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From Products Liability Law Daily, July 16, 2015

Tobacco maker cannot rely on toxic tort settlement agreement as defense to intentional tort claims

By Pamela C. Maloney, J.D.

A release and covenant not to sue concurrent tortfeasors agreed to in a toxic tort case by the administratrix of a smoker who died from lung cancer did not, by operation of New York law, bar intentional tort claims of fraudulent concealment and conspiracy to commit fraudulent concealment brought against tobacco companies to recover for that same injury, a Florida court of appeal ruled. However, the strict liability and negligence claims against the tobacco companies were barred under the terms of a settlement agreement (Philip Morris USA, Inc. v. Skolnick, July 15, 2015, Gross, J.).

Background. This is an Engle progeny case in which Beatrice Skolnick recovered compensatory damages from two tobacco companies—Philip Morris USA, Inc. and R.J. Reynolds Tobacco Company—for the wrongful death of her husband from lung cancer allegedly caused by smoking. Although the jury found for Skolnick on her product liability and negligence claims, it returned a verdict for the tobacco companies on her claims of fraudulent concealment and conspiracy to commit fraudulent concealment.

Settlement agreement. Prior to trial, the tobacco companies had moved for summary judgment on their affirmative defense that Skolnick’s claims were barred by a covenant not to sue contained in a settlement agreement she had signed as part of a class action lawsuit against Verizon Communications Inc. and other defendants responsible for the operation of a Sylvania Plant. The underlying complaint in that action had charged the defendants with releasing toxic emissions into the area and that these emissions had caused her husband to develop colon and lung cancer. Summary judgment was denied, the jury verdict was entered, and the parties filed cross-appeals.

Effect of settlement on intentional torts claims. At issue was whether the release and covenant-not-to-sue provisions barred Skolnick from bringing her tobacco suit because both were predicated on her husband’s death from lung cancer. Addressing the intentional tort claims, the court explained that New York public policy precludes an exculpatory clause, such as a covenant not to sue, from applying to intentional torts. The egregious nature of the fraudulent concealment and conspiracy to commit fraudulent concealment at issue in this case rendered the release and covenant not to sue in the underlying settlement agreement inapplicable to these torts, the court declared.

Effect of settlement on strict liability and negligence claims. The strict liability and negligence claims presented a separate issue. The court explained that New York’s “flat bar” rule governed the interpretation of the release and covenant not to sue at issue because the language used in the provision was general and did not identify specific defendants. Under the “flat bar” rule, a general release and covenant not to sue that discharged all other parties who might be liable for damages in addition to a named tortfeasor is sufficient to release a joint tortfeasor not named or specifically identified in the release and covenant not to sue. The result in this case was that Skolnick was barred from suing anyone who would be considered a joint or concurrent tortfeasor, whether known or unknown. The court clarified that the tobacco companies would be concurrent tortfeasors with those in the toxic tort case because their independent tortious acts combined to cause the same injury—Mr. Skolnick’s lung cancer. As such, the tobacco companies fell under the umbrella of the covenant not to sue.

The court rejected Skolnick’s argument that the covenant not to sue was prospective only and did not apply to her lawsuit which, she argued, related back in time to when the Engle class action originally was filed. Skolnick’s argument overlooked the mechanics of joining the Engle class. The covenant not to sue was signed in 2004, years before the Florida Supreme Court decertified the Engle class. Following decertification, the Engle-progeny plaintiffs were required to take the further step of filing an individual action, which is precisely what Skolnick agreed not to do when she executed the settlement agreement in the toxic tort case. Hence, her strict liability and negligence claims against the tobacco companies were barred by the settlement agreement in the toxic tort case. And the verdict on those claims was reversed.

Statute of repose. The court also determined that the trial court erred in applying the court of appeal decision in Philip Morris v. Hess, which held that fraud claims must begin within 12 years after the date of the commission of the alleged fraud. The Florida Supreme Court had reversed Hess, holding instead that the tobacco companies’ last act or omission triggered Florida’s statute of repose [see Products Liability Law Daily’s April 3, 2014 analysis]. Based on that finding, it was not necessary for purposes of the repose statute that the smoker relied on the allegedly fraudulent act during the 12-year repose period. Because the trial judge instructed the jury based on the court of appeal’s erroneous precedent and because it could not be determined if that erroneous instruction contributed to the defense verdict on the intentional tort claims, the verdict in favor of the tobacco companies on those claims was reversed and remanded.

The case is No. 4D13-4696.

Attorneys: Amir C. Tayrani (Gibson, Dunn & Crutcher, LLP), Joseph H. Lang, Jr. (Carlton Fields Jorden Burt, PA), and Peter M. Henk (Shook Hardy & Bacon, LLP) for Philip Morris USA, Inc. Gregory G. Katsas (Jones Day) for R.J. Reynolds Tobacco Co. David J. Sales (David J. Sales, PA) for Beatrice Skolnick.

Companies: Philip Morris USA, Inc.; R.J. Reynolds Tobacco Co.

MainStory: TopStory ClassActLitigationNews TobaccoProductsNews FloridaNews

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