Appendix — Armstrong v. Owens-Illinois, Inc.

92-228 |} Mupreme Cowt, US

No. = FILED

JUL 6 1999

In The |

OFFICE OF THE CLERM

Supreme Court of the United States

-—

October Term, 1992

OTHELLO ARMSTRONG, et ai.,

Petitioners,

VS.

OWENS-ILLINOIS, INC.,

Respondent.

On Petition for Writ of Certiorari to the Court of Appeals of

Maryland

SUPPLEMENTAL APPENDIX FOR

PETITIONERS

HARRY GOLDMAN, JR.

Counsel of Record

SHEPARD A. HOFFMAN

MICHAEL P. CASEY

GOLDMAN & SKEEN, P.A.

Attorneys for Petitioners

1123 Munsey Building

Calvert & Fayette Streets

Baltimore, Maryland 21202

(410) 837-4222

(410) 685-7155 (FAX)

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TABLE OF CONTENTS

Page

Appendix H — Decision of Court of Appeals of Maryland

Opinion, Owens-Illinois v. Armstrong, 326 MD. 107,

128-29, Reversing Petitioners’ Punitive Damage

Awards and Applying the New Law Announced in

I 0 6s BER ee Cee ete ees ns 18a

Appendix I — Decision of Court of Appeals of Maryland

Opinion, Owens-/llinois v. Zenobia, 325 Md. 420,

469, Stating Clear and Convincing Standard of

Evidence to be Applied in Punitive Damage Awards

18a

APPENDIX H — DECISION OF COURT OF APPEALS OF

MARYLAND OPINION, OWENS-ILLINOIS V.

ARMSTRONG, 326 MD. 107, 128-29, REVERSING

PETITIONERS’ PUNITIVE DAMAGE AWARDS AND

APPLYING THE NEW LAW ANNOUNCED IN ZENOBIA

604A.2d 47

OWENS-ILLINOIS, INC.

Othello ARMSTRONG , etal.

No. 77, Sept. Term, 1991.

Court of Appeals of Maryland.

April 7, 1992.

Harry S. Johnson (Patrick C. Smith, Gardner M. Duvall, Julia

K. Evans, Whiteford, Taylor & Preston, on brief), Baltimore,

Walter E. Dellinger, Durham, N.C., argued, for petitioner.

Edward F. Houff, Carolyn J. Moses, Church & Houff, P.A.,

Baltimore, for amicus curiae Center for Claims Resolution.

Shepard A. Hoffman (Harry Goldman, Jr., David M. Layton,

Goldman & Skeen, P.A., on brief), Baltimore, for respondents.

Argued before MURPHY, C.J., ELDRIDGE, RODOWSKY,

McAULIFFE, CHASANOW, KARWACKI and ROBERT M.

BELL, JJ. |

19a

Appendix H

CHASANOW. Judge.

Kaylo is an asbestos-containing insulation that was

manufactured and sold by petitioner, Owens-Illinois, Inc., from

1948 to 1958. In 1958, Owens-Illinois, Inc. conveyed the Kaylo

product line to Owens-Corning Fiberglas. Kaylo was generally sold

as 50-60 pound blocks which were separated into pieces with

hammers or saws. The cutting, fitting, and installation of Kaylo was

alleged to have been extremely dusty work.

Respondent, Othello Armstrong, worked first as a laborer and

later as a welder on engines and in boiler rooms of various ships

being built or repaired at the Bethlehem Steel Corporation

shipyards. Armstrong was employed at the shipyards from 1942 to

1963. While there, Armstrong claims he was exposed to thick

clouds of asbestos-containing dust which was identified by a

witness as Kaylo dust. There is no allegation that Armstrong was

exposed to asbestos products after he left the shipyards in 1963.

Respondent, Forrest Wood, was a rigger at a Bethlehem Steel

shipyard from 1941 to 1975. As a rigger, Wood assisted other

workmen in the removal of equipment and materials from ships. His

job included assisting pipe-coverers in the installation and removal

of pipe-covering insulation. This work, like that performed by

Armstrong, was alleged to have involved exposure to heavy clouds

of Kaylo dust.

Armstrong and Wood, along with two other workers not

directly involved in this appeal, filed suit in the Circuit Court for

Baltimore City against Owens-Illinois and other companies that

manufactured, installed, or supplied asbestos-containing

insulation products. The plaintiffs’ allegations were based on

negligence and strict liability in tort. A jury returned verdicts for

20a

Appendix H

Armstrong and the Woods against each defendant. The trial court,

Judge Clifton J. Gordy, Jr., denied the defendants’ motion for

judgment notwithstanding the verdict.

Owens-Illinois and Eagle-Picher Industries, two of the

defendants, appealed. The latter’s appeal was stayed after it filed a

Title 11 bankruptcy petition in the United States Bankruptcy Court

for the Southern District of Ohio, thus making Owens-Illinois the

sole defendant seeking review of the judgments. The Court of

Special Appeals affirmed the awards. Owens-Illinois v. Armstrong,

87 Md.App. 699, 591 A.2d 544 (1991).

This Court granted Owens-Illinois’ petition for certiorari. We

shall address each issue raised by Owens-Illinois, amplifying when

necessary the factual scenario presented above.

BUSINESS RECORDS

In 1969, a Bethlehem Steel industrial health engineer was

directed by a vice president to conduct an asbestos exposure study

and prepare a report on the exposure of both Bethlehem and non-

Bethlehem personnel to asbestos-containing dust at Bethlehem’s

facilities. The five-page report was offered into evidence by

Owens-Illinois as a business record of Bethlehem Steel.

Owens-Illinois contends the Bethlehem study should have

been admitted because it showed that, in three “bystander” dust

counts taken around employees in the same jobs as Wood and

Armstrong working in ship engine rooms where insulation was

being installed, no measurable amount of asbestos fibers was

detected. Although acknowledging that the report was prepared and

maintained in the ordinary course of business, Armstrong and Wood

objected to its admissibility. Judge Gordy ruled:

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Appendix H

“I don’t have any problem with this [meeting

the] business record exception. That does not

automatically make an exhibit aumissible. It

gets over that hurdle, but it is significantly

unreliable ... I am not satisfied that the

conclusions or the results cited herein are

reliable. Itis not trustworthy ...”

On appeal, Owens-Illinois contends that “once a document has

been found to be a business record there is no additional

trustworthiness or reliability test unless [in acriminal case] the 6th

Amendment is implicated.” We disagree with Owens-Illinois and

hold that a trial judge has discretion to exclude a document that

meets the technical requirements of a business record when the

objecting party persuades the judge that the document lacks the

degree of reliability and trustworthiness that business records are

ordinarily assumed to possess!

In Palmer v. Hoffman, 318 U.S. 109, 63 S.Ct. 477, 87 L.Ed. 645

(1943), tort actions were filed against a railroad for death and

personal injuries arising out of a railroad accident at a grade

crossing. Plaintiffs alleged that the railroad was negligent because

the engineer failed to ring the bell, blow the whistle, and have ali ght

burning at the front of the train when approaching the crossing. Two

days after the accident, pursuant to railroad requirements, the

engineer gave a signed statement to railroad officials and to a State

Public Utilities Commission representative containing his version

of the accident and denying any negligence. Before trial the

engineer died. At trial, the engineer’s statement was offered into

evidence by the railroad as a business record. Plaintiffs’ objection

1. Armstrong and Wood also contended before the trial judge that the 1969

asbestos dust study was not relevant. The Court of Special Appeals saw no need to reach

that issue, and it was not raised before this Court.

2a

Appendix H

to the admissibility of the statement was sustained, and after a

verdict for the plaintiffs, the railroad appealed. The United States

Supreme Court ultimately granted certiorari and upheld the trial

judge’s decision notto admit the engineer’s statement. Perhaps the

best analysis of the Palmer decision is found in 2 McCormick on

Evidence, § 288 at 272 (John W. Strong ed., 4th ed. 1992)

(hereinafter, McCormick), which provides:

“While Palmer has been subject to various

interpretations, the most reasonable reading of

it is that it did not create a blanket rule of

exclusion for accident reports or similar

records kept by businesses. Rather, it

recognized a discretionary power in the trial

court to exclude evidence which meets the

letter of the business records exception, but

which, under the circumstances, appears to

lack the reliability business records are

assumed ordinarily to have. The existence of a

motive and opportunity to falsify the record,

especially in the absence of any countervailing

factors, is of principal concern. The Federal

Rule incorporates this reading of Palmer by

permitting admission if the report otherwise

complies with the requirements of the rule,

‘unless the source of information or the method

or circumstances of preparation indicate lack

of trustworthiness.’ ” (Footnotes omitted).

This Court has recognized that, in some instances, business

records may be excluded if established to be unreliable or

untrustworthy. In Marine Bank v. Stirling, 115 Md. 90, 102-03, 80

A. 736, 739-40 (1911), abank ledger on which checks “found loose

23a

Appendix H

in the bank” were entered was found too uncertain or unreliable to

be admissible. We stated:

“Such a claim would not ordinarily of

itself affect the admissibility of an individual

ledger, containing the accounts between

depositors and the bank, but under such

circumstances as are shown in this case there is

too much indicating the uncertainty and

unreliability of this ledger account to permit it

to be used as evidence perse ...”

115 Md. at 103, 80A. at 740.

The federal rules of evidence pertaining to the hearsay

exception for business records and public records exclude

otherwise admissible records if the sources of information or other

circumstances “indicate lack of trustworthiness.” Federal Rules of

Evidence 803(6) and 803(8).

In Ellsworth v. Sherne Lingerie, Inc., 303 Md. 581, 495 A.2d

348 (1985), this Court examined the public records hearsay

exception and held that “factual findings” contained in public

records are admissible unless the party Opposing introduction of a

public record proves the factual finding is unreliable. Judge

McAuliffe, writing for the Court, indicated how such unreliability

may be established. The reasoning is equally applicable to proving a

business or public record is untrustworthy. The Court stated:

“We also make clear that even though the

burden rests upon the party opposing the

introduction of a public record to demonstrate

the existence of negative factors sufficient to

24a

Appendix H

overcome the presumption of reliability, this

does not mean that additional evidence will be

required in every case to meet that burden.

Indicia of unreliability may be contained in the

report itself, or may be disclosed by the

evidence of the party offering the report.”

303 Md. at612,495A.2d at 364.

The factors that can be utilized by a trial judge in determining

whether a business record or a portion of a business record should be

excluded for lack of trustworthiness may include such factors as: 1)

the purpose for which the record was prepared and any possible

motive to falsify including whether the record’s use in prospective

litigation was a motive for its preparation, see Rossi v. Mobil Oil

Corp., 710 F.2d 821, 830 (Temp.Emer.Ct.App.1983), Jefferson

Garden Associates v. Greene, 202 Conn. 128, 520 A.2d 173, 181

(1987); 2) how routine or non-routine the record is and how much

reliance the business places on the record for business purposes,

Palmer v. Hoffman, supra; and 3) where, as in the instant case, the

record contains opinions and conclusions — how valid,

speculative, or conjectural the opinions or conclusions are, as well

as the need for interpretation or cross-examination to prevent

misleading or confusing the trier of fact. See 2 McCormick, § 293 at

280-81.

Wood and Armstrong contend that the trial judge was correctin

his determination that the disputed “business record” of the

asbestos dust study was untrustworthy. The Court of Special

Appeals aptly noted that the study was made at the request of one of

Bethlehem’s vice-presidents and “[o]n its face, the report appears to

be a single or, at most irregular, request.” 87 Md.App. at 712, 591

A.2d at 550. The industrial health engineer may have been reluctant

25a

Appendix H

to report that personnel, including non-Bethlehem personnel, were

being exposed to potentially lethal levels of asbestos dust.

Armstrong and Wood point to a number of additional reasons why

the report lacks trustworthiness which we note might also go to its

relevancy. Armstrong had left Bethlehem six years before the Study,

and Wood had started working in the shipyard twenty-eight years

before the date of the study. The report does not indicate what

products were being used in 1969 when the asbestos dust counts

were done and that this information would be iraportant because

manufacturers had reduced or eliminated the asbestos in their

insulation by 1969. The report also does not indicate whether the

working conditions and dust exposure of the employees in the 1969

study were similar in relevant aspects to the working conditions and

dust exposure of Wood and Armstrong.

The Owens-Illinois product Kaylo was apparently not one of

the insulating products in use during the 1969 asbestos dust Study,

since Owens-Illinois had stopped manufacturing Kaylo eleven

years before the study, and we have no description of the asbestos

content, if any, of the insulation products that were in use during that

Study. Further, the trial judge was concerned that the report lacked

sufficient specificity as to the methodology used in conducting the

study. For the reasons indicated, the trial judge did not err in

concluding that the “business record” lacked trustworthiness, and if

the 1969 dust study results were to be admitted, the personnel

conducting the study would have to be called as witnesses to

establish the study’s validity.

Although we sustain the trial judge’s ruling which excluded the

“business record” in the instant case because it lacked

trustworthiness, we hasten to add that, where a record qualifies asa

business record, there is a presumption of trustworthiness, and the

objecting party, especially in a civil case, bears a heavy burden in

26a

Appendix H

order to exclude an otherwise admissible business record as

untrustworthy.

PROXIMATE CAUSE

Owens-Illinois’ next contention is that Armstrong did not

prove proximate cause because he “failed to present any evidence

that had a warning been given, it would have been heeded.” That

contention is based in part on the fact that Armstrong smoked

cigarettes for forty years until he quit in the mid-1970’s despite

health warnings that were placed on cigarette packages after

January 1, 1966. Therefore, according to Owens-Illinois, the lack of

a warning On its asbestos product was not the proximate cause of

Armstrong’s asbestoses because there is no evidence that he would

have heeded that warning.

In analyzing this issue, we must keep in mind that we are being

asked to declare as a matter of law that there was insufficient

evidence to have submitted this aspect of the case to the jury. Under

these circumstances, an appellate court must view the evidence in

the light most favorable to the prevailing party below, resolving all

conflicts in its favor. Lehman v. Balto. Transit Co., 227 Md. 537,

540-41, 177 A.2d 855, 857 (1962). “A party is not entitled to

judgment n.o.v. unless the facts and circumstances so considered

are such as to permit of only one inference with regard to the issue

presented.” Jmpala Platinum vy. Impala Sales, 283 Md. 296, 327,

389 A.2d 887, 905 (1978).

Causation is a necessary element of any strict liability action.

Phipps v. General Motors Corp., 278 Md. 337, 344, 363 A.2d 955,

958 (1976). In considering whether causation has been proven ina

failure to warn strict liability action, the trier of fact is entitled to

~—ttraw the reasonable inference that people are assumed to act for

27a

Appendix H

self-preservation absent proof to the contrary. See Md. Central R.R.

v. Neubeur, 62 Md. 391, 402 (1884); Nizer v. Phelps, 252 Md. 185.

205,249 A.2d 112, 123 (1969).

Owens-Illinois asserts that Armstrong’s “testimony that he

smoked for forty years is sufficient evidence to rebut a ‘self-

preservation’ presumption.” We disagree and hold that the issue of

causation was properly submitted to the jury.

This issue was addressed in Raney v. Owens-Illinois, 897 F.2d

94 (2nd Cir.1990). There the U.S. Court of Appeals fer the Second

Circuit held:

“[A] prediction as to what a worker,

alerted to the [asbestos] hazards, would have

done is generally within the range of

reasonable dispute that makes matters

appropriate for submission to a jury. Evidence

that [decedent], who had begun smoking and

perhaps had become addicted years before

cigarette health warnings appeared, did not

stop smoking after such warning ... is, at

most, acircumstance for the trier to consider in

deciding whether an asbestos warning would

have been heeded. Such evidence does not

preclude a finding in plaintiff's favor. As [the

trial judge] noted, a jury could reasonably

conclude that [decedent] would have adjusted

his conduct more significantly to asbestos

warnings than tocigarette warnings . . .”

897 F.2d at 96. See also Skonberg v. Owens-Corning Fiberglas

Corp., 215 Ill.App.3d 735, 159 Ill.Dec. 359, 363, 576 N.E.2d 28. 32

28a

Appendix H

(1991).

The fact that Armstrong was a heavy smoker who ignored

warnings placed on cigarette packages during the last decade of the

forty-year period when he smoked is not enough evidence to find as

a matter of law that he would have ignored warnings about the

dangers of asbestos. We find that there was sufficient evidence for

the jury to reasonably conclude Armstrong would have heeded a

warning of health hazards from inhalation of asbestos-containing

dust from Kaylo products and that Owens-Illinois’ failure to warn

was the proximate cause of Armstrong’s asbestoses.

SUBSTANTIAL FACTOR

Wood testified that while assisting workers installing Kaylo

pipe-covering, large amounts of dust “would fly like snowflakes” in

the air around them. Armstrong testified that he was exposed to dust

from pipe-covering material at the shipyard. One of Armstrong’s

fellow employees who worked with him for years testified that

Armstrong labored near pipe-coverers using Kaylo, which created

clouds of dust that completely coated the workers. Expert witnesses

testified that the occupational exposure to asbestos was a

substantial factor in causing Wood’s and Armstrong’s asbestoses.

The trial judge instructed the jury:

“In order fora plaintiff to recover againsta

particular defendant, certain things must be

shown—must be proved by the plaintiffs by a

preponderance of the evidence. You must

determine whether each plaintiff has proven by

a preponderance of the evidence that he has

asbestoses, he worked in proximity to and

inhaled respirable asbestos fibers from the

29a

Appendix H

products of a particular defendant. It must be

shown that a product or products manufactured

or supplied by that defendant, by a particular

defendant was a substantial factor in causing

the asbestoses.

If no product manufactured or supplied by

a particular defendant was a substantial factor

in Causing the asbestoses, then that defendant

has no responsibility, and the defendant is out

right away. ’

Unless there is a product that was

manufactured or supplied by a particular

defendant which was a substantial factor in

causing the asbestoses, there is no

responsibility on the part of that defendant.”

Owens-Illinois contends that the instruction was deficient

because it failed to adequately address the special legal meaning of

“substantial factor.” The company insists that the jury should have

been instructed that, in order for its product to be a substantial factor

in Causing asbestoses, plaintiffs must show that each of them

worked in proximity to Kaylo with enough frequency and with

enough regularity for the inhaled fibers from Kaylo to have

substantially contributed to their asbestoses. We need not decide

whether the requested instruction was correct, since the matter was

fairly covered by the instruction actually given.

We believe that in the instant case “substantial factor” was nota

mysterious phrase requiring elucidation. The phrase has even been

considered as one that is “sufficiently intelligible to furnish an

adequate guide in instructions to the jury, and that it is neither

——

30a

Appendix H

possible nor desirable to reduce it to any lower terms.” See W. Page

Keeton, Prosserand Keetonon Torts, § 41 at 267 (Sthed. 1984) and

authorities cited therein. The plaintiffs’ expert witnesses obviously

understood the phrase “substantial factor” and, no doubt, so did the

jury.

In the instant case, especially in light of the expert testimony

and the nature and extent of Wood’s and Armstrong’s exposure to

Kaylo, the judge was not obligated to further define the concept of

substantial factor. “The court need not grant a requested instruction

if the matter is fairly covered by instructions actually given.”

Maryland Rule 520(c).

CAP ON NONECONOMIC DAMAGES

Next Owens-Illinois argues that the Court of Special Appeals

erred in holding that Armstrong’s damage award ? was not subject to

reduction by the cap on noneconomic damages in Maryland Code

(1974, 1989 Repl. Vol.), Courts & Judicial Proceedings Article § 11-

108 (hereinafter the CAP statute). Section 11-108 provides in

relevant part:

(b) Limitation of $350,000 established.—

In any action for damages for personal injury in

which the cause of action arises on or after July

1, 1986, an award for noneconomic damages

may notexceed $350,000.” (Emphasis added.)

Owens-Illinois contends that Armstrong’s cause of action “arose”

in September of 1987 when he was first diagnosed as having

asbestoses and, therefore, his award for nonecnomic damages is

2. Owens-Illinois challenges only Armstrong's damage award.

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Appendix H

subject to the CAP statute. Owens-Illinois argues that the cause of

action “arises” at the time the claimant, with due diligence,

discovers his injury. Its argument is an extension of this Court’s

interpretation the word “accrues” in the statute of limitations

context.

In an asbestos-related injury case, this Court held that “in

situations involving the latent development of disease, a plaintiff’s

cause of action accrues when he ascertains, or through the exercise

of reasonable care and diligence should have ascertained, the nature

and cause of his injury.” Harig v. Johns-Manville Products, 284

Md. 70, 83, 394 A.2d 299, 306 (1978) (emphasis added).? In

reaching this conclusion in Harig, the Court compared an asbestos

related injury to a medical malpractice injury and reasoned that “a

person incurring disease years after exposure cannot have known of

the existence of the tort until some injury manifests itself. In neither

case can the tort victim be charged with slumbering on his rights, for

there was no notice of the existence of a cause of action.” Id. at 80,

394 A.2d at 305 (emphasis added). Thus the Court recognized a

distinction between the time that a cause of action comes into

existence and the time that a cause of action may reasonably be

discovered.

Owens-Illinois asks this Court to hold that a cause of action

“arises” when it is discovered as opposed to when it comes into

existence. In construing the CAP statute, “we assume that the words

of the statute are intended to have their natural, ordinary and

generally understood meaning in the absence of evidence to the

3. The principle that the statute of limitations is tolled until a plaintiff has either

express or implied knowledge of the wrong is referred to as the “discovery rule.” In

Poffenberger v. Risser, 290 Md. 631, 637, 431 A.2d 677, 681 (1981), this Court held

that the discovery rule was applicable to civil actions generally.

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Appendix H

contrary.” Brodsky v. Brodsky, 319 Md. 92,98,570A.2d 1235, 1237

(1990). According to Webster’s New World Dictionary (2d ed.) the

word “arise” means “to come into being; originate.” Giving the

word its ordinary meaning, we believe that a cause of action arises

when it first comes into existence.

We agree with the Court of Special Appeals’ conclusion that a

cause of action in negligence or strict liability arises “when facts

exist to support each element.” Armstrong, 87 Md.App. at 724-25,

591 A.2d at 556. In a negligence claim, the fact of injury would

seemingly be the last element to come into existence. The breach,

duty, and causation elements naturally precede the fact of injury.

Likewise in a Strict liability claim, the existence of the defective

product and the causal connection will precede the resultant injury.

Therefore, Armstrong’s noneconomic damages should be reduced

under Section 11-108 of the Courts & Judicial Proceedings Article

only if his “injury” came into existence on or after July 1, 1986.

Unfortunately, identifying the time at which an asbestos

related injury came into existence is usually not a simple task. Due

to the latent nature of asbestos-related disease, experts and courts

alike have had difficulty in pinpointing its onset. In Mitchell v.

Maryland Casualty, 324 Md. 44, 595 A.2d 469 (1991), this Court

addressed argument over when “bodily injury” due to asbestos

exposure “occurred” for the purpose of triggering coverage under a

standard form insurance policy.* The Court considered expert

testimony on behalf of both parties: Dr. Epstein, aclinician, and Dr.

Craighead, a pathologist. It is no great surprise that the clinician

testified that “bodily injury” did not occur until asbestoses had

4. The insurance policy in Mitchell v. Maryland Casualty, 324 Md. 44,595 A.2d

469 (1991) specifically employed the terms “bodily injury” and “occurrence” in

defining the scope of the policy’s coverage. For technical accuracy, we retain use of

those terms here.

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Appendix H

manifested itself or was clinically detectable. He explained:

“Asbestoses is a disease that occurs in lung

tissue as a result of prior asbestos exposure.

Although asbestos fibers may be deposited in

lung tissue in the course of various

occupational exposures, ... the disease of

asbestoses occurs only when there has been

functional impairment of the lung. The human

body has extremely effective defense

mechanisms to protect the individual from

suffering functional impairment as a result of

inhalation of asbestos fibers (or other

aerosolized materials). It is only when these

defensive responses have produced enough

alteration in the structure or physiology of the

lung to lead to clinically detectable or

symptomatic changes that disease can be said

to be present.”

Mitchell, 324 Md. at 667, 595 A.2d at 480. Thus, the insurance

company argued that “bodily injury” occurred only upon the

manifestation of disease. Conversely, the pathologist testified that

bodily injury occurred much earlier:

“As a pathologist I define an ‘injury’ to be

the alteration of structure and/or function of a

cell, tissue or organ. An ‘injury’ also would

include physical or chemical damage to the

body which may be detectable only on a

microscopic or subclinical level. As a

pathologist I define ‘disease’ as the process of

reaction and/or repair to injury. In the

I ineeeeeeaeaeiiiesianile

34a

Appendix H

discussion which follows of the diseases of

asbestoses, bronchogenic carcinoma, and

mesothelioma, there are injuries to cells,

tissues and/or organs and associated diseases

caused by exposure to asbestos fibers as

described, notwithstanding the fact that the

injuries and diseases may not be noticeable toa

harmed individual or diagnosable by a

clinician until some later point in time.”

Mitchell, 324 Md. at 64, 595 A.2d at 479. Chief Judge Murphy,

writing for the Court, noted that despite the physicians’

disagreement as to the time when a change in-the lungs may be

classified as disease “there was no disagreement that the inhalation

and retention of asbestos fibers may cause immediate harm to the

cells and tissues of the lung.” Mitchell, 324 Md. at 61,595 A.2d at

477.

Fortunately, we have the benefit of hindsight in determining

whether Armstrong’s cause of action existed prior to 1986. We now

know that in 1987 Armstrong was diagnosed as having asbestoses,

and we agree with the Court of Special Appeals’ conclusion that

“{i]t is inconceivable that Armstrong’s asbestoses came into

existence between July 1, 1986 and his medical examination in May

1987.” Armstrong, 87 Md.App. at 727,591 A.2d at 557. We need not

decide exactly when Armstrong contracted asbestoses. Given that

Armstrong was exposed to large amounts of asbestos from 1943 to

1963, his asbestoses probably had its genesis relatively early in the

course of his exposure.

Owens-Illinois’ expert testified that

“asbestoses does not develop immediately

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Appendix H

after exposure. It takes many, many years, and

usually the kind of latency period that we are

talking about is probably at the minimum 15

years but more ordinarily 20 or more years.

During unusual circumstances less than that

could cause the disease.”

Based on Owens-Illinois’ expert’s testimony, it is reasonable to

assume that Armstrong’s asbestoses took approximately twenty

years to develop. Since his exposure began in the early 1940’s, the

most reasonable conclusion is that his asbestoses developed at least

by the mid-1960’s. Even assuming that the initial damage to

Armstrong occurred in 1963, the last year in which he worked in the

shipyards, the disease “ordinarily” would have developed by 1983

and under “unusual” circumstances even earlier. The only

reasonable conclusion, even viewed in the light most favorable to

Owens-Illinois, is that Armstrong had asbestoses prior to July

1,1986. Consequently, we affirm the Court of Special Appeals’

holding that Armstrong’s damage award is not controlled by the cap

on noneconomic damages.

DAMAGE SETOFF

In the Armstrong case, the jury returned a compensatory

damage verdict against Owens-Illinois, together with defendants

Owens-Corning Fiberglas and Eagle-Picher, in the amount of

$730,000. In the Wood case, the jury returned a compensatory

damage verdict against Owens-Illinois and Owens-Corning

Fiberglas in the amount of $657,000. The jury in both cases also

5. Armstrong's expert defined the latency period, as well as the disease,

somewhat differently. She testified that asbestoses is active and present from the time

that the first fiber gets into the lungs but that often symptoms may not develop for twenty

to thirty years.

a,

Appendix H

determined that Owens-Illinois and Owens-Corning Fiberglas

were liable for punitive damages. The punitive damage phase of the

trial was to commence the following day.

Subsequent to the verdicts, but before the punitive damage

phase, Armstrong and Wood reached a settlement with Owens-

Corning Fiberglas. Under the terms of the setthkement, Owens-

Corning Fiberglas would pay its full pro rata share of each

compensatory damage award (one-third of the award in the

Armstrong case and one-half of the award in the Wood case) plus an

additional amountto settle the punitive damage claims.

In the Armstrong case, Owens-Corning Fiberglas paid

$304,166.33, which Owens-Illinois acknowledges represents

$60,833 to settle the punitive damage claim and $243,333.33 (one-

third of $730,000) to settle the compensatory damage claim. In the

Wood case, Owens-Corning Fiberglas paid $410,625, which

Owens-Illinois acknowledges represents $82,125 to settle the

punitive damage claim and $328,500 (one-half of $657,000) to

settle the compensatory damage claim.

At the conclusion of the case, the trial judge reduced the

amount of each compensatory damage verdict by the amount that

Owens-Corning Fiberglas paid to settle the compensatory damage

award. Again, in each case, that amount equalled Owens-Corning

Fiberglas’ pro rata share of the award. Owens-Illinois contends that

the judge should have reduced the amount of each compensatory

damage verdict by the full amount of compensation paid by Owens-

Corning Fiberglas, including the punitive damage settlement

amount.

The Maryland version of the Uniform Contribution Among

Tortfeasors Act, Maryland Code (1957, 1991 Repl. Vol.), Article 50,

37a

Appendix H

§ 19 (hereinafter UCATA) provides that:

“A release by the injured person of one

joint tortfeasor, whether before or after

judgment, does not discharge the other

tortfeasors unless the release so provides; but

reduces the claim against the other tortfeasors

in the amount of the consideration paid for the

release, Of in any amount or proportion by

which the release provides that the total claim

shall be reduced, if greater than the

consideration paid.” (Emphasis added).

Section 19 of the UCATA specifically provides that the amount of

consideration paid in excess of apro rata share shall reduce the total

claim. The purpose of the Act is to prevent double recovery. The

amount recoverable from the non-settling defendant when added to

the amount recoverable from the settling defendant cannot exceed

the plaintiff’s verdict. See Martinez v. Lopez, 300 Md. 91,476A.2d

197 (1984). The Court of Special Appeals in Exxon Corp. v. Yarema,

69 Md.App. 124, 138, 516 A.2d 990, 997 (1986), addressed the

scope of § 19 and held that “the Uniform Contribution Among

Tortfeasors Act does not apply to punitive damages.” We adopt the

rationale of that opinion.

We first note that, although Owens-Illinois and Owens-

Corning Fiberglas are joint tortfeasors with regard to the

compensatory damage claims, they are not joint tortfeasors with

regard to punitive damage claims. In contending that each damage

award should have been reduced by the entire settlement amount,

Owens-Illinois fails to recognize this distinction. Examining the

purposes of the UCATA in light of the inherently different functions

that punitive and compensatory damages serve, it is apparent that

38a

AppendixH

the Act does not envision a reduction of a nonsettling tortfeasor’s

liability by another’s settlement of punitive damages.

The UCATA is derived, with the omission of certain sections

not here relevant, from the statute promulgated by the

Commissioners on Uniform State Laws in 1939 (the 1939 Model

Act). Martinez, 300 Md. at 97, 476 A.2d at 200. As noted by the

Court of Special Appeals in Exxon, the Commissioners’ Prefatory

Note to the 1939 Model Act provides in part:

“It is apparent that an injury resulting from the

joint tort of two or more persons involves each

of them, jointly and severally, in liability for

the entire damage. It is equally apparent that

this is an instance of a common obligation

resting on two or more, the discharge of which

by one of them accrues to the advantage of the

others.”

69 Md.App. at 136, 516 A.2d at 996. We agree with the Court of

Special Appeals’ conclusion in Exxon that “the drafters intended

section 19 to deal with the common liability of two or more joint

tortfeasors and not with the unique liability of an individual

wrongdoer.” Exxon, 69 Md.App. at 136, 516A.2d at 996. Thus, the

Act envisions joint tortfeasors sharing the responsibility for

compensating an injured party for the harm that he or she suffered or

prospectively will suffer. This, obviously, is the purpose of

compensatory damages. See Restatement of Torts (Second), § 903

(1979).

In contrast, the award of punitive damages is not an attempt to

compensate the injured party for harm suffered, but rather is, as the

name implies, punitive in nature. This Court explained in Embrey v

39a

Appendix H

Holly, 293 Md. 128, 442 A.2d 966 (1982), punitive damages “*...

are awarded, over and above full compensation, to punish the

wrongdoer, to teach him not to repeat his wrongful conduct and to

deter others from engaging in the same conduct.’ ” /d. at 141, 442

A.2d at 973 (quoting Wedeman v. City Chevrolet Co., 278 Md. 524,

531, 366 A.2d 7, 12 (1976)). The Court went on to explain that

punitive damages “in order to be fair and effective, must relate to the

degree of culpability exhibited by a particular defendant and that

party's ability to pay. Punitive damages, in essence, representa civil

fine, and as such, should be imposed on an individual basis.” Jd.

(293 Md.] at 141-42, 442 A.2d at 973. The Court in Embrey,

recognized that punitive damages could be awarded in different

amounts against each defendant or that they could be awarded

against one defendant and not another, depending on evidence

presented as to the degree of culpability, the existence or

nonexistence of malice, and the financial worth of each defendant.

Id. at 142-43, 442 A.2d at 973-74. Because acompensatory award is

a joint and several liability against all the joint tortfeasors while a

punitive damage award is an individual liability, the settlement of a

punitive damage claim by one tortfeasor will not reduce the

compensatory or punitive damage award against the nonsettling

tortfeasors.

Armstrong and Wood contend, and we agree, that the UCATA

does not entitle Owens-Illinois to benefit from the fact that the jury

found Owens-Corning Fiberglas liable for punitive damages and

that Owens-Corning Fiberglas-made a payment to avoid that

liability. The settlement here at issue contained two distinct

liabilities and reflected settlement of both liabilities separately.

Owens-Illinois argues that allowing a plaintiff to apportion his or

her settlement between compensatory and punitive damages invites

abuse.

40a

AppendixH

In the instant case, to settle the compensatory damage claims,

Owens-Corning Fiberglas paid to each plaintiff its full pro rata

share of the compensatory damages assessed by the jury. There was

no “abuse,” chicanery, or collusion. Instead, Owens-Corning

Fiberglas was clearly attempting, in good faith, to separately settle

its compensatory damage liability and its punitive damage liability.

Consequently, we affirm the Court of Special Appeals’

judgment that the trial court did not err when it reduced Owens-

Illinois’ liability only by the amount of the compensatory

settlement.

PUNITIVE DAMAGES

The jury award of punitive damages in the instant case must be

reversed. In Owens-Illinois v. Zenobia, 325 Md. 420, 601 A.2d 633

(1992), we stated “the ‘clear and convincing’ standard of proof for

punitive damages in tort cases applies to the instant cases [and] to

the two cases heard by us the same day . . .” One of the two cases

heard the same day as Zenobia, to which that opinion refers, is the

instant case. Consequently, for the reasons stated in Zenobia, we

shall reverse the awards of punitive damages and remand the cases

for new trials on the issue of punitive damages. The plaintiffs will be

required to prove their entitlement to punitive damages by clear and

convincing evidence based on the standards set forth in Zenobia.

JUDGMENT OF THE COURT OF SPECIAL APPEALS

AFFIRMED IN PART AND REVERSED IN PART. CASE

REMANDED TO THAT COURT WITH INSTRUCTIONS TO

REMAND THE CASE TO THE CIRCUIT COURT FOR

BALTIMORE CITY FOR NEW TRIALS LIMITED TO THE

ISSUE OF PUNITIVE DAMAGES. COSTS IN THIS COURT

AND IN THE COURT OF SPECIAL APPEALS TO BE PAID

TWO-THIRDS BY PETITIONERS AND ONE-THIRD BY

RESPONDENTS.

4la

APPENDIX I — DECISION OF COURT OF APPEALS OF

MARYLAND OPINION, OWENS-ILLINOIS V. ZENOBIA,

325 MD. 420, 469, STATING CLEAR AND CONVINCING

STANDARD OF EVIDENCE TO BE APPLIED IN

PUNITIVE DAMAGE AWARDS

601 A.2d 633

OWENS-ILLINOIS, INC. etal.

7h

William ZENOBIA, Sr. etal.

No. 66, Sept. Term, 1991.

Court of Appeals of Maryland.

Feb. 14, 1992.

Reconsideration Denied March 11, 1992.*

Gardner M. Duvall (Harry S. Johnson, Patrick C. Smith, John

G. Billmyre, Whiteford, Taylor & Preston, on brief, C. Robert

Loskot (John G. Sakellaris, Bernstein, Sakellaris, & Ward, on

brief), Baltimore, John J. Nagle, III, Margaret E. Swain, Barbara M.

Gaughan, Power & Mosner, P.A., on brief), Towson, for ~

petitioners/cross respondents.

Thomas V. Monahan, Jr., Toni-Jean Lisa, Goodell, DeVries,

Leech & Gray of Baltimore, amicus for Maryland Ass’n of Defense

Trial Counsel.

*The addendum to this opinion denying Motion for Reconsideration can be found

at 325 Md. 665 and 602 A.2d 1182.

42a

Appendix!

Gary I. Strausberg, Janet & Strausberg, Paul B. Bekman,

Israelson, Salisbury, Clements & Bekman, Baltimore, amicus for

Maryland Trial Lawyers’ Ass'n.

Robert Dale Klein, Wharton, Levin & Ehrmantraut,

Annapolis, Malcolm E. Wheeler, Parcel, Mauro, Hultin &

Spaanstra, PC, Denver, Colo., amicus for Product Liability

Advisory Council, Inc., Motor Vehicle Manufacturers Ass’n of the

United States, Inc., Chamber of Commerce of the U.S., National

Ass'n of Manufacturers of the U.S., Business Roundtable, and

Chemical Manufacturers Ass'n.

Edward F. Houff, Caroiyn J. Moses, Church & Houff, PA,

Baltimore, amicus for Center for Claims Resolution.

James R. Eyler, John P. Sweéney, Gregory L. Lockwood Miles

& Stockbridge, Baltimore, amicus for Owens-Corning Fiberglas

Corp.

Clifford C. Cuniff, Baltimore, for respondents/cross

petitioners.

Peter G. Angelos, PatriciaJ. Kasputys, Timothy J. Hogan, Law

Offices of Peter G. Angelos, Baltimore, amicus for Law Offices of

Peter G. Angelos.

Argued before MURPHY, C.J., ELDRIDGE, RODOWSKY,

McAULIFFE, CHASANOW, KARWACKI and ROBERT M.

BELL, JJ.

ELDRIDGE, Judge.

43a

Appendix!

We issued a writ of certiorari in these cases to consider several

important questions relating to a strict products liability cause of

action based on failure to warn of the dangerousness of the

products, and to reconsider some of the principles governing

awards of punitive damages in tort cases.

The plaintiffs Louis L. Dickerson and William L. Zenobia filed

in the Circuit Court for Baltimore City separate complaints seeking

damages for injuries resulting from exposure to asbestos, and the

complaints were consolidated for purposes of trial and appeal. Both

plaintiffs have pleural and parenchymal asbestoses. At the time of

the trial, the plaintiffs abandoned all theories of liability except for

strict liability under § 402A of the Restatement (Second) of Torts.

The plaintiff Dickerson sought damages from Owens-Illinois,

Inc., Eagle-Picher Industries, Inc., and Celotex Corp., all of which

manufactured products containing asbestos, and from MCIC, Inc.,

and Porter Hayden Company, both of which supplied and installed

products containing asbestos. Dickerson claimed that he was

exposed to asbestos from 1953 to 1963 when he worked as a laborer

both at the shipyard and at the steel mill owned and operated by the

Bethlehem Steel Corporation at Sparrows Point, Maryland.

The plaintiff Zenobia sought damages from the manufacturer

Owens-Illinois, Inc., and the suppliers/installers MCIC, Inc.,

Porter Hayden Co. and Anchor Packing Co.' Zenobia alleged that

he was exposed to asbestos while working as a painter for four

months at the Bethlehem Steel Sparrows Point shipyard in 1948,

while working as a pipe fitter for eighteen months at the Maryland

Shipbuilding and Drydock shipyard in 1951 and 1952, and while

1. All other defendants named by both plaintiffs in the original complaints and

subsequent amended complaints had either been granted summary judgment before the

trial or had settled prior to or during the trial.

44a

Appendix I

employed as acleanup man at the Carling Brewery for three months

in 1968.

The jury awarded compensatory damages to the plaintiff

Dickerson in the amount of $1,300,000 against all five defendants.

In addition, the jury initially determined that punitive damages

were warranted against certain defendants, and, subsequently the

jury awarded punitive damages against Owens-Illinois in the

amount of $235,000, against Porter Hayden in the amount of

32,500, and against Celotex in the amount of $372,000. The jury

awarded to the plaintiff Zenobia compensatory damages in the

amount of $1,200,000 against all four defendants; subsequently it

awarded punitive daimages against Owens-Illinois in the amount of

$235,000 and against Porter Hayden in the amount of $2,500.

Pursuant to a stipulation, each of the defendants was deemed to

have cross-claimed for contribution or indemnity against all other

defendants prior to trial. Anchor Packing Co., a supplier and

installer of products containing asbestos, sought in the Zenobia

case indemnity against Raymark, Inc., a manufacturer, asserting

that Raymark was Anchor’s primary source of asbestos containing

products. Raymark, Inc., had settled with both plaintiffs before

trial. The cross-claims were tried separately, after the verdicts for

the plaintiffs. At the time of the cross-claim trial, Raymark, Inc.,

was under the exclusive jurisdiction of the bankruptcy court. The

circuit court granted the defendants’ crossclaims for contribution

against ali settling defendants including Raymark, Inc. The

compensatory damages verdicts were reduced proportionally in

light of the releases between the plaintiffs and the settling

defendants. In addition, the trial court held that Anchor Packing Co.

was entitled to indemnity against Raymark, Inc., in the Zenobia

case. Thus, because of the plaintiff Zenobia’s settlement with and

release of Raymark, the trial court struck the jury’s award against

Anchor Packing.

45a

Appendix I

The compensatory and punitive damages awards were

appealed to the Court of Special Appeals by Owens-Illinois, Inc.,

MCIC, Inc., Porter Hayden, Co., Eagle-Picher Industries, Inc., and

Anchor Packing, Co.* The plaintiffs appealed from the cross-claim

determinations. The Court of Special Appeals affirmed all aspects

of the awards for compensatory damages and affirmed the awards in

the cross-claim trial. The award of punitive damages against

Owens-Illinois was affirmed, and the award of punitive damages

against Porter Hayden was reversed. See MCIC, Inc. v. Zenobia, 86

Md. App. 456, 587 A.2d 531 (1991).

Thereafter petitions and cross-petitions for a writ of certiorari

were filed in this Court. The only manufacturer which filed a

certiorari petition was Owens-Illinois. Owens-Illinois argued that

it was entitled to a new trial because certain depositions were

improperly admitted into evidence, and because the trial court gave

an erroneous jury instruction that Owens-Illinois hada duty to warn

of the hazards of asbestos after it had stopped manufacturing

products containing asbestos. Owens-Illinois also challenged the

award of punitive damages. MCIC, Inc., and Porter Hayden Co.,

which supplied and installed products containing asbestos, also

filed certiorari petitions which raised a single issue, namely

whether certain deposition testimony was erroneously admitted

against them.

The plaintiffs filed a conditional cross-petition for a writ of

certiorari, asking that the Court address the issues raised in the

cross-claims trial if the Court granted the defendants’ petitions.

Specifically, the plaintiffs requested this Court to decide whether

2. Before argument in the Court of Special Appeals, the defendants Celotex

Corp. and Eagle-Picher Industries, Inc., filed a bankruptcy petition. All further

proceedings in the cases against Eagle-Picher Industries and Celotex Corp. were

automatically stayed.

46a

Appendix!

the bankrupt debtor Raymark, Inc., can be adjudicated a joint

tortfeasor without leave of the bankruptcy court. If so, the plaintiffs

argued that Raymark was not properly adjudicated a joint

tortfeasor, and that, therefore, contribution, as well as indemnity in

favor of Anchor Packing Co., should not have been awarded with

regard to Raymark.

In response to the plaintiffs’ conditional cross-petition for

certiorari, the defendant Anchor Packing Co. filed a conditional

cross-petition for certiorari. In the event that this Court granted the

plaintiffs’ conditional cross-petition, Anchor Packing Co.

requested that the Court address the following contentions: (1)

certain deposition testimony was erroneously admitted; (2) an

instruction that Anchor had acontinuing duty to warn of the hazards

of asbestos after the plaintiffs’ last exposure to asbestos containing

products was improper; (3) the plaintiff Zenobia failed to show that

the products which Anchor supplied and/or installed contained

asbestos or that the plaintiff Zenobia was exposed to Anchor’s _

products; and (4) because the verdict for compensatory damages

was excessive and against the weight of the evidence, Anchor’s

motion for a new trial or remittitur should have been granted.

This Court granted all of the petitions and cross-petitions.

Additional facts will be set forth in the particular parts of this

opinion to which the facts relate.’

3. We note that there were numerous issues which were raised and decided in the

Court of Special Appeals but which were not raised in this Court. For example, in the

Court of Special Appeals all of the defendants now before this Court had argued that the

evidence was insufficient to show that the defendants’ activities were substantial factors

in causing the plaintiffs’ injuries. In this Court, the defendant Anchor Packing Co. is the

only defendant raising this issue, and it asserted only that “Zenobia failed to prove that

Anchor’s product contained asbestos or that Zenobia was regularly or frequently

exposed to respirable asbestos dust from an Anchor product.” (Anchor’s conditional

cross-petition fora writ of certiorari, p. 16).

47a

Appendix]

I.

The defendants’ initial argument is that certain deposition

evidence should not have been admitted because it was irrelevant

and because these defendants were not present at the depositions

and thus were unable to cross examine the deponents.* The

depositions were admitted into evidence for the limited purpose of

proving what the defendants should have known concerning the

dangers of asbestos. Such knowledge is often referred to as “state of

the art.” The defendants do not argue that “state of the art” or an

clement of knowledge is not relevant in this strict liability case;

rather they insist that these depositions, because they pertain to

what other companies knew about asbestos, are not proper “state of

the art” evidence. In order to resolve these arguments, it is

necessary to discuss briefly why any element of knowledge is

relevant in this strict liability case.

A.

Section 402A of the Restatement (Second) of Torts, adopted by

this Court in Phipps v. General Motors Corp., 278 Md. 337, 344,

363 A.2d 955, 958 (1976), requires that, in order to recover undera

theory of strict liability, a plaintiff must show:

4. The defendants Anchor Packing Co., MCIC, Inc., Porter Hayden Company

and Owens-Illinois object to the admission of the deposition testimony of Dr. Mancuso.

The defendant Owens-Illinois also objects to the admission of the deposition testimony

of Mr. John Humphrey, Mr. Louis Pechstein and Dr. Kenneth Smith.

Dr. Mancuso is a medical doctor who served as an industrial hygiene consultant

to the Philip Carey Co. (predecessor to Celotex Corp.) in 1962 and 1963. Mr. John

Humphrey was President of the Philip Carey Co. from 1948 to 1967. Mr. Louis

Pechstein was in charge of corporate records, claims and studies for the Philip Carey Co.

from 1955 to 1979. Dr. Kenneth Smith was the medical director for Johns-Manville

Corp. from 1944 to 1966.

48a

Appendix I

“(1) [that] the product was in a defective condition at the

time it left the possession or control of the seller,

(2) that it was unreasonably dangerous to the user or

consumer,

(3) that the defect was acause of the injuries, and

(4) that the product was expected to and did reach the

consumer without substantial change in its condition.”

Thus, on its face, § 402A subjects a seller of a defective

product to strict liability without regard to the knowledge of the

defect and “even though [the seller] has exercised all possible care

in the preparation and sale of the product.” Restatement (Second) of

Torts §402A, Commenta(1965).

When aproductis alleged to be defective because of a failure to

give an adequate warning, however, many courts have relied on

Comment j of § 402A. Comment } explains that “the seller is

required to give warning against [the danger], if he has knowledge,

or by the application of reasonable, developed human skill and

foresight should have knowledge, of the... danger.” The comment

goes on to distinguish a product containing an adequate warning

from a defective product, stating: “a product bearing such a

warning, which is safe for use if it is followed, is not in defective

condition, noris it unreasonably dangerous.” *

Several courts have acknowledged that the language in

5. Those jurisdiction which hold that evidence of knowledge of dangerous quality

is relevant ina failure to warn case, do not regard lack of knowledge as a factor in a strict

liability design defect case. See C. Marvel, Annotation, Strict Products Liability:

Liability for Failure to Warn as Dependent on Defendant's Knowledge of Danger, 33

A.L.R. 4th 368, 378 n. 14(1984). ,

49a

Appendix I

Comment j appears to contradict or create an exception to the basic

rule set out in § 402A. See, e.g., Woodill v. Parke Davis & Co., 79

Il.2d 26, 37, 37 Ill.Dec. 304, 310, 402 N.E.2d 194, 200 (1980):

Little v. PPG Industries, Inc., 19 Wash. App. 812, 821-822, 579 P.2d

940, 946-947 (1978), modified on other grounds, 92 Wash.2d 118,

594 P.2d 911 (1979). Nevertheless, the majority of courts which

have considered a failure to warn case in the context of strict

liability have either expressly or implicitly held that a manufacturer

of a product, which is defective only because of the lack of an

adequate warning, is not liable when the failure to warn resulted

from an absence of knowledge of the dangerous quality of that

product.

Moreover, the courts reason, the presence of the required

knowledge can be established by evidence that the dangerous

quality of the product should have been known by a manufacturer

because it was known in the scientific or expert community. As

Judge John Minor Wisdom stated for the court in another case

involving a claimed injury from asbestos, Borel v. Fibreboard

Paper Products Corporation, 493 F.2d 1076,1089 (5th Cir.1973),

cert. denied, 419 U.S. 869, 95 S.Ct. 127,42 L.Ed.2d 107 (1974),

“in cases such as the instant case, the

manufacturer is held to the knowledge and skill

of an expert. This is relevant in determining (1)

whether the manufacturer knew or should have

known the danger .... The manufacturer’s

Status as expert means that at a minimum he

must keep abreast of scientific knowledge,

discoveries, and advances and is presumed to

know what is imparted thereby.”

The same point was made by the United States Court of Appeals for

50a

Appendix I

the Fourth Circuit in Lohrmann y. Pittsburgh Corning Corp., 782 -

F.2d 1156, 1164 (4th Cir. 1986):

“Industry standards and state of the art are not

synonymous. State of the art includes all of the

available knowledge on a subject at a given

time, and this includes scientific, medical,

engineering, and any other knowledge that

may be available. State of the art includes the

element of time: What is known and when was

this knowledge available.”

See, e.g., Hardy v. Johns-Manville Sales Corp., 681 F.2d 334, 344

(Sth Cir.1982); Gordon v. Niagara Mach. & Tool Works, 574 F.2d

1182,1190 (Sth Cir.1978); Shell Oil Co. v. Gutierrez, 119 Ariz. 426,

434, 581 P.2d 271, 279 (1978); Oakes v. Geigy Agricultural

Chemicals, 272 Cal.App. 2d 645, 651, 77 Cal. Rptr. 709, 715 (3d

Dist.1969); Woodill v. Parke Davis & Co., supra, 79 I11.2d at 37, 37

Ill.Dec. at 308, 402 N.E.2d at 198; Smith v. E.R. Squibb & Sons, Inc.,

405 Mich. 79, 90, 273 N.W.2d 476, 480 (1979); McKee v. Moore,

648 P.2d 21 (Okla. 1982); Cochran v. Brooke, 243 Or. 89, 94-96, 409

P.2d 904, 906-907 (1966). See also C. Marvel, Annotation, Strict

Products Liability: Liability for Failure to Warn as Dependent on

Defendant’s Knowledge of Danger, 33 A.L.R.4th 368 (1984), and

cases cited therein. As previously indicated, this evidence

concerning the presence or absence of knowledge in the expert

community is called “state of the art” evidence.

6. For two competing views on the desirability of allowing a knowledge

component in a strict liability case, see W. Murray, Jr. Requiring Omniscience. The

Duty to Warn of Scientifically Undiscoverable Product Defects, 71 Geo.L.J. 1635,

1638 n. 21 (1983), J. Martineau, The Duty to Warn Under Strict Products Liability as

Limited by the Knowledge Requirement: A Regretful Retention of Negligence

Concepts, 26 St. Louis U.L.J. 125 (1981).

Sla

Appendix!

Consequently, in a failure to warn case governed by the

Restatement 402A and Comment j, negligence concepts to some

extent have been grafted onto strict liability. In such cases, a

majority of courts hold that an element of knowledge or “state of the

art” evidence is directly pertinent to a cause of action under § 402A

of the Restatement (Second) of Torts, and liability is no longer

entirely “strict.””

On the other hand, a few courts have held that neither the

defendant’s actual knowledge nor evidence of scientific knowledge

about the dangerous characteristics of the product is relevant in a

strict liability failure to warn case. Elmore v. Owens-Illinois, Inc.,

673 S.W.2d 434, 436-439 (Mo.1984); Beshada v. Johns-Manville

Products Corp., 90 N.J. 191, 202-208, 447 A.2d 539, 548-549

(1982); Kisor v. Johns-Manville Corp., 783 F.2d 1337, 1340-1342

(9th Cir. 1986) (applying Washington law).

Before the trial in the present cases the plaintiffs asserted that

evidence of knowledge should not be relevant with regard to their

strict liability claims. The defendants, however, argued that the

7. Professors Henderson and Twerski argue that the difference between strict

liability and negligence in a failure to warn case is entirely semantic and unnecessarily

confusing. They suggest that since courts apply negligence concepts in all failure to

warn cases, all such cases sound in negligence. J. Hendersonand A. Twerski, Doctrinal

Collapse in Products Liability: The Empty Shell of Failure to Warn, 65 N.Y.U.L.Rev.

265 (1990).

We note that despite the overlap of negligence principles in a strict liability

failure to warn case, strict liability differs from a negligence cause of action in that

contributory negligence is not a defense toa strict liability claim. Ellsworth v. Sherne

Lingerie, Inc., 303 Md. 581, 597-598, 495 A.2d 348, 356-357 (1985). In addition, in

light of the other comments to § 402A of the Restatement (Second) of Torts, which

apply in defective design, defective construction, and failure to warn cases, there are

some differences between a negligent failure to warn case and a failure to warn based

upon § 402A and Comment}.

52a

Appendix!

plaintiffs were required to produce “state of the art” evidence as part

of their case. The trial judge, apparently relying on a prior ruling in

another case by Judge Levin for the Circuit Court for Baltimore

City, agreed with the defendants and required that the plaintiffs

introduce “state of the art” evidence. Consequently, at trial the

plaintiffs introduced evidence designed to show the requisite

knowledge or “state of the art.” Moreover, neither side in the Court

of Special Appeals or before this Court challenged the trial court’s

ruling thata knowledge component or “state of the art” is pertinent

in astrict liability failure to warn case.

The United States Court of Appeals for the Fourth Circuit,

applying Maryland law, has held that in a strict liability failure to

warn case, “state of the art” is relevant with regard to the

defendant’s liability. See Lohrmann v. Pittsburgh Corning Corp.,

supra, 782 F.2d at 1164 (“in Maryland, state of the art can be

considered in a strict liability tort case where the claimed defect isa

failure to warn”). The federal Court of Appeals reasoned that in

Phipps v. General Motors Corp., supra, this Court “adopted strict

liability in tort as expressed in § 402A of the Restatement (Second)

of Torts,” that Comment) is part of § 402A, and that

“(t]he language of Comment (j) is state-of-the-

art language because it requires the seller to

give a warning if he has knowledge, ‘or by the

application of reasonable, developed human

skill and foresight should have knowledge’ of

the danger.”

Lohrmann v. Pittsburgh Corning Corp., supra, 782 F.2d at 1164-

1165.

While this Court has not previously dealt with this issue, we

53a

Appendix!

agree that our adoption of § 402A in the Phipps case included

Comment j and the knowledge component provided for in

Comment j. The Phipps opinion expressly indicated that our

adoption of § 402A included the official comments (278 Md. at

346, 363 A.2d at 959-960):

“Under § 402A, various defenses are still

available to the seller in an action based on

Strict liability in tort. These defenses are set

forth and explained in the official comments

following § 402A.”

Moreover, in Phipps., we discussed with approval several of the

- official comments, including Comment j. /bid In addition, as

pointed out by the court in Lohrmann, 782 F.2d at 1164, the Phipps

opinion went on to state that “[d]espite the use of the term ‘strict

liability’ the seller is not an insurer, as absolute liability is not

imposed on the seller for any injury resulting from the use of his

product.”:278 Md. at 351-352, 363 A.2d at 963. See also Miles

Laboratories v. Doe, 315 Md. 704, 724, 556A.2d 1 107, 1117(1989)

(“[olur adoption of § 402A in Phipps... implicitly adopted the

substance of Comment k”); Ellsworth v. Sherne Lingerie, Inc., 303

Md. 581, 591-592, 495 A.2d 348, 353 (1985) (to the same effect

with respect to Comment g of § 402A).

We hold that Comment j of § 402A is applicable to a strict

liability cause of action when the alleged defect is a failure to give

adequate warnings. Therefore, the seller is not strictly liable for

failure to warn unless the seller has “knowledge, or by the

application of reasonable, developed human skill and foresight

should have knowledge, of the presence of the ... danger.”

Restatement (Second) of Torts § 402A, Comment j. Moreover, we

agreed with the numerous cases holding that, for purposes of the

S4a

Appendix I

“should have knowledge” component of comment), amanufacturer

of a product is held to the knowledge of an expert in the field. See

Babylon v. Scruton, 215 Md. 299, 304,138 A.2d 375, 378 (1958),

quoting 2 Harper & James, The Law of Torts § 28.4 (negligence case

_-pointing out that “ ‘a person who undertakes such manufacturing

will be held to the skill of an expert in that business and to an

expert’s knowledge of the arts, materials, and processes. Thus he |

must keep reasonably abreast of scientific knowledge and

discoveries touching his product...” ”).°

B

As previously stated, the defendants argue that the deposition

evidence was inadmissible because (1) they were not present.at the

depositions and did not have the opportunity to cross examine the

deponents, and (2) this deposition evidence, pertaining to what

other asbestos manufacturers knew about the dangers of asbestos, is

not proper “state of the art” evidence. We shall first address the

requirements of Maryland Rule 2-419 and the former testimony

8. Itus notentirely clear whether the knowledge or state of the art component ina

strict liability failure to warn case is an element to be proven by the plaintiff or is an

affirmative defense. Cf. Ellsworth v. Sherne Lingerie Inc., supra, 303 Md. at 592-596,

495 A.2d at 353-356 (discussing whether “misuse” of a product is a partof the plaintiff s

case or an affirmative defense).

Prosser and Keeton take the position that a plaintiff who seeks to recover ina strict

liability failure to warn case must show that the defendant knew or should have known

of the hazard about which he failed to warn. Prosser and Keeton, Torts § 99, at 697 (Sth

ed. 1984). See also M. Madden, Products Liability § 10.3, at 377-378 (2d ed. 1988). On

the other hand, an American Law Reports Annotation collecting cases concerning strict

liability for failure to warn seems to assert that the absence of knowledge of the danger is

an affirmative defense which must be proven by the defendant. C. Marvel, Annotation,

Strict Products Liability: Liability, For Failure to Warn as Dependent on Defendant's

Knowledge of Danger, supra, 33 A.LR. 4th 368, and cases cited therein. Many cases

also refer to the knowledge component in a strict liability failure to warn case as a

“defense.”

(Cont'd)

55a

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exception to the hearsay rule, and then discuss the admissibility of

the depositions on relevance grounds.

1.

The defendants argue that the deposition testimony should not

have been admitted because they were not presentat the depositions

and did not have an opportunity to cross examine the witnesses. The

defendant suppliers/installers Anchor Packing Co., Porter Hayden

and MCIC, Inc., were not present at the deposition of Dr. Mancuso,

nor were any other non-manufacturing suppliers/installers of

asbestos. Several manufacturers, however, were present at this

deposition, including Owens-Illinois. Similarly, although Owens-

Illinois was not present several defendant manufacturers attended

the depositions of Dr. Smith, Mr. Pechstein and Mr. Humphrey.

Depositions meeting the requirements of Maryland Rule 2-419

may be admissible under the former testimony exception to the rule

against hearsay.’ In Huffington v. State, 304 Md. 559, 569-574, 500

(Cont'd)

Itis not necessary for us to decide in this case whether the knowledge component

is an element of the plaintiff's case or an affirmative defense because neither the

plaintiffs nor the defendants have raised any issue in this regard. Nevertheless, we

agree with those authorities, and with the Circuit Court for Baltimore City, that the

knowledge or state of the art component is an element to be proven by the plaintiff. Ina

strict liability failure to warm case, the alleged defect is the failure of the seller to give an

_ adequate warning. The seller, however, need not give any warning if the requisite state

of the art or knowledge does not require it. Thus, where a product lacks a warning

because of insufficient knowledge on the part of the manufacturer or in the scientific

field involved, the product is not defective. As defectiveness is an element to be proven

by the plaintiff, the knowledge or state of the art component is not an affirmative

defense. See Ellsworth v. Sherne Lingerie, Inc., supra, 303 Md. at 597, 495 A.2d at

356.

9. Maryland Rule 2-419(a)(3)(C) provides that deposition testimony may be

used when the deponent is unavailable. Rule 2-419(c) further

(Cont'd)

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Appendix!

A.2d 272, 277-279 (majority opinion), 304 Md. at 597, 500A.2d at

291 (dissenting opinion) (1985), cert. denied, 478 U.S. 1023, 106

S.Ct. 3315, 92 L.Ed.2d 745 (1986), we endorsed the substance of

Federal Rule of Evidence 804(b)(1) as the test for the admissibility

of former testimony.'® See also Grandison v. State, 305 Md. 685,

734-735, 506 A.2d 580, 609-610, cert. denied, 479 U.S. 873, 107

S.Ct38, 93 L.Ed.2d 174(1986).

The United States Court of Appeals for the Sixth Circuit in

Clay v. Johns-Manville Sales Corp., 722 F.2d 1289,1295 (6th

Cir.1983), cert. denied, 467 U.S. 1253,104S.Ct. 3537, 82 L.Ed.2d

842 (1984), quoting Weinstein & Berger, Evidence 804(b)(1)[{04],

at 804-67 (1969), noted that “ ‘cases decided since the enactment of

804(b)(1) for the most part indicate a reluctance to interpret

“predecessor in interest” in its old, narrow, and substantive law

(Cont'd)

“Deposition Taken in Another Action.—A deposition

lawfully taken in another action may be used like any

other deposition if the other action was brought in any

court of this State, of any other state, or of the United

States, involved the same subject matter, and was brought

between the same parties or their representatives or

predecessors in interest.”

Although Rule 2-419(C) applies only whea the deponent is unavailablethe Court of

Special Appeals held that because the defendants did not object to the depositions on

this ground, they had waived the objection. No party has challenged before us this ruling

by the Court of Special Appeals

10. Federal Rule of Evidence 804(b)( 1) provides:

“Former Testimony. Testimony given as a witness at another hearing of the

same or a different proceeding, or in a deposition taken in compliance with law in the

course of the same or another proceeding, if the party against whom the testimony is

now offered, or, in a civil action or proceeding, a predecessor in interest, had an

opportunity and similar motive to develop the testimony by direct, cross, or redirect

examination.”

57a

Appendix!

sense, of privity.”’ Accordingly, the court explained the former

testimony hearsay exception contained in 804(b)(1) as follows

(/bid., quoting Lloyd v. American Export Lines, Inc., 580 F.2d

1179,1187 (3d Cir.), cert. denied, 439 U.S. 969, 99 S.Ct. 461, 58

L.Ed.2d 428 (1978)):

“ “if it appears that in the former suit a party

having a like motive to cross-examine about

the same matters as the present party would

have, was accorded an adequate opportunity

for such examination, the testimony may be

received against the present party.’ Under

these circumstances, the previous party having

like motive to develop the testimony about the

same material facts is, in the final analysis, a

predecessor in interest to the present party.”

Thus, a “predecessor in interest” for the purposes of this rule is

interpreted to include any party with a similar motive to develop the

testimony. Privity between the two parties is no longer required.

Deposition testimony is admissible if some other party, present at

the deposition, had the same opportunity and similar motive to

develop the testimony as the party against whom the deposition is

offered. Clay v. Johns-Manville Sales Corp., supra, 722 F.2d at

1294-1295; Hendrix v.. Raybestos-Manhattan, Inc., 776 F.2d

1492,1505 (11th Cir.1985); Dartez v. Fibreboard Corp., 765 F.2d

456, 462-463 (Sth Cir.1985). As we have expressly adopted the

substance of Federal Rule of Evidence 804(b)(1), we agree that

“[m]otive to develop the testimony, [rather than privity between the

parties], is the key factor” in assessing whether the parties present at

the deposition are predecessors in interest for purposes of Maryland

Rule 2-419(c). J. Murphy, Maryland Evidence Handbook 802(D),

at 259 (1989).

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Appendix 1

In deciding whether the deposition testimony was properly

admitted in these cases, we shall first address the principal

argument of the defendant suppliers/installers as to why the

deposition of Dr. Mancuso was improperly admitted against them.

They argue that their interests were not adequately protected by the

presence of the manufacturers at the Dr. Mancuso deposition

because manufacturers of asbestos would not have the same motive

to develop certain testimony as a supplier/installer would.

Therefore, the argument continues, the manufacturers were not the

predecessors in interest of suppliers/installers. In fact, the

suppliers/installers argue, their interests conflict with the interests

of the manufacturers in this litigation.

The depositions were admitted for the limited purpose of

proving “state of the art.” As earlier explained, state of the art

evidence is directly relevant to whether a product was defective

when it was sold by a manufacturer. In a strict liability action, if a

product is defective when it was sold by a manufacturer because it

lacked a warning of its dangerous characteristics, although it should

have had such a warning in light of the state of the art, and if the

defective and dangerous product reaches the user plaintiff without

substantial change, middlemen or intermediate sellers of the

defective product are strictly liable to the plaintiff user just as the

manufacturer is liable to the plaintiff.

- Restatement (Second) of Torts 402A, Comment f; Eaton Corp.

v. Wright, 281 Md. 80, 88-90, 375 A.2d 1122, 1126-1127 (1977).~

This principle, at least at the present stage of the law’s development,

is fully applicable in a strict liability failure to warn case. Prosser

and Keeton explain as follows (Prosser and Keeton, Torts § 99, at

697 (Sthed. 1984), emphasis added):

“It is commonly said that a product can be

59a

Appendix!

defective in_the kind of way that makes it

unreasonably dangerous by failing to warn or

failing adequately to warn about a risk or

hazard related to the way a product is designed.

But notwithstanding what a few courts have

said, a claimant who seeks recovery on this

basis must, according to the generally accepted

view, prove that the manufacturer-designer

was negligent. There will be no liability

without a showing that the defendant designer

knew or should have known in the exercise of

ordinary care of the risk or hazard about which

he failedtowarn....

“There is one aspect of this so-called strict

liability in addition to the matter of defenses

and limitations on liability that distinguish it

from negligence liability. When a

manufacturer or assembler markets without

adequate warnings, a reseller is subject to

liability without negligence in reselling the

product without adequate warning. ‘Thus, all

those in the marketing chain subsequent to a

sale by the manufacturer are liable without

negligence for the negligence of the

manufacturer in failing to warn or adequately

to warn.”

See also Nissen Corp. v. Miller, 323 Md. 613, 624, 594 A.2d 564,

569 (1991) (“Itis clear that Maryland espoused the doctrine of strict

liability in tort in order to relieve plaintiffs of the burden of proving

specific acts of negligence. . . where plaintiffs can prove a product

is defective and unreasonably dangerous when placed in the stream

60a

Appendix |

of commerce” ) (emphasis added). Consequently, with respect to the

strict liability claim of a plaintiff, intermediate sellers such as the

suppliers/installers in the present case have the same interest as the

manufacturers in attempting to show that the state of the art did not

require a warning and that, therefore, the product was not defective

under the principles of § 402A, Comment j, of the Restatement

(Second) of Torts."

The defendant Owens-Illinois has even less cause to complain

about the admission of depositions under Maryland Rule 2-419(c).

A defendant manufacturer was present at each of the depositions

admitted against Owens-Illinois. Owens-Illinois clearly is held to

the same “state of the art” standard as those defendants present at

11. The supplier/installers in the present case disagree that, with respect to the

strict liability claims of the plaintiffs, the suppliers/installers and the manufacturers

have the same interests concerning a deposition on state of the art. The supplier/

installers argue that, whereas a manufacturer may be strictly liable to the plaintiffs if the

product failed to contain warnings which were dictated by the state of the art, an _

intermediate supplier of the same product is not strictly liable to the plaintiffs unless he-

knew or, based on information actually given to him, should have known that a warning

was required. While there might be merit in this argument if the plaintiffs’ cause of

action were based on negligence, as pointed out above the argument is inconsistent with

the principles of strict liability under § 402A of the Restatement even as modified by

Comment j. Furthermore, the defendants cite no cases, and we are aware of none,

supporting the defendants’ view of an intermediate seller’s liability to a plaintiff in a

strict liability cause of action.

We would agree that there is a circumstance when the interests of a supplier/

installer and a manufacturer would not be the same in examining adeponent such as Dr.

Mancuso. To the extent that the deposition might relate to an indemnity claim by the

supplier/installer against the manufacturer, it would be to the supplier/installer’s benefit

to elicit testimony that, whereas expert medical and scientific information existed so as

to warrant a warning by manufacturers, such information was not generally known

outside the scientific community and would not have been readily available to non-

manufacturing suppliers/installers. In the instant cases, however, the defendant

suppliers/installers complain solely about the admission of the Dr. Mancuso deposition

at the trial of the plaintiffs’ claims. They have made no complaint about the evidence at

the separate cross-claims trial.

6la

Appendix!

the depositions. The defendants at the depositions are predecessors

in interest to Owens-Illinois because they had the same opportunity

to develop the testimony. Therefore, these depositions fall within

the former testimony exception to the rule against hearsay and are

admissible against Owens-Illinois under Rule 2- 419(c).

2.

We now turn to the defendants’ argument that these

depositions should not have been admitted because they do not

address what was known to the expert, medical or scientific

community but, rather, address what other asbestos manufacturing

companies knew. As previously stated, all manufacturers are held to

the knowledge and skill of an expert. Borel v. F ibreboard Paper

Products Corporation, supra, 493 F.2d at 1089. The defendants’

argument that this expert testimony is irrelevant because it relates

only to what individual companies discovered, “reflects a

misunderstanding of acritical issue in any product liability action:

the state of the art pertaining to any possible risks associated with

the product.” Dartez v: Fibreboard Corp., supra, 765 F.2d at 461.

The United States Court of Appeals for the Fifth Circuit

considered this argument in an identical context in Dartez v.

Fibreboard Corp., supra. That court determined that similar

deposition evidence was relevant to the state of the art element of a

products liability case, explaining (/bid.) (emphasis added):

“Dartez was required to establish that the

dangers of asbestos were reasonably

foreseeable or scientifically discoverable at

the time of his exposure before these

defendants could be found liable .... Borel

holds all manufacturers to the knowledge and

ai

62a

Appendix!

skill of an expert. They are obliged to keep

abreast of any scientific discoveries and are

presumed to know the results of all such

advances. Moreover, they each bear the duty to

fully test their products to uncover all

scientifically discoverable dangers before the

products are sold. ... The actual knowledge of

an individual manufacturer is not the issue.”

Accord Clay v. Johns-Manville Sales Corp., supra, 722 F.2d at

1294-1295.

We agree with the United States Courts of Appeal for the Fifth

and Sixth Circuits that deposition evidence concerning what

scientific and medical experts in the field knew about the dangers of

asbestos is relevant to the plaintiff’s attempt to prove state of the art.

Such expert evidence is not irrelevant merely because these experts

were employed by private companies. Because manufacturers are

held to the standards and knowledge of an expert, this evidence is

relevant to show what was scientifically and medically available

and discoverable by other experts in the field.

Moreover, “ ‘the admissibility of expert testimony is a matter

largely within the discretion of the trial court, and its action in

admitting or excluding such testimony will seldom constitute a

ground for reversal.’ ” Bloodsworth v. State, 307 Md. 164, 185-

186,512A.2d 1056, 1067 (1986), quoting Raithel v. State, 280 Md.

291, 301,372 A.2d 1069, 1074-1075 (1977). Here, the deposition

evidence included statements concerning the availability of

published scientific and medical data about the dangers of asbestos

expo sure in addition to statements about the results of experiments

conducted by experts on behalf of the Johns-Manville and Philip

Carey Companies.

63a

Appendix!

Furthermore, even if the admission of the depositions were an

abuse of discretion, the defendants have not shown that the error

was prejudicial. The live testimony of Dr. Schepers in large part

duplicated the state of the art evidence in the depositions. Dr.

Schepers testified that in 1930 there were approximately fifty

medical articles concerning the dangers of asbestos and that by

1960 there were “nearly a thousand” such articles. Dr. Schepers

further testified about experiments which he conducted with

asbestos containing products on behalf of Owens-Illinois.

In light of the nature of the deposition testimony and the

additional state of the art testimony by Dr. Schepers, the defendants

have not shown that the admission of these depositions constituted

reversible error. z

II.

The defendant Owens-Illinois contends that the trial court

should not have instructed the jury that the duty to warn continues

after the defendant stops manufacturing or selling products

containing asbestos. The instruction only applied to the Zenobia

case. The plaintiff Zenobia had argued that because he was asmoker

and smoking aggravated the development of asbestoses, a post-

exposure warning from Owens-Illinois would have prevented the

aggravation of his disease. Owens-Illinois stopped manufacturing

asbestos in 1958. Owens-Illinois’ argument is not that, under the

particular facts of this case, it was not required to give a warning

after 1958. Instead, Owens-Illinois argues that, as a matter of law, a

manufacturer has no duty whatsoever to warn after it stops

manufacturing the product. ‘

Generally, a manufacturer of a defective product has a duty to

warn of product defects which the manufacturer discovers after the

64a

Appendix I

time of sale. As this Court stated in Rekab, Inc. v. Frank Hrubetz &

Co., 261 Md. 141, 146,274A.2d 107, 110(1971), quoting 1 Frumer

and Friedman, Products Liability § 8.02, at 148.3, “‘[e]venif there

is no duty to warn at the time of the sale, facts may thereafter come to

the attention of the manufacturer which make it imperative that a

warning then be given.’” See, e.g., LaBelle v. McCauley Ind.

Corp., 649 F.2d 46, 48-49 (Ist Cir.1981); Fell v. Kewanee Farm

Equipment Co., 457 N.W.2d 911, 920 (lowa 1990); Comstock v.

General Motors Corp., 358 Mich. 163, 176, 99 N.W.2d 627, 634

(1959); Feldman vy. Lederle Laboratories, 125 N.J. 117, 144, 592

A.2d 1176, 1190 (1991) (“a manufacturer is obligated to

communicate a warning based on_ subsequently-acquired

knowledge of the danger as soon as reasonably foreseeable”); Smith

v. Selco Products, Inc., 96N.C.App. 151,158, 385 S.E.2d 173,176-

177 (1989), review denied, 326 N.C. 598, 393 S.E.2d 883 (1990)

(“A manufacturer does not completely discharge its duty-to warn

simply by providing some warnings of some dangerous propensity

of its product at the time of sale. Acontinuing duty exists to provide

post-sale warnings of any deficiencies it learns exist in the

product”). Therefore, if a manufacturer discovers a product defect

after the time of sale, the manufacturer must make-reasonable

efforts to issue a post-sale warning. Rekab, Inc. v. Frank Hrubetz &

Co., supra, 261 Md. at 147,274A.2d at 111, quoting Levin v. Walter

Kidde & Co., Inc., 251 Md. 560, 564, 248 A.2d 151, 154 (1968)

(“The duty owed is a reasonable warning”). See also Comstock v.

General Motors Corp., supra, 358 Mich. at 176, 99 N.W.2d at 634

(General Motors had a duty to “take all reasonable means to convey

effective warning”).

Owens-Illinois does not argue that Rekab, Inc. v. Frank

Hrubetz & Co., supra, was wrongly decided. In fact Owens-Illinois

acknowledges its continuing duty to warn of defects. Nonetheless,

it contends that, as a matter of law, its continuing duty to warn

65a

Appendix I

ceased when it stopped manufacturing asbestos products in 1958.

Owens-Illinois relies on the assertion that “state of the art”

information about the hazards of asbestos was no longer available

to itafter 1958. Alternatively, Owens-Illinois contends that even if

it had known of the hazards of asbestos after 1958, it had no

reasonable means of communicating a warning to the users of its

products, including the plaintiff Zenobia.

We cannot agree with Owens-Illinois’ reasoning.'? As

previously stated, the post-sale duty to warn requires reasonable

efforts to inform users of the hazard once the manufacturer is or

should be aware of the need for a warning. Owens-Illinois was not

precluded from showing that it did not become aware of the need for

a warning or that, in light of the fact that it no longer manufactured

the product, it made reasonable efforts to warn.

The Supreme Court of Washington addressed this issue in

Lockwood v. AC & S, Inc., 109 Wash.2d 235, 744 P.2d 606 (1987).

The plaintiff Lockwood had asbestoses as a result of his exposure to

a Raymark Industries product. Raymark argued that documents

revealing what it knew about the hazards of asbestos after 1972

were irrelevant because Lockwood’s last exposure preceded 1972.

The court rejected this argument, stating (109 Wash.2d at 260, 744

P.2d at 691):

“(W]e believe that if Raymark had made a

12. The defendant Anchor Packing Co., Inc., makes a similar argument based on

the fact that the plaintiff Zenobia was not exposed to asbestos products supplied by

Anchor after 1953. Anchor argues that because Zenobia was no longer a user of the

product, no reasonable effort to warn would have reached him. Our reject'on of Owens-

lilinois’ continuing duty to warn argument also applies to Anchor Packing Co.'s

argument.

en ar

66a

Appendix!

reasonable effort to provide Lockwood with

the information it acquired about the dangers

of asbestos exposure after his retirement, the

seriousness of his injury might have been

reduced. Under those circumstances, Raymark

had acontinuing duty to warn Lockwood of the

known dangers of its product after he was no

longerexposed to it.”

The court cautioned that the “warning should be required to the

ex.ent practicable” under the circumstances.

The fact that a manufacturer or seller has discontinued its

asbestos product line, and the fact that the plaintiff was no longer

exposed to its product, are not circumstances which should

necessarily relieve the seller of its duty to warn. Rather, these

factors are relevant to a determination of what reasonable efforts to

discover the danger and to warn are required."’ A seller is not

entitled to automatic relief from its continuing duty to warn merely

because it no longer manufacturers a defective product.

Ill.

The defendant Anchor Packing Co. makes two additional

arguments. It asserts that because the verdict for compensatory

13. See V. Schwartz, The Post-Sale Duty to Warn Two Unfortunate Forks in the

Road to a Reasonabie Doctrine, 58 N.Y .U.L.Rev. 892, 896 (1983):

“[T)he facts of a particular case, such as the gravity and

likeliehood of harm, the number of persons <ifected, and

the economic cost and practical problems associated with

identifying and contacting current product users, should

all be relevant in determining whether a manufacturer has

satisfactorily discharged a post-sale duty to warn.”

67a

Appendix I

damages was excessive in the Zenobia case, the trial court should

have granted its motion for new trial or forremittitur. In addition, it

argues that the plaintiff Zenobia failed to show that the products

which Anchor Packing Co. supplied or installed contained asbestos

or that Zenobia was exposed to Anchor Packing Co.’s products. The

record in the Zenobia case does not support Anchor Packing Co.’s

arguments.

The granting or denial of a motion for new trial based upon the

excessiveness of damages or a motion for remittitur is within the

discretion of the trial court As stated by this Court in Banegura v.

Taylor, 312 Md. 609, 624, 641 A.2d 969, 976 (1988), quoting

Kirkpatrick v. Zimmerman, 257 Md. 216, 218, 262 A.2d 631, 632

(1970):

“[A]n abuse of that discretion may be reviewed

by an appellate court... but... ‘[wJe know of

no case where this Court has ever disturbed the

exercise of the lower court’s discretion in

denying a motion for [a] new trial because of

. the inadequacy or _ excessiveness. of

[compensatory] damages.’ ”

The plaintiff Zenobia produced medical evidence that showed that

his injuries are permanent and progressive. We cannot say that the

trial court abused its discretion in refusing to grant Anchor Packing

Co.’s motion for new trial or remittitur.

With respect to Anchor Packing Co.’s second argument that the

plaintiff Zenobia failed to show that he was exposed to products

which contained asbestos supplied by Anchor Packing Co., it is

simply not supported by the factual record in this case. The plaintiff

Zenobia testified that he had handled gaskets used on high

temperature steam lines bearing the label “Anchor Packing” while

68a

Appendix I

working at the Maryland Shipbuilding and Drydock. He testified

that he cut and hammered these products supplied by Anchor

Packing Co. and that these products generated dust. Furthermore,

Anchor Packing Co. admitted to selling gaskets containing asbestos

designed for high temperature steam lines. This testimony

undercuts Anchor Packing Co.’s argument that Zenobia failed to

prove that he was exposed to Anchor Packing Co.’s asbestos

containing products.

IV.

In granting the petitions for a writ of certiorari in these cases,

this Court issued an order requesting that the briefs and argument

encompass the following issue:

“In light of the concurring opinion of Judges

Eldridge, Chasanow, and Cole in Schaefer v.

Miller, 322 Md. 297, 312-332, 587 A.2d

491(1991), what should be the correct standard

under Maryland law for the allowance of

punitive damages in negligence and products

liability cases, i.e., gross negligence, actual

malice, or some other standard. See, e.g., Smith

v. Gray Concrete Pipe Co., 267 Md. 149, 297

A.2d 721(1972); Davis v. Gordon, 183 Md.

129, 36A.2d 699 (1944).”

See Maryland Rule 8-131(b).

As noted in the opinion of Judges Eldridge, Cole and

Chasanow in Schaefer v. Miller, supra, 322 Md. at 312-332, 587

A.2d at 498-509, in recent years there has been a proliferation of

claims for punitive damages in tort cases, and awards of punitive

—————

69a

Appendix |

damages have often been extremely high. See 2 J. Ghiardi and J.

Kircher, Punitive Damages Law and Practice § 21.01, at 2 (1985):

D. Owen, Problems in Assessing Punitive Damages Against

Manufacturers of Defective Products, 49 U.Chi.L.Rev. 1,6 (1982)

(“Large assessments of punitive damages may not yet be a major

threat to the continued viability of most manufacturing concerns,

but the increasing number and size of such awards may fairly raise

concern for the future stability of American industry”); M.

Peterson, S. Sarma, M. Shanley, Punitive Damages, (Rand, The

Institute for Civil Justice, 1987); J. Sales and K. Cole, Punitive

Damages: A Relic That Has Outlived Its Origins, 37 Vand. L. Rev.

1117, 1154 (1984) (“the amount of punitive damages awarded in

recent years .. . has escalated to astronomical figures that boggle

the mind”). But see S. Daniels and J. Martin, Myth and Reality in

Punitive Damages, 75 Minn. L. Rev. 1 (1990).

Accompanying this increase in punitive damage claims,

awards and amounts of awards, is renewed criticism of the concept

of punitive damages in a tort system designed primarily to

compensate injured parties for harm. See, e.g., E. Elliott, Why

Punitive Damages Don't Deter Corporate Misconduct Effectively,

40 Ala. L. Rev. 1053 (1989); Pacific Mutual Life Ins. Co. v. Haslip,

U.S, _,__, 111 S. Ct. 1032, 1043, 113 L. Ed. 2d 1, 20(1991).

In Maryland the criticism has been partly fueled and justified

because juries are provided with imprecise and uncertain

characterizations of the type of conduct which will expose a

defendant to a potential award of punitive damages. Accordingly,

we shall (1) examine these characterizations of a defendant’s

conduct in light of the historic objectives of punitive damages, (2)

more precisely define the nature of conduct potentially subject toa

punitive damages award in non-intentional tort cases, and (3)

heighten the standard of proof required of a plaintiff seeking an

award of punitive damages.

70a

Appendix!

These cases, along with two others heard by us on the same

day,'* directly raise the problem of what basic standard of wrongful

conduct should be used for the allowance of punative damages in

negligence actions generally, and in products liability actions based

on either negligence or on strict liability. The jury in these cases

received the following instruction on punitive damages:

“Implied malice, which the plaintiffs have to

prove in order to recover punitive damages in

this case, requires a finding by you of a wanton

disposition, grossly irresponsible to the rights

of others, extreme recklessness and utter

disregard for the rights of others.”

Similarly, the Court of Special Appeals evaluated the evidence and

stated that in order to affirm a punitive damages award,

“{wJe... require a showing that the defendant

conducted itself ‘in an extraordinary manner

characterized by a wanton and reckless

disregard for the rights of others.’”

MCIC, Inc. v. Zenobia, 86 Md. App. 456, 466, 587 A.2d 531, 586

(1991), quoting Eagle-Picher v. Balbos, 84 Md. App. 10,73,578A.

2d 228, 259 (1990), cert. granted, 322 Md. 737, 589 A.2d 968

(1991). Each court required the plaintiffs to show by a

preponderance of evidence that the defendants acted with

“implied” rather than “actual” malice. That is, the plaintiffs were

not required to show that the defendants’ conduct was characterized

by evil motive, intent to injure, fraud, or actual knowledge of the

defective nature of the products coupled with a deliberate disregard

of the consequences. Instead, the plaintiffs were required to show

only that the defendants’ conduct was grossly negligent.

14. Eagle-Picher Industries, Inc., et al. v. Balbos, et al. (No. 22, Sept. Term

1991); Owens-Illinois, Inc. v. Armstrong, etal. (No. 77, Sept. Term 1991).

Tla

Appendix!

The standard applied by the trial court and the Court of Special

Appeals results from, and consequently requires re-examination of,

some of the decisions of this Court relating to punitive damages.

That re-examination involves two separate rulings by this Court

over the past twenty years. First, the injuries of the plaintiffs are

surrounded by “contractual” relationships, e.g., the employment

contract, the contracts to produce/supply asbestos, etc.

Consequently, these cases call into question the validity of this

Court’s holdings in H & R Block v. Testerman, 275 Md. 86, 338A.2d

48 (1975), and Wedeman v. City Chevrolet, 278 Md. 524, 366A.2d7

(1976), that, when acontract is involved, the standard for an award

of punitive damages differs depending on whether the tortious

conduct occurs before or after the contract. Second, these cases

challenge the application of the implied malice standard of Smith v.

Gray Concrete Pipe Co., supra, to a negligence or other non-

intentional tort case.

A.

For the reasons set out more fully in the opinion of Judges

Eldridge, Cole and Chasanow in Schaefer v. Miller, supra, 322 Md.

at 312-322, 587 A.2d at 498-509, we abandon the “arising out of

contract” distinction drawn in H & R Block v. Testerman, supra,

Wedeman v. City Chevrolet, supra, and their progeny, for the

purposes of allowing an award of punitive damages in tort cases.

Under the Testerman-Wedeman rule, where a contractual

relationship existed, the basic standard for exposure to punitive

damage liability would vary depending on whether the wrongful

conduct took place before or after the formation of the contract. The

Testerman-Wedeman principal required that, if the wrongful

conduct constituting the basis for a punitive damages claim

occurred after the formation of a contract, the plaintiff must prove

actual malice in order for the jury to consider an award of punitive

Appendix!

damages, butif the wrongful conduct occurred before the formation

of acontract, punitive damages were allowable upon a showing of

“implied” malice. H & R Block v. Testerman, supra, 275 Md. at 46-

47, 338 A.2d at 54; Wedeman v. City Chevrolet, supra, 278 Md. at

532,366A.2dat 13."

“(T]he purposes of punitive damages relate entirely to the

nature of the defendant’s conduct.” Schaefer v. Miller, supra, 322

Md. at 321, 587 A.2d at 503. Whether the tort occurred before or

after the formation of a contractual relationship should not

determine whether actual or implied malice is required for allowing

an award of punitive damages. Rather, the availability of a punitive

damages award ought to depend upon the heinous nature of the

defendant’s tortious conduct. Schaefer, 322 Md. at 321-322, 587

A.2d at 503. See, e.g., Vancherie v. Siperly, 243 Md. 366, 373-374,

221 A.2d 356, 360 (1966); McClung-Logan v. Thomas, 226 Md.

136, 148, 172 A.2d 494, 500 (1961); Davis v. Gordon, supra, 183

Md. at 133-134, 36 A.2d at 701; Heinze v. Murphy, 180 Md. 423,

15. Defective product actions, “{i]n avery real sense, .. . arise out of acontractual

relationship.” American Laundry Mach. v. Horan, 45 Md. App. 97, 116,412 A.2d 407,

419 (1980). Despite this statement in the first Court of Special Appeals case to consider

punitive damages ina defective product negligence action, the Court of Special Appeals

has consistently held that implied malice will suffice to support an award of punitive

damages ina products liability case. See MCIC, Inc. v. Zenobia, 86 Md.App. 456, 466,

587 A.2d 531, 536(1991); Owens Illinois v. Armstrong, 87 Md.App. 699,719,591 A.2d

544, 553, cert. granted, 324 Md. 90, 595 A.2d 1077 (1991); Eagle-Picher v. Balbos, 84

Md.App. 10, 72-73, 578 A.2d 228, 259 (1990), cert. granted, 322 Md. 737,589 A.2d

968 (1991); Harley-Davidson Motor Co., Inc. v. Wisniewski, 50 Md. App. 339,437 A.2d

700 (1981), cert. denied, 292 Md. 596 (1982); American Laundry Mach. v. Horan,

supra.

In American Laundry Mach. v. Horan, supra, 45 Md.App. at 116, 412 A.2d at

419, the Court of Special Appeals reasoned that because the contract was not one

between the party injured and the manufacturer of the product, the tort did not “arise out

of a contract” and that the “standard to be applied, therefore, is not that stated in

Testerman, but rather the ‘legal equivalent’ implied malice standard normally

applicable in tortcases.” /bid. Because of the approach we take in this case, we need not

express any view concerning this reasoning by the Court of Special Appeals.

a

73a

Appendix |

431-432, 24A.2d 917, 921-922 (1942); Nichols v. Meyer, 139 Md.

450, 457,115 A. 786, 788 (1921); Baltimore and Ohio R.R. Co. v.

Boyd, 63 Md. 325, 334-335 (1885).

Awarding punitive damages based upon the heinous nature of

the defendant’s tortious conduct furthers the historical purposes of

punitive damages—punishment and deterrence. Schaefer v. Miller,

supra, 322 Md. at 321,587 A.2d at 503; Embrey v. Holly, 293 Md.

128, 142,442A.2d 966, 973 (1982); First Nat’! Bank v. Fid. & Dep.

Co., 283 Md. 228, 232, 389 A.2d 359, 361 (1978). Thus, punitive

damages are awarded in an attempt to punish a defendant whose

conduct is characterized by evil motive, intent to injure, or fraud,

and to warn others contemplating similar conduct of the serious risk

of monetary liability.

Because the Testerman-Wedeman distinction focuses on when

the conduct occurred rather than on the nature of the conduct, it has

no relationship to the purposes of punitive damages. Furthermore,

the “ ‘arising out of contractual relations’ rule formulated in

Testerman and Wedeman had no support in the Maryland cases

relied on in the Testerman and Wedeman opinions.” Schaefer v.

Miller, supra, 322 Md. at 316,587 A.2d at 501.As more fully set out

in Schaefer, 322 Md. at 322-323, 587 A.2d at 504, the Testerman-

Wedeman rule has led to irrational results and its application has

been inconsistent.

The irrational and inconsistent application of a punitive

damages standard undermines the objective of deterrence because

persons cannot predict, and thus choose to abstain from, the type of

behavior that is sanctioned by a punitive damages award.

Consequently we abandon the “arising out of acontract” distinction

74a

Appendix |

‘and return to the principles relating to punitive damages which had

prevailed in this State for many, many years before Testerman.”

Schaefer v. Miller, supra, 322 Md. at 327,587 A.2d at 506.

B.

In the years before Testerman, this Court had articulated two

standards governing an award of punitive damages in non-

intentional tort cases. The test that applied prior to 1972 was that

“punitive damages were not recoverable in negligence actions

absent actual malice or similar wrongful motive. They were not

recoverable on an implied malice basis no matter how gross,

reckiess, or wanton the defendant’s conduct might be.” Schaefer v.

Miller, supra, 322 Md. at 327,587 A.2d at 506. Although articulated

in various ways, the so called “actual malice” standard was

explained in an earlier case as follows:

“(T]o entitle one to such damages there must be

an element of fraud, or malice, or evil intent

. entering into and forming part of the

wrongful act. It is in such cases as these that

exemplary or punitive damages are awarded as

a punishment for the evil motive or intent with

which the act is done, and as an example or

warning to others.”

Philadelphia, W. & B.R. Co. v. Hoeflich, 62 Md. 300, 307 (1884).

See, e.g., Davis v. Gordon, supra, 183 Md. at 133,36A.2d at 701 (in

negligence cases, punitive damages are awarded as a punishment

for evil motive or intent); Heinze v. Murphy, supra, 180 Md. at 429

431,24A.2d at 921 (“fraud, malice, orevilintent” is required).

In Davis v. Gordon, supra, this Court refused to adopt an

ee

75a

Appendix!

implied malice standard for the allowance of punitive damages ina

negligence action and held that there must be “actual malice.” In

reaching this conclusion, the Court analyzed whether the adoption

of an implied malice standard would serve the deterrent and penal

objectives of punitive damages. 183 Md. at 133, 36 A.2d at 701.

Because the implied malice standard would not further either

objective of punishment or deterrence, it was rejected.

In 1972 this Court, for the first time in a non-intentional tort

action, allowed an award of punitive damages based upon implied

malice. Smith v. Gray Concrete Pipe Co., supra. The Court in Smith

relied upon out-of-state authority to allow the plaintiff to recover

punitive damages upon a showing that the defendant was guilty of

“gross negligence,” which was defined as a “wanton or reckless

disregard for human life.” Smith, 267 Md. at 167,297 A.2d at 731."°

The Smith opinion did not attempt to analyze how this newly

established “gross negligence” standard would promote the

objectives of punitive damages.

The gross negligence standard has led to inconsistent results

and frustration of the purposes of punitive damages in non-

intentional tort cases. Schaefer v. Miller, supra, 322 Md. at 332, 587

A.2d at 508. Such a possibility was foreseen by the Smith Court, as

the majority in Smith expressed concern that a test requiring

“wanton” conduct or “reckless disregard of the rights of others”

presented “the danger of. . . atest which may be so flexible that it

can become virtually unlimited in its application.” Smith v. Gray

Concrete Pipe Co., supra, 267 Md. at 166, 297 A.2d at 731. Despite

the Smith Court’s limitation of the implied malice standard to torts

16. Judge Marvin Smith, dissenting in Smith v. Gray Concrete Pipe Co., supra,

267 Md. at 173-174, 297 A.2d at 734-735, discussed the inconsistency between the

majority's opinion and earlier Maryland cases, including Davis v. Gordon, supra.

76a

Appendix |

involving the operation of motor vehicles, the standard has been

freely applied to other nonintentional torts. See, e.g., Exxon Corp. v.

Yarema, 69 Md.App. 124, 516 A.2d 990 (1986), cert. denied, 309

Md. 47,522 A.2d 392 (1987); Medina v. Meilhammer, 62 Md.App.

239,489 A.2d 35, cert. denied, 303 Md. 683, 496A.2d 683 (1985);

American Laundry Mach. v. Horan, 45 Md.App. 97,412 A.2d 407

(1980). See also Liscombe v. Potomac Edison Co., 303 Md. 619,

637, 495 A.2d 838, 847 (1985) (assuming, without deciding, that

the Smith holding was applicable to non-intentional torts not

involving the operation of motor vehicles).

In the face of “a literal explosion of punitive damage law and

practice,” '’ many states have acted to define more accurately the

type of conduct which can form the basis for a punitive damages

award. In Tuttle v. Raymond, 494 A.2d 1353 (Me.1985), the:

Supreme Judicial Court of Maine reviewed its law on punitive

damages. The implied malice standard applied by the ’ower courts

in Tuttle allowed recovery of punitive damages upon a showing that

the defendant’s conduct was “wanton, malicious, reckless or

grossly negligent.” 494 A.2d at 1360. The court rejected this

standard, stating (494A.2d at 1361):

“*Gross’ negligence simply covers too broad

and too vague an area of behavior, resulting in

an unfair and inefficient use of the doctrine of

punitive damages. . .Asimilar problem exists

with allowing punitive damages based merely

upon ‘reckless’ conduct. ‘To sanction punitive

damages solely upon the basis of conduct

17. 2J. Ghiardi and J. Kircher, Punitive Damages Law and Practice § 21.01, at2

(1985).

77a

Appendix I

characterized as heedless disregard of the

consequences would be to allow virtually

limitless imposition of punitive damages.’ ”

The Maine court went on to point out that the implied malice

standard “overextends the availability of punitive damages” and

consequently “dulls the potentially keen edge of the doctrine as an

effective deterrent of truly reprehensible conduct.” /bid. See also

Rawlings v. Apodaca, 151 Ariz. 149,162, 726 P.2d 565, 578 (1986)

(“We do not believe that the concept of punitive damages should be

stretched. We restrict its availability to those cases in which the

defendant’s wrongful conduct was guided by evil motives”);

Preston v. Murty, 32 Ohio St.3d 334, 335, 512 N.E.2d 1174, 1175-

1176 (1987) (“this [recklessness] is the type of malice which has

remained frustratingly vague. . .a positive element of wrongdoing

is always required”); Lee v. Bank of America, 218 Cal.App.3d 914,

920, 267 Cal.Rptr. 387, 390 (2d Dist.1990) (gross negligence or

recklessness is not enough); First Interstate Bank of Nevada v.

Jafbros Auto Body Inc., 106 Nev. 54, 56-57, 787 P.2d 765, 767

(1990) (without substantial evidence of oppression, fraud, or

malice, even unconscionable irresponsibility will not support a

punitive damages award).'8

18. See American College of Trial Lawyers, Committee Report on Punitive

Damages, at 6 and n. 23 (1989):

(I]t appears that the law is evolving in many jurisdictions

to require that there be some conscious indifference to the

rights of others before punitive damages are warranted.

see

“See, e.g., Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d

565 (1986); Freeman v. Anderson, 279 Ark. 282, 651

S.W.2d 450 (1983); Jardel v. Hughes, 523 A.2d 518

(Del. 1987); Tuttle v. Raymond supra; Preston v. Murty,

(Cont'd)

As previously indicated, arbitrary and inconsistent application

of the standard for awarding punitive damages frustrates the dual

purposes of punishment and deterrence. Implied malice as that term

has been used, with its various and imprecise formulations, fosters

this uncertainty. As pointed out by Professor Ellis, (D. Ellis,

Fairness and Efficiency in the Law of Punitive Damages, 56S.Cal.

78a

Appendix I

L.Rev. 1,52-53(1982)):

See also D. Owen, Punitive Damages in Products Liability

Litigation, 74 Mich.L.Rev. 1257,1283 n. 135 (1976) (“any

“(T]he law of punitive damages is

characterized by a high degree of uncertainty

that stems from the use of a multiplicity of

vague, overlapping terms ... Accordingly,

there is little reason to believe that only

deserving defendants are punished, or that fair

notice of punishable conduct is provided.”

i.

(Cont'd)

32 Ohio $t.3d 334, 512 N.E.2d 1174 (1987); Enright v.

Lubow, 202 N.J. Super. 58, 493 A.2d 1288

(App.Div.1985).”

The Committce recommended, at 12, that the following

standards be used:

“[P]ermitting punitive awards based merely on different

degrees of carelessness or inadvertent conduct

exacerbates the already difficult problem of articulating a

clear standard to be employed by the trier of fact and for

review on appeal. Thus, the logical and practical line of

demarcation should be drawn at the point where the

defendant realizes that his or her conduct will, or that

there is a strong probability that it may, cause the resulting

harm. Conduct, such as extreme carelessness, which does

not involve this basic element of consciousness should

not be the subject of punitive damages.”

|

79a

Appendix I

definition of the punishable conduct, such as marketing a product in

‘reckless,’ ‘wanton,’ or ‘flagrant’ disregard of the public safety will

necessarily be quite vague”); J. Henderson and A. Twerski,

Doctrinal Collapse in Products Liability: The Empty Shell of

Failure to Warn, 65 N.Y.U.L.Rev. 265, 290 (1990); D. Owen,

Problems in Assessing Punitive Damages Against Manufacturers

of Defective Products, supra, U.Chi.L.Rev. at 23 (‘“reckless”

standard exposes the defendant to punitive damages liability even if

the decision was made in good faith).

The implied malice test adopted in Smith v. Gray Concrete Pipe

Co. has been overbroad in its application and has resulted in

inconsistent jury verdicts involving similar facts. It provides little

guidance for individuals and companies to enable them to predict

behavior that will either trigger or avoid punitive damages liability,

and it undermines the deterrent effect of these awards.'®

19. See2L. Schlueter and K. Redden, Punitive Damages, Appendix B, at 418-

419(2nded. 1989), explaining:

“Punitive damage awards can only affect behavior if an

actor is able to conform to established standards of

conduct. If the standards are constantly changing, the

actor may be unable to predict accurately the line that

separates desirable from undesirable conduct. A potential

defendant will either become too cautious, refusing to

engage in socially beneficial behavior or will follow a

course of behavior that imposes more harm on society than

benefit.”

Accord D. Owen, The Moral Foundation of Punitive Damages, 40 Ala.L.Rev. 705,729

(1989); E. Elliott, Why Punitive Damages Don't Deter Corporate Misconduct

Effectively, 40 Ala.L.Rev. 1053,1057-1060, 1065 (1989); D. Owen, Problems in

Assessing Punitive Damages Against Manufacturers of Defective Products, 49

U.Chi.L.Rev. 1, 22-23, 47-49 (1982).

80a

Appendix!

Therefore, we overrule Smith v. Gray Concrete Pipe Co. and its

progeny, including Nast v. Lockett, 312 Md. 343, 539 A.2d 1113

(1988). In a non-intentional tort action, the trier of facts may not

award punitive damages unless the plaintiff has established that the

defendant’s conduct was characterized by evil motive, intent to

injure, ill will, or fraud, i.e., “actual malice.””° See Davis v. Gordon,

supra, 183 Md. at 133,36A.2dat701.”

..

“Actual malice,” defined above as conduct of the defendant

characterized by evil motive, intent to injure, ill will, or fraud, does

not translate easily into products liability cases. “Products

liability” actions are those cases in which the cause of action arises

from an injury caused by a defective product. The theories of

liability in such cases are negligence, strict liability and breach of

20. We recognize that the term “actual malice” has meant different things in the

law, thatits popular connotation may not always be the same as its legal meaning, and

thatits use has been cnticized. See, e.g., Masson v. New Yorker Magazine, Inc.,___ U.S.

, 111 S.Ct. 2419, 2430, 115 L.Ed.2d 447, 469 (1991); Hart-Hanks

Communications, Inc. v. Connaughton, 491 U.S. 657, 666 n. 7, 109 S.Ct. 2678,

2685, 105 L.Ed.2d 562, 576 (1989); Ross v. State, 308 Md. 337, 340 n. 1,519 A.2d 735,

736n. 1. Nevertheless, we simply use the term in this opinion as a shorthand method of

referring to conduct characterized by evil motive, intent to injure, ill will, or fraud. In

instructing junes with respect to punitive damages, however, it would be preferable for

trial judges not to use the term “actual malice.”

21. The scope of this opinion primanly encompasses the standard of conduct

which will support an award of punitive damages in socalled non-intentional tort cases,

i.e., negligence and stnct liability cases. In addition, our overruling of the Testerman

Wedeman “arising out of contract” principle is applicable to all tort actions. We shall

not at this ume, however, reconsider or modify the legal principles concerning the type

of conduct which will support an award of punitive damages in so-called intentional tort

actions, i.e., tort actions other than negligence and strict liability. To some extent, the

applicable legal principles are reviewed in Schaefer v. Miller, 322 Md. 297, 319-320,

587 A.2d 491, 502-503 (1991).

8la

Appendix]!

warranty.” As we held in Part B above, in ordinary non-intentional

tort cases, the plaintiff must prove that the defendant’s conduct was

characterized by an evil motive or intent to injure, or defraud the

plaintiff. Davis v. Gordon, supra, 183 Md. at 133, 36A.2d at 701.

Nevertheless, it is not likely that a manufacturer or supplier of a

defective product would specifically intend to harm a particular

consumer. We agree with the academic commentary and the courts

that “(t]he manufacturer of a defective product operating in vastly

different circumstances, . . . will require a unique description of

what specific conduct will render it liable for punitive damages.” 2

Ghiardi and Kircher, Punitive Damages Law and Practice, supra,

§ 6.04 at 12. Some form of “knowledge” of a defect and a

subsequent disregard of the danger are required for allowing an

award of punitive damages in most jurisdictions. After a survey of

the cases, Ghiardi and Kircher state ( § 6.21 at 98):

“In summary, case law establishes that a

defendant must have specific knowledge of a

product’s defect and its potential for harm

before an exemplary award is appropriate. This

knowledge is usually gained through

defendant’s testing procedures before

marketing or through postmarketing consumer

accident reports and complaints received by

the defendant.”

22. In Maryland a breach of warranty suit is acontract action. See Nissen Corp. v.

Miller, 323 Md. 613,619, 594 A.2d 564, 567 (1991); Frericks v. General Motors Corp.,

278 Md. 304, 307, 363 A.2d 460, 461 (1976); Frericks v. General Motors Corp., 274

Md. 288, 299, 336 A.2d 118, 125 (1975); Volkswagen of America v. Young, 272 Md.

201, 220, 321 A.2d 737, 747 (1974). Therefore, like any other contract action, punitive

damages are not recoverable under a breach of warranty count.

Appendix!

See, e.g., Donahue v. Phillips Petroleum Co., 866 F.2d 1008,1013-

1014(8th Cir. 1989) (applying Missouri law); Fell v. Kewanee Farm

Equipment Co., supra, 457 N.W.2d at 919-920.

We believe that in products liability cases the equivalent of the

“evil motive,” “intent to defraud,” or “intent to injure,” which

generally characterizes “actual malice,” is actual knowledge of the

defect and deliberate disregard of the consequences. Therefore, in

order for actual malice to be found in a products liability case,

regardless of whether the cause of action for compensatory

damages is based on negligence or strict liability, the plaintiff must

prove (1) actual knowledge of the defect on the part of the

defendant, and (2) the defendant’s conscious or deliberate

disregard of the foreseeable harm resulting from the defect.

The knowledge component, which we hold is necessary to

support an award of punitive damages, does not mean “constructive

knowledge” or “substantial knowledge” or “should have known.”

More is required to expose a defendant to a potential punitive

damages award. The plaintiff must show that the defendant actually

knew of the defect and of the danger of the product at the time the

product left the defendant’s possession or control.” See Sch. Dist. of

Independence v. U.S. Gypsum, 750 S.W.2d 442, 446

(Mo.App.1988) (“No Missouri case has permitted submission of

punitive damage claim in a strict products liability case on the

23. Actual knowledge, however, does include the willfull refusal to know. See,

e.g., State v. McCatlum, 321 Md. 451, 458-461, 583 A.2d 250, 253-255 (1991)

(Chasanow, J., concurring) (“ ‘[K]nowledge’ exists where a person believes that it is

probable that something is a fact, but deliberately shuts his or her eyes or avoids making

reasonable inquiry with a conscious purpose to avoid learning the truth.”) Therefore, a

defendant cannot shut his eyes or plug his ears when he is presented with evidence of a

defect and thereby avoid liability for punitive damages.

83a

Appendix |

theory that the defendant should have known of a dangerous defect

in its product”).*4

Furthermore, the plaintiff is required to show that, armed with

this actual knowledge, the defendant consciously or deliberately

disregarded the potential harm to consumers. Professor Owen

Suggests the term “flagrant indifference.” D. Owen, Punitive

Damages in Products Liability Litigation, supra, 74 Mich.L.Rev. at

1369. We prefer the characterization “conscious or deliberate

disregard,” and emphatically state that negligence alone, no matter

how gross, wanton, or outrageous, will not Satisfy this standard.

Instead the test requires a bad faith decision by the defendant to

market a product, knowing of the defect and danger, in conscious or

deliberate disregard of the threat to the safety of the consumer.

D.

The defendant Owens-Illinois and several amici argue that a

theory of strict liability in tort is inconsistent with an award of

punitive damages because strict liability by its nature does not

require a showing of fault, and an award of punitive damages

requires fault to be valid. Although a few commentators have

endorsed this argument,** the majority of courts which have

considered the issue have found no logical inconsistency in

allowing a punitive damages award in a strict liability action. See

Sturm, Ruger & Co., Inc. v. Day, 594 P.2d 38, 46-47 (Alaska 1979),

24. For cases invoiving instances where the plaintiffs demonstrated the actual

knowledge required, see, e.g., Fischer v. Johns-Manville Corp., 103 N.J.643,672,512

A.2d 466, 481 (1986) (“the evidence Supports a finding that Johns-Manville knew of the

dangers created by its product. Not only did it fail to warn users of the serious health

hazards associated with exposure to asbestos, it actually took affirmative steps to

conceal this information from the public”); Tetuan v. A.H. Robins Co., 241 Kan. 441,

484, 738 P.2d 1210, 1240 (1987) (“Far from simply being ‘grossly negligent’ in

marketing the Dalkon Shield, there was substantial evidence to conclude that Robins

deliberately, intentionally, and actively concealed the dangers of the Shield for year

after year”),

84a

Appendix!

cert. denied, 454 U.S. 894, 102 S.Ct. 391, 70 L.Ed.2d 209 (1981);

Masaki v. General Motors Corp., 71 Hw. 1, 9-11, 780 P.2d 566,

571-572 (1989); Gryc v. Dayton-Hudson Corp., 297 N.W.2d 727,

732 (Minn.), cert. denied sub nom. Riegel Textile Corp. v. Gryc, 449

U.S. 921, 101 S.Ct. 320, 66 L.Ed.2d 149 (1980); Fischer v. Johns-

Manville Corp., 103 N.J. 643, 652-654, 512 A.2d 466, 470-

471(1986); Home Ins. Co. v. American Home Products, 75 N.Y.2d

196, 204, 551 N.Y.S.2d 481, 486, 550 N.E.2d 930, 935 (1990);

Wangen v. Ford Motor Co., 97 Wis.2d 260, 270, 294 N.W.2d 437,

443 (1980); Fleet & Semple v. Hollenkemp, 52 Ky. 219, 225-226

(1852) (first case recognizing punitive damages in strict liability

and rejecting the argument that they are inconsistent). See also

cases cited in R. Lockwood, Annotation, Allowance of Punitive

Damages in Products Liability Case, 29 A.L.R.3d 1021, 1022

(1970) and Supplemental Cases. But see Scott v. Fruehauf Corp.,

302 S.C. 364, 370, 396 S.E.2d 354, 357 (1990); Butcher v.

Robertshaw Controls Co., 550 F.Supp. 692, 705 (D.Md.1981); Doe

v. Miles Laboratories, Inc., 675 F.Supp. 1466, 1481 (D.Md.1987),

aff'd, 927 F.2d 187 (4th Cir.1991).

The plaintiffs before trial in these cases dismissed all theories

of liability except for strict liability. Thus, as stated in Part I, in order

to recover compensatory damages under a strict liability theory, the

plaintiffs were required to prove:

“(1) [that] the product was in a defective condition at the

time it left the possession or control of the seller;

25. See, e.g., 2 Ghiardi and Kircher, Punitive Damages Lawand Practice, supra,

§ 6.01 at2-5; F. Tozer, Punitive Damages and Products Liability, 39 Ins. Counsel J. 300

(1972). But see D. Owen, Punitive Damages in Products Liability Litigation, 74

Mich.L.Rev. 1257, 1268-1271 (1976) (where the author systematically raises and

rejects each argument concerning the incompatibility of strict liability actions and

punitive damages awards).

85a

Appendix I

(2) that it was unreasonably dangerous to the user or

consumer;

(3) that the defect was acause of the injuries;

(4) that the product was expected to and did reach the

consumer without substantial change in its condition.”

Phipps v. General Motors Corp., supra, 278 Md. at 344, 363A.2dat

958. In addition, for the reasons set forth in Part I of this opinion, a

“knowledge” or “state of the art” element is pertinent in a strict

liability case based on a failure to warn. While the cause of action

does not require a showing of any particular intent or actual

knowledge, it also does not require the plaintiff to negate an evil

intent or actual knowledge of a defect and deliberate disregard of

the consequences. Therefore the elements of a strict liability claim

are not inconsistent with evidence of evil intent or wrongdoing

offered to support a punitive damages award.

It is true that the evidence necessary to support a punitive

damages award goes far beyond that required to support a

compensatory damages award based on the underlying strict -

liability claim. In the same manner, the evidence of actual malice

that will support a punitive damages award in a products liability

action based on negligence requires the plaintiff to prove much

more than negligence. The defendant Owens-lIliinois does not

argue, however, that there is an inconsistency between anegligence

cause of action and punitive damages. The showing of actual malice

required for a punitive damages award is the same regardless of

whether the plaintiff’s claim for compensatory damages was based

on strict liability or on negligence. In either case, the evidence must

show malicious conduct and not simply the supplying of a defective

product or negligence.

86a

Appendix!

We agree with the Supreme Court of New Jersey that “[t]he

right to recover punitive damages cannot sensibly, in this day and

age, be made to turn on the form of the pleading.” Fischer v. Johns-

Manville Corp., supra, 103 N.J.at658,512A.2d at474. Therefore,

punitive damages are recoverable in a strict products liability case

in the same manner as they are available in a products liability

negligence case.

E.

The defendant Owens-Illinois and some amici have argued

that, in order for a jury to consider a punitive damages award, a

plaintiff should be required to establish by clear and convincing

evidence that the defendant’s conduct was characterized by actual

malice.

The function of the standard of proof is to “allocate the risk of

error between the litigants and to indicate the relative importance

attached to the ultimate decision.” Addington v. Texas, 441 U.S.

418, 423, 99 S.Ct. 1804, 1808, 60 L.Ed.2d 323, 329 (1979).

Furthermore, the clear and convincing standard has been used

“in civil cases involving allegations of fraud or

some other quasi-criminal wrongdoing by the

defendant. The interests at stake in those cases

are deemed to be more substantial than mere

loss of money and some jurisdictions

accordingly reduce the risk to the defendant of

having his reputation tarnished erroneously by

increasing the plaintiff’s burden of proof.”

Ibid.

See Pacific Mutual Life Ins. Co. v. Haslip, supra, US. » 111

87a

Appendix I

S.Ct. at 1062, 113 L.Ed.2d at 43 (O’Connor, J., dissenting) (“there is

a stigma attached to an award of punitive damages that does not

accompany a purely compensatory award. The punitive character

of punitive damages means that there is more than just money at

Stake”’).

Maryland requires a “clear and convincing evidence” standard

of proof in cases of fraud, First Nat’! Bk. v. U.S.F. & G. Co., 275 Md.

400, 340A.2d 275 (1975), andin attorney disciplinary proceedings,

Bar Ass'n of Baltimore City v. Posner, 275 Md. 250, 339 A.2d 657,

cert. denied, 423 U.S. 1016, 96S.Ct. 451,46 L.Ed.2d 388 (1975). In

First Nat’! Bk. v. U.S.F. & G. Co., supra, 275 Md. at 41 1,340A.2dat

283, this Court stated:

“When fraud, dishonesty or criminal conduct

is imputed, something more than a mere

preponderance of evidence must be produced;

the proof must be ‘clear and satisfactory’ and

be of such a character as to appeal strongly to

the conscience of the court.”

-

See also Everett v. Baltimore Gas & Elec., 307 Md. 286, 301,513

A.2d 882, 890 (1986) (“certain cases require a more exacting

standard because of the seriousness of the allegations’’).

A growing majority of states requires that a plaintiff prove the

defendant’s malicious conduct by clear and convincing evidence

before punitive damages can be considered.” Many states have

26. Adoption of this standard is supported by <he academic commentary on the

topic of punitive damages as well. See American College of Trial Lawyers, Committee

Report on Punitive Damages, supra, at 12; D. Ellis, Jr., Punitive Damages, Due

Process, and the Jury, 40 Ala. L.Rev. 975, 994-995 ( 1989); M. Wheeler, The

Constitutional Case for Reforming Punitive Damages Procedures, 69 Va.L.Rev. 269,

298 (1983); D. Owen, Problems in Assessing Punitive Damages Against

Manufacturers of Defective Products, supra, 49 U.Chi.L.Rev. at 58-59.

88a

Appendix!

adopted the clear and convincing standard by statute.”’ Other states

have adopted the standard by judicial decisions. See Linthicum v.

Nationwide Life Ins. Co., 150 Ariz. 326, 332, 723 P.2d 675, 681

(1986); Masaki v. General Motors Corp., supra, 71 Haw. 1, 780

P.2d 566; Travelers Indem. Co. v. Armstrong, 442 N.E.2d 349

(Ind.1982); Tuttle v. Raymond, supra, 494A.2d at 1363; Wangen v.

Ford Motor Co., supra, 97 Wis.2d 260, 270, 294 N.W.2d 437, 443.

In Masaki v. General Motors Corp., supra, the products

liability case arose when the van the plaintiff was repairing “self-

shifted” into reverse gear, rendering the plaintiff a quadriplegic.

Masaki alleged that the product was defectively designed and

manufactured and that he had not been warned of the defect. The

case was presented to the jury on negligence, strict liability and

breach of warranty theories, and the jury awarded both

compensatory and punitive damages. The Supreme Court of

Hawaii began its analysis by reviewing the purposes of punitive

damages as punishment and deterrence. In order to effect these

purposes, “‘a positive element of conscious wrongdoing is always

required. Thus punitive damages are not awarded for mere

inadvertence, mistake orerrors of judgment.” 71 Haw. at 7, 780 P.2d

at 571, citing, Restatement (Second) of Torts § 908, Comment b.

The Masaki court then expressed two compelling reasons for

adopting a clear and convincing standard, stating (71 Haw. at 16,

780 P.2d at 575):

27. Ala.Code § 6-11-20 (1991 Cum.Supp.); Alaska Stat. § 09.17.020 (1991

Cum.Supp.); Cal.Civ.Code § 3294(a) (West 1992 Cum.Supp.); Ga.Code Ann. § 51-12-

5.1 (Michie 1991 Cum.Supp.); Ind.Code Ann. § 34-4-34-2 (Burns 1986); lowa Code

§ 668A.1 (West 1987); Kan. Stat.Ann. § 60-3701(c) (1991 Cum.Supp.);

Ky.Rev.Stat.Ann. § 411.184(2) (Michie/Bobbs-Morril 1990 Cum.Supp.);

Minn.Stat.Ann. § 549.20 (West 1988); Mont.Code Ann. § 27-1-221(5) (1991); Nev.

Rev.Stat. §42.005(1) (Michie 1991 Cum.Supp.); N.D.Cent.Code § 3203.2-11 (1991

Cum.Supp.); Ohio Rev.Code Ann. § 2307.80(A) (Anderson 1991); Okla.Stat. tit. 23,

§ 9 (West 1987); Or.Rev.Stat. § 30.925 (1991); S.C.Code Ann. § 15-33-135 (Law Coop.

1991 Cum. Supp.); S.D.Codified Laws Ann. § 21-1-4.1 (1987); Utah Code Ann.

§ 78-18-1 (1991 Cum.Supp.).

Colorado requires proof beyond a reasonable doubt to support a punitive damages

award. Colo.Rev.Stat. §13-25-127(2) (1989).

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Appendix I

“[P]unitive damages are a form of punishment

and can stigmatize the defendant in much the

same way as a criminal conviction. It is

because of the penal character of punitive

damages that a standard of proof more akin to

that required in criminal trials is appropriate

. A more stringent standard of proof will

assure that punitive damages are properly

awarded.”

Similarly, the Supreme Court of Arizona adopted a clear and

convincing evidence standard of proof for punitive damages in

Linthicum v. Nationwide Life Ins. Co., supra, 150 Ariz. 326, 723

P.2d 675. That court stated (150 Ariz. at 332, 723 P.2d at 681):

“As this remedy is only to be awarded in the

most egregious of cases, where there is

reprehensible conduct combined with an evil

mind over and above that required for the

commission of a tort, we believe it appropriate

to impose a more stringent standard of proof.”

The Arizona Court reasoned that a loose assessment of punitive

damages undermines the “deterrent impact” and thus “becomes

onerous not only to defendants but the public as a whole.” Jbid.

Both the Arizona court and the Hawaii court looked to the

Supreme Judicial Court of Maine’s opinion in Tuttle v, Raymond,

supra, 494 A.2d 1353, for guidance. In that action arising out of an

automobile accident, the court was urged to abolish the common

law allowance of punitive damages in Maire. While the Court

refused to abolish common law punitive damages in Maine, it did

“redefine and clarify the type of tortious conduct necessary to

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Appendix I

justify an award of punitive damages ... and heighten[ed] the

standard of proof incumbent ona plaintiff seeking such an award.”

Tuttle, 494 A.2d at 1354. The court imposed a higher burden of

proof because, “although punitive damages serve an important

function in our legal system, they can be onerous when loosely

assessed.” 494A.2d at 1363. The court explained (/bid. ):

“The potential consequences of a punitive

damages claim warrant a requirement that the

plaintiff present proof greater than a mere

preponderance of the evidence. Therefore, we

hold that a plaintiff may recover exemplary

damages based on tortious conduct only if he

can prove by clear and convincing evidence

that the defendant acted with malice.”

Use of a clear and convincing standard of proof will help to

insure that punitive damages are properly awarded. We hold that

this heightened standard is appropriate in the assessment of

punitive damages because of their penal nature and potential for

debilitating harm. Consequently, in any tort case a plaintiff must

establish by clear and convincing evidence the basis for an award of

punitive damages.

r.

We now turn to the matter of the effective date of our holdings

with respect to punitive damages.

Until today, under Maryland common law a plaintiff in a tort

case was required to establish by a preponderance of the evidence

those circumstances which would authorize the allowance of an

award for punitive damages. By changing this standard of proof to

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Appendix!

clear and convincing evidence, we have not overruled any

particular Maryland cases on the ground that they were wrongly

decided at the time. Instead, we have exercised our constitutional

authority to change the common law. See Murphy v. Edmonds, 325

Md. 342, 362,601 A.2d 102, 112 (1992); Julian v. Christopher, 320

Md. 1, 9-11, 575 A.2d 735, 739 (1990); Wildermuth v. State, 310

Md. 496, 529, 530A.2d 275, 291-292 (1987); Ireland v. State, 310

Md. 328, 331-332, 529 A.2d 365, 366-367 (1987): Kelley v. R.G.

Industries, Inc., 304 Md. 124, 140, 497 A.2d 1143, 1150-115]

(1985), and cases there cited.

Recently in Julian v. Christopher, supra, 320 Md. at 101 isSee

A.2d at 739, we reiterated the principle that “[o]rdinarily decisions

which change the common law apply prospectively, as well as to the

litigants before the court. Williams v. State, 292 Md. 201 , 217,438

A.2d 1301, 1309 (1981).” Thus in Boblitz v. Boblitz, 296 Md. 242,

275, 462 A.2d 506, 522 (1983), we changed the common law by

abrogating interspousal immunity in negligence cases and held that

the change was applicable to the case then before the Court and to

Causes of action accruing after the date of our decision.

Where, however, a change in the common law does not affect

the elements of a cause of action but relates to requirements at a

trial, we have held that the change applies “to cases where the trials

... Commence after the date of our opinion in the present case,”

Jones v. State, 302 Md. 153, 161, 486 A.2d 184, 189 (1985). See

also, e.g., Williams v. State, supra, 292 Md. at 219, 438 A.2d at

1310; Lewis v. State, 285 Md. 705,716,404..2d 1073, 1079 (1979),

Therefore, the “clear and convincing” standard of proof for

punitive damages in tort cases applies to the instant cases, to the

other two cases heard by us the same day (Nos. 22 and 77), and to all

trials commencing and trials in progress on or after the date this

92a

Appendix!

opinion is filed.

The overruling of both Smith v. Gray Concrete Pipe Co., supra,

and the “arising out of contract” principle of H & R Block v.

Testerman, supra, and Wedeman vy. City Chevrolet, supra, is in a

somewhat different category. By overruling those holdings, we are

not changing the common law. Rather, for the reasons set forth in

this opinion and in Schaefer v. Miller, supra, 322 Md. at 312-332,

587 A.2d at 498-509, we have concluded that the Smith, Testerman

and Wedeman holdings were erroneous and were inconsistent with

Maryland common law. Moreover, this Court had not previously

decided whether the Smith and Testerman-Wedeman principles

were even applicable to products liability cases.

When apriorcase in this Court is overruled on the ground that it

was erroneously decided, the question whether our new holding is

retroactive or only prospective is governed by the principles set

forth in opinions such as American Trucking Ass’ns v. Goldstein,

312 Md. 583, 591-595,541 A.2d 955, 959-961(1988); Potts v. State,

300 Md. 567, 576-583,479A.2d 1335, 1340-1343 (1984); McClain

v. State, 288 Md. 456, 470, 419 A.2d 369, 375 (1980); State v. Hicks,

285 Md. 310, 336-338, 403 A.2d 356, 370-371(1979); Wiggins v.

State, 275 Md. 689, 698-716, 344 A.2d 80, 85-95 (majority

opinion), 275 Md. at 732-741, 344 A.2d at 104-109 (dissenting

opinion) (1975). See also Linkletter v. Walker, 381 U.S. 618, 85

S.Ct. 1731, 14 L.Ed.2d 601 (1965)

As set forth in the above-cited cases, two major considerations

in determining whether a new holding is to be applied only

prospectively are the purpose of the holding and the extent of

reliance upon the overruled cases. Because the primary purpose of

punitive damages is to deter defendants rather than to benefit

plaintiffs, the purpose is served by applying today’s decision

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Appendix I

retroactively. Furthermore, this is not a situation where there may

have been reliance on the Smith case and the TestermanWedeman

principle. A potential tort plaintiff does not in advance plan for or

depend upon a particular punitive damages standard in a possible

future tort case.

Therefore, our overruling of Smith and our overruling the

“arising out of contract” principle of Testerman and Wedeman shall

be retroactive as well as prospective. At the same time, however. a

defendant in some other case may not complain abouta trial court’s

application of Smith or the Testerman-Wedeman rule if the

defendant failed to object or properly preserve the issue, and if the

issue was not raised pursuant to Maryland Rule 8-131(b). See

Murphy v. Edmonds, supra, 325 Md. at 375, 601 A.2d at 118 (no

party questioned the applicability of the “gross negligence”

standard for punitive damages, and the issue was not raised by this

Court under Rule 8-131(b); therefore this Court would not applya

different standard); Boyer v. State, 323 Md. 558, 581 n. 15,594A.2d

121, 132n.15(1991) (same).

G.

As pointed out above, the standards for allowing an award of

punitive damages, articulated in this opinion, apply to the present

28. Although we have in this case changed the standard of proof for punitive

damages, and overruled the Smith case and the “arising out of contract” principle of

Testerman and Wedeman, some of the amici briefs have suggested additional changes in

the law regarding punitive damages, such as adoption of the standards discussed in

Pacific Mut. Life Ins. CQv. Haslip,__U.S.__)___-_, 111 S.Ct. 1032, 1044-1046,

113 L.Ed.2d 1, 21-23 (1991), requiring a punitive damages award to bear some

relationship to the compensatory damages, requiring a punitive damages award to have

some relationship to the plaintiff’ s costs or harm not covered by compensatory damages

(see the authorities reviewed in St. Luke Church v. Smith, 318 Md. 337, 344-354, 568

A.2d 35, 38-43 (1990)), limiting the admissibility of net worth evidence, and other

matters. We shall, however, leave any exploration of these issues for another day.

94a

Appendix!

cases. Therefore, the new standards govern the plaintiffs’ claims for

punitive damages against Owens-Illinois.

As discussed earlier, the punitive damages claims in the

present cases were submitted to the jury under an “implied malice”

standard. In addition, the jury was not instructed that the standard of

proof was clear and convincing evidence. Because the jury was not

properly instructed as to the standards for allowing awards of

punitive damages, we remand for a new trial of the claims for

punitive damages against Owens-Illinois. The parties, of course,

are not limited to the same evidence produced at the original trial.

Consequently, when all of the evidence in the remand trial on

punitive damages is introduced, the trial court must determine,

based on the standards articulated today, whether there is sufficient

evidence to present the issue of punitive damages to the jury. If so,

the trial court must properly instruct the jury as to the elements

which must be shown by the plaintiffs as well as to the standard of

proof.”

V.

The plaintiffs argue that the trial court should not have reduced

their awards by deeming that the defendants were entitled to

contribution against Raymark, Inc., and that Anchor Packing Co.

29. Several amicus curiae briefs filed in support of the defendants in these cases

present two suggestions conceming tnals on the issue of punitive damages.

First they argue that evidence of prior punitive damage awards for the same

“course of conduct” should be admissible to mitigate a punitive damages award. They

assert that the potential for multiple awards of punitive damages violates the

fundamental fairness guaranteed by the Due Process Clause of the Fourteenth

Amendment. We do not agree with the argument that a refusal to allow the jury to

consider prior awards of punitive damages violates fundamental fairness. Amici make

no distinction between those punitive damages awards that are pending on appeal, those

that have been reversed and those that have been paid. If an award of punitive damages

(Cont'd)

95a

Appendix I

was entitled to indemnity against Raymark. Raymark was a

manufacturer of asbestos.

Although Raymark was named as a defendant in the original

ccmplaint in the Dickerson case, this manufacturer settled early

with the plaintiff Dickerson. Dickerson later filed an amended

complaint, which superseded the original complaint, and which did

not name Raymark as a defendant. Raymark also settled early with

the plaintiff Zenobia. Raymark was never named as a defendant in

the Zenobia case, either in the original or in any amended

complaint. Sometime after these settlements but before the cross-

claims trial, Raymark came under the jurisdiction of the federal

(Cont'd)

has in fact been satisfied, the evidence of the defendant's financial means mightinsome

cases reflect that payment. Furthermore, the admission of pnor punitive damage awards

would require the trial court to conduct a complicated evidentiary proceedings to

determine if the defendant had in fact satisfied the punitive judgment. We decline to

impose this onerous burden on the trial court.

Second, amici argue that we should impose mandatory bifurcation of the

compensatory and punitive damages claims. We note that a trial court may exercise its

discretion and bifurcate these issues, pursuant to Maryland Rule 2-503(b). In addition,

as frequently occurs in light of Maryland Code (1974, 1989 Repl. Vol.), § 10-913(a) of

the Courts and Judicial Proceedings Article (precluding evidence of a defendant's

financial means until there has been a finding that punitive damages are supportable

under the facts), the trial court will instruct the jury on the compensatory claims and on

the defendant’ s potential liability for punitive damages. Then, once the jury has made a

finding of liability on the underlying claims and has determined that there should be

liability for punitive damages, the trial court will further instruct the jury concerning the

calculation of a punitive damages award. This is precisely the procedure that was

followed in these cases.

If there were two separate damages trials in every case, much of the evidence at

the trial solely on the issue of punitive damages would duplicate the evidence admitted

at the compensatory damages trial. Many of the same witnesses would have to be

recalled to repeat their testimony before the jury. In light of the fact that this duplication

would burden both witnesses and jurors as well as waste judicial resources, we believe

that mandatory bifurcation is undesirable.

96a

Appendix!

bankruptcy court.

As far as the docket entries or record in these cases show, no

defendant ever filed a cross-claim expressly against Raymark.

Furthermore, the defendants do not in this Court dispute the

plaintiffs’ assertion that Raymark never had any notice of a cross-

claim against it. Instead, the cross-claims in these cases were

effected by a crossclaim “stipulation” providing that every

defendant named in the original complaint or in an amended

complaint

“stipulate and agree that cross-claims . . . are

considered to have been filed by each

defendant against each other defendant. Each

defendant is considered to have denied the

allegations of the cross-claims filed against it.”

Because Raymark was never named in the original or an

amended complaint in the Zenobia case, Raymark could not have

entered into this stipulation in the Zenobia case. Raymark was nota

party to the Zenobia case, and no defendant sought to implead

Raymark into the Zenobia case. See Maryland Rule 2-322 requiring

service, upon a person not previously a party to the action, of a

summons, the complaint, and all pleadings and motions previously

filed in the action. The trial court could not exercise jurisdiction to

grant across-claim against Raymark in the Zenobia case.

With respect to the Dickerson case, the “stipulation”

apparently covers the cross-claims against Raymark for

contribution because Raymark was named in Dickerson’s original

complaint. The plaintiff Dickerson argues that the trial court should

not have determined that Raymark was a joint tortfeasor because

Raymark had filed for bankruptcy protection at the time of the

97a

Appendix I

cross-claims trial.

It is not necessary for us to determine, however, whether the

trial court violated the automatic bankruptcy stay in granting the

cross-claims against Raymark for contribution in the Dickerson

case, because there was insufficient evidence in that case to find that

Raymark was a joint tortfeasor. No evidence was presented against

Raymark at the trial on the plaintiffs’ claims, presumably because

Raymark was nota defendant at that stage. In the cross-claims trial,

the only evidence submitted against Raymark was the deposition of

an Anchor Packing Co. employee who stated that Anchor bought

sixty to seventy-five percent of its asbestos containing products

from Raymark. There was no evidence presented at either trial

regarding (1) the plaintiff Dickerson’s exposure to Raymark’s

products, (2) whether Raymark’s products were a substantial factor

in causing the plaintiff Dickerson’s injuries, or (3) whether

Raymark failed to warn the plaintiff Dickerson of the dangers in its

products. In order for Raymark to be adjudicated a joint tortfeasor,

the defendants seeking contribution must prove each of the

elements that the plaintiff is required to prove. There was simply no

such evidence in the Dickerson case.

Therefore, the granting of the cross-claims against Raymark in

both the Dickerson and the Zenobia cases are reversed. On remand

the compensatory awards must be adjusted to reflect the reversal of

the cross-claim adjudication of Raymark as a joint tortfeasor. For

this reason the judgments for compensatory damages must be

vacated.

JUDGMENT OF THE COURT OF SPECIAL APPEALS

VACATED, AND CASES REMANDED TO THE COURT OF

SPECIAL APPEALS WITH DIRECTIONS TO VACATE THE

JUDGMENTS OF THE CIRCUIT COURT FOR BALTIMORE

98a

Appendix!

CITY AND REMAND THE CASES TO THE CIRCUIT COURT

FOR BALTIMORE CITY FOR FURTHER PROCEEDINGS NOT

INCONSISTENT WITH THIS OPINION. PLAINTIFFS TO PAY

ONE-THIRD OF THE COSTS IN THIS COURT AND IN THE

COURT OF SPECIALAPPEALS AND DEFENDANTS OWENS-

ILLINOIS, INC., MCIC, INC., ANCHOR PACKING CO. AND

PORTER HAYDEN COMPANY, TO PAY TWO-THIRDS OF THE

COSTS IN THIS COURT AND IN THE COURT OF SPECIAL

APPEALS.

MOTION FOR RECONSIDERATION DENIED.*

McAULIFFE, Judge, concurring.

I join in all except Part IV of the Court’s opinion. With respect

to Part IV, Iconcur in the result. I agree that we should abandon the

“arising out of acontract” distinction discussed in Part IV A of the

Court’s opinion and that we should adopt the “clear and

convincing” standard of proof for the award of punitive damages in

any case. Moreover, I agree with the specific test adopted by the

Court forthe availability of punitive damages ina products liability

case.

I write separately only to point out that although the Court’s

opinion makes clear that “actual knowledge of the defect and

deliberate disregard of the consequences” will be considered the

equivalent of “evil motive,” “intent to defraud,” or “intent to injure”

and therefore within the definition of “actual malice” in products

liability cases, Court’s opinion at 461, 601 A.2d at 653 it does not

state whether an “equivalent” state of mind will be recognized in

*The addendum to this opinion denying Motion for Reconsideration can be found

at 325 Md. 665 and 602 A.2d 1182.

99a

Appendix!

other nonintentional torts. The Court’s opinion should not, I

suggest, be interpreted as excluding that possibility.

There is a state of mind that falls just short of an intent to injure,

but is sufficiently egregious to be treated as the legal equivalent of

an intent to injure for criminal as well as civil purposes. Judge

Moylan, writing for the Court of Special Appeals in DeBettencourt

v. State, 48 Md.App. 522, 530,428 A.2d 479, cert. denied, 290 Md.

713 (1981), provides an apt definition:

It is... that the willful doing of a dangerous

and reckless act with wanton indifference to

the consequences and perils involved, is just as

blameworthy, and just as worthy of

punishment, when the harmful result ensues, as

is the express intent to kill itself. This highly

blameworthy state of mind is not one of mere

negligence ... It is not merely one even of

gross criminal negligence. . . Itinvolves rather

the deliberate perpetration of a knowingly

dangerous act with reckless and wanton

unconcern and indifference as to whether

anyone is harmed or not. The common law

treats such a state of mind as just as

blameworthy, just as anti-social and, therefore,

just as truly murderous as the specific intents to

kill and to harm.

More recently, see Robinson v. State, 307 Md. 738, 744-46, 517

A.2d 94 (1986).

The Court’s test for liability for punitive damages in a products

liability case that the defendant had actual knowledge of the defect

100a

Appendix!

and proceeded with a conscious or deliberate disregard of the

foreseeable harm resulting from the defectis the civil analogue of

DeBettencourt’s “deliberate perpetrationof a knowingly dangerous

act with reckless and wanton unconcern and indifference as to

whether anyone is harmed or not.” The Court thereby

acknowledges that a mental state sufficiently egregious to support a

conviction of murder is sufficiently egregious to support the

imposition of punitive damages.

This rationale, defined precisely and shorn of terms which

might suggest that a lesser state of mind would suffice, should apply

with equal force in all non-intentional tort cases. A person who is

actually aware that his action involves aclear and serious danger of

substantial harm to the plaintiff or anyone in the plaintiff’s class,

and who unreasonably takes such action with flagrant indifference

as to whether anyone will be harmed or not, should be liable for

punitive damages if his conduct causes the foreseeable harm. This

type of outrageous conduct, being just short of intentional harm,

warrants such a sanction. Although the requisite comduct and state

of mind will often include gross negligence, the test would not be

met by ashowing of gross negligence alone.

I assume that the Court does no more than to leave this

discussion for another day.

ROBERT M. BELL, Judge, concurring and dissenting. As

relevant to this opinion,’ the Court’s opinion today effects a

significant, if not, revolutionary, change in Maryland law

respecting punitive damages. In one fell swoop, we have modified

the law of punitive damages in three respects. First, we have

1. I agree with the Court’s opinion except for portions of part IV B. and C., which

this opinion addresses.

eT

10la

Appendix!

abolished the distinction held to exist, for purposes of determining

whether punitive damages may be awarded, between torts “arising

out of contract” and those that do not, overruling in the process

H & R Block v. Testerman, 275 Md. 36, 338 A.2d 48 (1975) and

Wedeman v. City Chevrolet, 278 Md. 524, 366 A.2d 7 (1976). In an

even greater step, we have followed the trend and held that a new,

higher burden of proof henceforth will apply when a party seeks

punitive damages. Thus, we have joined the trend of permitting

awards of punitive damages only upon greater proof than usually

required in civil cases. We made this change in an effort “to insure

that punitive damages are properly awarded.”

Finally, we reformulated the test for determining whether, ina

given Case, punitive damages may be awarded. A casualty of that

formulation is Smith v. Gray Concrete Pipe Co., 267 Md. 149, 297

A.2d 721 (1972), the case in which “implied malice” was first

recognized to be a predicate for the award of punitive damages.

Stating the reason a new standard is necessary, the majority notes

that, when decided, Smith v. Gray Concrete Pipe Co., supra, was

inconsistent with this Court’s precedents and did not attempt to

analyze how a “gross negligence” standard promoted the objectives

of punitive damages. Furthermore, it says that the Smith standard

produced “inconsistent results and frustration of the purposes of

punitive damages in non-intentional tort cases.” The majority

asserts that the standard “provides little guidance for individuals

and companies to enable them to predict behavior that will either

trigger or avoid punitive damages liability, and it undermines the

deterrent effect of these awards.” (footnote omitted)

In its place, relying on Davis v. Gordon, 183 Md. 129, 133, 36

A.2d 699, 701 (1944), the Court adopts, in nonintentional tort cases,

a standard of “actual malice,” i.e. “evil motive,” “intent to injure,”

“tl-will,” or “fraud.” Because, however, in the usual products

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liability case, whether proceeding on negligence or strict liability,

the sale of the product, defective by virtue of a failure to warn or

otherwise, ordinarily will not involve evil motive, conscious intent

to injure any particular person, ill will or fraud, we also adopt a

variation on the “actual malice” theme: actual knowledge of the

defect and conscious or deliberate disregard of the consequences.

The majority deems that standard to be the equivalent of “actual

malice.” But the first prong of that equivalent, the majority is

emphatic, must be strictly limited; it means that nothing less than

“actual knowledge” will suffice. That there is available evidence

about which a defendant “should have known” will not be sufficient

to support an award of punitive damages. The most the majority will

concede is that, where a “willful refusal to know” i.e., “where a

person believes that it is probable that something is a fact, but

deliberately shuts his or her eyes or avoids making reasonable

inquiry with a conscious purpose to avoid learning the truth,” see

concurring opinion (Chasanow, J.) in State v. McCallum, 321 Md.

451, 458, 583 A.2d 250, 253 (1991), is proven, the person so

refusing will be charged with actual knowledge of the product’s

defect.

Because I share some of the majority’s concerns regarding the

proliferation of punitive damages claims and their amounts, I join,

enthusiastically, with it in adopting two of the changes. Ican see no

reason for maintaining a distinction, for punitive damages

purposes, between torts arising out of a contract and those that do

not. Similarly, I believe that requiring proof of punitive damages by

clear and convincing evidence is fair and just. Allowing punitive

damages to be assessed against a defendant is serious business; it is

right that we take steps to insure that it is not viewed lightly.

Enhancing the burden of proof to a level commensurate with the

seriousness of the matter to be decided is appropriate. I agree with

the majority that, because the purpose of punitive damages is, at

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least in part, to punish, requiring a lower burden of proof for its

award is inconsistent with the way we treat other serious cases.

I part company with the majority on the question of what is the

appropriate standard for determining the cases in which punitive

damages are appropriate. While I have no quarrel with requiring

that, in some cases, “actual malice,” characterized as “evil motive,”

“intent to injure”, “ill will”, “fraud”, or, in the case of products

liability actions, “actual knowledge of the defective nature of the

product, coupled with a deliberate disregard of the consequences”,

be shown, I am opposed to excising from the standard the concept

adopted by Smith v. Gray Concrete Pipe Company (267 Md. at 167,

297 A.2d at 731): “wanton or reckless disregard for human life,”

sometimes characterized as “gross negligence”. That standard, now

the old one, is a floor, not a ceiling; it sets a minimum requirement,

nota maximum. Therefore, if adefendant acts with “actual malice,”

however, characterized, he or she will be subject to an award of

punitive damages under the old standard. On the other hand, by

adopting the “actual malice” standard, the majority does much

more than excise a useless phrase, it places outside the scope of

punitive damages eligibility numerous deserving cases, differing

from cases that remain punitive damages eligible only in the

subjective element. That change simply goes too far.

The perception is that more claims for punitive damages,

involving conduct so diverse that predictability and, therefore, the

ability to choose the proper conduct and avoid being culpable, than

were justified, were being brought and allowed with the result that

the purposes of punitive damages were being undermined. The

changes proposed are for the purpose of making the awards more

uniform and consistent with the historical bases for punitive

damages awards: punishment and deterrence. The purposes of

punitive damages are better served, it has been determined, by

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requiring a more stringent standard for assessing punitive damages

and by requiring a greater burden of proof. To be sure, one of the

goals of today’s decision is to set a higher threshold for punitive

damages eligibility. That is accomplished by changing the burden

of proof, that clearly will exclude some undeserving cases, no

doubt, a large number, even applying the old standard. But, by both

changing the burden of proof and the standard, an even greater

percentage of deserving cases, heretofore eligible for punitive

damages awards, is affected. Indeed, by so doing, not only is the

threshold raised, but excluded is an entire category of cases, non-

intentional torts, involving, in many instances, injuries of greater

severity than in cases that still qualify and, thus, not necessarily

those least deserving of an award of punitive damages. And the

distinction causing the exclusion is the subjective intent of the

defendant. While I can agree, as I have previously indicated, to

raising the threshold by raising the level of the proof required, I

cannot agree that punitive damages should be awarded only in cases

of ‘‘actual malice,” where there is a subjective intent element. In

cases where there is no actual malice, the totality of the

circumstances may reveal conduct on the part of a defendant that is

just as heinous as the conduct motivated by that actual malice and,

so, for all intents and purposes is the same.

Although not intentional, i.e., willf

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