LOS ANGELES (Legal Newsline) - A California appeals court has sharply limited the ability to obtain punitive damages against corporations, ruling in an asbestos lawsuit that the plaintiff had failed to identify specific employees who engaged in behavior deserving such punishment.
The plaintiff in Morgan v. J-M Manufacturing, a construction worker afflicted with fatal mesothelioma, sued former units of bankrupt asbestos manufacturer Johns-Mansville over claims it had sold asbestos-containing concrete pipe that caused his illness. The jury awarded the late Norris Morgan and his widow $15.3 million in compensatory damages and another $15 million in punitives.
The defendant company argued the Morgans weren’t entitled to punitive damages because they failed to show any particular officer or executive authorized the type of conduct meriting exemplary damages. Plaintiff lawyers at Simmons Hanly Conroy argued the entire organization was at fault, so they didn’t need to introduce clear and convincing evidence that an actual human employee was to blame.
The Court of Appeal for the Second District rejected that reasoning in a Feb. 18 decision, dealing a blow to similar arguments that are routinely made against companies that made or sold asbestos-containing products decades earlier.
“That the defendant is a large company does not relax a plaintiff’s burden of proof to the point Morgan argues here,” Justice Victoria Chaney wrote.
The decision doesn’t give large corporations with complex layers of management a free ride, the court explained. Plaintiffs can still present circumstantial evidence that authorized persons within the corporate hierarchy “acted despicably in `willful and conscious disregard of the rights or safety of others,’” the court ruled, citing a 2003 California appellate decision, Romo v. Ford Motor Co. They need to present enough such evidence to meet the clear and convincing standard of civil jury trials, the court said.
The decision is a victory for corporate defendants generally and not just companies facing asbestos claims, said Don Willenburg, a partner with Gordon & Rees in Oakland, who commented on the decision in a recent blog post.
Willenburg said plaintiff lawyers will likely cite the decision to justify more intrusive discovery to obtain evidence of wrongdoing. But even more discovery might not uncover enough evidence to support claims over products that were discontinued years or decades ago, he said.
“I think the decision will be helpful for many defendants, even for recent behavior. Regardless of when the conduct occurred, plaintiffs have to show that one or more individuals who occupy one of those roles also had the requisite knowledge and intent,” Willenburg said in an e-mailed comment.
“They cannot just blame `the organization’ or say `they must have known.’”
The decision prevents "unfair" punitive damages awards against companies in cases involving the actions of employees who do not represent them in an official capacity like a director or managing agent does, Willenburg said.
"The larger and more decentralized a corporation's operations, the more likely this new decision will come into play," he added.