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Herman v. Sunshine Chemical Specialties Inc.

Decided: July 28, 1993.

SANDRA HERMAN, PLAINTIFF-APPELLANT, AND ROBERT HERMAN, HER HUSBAND, PLAINTIFF,
v.
SUNSHINE CHEMICAL SPECIALTIES, INC., A N.J. CORP.; CONCORD HARLEY CORP., Dì IN N.J., A/K/A CONCORD CHEMICAL CORP., A/K/A HARLEY CHEMICAL CORP., A/K/A CONCORD CHEMICAL COMPANY, INC., A/K/A HARLEY CHEMICAL CORP., A DIVISION OF CONCORD CHEMICAL COMPANY, INC., DEFENDANTS. PARKER, MCCAY & CRISCUOLO AND GENERAL ACCIDENT INSURANCE COMPANY, INTERVENORS-RESPONDENTS



On certification to Superior Court, Appellate Division, whose opinion is reported at 257 N.J. Super. 533 (1992).

For reversal and reinstatement -- Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- None. The opinion of the Court was delivered by Pollock, J.

Pollock

This case raises the issue whether plaintiffs in a products-liability action presented sufficient evidence of the financial condition of defendant Sunshine Chemical Specialties, Inc. (Sunshine) to sustain an award of punitive damages. Finding the evidence insufficient, the Appellate Division reversed the judgment and remanded the matter to the Law Division. 257 N.J. Super. 533, 608 A.2d 978 (1992). We granted the petition for certification of plaintiff Sandra Herman (plaintiff or Mrs. Herman), 130 N.J. 398, 614 A.2d 620 (1992), reverse the judgment of the Appellate Division, and reinstate the $400,000 award of punitive damages.

-I-

In February 1985, Sunshine engaged Sandra Herman as an independent contractor to demonstrate and sell its products. During a two-day training period, Sunshine instructed Mrs. Herman about the company's products and personnel. No part of the training concerned the potential hazards or safe use of the products.

Sunshine's best-selling product was Sun-Clean Concentrate (Sun-Clean), an all-purpose cleaner that generated gross sales of $1 million in 1985 and $1.2 million in 1986. The Sun-Clean label stated: "SUN CLEAN is safe to use." In larger print, the label provided that Sun-Clean "CONTAINS NO ACIDS, CAUSTICS[,] AMMONIA, ALIPHATIC OR AROMATIC SOLVENTS." The label represented that Sun-Clean met the "operating standards" of the Occupational Safety and Health Administration (OSHA). It did not warn of the dangers of inhaling Sun-Clean vapors.

Sunshine did not manufacture Sun-Clean. Instead, it purchased in bulk from Harley Chemical Corp. (Harley) a product called "3-D," which Harley colored orange and transferred to one-and five-gallon containers bearing the Sun-Clean label.

Robert Feldman, the president and sole owner of Sunshine, designed the Sun-Clean label by cutting and pasting together the labels from products of other manufacturers. Although Harley had provided to Sunshine a "safety data sheet" that outlined the hazardous ingredients of its products, Feldman either did not know of the sheet or ignored it. The sheet indicated that 3-D contained sodium hydroxide, a caustic soda. In contrast, the Sun-Clean label specifically stated that the product contained no caustics. Harley placed on 3-D a label warning, "Danger . . . . Avoid breathing vapor. Keep container closed. Use with adequate ventilation." The Sun-Clean label, however, did not warn against breathing Sun-Clean vapors. Furthermore, Sunshine did not submit either the label or the product to OSHA for approval, nor did the company consult "OSHA operating standards" to determine whether the product met those standards. Feldman simply had removed the OSHA seal from another label.

Feldman submitted the cut-and-paste label to Robert Solly, the president of Harley. Solly reviewed the label for accuracy. A chemist employed by Sunshine also had the responsibility to review labels. Neither Solly nor the chemist recommended any changes.

While demonstrating Sun-Clean in July 1985, Mrs. Herman suffered a coughing fit. Shortly thereafter she developed a fever and breathing problems. After two weeks she consulted a doctor, who treated her for a suspected respiratory infection. Her respiratory problems continued, and she consulted a second physician and then an allergist, who were likewise unsuccessful in treating her. The doctors then placed her on steroid- and cortisone-based drugs that improved her breathing, but caused her to gain over sixty pounds.

Mrs. Herman continued to work for Sunshine after she became ill. Not until October 1986 did her doctors suspect a connection between her asthma and her work. Mrs. Herman stopped working for Sunshine the next month. In August 1987 her doctors learned that Sun-Clean contained a caustic, sodium hydroxide. The doctors then diagnosed her as suffering from "occupational asthma," meaning asthma not related to allergies but caused by exposure to chemicals in the workplace.

On September 3, 1987, Mrs. Herman and her husband filed a complaint against Sunshine Chemical and Concord Chemical Corp. (Concord), which had purchased Harley. They asserted claims in strict liability, negligence, and breach of express and implied warranty. Later, they amended the complaint to include a claim for punitive damages.

Plaintiffs settled with Concord, and the trial proceeded against Sunshine. At trial, all counsel mistakenly assumed that N.J.S.A. 2A:58C-1 to -7 (the act), concerning product liability and punitive damages, did not apply to the case. Apparently they thought that the act did not apply because the alleged wrongful conduct had occurred before the act's passage. The act, however, provides: "This act shall take effect immediately except that provisions of this act that establish new rules with respect to the burden of proof or the imposition of liability in product liability actions shall apply only to product liability actions filed on or after the date of enactment." L. 1987, c. 197, § 8 (codified as Historical Note to N.J.S.A. 2A:58C-1). Section 8 clearly states that the act applies to all products-liability actions filed after the date of enactment, July 22, 1987. This action was filed on September 3 of that year. The act applies.

In a supplemental brief submitted after oral argument, plaintiff asserts that the parties implicitly agreed that the common law, not the act, should govern this case. Defendants disagree. We cannot resolve the issue on the record, which contains no evidence of any such agreement.

In response to specific questions, the jury returned a verdict finding that Sun-Clean was defective, that the product had harmed Mrs. Herman, that Sunshine had been negligent, and that its negligence had harmed her. The jury also found that Concord had knowingly placed in the stream of commerce the defective product, which also had harmed Mrs. Herman. Apportioning fault eighty percent to Sunshine and twenty percent to Concord, the jury awarded Mrs. Herman $410,000 in compensatory damages and $400,000 in punitive damages. It awarded nothing to Mr. Herman, who, by the time of trial, had separated from Mrs. Herman and was seeking a divorce.

Sunshine unsuccessfully moved for a new trial, arguing in part that Mrs. Herman had not presented sufficient evidence of defendants' financial condition and that the punitive damages were excessive.

General Accident Insurance Company (General Accident), which insured Sunshine, paid to Mrs. Herman the compensatory damages and received a partial warrant for satisfaction. It ...


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