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.

No Duty to Prevent Take Home Exposure in Arizona

The Arizona Court of Appeals has held in a case of first impression that an employer has no duty of care to protect family members from asbestos taken home on an employee’s work clothes. Quiroz v. ALCOA Inc., et al., No. 1 CA–CV 15–0083 (9/20/2016).

Background Facts

laundryDr. Ernest V. Quiroz was allegedly exposed during his childhood to asbestos brought home on his father’s work clothes from the Reynolds Metals extrusion plant in Phoenix. Dr. Quiroz left the family home at age 14 to attend seminary high
school in Los Angeles. He gave up plans for the priesthood after meeting the girl he would marry, and instead attended college in Los Angeles and medical school in Michigan before entering practice in Grand Rapids in the 1980s. Dr. Quiroz was diagnosed with mesothelioma in 2013, and died the following year at age 62. Dr. Quiroz testified in his deposition that he never entered the Reynolds Metals extrusion plant, and acknowledged that his only asbestos exposure related to Reynolds Metals would have been from his father’s work clothes. The trial court granted Reynolds Metals’ summary judgment motion based on the lack of duty under Arizona law to an employee’s family members. Plaintiffs timely appealed.

The Court’s Analysis

Dr. Quiroz was a very sympathetic claimant – potential priest, respected doctor, lay leader of his church, devoted husband and father with five children and six grandchildren – and absolutely no occupational or para-occupational exposure. His family and counsel, Waters Kraus & Paul, sought to use this case to extend liability for take-home exposure beyond the limited number of states that have recognized the claim. Acknowledging that there was no “special relationship” between Reynolds Metals and Dr. Quiroz, plaintiffs argued that premises owners such as Reynolds Metals had a duty to protect persons from hazards which foreseeably left their premises based on three main grounds: (1) Restatement (Third) of Torts §7 (imposing a general duty of reasonable care on all persons), (2) Restatement (Third) of Torts §54 (imposing a duty of care on possessors of land “for artificial conditions or conduct on the land that poses a risk of physical harm to persons or property not on the land”), and (3) “public policy.”

The Court of Appeals rejected each of plaintiffs’ arguments and affirmed the trial court’s grant of summary judgment. Consistent with the common law around the country, the existence of a duty of care is a pre-requisite for a negligence claim in Arizona. However, the Arizona Supreme Court has steadfastly rejected any consideration of foreseeability in determining the existence of a duty of care. The Quiroz court noted that Arizona had previously declined to adopt any general duty of care such as that in Restatement (Third) of Torts §§7 and 54, and it declined to do so here as well, explaining that doing so would:

substantially change Arizona’s longstanding conceptual approach to negligence law by effectively eliminating duty as one of the required elements of a negligence action. . . . The Third Restatement approach significantly lessens the role of the court as a legal arbiter of whether society should recognize the existence of a duty in particular categories of cases; for this reason, adopting the Third Restatement would increase the expense of litigation.

The court further declined plaintiffs’ invitation to either follow Restatement (Second) of Torts § 371 (imposing on a possessor of land liability for physical harm to others outside of the land caused by an activity thereon which he realizes or should realize will involve an unreasonable risk of physical harm) or to recognize a duty on the part of Reynolds Metals as a landowner to Dr. Quiroz, because those theories do – but Arizona does not – consider foreseeability in determining whether a duty of care exists.

Quiroz also rejected plaintiffs’ argument that public policy supported imposing a duty of care, in part because plaintiffs offered no statutory or common law basis for the public policy beyond the Restatement sections discussed (and rejected) above. The court also rebuffed Plaintiff’s argument that “any property owner could reasonably expect that a lack of due care in handling toxins on its premises, resulting in off-premises injury, could lead to liability,” which the court saw this as putting the cart before the horse: “A finding of a duty of care must come before considering whether Reynolds exercised due care.” The court further questioned where the dividing line would be if claims by person off-premises were permitted – would they be limited to family members with regular exposure, or could claims be brought by persons with more tangential alleged exposure, and would such an expansion result in unlimited or insurer-like liability? As Quiroz explained, other states around the country which, like Arizona, do not employ foreseeability in their duty analysis have all rejected claims based on take-home exposure for these and other reasons. Because there was no basis under Arizona law for any duty of care on the part of Reynolds Metals to Dr. Quiroz, no negligence claim could be stated and summary judgment was correctly granted.

Although the Arizona Supreme Court has repeatedly addressed the lack of any role of foreseeability in determining the existence of a duty under Arizona law, we anticipate that Plaintiffs will seek review of the Court of Appeals decision here.

After “Roundup” of Evidence, EPA finds Glyphosphate “Not Likely to be Carcinogenic to Humans”

croppyEarlier this month, the EPA issued a position paper regarding the risks of glyphosate.  Notably, in classifying glyphosate’s cancer risk to humans, the EPA states, “The strongest support is for ‘not likely to be carcinogenic to humans’ at doses relevant to human health risk assessment.”

Although the EPA report is not dispositive on the issue and will be followed by with a “final assessment” in early 2017, it is a positive development.  The FIFRA Scientific Advisory Panel of the EPA, much like the European Food Safety Authority, is not accepting the recent IARC position that glyphosate is “probably” carcinogenic to humans.  Consequently, causation in litigation involving glyphosate will remain a challenge for plaintiffs’ firms to establish.

Since the IARC position was issued in 2015, plaintiff’s firms have filed a number of lawsuits in California, Illinois, and New York against Monsanto.  In late July, one plaintiffs’ firm filed a motion requesting that the multidistrict panel be in the U.S. District Court for the Southern District of Illinois, where three lawsuits are pending. In total, 21 lawsuits have been filed in 14 district courts nationwide naming Monsanto only.  The parties expect a ruling this fall on whether the matters against Monsanto will be consolidated.

Mediation Practice in the Southern District of New York

Over the past 25 years, the use of mediation by courts and litigants has mushroomed. One might well ask whether efforts at establishing mediation norms and standards have been able to keep up with this growth spurt in mediation’s broad acceptance and popularity. There are multiple forums for conducting ADR. Some “mediations” involve little more than counsel, either with or without their clients present, sitting down before an adjuster” in a no frills attempt to bridge the parties’“bid” and “ask”. Other mediators will talk to the parties, either together or separately, for a couple of hours and then, in the absence of a quick agreement, call it quits. Unless counsel is familiar with the practice of a particular mediator or mediation provider, it may be a challenge to correctly forecast for the client what will take place during the mediation session and what, if anything, may be demanded of them.

There are no widely accepted guidelines concerning the qualifications to be a mediator. A retired professional wrestling referee with no formal mediation training could probably hang out a “mediation” shingle at a store front. At least, in that instance, parties could be assured that this mediator would not tolerate hitting below the belt. Hopefully, counsel will have performed diligence concerning the background, qualifications and methodology of the mediator selected. This research should assist counsel in explaining to the client who the mediator is and what his or her qualifications are.

9-16Although some mediators have no doubt engaged in blatant conflict of interest, coercive behavior or outright fraud, these incidents are thankfully infrequent. In a mediation proceeding in which a client is represented by counsel, counsel can simply terminate an improper or abusive mediation by walking out with the client. However, this is probably not what the nervous client wants to hear from the lawyer before the mediation begins.

A Boston University Law Review article by Professor Michael Moffitt, titled “Suing Mediators” [Vol. 83:147, 154 (2003)] observes that “a clear standard of practice for mediators is difficult to identify. Mediation is a fragmented occupation, with practitioners varying to tremendous degree in their training and methodology. While some have argued that mediation should be treated as a profession, the lack of coherence in admission and practice standards makes the analogy imperfect at best. Instead, mediators operate under a patchwork of standards, promulgated by a range of practice associations, program administrators, and court systems.”

As more and more cases are referred to court-annexed mediation, courts have come to recognize their responsibility to ensure the quality of the mediation services provided. However, very few of the mediation programs that operate on the state or federal level have implemented any kind of systematic, performance-based competency assessment of their mediators. In the absence of competency assessment, court-annexed mediation programs have tended to rely on past training and experience, and participant feedback (when it is available), to determine whether the mediators on their rosters are doing a good job.

The ADR Program for the SDNY has taken steps to standardize mediation practice in its court-annexed mediation program. A joint pilot project was created by the New York City Bar Association Committee on Alternative Dispute Resolution and the ADR Program for the SDNY to create a mechanism for continued evaluation of mediators once they are added to the SDNY mediation roster. As a result of the project, a protocol was developed for ongoing evaluation of the SDNY’s panel mediators. In the past, mediators have been assigned by court staff on the basis of their having been previously approved by the court to perform court-annexed mediation. The evaluation protocol, which requires live observation and evaluation of the mediator during a mediation, went into effect in January 2016. Even mediators who have been conducting court-annexed mediations for many years will be subject to evaluation. The SDNY may be the only federal district court that presently conducts ongoing observation and evaluation of court-annexed mediators.

An intrinsic challenge to developing an evaluation protocol is determining what skillsets make for a good mediator in the first instance. For example, is there a place in the mediation room for the mediator to use pushing and prodding? Is there a point when pushing and prodding may be viewed by the participants (or by the evaluator) as coercion? As the planning for the SDNY protocol progressed, project participants identified different components of the mediation process to evaluate.

In identifying these components, however, the ADR Program for the SDNY was more or less communicating to its corps of 300 volunteer mediators that a certain mediation “process” was expected to be adhered to. For example, the components of the process that would be evaluated include: (1) the pre-mediation conference call with counsel; (2) the mediator’s opening statement; (3) the joint session and (4) exploring facts/interests and developing opinions.

The formalization of this checklist made several implicit assumptions about how a mediation should be conducted. First, that a pre-mediation conference call was a good idea and that it was helpful to discuss the mediator’s expectations during that call; second, that the mediator would give an opening statement at the mediation; and third, that the mediator would conduct a joint session with all participants present at the mediation rather than move directly into private caucuses.

Within the protocol’s rubric, there is certainly flexibility to permit the mediators to “do their own thing” at the mediation without the risk of receiving a failing grade from the mediator evaluator. For example, some mediators request that counsel for the parties each make an opening statement in the joint session before private caucuses take place. Some do not use this practice. Some mediators will caucus first with the plaintiff; others prefer to meet first with the defendant. But minor variations aside, a lawyer for a party required to attend a mediation in the SDNY should know what to expect. Far from the Boston University Law Review’s dour assessment of the state of the mediation art in 2003, considerable progress has been made in standardizing mediation practice. Lawyers who have been directed to mediation by the SDNY Mediation Office should be able to provide their clients a solid roadmap of they may expect during the mediation.

Property Seller’s Failure to Disclose Environmental Cleanup Actionable, Even For “As Is” Sale

On August 18, 2016, a New Jersey appellate court ruled that a property seller’s failure to disclose environmental contamination and cleanup could expose the seller to liability for fraud. In Catena v. Raytheon Co. the Appellate Division reversed a trial court’s decision which had granted summary judgment based on the statute of limitations. The Appellate Division found that the “discovery rule” applied to claims asserting fraud and that Catena, the purchaser of commercial property, was not time barred in his lawsuit which was brought more than a decade after his purchase. The “discovery rule” delays the commencement of the limitations period, i.e., a plaintiff’s claim does not accrue until the plaintiff discovers, or by an exercise of reasonable diligence and intelligence should have discovered that he may have a basis for an action claim. In a real estate setting, intentional nondisclosure of a material defect which is not observable by a Buyer can give rise to a finding of fraud by the Seller and the statute of limitations will not bar a suit many years after the sale if the Buyer, after appropriate due diligence, had no reason to know of the defect.

9-13In this case, the Seller, individually or through his partnership, owned the property since 1983. When the Seller defaulted on its mortgage in 1987, Seller’s mortgage lender (“Lender”) took possession of the property and began making efforts for its sale. Lender engaged a consultant to take soil samples; it was discovered that the property was contaminated with perchloroethylene (“PCE”). In June 1988, the Lender and Seller arranged for the excavation and removal of the known contaminated soil. The environmental consultant specifically warned that it could not guarantee that all the contaminated soil had been removed. Neither the Lender, the Seller, nor the environmental consultant notified the New Jersey Department of Environmental Protection (“NJDEP”) of the contamination.

Catena entered into a contract to purchase the property “as is” later in June 1988. There were no representations or warranties made by the Seller. On the day before the closing, the Lender provided Catena’s attorney with a 1987 affidavit submitted to the NJDEP which stated that, on information and belief, the only occupants on the site had been a dry wall construction contractor, a bank, and a trucking concern, and that they had not engaged in operations which involved hazardous substances. This form affidavit was commonly used in the 1980s to demonstrate the non-applicability of the Environmental Cleanup Responsibility Act (“ECRA”), a statute that required remediation prior to property transfers in certain circumstances. The Seller also provided Catena with a copy of the 1988 affidavit that Seller submitted to the NJDEP which included the same information as the Lender’s affidavit. This later submission was to confirm that the sale to Catena was not subject to ECRA. Neither affidavit mentioned the discovery of contamination or the soil removal that had been undertaken.

After the closing of title in November 1988, Catena retained a consultant to perform an environmental assessment which found that the past uses of the property were far more extensive than those stated in the affidavits, including production of aircraft parts, assembly of mechanical electrical parts, a textile knitting and dyeing operation, the manufacture of prefabricated exterior building facades, and a distribution center for screen-printing inks and related supplies. These prior uses would likely have caused the sale to Catena to require compliance with the ECRA statute. The Assessment recommended that Catena investigate the possible presence of contamination, but Catena did not investigate. Instead, nearly ten years later when Catena sought to refinance the property, his prospective lender hired a consultant to conduct an investigation. That investigation found PCE contamination, which it reported to the NJDEP. The consultant opined that the likely cause of the contamination was the historical use of the property in airplane-related industries.

Beginning in 1998, Catena proceeded with a robust but intermittent investigation of his property. In the early 2000s, groundwater and stream contamination was discovered.

Catena sued the Seller, and the prior owners and operators of the property, including those who likely caused the PCE contamination, pursuant to the NJ Spill Act. Through discovery in the litigation, Catena obtained reports and communications between the Seller and the Lender concerning the partial cleanup of soil that they had performed but did not tell him about. Catena amended his complaint to assert claims of common law fraud and violations of the Consumer Fraud Act against the Seller and Lender. Catena testified at his deposition that he did not know of the contamination before his purchase and admitted that he did not ask the Seller or Lender whether there were any environmental issues. He also did not investigate the past uses of the property prior to the purchase.

The Seller and Lender moved for summary judgment with regard to the fraud claims, alleging that more than six years (the statute of limitations for fraud claims) had passed since these claims accrued. The trial court agreed with the Seller, finding that Catena should have been aware of the fraud when he entered into an administrative agreement with the NJDEP in June 1998 to conduct the investigation of his property. Catena appealed, arguing that the fraud was not discovered until December 2007 during Seller’s deposition.

The Appellate Division reversed the trial court’s ruling and found that even though Catena learned of the contamination in the late 1980s, he wasn’t aware (and could not have become aware) of the fraud until he learned of it in discovery. The court explained the importance and general acceptance of the discovery rule in cases involving fraud: the victim’s lack of awareness of the fraud is the wrongdoer’s very object. The rule thus prevents the wrongdoer from benefiting from his own deceit.

The court concluded that when Catena first became aware of contamination, he had no reason to believe that the Seller or the Lender knew about these site conditions. They had not made any representations and their affidavits to NJDEP did not show any suspicious prior users (which were only required to be identified back to 1984). Indeed, Catena’s consultant concluded that the contamination was caused by “airplane related industries” and none of the prior users in the Seller’s and Lender’s affidavits were involved in that industry.

Moreover, Catena would not have learned about the partial cleanup by conducting a public records search, as the contamination and remediation was not reported to NJDEP. Thus, there was no evidence that a more diligent pre-suit investigation would have led to the information about the fraud.

Given these facts, the court concluded that the fraud and Consumer Fraud Act claims were not time barred. The court made clear that the application of the discovery rule is fact and case sensitive and requires a careful analysis of when the purchaser became aware of facts that would alert a reasonable person to the possibility of an actionable claim.

The inescapable conclusion for real estate sellers is that they will face viable claims by purchasers years after a sale if sellers fail to disclose known environmental conditions and remediation activities even in “as is” sale transactions with no affirmative representations or warranties.

California Greenlights “Jurisdiction by Joinder” in Mass Tort Cases

9-1The California Supreme Court earlier this week issued an opinion that, in the words of the dissent, allows for “jurisdiction by joinder.” (Bristol-Myers Squibb Co. v. Superior Court (Anderson), Case No. S221038.) Plaintiffs with claims arising wholly outside California, against non-California defendants, may nevertheless be entitled to jurisdiction in a California court. The keys appear to be (a) whether the claims are similar to those of California residents (b) who are also plaintiffs in the suit (c) against a defendant that conducts significant activity in California as well as elsewhere. While Bristol-Myers most directly applies to large entities in mass tort cases, its rationale could well extend to any lawsuit in which a product was sold or activity conducted in multiple states. The 4-3 decision may also be the subject of a petition for certiorari to the United States Supreme Court.

“Bristol-Myers Squibb Company (BMS), a pharmaceutical manufacturer, conducts significant business and research activities in California but is neither incorporated nor headquartered here.” Eight California lawsuits were filed against it related to BMS’s drug Plavix. Plaintiffs were 86 California residents and 592 nonresidents. None of the residents purchased the drug in or from California, or had other relevant contacts with the state.

The opinion recognizes that “BMS’s business contacts in California are insufficient to invoke general jurisdiction,” because under Daimler AG v. Bauman (2014) 571 U.S. __ , 134 S.Ct. 746, 187 L.Ed.2d 624 that is restricted to a corporation’s state of incorporation or principal place of business. (We have blogged about Daimler and its progeny before: California Court rules no jurisdiction over foreign parent corporations; No in state dealings for years – no jurisdictionOut of state defendant? Out of state exposure? File suit somewhere else; Registered in Delaware Is Not At “Home” There; and A More Personal Touch: Challenge to Madison County Jurisdiction.) Bristol-Myers held, however, that “the company’s California activities are sufficiently related to the nonresident plaintiffs’ suits to support the invocation of specific jurisdiction.”

The court found that it was undisputed that there was specific jurisdiction over the California plaintiffs’ claims, and found that there should be jurisdiction over the nonresidents’ claims as well because “BMS sold Plavix to both the California plaintiffs and the nonresident plaintiffs as part of a common nationwide course of distribution.”

The California activities that Bristol-Myers found “related” to the nonresident plaintiffs’ claims: “BMS’s extensive contacts with California, encompassing extensive marketing and distribution of Plavix, hundreds of millions of dollars of revenue from Plavix sales, a relationship with a California distributor, substantial research and development facilities, and hundreds of California employees” is enough for California courts to “exercise specific personal jurisdiction over nonresident plaintiffs’ claims in this action, which arise from the same course of conduct that gave rise to California plaintiffs‘ claims: BMS’s development and nationwide marketing and distribution of Plavix.”

Bristol-Myers pointed out that the court had previously “adopted a sliding scale approach to specific jurisdiction,” such that that “the more wide ranging the defendant‘s forum contacts, the more readily is shown a connection between the forum contacts and the claim.” Specific jurisdiction is thus proper in this case because “BMS’s contacts with California are substantial and the company has enjoyed sizeable revenues from the sales of its product here — the very product that is the subject of the claims of all of the plaintiffs.”

The court identified several California interests in the joint litigation. One is that “evidence of the injuries allegedly suffered by the nonresident plaintiffs may be relevant and admissible to prove that Plavix similarly injured the California plaintiffs,” so “trying their cases together with those of nonresident plaintiffs could promote efficient adjudication of California residents’ claims.” Similarly, the court was concerned that “separating the nonresident plaintiffs from the resident plaintiffs and forcing the nonresidents to sue in other states” could result in “delays in the California proceedings that would be created by the litigation and appeals of discovery and factual conflicts in the various other forums.” A further, case-specific reason was that “California also has an interest in regulating the conduct of BMS’s codefendant, McKesson Corporation, which is headquartered in California, as a joint defendant with BMS.”

As the dissenting opinion stated: “The majority expands specific jurisdiction to the point that, for a large category of defendants, it becomes indistinguishable from general jurisdiction.” The dissent argued that “mere similarity of claims is an insufficient basis for specific jurisdiction. The claims of real parties in interest, nonresidents injured by their use of Plavix they purchased and used in other states, in no sense arise from BMS’s marketing and sales of Plavix in California, or from any of BMS’s other activities in this state.” The dissent quoted with approval a law review article on the Court of Appeal’s decision: “The claims of the California and nonresident plaintiffs are merely parallel.”

Although the majority opinion was couched in terms of “the particular circumstances of this case,” the dissent looked to the broader precedent being set.

“[T]he majority notes that BMS maintains some research facilities in California, although the majority concedes Plavix was not developed in those facilities. … This second ground of relatedness is both illogical and startling in its potential breadth. Because BMS has performed research on other drugs in California, claims of injury from Plavix may, according to the majority, be adjudicated in this state. Will we in the next case decide that a company may be sued in California for dismissing an employee in Florida because on another occasion it fired a different employee in California, or that an Illinois resident can sue his automobile insurer here for bad faith because the defendant sells health care policies in the California market?”

“As California holds a substantial portion of the United States population, any company selling a product or service nationwide, regardless of where it is incorporated or headquartered, is likely to do a substantial part of its business in California. Under the majority’s theory of specific jurisdiction, California provides a forum for plaintiffs from any number of states to join with California plaintiffs seeking redress for injuries from virtually any course of business conduct a defendant has pursued on a nationwide basis, without any showing of a relationship between the defendant’s conduct in California and the nonresident plaintiffs’ claims. The majority thus sanctions our state to regularly adjudicate disputes arising purely from conduct in other states, brought by nonresidents who suffered no injury here, against companies who are not at home here but simply do business in the state.”

The dissent took issue with other reasons proffered by the majority. While “[t]he majority argues that taking jurisdiction over the nonresidents’ claims furthers a California interest because evidence of their injuries may be admissible to help the California plaintiffs prove Plavix was a defective product,”  the dissent pointed out that “admissibility of other injuries does not depend on joinder of the other injured person.” The majority thought that joint litigation would help the California plaintiffs, but the dissent pointed out that there are many other Plavix suits in other courts around the country. “Whether or not real parties’ claims are heard together with those of the California plaintiffs, inefficiency and the potential for conflicting rulings will exist so long as actions are simultaneously pending in several state and federal courts….No mechanism exists for centralizing nationwide litigation in a state court; there is no means by which pending actions in Illinois courts, for example, can be transferred to a California court.”

The dissent also answered the question, what’s the superlative of “red herring?”

“Finally, the majority asserts that California’s interest in regulating the conduct of codefendant McKesson Corporation (McKesson), a pharmaceutical distributor headquartered in California, justifies adjudicating real parties’ claims against BMS in a California court.…Of all the majority’s red herrings, this is perhaps the ruddiest.” Because of course the question is jurisdiction against Bristol-Myers, not the co-defendant (and there was question as to its role anyway). Research indicates this is the first use of “ruddiest” in a reported California decision. It may not be the last.

As stated above, while Bristol-Myers most directly applies to large entities in mass tort cases, its rationale could well extend to any lawsuit in which a product was sold or an activity conducted in multiple states. The most significant limitation appears to be that a nonresident plaintiff still may not be able to challenge a nonresident defendant in California courts alone; the nonresident needs to find California plaintiffs with similar claims. In any event, counsel who have been advising clients that the Daimler decision forecloses claims in California courts based on general jurisdiction should re-examine that position in light of the Bristol-Myers ruling on specific jurisdiction.