More Chemicals (DBAs) Slated for Warnings – But Where Will They Put the Warning Labels?

On November 19, 2014, California’s OEHHA will conduct a meeting to determine whether a group of chemicals known as Dibenzanthracenes (DBAs) should be listed as known  to cause cancer. For those of you not familiar with the OEHHA, it describes its authority and function thusly:

The California Environmental Protection Agency’s Office of Environmental Health Hazard Assessment (OEHHA) is the lead agency for the implementation of the Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65). The Carcinogen Identification Committee (CIC) advises and assists OEHHA in compiling the list of chemicals known to the State to cause cancer as required by Health and Safety Code section 25249.8. The Committee serves as the State’s qualified experts for determining whether a chemical has been clearly shown through scientifically valid testing according to generally accepted principles to cause cancer.

OEHHA’s treatment of DBAs lends some insight into the workings of this agency with far-reaching authority.  It is OEHHA that mandates the use of the ubiquitous “Prop. 65 Warnings” that adorn products and buildings throughout the Golden State.

First, DBAs are five-ring polycyclic aromatic hydrocarbons (PAHs) that contain an anthracene core (three linear benzene rings). DB[a,h]A has been listed by Prop. 65 since 1988.  The same chemical was listed as “probably carcinogenic to humans” by the International Agency for Research on Cancer in 1987.  The National Toxicology Program classified DB[a,h]A as “reasonably anticipated to be a human carcinogen” in its Second Report on Carcinogens in 1981, and the U.S. Environmental Protection Agency listed it as a “probable human carcinogen” based on experimental animal evidence.   But none of these authorities have so listed DB[a,c]A or DB[a,j]A, which OEHHA now proposes to add to its list of carcinogens.

Like many other PAHs, DBAs are produced as products of incomplete combustion or pyrolysis of organic matter (e.g., cigarette and marijuana smoke, gasoline engine exhaust, and industrial emissions such as fuel combustion, coke oven operations, and coal-tar distillation) and during high temperature cooking (e.g., grilling, broiling, roasting, baking, frying).  DBAs are known to be included in the smoke of forest fires and even the campground fires one might use to toast marshmallows.

With the exception of smokers and occupationally exposed workers, most individuals are exposed to PAHs predominately from dietary sources.  DBAs are present in the air (ambient and indoor, in occupational settings and cooking fumes); in water (drinking and fresh); in dried sediments; and in food (fresh and cooked).  OEHHA reports that DBAs are present in cigarette smoke and marijuana smoke, slightly more so in marijuana smoke (0.00115 μg/ tobacco  cigarette; 0.00141 μg/ marijuana cigarette ).

DBAs have been aggressively studied for decades.  OEHHA has a page on its website titled “Evidence on the Carcinogenicity of Dibenzanthracenes,”  which has a section of references covering 10 pages.  Despite that, OEHHA notes that “[n]o data on the long-term effects of human exposure to pure DBAs were identified in the literature search conducted by OEHHA” and that “[n]o epidemiology studies were identified that investigated the risk of cancer associated with exposure specifically to DBAs.”  Nevertheless, relying on animal studies, in vivo studies and mechanistic analyses, OEHHA proposes to list the chemicals found in marijuana smoke, fresh vegetables and forest fire smoke as having been “clearly shown through scientifically valid testing according to generally accepted principles to cause cancer.”

Perhaps such a determination can be justified, but where will they put the warning labels?

PS – At the same November meeting, OEHHA will consider expanding its listing of N- nitrosomethyl-n-alkylamines (NMAs).  According to OEHHA, NMAs have been detected in personal care products, such as shampoos and conditioners, and household cleaning products, such as dishwashing liquids and surface cleaners. NMAs are not intentionally added to these products, but may form as a result of the reaction of nitrite with amine compounds.  However, the challenge as to locating warning labels on these products is perhaps somewhat lesser than that relating to DBAs.

The public has until October 13 to comment on two hazard identification documents: “Evidence on the Carcinogenicity of Dibenzanthracenes” and “Evidence on the Carcinogenicity of N-Nitrosomethyl-n-alkylamines.”

$2.8 Million Mesothelioma Verdict Reversed in Part Due to Dr. Barry Castleman’s Prejudicial Trial Testimony

On July 24, 2014, the Supreme Court of Delaware reversed and remanded a $2.8 million jury verdict in a mesothelioma case because the plaintiff’s expert, Dr. Barry Castleman, called the defendant a liar and accused it of bribery in front of the jury.

The plaintiff alleged that defendant R.T. Vanderbilt Company, Inc. sold industrial talc to the decedent’s employer, Borg Warner, and that the decedent was exposed to asbestos contained in the talc during the manufacture of ceramic bathroom fixtures.

At trial, Vanderbilt denied that the talc contained actual asbestos (as opposed to asbestiform minerals) or that it caused mesothelioma.  Vanderbilt also argued that Borg Warner breached the standard of care because it failed to operate the facility in a safe manner for its employees.  During trial, three of the plaintiff’s witnesses made inflammatory and prejudicial statements against Vanderbilt.  On appeal the court found the statements made by Dr. Castleman egregious enough to order a new trial.

At trial, Dr. Castleman testified that Vanderbilt’s employees were “liars” and Vanderbilt had spent millions of dollars bribing public officials to obtain favorable reports and undermine government regulatory action. The trial court advised the jury to “disregard the statement about buying senators and governors,” but gave no curative instruction about Vanderbilt’s alleged dishonesty.  The court did express concern, however, whether “any amount of curative instructions would erase [the statements] from the minds of the jury.”

The Supreme Court reversed the jury’s verdict finding that 1) the trial court abused its discretion when it denied Vanderbilt’s motion for a new trial based on the inflammatory and prejudicial statements made by Dr. Castleman and 2) the trial court erred when it failed to instruct the jury on the duty of care of the decedent’s employer.  The court noted that Dr. Castleman’s comments went to the heart of the defense by impermissibly challenging Vanderbilt’s character, credibility and motivations. The court also found that the admonition to the jury to disregard the bribery statement was insufficient to mitigate the prejudice resulting from the testimony.  Finally, the court expressed concern that Dr. Castleman’s statements appeared to have been intentionally made on cross-examination, without regard to the questions asked.

This decision provides persuasive grounds to limit Dr. Castleman’s testimony at future trials and depositions.  Defense counsel should consider citing this decision in motions in limine to pre-empt experts’ potential inflammatory and prejudicial testimony. Defense counsel also should vigilantly object to improper conduct at trial and not hesitate to move for a new trial based on a witness’ prejudicial testimony and/or a trial court’s inadequate curative instructions to the jury.  Finally, defense counsel need to be diligent to ensure that the record is clear about which instructions were proposed and promptly object if any of those instructions are omitted during the jury’s charge.

MDL Court Rules That Work on Two Pumps Not a Substantial Factor

Substantial factor?  I know it when I see it.

Many of us have struggled for quite some time in reaching a consensus on what level of exposure does, and does not, constitute a “substantial factor” when assessing causation of an asbestos-related disease.  In a recent order on a motion for summary judgment, Judge Eduardo Robreno of the asbestos MDL, applying maritime law, weighed in on the issue.  His decision gives additional guidance, if it does not end the discussion.

The case involved a former U.S. Navy sailor who testified to exposure to original asbestos-containing gaskets and packing used with two pumps found on the virtually new USS Downes.  Even while accepting that evidence as accurate, Judge Robreno granted the MSJ by determining this was a “mere minimal exposure” as described in Lindstrom v. A-C Prod. Liab. Trust, 424 F. 3d 488 at 492. Judge Robreno stated:

Although there is evidence that Plaintiff was exposed to respirable dust from the original gasket and packing used with a single Buffalo electric fire pump, and the original gasket used with a single Buffalo evaporator pump —-, maritime law requires more than a “mere minimal exposure” to support a finding of causation. (Citation omitted.)  As such, no reasonable jury could conclude from the evidence that Decedent was exposed to asbestos from a product manufactured and/or supplied by Defendant such that it was a substantial factor in the development of his illness.

Other courts have likewise relied upon Lindstrom to reject claims that minimal exposures constituted a substantial factor.  The Sixth Circuit expressed the sentiment memorably in Moeller v. Garlock Sealing Technologies, 660 F.3d 950 at 955 (6th Cir. 2011):

On the basis of the record, saying that exposure to Garlock gaskets was a substantial cause of [plaintiff’s] mesothelioma would be akin to saying that one who pours a bucket of water into the ocean has substantially contributed to the ocean’s volume.

From a defense prospective, this order from Judge Robreno compares favorably with other attempts to define a substantial factor.  In California, for example, we must deal with the language of Jones v. John Crane, Inc., 35 Cal. Rptr. 3d 144 (2005).  In Jones, John Crane argued that the exposures attributable to its products were comparable to ambient levels of asbestos in the community at large, and paled in comparison to the plaintiffs’ other exposures (10 fiber hours, or .005 fiber years, compared to an estimated 200 fiber years of exposure to asbestos-containing insulation and 2.8 fiber years from ambient exposures). Plaintiff experts challenged the defense calculations and offered expert testimony that every exposure contributed to the risk.  The court ruled against the defense: “[A] level of exposure that is the equivalent of that to which one might be exposed in the ambient air over a lifetime is not necessarily insignificant.”

While the order from Judge Robreno gives us at least one example of what does not constitute a substantial factor, it provides scant guidance as to how to assess future cases.  Nevertheless, at least when maritime law is applied, it is reassuring to know that there are some acknowledged exposure scenarios that do not qualify as substantial factors.

Alameda Judge Enforces “No-PID” Stipulation Against Plaintiffs

On August 15, 2014, Alameda Superior Court Asbestos Coordination Judge Jo-Lynne Q. Lee enforced a “no-PID” stipulation that a plaintiff spouse would not provide product identification (PID) testimony, and sanctioned plaintiffs’ counsel for trying to un-do the stipulation.

Plaintiffs’ counsel stipulated at Mr. Leeper’s deposition that Mrs. Leeper would not provide product identification testimony.  In exchange, the defendants agreed not to seek to continue the trial date (advanced due to Mr. Leeper’s health) based on the fact that Mrs. Leeper’s deposition was delayed.  At Mrs. Leeper’s deposition months later (and only two months before trial), plaintiffs’ counsel sought to withdraw the prior no-PID stipulation because Mrs. Leeper recalled four specific, separate products affecting five defendants. The defense objected and moved for a protective order. Judge Lee ordered that Mrs. Leeper not be allowed to give product identification testimony.

The stipulation … was freely entered into by Plaintiffs’ counsel, on behalf of Plaintiffs, and it is an enforceable waiver of the right of [Mrs. Leeper] to offer product identification testimony.  [Citation omitted.] Plaintiffs do not argue that there are grounds for rescinding the stipulation, they provide no evidence that would justify that relief; they merely offer counsel’s representations that counsel entered into the stipulation “in good faith.”

The court recognized that the “obvious and severe prejudice to the defendants affected.” “Defendants have relied upon the stipulation in conducting discovery, preparing witnesses, and generally preparing a defense at trial.”  The court also awarded $1,800 in sanctions against plaintiffs’ counsel.

Attached are the moving papers, the plaintiffs’ opposition, and Judge Lee’s order.  The defendant’s counsel waived reply.

Given this recent order, will plaintiffs’ counsel refrain from entering into future no-PID stipulations?  That remains to be seen, but this order is a welcome recognition that such stipulations should be enforced.

Wisconsin Gubernatorial Candidate Supporting Repeal of Wisconsin’s Asbestos Bankruptcy Trust Transparency Act

Wisconsin gubernatorial candidate Mary Burke has announced that, if she translates last week’s primary victory into a general election victory this fall, she will repeal Act 154, Wisconsin’s new asbestos bankruptcy trust transparency law. Burke supports the proposed Assembly bill to repeal Act 154, which was signed by Wisconsin Gov. Scott Walker in March 2014.  More than 100,000 Wisconsin veterans and various lobbyists opposed the enactment of Act 154, and apparently the fight is not yet over.

Act 154, which applies to lawsuits filed on or after March 29, 2014, requires asbestos plaintiffs to disclose all potential and pending asbestos trust claims via sworn statements, and sets guidelines for the substance and effects of the required disclosure.  The plaintiff’s sworn statement must include “the name, address, and contact information for the asbestos trust, the amount claimed by the plaintiff, the date that the plaintiff filed the claim, the disposition of the claim and whether there has been a request to defer, delay, suspend, or toll the claim against the asbestos trust.”

To enhance transparency, the Act allows this information to be used in court:  “Trust claims materials and trust governance documents are admissible in evidence.  No claims of privilege apply to trust claims materials or trust governance documents.”  The Act broadly defines “trust claims materials” as all documents and information relevant or related to a pending or potential claim against an asbestos trust. These materials include claims forms and supplementary materials, proofs of claim, affidavits, depositions and trial testimony, work history, and medical and health records.  The plaintiff is obligated to supplement the information and materials provided within 30 days after filing an additional claim or receiving additional information or documents related to any asbestos trust claim.

In addition, under the Act, the defendants may identify additional asbestos bankruptcy trusts that the defendants reasonably believe the plaintiff should file claims with, even if these trusts are not identified by the plaintiff.  Upon motion of the defendants with supporting documentation, the court may order the plaintiff to file claims against defense-identified asbestos trusts.

Further, the Act provides that trust documents may be used at trial “to support a jury finding that the plaintiff may have been exposed to products for which the trust was established to provide compensation and that such exposure may be a substantial factor in causing the plaintiff’s injury that is at issue in the action.”

The Act also governs trial verdicts and the plaintiff’s ability to collect damages.  For a verdict where the defendant is negligent, the plaintiff may not collect any amount of damages until after the plaintiff assigns to the defendant all rights and claims against asbestos trusts.

Wisconsin’s Act 154 is thus a model for increased transparency between the bankruptcy and civil systems.  That it faces possible repeal threatens that transparency, without providing any fairer compensation to injured workers.

To read more about asbestos bankruptcy trusts, see prior posts on this blog:

$17.7 Million Verdict in Los Angeles Smoking Lung Cancer Case

On July 30, a Los Angeles County jury found that Lorillard Tobacco Co.’s cigarettes contributed to the 1998 death from lung cancer of smoker William “Earl” Major. The jury reportedly deliberated for about a day before finding in favor of Major’s widow, Tajie Major.

In a 12-0 decision in Major v. Lorillard Tobacco Co., the jury found Major had damages totaling $17,736,700. The jury reportedly apportioned liability 17 percent to Lorillard, 50 percent to Major and 33 percent to cigarettes he smoked that were made by other manufacturers. The trial judge was the Honorable Amy Hogue. Plaintiff’s counsel was Gilbert Purcell of Brayton Purcell.

Tajie Major filed her product liability/negligence complaint in November 2011. She said her husband smoked Kent, as well as Marlboro and Winston, which were made by Philip Morris USA Inc. and R.J. Reynolds Tobacco Co., respectively. Two other tobacco companies were sued along with Lorillard, but Major’s claims against them were dismissed before trial.

This case is particularly interesting because the Brayton Purcell firm is best known for its work in the asbestos litigation; its past claims against Lorillard have focused on its asbestos liabilities, as Lorillard used asbestos in the “micronite filter” of its Kent brand of cigarettes in the 1950s.  In fact, before bringing this tobacco action, the Brayton firm previously filed an asbestos-related complaint in San Francisco Superior Court in 1999 on Mrs. Major’s behalf, arguing that asbestos was the cause of her husband’s disease, and named Lorillard, R.J. Reynolds and Philip Morris in that lawsuit.

This case represents a clear change in direction by the Brayton firm, and it remains to be seen whether Brayton’s success may inspire other traditional asbestos plaintiffs’ firms to enter the tobacco litigation.  The number of lung cancer cases being filed in recent times is increasing.

Will the Government Contractor Defense Go Before the Supreme Court?

Counsel for Hawaii asbestos plaintiffs has asked the U.S. Supreme Court to review a decision finding a “colorable” government contractor defense in favor of vendors selling equipment to the military (see attached petition for writ of certiorari).  In an April 25 opinion, Judge Paul Watford writing for the 9th Circuit, affirmed rulings by Judges Leslie Kobayashi and J. Michael Seabright of the U.S. District Court for the District of Hawaii denying motions to remand. Leite v. Crane Co., 749 F. 3d 1117 (9th Cir. 2014).

In the two cases, the defendants – suppliers of products to be used on U.S. Navy warships – had removed the actions from the Hawaii state court to federal court, arguing that they would be able to rely upon  the “government contractor” defense to defeat failure to warn claims.  Plaintiffs’ counsel Galiher DeRobertis Ono brought motions to remand arguing that the defendants could not present a “colorable” federal defense.  The judges of the district court found that the defendants had made a showing of a “colorable” defense by presenting evidence including affidavits from expert witnesses, and the 9th Circuit agreed.

Importantly, the removing defendants, to sustain their burden to defeat a motion to remand, need only show a “colorable” defense.  As the 9th Circuit stated, at this stage, the removing defendant “doesn’t have to prove that its government contractor defense is in fact meritorious, and we express no view on whether it is.” The 9th Circuit drew an analogy comparing the standard to be applied to the evidence submitted by the removing defendant, with the standard to be applied to the evidence submitted by a plaintiff when a defendant challenges subject matter jurisdiction relying upon Fed. R. Civ. P. 8(a)(1).

The petition focuses on the contention that it was inappropriate for the district court to rely upon expert affidavits to interpret or construe government specifications dealing with the obligations of vendors to provide warnings when selling equipment to the Navy.  While this relatively narrow issue does not truly address the central principles of the government contractor defense, it is possible that if the petition is granted and the decision is reviewed, the Supreme Court may consider more broadly the application of the defense in such settings. Any decision in this area could preserve, or otherwise impact, the ability of defendants across the land to avail themselves of removal to place their cases in the district court. Watch this blog for further developments on this petition.

Madison County, Illinois: Open for Business to Plaintiffs From Everywhere

Madison County, Illinois, has long been a favored jurisdiction for plaintiffs to file asbestos cases, regardless of where they reside or where their exposure occurred.  This trend has accelerated over the past three years, with thousands of asbestos filings there each year.

Recently, new firms have begun filing there, encouraged by the prospects of favorable juries and favorable damages law.  For example, Madison County set a record last year with 1,678 new asbestos case filings, more than any other jurisdiction in the nation, a 42 percent increase in filings since 2010.  In the first quarter of 2014, out-of-state plaintiffs’ firms filed a majority of the new cases, a shift from 2010 when local firms held the majority.  Recently, when Judge Stephen A. Stobbs denied four forum non conveniens motions to dismiss, Madison County sent the message – loud and clear – that it is open for business and welcomes new filings from out of state.

Defendants in four different cases moved for dismissal based on forum non conveniens by arguing that Madison County was an inconvenient venue for the parties.  Beacher (Brown) v. American Biltrite Co. (Case No. 12-L-1392); Warden v. Caterpillar, Inc. (Case No. 12-L-1065); Murphy v. CBS Corp. (Case No. 12-L-1141); and Hunt (Munsey-Hunt) v. 84 Lumber Co. (Case No. 12-L-1140).  Under Illinois Supreme Court Rule 187(c)(2), a court that has jurisdiction over the parties and the subject matter involved “may nevertheless decline jurisdiction of a case when it is apparent that trial in another forum with jurisdiction over the parties would be more convenient and better serve the ends of justice.”  Berbig v. Sears Roebuck & Co. Inc., et al., 378 Ill. App. 3d 185, 188 (1st Dist. 2007) quoting Vinson v. Allstate, 144 Ill. 2d 306, 311 (1991); see Il. S. Ct. R. 187.

Each of the four motions was predicated on similar facts: (1) none of the plaintiffs lived in Illinois, let alone Madison County, and (2) none of the plaintiffs ever worked in Illinois, let alone Madison County.  While venue was proper based on the presence of a Madison County defendant, the defendants argued that Madison County was inconvenient for all the parties and the witnesses involved, and the cases should be dismissed.

Despite the obvious lack of connection to Illinois, Stobbs denied all four motions.  Stobbs insisted that for defendants to meet their burdens under the motion, they must demonstrate which court would be the appropriate court to try the cases, whether such court would have jurisdiction and venue over all parties to the case, and whether this court would be more convenient to all parties to the litigation.  Stobbs found that the defendants’ motions failed to adequately address which forum would be more convenient and how that forum would be more convenient to each and every party. The defendants argued that the standard is almost impossible to show when a plaintiff sues dozens or hundreds of defendants at a time (standard in asbestos cases), and essentially makes the forum non conveniens doctrine a dead letter in Madison County asbestos cases.

These rulings herald that Madison County is “open for business” to asbestos plaintiffs, regardless of where the operative events took place.  This is all the more concerning given that numerous out-of-state firms have recently filed in Madison County for the first time, and its asbestos docket has substantially increased over the past three years.  As the West Coast becomes less attractive to plaintiffs because of legal developments in those jurisdictions, these decisions clearly solidify Madison County’s reputation as a venue of choice for plaintiffs nationwide.

Three of the four decisions are being appealed.  In their appeals, the defendants argue that Stobbs abused his discretion in denying the forum non conveniens motions in cases that have absolutely no connection to Illinois.  The defendants maintain that these cases should be tried in the most appropriate forum, the one with the most connections to the case.

The defendants also cite staggering statistics to support their argument that sustaining Stobbs’ denials would render the forum non conveniens doctrine virtually useless in Madison County.  The defendants use the firm of Napoli, Bern, Ripka, Shkolnik, which represents these plaintiffs, as an example.  The firm’s filings rose from 343 in 2012 to 548 in 2013, making it the top asbestos filer in the county.  Napoli also files a majority of the lung cancer cases in Madison County, which is particularly concerning because lung cancer is most often caused by smoking and non-asbestos-related causes.  The defendants argue that if Madison County opens its arms to lung cancer cases from around the country, most of which will have no ties to Illinois, then those filings will “overwhelm the docket, swamp the court and crowd out court resources that would otherwise be available to actual Madison County residents.”

As the Illinois Court of Appeals decides whether to overturn Stobbs’ decisions, Madison County will remain “open for business” for plaintiffs all around the country.  Regardless of whether those plaintiffs have stepped foot inside the state, worked for an Illinois company, or  come close to a product manufactured by an Illinois business, for now, they are welcomed with open arms in Madison County.

California Court Rules: No Jurisdiction Over Foreign Parent Corporations

This week in Young v. Daimler AG, the California Court of Appeal held that there is no general personal jurisdiction over foreign companies in California whose only “connections” to the state are the activities of its legally separate but wholly owned subsidiaries. This is the first appellate case in California applying the U.S. Supreme Court’s January 2014 decision on this issue, Daimler AG v. Bauman (2014) 134 S.Ct. 746.

Young is particularly significant because it abrogates an entire theory of general jurisdiction law in California — the “representative services doctrine” — and gives out-of-state and foreign defendants welcome protection from lawsuits in California, even if they have in-state subsidiaries doing substantial business. It is important to note that this case did not involve any other theory of jurisdiction, such as an “alter ego”-type of theory holding a foreign parent subject to jurisdiction in California, where its corporate formality-ignoring subsidiary operates.

The representative services doctrine, set forth in Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, held that general personal jurisdiction could be asserted over a foreign defendant if its in-state subsidiary performed “a function that is compatible with, and assists the parent in pursuit of, the parent’s own business.” In other words: “[I]f a parent uses a subsidiary to do what it otherwise would have done itself, it has purposely availed itself of the privilege of doing business in the forum. Jurisdiction over the parent is therefore proper.” This may describe many foreign parent-domestic subsidiary relationships, but the U.S. Supreme Court held in Bauman that it does not confer personal jurisdiction, and Young agrees.

This is not the only such case before the Court of Appeal on this very issue — Daimler AG v. Superior Court (Pierson) is scheduled for oral argument on August 18, 2014. Young and Pierson involve the same question, arising out of the same fact pattern: May a California state court exercise general personal jurisdiction over a foreign company, solely due to the in-state activities of its subsidiaries? Young, applying the U.S. Supreme Court’s Bauman decision, answered “no.” The California Supreme Court unanimously ordered in March 2014 that the Pierson plaintiffs show cause why service of summons on Daimler should not be quashed in light of Bauman. Pierson is before a different Court of Appeal district (the Third, in Sacramento) than was Young (the First, in San Francisco), but Pierson is likely to be decided the same way.

Young and Pierson are product liability cases involving Jeep vehicles manufactured by DaimlerChrysler before Chrysler’s split from Daimler AG and bankruptcy. Both plaintiffs pursued their claims against Daimler AG as the ultimate parent of DaimlerChrysler at the time the vehicles in question were manufactured.

In Young, the plaintiffsasked the court to apply the Ninth Circuit’s then-current decision in Bauman v. DaimlerChrysler Corp. (2011) 644 F.3d 909, which held that general jurisdiction over Daimler AG was appropriate in California because of the extensive activities of its indirect subsidiary Mercedes-Benz USA. This case cited the representative services doctrine as the source of its holding, that is, Mercedes-Benz USA’s activities in California were so important to Daimler AG that general jurisdiction over Daimler AG was appropriate.

In reversing the Ninth Circuit, the U.S. Supreme Court held in Bauman that the representative services doctrine “rested primarily on [the] observation that [American subsidiary] MBUSA’s services were ‘important’ to Daimler, as gauged by Daimler’s hypothetical readiness to perform those services itself if MBUSA did not exist. Formulated this way, the inquiry into importance stacks the deck, for it will always yield a pro-jurisdiction answer[.] . . . The Ninth Circuit’s agency theory thus appears to subject foreign corporations to general jurisdiction whenever they have an in-state subsidiary or affiliate, an outcome that would sweep beyond even the ‘sprawling view of general jurisdiction’ we rejected in” other cases.

Applying Bauman, Young affirmed the trial court’s grant of Daimler AG’s motion to quash service of summons and agreed that because Daimler AG itself did not do business in California, there was no general personal jurisdiction: “In our view, appellant’s argument impermissibly ‘elide[s] the essential difference between case-specific and all-purpose (general) jurisdiction. . . . Indeed, the test endorsed in Bauman . . . whether a foreign defendant is ‘essentially at home in the forum state’—focuses on the defendant’s significant corporate presence in the forum.”

Young recognized that this means the representative services doctrine is essentially dead: “While the Bauman II Court questioned the formulation and application of the Ninth Circuit’s agency test [the representative services doctrine], in the end it assumed agency and still concluded that MBUSA’s California contacts were insufficient to confer general jurisdiction in California.” This is hugely important to multistate and international businesses. Such defendants cannot be sued in California, even if their subsidiaries do substantial business in California. Young is a clear rejection of the representative services doctrine and the opinion did not limit the application of its decision to the particular facts of the case before it.

Out-of-state and foreign businesses participating in California’s economy through subsidiaries are common. Such businesses must remain careful to ensure that their subsidiaries observe corporate formalities and remain legally separate. Overall, however, Young brings California general jurisdiction law in line with U.S. Supreme Court precedent and will make establishing jurisdiction over out-of-state and foreign defendants significantly more difficult in the future.

California Decision Requires Product Identification Proof, But Nixes Sophisticated User Again

A California Court of Appeal recently issued an interesting decision affirming summary judgments for two asbestos defendants on product identification grounds, but reversing a summary judgment that had been awarded to a third defendant on “sophisticated user” grounds.

Collin v. CalPortland Co. (C063875, C065180, certified for publication July 30, 2014) affirmed summary judgment for CalPortland. The company sold two cements during the same time period: one called plastic cement that did not contain asbestos, and a second product called Colton gun plastic cement that did contain asbestos. Both were packaged and used similarly, the only difference being the one with asbestos was labeled Colton gun plastic cement. The plaintiff argued that even though he couldn’t recall the word “gun” on the packaging, the similarities between the two products were sufficient to raise an issue of fact. The court said this was speculative, rejecting the plaintiff’s product similarity argument. “Plaintiff does not claim that further discovery may produce evidence of exposure to Colton gun plastic cement, as opposed to the asbestos-free plastic cement. … [¶] Although a party may rely on reasonable inferences drawn from direct and circumstantial evidence to satisfy its burden on summary judgment, we do not draw inferences from thin air.”

Collin also affirmed summary judgment for Kaiser Gypsum. The plaintiff testified he saw Kaiser Gypsum pre-mixed joint compound at construction sites from the 1950s to 1995, but could not pinpoint any particular year. Kaiser submitted evidence that it started selling asbestos containing pre-mixed joint compound in 1959, began selling an asbestos-free joint compound in 1974, and stopped selling products with asbestos by early 1976. The plaintiff argued that based on probabilities, there was a greater than 50 percent chance that the joint compound he encountered contained asbestos, since Kaiser Gypsum used asbestos for the first 17 years of his work history (1959-1974) and asbestos-free only for a couple of years thereafter. Collin said this was speculative and rejected the plaintiff’s probability argument.

Collin reversed the grant of summary judgment to J-M Manufacturing Co. and Formosa Plastics Corporation USA (alleged alter egos and makers of Transite pipe). These defendants argued that the plaintiff was a sophisticated user because he owned two construction businesses; had obtained information from the Contractors State License Board that working with asbestos products could be hazardous; and from 1976-1980, he saw notices specific for asbestos posted at job sites. Collin found this insufficient to bar liability under the sophisticated user defense. Unlike the HVAC technician in Johnson v. American Standard, there was no evidence that the plaintiff had specialized knowledge or training with regard to Transite pipe, or ever read a material safety data sheet (MSDS) concerning Transite. There was no expert testimony that the plaintiff should have known of the dangers associated with Transite pipe, nor did the plaintiff recall ever seeing any warnings about the dangers of asbestos on any Transite pipe.

This is a hopeful decision on product identification grounds, and another in a series of California cases finding the sophisticated user defense inapplicable. It came from the Court of Appeal, Third Appellate District (Sacramento), which is a less frequent venue for asbestos cases than the First (San Francisco) and Second (Los Angeles) Districts.