Products Liability Law Daily Successor distributor strictly liable for worker’s asbestos-related injuries
Thursday, May 30, 2019

Successor distributor strictly liable for worker’s asbestos-related injuries

By Susan Engstrom

A state trial court did not err in relying on the product line doctrine of successor liability to find in favor of the worker’s estate.

In an asbestos-exposure action brought by the estate of a worker who died from mesothelioma, a Washington appeals court held that the product line doctrine of successor liability applied to an asbestos distributor that had acquired 100 percent of the assets of another distributor facing strict liability under the Restatement (Second) of Torts. The successor distributor availed itself of the goodwill associated with the predecessor’s sales of unreasonably dangerous materials by holding itself out as a continuation of the acquired distributor. The court also determined that the limitations period in a Washington statute regarding claims against dissolved corporations did not apply to defeat the product line doctrine, and that a jury award of noneconomic damages was sustainable under the state’s wrongful death and survivor statutes (Leren v. Kaiser Gypsum Co., Inc., May 28, 2019, Verellen, J.).

The decedent had worked for a manufacturer of thin, decorative bricks for nearly two decades. Benson Chemical Corporation supplied the manufacturer with raw asbestos used to make the bricks. As part of his job, the worker poured 100-pound sacks of raw asbestos into large hoppers used to mix ingredients for the bricks. This created large clouds of asbestos dust. After the bricks hardened, the worker cut them with a power saw, producing even more dust. He never wore a mask or any other protective gear. In 2015, he was diagnosed with a rare form of mesothelioma. He filed negligence and product liability claims against various entities, alleging personal injuries from mesothelioma caused by frequent exposure to asbestos. After he died, his estate added a wrongful death claim and added Elementis Chemicals, Inc. as a defendant.

In the late 1970s, Harrisons & Crosfield (Pacific), Inc. (HCP) acquired 100 percent of Benson’s stock and dissolved Benson as an independent company. Elementis is the undisputed successor to HCP, and was the sole defendant at trial. Based on the jury’s special verdict and its own findings of fact, the trial court relied on the product line doctrine of successor liability and entered judgment in favor of the estate. Elementis appealed.

Corporate successor liability. Because the worker’s alleged exposures to asbestos occurred prior to the enactment of the Washington Product Liability Act, the appeals court evaluated potential liability using common law principles embodied in Restatement (Second) of Torts. Under section 402A of the Restatement, strict liability may be imposed on any party involved in distributing an unreasonably dangerous product. Here, it was undisputed that asbestos is unreasonably dangerous and that Benson distributed the raw asbestos that caused the worker’s mesothelioma. The question was whether Elementis was liable for those sales based on HCP's acquisition of Benson's assets.

The court explained that in products liability cases, successor liability arises when one corporation benefits from another’s goodwill after acquiring its product line. Washington adopted the product line doctrine of corporate successor liability for the "essential purpose" of providing a product liability claimant with a meaningful remedy when a successor corporation acquires the assets of a predecessor. The doctrine applies if a successor: (1) acquires substantially all of the predecessor’s assets, leaving no more than a mere corporate shell; (2) holds itself out to the general public as a continuation of the predecessor by producing the same product line under a similar name; and (3) benefits from the goodwill of the predecessor. The court rejected Elementis’ contention that the product line doctrine is limited to manufacturers, explaining that when a successor distributor acquires a predecessor’s goodwill, holds itself out as akin to the predecessor by continuing to distribute similar unreasonably dangerous products, and realizes benefits from those distributions, then the doctrine applies.

Here, the court determined that the doctrine applied to HCP’s acquisition of Benson. The evidence revealed that HCP had acquired all of Benson’s assets and left it a mere corporate shell. Moreover, there was no dispute that HCP held itself out as a continuation of Benson post-dissolution. Substantial evidence also supported the conclusion that Benson’s goodwill was transferred to HCP and that HCP benefited from Benson’s goodwill in its sale of asbestos products to consumers. For example, long after Benson’s dissolution, HCP continued to place ads describing Benson as a division; continued to distribute raw asbestos under Benson’s name; and maintained the same Seattle office with the same phone number and many of the same employees.

The fact that HCP sold only Union Carbide’s brand of raw asbestos while Benson had sold only the Johns-Manville’s brand did not preclude application of the product line doctrine because both brands were the same type of product: i.e., raw white asbestos. The doctrine does not require that the products be identical. In the court’s view, Benson’s goodwill was associated with its ability to deliver raw asbestos generally, and HCP leveraged that goodwill to continue selling raw asbestos after it dissolved Benson. HCP benefitted from those sales. As such, the policies, essential purpose, and requirements of the product line doctrine supported holding Elementis strictly liable.

Statute of limitations. The court also rejected Elementis’ argument that the worker’s claims were time-barred under Washington’s statute of limitations for claims against dissolved corporations and their shareholders. Elementis provided no authority for the proposition that the legislature intended to bar successor liability claims when it enacted the dissolution statute. Moreover, Benson, the dissolved corporation, was not a party to this suit; nor was Elementis a defendant in its capacity as successor to a former Benson shareholder. Accordingly, the statute did not apply, and the trial court did not err in denying Elementis’ motion for summary judgment on this issue.

Wrongful death and survivor actions. Elementis additionally contended that the worker’s estate was not entitled to a jury award of noneconomic damages under the survival statute because the worker’s stepchild was not a statutory stepchild. According to Elementis, any legal relationship between the stepdaughter and the worker was severed when the worker and the stepdaughter’s mother divorced. However, the state supreme court has rejected the argument "that once a marriage ends, the step relationship ends." In this case, the bonds of affinity between the worker and the stepdaughter indisputably lasted until the end of his life. Therefore, the stepdaughter was a statutory beneficiary under the wrongful death statute, and the estate was allowed to collect noneconomic damages under the survival statute.

Superseding cause of injury. Finally, the trial court properly declined to give a superseding cause instruction to the jury because the requesting party, Elementis, failed to show that the worker’s employer had actual, specific knowledge of the harm from prolonged asbestos exposure.

The case is No. 77870-6-1.

Attorneys: Matthew Phineas Bergman (Bergman Draper Oslund, PLLC) for Edward P. Leren. Nathaniel Justin Ree Smith (Soha & Lang PS) for Kaiser Gypsum Co., Inc. and Elementis Chemicals, Inc.

Companies: Kaiser Gypsum Co., Inc.; Elementis Chemicals, Inc.

MainStory: TopStory SCLIssuesNews DesignManufacturingNews SofLReposeNews AsbestosNews DamagesNews WashingtonNews

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