Monday, April 23, 2012
C.A. Upholds Punitive Damages for Sale of Asbestos-Lined Brakes
Justices Reject Argument That $4.5 Million Award Was Excessive, Call Conduct ‘Highly Reprehensible’
By KENNETH OFGANG, Staff Writer
The First District Court of Appeal has affirmed a judgment requiring a manufacturer of asbestos-lined brake shoes to pay $4.5 million in punitive damages to the widow of a cancer victim.
The conduct of ArvinMeritor’s predecessor company in failing to warn purchasers of the carcinogenic linings was sufficiently reprehensible to justify the award, Justice Ignacio Ruvolo wrote Thursday for Div. Four. The punitive damages were 2.4 times the compensatory damages, although ArvinMeritor was not responsible for any of the compensatory damages because they were completely offset by settlements with other parties.
The suit was brought by Gordon and Emily Bankhead. Gordon Bankhead died while ArvinMeritor’s appeal was pending.
The Bankheads sued after Gordon Bankhead was diagnosed with mesothelioma in January 2010. The complaint raised products liability claims against several defendants, including ArvinMeritor, a Michigan-based manufacturer of automobile products.
The company was formed by the merger of Meritor Automotive, Inc., and Arvin Industries, Inc., in 2000. Meritor had been formed in 1997, as a spinoff of Rockwell International’s automotive division. The company shortened its name to Meritor, Inc. last year.
The complaint alleged that Gordon Bankhead had worked for more than 30 years for Sea-Land Shipping Company in Oakland and for other companies that serviced and repaired heavy duty vehicles, and that he regularly handled asbestos-containing breaks, and was present when those brakes were ground or otherwise used in ways that caused him to breathe asbestos dust. Rockwell and another defendant were alleged to have attached asbestos-containing linings to brake shoes and axles.
The case went to trial in October 2010 in Alameda Superior Court against the non-settling defendants. In the first phase, Pneumo Abex LLC, ArvinMeritor, and Carlisle Corporation were found liable for $3.9 million in damages—with ArvinMeritor liable jointly and severally liable for $1.47 million in economic damages, and severally liable for 15 percent of $2.5 million, or $375,000, in noneconomic damages, for a total of $1.845 million.
In phase two, after Carlisle settled, the jury awarded punitive damages of $9 million against Abex and $4.5 million against ArvinMeritor. Abex’s appeal remains pending and was argued April 10.
Negative Net Worth
ArvinMeritor argued that the second-phase verdict was excessive in light of the company’s financial condition, as reflected by testimony that it had a net worth of -$1.023 billion, and was disproportionate to the amount of compensatory damages.
But Ruvolo, writing for the Court of Appeal, said the jury had substantial evidence that the company’s net worth was not a true reflection of its financial condition and ability to pay. He noted that the company was profitable and had a substantial cash flow, which enabled it to borrow more than $200 million in the year prior to trial, to maintain a credit line of $539 million, and to pay millions of dollars in executive compensation.
As for the ratio of punitive to compensatory damages, the jurist said it was within the bounds of California law and federal due process.
He cited several cases applying the U.S. Supreme Court’s punitive damage jurisprudence, including Gober v. Ralphs Grocery Co. (2006) 137 Cal.App.4th 204. There the court allowed a six-to-one ratio in a sexual harassment case, even though the conduct was “only moderately reprehensible,” Ruvolo explained, in that it did not involve actual or threatened physical harm, and the harasser was transferred promptly after the employer was told what had happened.
In this case, the presiding justice noted, there was testimony that Rockwell knew during the 1960s that exposure to asbestos dust could cause disease, and that it complained to Abex on at least two occasions in the 1970s about asbestos dust in the brake linings, but it did not place any warnings on the products until the early 1980s, did not place cancer-specific warnings on them until 1987, and continued to sell them into the following decade.
That testimony, Ruvolo said, is sufficient to place the defendant’s conduct at the high end of the reprehensibility scale, and thus justifies the 2.4-to-1 ratio, even after taking into consideration the obvious “inclusion of a punitive element” in the noneconomic damages award.
The case is Bankhead v. ArvinMeritor, Inc., 12 S.O.S. 1776.
Copyright 2012, Metropolitan News Company