentional violation, the PAGA cause of action is separate and independent, and does not require a plaintiff to make this showing. The parties stipulated during litigation that Friant had issued 5,776 itemized wage statements to the plaintiff and other employees that failed to include such information. Accordingly, the Court reversed the grant of summary judgment because a triable issue of material fact existed.

 

The Court’s most significant discussion focuses on how to interpret the law when a plaintiff raises a PAGA-authorized claim based on an underlying Labor Code violation, such as 226, which authorizes its own cause of action with attendant elements. In reaching the conclusion that PAGA does not require the same injury and intent elements as Section 226, the Court addressed the plain language of the statutes and the legislative histories of Section 226 and PAGA.

 

In discussing the plain language of both Section 226 and PAGA, the Court noted that PAGA is a type of qui tam statute that allows aggrieved employees to recover civil penalties on behalf of the state, rather than simply for themselves. Thus, while Section 226 authorizes private statutory damages actions, PAGA “deputizes citizens as private attorneys general” to enforce the Labor Code and collect penalties that will be used for the benefit of the general public. The Court pointed to California courts’ history of distinguishing between civil penalties authorized under PAGA and statutory penalties available to employees through the Labor Code. In this case, the Court noted that Section 226(e) authorized “actual damages” or “penalties” rather than a “civil penalty,” whereas PAGA authorizes “civil penalties.” Accordingly, the Court found that the requirements of Section 226(e) to show injury as a result of a knowing and intentional violation do not apply to PAGA causes of action.

 

The Court also addressed the legislative histories that led to the enactment of both Section 226 and PAGA. The Court specifically discussed the fact that the language added to Section 226 requiring injury and a knowing and intentional violation was added long before the passage of PAGA. The Court noted that Section 226’s legislative history pointed to a desire to remedy harm caused to an individual employee from an employer’s failure to comply with the Labor Code. Indeed, a few years later the Legislature added a specific provision authorizing a civil penalty available to individuals. Accordingly, the Court found that Section 226 authorizes a separate and distinct cause of action from that authorized by PAGA.

 

The Court cited further support from the fact that a PAGA plaintiff must “comply with administrative procedures” outlined in PAGA, including allowing an employer the right to cure violations. A violation of Section 226(a) is one such non-curable violation. The Court found particularly compelling the fact that PAGA cites specifically to subsection 226(a) rather than to Section 226 generally.

 

The Court further pointed out that its interpretation is consistent with many federal court decisions that have determined Section 226(e) requirements do not apply to PAGA claims based on Section 226(a) violations. The Court also distinguished case law cited by employer Friant, explaining that the PAGA claim in question is not a derivative action, but rather an independent cause of action.

 

The Lopez decision underscores California courts’ broad interpretation of wage and hour statutes and the various means of enforcing them.

 

RI Superior Court Finds Implied Private Cause of Action Within the State’s Medical Marijuana Law for Adverse Action Taken Against Qualifying Patients & Recognizes that the RICRA Provides Similar Protections for Qualifying Patients Faced with Workplace Discrimination

Posted in Employment Litigation, Litigation Trends, Massachusetts Courts, Rhode Island Courts

This article is Part Three of our Medical Marijuana and the Workplace: Recent Decisions from New England Courts Provide Significant Protections to Medical Marijuana Patient Employees Five-Part Series.

 

A few months before the Barbuto opinion, see Parts 1 and 2, a Rhode Island court issued a summary judgment ruling making it easier for employees to claim employment discrimination resulting from their status as qualifying medical marijuana patients.  See Callaghan v. Darlington Fabrics Corp., 2017 WL 2321181 (R.I. Super. May 23, 2017).  Judge Licht of the Rhode Island Superior Court issued an opinion in which he discussed the intent of Rhode Island’s General Assembly in enacting the Edward O. Hawkins and Thomas C. Slater Medical Marijuana Act, G.L. 1956 §§ 21-28.6-1 et seq. (the “Hawkins-Slater Act” or “RIMMA”).  Plaintiff Christine Callaghan alleged that because she held a medical marijuana card, Defendants Darlington Fabrics Corporation (“Darlington”) and the Moore Company (collectively, “Defendants”) had discriminated against her with respect to hiring for an internship position.  See id. at 1.

The material facts forming the foundation of Ms. Callaghan’s claims were not disputed by the parties.  Plaintiff needed to complete an internship to fulfill the requirements of her Master’s program at the University of Rhode Island.  Id.  Ms. Callaghan’s professor directed her to Darlington, a division of Moore Company, where Plaintiff met with Darlington’s Human Resources Coordinator, Karen McGrath, on June 30, 2014.  Id.  After Plaintiff was required to sign a Fitness for Duty Statement, which acknowledged that she would have to take a drug test before being hired, Plaintiff advised Ms. McGrath that she held a medical marijuana card authorized by the RIMMA.  Id.

During a conference call on July 2, 2014, Ms. McGrath and a colleague asked Plaintiff whether she was currently using medical marijuana.  Plaintiff responded affirmatively, explained that she would test positive for marijuana, and informed Darlington’s employees that she was allergic to other pain medications and would neither use nor bring medical marijuana with her into the workplace.  Plaintiff did not receive an internship.

Plaintiff then filed a three-count complaint on November 12, 2014. Count I sought a declaration that the “failure to hire a prospective employee based on his or her status as a medical marijuana card holder and user is a violation of the” Hawkins-Slater Act.  See id. at 2 Counts II and III sought damages: Count II alleged Defendants’ conduct violated the Rhode Island Civil Rights Act (RICRA), G.L. 1956 §§ 42-112-1 et seq.; and Count III alleged violations of the Hawkins-Slater Act due to employment discrimination.  See id.   Defendant moved for summary judgment on all three counts under Superior Court Rules of Civil Procedure 56.  Plaintiff filed a cross-motion for summary judgment on Counts I and III, and otherwise opposed Defendants’ motion on Count II.  See id. at 1.

The Court first endeavored to determine whether § 21-28.6-4(d) of the RIMMA, which provides that “No school, employer, or landlord may refuse to enroll, employ, or lease to, or otherwise penalize, a person solely for his or her status as a cardholder,” creates an implied private cause of action.  In doing so, the Court declared that it was necessary to ascertain whether the Rhode Island legislature intended for this provision to be enforceable.  See id. at 2.  After reviewing contradictory canons of statutory construction and the Rhode Island Supreme Court’s reluctance to imply private rights of action (id. at 3-8), the Court ultimately determined that the General Assembly expected § 21-28.6-4(d) to be enforced, and that an implied private right of action existed.  See id. at 8.

The Court then rejected an argument by Defendants that they refused to hire Ms. Callaghan not because of her status as a cardholder, but because she was unable to pass a mandatory pre-service drug test.  The Court noted that “the General Assembly explicitly instructed the courts to construe the Hawkins-Slater Act broadly.”  Id. (citing § 21-28.6-13).  The Court also reviewed several other provisions of the RIMMA and determined that the “Act provides that employers cannot refuse to employ a person for his or her status as a cardholder, and that that right may not be denied for the medical use of marijuana..”  Defendants also argued that their manufacturing facility contained dangerous equipment and “couch[ed] their concern as one of workplace safety.”  Id.  The Court concluded that safety concerns did not justify a refusal to hire and could be addressed later, referring to the RIMMA’s express statement that it “shall not permit “[a]ny person to undertake any task under the influence of marijuana, when doing so would constitute negligence or professional malpractice.” Sec. 21-28.6-7(a)(1).  Ergo, the Court opined, “[i]f an employee came to work under the influence, and unable to perform his or her duties in a competent manner, the employer would thus not have to tolerate such behavior.”  Id.

After addressing the claims arising under the RIMMA, the Court reviewed the claim sounding in unlawful discrimination under RICRA.  The Court first stated that RICRA is “expansive, and provides broad protection against all forms of discrimination in all phases of employment.”  See id. at 10. (Internal citation and quotation omitted).  The Court also recognized that “[i]n order to qualify for . . . a card [under RIMMA], Plaintiff must have a “debilitating medical condition.”  See id. (citing § 21-28.6-3(10)).    Defendants had argued that drug use is not a disability as defined by RICRA, whose scope they argued should be dictated by the federal American with Disabilities Act.  The Court determined that if Ms. Callaghan had a debilitating medical condition under the RIMMA, then ipso facto, she must also be disabled within the meaning of the RICRA:

A “debilitating medical condition” under the Hawkins-Slater Act must necessarily “substantially limit[] one or more … major life activities” under § 42-87-1. The examples of conditions which automatically qualify as debilitating medical conditions are severe: cancer, glaucoma, HIV/AIDS, and Hepatitis C. Sec. 21-28.6-3(3)(i) (2013).7 All of these diseases impair “the operation of a major bodily function,” such as the immune system, normal cell growth, or the like. See § 42-87-1(5). Further, all of the symptoms which would qualify a cardholder are also severe: “wasting syndrome; severe, debilitating, chronic pain; severe nausea; seizures; … or severe and persistent muscle spasms.” Sec. 21-28.6-3(3)(ii) (2013).8 Again, these would all naturally substantially limit a major life activity. Even just a plain reading of the terms, without reference to the definitions, makes it clear—“debilitating medical condition” connotes disability on its own. See Merriam-Webster’s Collegiate Dictionary 296 (Frederick C. Mish et al. eds., 10th ed. 2001) (equating debilitate with weaken or enfeeble).  Thus, Plaintiff is disabled under the terms of RICRA. Her status as a medical marijuana cardholder signaled that to Defendants—she could not have obtained such a card without a debilitating medical condition that would cause her to be disabled.

 

Id. at 11.  Thus, the Court held that Plaintiff also stated a claim for relief under RICRA.  See Id. at 13.

The result of the decisions in Barbuto and Callaghan is that medical marijuana patients may be allowed to file claims for workplace discrimination under the laws of Massachusetts and Rhode Island.  This is a stark divergence from earlier decisions in other states, and potentially opens the doors of the courthouse to qualifying patients that have incurred adverse actions from their employer as a result of their use of medical marijuana.  As a result of these rulings, we are likely to see a proliferation of cases brought in Massachusetts and Rhode Island.  Employers should not only prepare for this litigation, but also coordinate with employment counsel to adapt policies and procedures to reduce the risk of workplace discrimination claims.

Texas Court of Appeals Upholds Jury’s Finding of Gross Negligence While Correcting The Trial Court’s Calculation of Exemplary Damages

Posted in Asbestos Litigation

Recently, the Texas Court of Appeals (1) upheld a jury’s finding of gross negligence and (2) explained how a trial court should calculate exemplary damages under Texas law, in The Goodyear Tire & Rubber Company, v. Vicki Lynn Rogers, et al., No. 05-15-00001-CV, 2017 WL 3776837 (Tex. App. Sep. 13, 2017).  In this case, the decedent, Carl Rogers, passed away from mesothelioma.  From 1974 to 2004, he worked as a tire builder at a Goodyear facility in Tyler, Texas, where he allegedly was exposed to asbestos from overhead insulation and from brakes in tire building machines located in the Tyler facility.  Mr. Rogers’ wife (as the representative of his estate) and two daughters sued his employer, The Goodyear Tire & Rubber Company (“Goodyear”), for wrongful death allegedly caused by Goodyear’s gross negligence.  Typically, workers’ compensation is the exclusive remedy for plaintiffs who attribute the cause of death to the negligence of a decedent’s employer.  However, Texas’ workers’ compensation law allows a plaintiff’s surviving spouse and heirs to recover exemplary damages when the employee’s death resulted from the employer’s gross negligence.

 

The jury found by clear and convincing evidence that Goodyear’s gross negligence caused Mr. Rogers’ mesothelioma, and ultimately, his death.  To calculate exemplary damages, the trial court asked the jury to determine plaintiffs’ past and future pecuniary loss, past and future loss of companionship and society, and past and future mental anguish.  In addition to making those findings, the jury assessed $15 million in exemplary damages, with 90 percent of the award apportioned to the widow and 5 percent to each daughter.  After the jury’s verdict, the trial court conducted its own calculation of damages according to section 41.008(b) of the Texas Civil Practice and Remedies Code, which lowered the total award to $2,890,000.  On appeal, Goodyear unsuccessfully challenged the jury’s finding of gross negligence, but prevailed in its challenge to the trial court’s calculation of exemplary damages, reducing the total award to $1,150,000.

 

To prove gross negligence, “a plaintiff must demonstrate, by clear and convincing evidence that: (1) when viewed objectively from the defendant’s standpoint at the time of the event, the act or omission involved an extreme degree of risk, considering the probability and magnitude of the potential harm to others, and (2) the defendant had actual, subjective awareness of the risk involved, but nevertheless proceeded with conscious indifference to the rights, safety, or welfare of others.”  U-Haul Int’l, Inc. v. Waldrip, 380 S.W.3d 118, 137 (Tex. 2012).

 

The Texas Court of Appeals first addressed the objective component of gross negligence, and described extreme risk as the likelihood of the plaintiff’s serious injury, rather than a remote or even high probability of minor harm.  While Goodyear conceded that mesothelioma is a serious injury, it argued the plaintiffs did not prove the likelihood of that injury.  To support this argument, Goodyear used the plaintiffs’ best evidence regarding dosage, which increased the risk of developing mesothelioma by 22 times over that of someone who was not exposed to asbestos.  Even with this increase, Mr. Rogers’ chance of developing mesothelioma still amounted to one in 45,000, which Goodyear asserted could not amount to an extreme risk as a matter of law.  Instead of relying on the statistical evidence as Goodyear requested, the Texas Court of Appeals focused on the relationship between the employer and its employees.  There was evidence presented at trial that suggested the Goodyear plant in Tyler was aware of risks associated with asbestos from 1972 to 1983 and even was directed to conduct air sampling.  When new asbestos standards were released by OSHA in 1972, Goodyear communicated the standards in a letter sent to its plant personnel managers with Goodyear’s own instructions regarding asbestos.  The letter included a warning that asbestos fiber inhalation possibly caused mesothelioma, and stated that routine air sampling was to be conducted in the Goodyear facilities.  An employee for Goodyear, Ray Jackson, was trained in industrial hygiene and testified on behalf of Goodyear at trial.  He testified to personally taking asbestos samples at the Tyler plant from 1972 to 1976, but provided no physical proof.  However, at his deposition a few weeks before trial, he testified that the first time Goodyear performed air sampling tests for asbestos was in 1978 in response to an OSHA complaint.  Goodyear also kept a report of chemical samples that were taken in the Tyler facility, according to which thirty-six asbestos samples were taken, starting in 1978.  The report also indicated that Goodyear monitored the asbestos exposure to the contractors working in its facility, but not the exposure to its employees.  Further, Goodyear did not warn its employees of the risks associated with asbestos exposure until 1983.  In the mid-1980s, it began replacing the tire building machines with non-asbestos containing machines and commenced asbestos abatement of the insulation in the Tyler facility.  This relationship between the employer and its employees, along with the quick death associated with mesothelioma, were the main reasons the court upheld the jury’s decision regarding the objective component of gross negligence.

 

Next, Goodyear argued that plaintiffs did not prove the subjective element of gross negligence.  This element requires that the plaintiff prove the defendant knew about a risk, but by its actions or omissions established it did not care.  Regarding knowledge, Goodyear argued on appeal that the evidence at trial showed only that Goodyear generally knew, from 1974 to 1985, that asbestos exposure could cause mesothelioma, and not that it knew the dose of asbestos Mr. Rogers was exposed to could cause mesothelioma.  The Texas Court of Appeals was not persuaded.  In upholding the jury’s decision regarding the subjectivity component, the Court stated that it was sufficient to show that Goodyear knew that exposure to low levels of asbestos could cause people to develop mesothelioma, and that the communications Goodyear sent to its plants in 1972 gave the jury sufficient evidence to come to that conclusion.  As for an action or omission, Goodyear’s only evidence that it displayed proactive behavior came through its employee, Ray Jackson, who was impeached at trial with his prior deposition testimony.  Plaintiffs, on the other hand, submitted evidence that Goodyear had a pecuniary motive to not monitor its employees.  In a letter dated August 1981 from Goodyear to plants not manufacturing asbestos-containing products, Goodyear sought to avoid classification as an employer where asbestos fibers were released, citing the “considerable expense and duration” of a monitoring and medical surveillance program.  In the Court’s view, the reasons outlined above were sufficient for the jury to find the subjective component of gross negligence had been established against Goodyear.

 

The final and perhaps most interesting part of the decision concerned the trial court’s calculation of exemplary damages.  Under section 41.008(b) of the Texas Civil Practice and Remedies Code, the statutory calculation of exemplary damages is the sum of two times the economic damages, plus the statutory maximum of $750,000 in noneconomic damages.  The difference between “economic” and “noneconomic” damages formed the heart of the Texas Court of Appeals’ calculation pursuant to section 41.008(b).  Goodyear argued that the jury impermissibly considered non-monetary damages, like Mr. Roger’s practical advice to his spouse, in its calculation of exemplary damages.  Economic damages were defined by the Court as “those types of losses that are supported by evidence of an existing in fact, real monetary loss like lost wages, lost profits, or the increased expenditures associated with obtaining replacement or new services.”  Thus, practical advice given by Mr. Rogers was not considered an economic loss unless actual evidence was provided that displayed a monetary effect to replace that advice.  Based on this error, the Court of Appeals agreed with Goodyear’s assertion that plaintiffs had shown only $200,000 in actual monetary damages.  As a result, the court suggested a remittitur of exemplary damages reducing the total award to $1,150,000.