The Missouri Court of Appeals, Eastern District, on May 2, 2017, affirmed a $10 million dollar punitive damages verdict, as well as a $1.5 million actual damages verdict, against Crane Co. in Poage v. Crane Co., No. ED103953 (Mo. App. E.D. 2017). This case is significant because the Appellate Court sought to clarify the standards for the submission of a claim to the jury for punitive damages in a toxic tort/ products liability case. This opinion could serve as a blueprint for claims against products manufacturers/distributors, especially if there is a dispute as to what evidence must be in the record to support the submissiblity of a claim for punitive damages.
The factual background for the case is relatively simple. The plaintiff’s decedent, James Poage, served in the US Navy, and from 1955 to 1958 was stationed onboard the World War II era ship the USS Haynsworth. Part of Poage’s duties as a Machinist was to help with upkeep on the various valves and pumps on the USS Haynsworth. His duties also required removing old gaskets and packing on valves, including Crane valves, and replacing the old gaskets with new gaskets. Plaintiff elicited testimony from a shipmate who described how he did these procedures for 4 years, and that the decedent did the same duties (although the Court’s Opinion does not indicate that the decedent ever specifically worked with Crane valves or gaskets). It was alleged that the valves, including the gaskets and packing used on them, were supplied by Crane. Plaintiff Jane Poage alleged these products released asbestos dust during their repair and replacement, which the decedent James Poage inhaled. He eventually developed and died from mesothelioma. Mrs. Poage sought damages under two theories: (1) strict liability and (s) negligence, both of which were based on defective design and failure to warn. The jury returned a verdict of $1.5 million compensatory damages (later reduced to $822,250 to account for settlements from other defendants) and $10 million in punitive damages. In the Opinion, the Missouri Court of Appeals, Eastern District, affirmed the award of compensatory damages, finding that the plaintiff had produced sufficient evidence to establish “cause in fact”, including design defect, because Crane Co. “deliberately added” asbestos containing components to its valves. The Appellate Court then addressed whether the trial court erred in submitting the issue of punitive damages to the jury.
Crane argued on appeal that the trial court erred in submitting the issue of punitive damages to the jury because allegedly (1) Mrs. Poage submitted no evidence that Crane’s conduct was “outrageous” or done with “complete indifference or conscious disregard” for the safety of others, (2) Mrs. Poage failed to adduce evidence that Crane knew or had a high probability of knowing that use of the gaskets and packing could cause injury, (3) that Mrs. Poage failed to establish that an award of punitive damages would serve its intended purpose, and (4) that Mrs. Poage based her claim on an improper request to the jury that Crane be punished for harm to non-parties to the case. The Appellate Court rejected each of these arguments.
The Appellate Court noted that the two prerequisites for an award of punitive damages are: (1) demonstration of some element of “outrageous conduct” and (2) showing that the defendant acted with a “willful, wanton or malicious culpable” mental state. In a negligence action, punitive damages may be awarded if the defendant “knew or had reason to know” that the action would result in injury; while in a strict liability case, the plaintiff must present evidence that the defendant placed into commerce an unreasonably dangerous product “with actual knowledge of the product’s defect.” The Court noted that the plaintiff must prove a punitive damages claim by “clear and convincing proof.” While noting that punitive damages are usually not awarded in a negligence case, the Appellate Court further stated that if the plaintiff establishes with convincing clarity that the defendant’s conduct was outrageous because of “evil motive” or “reckless indifference” to the rights of others, punitive damages could be awarded.
The Court found sufficient evidence of “knowledge” to support the claim. Specifically it pointed to testimony from Crane’s corporate designee witness that Crane had general knowledge of the dangers of asbestos [but notably not of the specific disease mesothelioma]. From historical documents, plaintiff’s experts testified that Crane knew or should have known that asbestos could cause asbestosis. The Court also referenced testimony from the plaintiff’s “state of the art” expert referencing numerous articles that asbestos could cause asbestosis and lung problems. The Court also cited testimony that Crane’s Medical Director and its Personnel Director, who in 1936 served as Crane corporate representatives to the Illinois Manufacturers Association. The I.MA. allegedly drafted workers compensation legislation that severely limited, according to the Opinion, employee rights to recover for asbestos related injuries. Plaintiff’s expert testified that Crane, as a member of this lobbying association, sought to limit liability for asbestos related claims. Similarly, evidence of knowledge of asbestos hazards was allegedly shown through Crane’s membership in the National Safety Council, which published articles in its Journals about the alleged hazards from asbestos dust. [Significantly, that there was no reported evidence that Crane had any more involvement other than being a member of these organizations, other than its employees served on certain committees, and its Personnel Director was a member of a Subcommittee that drafted the a revisions to the Illinois Workers Compensation law.]
The Court held that circumstantial evidence of actual knowledge was sufficient to show that Crane had actual knowledge that its valves had a high probability of causing lung related diseases to a naval machinist. [Query-is “circumstantial evidence” of knowledge sufficient when the burden of proof for an award of punitive damages is by “clear and convincing evidence”? Presumably this possible divergence as to the standard of proof could be the basis for an appeal of this case to the Missouri Supreme Court.] The Appellate Court held that “there is sufficient evidence for a jury to conclude with clear conviction that Crane’s actions. . . were committed with conscious disregard or complete indifference.” The Court also held that plaintiff presented sufficient knowledge to support the conclusion that Crane acted with “conscious disregard or complete indifference”, but did not identify in its opinion what that specific evidence was.
The Court then found that the punitive damages award served the proper purposes of deterrence and punishment. The Court rejected the argument that there was no deterrence factor since Crane no longer sold asbestos-containing products. Instead, the Court said the award was justified because it deterred future misconduct by others. Furthermore, the purpose of punishment was satisfied because mesothelioma is a “very painful” and deadly cancer. The Court also rejected Crane’s argument that plaintiffs’ counsel, during his closing argument stated that punitive damages were justified because of the harm to persons other than Poage.
The Court also rejected Crane’s argument that it was denied due process by the punitive damages award. The Appellate Court held the award was supported by the “reprehensibility” of the defendant’s misconduct, and the disparity between the harm suffered and the amount of punitive damages awarded by them was not unconscionable. The Court specifically rejected the argument that a punitive damages award had to be judged by any specific ratio. The Court said the $10 million in punitive damage was justified because Crane was a “large”, “multi-billion dollar company”. Finally, the Court noted that mesothelioma was a “gruesome disease” that was hard to medically detect which cut Mr. Poage’s life short. Therefore, the punitive damage award was justified according to the Court.
Of tremendous importance to currently pending and future asbestos cases, the Appellate Court held that there is no right of defendants, such as Crane, to receive the benefit of any future sums that Mrs. Poage might receive from asbestos trusts, and no requirement that Missouri’s Contribution Act statutory set-off provided for such future payments. In other words, under this opinion, a plaintiff can recover a jury verdict, and after that verdict is final, can then file to recover hundreds of thousands of dollars from the current Bankruptcy Trusts, now numbering over 80.
The warnings of this case to manufacturers and sellers of products is simple. Such companies can be held liable for millions of dollars in punitive damages, even if there is no specific evidence of actual knowledge of a defect or the medical condition caused by the defect. Furthermore, being a member of a lobbying group or trade organization (even if there is no active participation by the corporate member), can be used to justify a punitive damage award. According to this opinion, merely incurring the disease of mesothelioma, a “gruesome disease”, can result in a $10 million punitive damage verdict with no setoffs for almost certain recoveries to be received by the plaintiff from bankruptcy trusts.
This decision may certainly result in future legislation to be enacted in the next session of the Missouri Legislature. Additionally, this case may be appealed to the Missouri Supreme Court, which may rule differently on the issues raised in the Poage opinion.
