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From Products Liability Law Daily, October 30, 2013

Sophisticated user defense unavailable to asbestos products maker; $14.5 million punitive award constitutional

By Pamela C. Maloney, J.D.

The sophisticated user defense was not available to a manufacturer of asbestos-containing products in an products liability and negligence action brought by a former Navy seaman who developed mesothelioma allegedly as a result of exposure to the manufacturer’s products, a California court of appeal determined (Pfeifer v. John Crane, Inc.October 29, 2013, Manella, N.). According to the court, when a manufacturer provides hazardous goods to a “sophisticated” intermediary that passes the goods to its employees or servants for their use, the supplier is subject to liability for a failure to warn the employees or servants of the hazards, absent some basis for the manufacturer to believe that the ultimate users knew, or should have known, of the hazards.

Background. William Pfeifer used asbestos-containing products manufactured by John Crane, Inc. (JCI), among other companies, both while serving in the U.S. Navy and when working for the U.S. government as a boiler technician after leaving the Navy. The technician and his wife filed negligence, strict liability, and loss of consortium claims against approximately 31 suppliers of asbestos-containing products, seeking both compensatory and punitive damages, all of which settled the claims except JCI.

Following special verdicts in favor of the Pfiefers, the jury awarded damages in the amount of $3,203,580.47 in economic damages (including $1,054,469.47 in past medical expenses, which was reduced after Mr. Pfeifer’s death to $545,703.29), and $4,000,000 in noneconomic damages. The jury also awarded Mrs. Pfeiffer $1,050,000 for loss of past and future consortium. Following the second phase of the trial, the jury awarded $14,500,000 in punitive damages. JCI challenged the verdict, contending that: (1) the trial court erred in rejecting its proffered instruction on the sophisticated user defense; (2) the punitive damages award was not supported by the evidence; and (3) there was insufficient evidence to support the jury’s findings on comparative fault.

Sophisticated user defense. According to its proffered sophisticated user defense, JCI claimed it was not liable for its failure to warn the technician regarding the hazards of asbestos while he served in the Navy because allegedly the Navy had greater knowledge of those hazards than JCI. In other words, JCI argued that employees of a sophisticated user should be deemed, as a matter of law, to be sophisticated users themselves. The court noted that the sophisticated user defense for suppliers, which was traceable to section 388 of the Restatement Second of Torts and implicitly extended to manufacturers under sections 394 and 399 of the Restatement, had been recognized by the California Supreme Court in Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56. In court in Johnson, however, stressed that the inquiry focused on whether the worker knew, or should have known, of the particular risk of harm from the product given rise to the injury, not on the employer’s knowledge.

In rejecting JCI’s attempt to expand the breadth of the sophisticated user defense in Johnson by asking the court to recognize a sophisticated “intermediary” defense, the court recognized that there was a division of authority on the issue of whether an employer-employee relationship could preclude a supplier’s liability for a failure to warn, provided that the relationship involved employee training or experience rendering both the intermediary (the employer) and the employee sophisticated users. In light that division, the court reexamined the decision in Johnson and concluded that the reasoning therein repudiated JCI’s contention. The court stressed that the Johnson decision clearly mandates that when the sophisticated user defense is proffered, the inquiry must focus on what the plaintiff knew or should have known. Thus, to avoid liability, there must be some basis for the supplier to believe that the ultimate user knew or should have known of the product’s hazards. In this case, the evidence showed that JCI provided no warnings about its products hazards during the technician’s term of Navy service and that the technician had no training or knowledge regarding the dangers of asbestos. Also absent was any evidence that JCI had reason to believe that the Navy would have issued warnings to the technician regarding JCI products while he served in the Navy or that it was readily known and apparent to the Navy that the amounts of dust released from JCI’s products were hazardous. Thus, the evidence did not support a reasonable inference that the Navy would warn or otherwise protect the technician from the dangers of JCI’s products.

Punitive damages. The court went on to determine that the technician provided sufficient evidence of malice to support the award of punitive damages. Specifically, the evidence showed that: (1) JCI knew that asbestos dust was hazardous; (2) JCI had taken action to protect its employees from those hazards; (3) JCI’s bonding process never fully encapsulated the asbestos fibers; and (4) JCI never tested its products to determine whether the processes used to replace worn gaskets created dust greater than ordinary background levels. In addition, the amount of the award was not excessive under applicable constitutional standards. The award was comparable in amount to awards against other defendants whose conduct in marketing dangerous products displayed the same high degree of reprehensibility, and the ratio between the compensatory damages and the punitive damages—which were approximately 2.3 times the relevant compensatory damages—was within recognized guidelines. Finally, the absence of civil penalties related to asbestos-based products during the technician’s naval service did not establish that the award of punitive damages was excessive.

Comparative fault findings. JCI also objected to the jury’s findings regarding comparative fault. Specifically, JCI challenged the allocation of zero percentage of fault to the technician and to another supplier of thermal insulation, as well as the 12.5 percent fault allocated to the Navy and its own 70 percent of fault. The court upheld the assessment of fault against both the technician and the other manufacturer because, under the principles of comparative fault, a party’s negligent conduct could be assigned a share of fault only if their negligent conduct was a substantial factor in causing the injuries. The evidence presented supported the jury’s determination that neither the conduct of the technician nor the products supplied by other manufacturer, which produced far less dust than those of JCI, were a substantial factor in causing the injuries. With regard to the allocation of fault to the Navy, the percentage accurately reflected the technician’s period of service. Finally, the jury was allowed to increase JCI’s share of liability based on its determination that the manufacturer’s conduct was more egregious than the Navy’s misconduct.

The case number is: B232315.

Attorneys: Brian P. Barrow (Simon Greenstone Panatier Bartlett ) for William and Anne Pfeifer. John L. Cooper (Farella Braun & Martel) for John Crane, Inc.

Companies: John Crane, Inc.

MainStory: TopStory DefensesLiabilityNews DamagesNews AsbestosNews CaliforniaNews

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