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

By on June 12, 2020

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.

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.

Filed under Asbestos, Bare Metal, New Jersey

Last Defendant at Trial, You Are Not Alone: Apportionment Under New Jersey Law

By on September 19, 2019

Last week in the Rowe v. Bell & Gossett decision, a unanimous New Jersey Supreme Court found that an asbestos defendant at trial may demonstrate settling co-defendants’ liability and their share of fault by using the co-defendants’ answers to interrogatories and corporate representative depositions from the pending or prior asbestos litigations. This evidence, along with plaintiff’s testimony on product usage and plaintiff’s own expert’s testimony on cross-examination, was sufficient to show that each settling defendant’s product was a substantial factor in causing injury and allow a jury to allocate fault. Thus, the court has provided guidance on how and not just that a remaining defendant may reduce its fault at trial. Under New Jersey’s joint tortfeasor law, as in many other jurisdictions, when two or more persons are jointly and severally liable for the same tort and injury, the jury must allocate fault between and among the tortfeasors, regardless of whether they all remain parties to the litigation.

The Supreme Court’s decision will require plaintiffs to fully understand the relative responsibilities among defendants before risking a settlement with some but not all of them. This will undoubtedly delay or completely prevent settlement opportunities, especially for parties of products that plaintiff most regularly used during his lifetime.

From a defense perspective, this decision endorses a streamlined approach for proving cross-claims at trial. non-settling defendant must simply be careful to timely and fully disclose its intent to demonstrate such non-parties’ liability at trial. With proper notice, the non-settling defendant may use the settling defendants’ written interrogatory answers, corporate representative depositions, responses to admissions, prior trial testimony, if any, or call them as a live witness if the content of these statements were made “against the party’s interest.”

In Rowe, plaintiff argued that interrogatory responses and corporate representative depositions were impermissible hearsay that could only be used, if at all, against the declarant co-defendants, not against plaintiff. The Supreme Court rejected that argument, finding that these statements were admissible under New Jersey Rule of Evidence 803(c)(25) because they were made by the corporate defendant and were “so far contrary to the [corporation’s] pecuniary, proprietary, or social interest, or so far tended to subject [that defendant] to civil or criminal liability . . . that a reasonable person in [that defendant’s] position would not have made the statement unless the person believed it to be true.” In Rowe, “when the relevant statements were made, each declarant was a defendant in this case or in other asbestos product liability cases.” Moreover, such statements admitted corporate relationships including potential successor liability, the manufacture or sale of goods containing asbestos, or the manufacture or sale of goods without warnings related to asbestos.

The Appellate Division had ruled that these statements were not “against interest” because “the existence of asbestos-containing products and the absence of warnings are objective, well-known historical facts that the settling defendants could not avoid acknowledging in the face of incontrovertible proof.” The Supreme Court rejected this argument, noting that statements against interest need not be on novel or controversial issues, or the only proof of a given claim. Thus, these statements were properly admitted by the trial judge and considered by the jury to apportion fault.

Filed under Apportionment, Asbestos, New Jersey

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

By on November 1, 2016

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.

Filed under Attorney Fees, Expert Witness Fees, New Jersey, Remediation

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

By on September 13, 2016

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.

Filed under cleanup, New Jersey, PCE, Perchloroethylene

New Jersey Appellate Court Rules That Insurance Rights May Be Transferred Without Consent of Carrier After The Events That Trigger Coverage

By on August 25, 2015

In Givaudan Fragrances Corporation v. Aetna, the Appellate Division of the New Jersey Court held that an assignee was permitted to pursue coverage on policies that were written to a different insured. The Appellate Division’s decision will certainly help companies, or individuals, who are successors in interest to a policy holder to obtain coverage for events that happened during the policy period, years or even decades ago, even if they themselves were not named insureds under the policy.

In this case, the policies were issued in 1964 – 1986 to Givaudan Corporation. Due to contamination at a Clifton, NJ facility in 1987 and 1988, Givaudan Corporation entered into Administrative Consent Orders with the New Jersey Department of Environmental Protection which provided for remediation. Thereafter, there were numerous corporate reorganizations that resulted in the creation of Givaudan Fragrances Corporation (GFC), which inherited various assets and liabilities, including the environmental liabilities associated with the Clifton facility.

In the 2000s, US EPA and the NJDEP commenced administrative proceedings and litigation against GFC relating to the Clifton property and alleged discharges from the property to the Passaic River. The dredge remedy for the Passaic River is expected to cost from $500 million to $1.7 billion, a new record for a Superfund cleanup.

GFC sought insurance coverage under the policies issued to Givaudan Corporation with regard to the USEPA and NJDEP actions. The carriers declined to provide coverage because GFC was not a named insured and the policies required consent of the carriers (which was neither sought nor given) to effectuate an assignment. GFC commenced a suit for coverage, and a year later, Givaudan Corporation (then called Givaudan Flavors) assigned its “insurance rights” to GFC.

GFC and the carriers sought summary judgment on the question of whether there had been an effective assignment, i.e., was GFC an insured. The trial court granted the carriers’ motion and dismissed the complaint, finding that the assignment was not merely a transfer of a limited claim but was, in effect, a transfer of the policy without carrier approval.

The Appellate Division reversed, reinstated the complaint and granted GFC’s motion for partial summary judgment, explaining that for occurrence-based policies, “the peril insured is the occurrence itself.” Therefore, “[o]nce the occurrence takes place, coverage attaches even though the claim may not be made for some time thereafter.” So, although a policy cannot be assigned, once a loss occurs, an insured’s claim under a policy may be assigned without the insurer’s consent. This is because the carrier’s risk has not been enlarged by the assignment. Instead, an assignment merely alters the identity of the claimant. The carriers’ “obligation to provide coverage to the party deemed to be an insured under the policies arose at the time of the loss. Although the precise amount of defendants’ liability may not be known, defendants’ obligation to insure the risk in accordance with their respective policies was not altered by the assignment.”

Clearly, this case will pave the way for the transfer of “insurance rights” after the occurrence of events giving rise to coverage, without the need for insurer approval.

N.B.: The California Supreme Court just last week reached the same conclusion in a case involving asbestos claims. A post will follow on the specifics of that decision.

Filed under Insurance, New Jersey, Site Cleanup, Superfund Program

Private Consultants To Oversee NJ Cleanups

By on May 8, 2009

Governor Corzine signed Executive Order No. 140 on May 7, 2009, which will almost certainly shake up the regulatory scene in the Garden State.  Under the new bill, some 19,000 properties, encompassing everything from residential USTs to large industrial facilities, may now be supervised by contractors who are licensed by a new state board.  New Jersey’s new program is modeled after a similar program in Massachusetts, which has increased its cleanup efficiency since it began privatizing cleanups some years ago. Under the MA program, Licensed Site Professionals ("LSPs") are selected and regulated by the Board of Registration of Hazardous Waste Site Cleanup Professionals. Demands for an overhaul of the remediation program in New Jersey began in 2006 after mercury contamination was found at a child care center in Gloucester County.  (So much for the bright idea of housing a day care facility, Kiddie Kollege, in the former thermometer manufacturing plant!).  At the time, NJDEP officials cited staff cuts that hampered the ability of the agency to oversee cleanups and an increase in the average case load of NJDEP project managers.  Of course, not everyone is thrilled about the new law.  Jeff Tittel, director of the New Jersey Sierra Club, believes the law will leave a "polluted legacy" throughout the state and "toxic time bombs" to be discovered by future generations.  But the real issue is how tough the new licensing board is likely to be in setting up the criteria for its LRSP’s and what disincentives will be put in place to discourage LRSP’s from cutting corners.  The New Jersey Sierra Club’s Press Release cautions that this law may have a transformative effect on how the government protects the public’s health.  Certainly, no one can reasonably dispute that the new legislation will be create an employment mini-boom among environmental consultants in New Jersey.  More importantly, the law should result in a re-focusing on polluted sites that have not been given adequate regulatory attention in the past.  Based upon the Massachusetts experience, the new law has the potential to be extremely beneficial for the environment and public health in New Jersey. 

Filed under Executive Order No. 140, Governor Corzine, New Jersey, New Jersey State Litigation, NJDEP, Sierra Club Tagged with