Pipe Manufacturer Successfully Appeals $15 Million Punitive Damages Award

Court of Appeal of California, Second Appellate District, Division One, January 27, 2021

This matter was filed after the plaintiff, Norris Morgan, was diagnosed with mesothelioma in December 2017.  The complaint alleged that the plaintiff was exposed to asbestos at construction jobsites where he worked in the 1970s and 1980s, including as a construction superintendent from 1979 to 1985 for Spriggs and Company and Bumbarger and Associates in 1985. Among other construction activities, the plaintiff supervised plumbers installing asbestos-cement water and sewer pipe on his worksites.

The matter was tried in October and November 2018, the only remaining defendant at the time of closing arguments was J-M Manufacturing Company (J-MM). After the case was submitted to the jury, J-MM filed a motion for a directed verdict arguing that the plaintiffs had not introduced substantial evidence that the plaintiff had ever been exposed to asbestos supplied by J-MM or that J-MM had acted with fraud, malice, or oppression, which would be required to support a punitive damage award. The trial court denied the motion.

The jury returned a verdict in favor of the plaintiffs against J-MM on November 13, 2018. The jury found J-MM 45 percent liable for the plaintiff’s injuries, and that J-MM “acted with malice, oppression, or fraud in connection with the conduct which caused Plaintiff’s mesothelioma.” The jury awarded $14,270,501 in compensatory damages (later reduced to $7,213,704.39), $15,000,000 in punitive damages and loss of consortium damages of $1,000,000.

On February 14, 2019, J-MM moved the trial court for judgment notwithstanding the verdict and for a new trial. The trial court denied both motions. J-MM appealed.

On appeal, J-MM challenged the trial court’s judgment and rulings on three grounds. First, J-MM argued that there was no evidence that the plaintiff was exposed to pipe supplied by J-MM. Second, J-MM argued that the trial court erred when it declined J-MM’s request for a jury instruction that J-MM was not liable for the conduct of another company, the Johns-Manville Corporation. Finally, J-MM argued that the jury’s punitive damage award was not supported by substantial evidence.

First, J-MM argued that it did not supply any asbestos pipe.  One of the businesses of the Johns-Manville Corporation and its related companies (JMC) was manufacturing and selling asbestos-cement pipe-sometimes called transite pipe. JMC declared bankruptcy in the early 1980s, and sold its asbestos-cement pipe business to two companies that began operations on January 1, 1983: J-M A/C Pipe Corporation (J-M A/C), which manufactured asbestos-cement pipe, and J-MM, which sold asbestos-cement pipe that J-M A/C manufactured. Pursuant to a bankruptcy court order, the JMC assets that J-MM acquired were “free of . . . all present and future liabilities . . . and all claims attributable to periods prior to the transfer which relate . . . to personal injury or property damage allegedly attributable to asbestos-fiber . . . .”

Causation in asbestos cases was reviewed in depth in Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953. “[U]ncertainty frequently exists,” the Supreme Court said, “whether the plaintiff was even exposed to dangerous fibers from a product produced, distributed or installed by a particular defendant.” (Id. at p. 975.) Nevertheless, “plaintiffs [bear] the burden of proof on the issue of exposure to the defendant’s product.” (Ibid.) “If there has been no exposure, there is no causation.” McGonnell v. Kaiser Gypsum Co., Inc., (2002) 98 Cal.App.4th 1098, 1103.

On appeal from an order denying a motion for judgment notwithstanding the verdict, our standard of review is “whether any substantial evidence-contradicted or uncontradicted-supports the jury’s conclusion.” Sweatman v. Department of VeteransAffairs (2001) 25 Cal.4th 62, 68. We may not reweigh evidence or consider witnesses’ credibility. In re Coordinated Latex Glove Litigation (2002) 99 Cal.App.4th 594, 606. Rather, we view the evidence in the light most favorable to the jury’s verdict, we disregard conflicting evidence, and we draw all legitimate inferences in favor of the verdict. Webb v. Special Electric Co., Inc. (2016) 63 Cal.4th 167, 192.

J-MM argued that the plaintiffs did not meet their burden, namely that there was not substantial evidence adduced at trial that the plaintiff had ever come into contact with any J-MM product as opposed to a JMC product. J-MM’s argument rests on its assertion that “[b]oth [JMC] and J-MM sold asbestos cement pipe marked ‘J-M Transite.’” JMC ceased operations in December 1982 and J-MM began operating on January 1, 1983. Plaintiff testified that he continued to be exposed to “J-M Transite” pipe for all of 1983, 1984, 1985, 1986, and whatever time in 1987 he continued to work at Bumbarger. During all of that time, the evidence established that there was only one supplier of “J-M Transite” pipe, J-MM. Therefore, this court found that the plaintiff’s testimony was sufficient to support the jury’s conclusion that the plaintiff was exposed to asbestos in products sold or supplied by J-MM.

As for its second argument, J-MM contended that the trial court erred when it failed to provide special jury instructions. At trial, J-MM requested the following special jury instruction:

“In this case, the following is true: Johns-Manville and J-M Manufacturing Company, Inc. are not the same entity. In late 1982, J-M Manufacturing Company, Inc. purchased certain portions of the pipe operations of Johns-Manville and began to do business on January 1, 1983. J-M Manufacturing Company, Inc. is not liable to Plaintiffs for any exposure to asbestos as a result of work performed with or around Johns-Manville products before January 1, 1983. No other proof is needed and you must accept these facts I have read to you as true in this trial.”

“A party is entitled upon request to correct, non-argumentative instructions on every theory of the case advanced by him which is supported by substantial evidence. The trial court may not force the litigant to rely on abstract generalities, but must instruct in specific terms that relate the party’s theory to the particular case.” Soule v. General MotorsCorp. (1994) 8 Cal.4th 548, 572. The giving of an instruction argumentative in form,” however, “is error.” Slaytonv. Wright (1969) 271 Cal.App.2d 219, 238. An instruction that goes too elaborately into the particular facts relied on by one of the parties is an argumentative instruction.

J-MM argued that the proposed instruction was “a neutral recitation regarding the binding impact of a court order on the scope of J-MM’s liability.” The trial court viewed the instruction as an “invit[ation] . . . to bolster [J-MM’s] closing argument by underscoring certain undisputed facts.” Indeed, as the trial court pointed out in its post-trial ruling, J-MM argued at the parties’ jury instruction conference that “these are not facts in dispute in any way, shape or form.” The trial court responded that “if it is undisputed, then you can argue it. But in the absence of a stipulation, I’m not going to instruct the jury as to particular facts.” On appeal, the court agreed with the trial court’s analysis.

Finally, J-MM argued that the evidence before the jury was insufficient to support the jury’s punitive damage award. The court agreed.

“In an action for breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant. [¶] . . . An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.” Civ. Code, 3294, subds. (a), (b).

J-MM argued that there is no evidence in the record that a J-MM officer, director, or managing agent authorized or ratified any conduct. The plaintiff did not argue that there is evidence identifying any act of any particular J-MM officer, director, or managing agent. The plaintiff’s argument was 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.

There is no requirement that the evidence establish that a particular committee or officer of the corporation acted on a particular date with “malice.” A corporate defendant cannot shield itself from liability through layers of management committees and the sheer size of the management structure. It is enough if the evidence permits a clear and convincing inference that within the corporate hierarchy authorized persons acted despicably in ‘”willful and conscious disregard of the rights or safety of others.” Romo v.Ford Motor Co. (2002) 99 Cal.App.4th 1115.

The Romo court went on to explain that a plaintiff can satisfy the “managing agent” requirement “through evidence showing the information in possession of the corporation and the structure of management decision making that permits an inference that the information in fact moved upward to a point where corporate policy was formulatedThese inferences cannot be based merely on speculation, but they may be established by circumstantial evidence, in accordance with ordinary standards of proof.” Romo, supra, 99 Cal.App.4th at p. 1141, italics added. The court explained that “[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.” (Ibid.)

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 the court found that did not happen here.

Therefore, the judgment is reversed with respect to the jury’s punitive damage award. The trial court’s judgment was affirmed in all other respects.