California asbestos litigation

The Maryland Court of Appeals unanimously ruled that Georgia-Pacific Corp. was not liable for illness involving a woman who was exposed to asbestos while doing her father’s laundry in the 1960s.

The Insurance Journal reported on the recent decision:

  • The Court of Appeals ruled that Georgia-Pacific Corp. was not obligated to warn relatives of the dangers of asbestos in the 1960s.
  • The hazard was not sufficiently known until federal regulations were issued in 1972 by the U.S. Occupational Safety and Health Administration.
  • The court’s ruling overturns a $5 million verdict.
  • Jocelyn Farrar had been exposed while doing laundry in the late 1960s and fell ill decades later.

In the decision, available on the website of the Maryland high court (pdf download), the Court explained that it rejected liability because:

  • There was no duty to warn persons such as Ms. Farrar, who was a “bystander of a bystander,” a person who never used the product and never directly came into contact with it.
  • The duty extends to those whom the supplier should expect to use the product or to third persons whom the supplier should expect to be endangered by its use.
  • Even if the danger was foreseeable, prior to 1972 OSHA regulations, it would have been difficult for the company to have provided a warning that could have avoided the danger.

The Maryland decision continues the recent trend in rejecting a duty in cases involving secondary exposure.  In 2012, California followed Ohio and joined the growing list of states which reject the defendant’s duty to an employee’s family member in “take home asbestos” cases. In an article featured in the DRI‘s Newsletter and published on May 9, 2014, co-authors Carter E. Strang and Karen E. Ross also noted the jurisdictions which have rejected secondary exposure claims.  Since their publication, California and Maryland have joined approximately nine other states in rejecting a duty in secondary exposure cases.  Another California court recently came to the same conclusion as the earlier California case in an unreported decision.

However, as Strang and Ross noted in their January 16, 2014 DRI article (pdf download), it is unclear how these cases will play out at the trial level, as a verdict of over $27 million was recently entered in California in a case involving take-home asbestos exposure.

As the National Association of Manufacturers noted, the Maryland Court of Appeals found:

“that there was skimpy knowledge at the time of the danger to household members from asbestos dust brought into the home, and that the company was unable to give warnings directly to such plaintiffs and the warnings would not have had any practical effect. “

Conclusion

Courts nationwide are increasingly rejecting the claims by plaintiffs and their attorneys that seek to impose duties far removed from the allegedly wrongful act.  Defense attorneys can and should seek to impose reasonable limits on the issue of duty to those instances in which harm is reasonably foreseeable to the alleged tortfeasor.  Raising appropriate defenses in cases involving “take home” claims “household” exposure, or secondary exposure is essential to the defense of toxic tort claims.

The California Supreme Court recently resolved conflicting opinions from state appellate intermediary courts on the subject of whether, or under what circumstances, a plaintiff may sue a dissolved out of State corporation in California. In Greb v. Diamond International Company, 56 Cal. 4th 243 (2013) the Court held that dissolved foreign corporations are not subject to suit in California where a direct conflict exists between California Corporations Code Section 2010 (which permits Plaintiffs to sue dissolved corporations for an indefinite period of time), and the corporate survival laws of the dissolved company’s state of incorporation.  See, Greb v. Diamond International Company, 56 Cal. 4th 243 (2013). (pdf download )

Factual Background of Case

In December of 2008, Plaintiff Greb filed an asbestos-related personal injury complaint in San Francisco Superior Court. His Complaint named Diamond International Company, a Delaware Corporation that had filed for dissolution in July of 2005, but which still had funds remaining on its liability insurance policy.

Defendant Diamond International Company, a dissolved Delaware corporation, filed a demurrer to the Complaint on the ground that, under Delaware’s corporate survival law, the action was not permitted because it was initiated more than three years after the corporation was dissolved.  Plaintiffs opposed the demurrer, arguing that California Corporations Code 2010 took precedence over Delaware law, and citing prior appellate court decisions and choice-of-law analysis. (pdf download of North American Asbestos decision)

The trial sustained the demurrer without leave to amend. The Court of Appeal affirmed.

The Supreme Court’s Decision

On final appeal, published February 21, 2013, the California Supreme Court affirmed and held that California Corporations Code Section 2010 only applied to dissolved California Corporations, not to foreign corporations. Notably, the Supreme Court considered and expressly rejected Plaintiffs’ alternative argument that, because Defendant was qualified to and did in fact conduct a large portion of its business prior to dissolution in the State of California, that it was a quasi-California corporation subject to California corporate survival law. In rejecting  Plaintiffs argument the Court stated: “We discern in the statutes no evidence that the Legislature intended…to accomplish the dramatic result ascribed to it by Plaintiffs – essentially, imposing on all…foreign corporations that are qualified to undertake repeated and successive business in California, the burden of complying with all provisions of…[California’s corporation code]…subject to what would often be a difficult choice of law analysis with regard to each California statutory provision that conflicts with a provision governing the corporation in its state of formation. As defendant suggests, such a scheme would require foreign corporations to “follow a litany of requirements regarding various corporate activities that their home state already regulates, creating innumerable, treacherous conflicts of law that the corporation would find impossible to navigate.”

Although not expressly referenced in the opinion, the California Supreme Court issued its ruling in the Greb within weeks of a seemingly related Delaware Court of Chancery decision holding that, even when funds remain on a dissolved Delaware corporation’s insurance policy, a plaintiff may not recover against the policy or initiate suit against the dissolved corporation outside of the time frame contemplated by Delaware’s corporate survival laws.

Conclusion

In recent years the California Supreme Court has published several decisions that are extremely favorable to the asbestos defense practitioner. In 2011 the Supreme Court  limited a plaintiff’s medical expenses to those actually paid by his or her insurance company to a medical provider. (pdf download of Howell v. Hamilton Meats decision) In 2012, the Court held that an equipment manufacturer cannot be held liable for a plaintiff’s exposure to asbestos-containing replacement component parts used with the equipment, where it neither manufactured nor supplied the asbestos containing replacement part involved in the exposure. (pdf download of O’Neil v. Crane Co. decision)

As seen above, the Greb case is the third California Supreme Court decision issued in the past two years limiting either the amount of damages recoverable to an asbestos plaintiff in a civil suit, or the pool of available defendants from which a recovery can be made. Recent decisions from California’s intermediary appellate courts give defense practitioners reason to hope that this trend will continue. (pdf download of Campbell v. Superior Court)

Given the current favorable appellate climate, California defense practitioners should be on the lookout for issues to press on demurrer, summary judgment, or in limine at trial in cases where Plaintiff’s claims against the client are tenuous on issues of jurisdiction and duty.

Co-authored by Brian Gross 

Navy ShipAfter years of inconsistent rulings in the trial and appellate courts, the California Supreme Court recently decided the issue of whether plaintiffs in asbestos litigation may pursue claims against equipment manufacturers for injuries caused by asbestos-containing replacement component parts they neither manufactured nor supplied. For the reasons below, the Court expressly rejected this theory of liability and affirmed judgment in favor of equipment manufacturers Crane Co. and Warren Pumps (O’Neil v. Crane Co., California Supreme Court Case No. S177401).

Procedural History of Case

This opinion originated from a wrongful death personal injury asbestos case first filed in Los Angeles Superior Court. Plaintiffs alleged that the Decedent was exposed to asbestos-containing gaskets, packing, and insulation materials found in or on the Defendants’ pump and valve products when Decedent served aboard ship in the United States Navy. Although the evidence demonstrated that Defendants’ products incorporated asbestos-containing component parts, it was undisputed that the Defendants did not manufacture or supply the asbestos-containing gaskets and packing actually found in or on the equipment at the time of Decedent’s exposure.

At trial, the Superior Court granted Defendants’ non-suit motions.  In doing so, the Superior Court ruled thatCalifornia’s strict liability and negligence law did not support imposition of liability for harm caused by another manufacturer’s product. The Second District Court of Appeal reversed the trial court’s decision.

California Supreme Court Ruling

On final appeal, the California Supreme Court reversed the Court of Appeal decision and affirmed the trial court judgment in favor of Defendants.  In so doing, the Court re-affirmed the general rules that a manufacturer cannot be held strictly liable for defects in another entity’s product, and that a manufacturer has no duty to warn of risks arising from another manufacturer’s products.

Impact of O’Neil Decision on California Asbestos Litigation Going Forward

The O’Neil decision will likely have a significant impact on asbestos litigation going forward. Although the decision does not entirely eliminate liability for all pump, valve, or other equipment manufacturers, it certainly limits the factual scenarios under which they may be held liable. Accordingly, California asbestos litigation counsel may anticipate the following:

  • An increased litigation focus on the remaining pool of asbestos replacement part manufacturers, such as gasket, packing and insulation manufacturer defendants
  • An increase in litigation against the direct suppliers of gasket, packing, and insulation materials (largely due to fact that many of the insulation, gasket, and packing defendants are now bankrupt)
  • Finally, because the O’Neil opinion leaves open the possibility that an equipment manufacturer may be held liable upon a showing that it “substantially participated” in creating a harmful combined use of its product with asbestos-containing replacement parts, equipment manufacturers should anticipate that certain Plaintiffs firms will pursue and develop this theory of liability against them through the pre-trial discovery process.