# Appendix — Armstrong v. Owens-Illinois, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1992
- **Citation:** 506 U.S. 871

## Text

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)

2243
tz *NJ (908) 257-6850¢(800) 3 APPEAL *NY (212) 840-4640*MA (617) 542-1114
Ss.ime. OC (202) 783-7288+PA (215) 925-6500°USA (800) 5 APPEAL

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:

2la
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.

3la
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.

32a
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.

33a
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

35a
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
Appendix!

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)

56a
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).

58a
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.

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