New Limits on Supplemental Environmental Projects Increase Risks to Business in EPA Enforcement

The United States Environmental Protection Agency has long made good use of its policy on Supplemental Environmental Projects (“SEP”). Since most environmental enforcement matters are resolved through settlements, the policy has resulted in significant environmental benefits in the communities directly impacted by violations.

Under EPA’s SEP policy, an alleged violator can voluntarily agree to undertake an environmentally beneficial project in exchange for mitigation of the penalty to be paid. The policy establishes guidelines, categories of projects and importantly, makes clear that a SEP does not include the activities required for a return to compliance. A SEP is something beyond compliance with a nexus to the damage allegedly caused by the violation. In exchange, EPA exercises its enforcement discretion in penalty assessment resulting in a smaller penalty payment.

A good Supplemental Environmental Project is a win-win-win. SEPs further EPA’s goal of protecting and enhancing the public health and the environment. Settling businesses often view SEPs as a better way to spend penalty dollars, giving them some say over how those dollars are spent and maybe even some positive public relations. SEPs are also often viewed positively by non-governmental organizations and local government because SEPs provide local benefits, which are viewed more positively than payments to the federal general fund. SEPs have resulted in the retirement of emissions credits, reductions in neighborhood emissions or restored wetlands, to name a few examples.

The future use of SEPs as a settlement tool is in question following Attorney General Session’s recent directive prohibiting any settlement agreement that “directs or provides for a payment or loan to any non-governmental person or entity that is not a party to the dispute.”

Many SEPs are performed by the alleged violator but third parties are the beneficiaries. While EPA’s policy does include a nexus requirement, it may be difficult to demonstrate that such SEPs meet the directive’s requirement that such settlement “directly remedies the harm that is sought to be redressed.” This standard will be especially challenging where the SEP goes beyond compliance requirements.

In taking away the option, or maybe just limiting it, it is not clear where the win falls and only time will tell if the new directive results in enforcement litigation instead of enforcement settlements. While a SEP may not have been the one thing that pushed a settlement to resolution, it often effectively opens the door to productive discourse. Going forward, businesses facing enforcement should take early stock of their options and be prepared for an increased likelihood of litigation and higher penalty assessments.

There’s No Place Like Home: United States Supreme Court Reaffirms Daimler, Sends Out-of-State Plaintiffs Packing In Two Highly Anticipated Cases

The United States Supreme Court has issued two highly-anticipated personal jurisdiction decisions limiting suits against defendants who are not “at home” in a state, or alternatively, did not commit a wrongful act in that state.

Specific Jurisdiction

“General jurisdiction” exists over a defendant only where it is “at home,” generally where it is incorporated or has its principal place of business.  “Specific jurisdiction” exists only when the claims in a lawsuit arises out of a defendant’s connection to the jurisdiction, such as selling products. The Supreme Court reaffirmed these limits on jurisdiction in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, No. 16-466 (June 19, 2017).

Some 678 plaintiffs (592 of whom were out-of-state residents) filed suit in California state court against Bristol-Myers Squibb Company (“BMS”), asserting various state-law claims based on injuries allegedly caused by a BMS drug called Plavix. BMS moved to quash the non-residents’ suits for lack of jurisdiction. BMS was headquartered and incorporated outside California, so there was no general jurisdiction. Despite the fact that the nonresidents had not taken the drug in California, the California Supreme Court held that California courts had “specific jurisdiction to entertain the nonresidents’ claims.”  The United States Supreme Court reversed.

The California Supreme Court had applied a “sliding scale approach to specific jurisdiction,” finding that BMS’s “extensive contacts with California” permitted a “less direct connection between BMS’s forum activities and plaintiffs’ claims than might otherwise be required.” Because the claims of both the resident plaintiffs and non-resident plaintiffs were similar and “based on the same allegedly defective product and the . . . misleading marketing and promotion of that product,” the “less direct connection” requirement as met. Thus, the court reasoned, it had personal jurisdiction over all the claims of all the plaintiffs, even in the absence of any California conduct as to the out-of-state plaintiffs.

The Supreme Court rejected this in no uncertain terms:

“Under the California approach, the strength of the requisite connection between the forum and the specific claims at issue is relaxed if the defendant has extensive forum contacts that are unrelated to those claims. Our cases provide no support for this approach, which resembles a loose and spurious form of general jurisdiction. For specific jurisdiction, a defendant’s general connections with the forum are not enough….What is needed—and what is missing here—is a connection between the forum and the specific claims at issue.”

This is true even if the defendant would suffer minimal or no inconvenience, even if the defendant has extensive contacts with the state, even if the forum had a strong interest in the application of its laws, and even if the forum state were the most convenient location for the litigation. Bristol-Myers should serve to help defendants limit the jurisdictions in which suit may properly be brought, and reduce forum-shopping in mass tort and perhaps other cases.

General Jurisdiction

On the issue of general jurisdiction, BNSF Railway Co. v. Tyrrell, No. 16-405 (May 30, 2017), the Supreme Court made clear that its 2014 ruling in Daimler AG v. Bauman precludes the exercise of general jurisdiction over a non-resident defendant unless that defendant has contacts which are so “continuous and systematic” so as to render that defendant essentially at home in the forum state. Thus, the Court rejected multiple theories on which plaintiff attempted to justify jurisdiction over BNSF in Montana.

First, it ruled that the Federal Employers’ Liability Act (“FELA”), a federal law that allows railroad workers to sue their employers for injuries that occur on the job, does not itself create a special rule authorizing jurisdiction over railroads just because they happen to do business in a particular place. Second, and most notably, the Court held that a Montana law that allows courts in the state to exercise jurisdiction over “persons found” was in violation of the Constitution. That is, even if BNSF conceded that it is “found” in Montana, the Court held that exercising jurisdiction over BNSF must still be consistent with the Due Process clause. Under its earlier decision, the Court explained, BNSF Railway can only be sued in Montana if it is “at home” there – something which normally means that the company is either incorporated in the state or has its principal place of business there.

With neither of those criteria met, the railroad was not so “heavily engaged in activity” in Montana as to present the kind of “exceptional” case in which jurisdiction could exist even outside the company’s state of incorporation and principal place of business. Thus, although BNSF could be sued in Montana for claims that are related to its business in Montana, it could not be sued there for claims that aren’t related to anything it did within the state.

Analysis

The Court’s two defense-friendly decisions on jurisdiction should bode well for defendants challenging jurisdiction, even in cases outside these specific factual contexts. General jurisdiction can only exist where a defendant is actually “at home,” and creative efforts – such as California’s “sliding scale” – will not pass constitutional muster to establish specific jurisdiction without a clear connection, such as a wrongful act, actually occurring in the forum state.

No Jurisdiction Over Out-of-State Defendant Registered to Do Business in Missouri

The Missouri Supreme Court recently held that an out-of-state defendant was not subject to jurisdiction in Missouri simply because it was registered to do business in Missouri and conducted activities there similar to those in other states. This decision reinforces the Missouri judiciary’s recent trend of limiting personal jurisdiction in cases with out-of-state defendants and is consistent with decisions around the country holding that registration does not confer jurisdiction.

In State ex rel. Norfolk Southern Railroad Co. v. The Honorable Collen Dolan, 2017 Mo. LEXIS 66 (Mo. Feb. 28, 2017) the Supreme Court of Missouri dismissed Norfolk Southern Railway Company (“Norfolk”) for lack of personal jurisdiction. The plaintiff brought suit against Norfolk for injuries he sustained while employed in Indiana. Norfolk is principally located and incorporated in Virginia. Norfolk annually complies with Missouri’s foreign business registration statutes by registering with Missouri and designating a registered agent for service of process. Norfolk conducts substantial business and owns property in Missouri. However, Norfolk also operates railroad tracks and conducts substantial business in at least 22 states and its business in Missouri accounts for only 2 percent of its nationwide business activity.

The Missouri Supreme Court determined that Norfolk was subject to neither general nor specific jurisdiction. Under the governing United States Supreme Court decision, Daimler AG v. Bauman,134 S. Ct. 746, 754 (2014), a court can normally exercise general jurisdiction over a corporation only when the corporation’s place of incorporation or its principal place of business is in the forum state. Because Norfolk was not headquartered or incorporated in Missouri, the court evaluated whether Norfolk represented an “exceptional case” where the contacts are so substantial and of such a nature as to render the corporation at home in that State.

Applying Daimler, the Missouri Supreme Court explained that such an exceptional case requires comparing the corporation’s activities in the forum state with its activities in other states through “an appraisal of a corporation’s activities in their entirety, nationwide and worldwide.” Because Norfolk’s business in Missouri constitutes only 2% percent of its total revenue and Norfolk conducts substantial business in 22 other states, the court declined to exert general jurisdiction over Norfolk.

Plaintiff argued, consistent with a multitude of rulings in Missouri’s lower courts, that Norfolk’s registration as a foreign corporation in Missouri equated to its consent to personal jurisdiction in Missouri. The court rejected this argument, holding that a foreign corporation’s business registration in Missouri “does not provide an independent basis for broadening Missouri’s personal jurisdiction to include suits unrelated to the corporation’s activities in Missouri when the usual bases for general jurisdiction are not present.”

The court also rejected multiple theories advanced by plaintiff to support specific jurisdiction over Norfolk. A court has specific jurisdiction if the defendant’s acts took place in the forum state, and here, the plaintiff pleaded no facts alleging the injury arose from Norfolk’s Missouri activities. Further, the Norfolk court found the fact that Norfolk engaged in the same “type” of business in the forum state and the state where the injury occurred irrelevant. A ruling otherwise would render every national corporation subject to specific jurisdiction in every state in which it conducted business regardless of where the injury occurred.

California Court Concludes Sarcastic Comment Sufficient For Punitive Damages

Earlier this month, a California appellate court ruled that an offhand remark by a corporate employee may be sufficient to award punitive damages. The court also addressed issues related to the “every-exposure” theory, without wading directly into the every-exposure debate.

In Phillips v. Honeywell International Inc. (March 17, 2017. Case F070761) — Cal.App.5th –, the court held that the trial court properly admitted a 1966 letter from an employee who was not an officer, director, or managing agent. The letter is well known (described in the opinion as “infamous”) in asbestos litigation as “the E.A. Martin letter,” and is the frequent subject of in limine motions. Martin was a purchasing director, and he was writing to one of his asbestos suppliers, sarcastically addressing an article in Chemical Week magazine: “[I]f you have enjoyed a good life while working with asbestos products why not die from it. There’s got to be some cause.”

The court held that the letter served as circumstantial evidence that the company was aware that asbestos could be a potential health hazard years before it ceased using asbestos, and was sufficient to support an award of $3.5 million in punitive damages (of a total $5.8 million award).

The admittance of the letter has broad implications, suggesting that any stray remark – even a sarcastic expression of confidence in a product ingredient by a corporate employee who was not in the upper echelon – can serve to support a finding of massive punitive damages.

As the California court noted, the same letter has been both admitted and rejected by multiple other courts. For example, an Illinois appellate court pronounced the letter “a revealing historical anecdote that may give us insight into the thinking within the asbestos industry in 1966, but it was irrelevant. A persuasive argument can also be made that even if it had some modest relevance, it was inflammatory, and whatever probative value it had was outweighed by its prejudicial effect.” (Dukes v. Pneumo Abex Corp. (2008) 386 Ill.App.3d 425, 439.)

In an unpublished portion of the decision (meaning it may not be cited as precedent in California, though it may be citable elsewhere), Phillips also addressed the split in authority regarding the “every-exposure” (a.k.a. “no safe dose”) theory versus the “every-identified-exposure” theory in asbestos litigation. Under the every-exposure theory of causation, “every exposure to asbestos fibers is a substantial factor in causing disease, regardless of fiber type or dose, so long as the fibers are traceable to a product and are not merely ‘background’ fibers found in the ambient air.” The same defendant lost a challenge to that theory in Davis v. Honeywell International Inc. (2016) 245 Cal.App.4th 477, and sought to have the Phillips court part ways with Davis. Instead, the Phillips court found that the expert had espoused the subtly different “every-identified-exposure” theory.

In reaching this conclusion, the Phillips court quoted an Ohio decision approvingly: “Although some courts have rejected the ‘each and every exposure’ theory, others have distinguished testimony suggesting a de minimis exposure to asbestos could cause mesothelioma from testimony that each significant exposure to asbestos could be a cause.” The California court found that this theory was “consistent with California law addressing proof of causation in asbestos-related cancer cases,” in that it considered only significant and identifiable exposures in determining the risk of the disease.

St. Louis Jurisdiction Determined As of Now, Not At Time of Exposure Decades Ago

A St. Louis court recently granted a defense motion to dismiss on jurisdictional grounds, which may signal an increased willingness to decline to impose jurisdiction over foreign corporations that do no currently conduct business in Missouri. The court’s analysis measured the corporation’s contacts at the present time, not at the time of exposure decades ago. This ruling is in opposition of the trend of allowing plaintiffs to forum shop in the 22nd Judicial Circuit in the City of St. Louis, which has quadrupled its asbestos-related lawsuits since 2010 and is now the fourth largest asbestos docket in the country.

In McGill v. Conwed, plaintiff allegedly sustained occupational exposure to asbestos while working as a laborer and carpenter in Kansas, Oklahoma, and Missouri from 1966 to 1976. During his deposition, plaintiff testified that his work with Conwed ceiling tiles occurred within Kansas. Conwed is not incorporated or principally located in Missouri. Conwed ceased manufacturing ceiling tiles in 1985.

As a result, Conwed moved to dismiss for lack of personal jurisdiction. Conwed argued that Missouri lacks specific jurisdiction because the claim does not arise out of any conduct within Missouri. Conwed argued that the court lacked general jurisdiction because Conwed ceased manufacturing operations in Missouri in 1985; has not conducted business in Missouri since that time; is not registered to do business in Missouri; has no subsidiary in Missouri; does not have a registered agent in Missouri; and does not own property or advertise in Missouri.

Conwed bolstered its argument with another recent St. Louis case, Smith v. Union Carbide, in which the court granted a motion to dismiss for lack of personal jurisdiction filed by DuPont, a company with greater contacts to Missouri. In that case, the claim emanated from alleged exposure to DuPont in Oklahoma, therefore defeating specific jurisdiction. While DuPont was neither incorporated nor had its principal place of business in Missouri, it had a subsidiary and registered agent in Missouri. Nonetheless, DuPont’s lack of incorporation and principal place of business in Missouri was sufficient for the court to decline to exert general personal jurisdiction.

On January 19, 2017, Judge Joan Moriarty, one of two primary asbestos judges in St. Louis, granted Conwed’s motion to dismiss. Judge Moriarty agreed that no basis existed to assert special jurisdiction because the claim against Conwed did not arise out of exposure to any Conwed product or service in Missouri. Further, Judge Moriarty declined to exert general jurisdiction over Conwed, stating that “Conwed undeniably would have been amenable to suit in Missouri prior to 1985, when it did regular and systematic business in Missouri. But now it has no business in Missouri, and has not for over 30 years.” Because Conwed did not currently have systemic, continuous, and substantial connections with Missouri, there was no general personal jurisdiction. Notably, the court reached its decision without mentioning the United States Supreme Court’s ruling in Daimler AG v. Bauman, the controlling decision on personal jurisdiction.

This ruling has positive ramifications for out-of-state defendants litigating asbestos products liability claims in St. Louis. As Judge Moriarty is one of only two asbestos judges presiding in St. Louis, it can be expected that the decision in McGill v. Conwed will result in an increase in the amount of out-of-state defendants (particularly those who are not currently registered to do business in Missouri) filing and winning personal jurisdiction motions.

Rhode Island Superior Court Finds Limited Discovery Insufficient to Waive Personal Jurisdiction, Reaffirms Importance of Minimum Contacts

Since tgavel scale 01he U.S. Supreme Court’s decision  in Daimler AG v. Bauman (2014) 134 S.Ct. 746, personal jurisdiction has quickly become a critical issue for asbestos defendants nationally. Perhaps because asbestos cases involve dozens of parties from multiple states, and are often commenced in jurisdictions far from where the exposures occurred, personal jurisdiction has quickly become a “first line” defense.  When and how this defense may be employed, however, is evolving, with Rhode Island being one of the most recent jurisdictions to address these issues in Harold Wayne Murray and Janice M. Murray v. 3M Company, et al., C.A. No. PC-16-0151 (R.I. Super October 13, 2016, Alice B. Gibney, J.).

In the wake of  Bazor v. Abex Corporation et al., C.A. No. PC-10-3965 (R.I. Super. May 2, 2016),  the Superior Court of Rhode Island answered the “when and how” questions by issuing an instructive ruling on what a defendant must do to preserve its right to contest jurisdiction.  The court held that a defense counsel’s “active conduct constitute[d] forfeiture of the defense of lack of personal jurisdiction.”  Although the defendant in Bazor forfeited its jurisdictional defense, the court nonetheless analyzed its underlying personal jurisdiction argument, holding that the moving defendant did not have sufficient minimum contacts to exercise specific or general jurisdiction over the defendant or its predecessor.  The court’s analysis therefore addressed two issues: 1) What must a defendant do to preserve a personal jurisdiction defense; and 2) What are the sufficient minimum contacts Rhode Island must have in order do exercise jurisdiction?

First, in regard to preservation of a personal jurisdiction defense, the court clarified its ruling in Bazor.  In Murray, the plaintiff served his complaint on defendant on January 29, 2016.  Defendant acted promptly and filed a motion to dismiss on February 29, 2016.  Though defendant’s counsel participated in four days of depositions prior to filing its motion, the court nonetheless found that defendant’s counsel’s participation in an exigent deposition was insufficient to constitute “forfeiture” of a motion to dismiss based on lack of personal jurisdiction.

Looking to federal jurisprudence for guidance, the court noted that it must examine (1) “any delay in the defendant’s assertion [of the 12(b)(6) defense] and the nature of said delay,” as well as (2) “the nature and extent of a defendant’s conduct prior to raising the motion to dismiss.”  The court further held that the first factor could be met by as little as four months’ delay; but reasoned that the second factor weighed more heavily than the mere passage of time.  The court held that the analysis under the second factor “requires proof that defendant’s conduct was inconsistent with defendant’s assertion that the court lacked personal jurisdiction over them.”  (internal citation and quotation omitted).  The level of participation, therefore, appears to be the deciding factor in cases like Bazor and Murray.  Notably, the court found that “Defendant’s participation in discovery was limited and reasonable,” and defendant’s post-filing participation in an additional eleven (11) deposition days did not amount to forfeiture of the lack of personal jurisdiction defense.  Notwithstanding the above, the court did not establish a “bright line” rule to precisely outline the necessary amount of participation required to forfeit a jurisdictional defense.  At most, the court established “[d]elays as short as four (4) months can constitute forfeiture,” however, one-month delays with limited participation in discovery will not.

Although Murray provides more guidance than Bazor, it is not entirely clear where this decision leaves litigants who want to participate in early discovery.  While the Murray decision assuages some fears that participating in any discovery will result in inadvertent forfeiture of a jurisdictional defense, there remains uncertainty of where on the timetable the line crosses from limited and reasonable discovery to potential forfeiture.  Ultimately, the lesson of Murray may be that the defense counsel should file its motion to dismiss timely; i.e. within one-month after being served.  Thereafter, it appears that defense counsel should limit its participation in discovery and timely pursue adjudication of the motion to dismiss.

The court also ruled on the underlying personal jurisdiction argument.  In doing so, the court addressed whether the defendant had sufficient minimum contacts with the forum enabling it to properly exercise specific or general jurisdiction. See Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014). When faced with the decision as to whether to assert specific jurisdiction over a party, the Rhode Island Supreme Court has employed a two part test:  1) does the cause of action arise out of the defendant’s contacts with Rhode Island; and if so, 2) whether any relationship among the defendant, forum, and the litigation exists.”

In employing this test in Murray, the superior court concluded it did not have a basis to assert specific jurisdiction over the defendant because “the cause of action does not arise out of Defendants’ contacts with Rhode Island.”  Moreover, plaintiff did not reside in Rhode Island and the cause of action was not based on an occurrence in Rhode Island.  Finally, there was no connection between the moving defendant’s Rhode Island based clients and the current cause of action.  Therefore, the court found that it could not assert specific jurisdiction over the defendant.

The court likewise determined that general jurisdiction did not exist.  In making this finding, the court noted that defendant was incorporated in Virginia, with is principal place of business in Ohio; its officers and executive employees were always located solely in Ohio; it has no offices or employees in Rhode Island; and it did not own or lease any property, sell products, nor has it ever registered to conduct business in Rhode Island.  Although the court found that defendant earned approximately one-tenth percent of its total annual net sales from Rhode Island, the totality of the evidence “cannot suggest that [defendant was] virtually at home in the forum state for the purposes of general jurisdiction.”  (internal citation and quotation omitted).

Ultimately, the Murray court’s holding is welcome news for defendants needing to engage in limited discovery to evaluate a motion to dismiss on personal jurisdiction grounds.  In addition, the court made clear that “minimum contacts” means what it says, and a defendant with de minimis sales in the state should not be deemed “at home” there.

 

California Supreme Court Finds Duty in Take Home Exposure Cases

12-5On December 1, 2016, the California Supreme Court ruled that premises owners and employers owed a duty to prevent take-home asbestos exposure to those in an employee’s household. The court declined to carve out an exception to the general duty imposed by California statute (Civ. Code, § 1714) on every person to exercise reasonable care for the safety of others. While the decision does not specifically cover take-home claims against product manufacturers, the rationale of the decision suggests that they too will be subject to take-home liability. Recognizing a duty to bystanders will expand the class of persons who may pursue employers and premises owners for asbestos exposure claims. The court found no inconsistency with its opinion and a number of other jurisdictions that have a “no duty” rule. One  distinguishing fact is that by the time exposure is alleged to have occurred in the 1970’s information and regulations regarding the dangers of take-home exposure would have been generally known to employers and premises owners, as the result of 1972 OSHA regulations and otherwise.

The court’s ruling came in two consolidated companion cases. In Kesner, plaintiff alleged he was exposed to asbestos when he spent an average of three nights per week at his uncle’s house in the 1970’s. His uncle, an employee of Pneumo Abex, LLC (“Abex”), worked in a plant where brake shoes were manufactured with asbestos fibers that were released during the manufacturing process, and it was alleged that the uncle brought the fibers home on his work clothes. Plaintiff was diagnosed with mesothelioma and he sued Abex. The Kesner appellate court reversed Abex’ nonsuit based upon prior California holding (Campbell v. Ford Motor Co.) that the employer had no duty to a bystander. In the companion case Haver, the decedent’s heirs claimed decedent was exposed to asbestos by her former husband, who was allegedly exposed to asbestos from pipe insulation and other tools while employed as a fireman and hostler in the early 1970’s. Decedent was diagnosed with mesothelioma. The Haver appellate court affirmed the trial court’s order sustaining defendant’s demurrer, relying upon Campbell and distinguishing Kesner on the ground that Kesner sounded in negligence whereas the Havers’ claims rested on a premises liability theory.

The Supreme Court held that in both instances, a reasonable employer should have known that asbestos presented risk of harm in the workplace and that it was foreseeable its employees would travel outside the workplace, particularly to their homes. “The relevant intervening conduct here – that workers returned home at the end of the day and, without adequate precautions, would bring asbestos dust home – is entirely foreseeable.” Thus, the exposure was foreseeable and duty attached.

The court did, however, limit the duty to “household” members, and not just anyone with whom a worker might come into contact (e.g. carpools, restaurant workers, or bus passengers). “We hold that an employer’s or property owner’s duty to prevent take-home exposure extends only to members of a worker’s household, i.e., persons who live with the worker and are thus foreseeably in close and sustained contact with the worker over a significant period of time.” The court stopped short of limiting the duty to “immediate family members” and instead applied it to “household members”, an acknowledgement of bonds which may be found in non-traditional and quasi-familial living arrangements. The court also explicitly acknowledged that “… a finding of duty is not a finding of liability. To obtain a judgment, a plaintiff must prove that the defendant breached its duty of ordinary care and that the breach proximately caused the plaintiff’s injury and the defendant may assert defenses and submit contrary evidence on each of these elements.”

Government Contractor Defense Victory in California

A recent California decision describes a set of facts in which the government contractor defense can be successfully applied. Such circumstances have been few and far between.

In Kase v. Metalclad Insulation Corp., the appeal was from an order by San Francisco’s soon-to-be Presiding Judge Teri Jackson granting summary judgment to defendant.

12-2Mr. Kase claimed exposure to asbestos-containing insulation products while working on US Navy nuclear submarines in the 1970’s. The court pointed out that unlike other defendants who have in the past unsuccessfully attempted to assert the defense, Metalclad did not design or produce a piece of hardware or equipment. Instead, Metalclad was a broker of Unibestos. The court finds the government contractor defense was properly asserted for Metalclad while simultaneously acknowledging other decisions that have denied its application for equipment manufacturers. We are left with the predicament wherein a broker who distributes Unibestos can assert the government contractor defense, whereas an equipment manufacturer who has its products insulated with Unibestos cannot. The court notes that the record demonstrated that the Unibestos product at issue was never in the possession of Metalclad. Instead, Metalclad had only arranged for its delivery to the shipyard.

The opinion is lengthy, 28 pages, and includes several points benefitting potential government contractor defendants, including:

  • There is no “off the shelf” limitation to the application of the defense.
  • Products “incidentally sold commercially” may still qualify as military equipment.
  • Insulation specifications required, first explicitly and later impliedly, the use of asbestos. The court ruled that that if only asbestos will fulfill the performance requirements, then it is not necessary that the government specifications explicitly use the word asbestos. “Performance requirements can mandate a design choice, and the uncontroverted evidence is that it did so in this case.”
  • There was no duty to warn as the Navy “was well aware of the potential hazards of asbestos.”
  • Similarly, although this case did not involve “back and forth” negotiations characteristic of other successful government contractor defenses, that not necessary. “We recognize this is not a case involving substantial “back and forth” between a government agency and a contractor designing a unique piece of equipment, such as an aircraft or transport vehicle. [Citations omitted] No case involving that scenario, however, has involved the decades of naval studies and investigations, and the history of naval specifications, unique to the universe of asbestos cases.”
  • Unibestos had asbestos warnings on its insulation products not later than 1968.

While this decision is certainly good news for Metalclad and other similarly situated defendants, other courts may limit it to the specific facts of this case. It seems odd that a company that arranges for the delivery of boxes of Unibestos to the shipyard is protected from liability, while the company that ships its pumps to the same shipyard with comparatively miniscule rings of asbestos containing packing inside their pumps nevertheless is frequently denied the same defense. Perhaps arguing this inconsistency will gain some traction for government contractor equipment manufacturers in the future.

Attorney Fees May Be Awarded in Cost Recovery Actions in New Jersey

11.1Environmental cost recovery actions in New Jersey are typically brought pursuant to the New Jersey Spill Compensation Act, N.J.S.A. 58:10-23.llf, but the Spill Act has no provision for awarding attorneys fees to the prevailing party. The New Jersey Environmental Rights Act (“ERA”), N.J.S.A. 2A:35A-10, provides for attorneys’ and experts’ fees, but an ERA action is only permitted where there is either a continuous or intermittent environmental violation and there is a likelihood that the violation will recur in the future. The ERA was the mechanism for interested parties to act as “private attorneys general” in enforcing environmental laws, including inadequate enforcement of environmental laws by the Department of Environmental Protection. Indeed, the purpose of the ERA was to compel compliance by awarding injunctive or equitable relief. Thus, until recently, ERA was not found to provide for monetary compensation for remediation of property due to past conduct.

In Bradley v. Kovelesky, the current property owner sued prior owners after soil and groundwater contamination was discovered. The claims were not originally made pursuant to the ERA and defendants objected to plaintiffs amending the complaint to assert an ERA claim. To decide whether to allow the amended pleading, the court had to decide whether such a claim would be futile. The appellate court concluded that an ERA claim is not futile because the Brownfield and Contaminated Site Remediation Act, N.J.S.A. 58:10B-1.3, requires that a “person in any way responsible for a hazardous substances … shall remediate the discharge.” Thus, plaintiffs argued that because the prior owner has not and currently is not conducting remediation, it is a continuous violation of the Brownfield Act. Further, if the prior owner’s failure to remediate continues into the future, it will remain in violation of the Brownfield Act. Based on this scenario, the court found a continuous or intermittent violation that is likely to “recur in the future” as required by an ERA lawsuit.

Thus, plaintiffs were permitted to amend their complaint to assert an ERA claim.

ERA contains a powerful tool for a cost recovery plaintiff. “In any action under this act the court may in appropriate cases award to the prevailing party reasonable counsel and expert witness fees, but not to exceed a total of $ 50,000 in an action brought against a local agency or the Department of Environmental Protection, where the prevailing party achieved reasonable success on the merits.”  Let’s see whether this decision gives new life to the ERA. Certainly the threat of attorneys’ fees and experts’ costs are often the motivation for an amicable resolution to cost recovery litigation.

We will watch this case to see whether it is ultimately tried and fees awarded.

Washington Supreme Court Affirms That Expiration of the Statute of Limitations on Personal Injury Claims Bar Subsequent Wrongful Death Action

Gavel and old clockOn October 6, 2016, the Washington Supreme Court held that the expiration of a personal injury claim during the injured party’s lifetime similarly bars any wrongful death action based on the same injury.  Deggs v. Asbestos Corp. Ltd., No. 91969-1, ___ Wn.2d ___ (Oct. 6, 2015).  The Court followed stare decisis to affirm the trial court’s order granting summary judgment for all defendants on grounds that the running of the limitations period on a decedent’s personal injury claim prior to death also operated to bar the personal representative from bringing a claim under the state wrongful death statute.  The Court expressly declined to overrule several prior Washington Supreme cases adopting such a rule.

Background Facts

Decedent Roy Sundberg was exposed to asbestos while working for various employers from 1942 to 1989.  After being diagnosed with multiple diseases, Mr. Sundberg and his wife filed an asbestos lawsuit against numerous defendants in 1999.  In 2001, their claims were tried to verdict in which the jury awarded plaintiffs over $1.5 million in damages.  Respondent Judy Deggs, the Sundbergs’ daughter, did not file her own claim even though Washington recognizes claims for loss of parental consortium.

Mr. Sundberg died in 2010.  In 2012, the Sundbergs’ daughter, as the personal representative of the estate, filed a wrongful death against several new defendants and one holdover defendant from the personal injury action.  The 2012 lawsuit asserted liability for the same injuries and asbestos exposure as the 1999 lawsuit.

In 2013, the trial court granted summary judgment for all defendants on grounds that both the wrongful death action and survival action were barred by the expiration of the statute of limitations on the decedent’s underlying claims against the defendants.  In doing so, the trial relied on Washington Supreme Court precedent holding that while wrongful death actions generally accrue at the time of death, Washington has recognized a “well-recognized limitation” that “there must be a subsisting cause of action in the deceased” at the time of death and that “the action for wrongful death is extinguished” in cases when the deceased either previously released the personal injury claims, obtained a judgment, or failed to “bring an action for injuries within the period of limitation.”  Grant v. Fisher Flouring Mills Co., 181 Wash. 576, 580-81, 44 P.2d 193 (1935); Calhoun v. Washington Veneer Co., 170 Wash. 152, 159-60, 15 P.2d 943 (1932); Johnson v. Ottomeier, 45 Wn.2d 419, 422-23, 275 P.2d 723 (1954).  In 2015, the Washington Court of Appeals affirmed in a 2-1 decision.[1]  Deggs v. Asbestos Corp. Ltd., 188 Wn. App. 495, 354 P.3d 1 (2005).  The Washington Supreme Court granted review.

The Court’s Analysis

In a 5-4 decision, the Washington Supreme Court applied stare decisis and refused to overturn the long-standing precedent establishing that the right to a wrongful death action remained predicated on the deceased having a valid cause of action at the time of death.  The Court first examined the lengthy history of cases like Grant and Calhoun in which it had relied on Lord Campbell’s Act to recognize that various acts or omissions by injured parties during their lifetime may limit or extinguish their heirs from maintaining a subsequent wrongful death action.

While acknowledging that the Court in its present composition may have reached different results if the issue on appeal was a question of first impression, the Court held that the requirements for abandoning stare decisis were not met in this case.  Specifically, the Court concluded that there was no “clear showing” that the prior decisions were harmful.  The Court reasoned that it was not faced with a case where the deceased “was prevented from bringing a personal injury claim within the statute of limitations” before death.  “Instead, we are faced with a case where the deceased knew of the injury, sued, and either settled with or won against all the named defendants.”  Thus, the Court concluded that because the deceased and his heirs had the knowledge and opportunity to bring a personal injury claim against the defendants during his lifetime, there was no clear showing that the prior precedent was harmful.

The Court contrasted the lack of harm to the plaintiffs to the “considerable harm on settled expectations if we were to abandon the rule from Lord Campbell’s Act now” because “[m]any entities that reasonably relied upon our precedent to close the book on potential claims based on the passage of the underlying statute of limitations would now find themselves subject to potential liability based on a court opinions they were not parties to.”  It also distinguished the situation in which the cause of death was not known until after the decedent had passed away because those cases would fall under Washington’s discovery rule, which would effectively toll the statute of limitations on any personal injury claims until after death.

The Court further cited the legislative’s acquiescence in the prior decisions by noting that the legislature had subsequently amended the wrongful death statute several times without changing the statute to supersede the Court’s prior holdings on this issue. Finally, the Court noted that the legal underpinnings for the prior decisions had not changed or disappeared altogether.

The dissent focused on the lack of language in the wrongful death statute expressly conditioning the right to bring a wrongful death claim on the existence of a valid personal injury claim, as well as the perceived unfairness of extinguishing a wrongful death cause of action before it could accrue upon the injured party’s death.

Conclusions

In practical terms, the majority of the Court did not want to undo a long-established rule of law requiring the existence of a valid personal injury cause of action at the time of death in order for a wrongful death action to proceed.  The Court recognized that under such circumstances, there is nothing inherently prejudicial about preventing the heirs from taking a second bite at the apple where the deceased had a full and fair opportunity to bring claims for the same injuries and damages during his or her lifetime. It also should be noted the dissent was unable to articulate how trial courts would be able to set off or segregate settlement amounts and damages awarded in a prior personal injury action from damages sought in the wrongful death action based on the same injuries.  Finally, the Deggs holding should equally apply to prevent a subsequent wrongful death action in cases in which the deceased executed a valid release or obtained a judgment against particular defendants during his or her lifetime.

While Deggs will prevent the resurrection of many old personal injury claims, it is anticipated that the plaintiffs’ bar may seek legislation to amend the wrongful death statute and supersede this ruling.  In other words, stay tuned.

[1] Respondent did not appeal the trial court’s dismissal of the estate’s survivorship claims, as Washington’s survival statute on its face merely preserves existing personal injury claims at the time of death, rather than creating a separate, independent action like the wrongful death statute.  RCW 4.20.046(1); RCW 4.20.060.