Courthouse Steps Decision Teleforum: Air & Liquid Systems Corp., et al. v. DeVries

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Litigation Practice Group, was recorded on Monday, April 1, 2019, during a live teleforum conference call held exclusively for Federalist Society members.     

 

Wesley Hodges:  Welcome to The Federalist Society's teleforum conference call. This afternoon's subject is a Courthouse Steps Decision Teleforum on  Air & Liquid Systems Corp., et al v. DeVries. My name is Wesley Hodges, and I am the Associate Director of Practice Groups at The Federalist Society.

 

As always, please note that all expressions of opinion are those of the expert on today's call.

 

Today we are very fortunate to have with us Karen R. Harned, who is Executive Director for the NFIB Small Business Legal Center. After our speaker gives her remarks today, we'll move to an audience Q&A, so please keep in mind what questions you have for this case, for any of the Justices who gave opinions on it, or just for our speaker today as well. Thank you very much for sharing with us, Karen. The floor is yours.

 

Karen Harned:  Thanks for having me, Wes. And thanks for those that have joined in on this call regarding this case that really was very much under the radar but could ultimately end up, I think, having some big implications, at least in product liability law moving forward. On March 19th, the Supreme Court decided Air & Liquid Systems v. DeVries, which concerned whether federal maritime law requires a manufacturer of non-asbestos containing parts—like pumps and turbines and blowers that are used on Navy ships—to warn Navy sailors when it's likely that asbestos will be used with those parts later. In this case, the asbestos parts were used as insulation or connective parts like gaskets. And so when the Navy sailors were working with certain parts, they could be exposed to that asbestos. So the plaintiffs were two Navy veterans and their families. The sailors eventually passed away before this litigation concluded, so it was carried on by their wives. They had developed cancer and died from asbestos exposure.

 

So they originally brought their suit in Pennsylvania state court. They did not sue the Navy because they believed the Navy would be found immune from liability. As a practical matter, they could not recover from the manufactures of the asbestos containing parts like the insulation, the gaskets, because if you've been following asbestos litigation at all, you know that most if not all of these companies have gone bankrupt, so they had no money. So as a result, they sued the manufacturers of the non-asbestos containing products for failure to warn. And again, these were turbines and blowers and those sort of things and would come to the Navy as a bare metal product. It had no asbestos on it.

 

So the plaintiffs argued that the manufacturers had a duty to warn these sailors because even though their parts were bare metal, they knew that asbestos would be required by the Navy to be incorporated with their parts to properly function on the boats, on the ships. But the defendants argued that they had no duty to warn because they weren't doing the incorporating. They did not make, distribute, or sell asbestos containing products. They were selling the bare metal products, and the Navy was the one having these parts incorporated that were dangerous. So invoking federal maritime jurisdiction, the manufacturers, the defendants, did successfully get the case removed out of Pennsylvania state court to federal court. And the district court granted summary judgement in favor of the manufacturers, but then the Third Circuit turned around. They vacated, they remanded, and argued for the application of a foreseeability test, which I'll cover here in a second.

 

So the Supreme Court voted by 6-3 in an opinion that Justice Kavanaugh wrote that a product manufacturer does have a duty to warn under certain circumstances, which I'll cover momentarily. Kavanaugh's standard is a new one that was really articulated for the first time in this case, and some are now calling it the required incorporation standard. So when he was going through his opinion, Justice Kavanaugh first outlined basic tort law principles. And I should say he was joined by the liberal wing of the Court, Breyer, Sotomayor, Kagan, Ginsberg, as well as Justice Roberts. Justice Gorsuch filed a dissent that was joined by Justices Thomas and Alito.

 

So as he goes through his opinion, Kavanaugh first says his understanding of basic tort law principles, and particularly when it concerns the duty to warn standard and what that means. And he explains that duty to warn imposes a general duty of care, including a duty to warn on a product manufacturer when that manufacturer knows or has reason to know that its product is or is likely to be dangerous for the use of which it is supplied, and that the manufacturer has no reason to believe that the end users, the product's users, are going to realize that danger. And he cites the Section 388 of the Second Restatement of Torts. And then he goes on to say that federal and state courts have not agreed on how to apply this general tort law of the duty to warn principle. They have not agreed when you've got a situation like here where you've got a manufacturer of a product that later is going to be incorporated with a dangerous part in order for the integrated product where these two parts are combined to function as they're intended.

 

And he then goes through the three different approaches. So the first is a foreseeability test, and this is a test that the Third Circuit had adopted in this case. And Kavanaugh does reject this, and his colleagues reject this. And Kavanaugh characterizes it as a very plaintiff friendly doctrine in which it's very broad, and it imposes a duty to warn on the manufacturer when it was foreseeable that its product is going to be used with another dangerous product or part, even if the manufacturer's product did not require that use or incorporation of that other dangerous part or product. So that's very broad. So even if it's not required to be used with it, you would still have a foreseeability test there, or you'd still have a duty to warn on the part of the manufacturer of the non-dangerous product.

 

So then there's the next defense, which Kavanaugh characterizes as defendant friendly, and that's known as the bare metal defense. This, not surprisingly, is what the petitioners in this case were asking the Court to adopt because they argued that it was very cut and dried, very easy to apply. And under this defense, a manufacturer would not have a duty to warn for injuries caused by a product it did not manufacture, sell, or distribute, even if its bare metal product requires incorporation of a part that that manufacturer knows or has reason to know is likely going to be.

 

So studying those two extremes, if you will, out, Kavanaugh charts a middle ground, or so he calls it, and it's called required incorp- -- well, some are referring to it as the required incorporation standard. Who knows what the name will ultimately be, but the standard is this, that if you're a manufacturer, you're going to have a duty to warn if your product requires incorporation of a part, like these products did, that the manufacturer also knows or has reason to know that that ultimate integrated product is likely to be dangerous for its intended uses, and the manufacturer has no reason to believe that the product's users will realize that danger. So it is not as bad as a foreseeability test because it is a little more cabined as far as you have to know that it's going to be in an integrated product that's going to be dangerous ultimately and that that dangerous part is going to have to be incorporated in it.

 

So then he goes through his reasoning on why he doesn't think this new standard is going to be that burdensome for the product manufacturer and, in fact, makes sense for them to be the ones to warn. And he says that the product manufacturer knows the nature of the ultimate integrated product, what it's ultimately going to be, and is typically more aware of the risks associated with that. And he said in contrast, a parts manufacturer may really only be aware that its part could conceivably be used in any number of ways in any number of products. And a parts manufacturer may not always be aware that it could be used in a way that poses risk of danger, which I just find curious just in light of the fact that the parts we're talking about here that were dangerous contained asbestos, which I think all of us know is dangerous. And then he does acknowledge that there are costs associated with -- time and money associated with warnings, but he views it as a relatively light burden, that manufacturers already have a duty to warn on their products, so what's another warning, basically, I think is where he was going with that.

 

And so then he finishes up by making it clear that this rule is tightly cabined. He goes back and says that there's not just a question of mere foreseeability. It requires, rather, that the manufacturers warn only when their product requires a part in order for the integrated product to function as intended. And then he says, "We do not purport to define the proper tort rule outside of the maritime context," I think hoping that that means that's all we're going to get, which, let's all hope. And so that was his opinion.

 

And then we had Justice Gorsuch who had a grade to say -- and I have to say, it was refreshingly brief opinions on both sides. Gorsuch starts out and says everybody agrees that people who actually supplied asbestos have to warn. And then he says everybody agrees that the Third Circuit went too far with this broad foreseeability test, and so he was happy about that. But then he goes on to really criticize this opinion and say the new three-part standard, although an improvement, he's concerned it suffers because it really is not grounded in common law. And he talks about his understanding of common law, and he says there's no duty to warn or instruct about another manufacturer's products, though those products might be used in connection with a manufacturer's own products. Instead, the manufacturers duty is restricted to warnings based on the characteristics of the manufacturer's own product. And then he has some case law citing that. And he says that it's black letter law, that the supplier of a product generally must warn only about those risks associated with the product itself, not those associated with the products and systems into which it may later be integrated, and cites the Third Restatement of Torts: Products Liability, Section 5(b).

 

And so he also says that when it comes to warnings, the common sense rule really should be the manufacturer of the product is the best to understand and warn users about its risks, and that the language of law and economics really is incentivizing that kind of structure so that when you're placing the duty to warn on the manufacturer, you're forcing that entity to internalize the full costs of any injuries that could result from inadequate warnings, and that we're really -- with this, he's concerned that with Kavanaugh's new standard, you're diluting the incentive of the manufacturer of the dangerous product to warn about the dangers that their product will have on others.

 

Then he has some interesting examples, colorful examples, and he said that the traditional common law rule better accords with consumer expectations. And he says look at a home chef who buys a butcher's knife. You may expect to read warnings about the danger of knives, but you're not going to expect to see dangers of undercooked meat. Or somebody that buys gasoline may expect to see warnings at the pump about its flammability, but not necessarily the dangers about reckless driving. And he goes on to say that the traditional tort rule has another virtue, and that's that it's simple to apply, which was something that the petitioners had said a lot in their argument before the Court, both in the briefings and the courtroom.

 

Really, with that, he goes on to just provide a number of -- really throw out a number of questions as to what it means to be an integrated product. How far does that go? Is it just these blowers working, or are we going to go all the way to the propeller? Is it the whole ship? And that really, it's just rife for mischief, I think, is what he's trying to get at in the Court. He also is worried -- he said it's great that we're saying it only applies in maritime, but if this goes beyond maritime, what kind of things could follow from that? Would a company that sells smartphone cases have to warn about the risk of exposure to cell phone radiation, or a car maker have to warn about the risk of improperly stored antifreeze?

 

And then he talks about, as a practical matter, what could this all mean, just more price -- higher prices, that when we effectively require manufacturers of safe products to subsidize those who make more dangerous items, we're promising to raise the price and restrict the output of socially productive products. Tort law is supposed to be about aligning liability with responsibility, not mandating a social insurance polity in which everyone must pay for everyone else's mistakes.

 

So it was a really good opinion, I thought, as far as a dissent. But sadly, it was the dissent. So that really was the case. It'll be interesting to see how this is applied moving forward. And with that, Wes, I will take questions.

 

Wesley Hodges:  Wonderful. Well, thank you so much for those remarks, Karen. While we wait for any audience questions, I do want to touch on this real fast, Karen. So this was a maritime case. Can you discuss a little bit more on what it means beyond that context?

 

Karen Harned:  Right. Well, so it was maritime, but it was also concerning asbestos. And for those that have followed asbestos cases, which I mentioned before -- and I should say, we had filed an amicus brief in this case urging the Court to keep the bare metal defense because we have seen now these asbestos cases flow down to even smaller businesses that we represent just because all of the big asbestos manufacturers are out of money. They're bankrupt. That's a reality.

 

And so what does this mean going forward? Well, at least in asbestos litigation, I was on the phone with a practitioner prior to this call, and she was suggesting that it's going to make summary judgement motions a lot more difficult. In this case, Air & Liquid Systems, they did get a summary judgement at the district court level, and she's assuming now that most of the plaintiffs that they're going to be fighting are going to raise this case and this new standard in their initial pleadings, which may mean that they're not going to get summary judgment. They're going to have to go further in the litigation, spend more money, take more time, all of that. So that at a minimum, I think, I would expect to see. I don't know why a plaintiff's lawyer wouldn't try it, at least, on a number of these cases. And maybe they'll succeed, maybe they won't, but I would assume they're going to raise it.

 

Beyond that, I do think the plaintiff's lawyers, they're going to look to expand, as much as they can, tort law. And this is a relatively good principle for them moving forward on duty to warn, and so I can't imagine they're not going to try it in context even outside of asbestos. I mean, only time will tell. I just feel like it gives them in asbestos litigation another lifeline, in broader products liability litigation. With the right judge, it might give them an argument that gets them farther down the road, if not to ultimate success. And that's why I think, ultimately, this decision is unfortunate.

 

Wesley Hodges:  Well, thank you, Karen. It does look like we do have one question from the audience. Here's our first caller.

 

Caller 1:  Karen, I appreciate your presentation. I guess I'm always struck in all of these cases involving the Navy that if there's a culpable party at all, it's clearly the United States Navy. And I understand that the sovereign immunity principles make it tough to sue, but has Congress to your knowledge ever given serious consideration that, okay, to the extent that there is large liability being imposed based on what went on in the Navy that maybe it ought to step up to the plate and fund all of this?

 

Karen Harned:  Right. I actually think that's a great point. I do not know the answer to that question, but I'm curious and actually need to look that up to see if Congress has -- if at least somebody's introduced legislation because I do think that they were extremely culpable in this case. They were the ones that were requiring the asbestos parts and these kinds of bare metal products, too, to be used. So they were the ones that if you were going to make for them, you had to -- this had to happen. They were really the ones exposing their own sailors to danger, in my opinion. So I think that's a really good point, and really is something that, really, I think only Congress can change, and hopefully there's somebody up there. Maybe this decision will help with that. But I just don't know the answer as to whether or not there's legislation out there.

 

Wesley Hodges:  Well, thank you so much, caller, for your question. It does look like we do have another question from the audience. Caller, you are up.

 

Don Haycraft:  Karen, this is Don Haycraft, an attorney in New Orleans, Louisiana. I attended oral argument last week in another maritime case before the Supreme Court called The Dutra Group v. Batterton which has to do with the availability of punitive damages in the Jones Act seaman's case. And I just wanted to note for the audience and for you that Justice Kavanaugh had a couple of questions for counsel in this more recent case which struck me as ringing true with his opinion that had just been issued the week before in the case you're mentioning today. That is, he talked about the admiralty law special solicitude for seamen, or sailors, as he put it. And in one of his questions, he specifically referenced that standard. And I note that that was a quote he used that same support in his DeVries opinion. Don't know whether you follow the punitive damages issues, but I thought it was interesting that Justice Kavanaugh may be turning out to be a maritime lawyer after all.

 

Karen Harned:  Yeah, that's really interesting, and that was -- I thank you for raising that solicitude of the seamen argument because that was very present in his opinion as you noted, and very much what the respondent spent a lot of time on in their briefing. And I even think the American Association for Justice, the trial bar, had quite a bit of that on their briefing, too, in this case. So that is interesting. And for those that don't know, it's really more that this idea that it's a hard job, that when you're out at sea for endless days, weeks, months, you don't have the same opportunities as somebody on land does because you just don't have the opportunity to go home at night and see your family and that sort of thing, and so I guess it's just kind of more of a heightened standard, maybe, or sympathy.

 

And on the sympathetic front, I would just say even the way that Justice Kavanaugh started his opinion, it was pretty clear he was just looking for a pocket, and these manufacturers were the only ones left with any money in their pockets. I mean, I just felt like reading in between the lines, that kind of came through, and they just didn't like a result that was not going to give any relief to these families.

 

Don Haycraft:  Exactly. And I have a feeling Justice Kavanaugh is leaning the same way now about punitive damages.

 

Wesley Hodges:  Well, very good. Thank you so much, caller, for your question. We do appreciate it. It does look like we do have another question. Next caller, you're up.

 

Caller 3:  This is somewhat tangential, but can I ask how venue is determined for special maritime jurisdiction?

 

Karen Harned:  Okay. Well, I am not a maritime attorney, so I think we need that gentleman that was just on. I do not know. I mean, all I know is in this case, it was the manufacturers that brought it into the federal court system under admiralty law.

 

Wesley Hodges:  Well, thank you caller. Here is our next caller.

 

Andy Urko:  Thank you, Karen, for a great presentation. This is Andy Urko in Southern California. What concerns me about this is that I do agree with the dissent, and that makes it more complex than it need be. And also, it appears to me that it stops too short of imposing a strict liability standard on the manufacturers, and that's very concerning to me.

 

Karen Harned:  Yeah, I would agree. And I'm trying to look here, feverishly, for a good quote that Gorsuch had, too, about just how he feels like this opinion is really trying to change the law to fit the facts. I mean, I kind of read it as trying to change -- and I cannot find the exact quote, so I apologize, but something along the lines of letting the facts dictate where the law comes out rather than principles of law dictate where the case should come out. I mean, I just felt like it read that way, too, and so I thought that was an interesting and good critique by Justice Gorsuch in his dissent.

 

Wesley Hodges:  Well, thank you, caller. We do appreciate your question. Karen, before we see any more questions from the audience, I do want to ask you -- you mentioned that you presented an amicus brief. Would you mind discussing just the amici that were involved?

 

Karen Harned:  Sure. So we filed, obviously, and one of the reasons we've gotten involved in these asbestos cases on behalf of small businesses because now, because of all the asbestos bankruptcies of the larger manufactures, we're just seeing more and more smaller businesses get put in these suits and having to try to get out of them. So these decisions are important to us. Chamber, not surprisingly, also filed, and then there was an interesting brief that came in from Richard Epstein, who's familiar to The Federalist Society crowd, on behalf of the petitioners, Air & Liquid in this case, and really did a fantastic job just outlining just basic tort law and the importance of having clear tests, and that the bare metal defense really needed to stay. And it's just a really good read and very good history in there too. And then on the other side, I do think the American Association of Justice, the trial bar, their brief was good and noteworthy as well. So there were several briefs in the case. I mean, not a ton, but definitely some good ones.

 

Wesley Hodges:  Well, thank you so much, Karen. Seeing no immediate questions from the audience, Karen—and thank you again so much for your questions, audience—Karen, I turn the mike back to you. Do you have any closing thoughts for us today before we sign off?

 

Karen Harned:  Kavanaugh's opinion was well written, and it was very interesting. Not really the result we wanted, but it will be interesting to see how he handles these tort cases going forward. I was surprised at the result, so we'll just have to see.

 

Wesley Hodges:  Wonderful. Well, Karen, on behalf of The Federalist Society, I would like to thank you for the benefit of your very valuable time and expertise today. We welcome all listener feedback by email at [email protected]. Thank you all for joining us. This call is now adjourned.

 

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