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Racich v. Celotex Corp.

decided: October 5, 1989.


Appeal from judgment against Celotex in the United States District Court for the Eastern District of New York, Eugene H. Nickerson, J., and from order denying Celotex's motion for judgment notwithstanding the verdict with respect to punitive damages.

Feinberg and Newman, Circuit Judges and Mishler, District Judge.*fn*

Author: Feinberg

Feinberg, Circuit Judge,

The Celotex Corporation appeals from a judgment against it in favor of plaintiff Jack P. Racich, after a jury trial before Eugene H. Nickerson, J., in the United States District Court for the Eastern District of New York, and from an order denying Celotex's motion for judgment notwithstanding the verdict. The jury awarded plaintiff both compensatory damages and punitive damages but denied recovery for co-plaintiff Gertrude C. Racich, wife of Jack. (For convenience, we will refer hereafter only to Jack P. Racich as plaintiff.) Appellant Celotex contends that the trial court erred in allowing punitive damages to be awarded and that the entire verdict was tainted by prejudicial closing remarks of plaintiff's trial counsel. Appellant asks us to dismiss plaintiff's punitive damages award, and order a new trial.


This appeal arises out of an asbestos-related personal injury action. The action is part of the national "asbestos scene, an unparalleled situation in American tort law," in which many thousands of personal injury claims have been filed "against asbestos manufacturers and producers." In re School Asbestos Litigation, 789 F.2d 996, 1000 (3d Cir.), cert. denied, 479 U.S. 852, 107 S. Ct. 182, 93 L. Ed. 2d 117 (1986). See also Jackson v. Johns-Manville Sales Corp., 750 F.2d 1314 app. at 1338-39 (5th Cir. 1985) (in banc), on rehearing, 781 F.2d 394 (5th Cir.), cert. denied, 478 U.S. 1022, 106 S. Ct. 3339, 92 L. Ed. 2d 743 (1986). Plaintiff Racich has been exposed to asbestos products for almost his entire adult life, from 1923 to 1974. During this period, he worked with asbestos-containing products manufactured by Philip Carey Corporation (Carey). In 1972, appellant Celotex purchased Carey and assumed all of its ordinary liabilities.

As a result of this exposure, plaintiff became ill with asbestosis, a progressive and irreversible pulmonary disease caused by inhaling asbestos fibers. An asbestosis victim experiences shortness of breath even during simple daily activities. Also, an asbestosis victim may suffer from heart disorder.

In March 1987, plaintiff instituted this diversity action in the Eastern District against 19 manufacturers and suppliers of products and materials containing asbestos. Celotex was named individually and as successor in interest to Carey. The complaint against Celotex alleged, among other things, that Celotex had breached its duty to plaintiff by failing to warn of the known dangers associated with its asbestos-containing products and by willfully and intentionally refusing to disclose these known hazards.

All of the many asbestos cases in the Eastern and Southern Districts were assigned for pretrial purposes to Judge Charles P. Sifton. In an omnibus motion before Judge Sifton, defendants raised issues relating to all the cases and sought, among other things, dismissal of all plaintiffs' requests for punitive damages. Judge Sifton denied the motion. In September 1988, this case was assigned to Judge Nickerson, and was tried shortly thereafter. At the time of the jury verdict, Celotex was the only remaining defendant in this case.

At trial, Celotex moved for a directed verdict with respect to punitive damages on the grounds that plaintiff had not shown that Celotex had assumed liability for punitive damages when it assumed the ordinary liabilities of Carey or that Celotex had ratified the acts of Carey. Counsel for Celotex also stated on the issue of punitive damages that "defendant would refer your Honor to the brief previously filed by the Asbestos Claims Facility," a group of asbestos claims defendants of which Celotex was a member. That brief included a number of arguments as to why punitive damages were inappropriate in mass tort litigation. Judge Nickerson denied the motion, and the jury determined plaintiff's compensatory damages to be $165,000, which was then subject to a 10 percent reduction for his negligence (also found by the jury). In addition, the jury awarded $100,000 in punitive damages against Celotex. Celotex then moved for judgment notwithstanding the verdict dismissing the claim for punitive damages, on the same grounds of no successor liability and the incorporated arguments of the Asbestos Claims Facility defendants.*fn1 In a brief memorandum opinion, Judge Nickerson denied the motion. This appeal followed.


A. Arguments based upon New York statutory and common law

The parties agree that New York law applies to this common-law action based upon diversity jurisdiction. Appellant's first argument to us is that plaintiff's suit is untimely, a contention that requires construction of New York's one-year revival statute. 1986 N.Y.Laws, ch. 682, ยง 4 (McKinney 1986). That statute, which became effective on July 30, 1986, was enacted in response to decisions of the New York Court of Appeals, which held that the statute of limitations in an action based upon exposure to a toxic substance runs from the date of the last exposure, not from the date on which the disease caused by the toxic substance was, or could have been, discovered. See, e.g., Steinhardt v. Johns-Manville Corp., 54 N.Y.2d 1008, 1010, 446 N.Y.S.2d 244, 430 N.E.2d 1297 (1981), cert. denied, 456 U.S. 967, 72 L. Ed. 2d 840, 102 S. Ct. 2226 (1982). The statute provides, in relevant part, that:

Notwithstanding any other provision of law . . . every action for personal injury, injury to property or death caused by the latent effects of exposure to . . . asbestos . . . which is barred as of the effective date of this act or which was dismissed prior to the effective date of this act solely because the applicable period of limitations has or had expired is hereby revived and an action thereon may ...

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