On October 28, 2016, Judge Robert Dierker issued an order in the case of Bristol v. Ford Motor Co., et al., 1522-CC10413, denying Ford’s Motion to Dismiss Based upon Lack of Personal Jurisdiction. Ford argued that there was no personal jurisdiction in the matter pursuant to Daimler AG v. Bauman, 134 S. Ct. 746 (2014), which states, “A court may assert jurisdiction over a foreign corporation to hear any and all claims against [it] only when the corporation’s affiliations with the State in which suit is brought are so constant and persuasive as to render [it] essentially ‘at home’ in the forum State.” Diamler, 134 S. Ct. at 751.
Plaintiff alleges decedent was exposed to Ford brake products in Utah when he was an employee of a Ford dealership. Based on discovery in this case, it was determined Ford brake products contained asbestos, during the time decedent was working on its products. The Court found Ford had and continues to have extensive manufacturing operations in Missouri and is licensed to do business in Missouri but is not incorporated in Missouri, nor does it have its principal place of business in Missouri. Ford products that contained asbestos brake linings were manufactured in Missouri and shipped to the dealership in Utah.
Based on the foregoing, Judge Dierker found that, although it is unclear that plaintiff’s decedent worked directly on vehicles made in Missouri, it is reasonable to infer that he did so. Judge Dierker also inferred that decedent was exposed to asbestos-containing brake linings on vehicles made in Missouri.
In his Order, Judge Dierker specifically rejected the finding that maintaining a registered agent is Missouri is sufficient to establish jurisdiction, stating “The Court also rejects the contention (albeit adopted by other rulings in this Circuit) that being registered to do business in Missouri constitutes consent to the general jurisdiction of the Missouri courts.”
Though Judge Dierker found the existence of a registered agent insufficient to establish jurisdiction, he concluded that plaintiff adequately established specific personal jurisdiction in this case, based upon the evidence presented that allegedly dangerous Ford products were shipped to the decedent’s employer in Utah from Ford plants in Missouri, thereby creating a clear risk of asbestos exposure to plaintiff’s decedent in Utah. Judge Dierker stated the plaintiff has shown that, for the purposes of due process and the Missouri “long-arm” statute, RSMo. § 506.500, it reasonable that Ford be sued in Missouri on account of its conduct in Missouri.
This is the second time Judge Dierker has specifically made the contention that the existence of a registered agent in Missouri will not establish personal jurisdiction. In Smith v. Union Carbide, et al. (1422-CC00457), DuPont filed a Motion to Dismiss Based on Lack of Personal Jurisdiction. Judge Dierker rejected Plaintiff’s arguments that service upon DuPont’s registered agent in Missouri was sufficient to confer general personal jurisdiction against DuPont. In reaching this opinion, Judge Dierker applied the due process analysis set forth in Daimler and found that DuPont is neither incorporated in, nor has its principal place of business in, Missouri and that Plaintiff failed to present evidence “indicating that this is an ‘exceptional case’ under Daimler, such that general personal jurisdiction should be extended beyond these paradigmatic forums.”
Though Judge Dierker denied Ford’s Motion to Dismiss Based upon Lack of Personal Jurisdiction, his finding that the existence of registered agent is not enough to establish jurisdiction in Missouri bolsters Defendants’ arguments when contesting personal jurisdiction in St. Louis City Circuit Court.
On September 29, 2016, the Missouri Supreme Court heard oral arguments in the case of State ex rel. Norfolk Southern Railway Company v. The Honorable Colleen Dolan, SC95514, in which an Indiana resident, Russell Parker, sued Norfolk Southern Railway Company under the federal employer’s liability act in a Missouri state circuit court, seeking damages for cumulative trauma injuries he alleges he sustained during the course of his employment with Norfolk Southern. Although it operates railroad lines in Missouri, the railway company is incorporated in and has its principal place of business in Virginia. Norfolk Southern moved to dismiss Parker’s lawsuit for lack of jurisdiction. The circuit court denied Norfolk Southern’s motion in December 2015. Norfolk Southern has appealed this issue to the Missouri Supreme Court.
Norfolk Southern’s point on appeal is whether the circuit court may exercise personal jurisdiction (legal authority) over Norfolk Southern. Related to this are issues of whether the allegations in Parker’s Petition arise from or relate to Norfolk Southern’s activities in Missouri are sufficient to give rise to specific jurisdiction, and whether the circuit court has general jurisdiction over Norfolk Southern through its operations in Missouri, even though it is not incorporated in Missouri and does not have a principal place of business in Missouri. The Missouri Supreme Court must also decide whether Norfolk Southern consented to jurisdiction and whether, under the due process clause, an out-of-state corporation’s compliance with mandatory business registration requirements can lead to a finding that the corporation has consented to jurisdiction.
The content of this blog is intended for informational purposes only, and is not intended to solicit business or to provide legal advice. Since the laws of different states vary, the information on this blog may not apply to every reader. You should not make, or refrain from making, any legal action based upon the information contained on this blog without first seeking professional counsel. Your use of the blog does not create an attorney-client relationship between you and Pitzer Snodgrass, PC, or the authors. The choice of a lawyer is an important decision and should not be based solely on advertising.
Recently, in the case of Kologenski v. Genuine Parts Corporation (1622-CC00427), Judge Sengheiser denied Genuine Parts Company’s (GPC’s) Motion to Dismiss for Lack of Personal Jurisdiction, finding that GPC consented to personal jurisdiction in Missouri by maintaining a registered agent to accept service of process in Missouri. This outcome is consistent among St. Louis City judges, as Judge David Dowd and Judge Joan Moriarty have recently ruled the same way on similar motions to dismiss for lack of personal jurisdiction.
Since the United States Supreme Court decided the case of Daimler AG v. Bauman, 134 S. Ct. 746 (2014), personal jurisdiction for corporations has become a fiercely contested issue. In Daimler, the Supreme Court determined the forum court did not have personal jurisdiction over the defendant because the conduct in question did not occur in the state. Further, the Supreme Court reasoned the defendant’s slim contacts with the state, relative to its other national and international contacts, were not sufficient to render it “at home” in the state for the purpose of personal jurisdiction. The application of the Daimler case and its due process analysis give rise to GPC’s Motion to Dismiss in the Kologenski case.
In Kologenski, Plaintiff James Kologenski was diagnosed with mesothelioma in January 2016 and filed his personal injury lawsuit in the Circuit Court of St. Louis City, Missouri alleging exposure to asbestos and asbestos containing products through his occupational work as a mechanic and truck driver from 1957 through 1990.
The Kologenski lawsuit was originally assigned to Judge Julian Bush one of the sitting “motion” judges in St. Louis City and Plaintiff’s change of judge transferred the case to Judge Joan Moriarty, the other sitting “motion” judge in St. Louis City. However, soon after the case was transferred to Judge Moriarty, GPC’s change of judge transferred the case to Judge Sengheiser. Since Judge Sengheiser is not one of the sitting “motion” judges in St. Louis City, GPC hoped for a favorable result on its Motion to Dismiss for Lack of Personal Jurisdiction.
The following will summarize the oral arguments for and against GPC’s Motion to Dismiss and Judge Sengheiser’s ruling. *It should be noted both parties filed several briefs in support of their arguments, which Judge Sengheiser read in their entirety, and the oral arguments served only to supplement the written briefs. The content of the parties written briefs are not analyzed.
GPC’s main argument was that simply having a registered agent in a state does not constitute consent to personal jurisdiction in that state forever. GPC analogizes its argument to a truck driver, in that a truck driver may drive through many different states, but this alone does not subject the truck driver to litigation in every state he has driven through if he gets into an accident in Missouri. GPC argues that it being subject to suit in this case is asimilar to it simply “driving through the state.”
GPC heavily relies on Daimler AG v. Bauman, 134 S.Ct. 746 (2014) and Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011). According to Daimler, “a court may assert jurisdiction over a foreign corporation to hear any and all claims against [it] only when the corporation’s affiliations with the State in which suit is brought are so constant and persuasive as to render [it] essentially ‘at home’ in the forum State.” Diamler, 134 S. Ct. at 751. GPC also argued that in the well-known holding of International Shoe Company v. State of Washington, Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945) (“due process requires minimum contacts with the territory of the forum only where the defendant is not “present” in the forum, or where it has not consented to jurisdiction in the forum”), the word “consent” is a broad, loaded word, and needs to be explicit. Having a registered agent should not constitute a corporation’s consent to all-purpose jurisdiction. Since Daimler states a Defendant must be “at home” in the state in order to be sued in the state, GPC argued there is simply not enough sufficient contacts to say GPC is “at home” in Missouri.
GPC maintains Plaintiff argues a “some equals all” approach, such that if an entity transacts some business in the state, all litigation concerning that entity can occur in that state. GPC contends this is improper logic because a registered agent does not constitute consent to all-purpose jurisdiction.
Further, GPC addresses the recent St. Louis City Orders issued by Judge Moriarty and Judge Dowd, which ruled a registered agent is enough for personal jurisdiction, and contends they rely on cases that were decided well before Daimler. Judge Sengheiser interrupts GPC’s argument and inquires as to the purpose of a registered agent. GPC responds that the registered agent is there to accept service if a cause of action arose in that state and the defendant can be sued there.
In support of their position, GPC points out that the Plaintiff did not purposefully avail himself in Missouri because he never lived in Missouri and did not buy a GPC product in Missouri, so this cause of action did not arise out of any transactions or occurrences in Missouri.
Plaintiff’s argument rests solely on the principal that having a registered agent in Missouri constitutes consent for purposes of personal jurisdiction. Plaintiff distinguishes Daimler from the current Kologenskicase and argues Daimler does not address the issue of consent; rather, Daimler deals with the question of specific and general jurisdiction when there is no consent.
Three St. Louis City judges, Judge Dowd, Judge Moriarty, and most recently Judge Ohmer, have ruled on this issue and all have found that having a registered agent constitutes consent. Plaintiff indicates his position is as simple as the Missouri registered agent statute, which states a foreign corporation with a registered agent “has the same duties, restrictions, penalties, and liabilities now or later imposed on, a domestic corporation of like character.” R.S.Mo. §351.582(2)(2012). Further, Plaintiff points out that Delaware, a state where most corporations are incorporated, has a registered agent statute which does not contain this specific language. In further support, Plaintiff notes there has yet to be a court decision stating a registered agent is not consent to personal jurisdiction. Plaintiff also argues GPC is subject to jurisdiction under Missouri’s long arm statute, R.S.Mo. §506.500 and read aloud portions of the statute which state a defendant is subject to jurisdiction in Missouri if it transacts any business within the state or commits a tortious act within the state.
In the alternative, Plaintiff argues that if Judge Sengheiser should determine GPC has not consented to personal jurisdiction, then he should find that GPC is “at home” in Missouri. GPC has been transacting business in Missouri for nearly 30 years and employs 500 employees in the state. During initial discovery, GPC produced an affidavit which stated GPC’s business in Missouri only constitutes 1.7% of its total business nationwide. However, Plaintiff argues that this 1.7% totals billions of dollars. Additionally, Plaintiff alleges that GPC is in fact doing business in Missouri because GPC has filed suit many times in Missouri against other entities and even sought a writ to the Missouri Appellate and Supreme Courts.
Plaintiff makes a public policy argument and argues if personal jurisdiction is denied for GPC, then Plaintiff would have to file an individual lawsuit against every other defendant in this case in many different states.
GPC notes that Plaintiff left out important language in the Missouri long arm statute when it was read aloud for the record. Missouri’s long arm statute also includes the words “arising from.” R.S.Mo §506.500 sets forth, a defendant is subject to the jurisdiction of Missouri courts “as to any cause of action arising from the doing of any of such acts: (1) the transaction of any business within this state…” GPC stresses the “arising from” language is important because other states’ long arm statutes say “related to,” but Missouri does not use that particular language. GPC maintains the present litigation does not “arise out of” the 1.7% of its business conducted in Missouri.
GPC argues that a registered agent’s authority is to accept papers on behalf of a corporation, but this authority is not granted in all 50 states. For instance, a registered agent in Missouri does not have authority to consent to personal jurisdiction on behalf of the corporation if the suit should have been filed in Arizona. GPC concludes that doing business for 30 years in Missouri does not give all-purpose jurisdiction to lawsuits that do not arise out of transactions in Missouri.
Plaintiff concludes by stating GPC’s role in the Kologenski case is not “simply driving through the state” because GPC is still currently registered in Missouri. GPC is not required to do business here, but it elected to be registered in Missouri and subjected itself to the laws of the state. Plaintiff finally states the basis of the current case is that Mr. Kologenski was exposed to asbestos while performing brake work during the time he attended school in Missouri.
Judge Sengheiser’s Ruling:
In an Order, dated September 6, 2016, regarding GPC’s Motion to Dismiss for Lack of Personal Jurisdiction, Judge Sengheiser cites Bryant v. Smith Interior Design Grp., Inc., 310 S.W.3d 227, 232 (Mo. banc 2010), which states a “court may assert personal jurisdiction over a defendant only if certain minimum contacts between Missouri and the defendant are established, unless one of the “traditional territorial bases of personal jurisdiction” exist—presence, domicile or consent.”
Judge Sengheiser analyzed whether there was personal jurisdiction over GPC under Daimler, but went on to say that Plaintiff need not show that GPC had minimum contacts with or is “at home” in Missouri in order to bring a lawsuit against GPC. According to Int’l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316, (1945), due process requires minimum contacts with the territory of the forum only where the defendant is not “present” in the forum, or where it has not consented to jurisdiction in the forum.
Judge Sengheiser relied on State ex rel. K-Mart Corp. v. Hollinger, 986 S.W. 2d 165, 167 (Mo. banc 1999), which states “a corporation has long been considered “present” within the state when its agent is served with process in the state.” Judge Senheiser agreed with this conclusion despite noting that in State ex rel. K-Mart, K-Mart conceded its contacts in Missouri were sufficient to satisfy due process requirements, and thus, the K-Mart court did not address the issue of whether registration of a foreign corporation and designation of an agent for service of process, without more, is always sufficient to confer jurisdiction.
Despite GPC’s arguments, Judge Sengheiser determined Daimler did not affect the long-standing rule that a defendant is present or has consented to jurisdiction through the appointment of a registered agent in the state. Judge Sengheiser concluded that since GPC maintains a registered agent in Missouri and was served through its registered agent, GPC is considered present in Missouri.
Judges in St. Louis City continue to rely on the K-Mart decision and find personal jurisdiction based upon the existence of a registered agent to accept service in Missouri, despite the fact that the K-Mart Court did not consider whether a registered agent always confers personal jurisdiction upon a corporation.
The issue of personal jurisdiction in Missouri continues to be disputed in both asbestos and non-asbestos cases. To date, the St. Louis City Circuit Court has several pending motions to dismiss for lack of personal jurisdiction waiting to be heard. Later this month, the Missouri Supreme Court will hear arguments on this same issue.
The content of this blog is intended for informational purposes only, and is not intended to solicit business or to provide legal advice. Since the laws of different states vary, the information on this blog may not apply to every reader. You should not make, or refrain from making, any legal action based upon the information contained on this blog without first seeking professional counsel. Your use of the blog does not create an attorney-client relationship between you and Pitzer Snodgrass, PC, or the authors. The choice of a lawyer is an important decision and should not be based solely on advertising.
The new trend among smokers, those trying to quit, and even non-smokers, are electronic cigarettes, or e-cigarettes. These e-cigarettes are marketed as a same alternative to cigarettes, but are they really safe? If they are not safe, will diseases caused by e-cigarettes be the next wave of toxic tort litigation in the United States? This post explores the possible dangers and potential liabilities which may be related to these e-cigarettes, but unfortunately, it is too soon to tell whether e-cigarettes are a safe alternative to smoking, or just another carcinogen.
What are E-Cigarettes?
According to the American Cancer Society, e-cigarettes are a form of electronic nicotine delivery system (ENDS). They are small battery-operated devices that look like cigarettes. When the smoker puffs on it, the system delivers a vapor of flavorings, nicotine, and other chemicals. The vapor is inhaled like cigarette smoke, and the nicotine is absorbed into the lungs. The success of e-cigarettes has expanded into the sale of e-cigars, “vape pens”, and “e-hookahs”. Many states do not have an age requirement for buying e-cigarettes, and there are few if any warnings on these “e-cigs”. These devices are also used by traditional smokers in order to take nicotine to places where smoking is not allowed.
Are E-Cigarettes Safe?
The manufacturers of electronic nicotine delivery systems tout their ingredients as safe, but there are still substances being inhaled, and there has been little research or testing regarding these substances. Many e-cigarette cartridges are not labeled with ingredients, so it is unknown what substances are being inhaled. According to the U.S. Food & Drug Administration, the amounts of nicotine and other substances a person gets from each cartridge are also unclear and have been found to vary greatly, even when comparing same brand cartridges from the same manufacturer.
When the solutions in ENDS are heated, they release acetaldehyde and formaldehyde – known toxins. The flavorings in the solutions may also be toxic. Studies have shown that e-cigarettes can cause short-term lung changes that are much like those caused by regular cigarettes. But long-term health effects are still unclear. This is an active area of research, but right now not much is known about the safety of these products.
Beginning on August 8, 2016, the U.S. Food and Drug Administration will begin to regulate ENDS. The FDA regulations will subject all manufacturers, importers and/or retailers of newly-regulated tobacco products to any applicable provisions related to tobacco products in the Federal Food, Drug, and Cosmetic Act and FDA regulations. In addition, there are several provisions aimed at restricting youth access to tobacco products, including not allowing sales to persons under the age of 18. The FDA rule requires all newly-regulated covered tobacco products must bear the following warning statement: “WARNING: This product contains nicotine. Nicotine is an addictive chemical.” At this time, it is too soon to tell if the newly enacted FDA regulations will affect the use and/or manufacture of ENDS.
The lack of research and regulation of ENDS creates many questions regarding the safety and long term effects of these devices. The American Cancer Society has determined that since ENDS are designed to deliver nicotine, this strongly suggests that ENDS use will lead to nicotine dependence, which could lead to the use of other tobacco products. Therefore, the American Cancer Society cannot recommend e-cigarettes and other ENDS products to help people quit smoking, because it isn’t yet known if they are safe and effective.
While many individuals have used e-cigarettes in order to quit smoking or to avoid the risks caused by smoking, “vaping” can lead to many other risks and may not eliminate risks associated with conventional smoking. Researchers had determined that in animal studies, e-cig vapors, whether containing nicotine or not, alter genes in the frontal cortex. The nature of the gene changes suggest that affected animals would exhibit behavioral changes, including ones associated with mental illness and hyper activity. Researchers observed that exposure to e-cig vapors in the womb caused the male animals to suffer from reproductive problems, and both sexes showed signs of emerging atherosclerosis. In both cases it appears that toxic aldehydes, such as acrolein, formaldehyde and acetaldehyde, are contributors.
A 2015 analysis published in the New England Journal of Medicine found that the exposure to formaldehyde from e-cigarettes, based on similar chronic use as tobacco, could be five to 15 times higher than from smoking cigarettes. According to the American Cancer Society, exposure to formaldehyde has been shown to cause cancer in laboratory animals and has also been linked to some cancers in humans, including throat cancer, nasal cancer, leukemia, and “popcorn lung”.
In the recent study, “Endothelial disruptive pro-inflammatory effects of nicotine and e-cigarette vapor exposures”, published in the American Journal of Physiology—Lung Cellular and Molecular Physiology, researchers exposed human and mouse cells to e-cigarette vapor, using both nicotine and nicotine-free e-cigarettes. They found that nicotine e-cigarette vapor resulted in a loss of function of the endothelial cells in the lungs, acute lung inflammation and decreased lung endothelial cell proliferation.
A study published on July 27, 2016 in the journal Environmental Science and Technology by researchers at the Lawrence Berkeley National Laboratory, “Emissions from Electronic Cigarettes: Key Parameters Affecting the Release of Harmful Chemicals”, found propylene glycol, an eye and respiratory irritant, and glycerin, a skin, eye and respiratory irritant, among 29 other chemicals released in e-cigarette vapor. According to this study, both chemicals are considered “probable carcinogens” by federal health officials. These chemical are used in e-cigarettes to create artificial smoke.
The Future of “Vaping”
According to the Centers for Disease Control, in 2014, two million high school students used e-cigarettes. Several U.S. Senators have asked the FDA to stop the marketing and sale of e-cigarettes to children. Experts are particularly concerned that the many candy-like flavors, such as bubble gum and cotton candy, are produced primarily to appeal to children. This marketing is creating a potential class of plaintiffs in this potential toxic tort.
Based on the research thus far, and the lack of regulation, this appears to be a potential area of liability in the future. As we learn more about the long-term effects of e-cigarettes, the potential for litigation will become more apparent.
Possible Practice Considerations
In our current asbestos practice, the prevalence of e-cigarette use in older individuals, as a method to quit smoking, may actually be causing or increasing their risk of developing lung cancer. Specifically with respect to alleged asbestos-related lung cancers, we may want to consider questioning plaintiffs whether, even if they have quit smoking, whether they are using e-cigarettes, which continues their exposures to known carcinogens.
While it is too soon to tell if “vaping” will be the next wave of toxic tort litigation, research shows that e-cigarettes are not necessarily a safe alternative to smoking. Additionally, the lack of regulation of the e-cigarette industry creates the potential for liability related to the hazards of “vaping”.
The content of this blog is intended for informational purposes only, and is not intended to solicit business or to provide legal advice. Since the laws of different states vary, the information on this blog may not apply to every reader. You should not make, or refrain from making, any legal action based upon the information contained on this blog without first seeking professional counsel. Your use of the blog does not create an attorney-client relationship between you and Pitzer Snodgrass, PC, or the authors. The choice of a lawyer is an important decision and should not be based solely on advertising.
Over the last few years, asbestos defense attorneys have slowly begun to introduce a defense to the causation of mesothelioma related to a specific genetic mutation. In a recent study, scientists have found that individuals who carry a mutation in a gene called BAP1 are susceptible to developing mesothelioma. See Testa JR, Cheung M, Pei J, Below JE, Tan Y, Sementino E, Cox NJ, Dogan AU, Pass H, Trusa S, Hesdorffer M, Nasu M, Powers A, Rivera Z, Comertpay S, Tanji M, Gaudino G, Yang, H and Carbone M. Germline BAP1 mutations predispose to malignant Mesothelioma. Nature Genetics. Online August 28, 2011. DOI: 10.1038/ng.912. Additionally, when these individuals are exposed to asbestos or similar mineral fibers, their risk of developing mesothelioma may be markedly increased.
This study, published online Aug. 28, 2011, in Nature Genetics, describes two U.S. families with a high incidence of mesothelioma, as well as other cancers, associated with mutations of the BAP1 gene. The research was funded by the National Cancer Institute (NCI), part of the National Institutes of Health, and led by scientists at the University of Hawai’i Cancer Center, Honolulu, and Fox Chase Cancer Center, Philadelphia, including Dr. Michele Carbone and Dr. Joseph Tesla.
Dr. Michele Carbone, Professor and former Director of the University of Hawai’i Cancer Center, believes that not only is the BAP1 genetic mutation capable of increasing the risk of developing mesothelioma and other forms of cancers with asbestos exposure, but also that it can directly cause mesothelioma. Dr. Tesla noted this was the first study to demonstrate that individual genetic makeup can greatly influence susceptibility to mesothelioma. Dr. Tesla opined that it is likely that other genes, in addition to BAP1, will be found to be associated with elevated risk of mesothelioma.
The study found evidence that some people with BAP1 gene mutations also developed breast, ovarian, pancreatic or renal cancers, suggesting the gene mutation may be involved in multiple cancer types.
The BAP1 Defense in Action
The BAP1 defense has only been argued in a few cases nationwide. In the recent case of Ortwein v Certainteed Corporation in Alemeda County, California Superior Court, Judge Jo-Lynne Lee granted defendant Certainteed’s motion to compel production of lung tissue samples from decedent Holly Ortwein for genetic testing. Judge Lee had not addressed whether the results of the genetic testing would be admissible as evidence. Judge Lee reasoned that since decedent had died from her illness, she no longer had a legally recognizable interest in her genetic information. The Court indicated that a person “owns” their own genetic information, meaning the remaining plaintiffs don’t have a legal interest in Ortwein’s genetic information. In her Order, Judge Lee stated, “It then follows that one person cannot have a constitutionally protected privacy interest in another person’s genetic information because any such interest would interfere with the owner’s right to control the use and disclosure of their own genetic information”.
Dr. Tesla submitted a declaration in the Ortweins’ case explaining that BAP1 gene mutation prevents the patient’s proteins from acting as tumor suppressors when cancer is detected. Tesla, however, disagreed with Carbone that mesothelioma can be caused absent exposure to asbestos.
A little closer to home, Georgia Pacific introduced the BAP1 defense in Bergstrom v. 84 Lumber, et al., 1322-CC09325, which was filed in St. Louis City Circuit Court. Prior to Georgia Pacific’s dismissal from the suit, defense counsel introduced the BAP1 defense when they filed a motion for an order compelling a blood examination from plaintiff David Bergstrom for genetic testing. In their motion to compel examination, they relied on Missouri Supreme Court Rule 60.01, which states that when the physical condition of a party is in controversy, the court may require the individual to submit to blood examination. Georgia Pacific argued that Bergstrom’s physical condition was put in controversy when he alleged that he suffers from mesothelioma caused by exposure to Georgia Pacific’s products. Plaintiffs’ counsel argued the BAP1 defense was without medical support.
Judge Robert Dierker granted Georgia Pacific’s motion compelling Bergstrom to submit to blood examination for purposes of genetic testing. However, Judge Dierker’s Order stated the test was to be conducted by Prevention Genetics, which is only authorized to test for a BAP1 gene mutation. Upon completion, the lab was ordered to share the results with Georgia Pacific and the Bergstroms’ counsel. Prevention Genetics also was ordered to destroy or turn over all of Bergstrom’s blood samples and results to his treating physician. The confidential results of the genetic testing were not submitted as evidence on the record.
The BAP1 genetic mutation defense does not always end favorably for the defendants. In the Alameda County, California Superior Court case of Perez v. ArvinMeritor, Inc. et al, defendants raised the BAP1 genetic mutation defense; however, Judge Brad Seligman awarded the plaintiff and his wife $19,449,863 in damages. Judge Seligman entered a judgment for plaintiffs Antonia and Raquel Perez and against Universal Fleet Supply, a co-defendant auto parts supply company, following a general civil court trial.
The existence of the BAP1 gene mutation raises several questions in asbestos related cases, including the admissibility of genetic testing. If genetic testing is allowed and a plaintiff has the BAP1 mutation, the defendants could argue that the gene mutation, not asbestos exposure, caused plaintiff’s disease. Would defendants have the same duty to warn an individual with the BAP1 mutations as the general population? While it is too early to know the ramifications of this defense, it is clear that in certain asbestos related cases, the BAP1 defense will change the usual discovery process and likely raise even more questions.
Disclaimer and Message Required by the Missouri Bar
On November 4, 2015, the Illinois Supreme Court filed the attached opinion in the matter of Folta v. Ferro Engineering, 2015 L 118070. In a 4-2 decision, the Court held that when the employee’s injury or disease first manifests after the expiration of certain time limitations under the Workers’ Compensation Act (820 ILCS 305/1 et seq. (West 2010)) and the Workers’ Occupational Diseases Act (820 ILCS 310/1 et seq. (West 2010)), the employee’s action is barred by the exclusive remedy provisions of those acts.
Mr. Folta worked for Ferro Engineering from 1966 to 1970, alleging exposure to products containing asbestos during that time period. Forty-one years later, Mr. Folta was diagnosed with mesothelioma. He filed a civil action in Cook County, Illinois against 15, including Ferro. In responses Ferro filed a Motion to Dismiss based on the exclusive remedy provision in the Workers’ Compensation Act and the Workers’ Occupational Diseases Act (Acts). Plaintiff alleged his action fell outside the exclusive remedy provision because his claim was not “compensable” under the Acts because his symptoms manifested more than 40 years after his last exposure to asbestos and any potential asbestos-related compensation claim was barred under the 25-year limitation provision in section 6(c) of the Workers’ Occupational Diseases Act.
The circuit court granted Ferro Engineering’s motion to dismiss, holding that the action was barred by the exclusive remedy provisions. Following resolution of the civil action with the 14 other defendants, Folta appealed the dismissal of the claims against Ferro. The appellate court reversed and remanded. Folta v. Ferro Engineering, 2014 IL App (1st) 123219. Relying on the Illinois Supreme Court’s court’s ruling inMeerbrey v. Marshall Field & Co., 139 Ill. 2d 455 (1990), the appellate court explained that an injured employee may bring a common-law action against his employer where “the injury is not compensable under the Act.” Folta v. Ferro Engineering, 2014 IL App (1st) 123219, ¶ 27. The appellate court determined that the term “compensability” must relate to the “ability to recover under the Act.” Id. ¶ 31. It found that Folta’s injury was “quite literally not compensable” under the Workers’ Compensation Act because all possibility of recovery was foreclosed due to the nature of his injury and the fact that his disease did not manifest until after the statute of repose expired. Id. ¶ 36. Accordingly, the appellate court held that Folta’s suit against Ferro Engineering was not barred by the exclusivity provisions of the Workers’ Compensation Act and the Workers’ Occupational Diseases Act, and remanded for further proceedings. Id. ¶ 44.
Of note, the Illinois Supreme Court allowed several amici curiae briefs in support of both parties. In support of Folta, the Court allowed briefs from the Illinois Trial Lawyers Association, the Asbestos Disease Awareness Organization, and the Illinois AFL-CIO. In support of Ferro Engineering, we allowed a joint brief from various businesses, including Caterpillar Inc., Aurora Pump Company, Innophos, Inc., Rockwell Automation, Inc., United States Steel Corporation, F.H. Leinweber Company, Inc., Driv-Lok, Inc., Ford Motor Company, and ExxonMobil Oil Corporation, as well as briefs from the Illinois Self-Insurers’ Association, the Illinois Defense Trial Counsel, and a joint brief from the American Insurance Association, Property Casualty Insurers Association of America, and the Travelers Indemnity Company.
The Court provided an analysis of the exclusive remedy provisions of the Workers’ Compensation Act and the Workers’ Occupational Diseases Act, in order to determine if these provisions bar an employee’s cause of action against an employer to recover damages for a disease resulting from asbestos exposure which arose out of and in the course of employment even though no compensation is available under those acts due to statutory time limits on the employer’s liability.
After a brief overview of the Acts, the Court noted both acts contain an exclusive remedy provision as part of the quid pro quo which balances the sacrifices and gains of employees and employers. Meerbrey, 139 Ill. 2d at 462. In discussing the scope of the exclusivity provisions under the Workers’ Compensation Act, the Court has indicated that the Act generally provides the exclusive means by which an employee can recover against an employer for a work related injury. Id at 462. However, an employee can escape the exclusivity provisions of the Act if the employee establishes that the injury (1) was not accidental; (2) did not arise from his employment; (3) was not received during the course of employment; or (4) was not compensable under the Act. Id. (citing Collier v. Wagner Castings Co., 81 Ill. 2d 229, 237 (1980)).
In this case, Folta relied on the fourth category, that his injury was not compensable under the act because he never had an opportunity to recover any benefits under the Act. On the other hand, Ferro’s position was that whether an injury is compensable is defined by the scope of the Act’s coverage, and not on the particular employee’s ability to recover benefits.
The Court then reviewed the Illinois Supreme Court’s historical analysis of a “compensable injury”. The Court concluded that Pathfinder Co. v. Industrial Comm’n, 62 Ill. 2d 556 (1976), Collier and Meerbrey stand for the proposition that whether an injury is compensable is related to whether the type of injury categorically fits within the purview of the Act, not whether an injury is compensable by whether there is an ability to recover benefits for a particular injury sustained by an employee. In all of these cases, the exclusivity provisions barred a common-law cause of action.
The majority notes that the Act specifically addresses diseases caused by asbestos exposure, citing several causes where employees and spouses had received compensation, which indicates the legislature intended that occupational diseases arising from workplace asbestos exposure are the type of injury contemplated to be within the scope of the Act. Accordingly, under Pathfinder, Collier and Meerbrey, Foltas injury is the type of injury compensable under the Act.
The Court went on to discuss the cases of Moushon v. National Garages, Inc., 9 Ill. 2d 407 (1956), andDuley v. Caterpillar Tractor Co., 44 Ill. 2d 15 (1969), which dealt with the Acts provisions that limit employer’s liability and the exclusive remedy provisions. Based upon their review of these cases, the Court stated that this court has held that despite limitations on the amount and type of recovery under the Act, the Act is the employee’s exclusive remedy for workplace injuries.
The Court stated that section 6(c) of the Workers’ Occupational Diseases Act barred Folta’s right to file an application for compensation. Based on the plain language of this section, the Court stated this provision acts as a statute of repose, and creates an absolute bar on the right to bring a claim. The Court noted that in enacting this section of the Act, the legislature intended to provide an absolute definitive time period within which all occupational disease claims arising from asbestos exposure must be brought, even if it bars a claim before it has even accrued. Allowing a common law action in spite of the exclusive remedy provisions, would render the statute of repose useless. Further, this interpretation would directly contradict the plain language of the exclusive remedy provision which provides that the employer’s liability is “exclusive and in place of any and all other civil liability whatsoever, at common law or otherwise.” 820 ILCS 310/11 (West 2010).
Folta further alleged that since decedent was precluded from recovering any compensation benefits offered by the statute, the effect was to essentially exclude this latent disease from coverage under the Act. Thus, relying on the Pennsylvania Supreme Court case of Tooey v. AK Steel Corp., 81 A.3d 851 (Pa. 2013), Folta asserts that her recourse against the employer must be found in the common law. The Tooey court defined “injury” to include “occupational disease” provided that, if occupational disease was the basis for compensation, that Act only applied to disability or death resulting from such disease and occurring within a 300-week time window. The court held, over a dissent, that this time limitation “operate[d] as a de facto exclusion of coverage under the Act for essentially all mesothelioma claims.” Id. at 863. Therefore, common law mesothelioma claims were not barred by the exclusive remedy provision of the Pennsylvania Act. Id. at 865.
The Illinois Supreme Court rejected this argument, based on the plaint language of the statute, which state that there is no right to recover damages from the employer for “any injury to health, disease, or death therefrom, other than for the compensation herein provided”, and that the Act is exclusive with respect to “any disease contracted or sustained in the course of the employment”, it would be “a radical departure to suggest that the exclusivity provisions apply only for certain occupational diseases in which the disability manifests within the time limitation.” “Consistent with Collier and Meerbrey, the litmus test is not whether there is an ability to recover benefits.” Folta v. Ferro Engineering, 2015 IL 118070, ¶ 42. “Nothing in our statute or the history of our jurisprudence suggests that a temporal limitation removes a work-related injury from the purview of the Act.” Id. The Court acknowledges the possible harsh results, but indicates the question of whether a different balance be struck should be addressed by the legislature, rather than the Court.
Finally, Folta argued that holding that the exclusive remedy provisions bar her cause of action would violate the Illinois Constitution’s guarantees of equal protection (Ill. Const. 1970, art. I, § 2), prohibition against special legislation (Ill. Const. 1970, art. IV, § 13), and the right to a certain remedy (Ill. Const. 1970, art. I, § 12). Folta contends that interpreting the exclusive remedy provisions to deprive the family of a right to recovery against the employer would arbitrarily create two classes of similarly situated injured workers who are treated unequally and without any rational basis. Folta argued that those workers who suffer from occupational diseases with short latency periods are eligible to receive compensation benefits, while those workers who suffer from occupational diseases with long latency periods are “categorically” prohibited from a right to recover compensation benefits and are additionally prohibited from seeking common-law damages. Folta v. Ferro Engineering, 2015 IL 118070, ¶ 46.
The Court found no merit with Folta’s arguments indicating that “all of these workers are precluded from seeking common law damages.” Id. at ¶ 47. The Court further noted that there are examples where the particular facts and circumstances are such that they do not allow for recovery of benefits against the employer. But there is no “categorical” class without a right to seek benefits against their employer. Further, “the acts do not prevent an employee from seeking a remedy against other third parties for an injury or disease.” Id. at ¶ 50. “Rather, in this case, the acts restrict the class of potential defendants from whom Folta could seek a remedy, limiting Folta’s recourse for wrongful death claims to third parties other than the employer.” Id. “In this case, Folta named 14 defendant manufacturers of asbestos related products. Folta was not left without any remedy.“ Id.
The Illinois Supreme Court concluded Folta’s action against Ferro Engineering for wrongful death is barred by the exclusive remedy provisions of the Workers’ Compensation Act and the Workers’ Occupational Diseases Act.
In his dissent, Justice Freeman, joined by Justice Kilbride, indicated he would affirm the judgment of the appellate court. Justice Freeman stated that in the unanimous opinion of the appellate court, the court noted the scope of the exclusive remedy provisions is not absolute. The court pointed to Meerbrey, which listed four exceptions to the Workers’ Compensation Act’s exclusivity provisions, which were discussed above. The appellate court rejected Ferro’s argument, correctly noting that Ferro’s proposed definition of compensability “would render the fourth Meerbrey exception superfluous, since Meerbrey already contains explicit exceptions for injuries that did not arise from a worker’s employment and injuries that were not received during the course of employment.” 2014 IL App (1st) 123219, Id. ¶ 30. The court held that the fourthMeerbrey exception applied to allow plaintiff to bring a common law suit against Ferro. Id.
The appellate court held the fourth Meerbrey exception applied here because plaintiff’s injury was “quite literally not compensable under the Act, in that all possibility of recovery is foreclosed because of the nature of plaintiff’s injury.” Id. at ¶ 36. In support of this point, the dissent distinguished Moushon from the current case because in Moushon, plaintiff’s injury was within the Workers’ Compensation Act’s “coverage formula” and the plaintiff received compensation for that injury. That the plaintiff might not have been able to recover statutory compensation for a particular element said to arise from his injury does not entitle him to file a common-law action against his employer for additional damages.
Justice Freeman indicated the majority’s interpretation of the exclusive remedy provisions “includes, at most, only scant mention of the canons of statutory construction”. Folta v. Ferro Engineering, 2015 IL 118070, ¶ 66. The dissent specifically identified the rule that “in construing a statute, the court may consider the reason for the law, the problems sought to be remedied, the purposes to be achieved, and the consequences of construing the statute one way or another.” Hubble v. Bi-State Development Agency of the Illinois-Missouri Metropolitan District, 238 Ill. 2d 262, 268 (2010). Id. at ¶ 69.
The dissent relies on Professor Arthur Lawson’s treatise Larson’s Workers’ Compensation Law § 100.01(1) (2015), which states: the Workers’ Compensation Act’s exclusive remedy provision thus “is part of the quid pro quo in which the sacrifices and gains of employees and employers are to some extent put in balance, for, while the employer assumes a new liability without fault, it is relieved of the prospect of large damage verdicts.”
Justice Freeman indicated the majority’s interpretation of the exclusive remedy provisions could not be the law. The dissent indicated that when the 25 year statute of repose in section 6(c) of the Workers’Occupational Diseases Act expires there is no longer a recognized right of action, therefore, the employee’s injury is not compensable under the Act, and the employee may bring, under the fourth Meerbreyexception, a common law cause of action against the employer.
In support of this opinion, the dissent further relies on Professor Larson’s treatise, which states: “other jurisdictions, including Illinois and Pennsylvania, have refused to follow the twisted logic (emphasis added) in Kane that would (1) bar the claim because it was unknown at the time the statute of repose expired and (2) bar the civil action because of the exclusive remedy provisions of the state’s workers’ compensation law.” 9 Larson’s Workers’ Compensation Law § 100.05(3)(b)(2015). The treatise cites the appellate case at bar,Meerbrey, two other appellate court decisions, and Tooey v. AK Steel Corp., 81 A.3d 851 (Pa. 2013). TheTooey court held that claims for occupational disease which manifested outside the 300-week period prescribed by the Workers’ Compensation Act did not fall within the purview of the Workers’ Compensation Act, and, therefore, the Workers’ Compensation Act’s exclusivity provision did not preclude injured employees from filing common-law claims against their employers.
In the opinion of the dissent, the interpretation of the Act could not be intended to leave the employee with no remedy under the Act or at common law. However, the majority addressed this claim directly, stating: “the acts do not prevent an employee from seeking a remedy against other third parties for an injury or disease.”Folta v. Ferro Engineering, 2015 IL 118070, at ¶ 50. “Rather, in this case, the acts restrict the class of potential defendants from whom Folta could seek a remedy, limiting Folta’s recourse for wrongful death claims to third parties other than the employer.” Id. “In this case, Folta named 14 defendant manufacturers of asbestos related products. Folta was not left without any remedy.“ Id.
Disclaimer and Message Required by the Missouri Bar
When evaluating a claim for medical malpractice, the potential exposure is a key consideration for both health care provider and defense counsel. Until recently, plaintiffs could receive unlimited non-economic damages awards in medical malpractice lawsuits for personal injury filed in Missouri. See, Watts v. Lester E. Cox Medical Centers, 376 S.W.3d 633 (Mo. banc 2012). Such unlimited damages may afford plaintiff a windfall, expose health care providers to unpredictable jury verdicts, and increase the overall cost of health care. However, the Missouri legislature has recently reinstated damage caps with Senate Bill No. 239, which was signed into law by Governor Jay Nixon on May 7, 2015, and takes effect on August 28, 2015.
The Missouri legislature has pursued tort reform over the past several years, which has brought meaningful change, but has also caused confusion regarding when damage caps are available at trial. In Lilian M. Lewellen v. Chad Franklin and Chad Franklin Auto Sales North LLC, 441 S.W.3d 136 (Mo. banc 2014), the Supreme Court of Missouri struck down Missouri’s statutory cap on punitive damages for all common law causes of action that existed prior to the adoption of Missouri’s Constitution in 1820. The Court’s rationale was that the statutory cap violated an individual’s right to due process and a jury trial for all claims existing at common law before 1820, when Missouri’s Constitution was ratified. However, the Court had previously held that claims brought under statutes created by the legislature could be subject to damage caps. Estate of Overbey v. Chad Franklin National Auto Sales North, LLC, 361 S.W.3d 364 (Mo. banc 2012). Therefore, whether a damage award could be capped was dependent upon whether the cause of action arose under the common law or was created by statute. Under this framework, any cause of action brought under a statute, such as wrongful death against health care providers, was subject to limited damages, while any cause of action brought under the common law, such as personal injury medical malpractice claims against health care providers, could not be limited by damage caps.
The Missouri Legislature recently voted to reinstate damage caps in medical malpractice cases with the passing of Senate Bill No. 239. The bill creates a statutory cause of action for claims against health care providers and abolishes the common law cause of action. Requiring plaintiffs to bring claims against health care providers under a statute, rather than the common law, allows the Legislature to limit damages by using the framework set forth by the Missouri Supreme Court. With this law, health care providers and their counsel are better able to evaluate the value of a claim and more meaningfully engage in settlement
Under the new law, plaintiffs are unable to receive an award of more than $400,000 in non-economic damages in medical malpractice claims, irrespective of the number of defendants. The Legislature has also created a separate damage cap for cases classified as “catastrophic personal injury.” The cap for catastrophic claims is increased to $700,000, irrespective of the number of defendants. The statute defines “catastrophic personal injury” to include cases of quadriplegia, paraplegia, loss of two or more limbs, brain injuries involving permanent cognitive impairment, irreversible major organ failure, and severe vision loss. These damage amounts were previously unlimited, which created increased exposure and risk at trial for health care defendants. The act also adjusts the statutory cap on non-economic damages in actions against health care providers for wrongful death from $350,000 to $700,000. Once again, this limit is irrespective of the number of defendants. The statutory caps will increase each year at a rate of 1.7%, effective January 1 of each year.
The caps apply to all “non-economic” damages, which include claims for pain and suffering, mental anguish, inconvenience, physical impairment, disfigurement, loss of capacity to enjoy life, and loss of consortium. The caps do not apply to compensation for any “economic” losses, such as the cost of past and future medical treatment or past and future lost wages. The caps also do not limit jury awards for punitive damages, which are defined in Missouri as damages intended to punish or deter willful, wanton, or malicious misconduct. In Missouri, punitive damages are considered extraordinary and harsh, and should be awarded sparingly. See, Rodriguez v. Suzuki Motor Corp., 936 S.W.2d 104 (Mo. banc 1996).
If a jury returns a non-economic damage award in excess of the applicable cap, the party wishing to limit the award must file a post-trial Motion requesting application of the statutory cap. Only at that point in time shall the trial court determine whether the increased limitation for catastrophic claims applies to the facts of the case, allowing for a maximum of $700,000 in non-economic damages. Health care providers have witnessed several changes over the last several years in the area of tort reform. The enactment of Senate Bill No. 239 is a protection for health care providers, which will serve to help providers and their counsel better evaluate claims for personal injury brought against them.
Disclaimer and Message Required by the Missouri Bar
On January 14, 2014, the United States Supreme Court decided the case of Daimler AG v. Bauman, 134 S. Ct. 746 (2014). The background of this case is as follows: Daimler is a German corporation which was sued in California by Argentinian plaintiffs for human rights violations in Argentina. The United States Court of Appeals for the Ninth Circuit upheld jurisdiction, reasoning that Mercedes-Benz USA, an indirect subsidiary of Daimler, was indeed an agent of Daimler and that the exercise of personal jurisdiction over Daimler was reasonable “under the circumstances of this case”. The circuits have disagreed over when such conduct may be attributed to a parent corporation, and Daimler argued that the Ninth Circuit made it too easy to attribute one corporation’s behavior to another.
Justice Ginsburg wrote the opinion, which was joined by seven other justices, which held that it did not matter whether Mercedes-Benz USA’s conduct was attributed to Daimler, because California did not have general jurisdiction over Daimler. Justice Ginsburg’s opinion begins by outlining the jurisprudential history of in personam jurisdiction, beginning with the “rigidly territorial focus” of Pennoyer v. Neff, 95 U.S. 714 (1878). Justice Ginsburg viewed International Shoe Co. v. Washington, 326 U.S. 310 (1945) as recognizing the distinction between specific jurisdiction, which includes only the specific conduct that connects the defendant to the territory, and general jurisdiction, which is “exercisable when a foreign corporation’s “continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.” Daimler at 754, citing International Shoe at 318. Ginsburg further stated that general jurisdiction should be exercised only when the corporation’s affiliations with the State in which suit is brought are so constant and pervasive “as to render [it] essentially at home in the forum State.” CitingGoodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846 (2011).
In the Daimler case, Justice Ginsburg assumed, for the purposes of this decision only, that Mercedes-Benz USA’s “contacts are imputable to Daimler, there would still be no basis to subject Daimler to general jurisdiction in California, for Daimler’s slim contacts with the State hardly render it at home there”. Daimlerat 760. The Court reiterated it’s holding in Goodyear, stating limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there. Id. With respect to a corporation, the place of incorporation and principal place of business are paradigm bases for general jurisdiction. Id.
Goodyear did not hold that a corporation may be subject to general jurisdiction only in a forum where it is incorporated or has its principal place of business; it simply typed those places paradigm all-purpose forums.Id. Accordingly, the inquiry under Goodyear is not whether a foreign corporation’s in-forum contacts can be said to be in some sense “continuous and systematic,” it is whether that corporation’s affiliations with the State are so “continuous and systematic” as to render essentially at home in the forum State. Id. at 761.
The U.S. Supreme Court concluded that Daimler, even with Mercedes-Benz USA’s contacts attributed to it, was not at home in California, and hence Daimler was not subject to suit there on claims by foreign plaintiffs having nothing to do with anything that occurred or had its principal impact in California.
Based on this decision, there are several considerations corporations must consider when contesting personal jurisdiction in Missouri and Illinois.
Does a Defendant need to file Motion to Dismiss Based on Lack of Personal Jurisdiction as Initial Filing?
Not necessarily. A Defendant can file a Motion to Dismiss Based on Lack of Personal Jurisdiction or include this defense in an Answer, or both. If a Defendant wants to argue their motion, it may be a better practice to have a separate Motion to Dismiss Based on Lack of Personal Jurisdiction to notice for Hearing. If a Defendant chooses to file a Motion to Dismiss Based on Lack of Personal Jurisdiction, it should be filed within the time to file a responsive pleading.
According to Missouri Supreme Court Rule 55.27(a)(2), “every defense, in law or fact, to a claim in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim, shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motio.” Including “(2) lack of jurisdiction over the person”. Rule 55.27(a) goes on to state, “(a) motion making any of these defenses shall be made: (A) Within the time allowed for responding to the opposing party’s pleading”.
Want of jurisdiction over the person may be raised by answer or by motion at the option of the pleader, but it is not necessary to use the label of “special appearance” in either the motion or an answer. State ex rel. Metal Service Center v. Gaertner, 677 S.W.2d 325, 327 (Mo. banc 1984). In re Marriage of Wheeler, 743 S.W.2d 605, 606 (Mo. Ct. App. 1988)
If not, does a Defendant waive their challenge to Personal Jurisdiction?
No, as long as the defense was included in Defendant’s responsive pleading with other affirmative defenses.
Further, according to Rule 55.27(a), “(m)otions and pleadings may be filed simultaneously without waiver of the matters contained in either” and “(n)o defense or objection is waived by being joined with one or more other defenses or objections in a responsive pleading or motion.”
Does a Defendant waive their challenge to Personal Jurisdiction if Defendant engages in discovery, discloses experts, etc.?
No. But it is a good practice to continue to assert the lack of personal jurisdiction defense when answering discovery, disclosing experts, attending depositions, etc.
It has long been held that a defendant who in a timely and proper manner raises the jurisdictional question created by a lack of venue may thereafter plead over, prepare for trial, utilize all of the procedures available for trial preparation, apply for or consent to continuances and changes of venue and actually try the case on the merits without waiving the defense of lack of personal jurisdiction. Greenwood v. Schnake, 396 S.W.2d 723, 726 (Mo.1965). “Having once hoisted the flag at the beginning of the journey a litigant over whose person a court lacks jurisdiction need not continuously wave the flag at every way station along the route.” Id.
In re Marriage of Berry, 155 S.W.3d 838, (Mo.App S.D. 2005), citing Crouch v. Crouch, 641 S.W.2d 86, 90 (Mo.banc 1982), states that “Rule 55.27(g)(1)(B) provides that the defense of lack of personal jurisdiction, among other things, is waived … if it is neither made by motion under this Rule [55.27] nor included in a responsive pleading.” “Due process requires that, in the absence of minimum contacts to support personal jurisdiction, the rule effect a waiver of the jurisdictional defense only if the defendant has already appeared before the court and has neither timely raised nor otherwise waived jurisdiction.” Id.
Is there a time limit to call up a Motion to Dismiss Based on Lack of Personal Jurisdiction?
There does not appear to be a time limit for calling up a Motion to Dismiss based on Lack of Personal Jurisdiction.
According to Missouri Supreme Court Rule 55.27(c), “(t)he defenses specifically enumerated (1)-(11) in subdivision (a) of this Rule [including lack of jurisdiction over a person], whether made in a pleading or by motion, and the motion for judgment mentioned in subdivision (b) of this Rule shall be heard and determined before trial on application of any party, unless the court orders that the hearing and determination thereof be deferred until the trial. Courts seem to prefer that Motions to Dismiss for Lack of Personal Jurisdiction are argued earlier in the litigation in order to streamline the litigation.
According to the Missouri Circuit Court for the Twenty-Second Judicial Circuit (St. Louis City)’s Docket Procedures, Dispositive Motions shall be scheduled and submitted at least 60 days prior to any peremptory trial setting or the motion may not be heard, unless circumstances establish good cause why that was not possible.
Recent Personal Jurisdiction Rulings in Missouri
There have been recent rulings on Defendants’ Motions to Dismiss Based on Lack of Personal Jurisdiction in St. Louis City circuit court motion divisions.
Hon. Robert H. Dierker 
In Smith v. Union Carbide, et al. (1422-CC00457), an asbestos case, DuPont filed a Motion to Dismiss Based on Lack of Personal Jurisdiction. Plaintiff relied on the State ex rel. K-mart Corp. v. Holliger, 986 S.W.2d 165 (Mo. banc 1999) and DuPont relied on the Daimler case. During oral arguments, Hon. Robert H. Dierker indicated he did not know if K-Mart was still good law after Daimler. He stated he believed Daimlerdoes not look at fairness, but constitutionality, saying “It might be fair, but it might not be constitutional.” Judge Dierker went on to say he thought K-Mart was a stretch and believed Daimler took the legs out of K-Mart.
In his written opinion, Judge Dierker rejected Plaintiff’s arguments that the presence and conduct of a DuPont subsidiary in Missouri should be attributed to DuPont for purposes of the jurisdictional analysis. Plaintiff also unsuccessfully argued that service upon DuPont’s registered agent in Missouri was sufficient to confer general personal jurisdiction against DuPont. In considering this argument, the Court noted that inK-Mart, however, K-mart conceded that “its contacts with Missouri [were] sufficient to satisfy due process requirements.” 986 S.W.2d at 168-69. Consequently, Judge Dierker applied the due process analysis set forth in Daimler. Applying that analysis, the Court found that DuPont is neither incorporated in, nor has its principal place of business in, Missouri and that Plaintiff failed to present evidence “indicating that this is an ‘exceptional case’ under Daimler such that general personal jurisdiction should be extended beyond these paradigmatic forums.”
Hon. David Dowd
Hon. David Dowd recently denied Genuine Parts Motion to Dismiss Based on Lack of Personal Jurisdiction in Sagers v. AGCO Corp., et al. (1422-CC10026), another asbestos case. Judge Dowd stated in his Order that since Genuine Parts maintained a registered agent in Missouri for service of process, Genuine Parts consented to being sued in Missouri. In support of his opinion, Judge Dowd stated “(u)nder section 351.582(2), issuance of a certificate of authority to a foreign corporation authorizes it to conduct business in Missouri and makes it “subject to the same duties, restrictions, penalties, and liabilities…imposed on, the domestic corporation of like character.” State ex rel. K-Mart Corp. v. Hollinger, 986 S.W.2d 165, 168 (Mo. Banc 1999). Doing business in a foreign territory in accordance with the laws of the territory has long been considered consent to be sued there. Railroad Co. v. Harris, 79 U.S. 65, 81 (1871).
Judge Dowd went on to rule that since Genuine Parts has a registered agent to accept service of process in Missouri, the long-arm statute is not needed to reach a Defendant, citing K-Mart. Judge Dowd also citedKnowlton v. Allied Van Lines, Inc., 900 F.2d 1196, 1199 (8th Cir. 1990), for the proposition that the “whole purpose of requiring designation of an agent for service is to make a nonresident suable in the local courts.” Judge Dowd opined that Daimler did not affect the rule that a defendant has consented to jurisdiction through the appointment of a registered agent in the state.
Does a Defendant need to file Motion to Dismiss Based on Lack of Personal Jurisdiction as Initial Filing?
Yes. Unless, a Defendant files a Motion for Extension of Time to Answer or Otherwise Appear (this is not considered a responsive pleading).
According to Illinois Supreme Court Rule 735 ILCS 5/2-301(a) (amended in 2000), “(p)rior to the filing of any other pleading or motion other than a motion for an extension of time to answer or otherwise appear, a party may object to the court’s jurisdiction over the party’s person, either on the ground that the party is not amenable to process of a court of this State or on the ground of insufficiency of process or insufficiency of service of process, by filing a motion to dismiss the entire proceeding or any cause of action involved in the proceeding or by filing a motion to quash service of process. Such a motion may be made singly or included with others in a combined motion, but the parts of a combined motion must be identified in the manner described in Section 2-619.1.
Unless the facts that constitute the basis for the objection are apparent from papers already on file in the case, the motion must be supported by an affidavit setting forth those facts.” The affidavits must assert the personal knowledge of the affiant, and set forth the particular facts of the claim or defense. Ill. S. Ct. R. 191. Certified copies of any documents upon which the affiant relies should be attached to the affidavit. Id. The affidavit should contain facts admissible into evidence and should affirmatively show that the affiant, if sworn as a witness, can testify to them. Id.
If not, does a Defendant waive their challenge to Personal Jurisdiction?
Further, 735 ILSC 5/2-301(a-5) states, “(i)f the objecting party files a responsive pleading or a motion (other than a motion for an extension of time to answer or otherwise appear) prior to the filing of a motion in compliance with subsection (a), that party waives all objections to the court’s jurisdiction over the party’s person”.
The court should rule on an objection to personal jurisdiction without deciding any issue of fact or considering the merits of the claim. Id. at § 5/2-301(b). If the court denies the motion to dismiss or to quash service, the moving party may still raise any objection or defense which it might otherwise have made. Id.
If the court denies the motion attacking personal jurisdiction, error in ruling against the objecting party on the objection is waived by the party’s taking part in further proceedings, unless the objection is on the ground that the party is not amenable to process issued by an Illinois court. 735 ILCS 5/2-301(c).
Does a Defendant waive their challenge to Personal Jurisdiction if Defendant engages in discovery, discloses experts, etc.?
Maybe. Depending on the activities a Defendant performs.
Filing a written appearance and paying an appearance fee do not waive an objection to personal jurisdiction, because neither of those acts involves a responsive pleading or a motion (which are the only kinds of acts that can cause a waiver under section 2–301 (a–5)). 88 Ill. B.J. at 33. KSAC Corp. v. Recycle Free, Inc., 364 Ill. App. 3d 593, 596, 846 N.E.2d 1021, 1024 (2006). According to the KSCA Court, citing Larochelle v. Allamian, 361 Ill. App. 3d 217, 836 N.E.2d 176 (2005), there is no longer a need for special appearance, “(s)ince section 2–301 no longer requires the filing of a special appearance (indeed, there is no longer any mention of a special appearance in the Code), we cannot conclude that the filing of a general appearance waives the issue of personal jurisdiction.” Id.
A pleading “consists of a party’s formal allegations of his claims or defenses,” and a motion is “an application to the court for a ruling or an order in a pending case.” In re Marriage of Wolff, 355 Ill.App.3d 403, 407, 290 Ill.Dec. 1011, 822 N.E.2d 596 (2005). Neither filing a jury demand nor responding to a discovery request fits the description of either a pleading or a motion. Accordingly, defendant’s actions in this case did not result in waiver of its objection to personal jurisdiction. KSAC Corp. v. Recycle Free, Inc., at 597.
The KSAC Court, in reviewing the case of Haubner v. Abercrombie & Kent Int’l, Inc., 351 Ill. App. 3d 112, 812 N.E.2d 704 (2004), which occurred before Section 2-301 was amended, stated “(t)he (Haubner) court noted that Supreme Court Rule 201(1) (210 Ill. 2d R. 201(1)) provides that engaging in discovery relative to the question of personal jurisdiction does not waive the right to raise an objection based on personal jurisdiction.” KSAC Corp. v. Recycle Free, Inc., at 596. However, because the defendant’s discovery request went beyond the question of personal jurisdiction, the court held that it amounted to a general appearance (waiver of personal jurisdiction). Id.
When a Defendant files a motion pursuant to Section 2-301 of the Code of Civil Procedure to object to the court’s jurisdiction for insufficient process or service of process, a party may obtain discovery only on the issue of the court’s jurisdiction over the Defendant, unless the parties agree otherwise or the court orders discovery on issues other than personal jurisdiction for good cause. Ill. S. Ct. R. 201(l). The Defendant may participate in a hearing regarding discovery or may conduct discovery pursuant to an agreement of the parties or court order without waiving its objection to the court’s jurisdiction. Id.
Is there a time limit to call up a Motion to Dismiss Based on Lack of Personal Jurisdiction?
No, but the better practice is to avoid accidently waiving a personal jurisdiction defense, so the sooner, the better.
Illinois Supreme Court Rule 184 appears to be the only provision dealing with the timing for the hearing of a motion. That rule simply provides: “(n)o provision in these rules or in the Civil Practice Law prescribing a period for filing a motion requires that the motion be heard within that period. Either party may call up the motion for disposition before or after the expiration of the filing period.” Id.
A motion must be brought to the attention of the court, and the court must be asked to rule on it. Verlinden v. Turner, 351 Ill.App. 511, 115 N.E.2d 576 (1st Dist. 1953) (abst.). To be considered, motions must be made promptly and at the earliest possible time. Stein v. Automatic Electric Co., 152 Ill.App. 392 (1st Dist. 1910). A motion on which no order is ever entered or that is never called to the attention of the court presumably is waived or abandoned. Brandes v. Illinois Protestant Children’s Home, Inc., 33 Ill.App.2d 319, 179 N.E.2d 425 (1st Dist. 1962) (abst.); City National Bank of Hoopeston, Illinois v. Langley, 161 Ill.App.3d 266, 514 N.E.2d 508, 112 Ill.Dec. 845 (4th Dist. 1987); Herricane Graphics, Inc. v. Blinderman Construction Co., 354 Ill.App.3d 151, 820 N.E.2d 619, 289 Ill.Dec. 843 (2d Dist. 2004).
A Sample Timeline of a Motion to Dismiss Based on Lack of Personal Jurisdiction in Illinois
In the recent Madison County, Illinois case of Billy Cirkles, Individually and as Personal Representative of Mary Lou Cirkles v. Asbestos Corp. LTD., et al (13-L-940), filed on June 4, 2013, defendant Whittaker, Clark & Daniels, Inc. filed a Special and Limited Entry of Appearance, Motion for Extension of Time to File Responsive Pleading, and a Notice of Hearing for its Motion for Extension of time on June 28, 2014.
On September 13, 2013, Whittaker, Clark & Daniels, Inc. filed a Motion to Dismiss for Lack of Personal Jurisdiction and noticed the Motion for Hearing on October 4, 2013. Plaintiff filed personal jurisdiction discovery against Whittaker, Clark & Daniels, Inc., and the Hearing for the Motion to Dismiss was continued and took place on February 11, 2014. In the interim, Whittaker, Clark & Daniels, Inc. only answered Plaintiff’s discovery regarding personal jurisdiction and filed a Response to Plaintiff’s Opposition to their Motion to Dismiss.
Judge Stephen Stobbs issued an Order, dated February 13, 2014, granting Whittaker, Clark & Daniels, Inc.’s Motion to Dismiss Based on Lack of Personal Jurisdiction, finding that Plaintiff failed to establish Whittaker, Clark & Daniels, Inc. had any contacts with Illinois such that it can be regarded as “at home” and doing business in Illinois. He further stated, discovery revealed Whittaker, Clark & Daniels, Inc., a New Jersey corporation, with its principal place of business in Connecticut, had no facilities, assets, employees, or registered agents in Illinois.
Recent Personal Jurisdiction Rulings in Illinois
There have been recent rulings on Defendants’ Motions to Dismiss Based on Lack of Personal Jurisdiction in the U.S. District Court, Southern District of Illinois, which are briefly summarized below.
In Cebulske v Johnson & Johnson, 2015 U.S. Dist. Lexis 38537, Personal Care Products Council (PCPC) brought their motion to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). The Court stated the plaintiff must show that PCPC “purposefully directed activities at the forum state or purposefully availed himself of the privilege of conducting business in the state” N.Grain Mktg., LLC v. Greving, 743 F.3d 487, 492 (7th Cir. 2014) in order to establish minimum contacts to ensure that defendant is put on notice that PCPC may be required “to submit to the burdens of litigation in the forum.”Burger King Corp. v. Rudzewicz, 471 US. At 474-476.
Judge Herndon determined plaintiff failed to assert that PCPC sold any products to the public, let alone Illinois residents, and failed to assert that PCPC intended for its activities to affect Illinois residents. Despite plaintiff’s presentation of a prima facie showing of a conspiracy involving the named defendants, no allegations were made that PCPC, as a nonresident defendant, was targeting Illinois residents, or that the organization had any ties with the state of Illinois to satisfy the “minimum contacts” due process requirement. Ultimately, plaintiff’s reliance on the conspiracy theory of personal jurisdiction is misplaced, as courts in Illinois are moving away from the theory as a basis for establishing personal jurisdiction.
Because PCPC has insufficient contacts with Illinois to establish “minimum contacts” for Due Process Clause purposes, this Court has no specific personal jurisdiction over the moving defendant. Additionally, plaintiff did not allege general personal jurisdiction, which requires a defendant to have “continuous and systematic” connections with the forum state so as to render the defendant at home in the forum for all intents and purposes. Therefore, because PCPC lacks the minimum contacts with Illinois necessary to justify the exercise of personal jurisdiction under the Due Process Clause of the Fourteenth Amendment, PCPC must be dismissed for lack of personal jurisdiction.
In Denton v. Air & Liquid Systems Corp., 2015 U.S. Dist. LEXIS 21986, Judge Yandle found plaintiff had failed to make out a prima facie case of personal jurisdiction. In this case, Defendant Valero was neither incorporated nor maintained its principal place of business in Illinois. Plaintiff did not contest that fact. Further, Plaintiff had not provided facts suggesting that Valero’s affiliation with Illinois was “so continuous and systematic as to render” Valero at home in Illinois. Valero undoubtedly has a presence in Illinois. However, the Supreme Court has made it clear that the mere presence of a defendant in the forum does not subject it to all-purpose jurisdiction in that forum. See Daimler AG, 134 S. Ct. at 752, 762 Accordingly, Plaintiff has failed to make out a prima facie case of personal jurisdiction. (Of note: five other defendants received separate opinions the same day with similar outcomes.)
 As of January 2015, Judge Robert Dierker was no longer assigned to one of St. Louis City circuit court’s two motion divisions.
Disclaimer and Message Required by the Missouri Bar
Parties entering into commercial contracts in Missouri and Illinois have available to them a number of risk limiting and shifting devices. However, in order to be enforceable, they must be drafted with care. Courts are often reluctant to allow an unconscionable result occur in the enforcement of an agreement, but generally allow parties to freely contract; even to enter into a “bad bargain,” if they are sophisticated consumers. This article reviews a few of these devices, on a high level, and shows how certain language is either enforced or interpreted by the courts.
In Alack v. Vic Tanny International of Missouri, Inc., 923 S.W.2d 330, 334 (Mo. banc 1996), Missouri’s leading case on exculpatory clauses, the Supreme Court of Missouri held:
“The best policy is to follow our previous decisions and those of other states that require clear, unambiguous, unmistakable, and conspicuous language in order to release a party from his or her own future negligence. The exculpatory language must effectively notify a party that he or she is releasing the other party from claims arising from the other party’s own negligence. Our traditional notions of justice are so fault-based that most people might not expect such a relationship to be altered, regardless of the length of an exculpatory clause, unless done so explicitly. General language will not suffice.”
“As general rule, exculpatory contracts are enforceable unless it would be against settled public policy of state to do so, or there is something in social relationship of parties militating against upholding agreement.”Harris v. Walker, 119 Ill. 2d 542 (Ill. 1988).
“An exculpatory clause, to be valid and enforceable, should contain clear, express, and unequivocal language referencing the types of activities, circumstances, or situations that it encompasses and for which the plaintiff agrees to relieve the defendant from a duty of care; thereby, party will be put on notice of range of dangers for which he assumes risk of injury, enabling him to minimize the risks by exercising a greater degree of caution.” Garrison v. Combined Fitness Center, 201 Ill. App. 3d 581 (Ill. App. 1st Dist. 1990).
Landlord-Tenant (Exculpatory Clause)
In Milligan v. Chesterfield Village GP, LLC, 239 S.W. 3d 613 (Mo. Ct. App. 2007), the lessee set forth claims of negligence as to city fire codes and ordinances, apartment rules and policies, and smoke alarm inadequacies, after being injured trying to escape a fire in her apartment building. The lessor, Chesterfield Village Apartments, asserted a defense of release based upon the following waiver of liability provision in the rental lease the plaintiff signed:
“Lessee hereby agrees that Lessor shall not be liable to Lessee, his family, guests, invitees, servants, or others for injury to or death of any person or pet, nor for loss or damage to property (including property of Lessee) occurring on or about the Leased Premises from any cause whatsoever, even if the cause or damages or injuries are alleged to be the fault or caused by the negligence or carelessness of the Lessor.”
The court held that the lessee had effectively released the lessor from liability because the clause clearly, unambiguously, unmistakably, and conspicuously applied even if the cause of damages or injuries were alleged to have been the fault or caused by the negligence of the lessor.
The overall lease contract must also clearly and unambiguously define who the “lessor” and “lessee” are. In this case, it is notable that the language of the provision only successfully released the “lessor”, which the court defined as Chesterfield Village Apartments. The property management company, McCormack Management Services, was not found to be a “lessor” because of ambiguous language in the contract. Because the court interpreted the definition of “lessor” to only include Chesterfield Village Apartments, McCormack Management could not use the waiver of liability clause as a defense. See also Easley v. Gray Wolf Investments, LLC, 340 S.W. 3d 613 (Mo. Ct. App. 2011).
Construction Equipment Lease (Indemnity Clause)
In Economy Forms Corporation v. J.S. Alberici Construction, Co., Inc., 53 S.W. 3d 552 (Mo. Ct. App. 2001), the court held the indemnification paragraph in the equipment lease was inconspicuous and it failed to expressly provide that lessee shall indemnify manufacturer/lessor of equipment for manufacturer/lessor’s own negligence. Therefore, the lessee was not required to indemnify lessor for lessor’s own negligence. InEconomy Forms, an employee of Alberici was injured while disassembling forms leased from Economy Forms Corporation (EFCO). The employee brought a negligence action against EFCO, and EFCO filed suit seeking indemnity from Alberici. EFCO (lessor) had an equipment lease agreement with J.S. Alberici (lessee) for forms that are used to pour concrete at construction sites. The lease included an indemnification paragraph which featured the following language:
“Lessee [Alberici] shall be entirely responsible for and shall pay and exonerate Lessor [EFCO] from liability for damages arising from injury to any persons or property as the result of the use or possession of the Leased Equipment by Lessee, its agents, employees, sub-contractors or any others after its delivery by Lessor and until its return to Lessor’s possession. Lessee shall also indemnify, defend and save harmless the Lessor from any such claims, founded or unfounded and whether based upon alleged negligence or otherwise.”
The court held that the indemnification paragraph failed to expressly provide that the lessee shall indemnify the lessor from the lessor’s own negligence and that the language was general and broad. The court also looked at whether the indemnification paragraph was conspicuous. The court reasoned that the indemnity paragraph was inconspicuous because it was “not highlighted or set forth differently than the other paragraphs and the title and language of the paragraph were in small print.”
NOTE: When drafting and inserting an indemnity paragraph within a lease contract, one might consider highlighting or setting apart the paragraph with larger font so that it will likely meet the ‘conspicuous’ test. (See §400.1-201 below) (Language doesn’t have to be ‘conspicuous’ if parties are sophisticated commercial entities. See Utility below)
“It is generally held that an indemnity contract will not be construed as indemnifying one against his own negligence, unless such a construction is required by clear and explicit language of the contract or such intention is expressed in unequivocal terms. Buenz v. Frontline Transp. Co., 227 Ill. 2d 302 (Ill. 2008).
Contract between Commercial Entities (Limited Liability Clause)
In Purcell Tire & Rubber Co., Inc. v. Exec. Beechcraft, Inc., 59 S.W. 3d 505 (Mo. bane 2001), the court addressed a limitation of liability clause in a pre-purchase survey contract for a used plane. In Purcell,Purcell contracted with Beechcraft for a pre-purchase inspection survey. Both parties were sophisticated commercial entities that negotiated at arm’s length for the contract. The contract, prepared by Beechcraft, limited Beechcraft’s liability to the performance of a maintenance survey prior to purchase. The contract included the following provision:
“It is expressly agreed that the liability, if any, of Executive Beechcraft, Inc. under this agreement shall be limited to the cost of services performed hereunder. All parties to this agreement expressly agree to indemnify and hold harmless Executive Beechcraft, Inc. from any damages or expenses claimed by any party to this agreement beyond the cost of the services performed hereunder.”
When an oil leak was later discovered that required the engine to be replaced, Purcell sued Beechcraft for negligence in failing to detect the leak. Purcell contended that the liability limitation was ambiguous; specifically the use of “any damages” and “any party”. The court reasoned that the clear, unambiguous, unmistakable, and conspicuous language requirement of Alack did not apply the same way in the context of sophisticated commercial entities. The court enforced the provision and held that the limited liability clause of the contract was unambiguous as to the parties because the parties were sophisticated commercial entities who were experienced in this type of sales transaction. Village of Big Lake v. BNSF R. Co., 433 S.W. 3d 460 (Mo. Ct. App. 2014).
Purchase Contract between Commercial Entities (Indemnity Clause)
In Utility Service and Maintenance, Inc. v. Noranda Aluminum, Inc., 163 S.W. 3d 910 (Mo. bane 2005), the Supreme Court of Missouri held that an indemnification provision between two commercial entities was enforceable. In Utility, Noranda, an aluminum company that specializes in painting high voltage electrical equipment, issued a purchase order to Utility that included the following indemnity clause:
“Seller [Utility] shall indemnify and save Purchaser [Noranda] free and harmless from and against any and all claims, damages, liabilities or obligations of whatsoever kind, including, but not limited to, damage or destruction of property and injury or death of persons resulting from or connected with Seller’s performance hereunder or any default by Seller or breach of its obligations hereunder.”
After the contract was executed, a Utility employee was injured while working at Noranda’s plant under the Utility-Noranda contract. He sued Noranda, alleging that it was negligent and caused his injuries. Noranda argued that under the provision, Utility was required to indemnify it for the damages sustained by the employee. Utility argued that the language of the provision was ambiguous. The court reasoned that the word “any” in the indemnity clause was unambiguous because both parties were sophisticated commercial entities. (See Purcell) It also reasoned that the ‘conspicuous’ requirement, set forth in Alack, was not required (because both parties were sophisticated commercial entities). The Court held that TIG, Utility’s insurance company, had a duty to indemnify Noranda for damages sustained by the employee.
NOTE: The court upheld the enforceability of these provisions among commercial entities, but to be safe one should use the Alack standard of expressly limiting or eliminating liability when drafting purchase/supplier contracts. (See language of Milligan v. Chesterfield Village above)
Purchase Contract (Disclaimer of Warranties by Seller)
Missouri Law expressly allows a seller to disclaim the warranty of merchantability and the warranty of fitness for a particular purpose. Mo.Rev.Stat. §400.2-316. “In order to exclude the implied warranty of merchantability successfully, the contract of sale must state specifically and conspicuously that the warranty of merchantability is being disclaimed.”Harber v. A/tee Industries, 812 F.Supp. 954, 956 (W.D. Mo. 1993) (applying Missouri Law). Missouri Statute §400.2-316 also provides that a seller may disclaim any warranty of fitness for a particular purpose by stating “there are no warranties which extend beyond the description on the face hereof.” In Haber, plaintiff sued seller of a utility truck after he was injured while operating it. Seller argued that he had properly disclaimed all warranties in the purchase contract. The contract contained the following language:
“Buyer purchases the goods sold hereunder AS IS and with all faults and buyer recognizes that there are no warranties of seller which extend beyond the description of the goods sold on the face hereof. Seller hereby disclaims any warranties, expressed or implied, of merchantability of the goods sold hereunder or of fitness for the particular purpose for which such goods are to be used by the buyer.”
The court granted summary judgment in favor of seller as to the plaintiff’s claims of breach of warranty of merchantability and warranty of fitness for a particular propose. The court held that the seller properly disclaimed the warranties in the contract and the language was not buried or inconspicuous.
NOTE: Missouri Statute §400.2-316 provides that language of disclaiming warranties must be “in writing and conspicuous.” According to §400.1-201, “A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous. Language in the body of a form is ‘conspicuous’ if it is in larger or other contrasting type or color. Whether a term or clause is ‘conspicuous’ or not is a decision for the court.
Purchase Contract (Disclaimer of Warranties by Manufacturer)
In Karr-Bick Kitchens & Bath, Inc., v. Gemini Coatings, Inc., 932 S.W.2d 877 (Mo. Ct. App. 1996), plaintiff bought paint varnish and applied it to a customer’s kitchen cabinets. After a short period of time, the varnish started peeling and cracking. Plaintiff sued Gemini Coatings, Inc., the manufacturer of the varnish, for breach of warranty of merchantability and fitness for a particular purpose. The labels on the varnish the plaintiff purchased contained the following language:
“Limitation of Liability: You must be delighted with this product or we will replace the material or refund the purchase price. WE MAKE NO OTHER WARRANTY OR GUARANTEE OF ANY KIND, EXPRESS OF IMPLIED, INCLUDING MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE. LIABILITY, IF ANY, IS LIMITED TO REPLACEMENT OF THE PRODUCT THE PRODUCT OR REFUND OF THE PURCHASE PRICE. LABOR OR COST OF LABOR AND OTHER CONSEQUENTIAL DAMAGES ARE HEREBY EXCLUDED.”
The court held that the disclaimer on the label affixed to the varnish containers by the manufacturer was sufficiently conspicuous to disclaim implied warranties of merchantability and fitness for a particular purpose. See also Am. Auto. Ins. Co. v. Omega Flex, Inc., 4:11CV00305 AGF, 2013 WL 2628658 (E.D. Mo. June 11, 2013) (Holding that when a manufacturer sells goods to a dealer who resells the goods to the ultimate purchaser, the latter cannot sue the manufacturer if the manufacturer has made a legally effective disclaimer of warranties).
Sales to Protect Interests in Product Exposure Cases
Vendor’s Endorsement (Agreement by Manufacturer)
In Standard Artificial Limb, Inc., v. Allianz Insurance Co., 895 S.W. 2d 205 (Mo. Ct. App. 1995), a vendor of an artificial leg (Standard) and its insurer brought action against an insurer of a component parts manufacturer to recover costs of defending and settling a tort action by injured plaintiff (malfunction of artificial limb) against vendor, manufacturer, and manufacturer’s distributor. Allianz Insurance, the manufacturer’s insurance company, claimed that the allegations against Standard (by the injured the party) were not subject to coverage under the language of the Vendor’s Endorsement because they fell under the policy exclusions. The policy stated:
“I. The insurance with respect to the vendor does not apply to:
(b) bodily injury or property damage arising out of any act of the vendor that changes the condition of the products, any failure to maintain the product in merchantable condition any failure to make such inspections, adjustments, tests or servicing as the vendor has agreed to make or normally undertakes to make in the usual course of business, in connection with the distribution or sale of products.”
The trial court had previously found that Standard and the injured party did not use a particular adhesive or any other bonding agent on the set-screws which secured the foot assembly of the artificial limb. The Court of Appeals held that Allianz, the manufacturer’s insurer, did not have a duty to indemnify Standard under the Vendor’s Endorsement because they were excluded from coverage under paragraph 1(b)(iii). The failure of Standard and the injured party to use adhesive on the set-screws of the artificial limb constituted a failure to make “such inspections, adjustments, tests, or service.” Therefore, the court held that Standard was responsible for the plaintiff’s injuries, not the manufacturer or its insurance company.
Professional Employer Organizations (PEO) Leased Employees
Leased Employees (Borrowed Servant Doctrine/Operation of Law)
Courts in Missouri have held that the borrowed servant doctrine can block a general employer’s (lessor of employees) vicarious liability for its employees’ negligence. The doctrine provides “in the leasing of equipment and operators to another, the mere fact that the general employer continues to pay the operator’s wages, the gas, oil, and other expenses, and is responsible for maintenance, does not prevent the operator from being an employee of the lessee.” Wren v. Vaca, 922 S.W.2d 408, 410 (Mo. Ct. App. 1996). The elements of the borrowed servant doctrine are: consent on the part of the employee to work for the special employer (lessee); (2) actual entry by the employee upon the work of and for the special master pursuant to an express or implied contract so to do; and (3) power of the special employer to control the details of the work to be performed and to determine how the work shall be done and whether it shall stop or continue.
In Wren, American Driver Leasing (ADL) leased Vaca to Mo-Kan Express pursuant to a driving contract. While driving for Mo-Kan, Vaca fell asleep and crashed, injuring Wren, who was asleep in the tractor that Vaca was driving. Wren sued Vaca and ADL for damages. The trial court granted summary judgment for ADL on the grounds that it did not exert enough control over Vaca to be held vicariously liable for his negligent actions. The Court of Appeals held that “in order for the general employer (ADL) to escape liability, it must surrender full control of the employee in the performance of the particular work.” The court held ADL had no right to assert control over when, where or how Vaca drove, and therefore ADL could not be held vicariously liable for Vaca’s actions. The Court of Appeals affirmed summary judgment in favor of ADL.
Leased Employees (Indemnification Clause)
In Hitchcock v. New Prime, Inc., 202 S.W. 3d 697 (Mo. Ct. App. 2006), Hitchcock leased a freightliner truck from New Prime, Inc. (NPI) As part of this transaction, two agreements were executed by Hitchcock and NPI; an Independent Contractor Operating Agreement (IOCA) and a Personnel Service Agreement (PSA). The PSA obligated NPI (lessor), upon request, to “lease” an NPI employee to Hitchcock (lessee). Rama Hitchcock, Hitchcock’s wife and employee of NPI, was “leased” to him at his request to operate the freightliner. The IOCA contained a hold harmless and indemnification provision which stated:
“You agree to hold New Prime harmless and to indemnify New Prime against all claims, losses, damages and expenses, including attorneys’ fees (i) arising out of Your acts or omissions or those of Your agents and employees (including drivers leased from New Prime …)”
The PSA contained the following provision:
“Lessee agrees not to hold NPI responsible for any damage or injuries suffered by lessee or to lessee’s equipment as a result of any action by driver and hereby releases NPI from any such claim.”
After receiving injuries in a motor vehicle accident while Rama was driving, Hitchcock filed an action against New Prime, Inc. The trial court entered summary judgment against Hitchcock for failure to state a claim because of the indemnification provisions of the agreement that he had signed. The Court of Appealsreversed the lower courts summary judgment holding that the indemnification provisions of the IOCA and PSA were not effective to release NPI from liability because the words “negligence,” “fault” or their equivalents were not used as required by Alack.
Liquidated Damages Clauses
Another contractual provision which seeks to limit losses or damages is a liquidated damages clause, which fixes the amount of damages in the event of a breach. Courts in Missouri will enforce a liquidated damages provision “when such a clause represents a reasonable forecast of harm caused by the breach and the harm is the type that is difficult to accurately estimate.” Kuczynski v. Intensive Maintenance Care, Inc., 48 S.W. 3d 55 (Mo. Ct. App. 2001). “A plaintiff must show at least some actual harm or damage is caused by a breach, however, before a liquidated damages clause can be triggered.” Mihlfeld & Associates, Inc. v. Bishop& Bishop, L.L.C., 295 S.W. 3d 163 (Mo. Ct. App. 2009).
In Kuczynski, a floor cleaning subcontractor (Kuczynski) brought action against a cleaning services contractor (Intensive Maintenance Care) for service fees allegedly owed pursuant to contract for cleaning services, and the contractor counterclaimed for liquidated damages, alleging breach of contract. The contract between the two parties contained a liquidated damages clause that provided:
In the event of a breach, Contractor (Intensive Maintenance Care) would be entitled to “20% of one-year’s gross payments for services paid by the customer under the contract.”
The trial court awarded damages to Kuczynski for cleaning service fees and also awarded damages to Intensive Maintenance Care on the counterclaim for Kuczynski’s failure to give proper notice. The Court of Appeals held that the liquidated damages clause was valid and enforceable, but remanded the case back to the trial court to recalculate the amount of damages pursuant to the provision.
Despite its difficulty in application, the evidentiary spoliation doctrine—not to be confused with the independent tort of spoliation—is a fairly common sense doctrine at heart. Boiled down to its most basic terms the spoliation doctrine prevents parties from destroying relevant evidence and using its absence to support their position. The spoliation doctrine prevents parties from benefitting from their intentional destruction of evidence by allowing the other parties to make an adverse inference to the jury that the destroyed evidence would have been favorable to their position. (more…)
In the recent case of In re Plavix Related Cases, 2014 WL 3928240 (2014), the Court narrowed the scope of personal jurisdiction in Illinois for out-of-state residents attempting to file a claim in Illinois courts. Specifically, In re Plavix Related Cases deals with the situation of several non-Illinois residents suing non-Illinois corporations in Illinois courts. (more…)
In the case of Lillian M. Lewellen v. Chad Franklin and Chad Franklin Auto Sales North LLC, No. SC92871, (Mo. banc Sept. 9, 2014), the Supreme Court of Missouri recently struck down Missouri’s statutory cap on punitive damages (Mo. Rev. Stat. § 510.265) for all common law causes of action that existed before Missouri’s Constitution was adopted. In short, the Court held the cap on punitive damages was unconstitutional as applied to all causes of action existing at common law before 1820. The Court previously held the statutory cap applied to causes of action created after 1820 (i.e. claims created by statute). See Lewellen, at *8, fn 9.
In Lewellen, the plaintiff sued Mr. Franklin and National in the Circuit Court of Clay County, Missouri, under theories of fraudulent misrepresentation and for fraudulent business practices under the Missouri Merchandising Practice Act (MMPA), section 407.010, et seq. RSMo. According to the Court’s opinion, the plaintiff visited the Defendants’ car dealership after learning about an advertised vehicle purchase program. The plaintiff alleged that during the vehicle purchasing process, the terms of the purchase program were not fully disclosed to her, that she was reassured by the dealership’s employees that the as-advertised program applied. Ultimately, after purchasing the vehicle, the terms were not honored.
During the course of discovery, the Court noted Mr. Franklin repeatedly failed to appear for depositions personally or as a representative of National and, as a result, the trial court sustained the plaintiff’s motion for sanctions. By the trial court’s order, the defendants’ pleadings and affirmative defenses were struck and, at trial, the Defendants were limited to defending only the claimed damages. The trial was bifurcated. During phase one, the jury determined the amount of compensatory damages and whether Mr. Franklin and National were liable for punitive damages. In the second phase, the jury determined the amount of punitive damages for which they were liable.
The plaintiff took judgment against Mr. Franklin and National and the jury awarded $25,000.00 in compensatory damages as to both defendants, $82,810.00 in attorneys’ fees under the MMPA claim, and punitive damages of $1 million for each claim. The defendants filed a post-trial motion to reduce the punitive damages awards, which the trial court granted, thereby reducing the punitive damages awards to $500,000.00 for Mr. Franklin and $539,050.00 for National. The trial court also reduced the compensatory damages award to a single award of $25,000.00. Appeals followed and the Supreme Court of Missouri took the issues up, having exclusive jurisdiction over the constitutionality arguments. The punitive damages reduction as to the MMPA claim, a statutory claim, was not appealed.
The Supreme Court of Missouri held Section 510.265 RsMo. violates an individual’s right to due process and a jury trial for all claims existing at common law before 1820, which was when Missouri’s Constitution was adopted. The Court relied upon its previous ruling in Watts v. Lester E. Cox Medical Centers, 373 S.W.3d 633, 638 (Mo. banc 2012), which struck down Missouri’s cap on noneconomic damages in medical malpractice cases. In a footnote to the Courts Lewellen opinion, it noted the Missouri General Assembly is free to cap punitive damages claims for statutory claims (i.e. the MMPA) and cited its prior ruling in Estate of Overbey v. Chad Franklin Nat’l Auto Sales N., LLC, 361 S.W.3d 3654, 375-81 (Mo. banc 2012) for that proposition.
Pitzer Snodgrass recently obtained a dismissal of a case involving statutory co-employee claims, with the Court finding there was no duty owed. Plaintiff’s cause of action arose from an incident that occurred in 2010, while he was working at a trucking company’s facility in St. Charles County, Missouri. At the time of this incident, plaintiff was an employee of the trucking company. Defendant was also an employee of the same company at the time of the alleged incident.
Plaintiff alleged in his Amended Petition that he was injured when he opened the door on a truck previously loaded by his co-employee, and plastic skids loaded by defendant came down and struck him. Plaintiff alleged that defendant was instructed not to double stack the plastic skids, yet defendant disregarded this instruction. Plaintiff alleged that defendant’s affirmative acts of not following instructions were outside the scope of his responsibility to provide a safe work place and caused or increased the risk of injury to plaintiff beyond the hazards normally associated with plaintiff’s employment. Plaintiff alleged that defendant was negligent and careless in that he:
Defendant asked the Court to review whether or not plaintiff’s claim was barred by Mo. Rev. Stat. 287.120 (2009), Missouri’s Workers’ Compensation Law (“the Act”).
Standard of Review Presented
“When a workers’ compensation exclusivity defense is raised, the summary judgment standard, i.e., whether a genuine issue of material fact exists, is not the appropriate standard of review.” Collier v. Moore, 21 S.W.3d 858, 860 (Mo. App. E.D. 2000). “Rather, the motion to dismiss should be granted where it appears that the trial court lacks subject matter jurisdiction because of workers’ compensation exclusivity.” Id. “Although the party raising the defense has the burden to prove lack of jurisdiction, the quantum of proof required is not high.” Id. If there is a question of whether or not the Act precludes the cause of action, it should be resolved in favor of the Labor and Industrial Relations Commission. See State ex rel. Larkin v. Oxenhandler, 159 S.W.3d 417, 421 (Mo. App. W.D. 2005); Howell v. Lone Star Industries, Inc., 44 S.W.3d 874, 877 (Mo. App. E.D. 2001); Kesterson v. Wallut, 116 S.W.3d 590, 595 (Mo. App. W.D. 2003).
Argument: Plaintiff’s Cause of Action was Barred by the Act
There is no dispute plaintiff was a statutory employee of the trucking company, and therefore a co-employee of defendant, who was also employed there. The sole question raised in this Motion is whether or not plaintiff has stated a valid cause of action against defendant, as a co-employee.
Missouri’s workers’ compensation statute holds employers liable, irrespective of negligence, to furnish compensation for personal injury of an employee “resulting from an accident arising out of and in the course of the employee’s employment.” Mo. Rev. Stat. § 287.120 (2008).In exchange, the employer is “released from all other liability . . . whether to the employee or any other person.” Id. This statute provides the sole means of recovery against an employer for an employee’s injury resulting from the employer’s failure to provide a safe workplace. State ex rel. Feldman v. Lasky, 879 S.W.2d 783, 785 (Mo. App. E.D. 1994).
In general, a co-employee shares the same immunity from common-law suit as the employer. Lasky, 879 S.W.2d at 785. The reason is that co-employees cannot be held personally liable for their negligence in carrying out their employer’s non-delegable duty to provide a safe workplace. Quinn v. Clayco Construction Co., Inc., 111 S.W.3d 428, 432 (Mo. App. E.D. 2003); State ex rel. Taylor v. Wallace, 73 S.W.3d 620, 621-22 (Mo. banc 2002). The exception to this rule is when the injured worker can demonstrate “circumstances showing a personal duty of care owed by the defendant to the injured worker.” Quinn, 111 S.W.3d at 432. The co-employee owed the injured worker a personal duty of care only if the co-employee “engages in an affirmative act, outside the scope of an employer’s non-delegable duties, directed at the injured worker . . . .” Quinn, 111 S.W.3d at 432 (emphasis added).
Recently, the Missouri Court of Appeals – Eastern District further discussed the issue of co-employee liability in Carman v. Wieland, Cause No. ED98872, 2013 WL 3667931 (Mo. App. E.D.). In Carman, both plaintiff and defendant were employed by the City of Richmond Heights as firefighters. Plaintiff alleged that she was injured when the co-employee defendant backed a fire truck into the station and struck plaintiff causing serious injury. The plaintiff in Carman filed suit against her co-employee and the Missouri Court of Appeals – Eastern District granted summary judgment in favor of the co-employee defendant.
In its ruling, the Court in Carman stated that:
Under the common law, a co-employee’s personal duties to fellow employees do not encompass a legal duty to perform the employer’s non-delegable duties. It is an affirmative act directed at a particular employee that places the co-employee’s conduct outside the scope of the employer’s non-delegable duties. Gunnett, 70 S.W.3d at 641 (emphasis added). At common law, a co-employee who has violated an independentduty to an injured employee can be held liable. Id. at 213 (emphasis in original). Co-employees, however, do not independently owe a duty to their fellow employees to perform the employer’s nondelegable duties because those necessarily derive from the master-servant relationship and are not independent of it. Id. at 214. Consequently, because a co-employee does not owe fellow employees the duty to perform the employer’s non-delegable duties independent of the master-servant relationship, such duties are not personal duties of the co-employee and cannot support an actionable claim of negligence. Id. at 215. In sum, under the common law, a co-employee’s personal duties to fellow employees do not encompass a legal duty to perform the employer’s non-delegable duties. Id. at 217. It is an affirmative act directed at a particular employee that places the co-employee’s conduct outside the scope of the employer’s non-delegable duties. Gunnett, 70 S.W.3d at 641.
The duty to maintain a safe working environment is a non-delegable duty belonging to the employer. Hansen, 375 S.W.3d at 209. Therefore, we hold that a co-employee owes to a fellow employee no common-law duty to exercise ordinary care and safety requiring the co-employee to refrain from operating a vehicle in a negligent manner when driving in the course of his work. As a matter of law, that responsibility is subsumed within an employer’s nondelegable duty to provide a safe working environment. The duty here to operate the fire truck in a safe manner was owed to the plaintiff by the employer. Because the plaintiff failed to allege any duty independent of the employer’s non-delegable duty to provide a safe working environment, the trial court should have granted summary judgment for the defendant on this basis.
Carman v. Wieland, Cause No. ED98872
In this case, like Carmen, the plaintiff had not alleged that the co-defendant employee did an affirmative act directed particularly at the plaintiff as required under Missouri law. Further, the allegations pled by plaintiff did not show that defendant owed a personal duty to plaintiff independent of the employer’s non-delegable duties. Such a finding requires an affirmative act personally directed at plaintiff, which did not occur and was not alleged. Rather, the allegations amounted to nothing more than allegations that a safe workplace was not provided, which is a non-delegable duty of the employer. Accordingly, defendant’s Motion was granted, as the trial court lacked subject matter jurisdiction as the cause of action is barred by the provisions of 287.010 et. seq.
Beginning on January 1, 2014, the Missouri Workers’ Compensation Act applies to mesothelioma and other toxic exposure. On July 11, 2013, Missouri Governor Jay Nixon signed Senate Bill 1, which amended the Missouri Workers’ Compensation Act, modifying the Act’s language regarding the Second Injury Fund and occupational diseases. For the purposes of this article, we will focus on the changes to the Act made to occupational diseases under Senate Bill 1.
The amended language of the Act affirmatively states that occupational diseases are covered under workers’ compensation laws. The amended Act specifically defines occupational diseases due to toxic exposure. The Missouri Revised Statutes Section 287.067.11 defines “occupational diseases due to toxic exposure”. The Act limits these diseases to mesothelioma, asbestosis, beryllosis, coal worker’s pneumoconiosis, bronchiolitis obliterans, silicosis, silocotuberculosis, manganism, acute myelogenous leukemia and myelodysplastic syndrome. RSMo. 287.200.4 creates an expanded benefit when an employee becomes permanently or totally disabled or dies as a result of one of the aforementioned diseases. For occupational diseases due to toxic exposure other than mesothelioma, the benefit is equal to 200% of the State’s average weekly wage for 100 weeks to be paid by the employer. For cases involving mesothelioma an additional amount of 300% of the State’s average weekly wage for 212 weeks shall be paid by the employer.
Once these toxic exposure awards are exhausted, permanent total disability shall be awarded to the injured worker. Upon death, the enhanced benefits must be paid to the employee’s dependents or become an asset of the employee’s estate if there are no dependents.
Additionally, the amended Act creates the Missouri Mesothelioma Risk Management Fund, which pays the benefits awarded in claims brought against the Fund’s contributing members. The Fund requires annual contributions to be made by its members. Employers who do not obtain insurance for mesothelioma liability shall not fall under the exclusive remedy provisions of the Act, therefore, a claim may be brought against these employers in civil court.
The Missouri Workers’ Compensation Act is the exclusive remedy for plaintiffs who are considered employees under the Act. If the employer insures for mesothelioma liability, the employee must bring their claim of occupational disease due to toxic exposure in the workers’ compensation system. Plaintiffs will still have the remedy to bring a civil case against manufacturers, distributors, and suppliers who allegedly contributed to their asbestos related disease. The effect for Missouri employers of the exclusive remedy of the Missouri Workers Compensation Act, is that the awards are capped, however, there will most likely only be one employer-defendant (or their insurer) to bear the brunt of this award.
It remains to be seen if in the plaintiff’s civil case against manufacturer, distributor, and supplier defendants, whether evidence of asbestos exposure adduced in the underlying workers’ compensation case will be conclusive evidence of asbestos exposure by the civil defendants. Additionally, it is unclear whether the defendants in a civil asbestos case could claim the workers’ compensation award as an offset against damages awarded to a plaintiff.
Though has yet to be any case law to interpret the amended Act, a recent Motion for Summary Judgment based on the exclusivity of the Missouri Workers Compensation Act was argued in St. Louis City in front of Judge Robert Dierker. In Rohletter v. Aerco International, et al, Defendant Southern Industrial argued that since the plaintiff was an employee of Southern Industrials’ predecessor, the Missouri Workers Compensation exclusive remedy should apply and the plaintiff would be required to pursue a claim in the workers compensation system. Southern Industrial argued that the newly amended Act would apply.
Judge Dierker indicated the Missouri Supreme Court had decided that the right to a trial cannot be trumped by the workers’ compensation system. Even when defense counsel pointed out the Missouri Workers’ Compensation Act provided for exclusive jurisdiction, Judge Dierker felt that the plaintiff had the right to bring their case in civil court. Judge Dierker interpreted the new amendment to apply to cases that “arise” after the January 1, 2014 effective date of the amendment. He indicated the key is when the claim “arose”, which would mean that the death or diagnoses would have to occur after January 1, 2014.
The full effect of these amendments to Missouri Workers’ Compensation Act has yet to be seen, but there is no doubt these amendments will change the landscape of asbestos litigation in Missouri.
Virtually everyone has an iPhone, iPad, Blackberry, or some other electronic device. Most, if not all, of these devices have the capability to snap photographs, upload messages, create a blog, and post a multitude of items on the World Wide Web. Whether it is a statement on Twitter, a picture posted to Facebook or a simple text message or email to a friend or client, we live in a world where anything and everything can be part of the public domain in a matter of seconds. With the advent of social networking sites and one’s ability to research people instantly on the internet, caution is needed when understanding the ramifications of these devices in the legal arena. While mobile devices provide great benefits to society, they can cause great harm in and out of the courtroom. A recent gaffe by “Today” weatherman Al Roker, for instance, provides a good example how simple and easy it is to utilize the internet, potentially improperly.
It’s not every day that a famous TV personality is called for jury duty, but when one is, it tends to make headlines, especially when the pictures are of fellow jurors waiting to be called to the assembly room. Mr. Roker reported for jury duty and posted several pictures of his fellow jurors and juror lounge, all in the name of promoting civic duty. The photographs were posted on Twitter along with several tweets. The instructions provided to Mr. Roker and other jurors were that no photographs of the courtroom were allowed, but no particular reference to the jury waiting area was made. While no court staffer allowed or even encouraged Mr. Roker to take photographs, no one explicitly prohibited this action either. Needless to say, the chief jury clerk asked Mr. Roker to cease and desist. However innocent Mr. Roker’s mistake, it highlights how the potential exists for the social media to impact the courtroom.
For the general public, cell phones have become an essential item to have on one’s person, similar to car keys, purses and wallets. In many cases, people have stopped wearing watches in lieu of pulling out their mobile device and obtaining everything from time, to weather, to headline news topics for the day. For many, smartphones are vital for conducting business, and this includes attorneys. No longer is it always necessary to bring your files to court to work on while you wait for your matter to be heard. Now you can work on cases, send emails and communicate with opposing counsel at the touch of a finger. With this ever-increasing and fast-paced electronic environment, it’s hard not to reach for your phone any time there is a lull in court. Thus, signage and statements by court personnel do little to curb cell phone use. The general public would rather take the risk of being embarrassed by an errant cellular ring or buzz than be burdened with turning off the phone.
In response, numerous states have tailored jury instructions to social media issues, including the ban of cell phones, while making the use of cell phones, computers or other mobile devices in the courtroom improper. Use of these items can range from exclusion of a juror to the imposition of fines, and even mistrials. Section 2.01, subsection 8, of the Missouri Approved Jury Instructions addresses social media issues as follows:
[Jurors may] not conduct any independent research or obtain any information of any type by reference to any person, textbooks, dictionaries, magazines, the use of the Internet, or any other means about any issues in this case or any witnesses, parties, lawyers, medical or scientific terminology, or evidence that is in any way involved in this trial. You are not permitted to communicate, use a cell phone, record, photograph, video, e-mail, blog, tweet, text, or post anything about this trial or your thoughts or opinions about any issue in this case to any other person or to the Internet, “Facebook,” “MySpace,” “Twitter,” or any other personal or public web site during the course of this trial or at any time before the formal acceptance of your verdict by me at the end of the case. If any of you break these rules, it may result in a miscarriage of justice, and a new trial may be required.
As stated in the Committee Comments based on this 2010 Revision:
The trial court has considerable discretion regarding the use of cell phones or other electronic devices in the courthouse and during trial. Judicial discretion may be exercised by oral admonition, the addition of a paragraph regarding such devices at the end of MAI 2.01, or using a separate instruction. Other appropriate admonitions or directions to the jury may be formulated and given by the trial judge as determined in light of particular facts or circumstances of a given case.
How do you curtail electronic devices, cell phones, laptops and other technology from interfering in the judicial process? It would seem that simple signage prohibiting their use or instructions from the bailiff mandating that electronic devices be on silent isn’t enough. The question, of course, is how do we balance people’s need for such devices with the need to ensure justice is served in the courtroom? To that end, should cell phones and similar devices be banned outright, or should only judges and court personnel, perhaps even attorneys, be allowed to possess them?
Examining other jurisdictions, the Circuit Court of Cook County, which comprises the largest portion of Chicago, Illinois, for example, has enacted a recent court order banning all devices “capable of connecting to the internet” in the court room. Under this policy, all cell phones are banned, and only lawyers, judges and journalists are exempt, while the general public is subject to contempt of court should a violation occur. While this isn’t an absolute ban on cell phone use in courtrooms, it does severely restrict the use by criminal defendants, witnesses, parties to a lawsuit and most of the casual observers in the courtroom. This would seem to be an effective policy to prevent cell phone abuse by jurors and others, but it has the potential to be seen as an unfair restriction on the non-professional citizens in the courtroom. However, according to Cook County’s Chief Judge, “The order is being enacted to provide safety within the courts, prevent pictures being taken with electronic devices and help to protect innocent individuals and those testifying in court.”
This new order was set to take effect on January 14, 2013 but has been delayed until April 15, 2013 to provide additional time for court administrators and sheriffs to provide notice and to create storage areas for those entering the courthouse with banned devices. The complaints, changes in policy and actions taken by Cook County following the enactment of this order may prove useful for other courts considering a similar ban.
Cook County provides a particular list of exempted parties which offsets the difficulties of a blanket ban on cell phone use in courthouses. As St. Louis Circuit Court Judge Steven Ohmer noted recently, a building-wide ban “would be a nightmare for the sheriff, and people would be unhappy as well.” Most members of the Bar conduct business on their cell phones while awaiting their matter to be heard by a judge, and applying a ban to attorneys would likely be met with much opposition. St. Louis City Circuit Court Judge David Mason is of the opinion that “courthouse rules and culture” should not yield to social networking and technology abuse. Given the need to balance courtroom etiquette and proper jury deliberation with the change in our now technologically-addicted culture, rules will undoubtedly have to be enacted to cope with ongoing electronic issues in the courtroom.
In Missouri, multiple circuits have enacted local rules on the use of cell phones and similar electronic devices. In the Thirty-First Circuit, cell phones are permitted in the courthouse, but any cell phone usage within the courtrooms themselves, without the permission of the court or judge, will result in seizure of the phone by the presiding bailiff and return of it at the discretion of the judge. In the Second Circuit, cell phones must be placed in silent mode and cannot be used for any reason in the courtroom, and any violation of this rule subjects the offender to having his or her cell phone confiscated until he or she exits the courtroom. The Thirty-Ninth Circuit bans all cameras and recording devices, including cell phones with cameras, except for purposes outlined under Supreme Court Rule No. 16, which permits use for media purposes. The Fifteenth Circuit mandates that no cell phones are allowed to ring in court. The Thirteenth Circuit restricts all electronic devices, including cell phones and other potential recording devices, from being turned on when entering the courtroom, and any jury member or potential jury selectee is prohibited from even bringing an electronic device into the courthouse.
Considering the power juries have, both in the criminal and civil contexts, courts may want to ensure that during deliberation, jurors do not have access to their cell phones. In the recent and relevant case of State v. Herndon, 224 S.W.3d 97 (Mo. Ct. App. W.D. 2007), the court found that telephone calls made during jury deliberations did not unduly influence the jury’s verdict. However, when it is revealed that prior to rendering a verdict, particular jurors have utilized their cell phones for personal or business use, the trial court conducts an inquiry into whether or not these improper communications affected deliberations. While a mistrial is not required when the court determines that the communications did not sway the jurors or prejudice the party, all cell phones should be confiscated prior to the jury’s deliberation.
In Herndon, several jurors used their cell phones to make personal calls and, most importantly, one of them received a phone call from an alternate on the jury who went so far as to say, “please look at all the evidence” because “this is somebody’s life we’re talking about.” While the court ultimately found that these communications did not improperly influence jury deliberations, it is important to note that prejudice is presumed when a non-juror has unauthorized communication with jurors. Id. at 101. In criminal matters, when there is prima facie evidence of improper communication between jurors and third persons, the state has the burden to show that the communication did not influence the jurors. Id. Accordingly, it may be prudent to dispose of a juror’s technology before deliberation begins to prevent formal inquiries into possible juror misconduct and avoid possible mistrials.
In addition to the potential abuses of cell phones, the advent and spread of social networking sites has opened the door for more serious jury or juror misconduct. Research conducted by Thomson Reuters and Westlaw found that from 1999–2009, approximately 90 verdicts were challenged based on allegations of internet-related juror misconduct, and nearly half of these instances occurred between 2009 and 2010.Over the last decade, blogging sites, Twitter accounts and Facebooking have exploded to reach almost every corner of the globe, including the jury box. For many years, jurors have been instructed to steer clear of outside sources and communicating with third parties concerning trial matters, but with the influence of the internet ever-growing, more safeguards may be required.
Social networking sites are increasing in popularity, and examples of improper jury conduct are increasing as well. Thomson Reuters monitored Twitter over a three-week period in November and December of 2010, and the results are not surprising: “people describing themselves as prospective or sitting jurors popped up at the astounding rate of one nearly every three minutes.” Most were related to complaints associated with jury duty, but some included clearly improper statements such as, “Looking forward to a not guilty verdict regardless of evidence,” and “I’ve already made up my mind. He’s guilty. LOL.”
In addition to jurors, courts must now deal with the expansive media and numerous news outlets and bloggers who may be present during trial. Like most jurisdictions, Missouri has enacted broadcasting rules related to audio and video coverage of trials, jurors, and relevant parties. Under Supreme Court Rule 16, “Broadcasting, televising, recording and photographing” is permitted so long as court approval is expressly granted and no improper monitoring of juveniles, jurors or attorneys and their clients is conducted. However, this rule does not cover Twitter news and other related sites. With the ease of a few clicks, proceedings may be summarized in part or in whole on the internet, to the possible detriment of the proceedings. Live tweeting during trial is becoming increasingly common, despite orders from judges prohibiting such in court.
Under the Federal Rules of Criminal Procedure, broadcasting during judicial proceedings is banned in the courtroom. Prior to the 2002 Amendment to Rule 53, the Rule specifically prohibited “radio broadcasting.” The 2002 Amendment eliminated “radio” from broadcasting, leaving a prohibition against “broadcasting” in general, although no commentary on what applies to broadcasting was provided. This change appears purposeful given the explosion of the internet and related websites, and although the Advisory Committee’s notes indicate that this change was not substantive, the notes do reveal that the Committee believed this change was needed to accommodate for the technology now available.
Citing this rule and interpreting it to modern technology, United States District Court Judge Clay Land ordered all tweeting banned from the courtroom during a criminal proceeding. In his Order, Judge Land found that “the term ‘broadcasting’ in Rule 53 includes sending electronic messages from a courtroom that contemporaneously describe the trial proceedings and are instantaneously available for public viewing.” Further, Judge Land reasonably concluded that “’twittering’ would result in casting to the general public and thus making widely known the trial proceedings,” and that “it appears clear that the drafters of Rule 53 intended to extend the Rule’s reach beyond the transmission of trial proceedings via television and radio.”
In contrast to Judge Land’s Order, United States District Judge Thomas Marten of the District of Kansas permitted a journalist to twitter a live feed during a criminal trial of various alleged gang members. Citing Federal Rule of Criminal Procedure 57(b), Judge Marten held that federal judges are afforded broad discretion in regulating courtroom affairs, and that allowing Twitter updates during proceedings would help the public understanding of the judicial system and grant the courts greater legitimacy. Whether or not Judge Marten’s views are widely accepted, his assertion is pertinent to the question of whether Twitter and similar technological advances have a place in today’s courts.
In the past and as technology has advanced, accommodations have been made in the courtroom. From allowing evidence presentations on ELMO projection devices, to permitting live television feeds of court proceedings, such as the infamous OJ Simpson trial, courts have adjusted to modern trends and the technologies many have become accustomed to. Integrations of technology and law have provided jurors with user-friendly visual aids and tools to decipher evidence, and have given attorneys greater tools with which to deliver their messages. With the advances in technology and an ever-growing online world where anything may be published in a matter of moments, courts will continue to face challenges related to technological innovation. In addition to tackling the inconveniences of off‑putting cellular telephone rings, inappropriate behavior and jury misconduct, new technology and new devices, courts will need to monitor and ensure the sanctity of the judicial system and the harm advancements in technology create. Perhaps there is a balance between court procedure and technology, one that may lead to the use of technology in a responsible way and prevent courtroom abuses.
 See Cook County Circuit Court General Administrative Order No. 2013-01.
 Patrick, Robert. “Cellphones Increasingly a Problem for Courts Across St. Louis Region.” St. Louis Post Dispatch December 27, 2012.
 Thirty-First Judicial Circuit Court Rule 9.6.
 Second Judicial Circuit Court Rule 9.2.
 Thirty-Ninth Judicial Circuit Court Rule 11.
 Fifteenth Judicial Circuit Court Rule 9.4.
 Thirteenth Judicial Circuit Court Rule 9.6.
 “Jurors should surrender their cell phones or other related devices to the court bailiff and the court should instruct them on this prior to retiring to their deliberation room.” See commentary by St. Louis Circuit Court Judge Robert Dierker in 28 Mo. Prac., Mo. Criminal Practice Handbook § 30:2 (2013 ed.).
 Herndon, 224 S.W.3d at 102.
 Missouri Court Operating Rule No. 16.
 Federal Rules of Criminal Procedure, Rule 53 (2002 Amendment).
 Wording located in Rule 53 as enacted in 1944, without the deletion of “radio.”
 See Fed.R.Crim.P. 53 advisory committee’s notes: “Given modern technology capabilities, the Committee believed that a more generalized reference to ‘broadcasting’ is appropriate.”
 November 2, 2009 Order in the matter of United States of America vs. John Mark Shelnutt, Case No. 4:09-CR14.
 Dean, Jacob (2011) “TO TWEET OR NOT TO TWEET: TWITTER, “BROADCASTING,” AND FEDERAL RULE OF CRIMINAL PROCEDURE 53,” University of Cincinnati Law Review: Vol. 79: Iss. 2, Article 11.; See also “As Witnesses Sing, Journo’s Twitter Tweets,” Associated Press: CBSNEWS, Mar. 6, 2009,http://www.cbsnews.com/stories/2009/03/06/tech/main4847895.shtml.
The Monarch Fire Protection District (“The District”), and two members of its Board of Directors (“Directors”), recently prevailed on a Motion for Summary Judgment prepared and filed by Pitzer Snodgrass. District Court Judge Rodney W. Sippel, issued an Memorandum Order on August 6, 2013, dismissing the pending Complaint, filed by three former chief officers of the District.
The Plaintiffs were terminated in the wake a sexual harassment lawsuit which resulted in a verdict against the District. The Plaintiffs were the top ranking officers of the District at the time that the alleged acts of discrimination and harassment took place. The Board of Directors of the Monarch Fire Protection District voted to terminate the three Plaintiffs, and a fourth officer who was not a party to the instant lawsuit, when the jury verdict against the District in the sexual harassment suit was affirmed in the Missouri Court of Appeals. The Plaintiffs were not members of the local union bargaining unit and did not have a written employment contract with the District. All three Plaintiffs testified that they did not request a pre or post termination hearing from the District or the Directors.
The Plaintiffs filed their lawsuit, naming as defendants the District and the two Directors, individually, who voted to terminate their employment. The Plaintiffs did not name the Board of Directors, as a whole, or a third board member who did not vote in favor of terminating the Plaintiffs. The Plaintiffs’ Complaint alleged they were terminated in violation of their procedural and substantive due process rights. Namely, the Plaintiffs alleged they had a constitutionally protected property interest in their continued employment at the District.
Finding of the Trial Judge:
In Judge Sippel’s thorough opinion, he held the District was protected by the doctrine of sovereign immunity, which shields political subdivisions from liability absent a statutory waiver. Further, Judge Sippel found the named Directors were entitled to official immunity, because the act of terminating an employee is discretionary in nature, and is shielded by qualified immunity, because the Directors had no objectively reasonable basis to know the termination of Plaintiffs would violate a constitutional right. Moreover, Judge Sippel found that under Missouri law, Plaintiffs failed to establish the existence of a constitutionally protected property interest in their continued employment. Rather, as Defendants successfully argued, the Plaintiffs were “at will” employees and could be fired for any reason, not illegal.
Valid service of process is a prerequisite to personal jurisdiction, and failure to comply with legal requirements of process deprives the court of authority to adjudicate. When a court enters a judgment when no valid personal jurisdiction has been obtained over the defendant, the judgment is void.
Service of process must conform to the manner and form established by law to invoke the court’s jurisdiction. Rule 54.20 sets forth the proof that a plaintiff must show the court to establish that the proper method of service has been followed. In the absence of proof of service, which is mandated by Rule 54.20, the court lacks the proof necessary to determine if the court has jurisdiction of the defendant. In the absence of such proof, the court does not have jurisdiction over the defendant. Id.
SERVICE OF PROCESS ON A FOREIGN INSURANCE COMPANY AUTHORIZED TO CONDUCT BUSINESS IN THE STATE OF MISSOURI: WHAT CONSTITUTES PROPER PROOF OF SERVICE THROUGH THE MISSOURI DEPARTMENT OF INSURANCE?
To establish the proof necessary to supply the circuit court with personal jurisdiction over a foreign insurance company authorized to conduct business in the State of Missouri, the requirements of Rule 54.15and Rule 54.20(c) must be met. Maddox v. State Auto Mut. Ins. Co., 356 S.W.3d 231 (Mo. App. E.D. 2011). In Maddox, the Court affirmed the circuit court’s setting aside a previously entered default judgment against a foreign insurance company. In Maddox, the plaintiff argued that the circuit court erred in setting aside the default judgment because the requirements of § 375.906 R.S.Mo. (2000) had been met. The Court of Appeals in Maddox disagreed, finding that the requirements of Rules 54.15 and 54.20(c) must also be met. Id. at 233-234. The Court explained as follows:
Rule 54.15 supplements section 375.906 by additionally requiring the director to request a signed return receipt from the addressee when forwarding the pleadings. “Rule 54.20 establishes the proof which must be presented to the court to establish that, in fact the defendant has been notified of the pendency of the action. In the absence of proof of service mandated by the Rule the court lacks the proof established by the Supreme Court as necessary to determine that the court has jurisdiction of the person of the defendant.” [Citation omitted]. “In the absence of such proof, the court does not have jurisdiction over the defendant, unless he has consented to such jurisdiction or has waived the objection to personal jurisdiction.”
Furthermore, it is well settled that if there is a conflict between a statute and a Supreme Court Rule, the Rule supersedes the statute.
Supreme Court Rule 54.15 provides in pertinent part as follows:
Service on Secretary of State, Secretary of Public Service Commission and Director of Insurance.
(a) Service of Process. Service of process on the secretary of state, secretary of the public service commission or director of insurance shall be made by serving a copy of the summons and petition, together with any remittance fixed by statute, on the respective official. The service of process shall be made as provided in Rule 54.13 or Rule 54.16.
(b) Notice to Defendant. The … director of the department of insurance shall forthwith mail to the defendant at the defendant’s last known address a copy of such service and a copy of the summons and petition. The mailing shall be by registered or certified mail requesting a return receipt signed by addressee only.
Rule 54.20 provides in pertinent part as follows:
Proof of Service
(c) Certificate of Secretary of State, Secretary of Public Service Commission and Director of Insurance – Mailing of Notice. The notice specified in Rule 54.15 shall be provided by the affidavit of the official mailing of such notice. The affidavit shall be endorsed upon or attached to the original papers to which it relates and it, together with the returned registered or certified mail receipt shall be forthwith filed in the court in which the action is pending.
Rule 54.20(c) specifically requires the Director of the Department of Insurance to provide an affidavit of the mailing of the pleadings together with the returned receipt in order to prove the notice requirement of Rule 54.15. Furthermore, Rule 54.20(c) requires that the affidavit include the returned registered or certified mail receipt. When an affidavit is mailed by first class mail, not by registered or certified mail, as required by Rule 54.15, proper proof of service is not had. In addition, if the affidavit filed fails to include a mail receipt that indicates a foreign insurance company in fact received the documents as required by Rule 54.20 proper service is not had. As stated above, the Court in Maddox held that these requirements must be met in addition to the requirements set forth in § 375.906 in serving and in proving service on a foreign insurance company.
Similarly, in Grooms v. Grange Mut. Cas. Co. 32 S.W.3d 618 (Mo. App. E.D. 2000), the Eastern District affirmed the setting aside of a default judgment against an insurer because of insufficiency of service. The plaintiff in Grooms argued that service was sufficient under § 375.906. The insurer argued that service was insufficient because the petition and summons were not mailed to the insurer by certified or registered mail. In finding service insufficient, the Court of Appeals held that the Department of Insurance was required to mail the documents to the insurer by certified or registered mail with return receipt. The Court explained:
This Court has previously held that both Rule 54.15 and Section 375.261, RSMo 1994, require that the Director mail to the defendant a copy of the summons and petition by registered or certified mail with return receipt signed by the addressee. Schuh Catering, Inc. v. Commercial Union Ins. Co., 932 S.W.2d 907, 908 (Mo. App. E.D.1996). Rule 54.20 establishes the proof that must be presented to the court to establish that the defendant has in fact been notified of the pendency of the action. Id. “In the absence of proof of service mandated by the Rule the court lacks the proof established by the Supreme Court as necessary to determine that the court has jurisdiction of the person of the defendant.” Id., citing Industrial Personnel Corporation v. Corcoran, 643 S.W.2d 816 (Mo.App.1981).
A plaintiff may attempt to argue that he was not required to comply with Supreme Court Rules 54.15 and 54.20 because service was obtained pursuant to § 375.906. However, as discussed above that argument was rejected recently by the Court in Maddox. The Maddox Court held the requirements under Rules 54.15 and 54.20 are additional requirements that also apply when service is sought pursuant to § 375.906.
The fact that the requirements in Rule 54.15 and Rule 54.20 are additional to the requirements of § 375.906, is further demonstrated in Maddox. In Maddox, the plaintiff argued that the evidence presented on the issue of lack of compliance with § 375.906 was insufficient. In declining to address that issue, the Court noted as follows:
The issue [of compliance with § 375.906] is not determinative because regardless, the record is still devoid of proof that [the insurer] was in fact given notice as required by Rule 54.20(c). Therefore, we should decline to reach the merits of the claim. Second, for the reasons discussed above, the original default judgment was void when entered.
Valid service of process is a prerequisite to personal jurisdiction, and failure to comply with legal requirements of process deprives the court of authority to adjudicate. A plaintiff suing a foreign insurance corporation authorized to conduct business in Missouri must comply with the requirements set forth in Rules 54.15 and 54.20. When a court enters a judgment when no valid personal jurisdiction has been obtained over the defendant, the judgment is void. Do not assume the Missouri Department of Insurance has properly satisfied proof of service requirements; check the court file and the case minutes!
A setoff provision in a policy of automobile insurance seeks to reduce coverage by amounts recovered by the insured from other insurance. In the context of uninsured motorist (UM) and underinsured motorist (UIM) coverage, a setoff provision most often seeks to reduce any amount payable under such coverages by all sums paid by or on behalf of the legally responsible tortfeasor. Setoff language is commonly found in the “Limit of Liability” section of the particular coverage.
Uninsured Motorist Coverage
Section 279.203, RSMo. requires that the limit of UM coverage be not less than the liability limit for bodily injury or death set forth in Section 303.030 – i.e. $25,000 per person and $50,000 per occurrence. Thus, any provision in a policy of insurance that purports by a setoff to reduce UM coverage below the limit required by statute is invalid. Cano v. Travelers Insurance Company, 656 S.W.2d 266 (Mo. 1983).
Nonetheless, policies may provide for setoffs against the limits of UM coverage so long as enforcement of the setoff provision does not reduce the available UM coverage to an amount less than that required by statute. For example, a setoff provision stating that “[t]he limit of liability shall be reduced by all sums paid because of the ‘bodily injury’ by or on behalf of persons or organizations who may be legally responsible” will be enforced up to the amount mandated by statute. Hunt v. Everett, 181 S.W.3d 248 (Mo. Ct. App. 2006),quoting Rodriguez v. General Accident Insurance Company of America, 808 S.W.2d 379, 381 (Mo. banc 1991); American Standard Insurance Company of Wisconsin v. Bracht, 103 S.W.3d 281 (Mo. Ct. App. 2003).
However, where a setoff provision states that it is entitled to a setoff from “any amount payable” under the terms of the UM coverage, the provision has been held ambiguous as to its intended effect. For example, inHunt, the setoff provision provided that “[a]ny amount payable under the terms of this Coverage will be reduced by any amount paid or payable for the same damages to or for an insured by or for any person…who is or may be held legally liable for bodily injury to such insured.” Hunt, 181 S.W.3d at 250. The court held that the language “any amount payable” was ambiguous in that it was unclear whether the language referred to the insured’s total damages or to the maximum amount of UM coverage (i.e. the UM policy limits). Given the ambiguity, the court concluded that the settlement amount was to be deducted from the total damages awarded to the insured.
Further, in Missouri, an insurer may not reduce UM coverage to an amount less than the statutory minimum by the amount of workers’ compensation benefits received by the insured. Douthet v. State Farm Mutual Automobile Insurance Company, 546 S.W.2d 156 (Mo. 1977); Cano v. Travelers Insurance Company, 656 S.W.2d 266 (Mo. 1983) (where the same insurer was both workers’ compensation carrier and UM carrier). In contrast, Illinois courts have held that insurers are entitled to setoffs for workers’ compensation benefits paid to the insured. Ullman v. Wolverine Insurance Company, 269 N.E.2d 295 (Ill. 1970); Taylor v. Pekin Insurance Company, 899 N.E.2d 251 (Ill. 2008).
In addition, in Missouri, a provision that would reduce the amount of UM coverage below that required by statute by benefits received by the insured pursuant to the policy’s medical payments coverage is invalid. Webb v. State Farm Mutual Automobile Insurance Company, 479 S.W.2d 148 (Mo. Ct. App. 1972). In Illinois, setoffs for medical payments coverage are enforceable so long as the total proven or undisputed damages incurred by the insured are less than the combined total of UM and medical payments coverage. Melson v. Illinois National Insurance Company, 274 N.E.2d 664 (Ill. 1971). The principle underlying the enforceability of setoff provisions in Illinois is whether application of the setoff is necessary to prevent double recovery by the insured. Hoglund v. State Farm Mutual Automobile Insurance Company, 592 N.E.2d 1031 (Ill. 1992).
Underinsured Motorist Coverage
Since UIM coverage is not mandatory coverage in Missouri, the parties to an insurance contract are free to limit the terms of coverage available under an automobile policy. However, provisions limiting coverage – specifically, setoff provisions – must be free from ambiguity. Several recent decisions illustrate the differing view among appellate courts regarding the enforceable nature of setoff provisions in the context of UIM coverage.
In Lynch v. Shelter Mutual Insurance Company, 325 S.W.3d 531 (Mo. Ct. App. 2010), the insured sought to recover a total of $200,000 in UIM benefits under four separate policies of insurance under which she, as a passenger, was insured. Under the insuring agreement for UIM coverage, Shelter promised to pay “uncompensated damages subject to the limit of liability stated in this endorsement.” Following the insuring agreement, the policy contained a “Limit of Our Liability” provision, which stated that the limits of UIM liability listed in the declarations would be reduced by all amounts paid or payable to the insured by, or on behalf of, those legally obligated to pay any portion of the damages to the insured. Since the underlying tortfeasor paid $100,000 and the UIM limit was $50,000, Shelter would owe nothing under its policy should the provisions be enforced. The Court of Appeals for the Southern District of Missouri held that the Shelter policy consistently stated that its UIM limit was subject to the language contained in the “Limit of Our Liability” provision and, thus, Shelter was entitled to enforce its setoff language. Further, the court held that the “Other Insurance” clause did not render the “anti-stacking” provision ambiguous, such that the policy was enforced according to its terms.
In Shelter Mutual Insurance Company v. Straw, 334 S.W.3d 592 (Mo. Ct. App. 2011), the Court of Appeals for the Southern District of Missouri reaffirmed Lynch, holding that the setoff language in the “Limit of Our Liability” provision of the Shelter policy was unambiguous. The policy allowed Shelter to reduce its UIM limits “by the amount paid, or payable, to the insured for damages by, or for, any person who…is legally liable for the bodily injury to that insured….” Following the rationale expressed in Lynch, the court held that the setoff language was enforceable and, thus, Shelter was entitled to reduce from its $100,000 limit of liability that amount paid by the underlying tortfeasor (i.e., $100,000).
However, the Court of Appeals for the Western District of Missouri has recently issued two decisions that hold contrary to Lynch and Straw. Both lawsuits involved the interpretation of Shelter policies containing UIM setoff language substantially similar to that at issue in the preceding cases. In Long v. Shelter Insurance Companies, 351 S.W.3d 692 (Mo. Ct. App. 2011), the plaintiff received $50,000 from the tortfeasor in settlement of her wrongful death claim. She then filed suit seeking payment of UIM benefits from Shelter under seven insurance policies issued to her and her husband. Shelter argued that plaintiff was only entitled to UIM coverage under one of the automobiles and that the policy limit was subject to a setoff for the $50,000 paid on behalf of the tortfeasor.
In spite of an “Other Insurance in the Company” clause stating that “[o]ur total liability under all our policies will not exceed the highest limit of any one policy,” the court held that this provision was ambiguous when read in conjunction with the “Other Insurance” clause. The “Other Insurance” clause stated as follows:
If an insured suffers bodily injury for which benefits are payable under this coverage, it applies as excess insurance over all other underinsured motorist insurance available to that insured.
Applying the principle that “where an insurance policy promises the insured something at one point but then takes it away at another, there is an ambiguity”, the Long court held that plaintiff was entitled to stack the UIM limits of the seven policies. The court concluded that the “Other Insurance” clause could be reasonably interpreted by an ordinary person to mean that Shelter’s UIM coverage would provide excess coverage to all other UIM policies (including other Shelter policies issued to her), which conflicts with the policy’s “anti-stacking” provision.
Further, the court found an ambiguity in the “Limit of Our Liability” provision. The court noted that the UIM endorsement’s insuring agreement stated that Shelter would “pay the uncompensated damages, subject to the limit of our liability stated in this coverage.” The court concluded that the endorsement’s reference to “this coverage” meant the coverage amounts shown in the declarations. Thus, the subsequent setoff language took away coverage that was earlier promised to the insured. In Wasson v. Shelter Mutual Insurance Company, 358 S.W.3d 113 (Mo. Ct. App. 2011), the Court of Appeals for the Western District of Missouri reaffirmed the holding in Long relative to the setoff language, concluding that “Shelter may deduct the $100,000 from State Farm from the Wassons’ total damages, but not from the policy limits for UIM coverage.”
So, at this point, there appears to be conflicting case law between the Western District and Southern District relative to the effect of setoff language similar to that employed in the Shelter policies. The Supreme Court of Missouri has not weighed in on the enforceable nature of this precise language. Nonetheless, these decisions illustrate how conflicting results can be reached by the different courts when interpreting similar policy language. While the outcome may be difficult to predict, we can state with certainty that there will be continued litigation over the enforceable nature of setoff provisions in the context of UIM coverage.
The Illinois Supreme Court recently issued an opinion concerning the doctrine of interstate forum non conveniens, which allows a court to decline jurisdiction of a case, even though it may have proper jurisdiction over the subject matter and the parties, if another forum would better serve the convenience of the parties and promote justice. The case, Fennell v. Illinois Central Railroad Co., 2012 IL 113812 (Dec. 28, 2012) involved a forum non conveniens motion brought by the defendant where the plaintiff resided in Mississippi, the injury occurred in Mississippi or Louisiana, the defendant maintained offices in Mississippi and Tennessee, and the only connections to Illinois were the location of the attorneys’ offices, some documentary evidence, and the location of one of the plaintiff’s experts. The Circuit Court of St. Clair County, Illinois denied defendant’s Motion to Dismiss onforum non conveniens grounds, which was affirmed by the Fifth Circuit.
Defendant Illinois Central Railroad Co. appealed, and the Illinois Supreme Court ruled courts should examine all public and private factors in the forum non conveniens analysis, and should not simply give deference to where a plaintiff decided to file the case. In ordering dismissal in favor of a Mississippi forum, the court noted “far less deference” should be given to the plaintiff’s choice of an Illinois forum when the plaintiff does not reside, and the cause of action did not arise, in Illinois.
After originally filing an asbestos lawsuit in the Circuit Court of Jefferson County, Mississippi, seeking recovery for injuries sustained as the result of alleged exposure to asbestos while employed by the Illinois Central Railroad, plaintiff refiled the suit in the Circuit Court of St. Clair County, Illinois. Plaintiff lived in Mississippi and worked for the railroad in Mississippi.
The railroad moved to dismiss the suit based on interstate forum non conveniens, and argued Mississippi was the most convenient forum to try the case. The Circuit Court of St. Clair County denied defendant’s motion to dismiss, and held St. Clair County was a convenient forum, as: (1) substantial documentary evidence critical to plaintiff’s case was located a short distance from the St. Clair County courthouse; (2) in-court testimony of two important witnesses for plaintiff would be available if the case were tried in Illinois, but unavailable if the case were tried in Mississippi; (3) St. Clair County was closer than Mississippi for plaintiff’s expert witness from Chicago; (4) the citizens of St. Clair County had an interest in asbestos; and (5) the Circuit Court of St. Clair County no longer had congested trial dockets.
The Supreme Court held the trial court abused its discretion when it denied defendant’s motion to dismiss the Illinois action in favor of an action in Mississippi. The Court ruled private factors weighed heavily in favor of the convenience of a Mississippi forum over an Illinois forum because plaintiff resided in Mississippi; the alleged exposure occurred in Mississippi and Louisiana; the vast majority of the identified witnesses, including the treating physicians, were located in Mississippi and were not subject to Illinois subpoenas; and a jury view of the premises would occur outside of Illinois.
In its analysis of public interest factors, the Court held Illinois had no relevant or practical connection with the litigation, as the only Illinois connections were the offices of the parties’ counsel, accessible and transportable documents in the possession of defendant’s counsel; and a compensated expert witness for plaintiff. The Court found these connections did not provide “a significant factual connection with the instant case that justified imposition of the burdens of a litigation upon the citizens and the court system of St. Clair County and Illinois.” Further, the Court held that merely conducting business in St. Clair County does not affect the forum non conveniens issue.
In sum, the Court found the weight of the private and public interest factors greatly favored Mississippi. Although the Court acknowledged this analysis is always case specific, deference to plaintiff’s choice of an Illinois forum was significantly lessened in the current case because: (1) Illinois was plaintiff’s second choice of forum; and (2) plaintiff did not reside in Illinois and the action did not arise in Illinois, such that Mississippi was the proper forum.
One of the most monumental decisions in the medical malpractice world in Missouri was handed down by the Missouri Supreme Court in Deborah Watts v. Lester E. Cox Medical Centers, et al., 376 S.W.3d 633 (Mo. 2012), on July 31, 2012. As most in the medical malpractice community are aware, the case held the cap on non-economic damages of $350,000 for medical malpractice actions found in Mo. Rev. Stat. § 538.210 unconstitutional. This cap had been in place and upheld by Missouri Courts since August 28, 2005. Given that the Watts case only addressed the constitutionality of the cap on non-economic damages in a personal injury case, the Court’s decision left the medical malpractice legal community attempting to determine whether or not the decision affected wrongful death cases. Given the language found in the Watts opinion focusing only on common law actions, and given the rationale used in upholding the cap in wrongful death cases decided prior to Watts, it is the opinion of this author that the wrongful death non-economic damages cap remains intact.
Watts provided the perfect test case for the non-economic damages cap on medical malpractice actions from the plaintiff’s perspective. Deborah Watts filed on behalf of her infant son, Naython Watts, alleging he suffered disabling brain injuries as a result of negligence committed by Cox Medical Centers and its associated physicians. Deborah Watts received prenatal care from Cox Medical Centers and was seen on October 30, 2006, due to cramping and her detection of decreased fetal movement. The jury found that the treating physician failed to perform appropriate tests, failed to notify Watts of the significance of decreased fetal movement and failed to perform any further diagnostic monitoring. Two days later, Watts was admitted to the hospital with lack of fetal movement. Although a Caesarian section delivery commenced, Naython Watts was born with catastrophic brain injuries due to fetal hypoxia and acidosis.
At the conclusion of trial, the jury awarded damages of $1.45 million in non-economic damages and $3.371 million in future medical damages. The non-economic damages were reduced to $350,000 by the trial court pursuant to Mo. Rev. Stat. § 538.210, and plaintiff appealed, claiming the reduction and application of the cap was unconstitutional since it violated the right to trial by jury found in article I, § 22(a) of the Missouri Constitution and several other portions of the Missouri Constitution. The Court found the non-economic cap of § 538.210 unconstitutional for infringing on the jury’s constitutionally protected purpose of determining the amount of damages sustained by an injured party. Id. at 636. In doing so, the Court also overruled its own prior decision of Adams By and Through Adams v. Children’s Mercy Hosp., 832 S.W.2d 898 (Mo. Ban 1992), wherein the Court had upheld the cap.
In discussing the rationale for its ruling, the Court specifically referenced the long history of the inviolate right to trial by jury for actions arising under Missouri common law. Article I, § 22(a) of the Missouri Constitution provides for a trial by jury as “heretofore enjoyed.” Noting that the Constitution was enacted in 1820, the Court undertook an analysis of the history of Missouri common law remarking that Missouri’s common law is based on the common law of England and that English common law recognized medical negligence as one of the five types of “private wrongs.” Id. at 638. Civil actions for personal injury damages had long been considered personal wrongs tried by civil juries. Using the history of Missouri common law, the Court stated “if Missouri common law entitled a plaintiff to a jury trial on the issue of non-economic damages in a medical malpractice action in 1820, Watts has a state constitutional right to a jury trial on her claim for damages for medical malpractice.” Id. at 638.
Noticeably absent in the Court’s rationale for striking down the cap as unconstitutional, was the mention of statutory causes of action, such as wrongful death actions. Nonetheless, in my opinion, the Court will continue to uphold the cap on non-economic damages for wrongful death actions. The same Court had decided Sanders v. Ahmed, 364 S.W.3d 195 (Mo. 2012), in April of 2012, only a few months prior to its Watts decision. In Sanders, the Missouri Supreme Court unequivocally upheld the cap in a wrongful death medical malpractice action. The Court noted that it did not need to decide whether or not the Adams case upholding the cap under common law was correct, since this case involved a statutorily created cause of action. Specifically, the Court indicated “Missouri does not recognize a common-law claim for wrongful death.” Id. at 201. The Court concluded by upholding the cap on non-economic damages holding that the legislature has the power to define the remedy available if it created the cause of action. Id.
Although I have set forth my opinion that the cap will continue to apply to non-economic damages in medical malpractice wrongful death actions, it should be noted there is a distinction in the rationale found in the opinions of the Court which long upheld the caps and the Watts decision with respect to the view expressed by the Watts Court that the legislature does not have the ability to effect the inviolate right to trial by jury. After Watts, there is some call for a Constitutional Amendment reinstating the caps for non-economic damages in all medical malpractice actions. The Missouri legislature and governor appear poised to address the issue in the upcoming year, and I anticipate their compromise will reinstate some limitation on all medical malpractice actions in the future. In the meantime, medical providers and malpractice insurers in Missouri continue to adapt and adjust to the reality of no limitations on damages in personal injury medical malpractice cases with a continuation of cap limitations on wrongful death medical malpractice actions.
The stacking of policies refers to the practice of combining insurance coverage limits to account for more than one vehicle insured under a multi-car policy, or under separate policies of insurance. Stacking has been the subject of many appellate decisions in recent years, particularly in the context of underinsured motorist coverage. Although the great majority of policies contain language that seeks to preclude the stacking of coverage (appropriately termed “anti-stacking” provisions), such language is not uncommonly deemed ambiguous by courts and rendered unenforceable so to permit stacking of certain coverages.
Where a single policy of liability insurance is issued covering multiple vehicles, only one of which was involved in the accident causing injury, the single limit of liability applies. O’Rourke v. Esurance Insurance Company et al., 325 S.W.3d 395 (Mo. Ct. App. 2010); National Union Fire Insurance Company of Pittsburgh, Pa. v. Maune, 277 S.W.3d 754 (Mo. Ct. App. 2009); Mazzocchio v. Pohlman, 861 S.W.2d 208 (Mo. Ct. App. 1993).
However, the Supreme Court of Missouri has recently held that where there are two policies covering a single automobile, both an ownership policy and an operator’s policy, anti-stacking clauses contained in the policies are void as against public policy (Missouri’s Motor Vehicle Financial Responsibility Law requiring at least $25,000 per person and $50,000 per occurrence in liability coverage). Karscig v. McConville, et al., 303 S.W.3d 499 (Mo. banc 2010). Thus, the insurer was required to pay the $25,000 limit under each of the two liability policies. It should be noted that the court in O’Rourke, in discussing the distinction between a single policy insuring multiple vehicles and multiple policies insuring the same vehicle, held that the financial responsibility law “only requires $25,000 for each insured vehicle involved in an accident, not $25,000 multiplied by the number of vehicles insured under one policy….” O’Rourk v. Esurance Insurance Company, et al., 325 S.W.3d at 398.
Uninsured Motorist Coverage
Issues pertaining to the stacking of uninsured motorist (UM) coverage can generally be broken down into two categories. The first category relates to stacking of coverages on behalf of the named insured or a resident member of the named insured’s household. In this context, Missouri case law is well-settled that UM coverage can be stacked given the statutory mandate for UM coverage, Mo. Rev. Stat. § 379.203, and the strong public policy derived from the statute. Cameron Mutual Insurance Co. v. Madden, 533 S.W.2d 538 (Mo. 1976). “Anti-stacking” provisions with respect to the named insured are void regardless of whether UM coverages were provided by the same or different insurers. Galloway v. Farmers Insurance Company, Inc., 523 S.W.2d 339 (Mo. Ct. App. 1975). Further, public policy mandates that when an insured has two separate policies containing UM clauses, effect shall be given to both coverages without reduction or limitation by policy provisions, and that both coverages are available to those insured under the policy. Bergtholdt v. Farmers Insurance Company, Inc., 691 S.W.2d 357 (Mo. Ct. App. 1985).
The second category relates to an “occupancy” insured – that is, an occupant of the insured vehicle other than the named insured and household residents. Under this scenario, appellate courts have historically held that stacking is not required. Hines v. Government Employees Insurance Company, 656 S.W.2d 262 (Mo. banc 1983). In fact, current case law holds that Missouri’s Motor Vehicle Financial Responsibility Law and the UM statute do not require that an insurer provide any UM coverage to an occupant of an insured vehicle where the policy excludes such occupants by its terms (although this holding is currently being challenged in appellate courts). Hines; Byers v. Shelter Mutual Insurance Company, 271 S.W.3d 39 (Mo. Ct. App. 2008).
Public policy does not require stacking of UM coverages on fleet vehicle commercial policies where the individual’s eligibility for payment of UM coverage arose solely from his occupancy of a vehicle. Linderer v. Royal Globe Insurance Company, 597 S.W.2d 656 (Mo. Ct. App. 1980). Further, public policy does not require the “doubling” of UM policy limits where multiple UM vehicles contributed to cause an accident. Tresner v. State Farm Mutual Insurance Company, 957 S.W.2d 380 (Mo. Ct. App. 1997).
In contrast to Missouri law, Illinois courts have held that “[i]nsurance policy provisions intended to limit the aggregation of coverage – generally referred to as antistacking provisions – do not undermine the legislative purpose supporting the mandate of uninsured motorist protection.” Bruder v. Country Mutual Insurance Company, 620 N.E.2d 355, 358 (Ill. 1993). Further, “anti-stacking” provisions do not conflict with the “premium rule” – the rule holding that it is unfair to permit an insurer to collect premiums and thereafter apply a provision limiting or absolving liability. Id. Thus, in Illinois, a policy’s “anti-stacking” provision may be enforced to preclude stacking of UM coverages where the policy language is unambiguous. Id.
Underinsured Motorist Coverage
Unlike UM coverage, there is no statute in Missouri mandating underinsured motorist (UIM) coverage, so the existence of UIM coverage and the ability to stack is typically determined by the contract entered into between the insured and insurer. Rodriguez v. General Accident Insurance Company, 808 S.W.2d 379 (Mo. 1991).
However, in interpreting insurance policies, Missouri courts have held UIM “anti-stacking” provisions ambiguous, thereby entitling an insured to stack UIM coverage in certain contexts. In fact, a significant number of recent opinions analyzing the enforceable nature of “anti-stacking” provisions in UIM policies have identified ambiguities within the policy so as to deem the “anti-stacking” provision unenforceable. These ambiguities are not necessarily found in the “anti-stacking” language itself, but instead, in other policy provisions that courts find incongruous with the “anti-stacking” language.
For example, where “Other Insurance” clauses found in two separate automobile policies provide that UIM coverage will be excess over “any other similar insurance,” Missouri courts have held that the phrase could be interpreted as one policy providing UIM coverage excess to such coverage provided in another policy; thus, the coverages under the policies stack despite the presence of “anti-stacking” provisions in both. American Family Mutual Insurance Company v. Ragsdale, 213 S.W.3d 51 (Mo. Ct. App. 2007); Chamness v. American Family Mutual Insurance Company, 226 S.W.3d 199 (Mo. Ct. App. 2007); Ritchie v. Allied Property & Casualty Insurance Company, 307 S.W.3d 132 (Mo. 2009). However, in Stewart v. Liberty Mutual Fire Insurance Company, 349 S.W.3d 381 (Mo. Ct. App. 2011), the Court of Appeals for the Western District of Missouri distinguished the UIM coverage’s “Other Insurance” clause from those at issue in theRagsdale, Chamness, and Ritchie policies, noting that the clause stated that UIM coverage was excess over applicable primary coverage. Thus, the court reasoned, the “Other Insurance” clause could not reasonably be understood to allow the stacking of multiple UIM coverages since UIM coverage was not primary. Since there was no conflict between the “anti-stacking” provision and the “Other Insurance” clause, the policy was not ambiguous and the “anti-stacking” provision was enforced.
In addition, Missouri courts have held that if the policy of insurance intertwines UM and UIM coverages to the point where there is an ambiguity between the two, an insured is permitted to stack the UIM coverages. Bauer v. Farmers Insurance Company, 270 S.W.3d 491 (Mo. Ct. App. 2008); Niswonger v. Farm Bureau Town & Country Insurance Company of Missouri, 992 S.W.2d 308 (Mo. Ct. App. 1999) (where UM and UIM coverages were “lumped together” as one coverage on the declarations page and a single premium was charged for both, even though the coverages were defined and treated separately in the policy itself).
As in Missouri, Illinois courts will enforce “anti-stacking” provisions so long as they are clear and unambiguous. “[M]ost cases in which the court has found that an insurance policy allows stacking have done so on the basis that the language of the policy was ambiguous because the declarations sheet listed more than one vehicle with separate coverages and separate premiums.” Hanson v. Lumley Trucking, LLC, 932 N.E.2d 1179, 1182 (Ill. App. Ct. 2010); see e.g., Johnson v. Davis, 883 N.E.2d 521 (Ill. App. Ct. 2007) (where the court found that stacking was allowed under the policy because the limits of the UIM coverage were listed four separate times, once for each vehicle covered, and four separate premiums for the UIM coverage were also listed on the declarations sheet). However, merely listing the premiums for each covered vehicle separately, without more, does not create an ambiguity so to permit stacking. Hanson, 932 N.E.2d at 1182.
On June 16, 1887, 150 years ago, Mr. Frank Primrose walked into the Philadelphia Western Union office with an encoded message for his agent dispatched to Ellis, Kansas to purchase wool. The message was sent, but no reply message was asked for, or paid for. Instead of sitting tight for further word, (because Primrose had just purchased all the wool he needed), his agent began to buy up all the wool he could, assuming those were his instructions. However, Western Union made a mistake in transcribing only one letter of the message, which made a huge difference in the content of the code they were using. All of this cost Mr. Primrose $20,000.00, a handsome sum in those times, and he sued Western Union for their mistake.
However, his case was not any more successful than his initial message attempt, because the Western Union “agreement” contained an “olde fashioned” limitation of liability provision, which dictated the damages that could be recovered for a mistake in an “unrepeated message” (one sent, but which was not repeated back to the sender to verify it was transcribed accurately), was the cost of sending the original message, to Mr. Primrose, $1.15. The Supreme Court of the land, in the case Primrose v. Western Union Tel. Co., 154 U.S. 1 (1894), held the limitation of liability clause enforceable because it was a “proper and lawful mode of securing a due proportion between the amount for which the carrier may be responsible and the freight he receives, and of protecting himself against extravagant and fanciful valuations.”
(The whole case can be found here.)
Limitation of Liability Clauses
Many industry form documents and custom construction contracts contain provisions shifting or limiting the respective parties’ risks. One of the main risk-limiting provisions seen primarily in the terms and conditions of professional service agreements is the “limitation of liability” clause (“LoL” clause). These clauses generally establish the maximum liability or exposure of the design professional if there is a claim. The purpose of these clauses is to recognize the proportional role of the professional service provider in the project and limit their liability according to the level of compensation received. If enforceable, the clause will serve to cap a party’s liability for damages to an amount certain.
Are they Enforceable? The Answer Depends Upon Your State’s Law
While these provisions are commonplace, not all U.S. jurisdictions find them enforceable. Though many states enforce them, still others hold them unenforceable unless properly worded, reviewing them under a strict scrutiny standard. Some states find them totally unenforceable for reasons ranging from violation of that state’s anti-indemnity statutes to public policy reasons.
Generally speaking, in order to contractually limit damages for a party’s future conduct, the contractual language at issue must be: 1) clear, 2) unambiguous, 3) unmistakable and 4) conspicuous, to be enforceable. While a contractual clause limiting the amount of damages that may be recovered for the acts of a party (limitation of liability clause) versus one that totally exonerates a party from its future conduct (exculpatory clause) are not exactly the same, some courts categorize both such clauses as “exculpatory clauses.”
An exculpatory clause is one that relieves a party from liability resulting from a negligent or wrongful act. Generally, exculpatory clauses in contracts are disfavored under the law of most states, and such contract provisions are strictly construed against the party claiming the benefit of the clause. Courts are reluctant to enforce contracts that relieve parties from the effects of their future acts, because, policy considerations and common sense tell you that, if exonerated, they will not use the same level of care they otherwise might. However, a limitation of liability clause simply places a fixed cap on the amount of damages that may be recovered against a contracting party in the event of a claim.
Generally, courts hold that such clauses are not per se against public policy, but several states are more protective, and many have enacted legislation, by way of their anti-indemnity statutes that hold such clauses void and unenforceable. In some situations, exculpatory clauses have been held to be invalid under particular statutory provisions and in other instances because the contract is one affected with a public interest. Statutory restrictions which preclude their use hold that statutory liability for negligence cannot be contracted away. Courts will analogize the clause to an indemnity provision for any unrecovered amounts over the liability cap, which results in one party indemnifying the other for their sole negligence. This generally runs afoul of an anti-indemnity statute, invalidating the clause.
Where the parties to a contract are sophisticated business entities dealing at arm’s length, the limitation is reasonable in relation to the design professional’s fee, and the damages are purely economic (versus a personal injury claim), most states will enforce a contract’s limitation of liability clause.
Enforceability of Limitation of Liability Clauses
There are several principles that emerge from those states that find limitation of liability clauses enforceable. As a rule, most states allowing them strictly construe them against the beneficiary of the clause. The clause must still meet the above four language requirements. However, a theme from these cases is that the courts are not in a position to re-write sophisticated parties’ business agreements, and will generally only enforce them as written. In other words, they must of themselves completely enumerate all of the instances where the liability of the design professional is to be limited.
Whether a claim arises out of “negligence” or “breach of contract,” the clause must address any circumstance for a potential claim, or the Courts will not enforce them. (If the clause only mentions negligence, then a breach of contract claim could be outside the protection of the clause, as an example). The Courts will not re-write the contract, and will strictly construe them against the party relying on them, limiting them to their exact language.
Some courts have held that, in the absence of evidence of separate negotiation or bargaining for the clause at issue, it will not be enforced. Some require evidence of separate consideration, or monetary recognition, for the limitation of liability clause. Other courts have held that, if the clause is not conspicuous, is set out along with several other numbered paragraphs, is in the same typeface and not highlighted in any way, it is not enforceable.
States that refuse to enforce the clauses do so for a number of reasons, including finding the clauses violative of the specific state’s anti-indemnity statute, or holding that they are unenforceable as against public policy. Due to the “professional” status of the designer, these states hold there exist “extra-contractual” duties that require invalidating these clauses. Some hold that claims of professional negligence operate outside of a contract, and so contract defenses simply are not available to limit liability in any way.
Risk-Management “Take Aways” for Drafting Effective Limitation of Liability Clauses
There are certain essential elements to any limitation of liability clause. Initially, it is important the clause be negotiated. This can be accomplished in several different ways. Use of pre-printed forms with blanks to fill in the appropriate liability caps (using either a standard figure, like $50,000.00, or the professional’s fee, whichever is higher, or some other limit which meaningfully takes into consideration the potential damages on the project), evidences the fact the clause was discussed. Highlighting the language in the agreement with different typeface, or bold print, or having a separate signature or initial block adjacent to the limitation of liability language will show it was conspicuous, negotiated and explicitly accepted.
All too many times, I have seen a well written LoL clause invalidated or ignored by a judge because a design professional failed to obtain a signed copy of its proposal letter or executed work authorization form which incorporated the terms and conditions containing the clause. Please remember: although you may have a “handshake agreement,” you do not have an enforceable “contract” with defenses you can use in response to a claim until the document is signed, and you should not begin work without a signed agreement.
Cases enforcing these clauses focus on the simple, clear and unambiguous nature of the language at issue. Therefore, the language must specifically state that it is a release of future “negligence,” “breach of contract” or other theory of recovery in order for the clause to be an effective waiver of these claims. General language releasing future claims will not suffice.
There must also be evidence of relatively equal bargaining power during contract negotiation, not a “take it or leave it” situation. When dealing with members of the general public, then, great care should be used with the clause to show it was understood and accepted, versus dealing with a sophisticated business entity at arm’s length.
Even following these suggestions does not guarantee a court will enforce the clause as written. These clauses will be subjected to heavy scrutiny. While these are simply suggestions, you should of course obtain the assistance of counsel in your respective jurisdiction to make sure that your limitation of liability language complies with the exact letter of the law in the subject state.
Most importantly, the design professional must be open to communicating with clients about the appropriate proportion of the potential responsibilities, liabilities and risk/reward that the project offers to all participants, so these limitations make much more sense in the context of who really benefits and who suffers, and who is best situated to deal with the risks that will undoubtedly arise as the project progresses.
If you have any questions about the enforceablility of your clause, please feel free to contact me!