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November 23, 2015 Practice Points

"Strongest Adverse Inference" Sanction Issued Against Asbestos Defendant

By W. Clay Massey

On November 5, 2015, Judge Peter Moulton of the New York Supreme Court sanctioned J-M Manufacturing Company in an asbestos lawsuit based on a finding that J-M had spoliated dozens of boxes of documents related to its manufacture of asbestos-containing products in the 1980s. According to the court’s sanction order, J-M had purchased an asbestos-cement-pipe business in 1983 from Johns-Manville Corporation, which had been a major manufacturer of asbestos products before it declared bankruptcy in 1982. The court found that, after the acquisition, J-M intentionally discarded 27 boxes of business records relating to that business in 1997 and lost “more than 10 bankers boxes (and possibly more than 50 boxes)” of documents related to that business in 1990.

The lawsuit at issue involved allegations by the estate of Richard Warren that Warren developed a cancer known as “mesothelioma” from his exposure to asbestos from cement pipe allegedly manufactured by J-M. The case is Warren v. Amchem Products, Inc., et al., 190281/2014.

The court found that J-M’s conduct in discarding and losing the documents was “inexplicabl[e],” “egregious and in bad faith.” As a result, the court ruled that the plaintiff was “entitled to the strongest adverse inference” that the documents would have supported the plaintiff’s claims at trial.

In issuing the sanction, the court rejected J-M’s argument that the sanction was unwarranted because J-M had not been served with a complaint or received notice of a specific claim or pending litigation (or a direct threat of litigation) when it discarded and lost the documents. The court rejected this argument based in part on “overwhelming evidence” that J-M knew of both the hazards of the asbestos and mesothelioma’s long latency period as far back as 1983 when purchasing the cement-pipe business from Johns-Manville Corp., which the court noted was “a company synonymous with asbestos litigation.” Based on that evidence, along with evidence that asbestos lawsuits had been filed against J-M as early as 1983, the court held that J-M had a duty to preserve the documents because it reasonably anticipated the future litigation, despite there being no notice of a specific claim against J-M when it discarded or lost the documents.

The court also held that the plaintiff was not required to show that the spoliated documents were relevant, or that plaintiff had been prejudiced by the spoliation. The court held that relevance was presumed because the court found that J-M’s spoliation resulted from its gross negligence. Also, the court held that the plaintiff was not required to show prejudice because it held that such a showing is not required where the requested sanction is an adverse inference.

The court’s adverse-inference sanction against J-M is significant not only because of its obvious negative implications for J-M in the Warren case, but also because of its potential broader implications for J-M and other parties in other New York asbestos-litigation matters. The Warren case is one of thousands of cases on the In re: New York City Asbestos Litigation docket (NYCAL), which is a consolidation of all asbestos cases pending in all counties within New York City. To the extent that J-M is a defendant in other NYCAL cases, J-M may face this adverse-inference sanction in those other cases, which could substantially impede J-M’s ability to avoid liability and benefit asbestos plaintiffs more generally across this large asbestos litigation docket.

On the other hand, the Warren sanction order’s potential broader implications in NYCAL cases involving exposure to J-M products might not be entirely beneficial to plaintiffs. It might also aid defendants other than J-M in their effort to reduce their potential liability in such cases. Under N.Y. C.P.L.R. § 1601(1), a defendant found to be 50 percent or less at fault for a plaintiff’s injury can be liable for non-economic damages only to the extent of its proportionate share of fault. Thus, a defendant can potentially reduce its liability by showing that another tortfeasor bears fault for the plaintiff’s injury. Accordingly, where there is evidence that a plaintiff was exposed to a J-M asbestos-containing product, other defendants might attempt to use the Warren sanction order as a tool for establishing J-M’s fault (particularly in cases that J-M has settled) based on arguments that they, too, have been deprived of the spoliated evidence in their effort to reduce their liability by establishing J-M’s fault for a plaintiff’s injury. Consequently, if the Warren sanction order has broader implications in NYCAL matters, it might end up being a two-way street for plaintiffs.

W. Clay Massey, Alston & Bird LLP, Atlanta, GA

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