Clarifying two issues frequently seen in asbestos cases, a California Court of Appeals has held that the sophisticated user defense does not automatically apply to employees of a sophisticated user employer, and sufficient evidence of malice, fraud or oppression was produced. Besides deciding these issues, the case of Pfeifer v. John Crane, Inc. Daily Journal 14455 (October 29,2013) discusses the issue of comparative fault with respect to absent co-defendants, including the Navy.
Plaintiff Pfeifer (later decedent) was a boiler tender from 1963-1971 for the Navy and thereafter was a boiler technician for the US Government until 1982. He was diagnosed with pleural mesothelioma in 2009. In 2010, he filed suit against various equipment suppliers and manufacturers based on his extensive work with valves and gaskets during his career. All defendants settled except John Crane, Inc. (JCI), a gasket manufacturer. At trial, judgment was entered against JCI for $7.2 million in compensatory damages and $14,000,000 in punitive damages. JCI was allocated a 70 percent share of comparative fault and found to have acted with malice, oppression or fraud.
Among other issues, JCI appealed on the grounds that there was no substantial evidence to support the finding of 70% comparative fault, the sophisticated user defense was wrongly rejected by the trial court, and there was no substantial evidence to support a finding of punitive damages.
In relying on the Sophisticated User Defense, JCI claimed the Navy and its employees should be considered a sophisticated user of asbestos products. However, the Appellate Court, calling the Navy a “sophisticated user intermediary” who purchased defendant’s goods, said the California Supreme Court in Johnson v. American Standard (2009) 43 Cal 4th 56, while not deciding the issue, “impliedly repudiated it.”
The Court said the intermediary’s sophistication does not alone suffice to avert liability for the supplier’s failure to warn, as the defendant must have reason to believe the intermediary’s sophistication is likely to protect the ultimate user, therefore, the Court rejected JCI’s claim that the intermediary’s sophistication invariably shielded the manufacturer or supplier from liability to the intermediary’s employees.
The Court gave examples of what a defendant could show to support a claim that the sophisticated intermediary’s employee should likewise be considered sophisticated, e.g., the supplier reasonably believed the intermediary would warn the ultimate user, the employees themselves should have known of the dangers in view of their own training, and specific dangers were “readily known and apparent” to the intermediary, such that it would be expected to protect its employees. Since JCI had shown none of these, the Court held that the trial court did not err in rejecting its jury instruction.
The Court also held that there was evidence upon which to base the punitive damage award. During the 1970s, JCI knew asbestos dust was hazardous and took action to protect its own employees from those hazards. It monitored the air in its factories and used controls to suppress dust levels and later prepared safety data sheets for its gaskets warning its own employees about exposure. The evidence also showed JCI knew its products were likely to pose dangers to users but did nothing to warn them. It never tested its gaskets, despite knowing the methods employed by users to replace their gaskets created asbestos dust. Testing by plaintiff’s expert showed the bonding agents in the gaskets did not fully encapsulate the asbestos fibers, but users were given the above-mentioned safety data sheets with warnings only when they asked for them. The Court held this was despicable conduct with an awareness of probable consequences.
The Court went on to hold that two specific defenses would not bar punitive damages: the existence of evidence of compliance by JCI with government safety regulations did not bar an award for the egregious misconduct which these standards were ineffective in preventing, and just because failure to warn users was consistent with industry practices in the 60s and 70s, that did not bar punitive damages.
The malice required for punitive damages was found on the evidence that the defendant handled the safety of its own employees differently from the lack of warning or concern shown to the ultimate users of its products. Look for plaintiff attorneys in the future to focus on this contrast.
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