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Fischer v. Johns-Manville Corp.

Decided: July 31, 1986.

JAMES FISCHER AND GENEVA FISCHER, PLAINTIFFS-RESPONDENTS,
v.
JOHNS-MANVILLE CORPORATION, JOHNS-MANVILLE PRODUCTS CORPORATION, JOHNS-MANVILLE SALES CORPORATION, CANADIAN JOHNS-MANVILLE ASBESTOS, LTD., CANADIAN JOHNS-MANVILLE CO., LTD., CANADIAN JOHNS-MANVILLE MINING COMPANY, LTD., DEFENDANTS-APPELLANTS, AND BELL ASBESTOS MINES, LTD., DEFENDANT



On certification to the Superior Court, Appellate Division, whose opinion is reported at 193 N.J. Super. 113 (1984).

For affirmance -- Justices Clifford, Handler and Pollock. For reversal -- Justices O'Hern and Garibaldi. The opinion of the Court was delivered by Clifford, J. O'Hern, J., dissenting.

Clifford

Plaintiff James Fischer and Geneva Fischer, his wife, brought suit against multiple defendants seeking to recover damages for lung diseases suffered by James Fischer as a result of his exposure to asbestos. The complaint sought compensatory and punitive damages from defendants-suppliers of asbestos under negligence, breach of warranty, and strict products liability theories. Plaintiffs elected to press at trial only the strict liability cause of action for compensatory damages, while at the same time they sought punitive damages. There were dismissals of numerous defendants before and during trial, leaving at the close of trial only the Johns-Manville defendants*fn1 (hereinafter Johns-Manville or defendant) and Bell Asbestos Mines, Ltd. (Bell).

The case was tried to a jury. At the close of trial, the jury awarded compensatory damages of $86,000 to James Fischer and $5,000 to Geneva Fischer. The jury found Johns-Manville eighty percent liable and Bell twenty percent liable. The jury also awarded James Fischer $300,000 in punitive damages, of which $240,000 was assessed against Johns-Manville and $60,000 against Bell. Both defendants appealed and the Appellate Division affirmed in its entirety the judgment of the trial court. 193 N.J. Super. 113 (1984).

In the court below Johns-Manville did not dispute the award of compensatory damages, nor did it "challenge either the amount of the punitive damages allowed or the trial judge's instructions respecting the standards which the jury was to apply in considering an award of punitive damages." 193 N.J. Super. at 120. Rather the contentions were that punitive damages are "not allowable at all" in strict product liability actions, ibid, and that even if they are, the proofs were inadequate to meet the necessary standard of "outrageous conduct in deliberate disregard of the rights of others," ibid, both of which contentions the Appellate Division rejected.

We granted certification, 97 N.J. 598 (1984), after which defendant Bell withdrew its appeal. In addition to its general argument that the case before us is one of great public importance, Johns-Manville's petition urges that the Appellate Division's determination runs counter to decisions by New Jersey federal district courts and thus requires clarification. As well it repeats the arguments made below, that (1) punitive damages "cannot conceptually flow" from a claim based on strict liability for failure to warn, (2) punitive damages "serve no purpose" in asbestos mass litigation, and (3) the record does not support a finding of punitive damages against Johns-Manville. As did the Appellate Division, we reject those contentions. We therefore affirm.

I

A full understanding of the background of this case requires a fairly extensive repetition of the pertinent facts set out in Judge Pressler's comprehensive opinion for the Appellate Division.

James Fischer worked for Asbestos Limited in Millington, Morris County, from 1938 until 1942, and then again in 1945. During his employment his varied duties included bagging asbestos fiber, grinding asbestos ore into fiber, and mixing asbestos fibers with other materials for the manufacture of

insulation materials. From 1942 through 1945 and from 1946 through 1947 Fischer toiled as a farm worker; in 1947 he took employment with National Starch Chemical Company in Plainfield. His only exposure to asbestos was while working at Asbestos Limited. During that time he received no cautionary warnings about any dangers of asbestos, nor was he instructed in the safe handling of asbestos by either his employer or the suppliers of asbestos materials, identified at trial as Johns-Manville and Bell.

Fischer suspected that he might be suffering from asbestos-related problems when in 1977 his pulmonary disease first manifested itself. His suspicions were confirmed in 1978, at which time he was given medication that ultimately produced such side effects as diabetes, rheumatoid arthritis, and osteoporosis. His progress thereafter continued downhill: in 1979 he entered the hospital for treatment of bronchitis with borderline pneumonia; although he returned to work thereafter, he experienced a heart attack in February 1980, when he was 61 years old. He has not worked since. His treating physician attributed his total disability as due 30% to chronic obstructive lung disease traceable to smoking, 60% to asbestos exposure and the side effects of the medication prescribed for pulmonary problems, and 10% to the heart condition.

The Appellate Division, focusing on what Johns-Manville knew and when it knew it, narrowed the issue to defendant's "actual knowledge." 193 N.J. Super. at 117. It viewed the "essential controversy" as whether defendants "did in fact have knowledge of the hazards of asbestos during the time of plaintiff's exposure some 45 years ago" -- "essential," because plaintiffs' punitive damage claim hinged on their contention that "defendants knew of these hazards as early as the 1930's and had made a conscious business decision to withhold this information from the public." Ibid. In particular, plaintiffs contended that defendants, "with full knowledge of the risks, deliberately chose not to give those warnings to users of the product, which might have enabled them to obtain protection

from prolonged exposure." Ibid. It was this conduct that plaintiffs labelled as "outrageous and flagrant," in disregard of "the substantial health risks to which defendants subjected the public * * *." That conduct therefore "justified the imposition of punitive damages." Ibid.

The Appellate Division summarized the evidence in support of those allegations as follows.

Johns-Manville, in its answers to interrogatories, which were read to the jury, admitted that

[t]he corporation became aware of the relationship between asbestos and the disease known as asbestosis among workers involved in mining, milling and manufacturing operations and exposed to high levels of virtually 100% raw asbestos fibers over long periods of time by the early 1930s. The corporation has followed and become aware of the general state of the medical art relative to asbestos and its relationship to disease processes, if any.

In response to plaintiffs' requests for admissions, also read to the jury, it admitted that in the early 1940's it knew that asbestos "was dangerous to the health" of those industrial workers who were exposed to excessive amounts of the material. Plaintiffs, moreover, produced as a witness Dr. Daniel C. Braun, president of the Industrial Health Foundation, a research organization which develops, accumulates and disseminates information about occupational diseases. Dr. Braun testified that Johns-Manville has been a member of the Foundation since 1936. He also testified that since 1937 the Foundation has sent to its members a monthly digest of articles appearing in scientific journals which relate to occupational disease. Relevant portions of the digests, which were admitted into evidence, included references to eleven scientific articles published between 1936 and 1941 documenting the grave pulmonary hazards of exposure to asbestos and discussing measures which could be taken to protect workers. Plaintiffs also proved that as early as 1933 claims were being made against Johns-Manville by asbestos workers, and in November of that year the Executive Committee of its Board of Directors passed a resolution authorizing the president of the corporation

to enter into negotiations for the settlement of any actions now pending or which may be hereafter brought against the Corporation by former employees founded upon alleged injury or disease resulting from their employment by the Corporation and, in his discretion, to settle any such cases upon such terms as he shall, in his uncontrolled discretion, deem advisable and for the best interest of the Corporation.

In December of that year high-level representatives of Johns-Manville met with officials of Raybestos-Manhattan, another major asbestos supplier, to discuss steps which the industry as a whole might take to reduce employee risk. It appears, however, that Johns-Manville never did arrange for or participate in any industry-wide meetings on the subject. The minutes of that 1933 meeting

also confirm the participants' view that at least for the time being "our past policy of keeping this matter confidential is to be pursued."

Perhaps most damning of all is the so-called Sumner Simpson correspondence of 1935 and 1941. Simpson was president of Raybestos. In October 1935, he received a letter from a Miss Rossiter, editor of the trade periodical Asbestos, suggesting that despite Simpson's earlier requests, made "for certain obvious reasons," that articles relating to asbestosis not be published, perhaps the time had come to print a positive article about industry efforts to reduce the risk in order "to combat some of the rather undesirable publicity given to it [asbestosis] in current newspapers." Simpson thereupon sent a copy of the letter to Johns-Manville's secretary, Vandiver Brown, expressing his opinion that "the less said about asbestos, the better off we are." Brown's reply stated in part:

I quite agree with you that our interests are best served by having asbestosis receive the minimum of publicity. Even if we should eventually decide to raise no objection to the publication of an article on asbestosis in the magazine in question, I think we should warn the editors to use American data on the subject rather than English. Dr. Lanza has frequently remarked, to me personally and in some of his papers, that the clinical picture presented in North American localities where there is an asbestos dust hazard is considerably milder than that reported in England and South Africa.

Some seven years later, in 1941, Brown wrote to Simpson regarding Miss Rossiter's proposal to include in a forthcoming issue of Asbestos a review of a book apparently linking asbestos exposure with pneumoconiosis. Noting that "a number of her subscribers would dislike an article on this subject in the trade magazine of the Asbestos Industry," Brown expressed the view that as a result of his communications with Miss Rossiter, "I am inclined to believe she will omit any review of the book in question."

Finally, plaintiffs' attorney read into evidence excerpts of the deposition testimony of Kenneth W. Smith, a physician who started to work for Johns-Manville in 1944 and eventually became Medical Director of its Canadian corporation. Dr. Smith testified that from the beginning of his employment he saw persons with asbestosis "on a regular and frequent basis" and frequently made recommendations that such employees receive job reclassifications which would remove them from continued exposure to asbestos dust. [193 N.J. Super. at 117-20.]

The court below held that in respect of the punitive damages claim, the proofs recited above fully supported plaintiffs' factual contentions and the jury's acceptance of them. 193 N.J. Super. at 117. On this appeal Johns-Manville's position, succinctly stated, is that the punitive damages award against it is legally impermissible, ill-advised as a matter of public policy in litigation of this nature, and factually unwarranted.

II

The "legally impermissible" argument rests on an asserted theoretical inconsistency between strict liability and punitive damages, which would preclude punitive damage claims when liability for compensatory damages is founded on strict products liability doctrine, if not in all situations at least in asbestos, strict liability lawsuits. We hold that there is no per se legal bar to pursuing a strict liability, failure-to-warn claim and a punitive damage claim in the same case. For this purpose there is no reason to distinguish asbestos litigation from other strict products liability actions. A brief examination of the development and purposes of strict products liability and punitive damages may illuminate the nature of their differences and clarify our holding that those differences do not create a bar to an award of punitive damages in a failure-to-warn, strict products liability case.

We trace current notions of strict products liability both to principles of warranty, a "freak hybrid born of the illicit intercourse of tort and contract," Prosser, "The Assault Upon The Citadel," 69 Yale L.J. 1099, 1126 (1960), and to tort strict-liability theory, found primarily in cases involving trespass or nuisance. For personal injuries arising from a breach of warranty, "strict liability is imposed upon the maker or seller of the product. Recovery of damages does not depend upon proof of negligence or knowledge of the defect." Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 372 (1960). For its part, strict liability in tort rests on the notion that certain activities that create danger must, regardless of their reasonableness, "pay [their] own way in the event [they] actually cause[ ] damage[ ] to others." Berg v. Reaction Motors Div., 37 N.J. 396, 410 (1962).

From these beginnings there evolved the doctrine of strict products liability as we know it today. The doctrine of strict liability in tort imposes liability for injury to another's person or property without any consideration of the defendant's intent to

commit the act or cause the injury, or of his moral blameworthiness. Although strict liability in tort has sometimes been referred to as "liability without fault," the expression "liability without moral blame" is more accurate. The "moral blame" connotation given to fault in the criminal law has little application in the law of torts. "There is a broader sense in which 'fault' means nothing more than a departure from a standard of conduct required of a person by society for the protection of his neighbors." W. Prosser and W. Keeton, The Law of Torts 535 (5th ed. 1984), quoted in Suter v. San Angelo Foundry & Mach. Co., 81 N.J. 150, 162 (1979).

[The] contention that liability in strict tort precludes consideration of a defendant manufacturer's fault is highly dubious. In fact, rather than dispensing with the notion of fault from products liability law, strict tort theory expands it by extending the legal consequences of fault to the "innocent" manufacture of defective products in a manner analogous to negligence per se.

[Owen, "Punitive Damages in Products Liability Litigation," 74 Mich.L.Rev. 1257, 1269 (1976) (footnotes omitted) (hereinafter Owen I).]

We have previously held that a defendant found liable under strict products liability theory will be considered at fault for purposes of applying the Joint Tortfeasors Contribution Law, N.J.S.A. 2A:53A-1 to -5. Suter, supra, 81 N.J. at 162-63; see also Cartel Capital Corp. v. Fireco of New Jersey, 81 N.J. 548, 566-67, 570 (1980) (total relevant fault was that of two defendants, one liable for production and distribution of a defective product, one liable for its negligent servicing of the product and its role in the chain of distribution).

Although the emphasis in strict products liability cases is on the safety of the product rather than on the manufacturer's conduct, e.g., Feldman v. Lederle Labs., 97 N.J. 429, 450 (1984), when, as here, the defect in the product consists of a failure to warn (specifically, defendant's failure to warn plaintiff James Fischer of the dangers in working with the asbestos ore and fiber that Johns-Manville supplied to Fischer's employer), "reasonableness of the defendant's conduct is a factor in determining liability." Id. at 451. But the appraisal of that reasonableness

is made, in a failure-to-warn case, on the basis of a hypothetical element, an assumed fact. As Feldman explains,

[t]he question in strict liability design-defect and warning cases is whether, assuming that the manufacturer knew of the defect in the product, he acted in a reasonably prudent manner in marketing the product or in providing the warnings given. Thus, once the defendant's knowledge of the defect is imputed, strict liability analysis becomes almost identical to negligence analysis in its focus on the reasonableness of the defendant's conduct. [97 N.J. at 450 (emphasis added).]

The quoted passage both demonstrates the limited extent to which negligence analysis creeps into our failure-to-warn, strict products liability law, and illuminates the contrasting approaches of strict liability and negligence theories. As trenchantly observed in Freund v. Cellofilm Properties, Inc., 87 N.J. 229 (1981), in the course of Justice Handler's exegesis on the difference between the two approaches, "under strict liability, the seller's knowledge [of the product's propensity to injure as it did] is presumed * * *. In negligence cases, such knowledge must be proved; the standard is what the manufacturer 'knew or should have known.'" Id. at 239 (quoting Phillips v. Kimwood Mach. Co., 269 Or. 485, 525 P. 2d 1033 (1974)). See also O'Brien v. Muskin Corp., 94 N.J. 169, 181-84 (1983) (risk-utility analysis to evaluate product's safety is sometimes phrased to inquire whether reasonable manufacturer, fully aware of dangers posed by product, would have manufactured and marketed it as he did).

As is obvious from the foregoing, although juries are asked in failure-to-warn cases to assess the reasonableness of a defendant's conduct, to prove a prima facie case of strict products liability a plaintiff need not introduce evidence relating to a manufacturer's or distributor's conduct, except to establish that the defendant did in fact put the offending article into the stream of commerce. This is in contrast to the quality of proofs required to establish a claim for punitive damages, in which a great deal must be shown about a defendant's conduct. "Punitive or exemplary damages are sums awarded apart from compensatory damages and are assessed when the wrongdoer's

conduct is especially egregious." Leimgruber v. Claridge Assocs., Ltd., 73 N.J. 450, 454 (1977); see also Nappe v. Anschelewitz, Barr, Ansell & Bonello, 97 N.J. 37, 48 (1984) (quoting Leimgruber v. Claridge Assocs., supra); Restatement (Second) of Torts § 908(1) (1979) (punitive damages awarded for outrageous conduct).

The type of conduct that will warrant an award of punitive damages has been described in various ways. The conduct must be "wantonly reckless or malicious. There must be an intentional wrongdoing in the sense of an 'evil-minded act' or an act accompanied by a wanton and willful disregard of the rights of another." Nappe, supra, 97 N.J. at 49 (citations omitted). "[T]he requirement may be satisfied upon a showing that there has been a deliberate act or omission with knowledge of a high degree of probability of harm and reckless indifference to consequences." Berg v. Reaction Motors, supra, 37 N.J. at 414. However one describes the conduct that will justify punitive damages, one thing is clear: "The key to the right to punitive damages is the wrongfulness of the intentional act." Nappe, supra, 97 N.J. at 49.

As should now be apparent, the proofs needed to establish a prima facie case of failure-to-warn, strict products liability differ markedly from the proofs that will support an award of punitive damages. Despite their differences -- one going to the theory of liability, the other bearing on the form and extent of relief -- they are not mutually exclusive nor even incompatible. There is no reason they cannot be litigated together. We agree with defendant's premises: strict products liability proofs center on the product; punitive damages proofs center on a defendant's conduct. We reject as wholly unwarranted the conclusion defendant draws -- that these differences preclude punitive damages claims in failure-to-warn, strict product liability cases.

Defendant places special reliance on our decision in Beshada v. Johns-Manville Prods. Corp., 90 N.J. 191 (1982). In that strict-liability, failure-to-warn, asbestos case, this Court held

that the "state-of-the-art" defense was unavailable to the defendants. That defense would permit a defendant to demonstrate that given the scientific, technological, and other information available at the time of manufacture or distribution, it could not have known of the dangers of the product. Feldman v. Lederle Labs., supra, 97 N.J. at 452. Thus the effect of the "state-of-the-art" defense is to permit a defendant to rebut the presumption of knowledge of its product's harmful propensities, not by showing merely its own lack of knowledge but rather by proving the impossibility of knowledge, even by experts in the field. Ibid.

Under the holding of Beshada a defendant is precluded and a plaintiff is relieved, on the liability aspect of an asbestos, strict-liability, failure-to-warn case, from introducing evidence relating to a defendant's actual knowledge or the state of knowledge in the asbestos field at the time of distribution. That principle, however, does not render the evidence inadmissible for all purposes. Hence we hold that in a strict-liability, failure-to-warn case involving exposure to asbestos or asbestos products, plaintiffs are not precluded from introducing evidence relating to defendants' knowledge or conduct as it may be relevant to other aspects of the case, including punitive damages.

In addition to those evidential differences, strict products liability and punitive damages are different in purpose and in the policies each seeks to promote. "All civil doctrines are shaped with a view toward setting and enforcing rules of behavior. * * * [C]ivil law has both 'reparative' [providing money substitutes for losses] and 'admonitory' [discouraging repetition of wrongful conduct and warning others who are inclined to engage in similar conduct] functions." Mallor and Roberts, "Punitive Damages: Toward a Principled Approach," 31 Hastings L.J. 639, 645, 647 & n. 56 (1980) (hereinafter Mallor and Roberts).

The overriding goal of strict products liability is to protect consumers and promote product safety. Manufacturers, by the act of marketing their products, are made responsible to the public for injuries caused by those products -- the "reparative" function. See O'Brien v. Muskin Corp., supra, 94 N.J. at 180. Economic policies underlie the legal theory. Manufacturers are usually the "cheapest cost-avoiders," Suter v. San Angelo Foundry & Mach. Co., supra, 81 N.J. at 173-74, and have the ability to spread the cost of losses caused by dangerous products. It is in furtherance of these policies that plaintiffs' burdens have been reduced. Plaintiffs are relieved, in strict products liability cases, of the burden of establishing defendants' negligence and knowledge or awareness of dangers.

Punitive damages, on the other hand, serve to express the community's disapproval of outrageous conduct -- the "admonitory" function. Punitive damages are determined "from the perspective of the defendant rather than of the plaintiff." Cappiello v. Ragen Precision Indus., Inc., 192 N.J. Super. 523, 532 (App.Div.1984) (quoting Bartolo v. Boardwalk Regency Hotel Casino Inc., 185 N.J. Super. 540, 544 (Law Div. (1982)). They have been described as "a sort of hybrid between a display of ethical indignation and the imposition of a criminal fine." Cabakov v. Thatcher, 37 N.J. Super. 249, 259 (App.Div. 1955) (quoting Haines v. Schultz, 50 N.J.L. 481, 484 (Sup.Ct. 1888)). They are awarded to punish the wrongdoer, and to deter both the wrongdoer and others from similar conduct in the future. E.g., Nappe, supra, 97 N.J. at 48-49; Leimgruber v. Claridge Assocs., supra, 73 N.J. at 454. "The doctrine of punitive damages survives because it continues to serve the useful purposes of expressing society's disapproval of intolerable conduct and deterring such conduct where no other remedy would suffice." Mallor and Roberts, supra, 31 Hastings L.J. at 641.

As with the differing proofs required for strict liability and punitive damages, the policies behind them, although differing from one another, are not incompatible. We disagree with

Justice O'Hern's assertion "that there is a strong doctrinal inconsistency in permitting a punitive damages claim in an action based on strict products liability. Post at 677. In fact, in products liability cases we believe punitive damages can complement strict liability. One court has defined punitive damages as a "sword" to be used with the "shield" of compensation provided by strict liability. Thiry v. Armstrong World Indus., 661 P. 2d 515, 517 (Okla.1983). In some cases punitive damages will provide the incentive necessary to encourage plaintiffs to pursue a manufacturer who engages in a "deliberate act or omission with knowledge of a high degree of probability of harm and reckless indifference to consequences," Berg, supra, 37 N.J. at 414, when the compensatory award for those harmful consequences would be outweighed by prohibitive costs of litigation. See also W. Prosser and W. Keeton, Law of Torts, supra, § 2 at 12 (punitive damages can remedy denial of compensation for actual expenses of litigation and serve as an incentive to seek redress for "a long array off petty cases of outrage and oppression").

Additional support for allowing punitive damages in strict products liability actions may be found in the availability of alternative theories of liability in products cases. Plaintiffs may pursue products claims not only under principles of strict liability but also under theories of negligence or intentional tort. No one would argue that in either of the latter instances a plaintiff would be barred from seeking punitive damages. Hence to allow punitive damages in products cases based on these theories but disallow them under strict liability would create an unnecessary and unwelcome anomaly in our law. The right to recover punitive damages cannot sensibly, in this day and age, be made to turn on the form of pleading -- a truism recognized by our learned judicial colleagues on the federal trial bench in New Jersey, albeit later by some ...


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