California Limits Punitive Damages Against Corporations

Last week, a California appellate court limited punitive damages against corporations. By statute, punitive damages can be awarded against a corporation only if the acts were taken or approved by an “officer, director, or managing agent.” Yet courts regularly allow plaintiffs to tar the entire organization without such specific proof. Morgan v. J-M Manufacturing Co. rejected that standard plaintiff position, re-affirmed the statutory restriction, and reversed a $15 million punitive damages award in an asbestos case.

Defendants will be able to use this decision to ward off punitive damages claims, including at the summary adjudication stage, for lack of sufficient evidence. Plaintiffs’ counsel will likely cite this decision to support discovery and deposition demands about specific individuals from corporate defendants. Even such more robust discovery may not uncover witnesses or other evidence to support a punitive damages claim, particularly in cases involving asbestos or other materials that have not been used for decades.

Some highlights from the decision:

The primary focus of J-MM’s argument is that there is no evidence in the record that a J-MM officer, director, or managing agent authorized or ratified any conduct. J-MM contends that at trial, Morgan “treated J-MM as a monolithic entity” and referred to the company—in its entirety—as “they,” without ever identifying who “they” referred to. “[O]f the few J-MM employees whose conduct was specifically identified at trial,” J-MM argues, “none even qualified as officers, directors or managing agents of J-MM during the relevant time period.”

Morgan does not argue that there is evidence identifying any act of any particular J-MM officer, director, or managing agent. Morgan’s argument is that “the entire organization was involved in the acts giving rise to malice,” and therefore it need not introduce clear and convincing evidence that any particular officer, director, or managing agent had the requisite state of mind.

“[i]t is difficult to imagine how corporate malice could be showing in the case of a large corporation except by piecing together knowledge and acts of the corporation’s multitude of managing agents.” … It may be that J-MM’s officers, directors, and managing agents acted with the requisite state of mind to support an award of punitive damages in an appropriate case. A plaintiff may be able to provide evidence at trial to “piec[e] together knowledge and acts of [J-MM’s] multitude of managing agents.” But that did not happen here.

That the defendant is a large company does not relax a plaintiff’s burden of proof . . .

***

The decision changed from unpublished, which could not be cited to California courts, to published and therefore citable. I joined in a successful publication request.

Supreme Court of Pennsylvania To Address Whether Registration of Out-of-State Businesses Creates General Jurisdiction

Pennsylvania’s unique corporate registration statute may be on the chopping block after a three-judge Superior Court panel in Mallory v. Norfolk Southern Railway agreed to transfer a jurisdictional dispute to the Commonwealth’s Supreme Court pursuant to a provision in the Pennsylvania Judiciary Code that gives the Supreme Court exclusive jurisdiction over any appeal from a trial court decision finding that a statute is “repugnant to the Constitution.” 42 Pa. C.S. § 722(7).

The key issue in Mallory v. Norfolk Southern Railway is whether Pennsylvania courts may constitutionally exercise general personal jurisdiction over out-of-state corporations simply because they register to conduct business in the Commonwealth of Pennsylvania. Pennsylvania law provides that a foreign corporation may not do business in the Commonwealth until it registers with the Pennsylvania Department of Business pursuant to 15 Pa.C.S.A. § 411. The Pennsylvania long-arm statute provides that general personal jurisdiction may be exercised over a foreign corporation in three circumstances: (1) incorporation under or qualification as a foreign corporation; (2) consent; and (3) the carrying on of a continuous and systematic part of its general business in Pennsylvania. 42 Pa. C.S. § 5301(a)(2). These statutes construed together appear to require foreign corporations to submit to the court’s general jurisdiction as a condition for doing business in Pennsylvania.

This is a hotly contested issue in Pennsylvania, and courts have struggled to reach a consensus as to whether the corporate registration and long-arm statutes comport with the U.S. Supreme Court’s holding in Daimler, which mandates that an out-of-state corporation is not subject to general jurisdiction unless it is registered to conduct business in or has its principal place of business in the forum.

In Mallory, the plaintiff (a resident of Virginia) filed suit in the Philadelphia Court of Common Pleas against his employer Norfolk Southern Railway (Virginia corporation with its principal place of business in Virginia) alleging violations of the Federal Employers’ Liability Act after allegedly being exposed to carcinogens while working at Norfolk’s locations in Ohio and Virginia. Norfolk filed Preliminary Objections seeking to dismiss the complaint for lack of personal jurisdiction. Plaintiff argued that Norfolk consented to general personal jurisdiction pursuant to 42 Pa.C.S.A § 5301 by registering to do business in Pennsylvania.

Judge Arnold New granted Norfolk’s Preliminary Objections for two reasons. First, he found that the Pennsylvania corporate registration statute does not comport with federal due process because it allows Pennsylvania to exert general jurisdiction over out-of-state entities that are not “at home” in the Commonwealth. This unique rule creates a federalism issue because it allows Pennsylvania courts to interfere with the right of other states to render verdicts against their own corporate citizens. Second, the corporate registration statute compels out-of-state entities to subject themselves to general jurisdiction as a condition of doing business in Pennsylvania. Judge New reasoned that this is contrary to U.S. Supreme Court law, which “made clear that a state cannot claim general jurisdiction over every corporation doing business within its borders… By wrapping general jurisdiction in the cloak of consent, Pennsylvania’s mandated corporate registration statute attempts to do exactly what the United States Supreme Court prohibited in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011), BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549 (U.S. 2017) and Daimler AG v. Bauman, 571 U.S. 117 (U.S. 2014).”

Judge New’s ruling is consistent with an overwhelming majority of courts throughout the country that have considered this same issue. See, e.g., Brown v. Lockheed Martin Corp., 814 F.3d 619, 636 (2d Cir. 2016) (“[T]he analysis that now governs general jurisdiction over foreign corporations…suggests that federal due process rights likely constrain an interpretation that transforms a run-of-the-mill registration and appointment statute into a corporate ‘consent’” to general jurisdiction); Lanham v. BNSF Ry. Co., 939 N.W.2d 363, 371 (Neb. 2020) (“[T]reating BNSF’s registration to do business in Nebraska as implied consent to personal jurisdiction would exceed the due process limits prescribed in [Goodyear and Daimler]”); Dutch Run-Mays Draft, LLC v. Wolf Block, LLP, 164 A.3d 435, 444 (N.J. Super. Ct. – App. Div. 2017) (“We now join the many courts that have circumscribed the view of general jurisdiction post-Daimler.”).

Pennsylvania law is unique in that it permits courts to exert general jurisdiction over out-of-state defendants solely on the basis that those entities registered to conduct business in Pennsylvania. Product defendants in Pennsylvania have for several years urged the appellate courts to align Pennsylvania law with U.S. Supreme Court law by overturning the relevant business registration and long arm statutes because those laws improperly compel foreign companies to consent to general jurisdiction though they are not “at home” in Pennsylvania. The Superior Court’s decision to transfer Mallory to the Supreme Court is a big step that we hope signals a change in controlling Pennsylvania law.

From a practical standpoint, Philadelphia has long been viewed around the country as a plaintiff-oriented jurisdiction that is a favorable forum to prosecute product liability and mass tort litigation. The Supreme Court’s ruling in Mallory has the potential to end such blatant forum shopping.

California continues on the PFAS regulatory vanguard by banning PFAS in Cosmetics

On October 1, 2020, California passed a law identified as the Toxic Free Cosmetics Act. The Act will prohibit, beginning on January 1, 2025, the manufacturing or selling of any cosmetic product with any intentionally added amount of 24 specified chemicals. The specific list of chemicals includes certain phthalates, formaldehyde, mercury, and PFAS (certain per- and polyfluoroalkyl substances). Although some states have previously passed legislation banning some of the specified chemicals in cosmetic products (e.g., in children’s products), California is the first state to pass such a broad band as to cosmetics in general, and specifically to PFAS.

This is not the first time the cosmetics industry has had to respond to environmental regulatory developments in California. Under California’s Proposition 65 law (“Prop 65”), cosmetics have been a frequent target for consumer bounty hunter actions. The cosmetics industry has generally taken steps to comply with Prop 65 by reducing the concentrations of Prop 65 chemicals or providing the required Prop 65 warnings under law. Nevertheless, the Toxic Free Cosmetics Act will no longer allow the option of a Prop 65 warning, which will require the cosmetics industry to now eliminate (not reduce) the 24 listed chemicals (excepting unavoidable trace quantities).

The inclusion of PFAS on the list of 24 chemicals is of particular interest, as California has also been on the forefront of other environmental regulatory actions concerning PFAS. PFAS includes over 5000 different compounds that have been used in a wide variety of industries. PFAS has recently been reported by the US Department of Health and Human Service’s Agency for Toxic Substances and Disease Registry (“ATSDR”), based on various publications, as potentially causing reproductive and developmental effects in animals, and the EPA has identified limited epidemiological findings concerning possible immune system and thyroid disruption, as well as cancer. Nevertheless, the epidemiological evidence concerning PFAS is very limited and currently developing.

PFAS has been used in many common consumer and industrial products, such as carpet, paints, food packaging, stain resistant sprays, and non-stick cookware. PFAS was also used as a fire-fighting compound in aqueous film forming foam, which served as a very effective fire extinguisher, and has been widely used by the military, airports, and other firefighters throughout the country. The broad uses of PFAS has resulted in detections in soil and drinking water aquifers throughout the United States.

The regulatory framework for addressing PFAS is evolving rapidly. For better or worse, California has stepped to the forefront. For example, on September 29, 2020, California passed a law banning the manufacture, sale and use of PFAS firefighting foam in most applications starting on January 1, 2022. In July 2020, the California Department of Toxic Substances Control released a proposal to regulate plant fiber-based food packaging containing PFAS and has been holding public workshops to develop such regulations.

California’s aggressive regulation of PFAS has also extended to the environmental presence of PFAS in drinking water. The EPA has not yet set a maximum contaminant level (“MCL”) in drinking water for PFAS. Instead of setting MCLs, EPA established health advisory levels for PFAS, which equate to 70 parts per trillion (ppt) in drinking water. As the threshold is advisory, it is not mandated; however, many states have adopted the EPA’s advisory level of 70 ppt.

California, nevertheless, stepped out in front of both the EPA and all other states. In February 2020, California’s State Water Resources Control Board reduced the response levels for PFOA and PFOS to 10 ppt and 40 ppt, respectively. Response levels are advisory levels above which California recommends taking a water source out of service. As day follows night, the removal of drinking water sources from service has resulted in environmental litigation concerning the recovery of associated costs, as a wave of PFAS litigation concerning both environmental releases and products liability is beginning to roll across the country.

The Absurdity of Prop. 65 – Something Fishy

Two recent events reminded me of the absurdity of California’s “Proposition 65” cancer warnings. You are all familiar with this regulatory scheme that started as a valid public health initiative that quickly became a boon for lawyers on both sides of the bar. What may be considered as a prime example of how this good idea has gone astray is the final resolution of a 10-year long court battle regarding the cancer risks purportedly associated with drinking coffee.

Ten years ago a “nonprofit organization” represented by plaintiffs’ attorney Raphael Metzger began a case against Starbucks and many others alleging that since roasted coffee beans contain acrylamide, a listed carcinogen with the state of California, coffee retailers should be fined for not including a Prop. 65 warning with the morning Joe they routinely sell to thousands of customers in the state. The case was assigned to Judge Elihu Berle, who you might recognize as the trial judge on the seminal O’Neil case that led to the “bare metal” defense for asbestos defendants in California.

The case did not proceed well for the coffee vendors, and several settled for amounts reported to be in the millions of dollars. No doubt vast amounts were spent with numerous high profile defense firms, but ultimately they achieved a favorable result. Perhaps unexpectedly, the California Office of Environmental Health Hazard Assessment recently rewrote their regulations concluding that acrylamide in coffee does not pose a cancer risk. Judge Berle has ordered the case dismissed. But only after 10 years of litigation and millions spent by settling defendants.

Trying to ease my mind from the vicissitudes of Prop 65 litigation, I decided to relax with some fishing. But even on a pier in the SF Bay, I could not escape yet another example of an absurd application of Prop 65. See the attached three photos. If you do not recognize it, that is a net fishermen use to raise up to the pier the big ones they have hooked (I say this only from having watched others as I never catch a big one). Notice the close up photo of the float on the net. It has a Prop 65 warning! How on earth could anyone ever sustain any type of exposure from that float that would actually enhance their risk of any type of cancer? But companies selling products into California have become so concerned with Prop 65 litigation that they now put warnings on everything. This type of over warning surely cannot be beneficial.

These are just a few examples of the ongoing excessive application of Proposition 65 that makes one wonder whether its requirement for warnings is actually benefitting California consumers.

EPA Draft Risk Assessment on Asbestos Flawed and could be Problematic for Automotive Friction Defendants

The United States Environmental Protection Agency (“EPA”) is currently conducting a chemical risk evaluation of asbestos. The EPA’s 310-page Draft Risk Evaluation for Asbestos (the “Draft”) identified risks for a variety of potential asbestos exposures. The Draft found that acceptable cancer risks were exceeded for much work with automotive brakes and clutches. If these findings are adopted in the final evaluation, defendants can expect asbestos plaintiffs’ counsel to trumpet the evaluation to juries, even though (as described below and detailed in the attached article) the analysis is flawed and inconsistent with both the scientific literature and legal standards regarding cancer causation.

The Draft looked at exposures to occupational mechanics, bystanders, and do-it-yourself mechanics. The only asbestos fiber type the EPA evaluated was commercial chrysotile, and the only potential causative diseases the EPA evaluated were mesothelioma and lung cancer. The EPA chose to evaluate acceptable cancer risks to individuals based on an Inhalation Unit Risk of 0.16 per fiber/cc.

The Draft found that acceptable cancer risks were exceeded for brake and clutch installation and removal for occupational mechanics at both high-end and central tendency exposure levels and for occupational non-users at all high-end levels. For brake repair and replacement performed indoors with compressed air, the Draft found that acceptable risk levels were exceeded for do-it-yourself mechanics and bystanders of do-it-yourself mechanics at high-end and central tendency levels. For brake work performed outdoors, the Draft found that acceptable risks levels were exceeded for do-it-yourself mechanics at high-end tendency levels when mechanic work was performed 30 minutes per day with 62 years of cumulative exposure starting at age 16. Contact the best Asbestos testing in Edmonton and get your issue fixed now.

While the final risk assessment has not been published, the conclusions found in the current Draft lead to concern that these findings will cause confusion or even improperly influence jurors in future asbestos trials. A finding by the EPA that working with and around asbestos-containing brakes and clutches leads to an unacceptable risk of mesothelioma and lung cancer would be used in the opening statements of every asbestos plaintiffs’ attorney in the country. Although the assessment is based on many assumptions that are not realistic, excludes large swaths of relevant scientific and medical studies, and makes conclusions regarding cancer causation that are entirely out of line with all current legal standards, it would be complicated and difficult to explain in necessary detail to a jury. It would simply be another factoid that will be used to persuade jurors that there is no safe level of chrysotile asbestos exposure and that all exposures cause disease. Surely, many hours of drafting and many tons of ink will be spilt in attempts to keep the findings of the EPA out of the courtroom through pre-trial motions to exclude and motions in limine. This is a future that will soon become all too real if there are not considerable changes made between the current Draft and the EPA’s final risk evaluation.

Proposed Changes to California Asbestos Jury Instructions on Causation

The Advisory Committee on California Civil Jury Instructions is considering changes to many instructions, including two on causation: CACI 435 (substantial factor in asbestos cases) and CACI 430 (substantial factor generally).

CACI 430, applicable in tort actions generally, defines “substantial factor” as “more than a remote or trivial factor” in contributing to the harm, which “does not have to be the only cause of the harm.”

CACI 435 is modeled on Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953, and provides that the “substantial factor” is not to be determined by causing harm, but a substantial factor contributing to plaintiff’s “risk of developing cancer.”

Two issues are addressed by the proposed changes: (1) whether CACI 435 applies to defendants other than manufacturers or suppliers of asbestos-containing products, such as property owners or those doing work at a site, and (2) whether in some asbestos cases the more traditional, cause-of-harm CACI 430 may be used.

The proposed changes would answer both in ways that help plaintiffs, and expand liability risk for some defendants. First, the proposed changes to CACI 435 will add “property” and “operations” to “product” as a possible source of asbestos exposure. The proposal cites Lopez v. The Hillshire Brands Co. (2019) 41 Cal.App.5th 679, 688, which ruled that CACI 435 was proper for claims against an employer/premises owner for asbestos at the site, even though not a manufacturer or supplier but rather a user of the product. Lopez reasoned that the point of CACI 435 was to focus on the risk of developing cancer from asbestos, and that the same considerations applied whether or not the defendant was a product manufacturer. Further, Lopez ruled that CACI No. 430’s terms “remote and trivial” are misleading and may confuse jurors: “jury instructions therefore should not suggest that a long latency period … precludes an otherwise sufficient asbestos claim.” The concern seems misplaced: there is no reason to assume jurors are incapable of understanding the concept of latency.

The proposed changes build on Lopez and would not only extend CACI 435 to non-manufacturers, but would drop from the “directions for use” contrary authority, and a reference that the issue was “was not settled.” Potentially worse, they would assert that CACI 430 may never be given in an asbestos case, whether or not in conjunction with CACI 435.

Complicating the problem: even the existing CACI 435 does not faithfully reflect Rutherford, which addresses “a substantial factor in contributing to the aggregate dose of asbestos the plaintiff or decedent inhaled or ingested” (emphasis in original). The existing instruction refers to a substantial factor contributing to the risk of cancer, without grounding that medical opinion (as did Rutherford) in comparative dose. The difference is particularly significant for defendants with minimal or low-dose exposure in cases where there is abundant alternative exposure (e.g., one home remodel job but a lifetime career working near asbestos insulation). GRSM and other defense attorneys have attempted in vain to get this instruction to reflect its source authority.

The proposals and directions for public comment are at https://www.courts.ca.gov/documents/caci20-02.pdf. Comments are due September 2, 2020. Pending that comment period, the changes are due to become effective November 15, 2020.

California Increases Potential Liability Exposure in Multi-Defendant Cases

The risks of litigating in California just got larger.

California’s Proposition 51 makes defendants jointly liable for all economic damages, but severally liable for noneconomic damages only in proportion to fault. The California Supreme Court yesterday unanimously ruled that intentional tortfeasors cannot use Proposition 51 to reduce their share of noneconomic damages. Resolving a split among intermediate appellate courts, the court ruled that “section 1431.2, subdivision (a), does not authorize a reduction in the liability of intentional tortfeasors for noneconomic damages based on the extent to which the negligence of other actors — including the plaintiffs, any codefendants, injured parties, and nonparties — contributed to the injuries in question.”

This decision will further incentivize plaintiffs to include and pursue intentional tort claims in multi-defendant cases, even when they are really only “add-ons” to a claim grounded in another theory (e.g., fraud claims in strict product liability failure to warn cases). The potential damages against any defendant facing such a claim now include all, not just some, of the noneconomic damages. Noneconomic damages for such matters as pain, suffering, and loss of consortium are often a multiple of the economic award. Compounding the problem: whether such intentional tort claims will be precluded from insurance coverage as a “loss intentionally caused by the insured.” 

In B.B. v. County of Los Angeles, police used excessive force and caused the death of a man they caught assaulting a woman on the street while in a drug-induced haze. The jury found decedent 40% responsible, several deputies negligent and collectively 40% responsible, and Deputy Aviles liable for battery and 20% responsible. The trial court entered a judgment holding Aviles liable for 100% of both economic and non-economic damages. The Court of Appeal reversed, but the Supreme Court reversed the Court of Appeal, effectively reinstating the judgment.

In a typically thoughtful opinion from Justice Chin, the court ruled that the statute’s application to cases decided “under principles of comparative fault” included negligence (and strict product liability), but did not include intentional tortfeasors. The court rejected multiple arguments that this was unfair and inconsistent with other language in Proposition 51, including those made by defendants and in an amicus curiae brief supporting the defense to which yours truly contributed.

We previously reported on this case just after it was argued, see here.

California Asbestos Trials in the Age of COVID-19

By: IAN WILLIAMSON, San Diego

We continue to monitor how various courts in California are handling asbestos trials. The situation is unsurprisingly fluid.  Some courts have started trials and we are closely following those.

San Francisco assigned one case to a trial judge on June 26, 2020. Discussions of how that matter would proceed to trial were ongoing when the case resolved. Generally, remote jury selection was discussed. There were discussions about how to have the jurors in court – socially distanced and having virtually all witnesses appear remotely.

In Alameda County (Oakland), jury selection is ongoing in two cases. These are both living mesothelioma cases with preference trial dates. Both cases had been initially set for trial in March. Jury selection is being conducted remotely – with hardships and questionnaires done electronically and voir dire via Zoom. Both cases appear headed to a situation where the jurors are participating 100% remotely unless they do not have the technical ability to do so. It appears that all witnesses will appear remotely. Defendants have raised significant due process concerns, and in one case petitioned the Court of Appeal for a writ. The Court of Appeal denied the petition as premature, even while acknowledging that serious fairness issues were being raised.

The COVID-19 pandemic continues to disrupt trials as court implement safety procedures.

Los Angeles County does not have any jurors available yet, but has just started re-issuing jury summonses. It is anticipated that all of the first wave of jurors will go to criminal cases. There are several preference cases pending trial that are being continued on a rolling 15-day basis (per the preference statute) until a jury pool is available. The court has urged parties to waive a jury (neither side has agreed) or consider smaller jury panels. The court is setting new preference trial dates in the fall, but noting that those trial dates are “not realistic” and the cases will likely be continued until there are juries available.

Low priority cases – such as wrongful death cases and non-preference personal injury cases – are being continued into 2021 in all three venues. When and how the courts will catch up on those remains to be seen.

All three of California’s primary asbestos courts are utilizing the MSC process to try to facilitate resolution of cases. Los Angeles and Oakland are ordering remote MSCs. San Francisco required counsel to appear in person. None of these courts are requiring client or carrier representatives to travel to appear in person.

Courts with very few cases (Fresno, Sacramento, Solano, etc.) do not seem to be treating asbestos cases any different than any other cases–meaning we do not anticipate trials before 2021.

Federal courts generally remain in operation but jury trials seem to be limited to criminal cases only. We are not aware of any Federal asbestos cases being called to start jury trials since the pandemic shut court operations down.

Visit the Gordon & Rees COVID-19 Hub for ongoing updates.

PA Appellate Court Declines Opportunity to Re-Evaluate State Registration Statute Under Daimler

The PA Superior Court of Pennsylvania – the Commonwealth’s intermediate appellate court – recently issued its long-awaited en banc opinion in Murray v. Am. Lafrance. A copy of the decision is attached HERE.

They key issue in Murray was whether an out-of-state company that registers to do business in Pennsylvania consents to general personal jurisdiction. The Pennsylvania corporate registration statute purports to confer consent to general jurisdiction over an out-of-state entity in exchange for the ability to conduct business within the Commonwealth. This issue has been hotly contested in recent years within Pennsylvania, with several courts finding that the registration statute is unconstitutional under U.S. Supreme Court precedent in Daimler, which provides that an out-of-state defendant is only subject to general jurisdiction where it is incorporated or maintains a principal place of business.

Despite the holding in Daimler, the Superior Court recently found in another matter that registration to conduct business in Pennsylvania establishes consent to general jurisdiction in the Commonwealth in a manner than comports with due process. Many defense-oriented commentators hoped that Murray would provide an opportunity for the Superior Court to reverse its prior rulings in accordance with Daimler.

In Murray, the trial court originally dismissed an out-of-state defendant for lack of general personal jurisdiction under Daimler, and on rehearing en banc the Superior Court upheld the order, but refused to resolve the mandatory consent to general jurisdiction issue, finding instead that Plaintiffs waived the argument by failing to raise it at the trial level. Although the Superior Court affirmed the order dismissing the out-of-state defendant for lack of personal jurisdiction, it did not address the merits of plaintiff’s argument that the defendant consented to jurisdiction by registering to conduct business in Pennsylvania.

Unfortunately for out-of-state product defendants that are registered to conduct business in Pennsylvania, the state of the law is such that consent by registration is still a sufficient basis for plaintiffs to assert general jurisdiction over out-of-state defendants in Pennsylvania, even after the Daimler decision appeared to reject this approach.

As this blog has previously reported, other states have rejected registration by an out-of-state defendant as consent to jurisdiction.

New Jersey Supreme Court Finds Liability Possible For Replacement Parts Supplied By Others If Original Product Contained Asbestos Components

Arthur Whelan was a plumber and infrequent auto mechanic. Decades before developing mesothelioma, Whelan alleges that he worked on numerous boilers that had asbestos components such as steam traps, fireboxes, steam valves and jacket liners. He also conducted a handful of brake jobs on Ford vehicles that involved asbestos parts. Whelan did not know whether the asbestos components in these products were original components, replacement components by the original manufacturer or replacement components by a different manufacturer. Nevertheless, Whelan sued the original manufacturers, alleging that they had a duty to warn product users of the dangers of the asbestos-containing product as initially manufactured and as asbestos-containing replacement parts were incorporated into the product, and the use of services like removing asbestos could help with the purpose of dealing with asbestos.

A divided New Jersey Supreme Court held in Whelan v. Armstrong Inc. that manufacturers may be found liable for asbestos-containing replacement components that they did not build or distribute, because “it is fair for them to bear such responsibility when they profit from the parts extending the life of their original products.”

The opinion provides a four-part test for holding manufacturers and distributors strictly liable for the failure to warn about the dangers of their products’ asbestos-containing components:

  • First, a plaintiff must prove that asbestos-containing components were included in the original products;
  • Second, those components were integral to the product and necessary for it to function;
  • Third, routine maintenance required replacing those parts with similar asbestos-containing components; and
  • Fourth, exposure to the initial components or replacement parts was a substantial factor in causing or exacerbating the plaintiff’s disease.

In reaching this decision, the court speculated that requiring the original manufacturer to provide warnings for the anticipated replacement parts of the product would not place a burden on the manufacturer. Justice Albin noted that imposing a duty to warn about asbestos-containing replacement parts, no matter who built them, “adds hardly any further burden or cost to the product manufacturers, who already have a duty to warn of the dangers of the original asbestos-containing components.”

The court ruled that the manufacturer must provide warnings given the foreseeability that third parties would be the source of asbestos-containing replacement components. “Warnings on defendants’ products would have provided a reliable form of protection for the ultimate user,” so “[t]he lack of warnings rendered the products defective.”

The decision is consistent with the recent maritime common law failure to warn case decided by the Supreme Court. In Air & Liquid Systems Corp. v. DeVries, 873 F. 3d 232 (2019), the Supreme Court found that in the maritime tort context, a product manufacturer has a duty to warn when (i) its product requires incorporation of a part, (ii) the manufacturer knows or has reason to know that the integrated product is likely to be dangerous for its intended uses, and (iii) the manufacturer has no reason to believe that the product’s users will realize that danger. On the other hand, California and Washington, among other jurisdictions, generally restrict liability to those in the chain of commerce of the injury-producing product.