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GONCALVES v. EAGLE-PICHER INDUS.

April 15, 1985

ANTHONY GONCALVES and CLARA GONCALVES
v.
EAGLE-PICHER INDUSTRIES, INC.



The opinion of the court was delivered by: POLLAK

 POLLAK, J.

 Plaintiffs Anthony and Clara Goncalves seek compensatory and punitive damages for injuries allegedly caused by asbestos products which defendant Eagle-Picher Industries manufactured. According to the Amended Complaint, Anthony Goncalves worked as a pipefitter and chemical operator for GAF Corporation in Linden, New Jersey, from 1963 to 1971; Mr. Goncalves also worked as a pipefitter and insulator for the American Cyanimid Corporation in Linden from 1972 to 1981. Amended Complaint para. 8. Plaintiffs allege that, during this eighteen-year period, Mr. Goncalves "continually worked with, used and was . . . exposed to the defendant's asbestos products." Id. That exposure has allegedly caused plaintiff to contract asbestosis.

 Defendant Eagle-Picher has moved for partial summary judgment on three of plaintiffs' claims against it: (1) the conspiracy claim contained in count IV of the Complaint, (2) the fraud claim, also contained in count IV, and (3) the claim for punitive damages. Plaintiffs do not oppose the motion insofar as it regards the claims for conspiracy and fraud. *fn1" Accordingly, Eagle-Picher's motion will be granted as unopposed with respect to those claims.

 The punitive damages portion of Eagle-Picher's motion is contested. Eagle-Picher has submitted the affidavit of Robert L. Bockstahler, the former President and General Manager of Eagle-Picher's Chemical and Fibers Division. In addition, both sides have submitted copies of various letters and memoranda written by or to Eagle-Picher personnel with regard to asbestos. Finally, plaintiffs have submitted partial copies of several articles, found in Eagle-Picher's Research Library, having to do with asbestos-related health hazards.

 The parties differ, of course, in the conclusions they draw from this factual record. In addition, they differ somewhat with regard to the applicable legal standard. I shall discuss both the legal standard and its application to this record, but before reaching either issue, I must determine whether, under the applicable law, punitive damages are available in products liability actions.

 I. Availability of Punitive Damages

 It is undisputed that a Pennsylvania court would hold that the substantive law of New Jersey governs this action. New Jersey is the state of plaintiffs' residence and the state in which Anthony Goncalves suffered both his exposure to asbestos and the resulting injuries. Amended Complaint paras. 1a, 8. Accordingly, it is the state which, under Pennsylvania choice of law rules, has the greatest interest in the outcome of this litigation. Kelly v. Johns-Manville Corp., 590 F. Supp. 1089, 1094-95 (E.D. Pa. 1984).

 There is some disagreement as to whether punitive damages are available in a New Jersey products liability action. Compare Gold v. Johns-Manville Sales Corp., 553 F. Supp. 482 (D.N.J. 1982) (Ackerman, J.) (punitive damages unavailable in strict liability actions); Wolf v. Procter & Gamble Co., 555 F. Supp. 613, 618 & n.1 (D.N.J. 1982) (Fisher, C.J.) (same) with Gogol v. Johns-Manville Sales Corp., 595 F. Supp. 971, 975-76 (D.N.J. 1984) (Gerry, J.) (punitive damages available in strict liability actions); Cinnaminson Township Board of Education v. U.S. Gypsum Co., 552 F. Supp. 855, 863 (D.N.J. 1982) (Thompson, J.) (same). A recent decision of the Appellate Division of the New Jersey Superior Court, Fischer v. Johns-Manville Corp., 193 N.J. Super. 113, 472 A.2d 577, 581-87 (App. Div.) (same), certification granted, 97 N.J. 598, 483 A.2d 137 (1984), holding that punitive damages can be had in a products liability case, is now pending before the New Jersey Supreme Court. My role is to predict what that court will rule. *fn2" McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 661-63 (3d Cir.), cert. denied, 449 U.S. 976, 66 L. Ed. 2d 237, 101 S. Ct. 387 (1980). See also Novosel v. Nationwide Ins. Co., 721 F.2d 894, 897 (3d Cir. 1983); Becker v. Interstate Properties, 569 F.2d 1203, 1205-06 & nn. 5-8 (3d Cir. 1977), cert. denied, 436 U.S. 906, 56 L. Ed. 2d 404, 98 S. Ct. 2237 (1978).

 In Gold v. Johns-Manville Sales Corp., 553 F. Supp. 482 (D.N.J. 1982), Judge Ackerman predicted that New Jersey would not allow punitive damages in actions based purely on strict liability, because (1) punitive awards would artificially raise the price consumers pay for the affected goods, and (2) such awards are "concerned with [defendants'] normative behavior," and would therefore confuse a jury charged according to strict liability principles. 553 F. Supp. at 484-85. Judge Fisher adopted this reasoning in Wolf v. Procter & Gamble Co., supra, 555 F. Supp. at 618 & n.1. Both Gold and Wolf preserve plaintiffs' right to present punitive damages claims in cases in which negligence as well as strict liability is alleged. Gold, supra, 552 F. Supp. at 485; Wolf, supra, 553 F. Supp. at 618. Under both decisions, however, punitive damages are unavailable in cases based solely on strict liability.

 Plaintiffs in this case press both negligence and strict liability claims. Accordingly, even under Gold and Wolf, punitive damages are legally available on plaintiffs' negligence claims, given sufficient proof of egregious conduct.

 Gold and Wolf would not permit plaintiffs to assert punitive damages claims on their strict liability counts. However, two cases decided since Gold and Wolf have concluded that New Jersey law permits punitive awards even where liability is based solely on section 402A of the Second Restatement of Torts. In Fischer v. Johns-Manville Corp., supra, the case now under review in the New Jersey Supreme Court, the Appellate Division of the New Jersey Superior Court expressly considered the arguments advanced in Gold, and concluded that Gold misapprehended applicable New Jersey precedent. 472 A.2d at 583-84. The court went on to decide that punitive damages serve the same policy goals in products liability actions as in other kinds of tort cases:

 
With respect to the public policy considerations implicated in allowing punitive damages in products liability cases, we concur with the judicial consensus that if punitive damages are awarded only in egregious situations, the public interest, on balance, is better served by allowing such an award than by precluding it. As we have noted, the underlying purpose of punitive damages is both to punish the offender and to deter him and others from engaging in similar conduct. Both punishment and deterrence are appropriate responses to a supplier of defective goods who has knowledge of the high degree of risk of grave harm to which they will subject the public but who nevertheless makes the cynical, conscious business decision to place and keep them on the market. Were punitive damages to be withheld, those entrepreneurs who act with flagrant disregard of the public safety would be able to write off the public's injury as a cost of doing business by the payment of compensatory damages, for which there is typically insurance coverage. One court has described this practice as the 'cold-blooded calculation' that it is more profitable to pay claims than to cure the defect . . . . Thus, it is only the threat of punitive damages which can ultimately induce these entrepreneurs and others to act with a reasonable modicum of responsibility.

 Id. at 584 (citations omitted). *fn3" Fischer was decided in January 1984. Nine months later, in Gogol v. Johns-Manville Sales Corp., supra, Judge Gerry decided that, in light of Fischer, Judge Ackerman's ruling in Gold incorrectly predicted how the New Jersey Supreme Court would rule on the issue. 595 F. Supp. at 975-76.

 Like Judge Gerry, I find Fischer persuasive. As the Fischer court noted, the weight of authority in other jurisdictions is strongly in favor of allowing punitive awards in strict liability actions. Id. 472 A.2d at 582-83 (citing cases); Annot., 13 A.L.R. 4th 52 (1982). A recent instance is the Third Circuit's articulation of Virgin Islands law in Acosta v. Honda Motor Co., 717 F.2d 828 (3d Cir. 1983), which took issue with Judge Ackerman's conclusion in Gold, supra, that, as a general matter, products liability defendants would be able to "pass on" punitive damage awards to consumers. See id. at 835-36. I conclude that the New Jersey Supreme Court will determine that punitive damages are available in ...


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