In the next case, Morgan v. J-M Manufacturing Company, Inc. 60 Cal.App.5th 1078 (2021), the 2nd District Court of Appeal upheld a $7 million personal injury verdict against an asbestos-cement pipe manufacturer despite exculpatory testimony from the plaintiff, holding that the testimony was an issue of witness credibility rather than sufficiency of the evidence, and holding that the trial court’s denial of a jury instruction requested by the pipe manufacturer was appropriate because, while the requested jury instruction was a recitation of undisputed facts, the purpose of jury instructions is to recite the law rather than facts, even undisputed ones.
The Morgan Case
Norris Morgan was exposed to asbestos at construction sites where he worked in the 1970s and 80s. After he was diagnosed with mesothelioma in December 2017, Morgan and his wife sued a number of defendants, including J-M Manufacturing for personal injuries and loss of consortium.
J-M Manufacturing was a pipe manufacturer. It sold “transit pipe,” an asbestos-cement pipe used to carry water and sewer between providers and their customers. J-M Manufacturing began business in 1983 by acquiring assets from Johns-Mansfield Corporation which had filed for bankruptcy in the early 1980s. Pursuant to a bankruptcy court order, the assets of Johns-Mansfield acquired by J-M Manufacturing were “free of . . . all present and future liabilities . . . and all claim attributable to periods prior to the transfer which relate . . . to personal injury or property damage allegedly attributable to asbestos-fiber.”‘
An unrelated company, J-M A/C Pipe Corporation had also purchased assets of Johns-Mansfield and also manufactured asbestos-cement pipe. The asbestos-cement pipe sold by both J-M A/C and J-M Manufacturing looked similar and both had the same stencil label: “J-M Transite.”
By the time trial commenced in October 2018, only J-MM and another defendant, Familian Corp., remained as defendants. Familian settled with the Morgans during trial leaving J-MM as the only remaining defendant. At the conclusion of trial, the jury found that Morgan was exposed to asbestos from products sold by J-M Manufacturing, that J-M Manufacturing was 45% responsible for Morgan’s mesothelioma, and awarded Morgans $15,270,501 in compensatory damages and $15 million in punitive damages. Based on the jury’s apportionment of fault, the trial court entered judgment in favor of the Morgans and against J-MM for $22,213,704.39.
J-M Manufacturing filed motions for judgment nothwithstanding the verdict and a new trial which were denied by the trial court. J-M Manufacturing appealed.
On appeal, J-M Manufacturing argued that (1) there was no evidence that Morgan was exposed to asbestos from pipe supplied by J-MM; (2) the trial court erred in declining J-MM’s request for a jury instruction that J-MM was not liable for the conduct of another company; and (3) the jury’s punitive damage award was not supported by substantial evidence.
Sufficiency of the Evidence
As to its first argument, J-M Manufacturing argued that it only produced 13-foot lengths of transite pipe, that Johns-Mansfield sold 10-foot lengths of transit pipe, and that Morgans testimony was that he had only ever seen 10-foot lengths of transit pipe. Thus, argued J-M Manufacturing, the uncontested evidence either showed that Morgan was exposed to transite pipe manufactured by Johns-Mansfield or, at best, that the pipe could have been transite pipe sold by either Johns-Mansfield or J-M Manufacturing since both produced pipe with the markings “J-M Transite.” As such, argued J-M Manufacturing, substantial evidence did not support the jury’s finding of liability.
The 2nd District Court of Appeal disagreed. Johns-Mansfield ceased operations in December 1983 and J-M Manufacturing commended operations on January 1, 1983 and Morgan testified that he worked with transite pipe marked “J-M Transite” for all of 1983, 1984, 1985, 1986 add part fo 1987. “Witnesses are not required to have perfect memories,” explained the Court of Appeal, and “JMM’s argument concerns Morgan’s credibility and the weight the jury might have given his testimony, not its sufficiency as evidence. “The jury,” explained the Court of Appeal” could have reasonably concluded that Morgan did not recall the length of the pipe he saw, regardless of how confident he was about his memory. And at the same time, the jury could have reasonably concluded that he recalled seeing ‘J-M Transite’ asbestos-cement pipe on job sites as ale as 1985, 1986, and 1987 [and is] evidence sufficient to support the jury’s conclusion that he was exposed to asbestos in products sold or supplied by J-MM.”
Requested Special Jury Instruction
As to its second argument, J-M Manufacturing argued that the trial court’s erred in declining to accept its requested special jury instruction that Johns-Mansfield and J-M Manufacturing were separate companies and that J-M Manufacturing was not liable for asbestos exposure caused by products manufactured by Johns-Mansfield. At the jury instruction conference, J-M Manufacturing argued that the special jury instruction should be accepted because they were “not facts in dispute in any way, shape or form.” In response, 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.”
“‘An instruction should state rules of law generally, rather than elaborate matters of evidence,'” explained the Court of Appeal, and here “Morgan never raised or argued successor liability, [ ] J-MM did not request an instruction on the elements of successor liability, and [ ] J-MM remained free at all times to draw the distinction between J-MM and [Johns-Mansfield.” Indeed, explained the Court of Appeal, the jury understood the distinction between J-M Manufacturing and Johns Mansfield, having allocated fault to Johns Mansfield of 1%, to J-M Manufacturing of $45%, and liability of the remaining 54% to other entities.
Civil Code section 3294 provides in part:
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 the 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.
Here, argued J-M Manufacturing, no evidence was presented at trial that an officer, director, or managing agent of J-M Manufacturing authorized or ratified any conduct. Rather, argued J-M Manufacturing, Morgan “treated J-MM as a monolithic entity,” and referred to the company – in its entirety – as “they,” without ever identifying who “they” referred to” and that “of the few J-MM employees whose donut was specifically identified at trial, none even qualified as officers, directors or managing agents of J-MM during the relevant time period.”
The Court of Appeal agreed. Explaining that while liability for punitive damages can be shown “through evidence showing the information in possession of the corporation and the structure fo management decisionmaking that permits an inference that the information in fact moved upward to the point where corporate policy was formulated,” and that “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” enabling a plaintiff to “‘piec[e] together knowledge and acts of [J-MM’s] multitude of managing agents,” “that did not happen here.”
While a tough pill to swallow for the defendant pipe manufacturer, the Court of Appeal’s decision appeared to swing in favor of the plaintiff based on evidence that ran counter to the arguments raised by the manufacturer (e.g., testimony concerning 10-foot lengths of pipe versus use of pipe marked “J-M transite” for a period up to four years after Johns-Manfield filed for bankruptcy), and the proper use of jury instructions to provide instructions concerning the law rather than facts, even undisputed facts. It wasn’t a total loss for the pipe manufacturer, however, who was able to reduce the jury verdict by over two-thirds from over $22 million to $7 million.