Caseflicks

California Supreme Court • 2010

McCann v. Foster Wheeler LLC

48 Cal. 4th 68 | 225 P.3d 516

Full access

Unlock the video and quiz

The written brief is free to read below. Subscribe to watch the video explainer and take the quiz.

Create an account Log in

Takeaway

In short, this case holds that California’s interest in compensating a current resident for a latent asbestos injury does not override another state’s stronger interest in applying its liability-limiting statute of repose to conduct, exposure, and a real-property improvement located in that other state.

Background

Terry McCann, then an Oklahoma resident, allegedly encountered asbestos while observing insulation work on a massive Foster Wheeler boiler at an Oklahoma oil refinery in 1957. Foster Wheeler, headquartered in New York, had specially designed and manufactured the boiler for the refinery; the boiler was assembled and installed in Oklahoma. McCann later lived in Minnesota and Illinois before moving to California in 1975. He was diagnosed with mesothelioma in California in 2005 and promptly sued Foster Wheeler and numerous other defendants there.

Foster Wheeler sought summary judgment, arguing that Oklahoma’s 10-year statute of repose barred the claim. That statute protects persons who design or construct improvements to real property after 10 years from substantial completion, even if an injury has not yet manifested. California’s asbestos limitations statute, by contrast, would make McCann’s action timely because he sued shortly after diagnosis. The trial court applied Oklahoma law, found Foster Wheeler protected by the Oklahoma statute, and dismissed it from the action.

The Court of Appeal reversed. It concluded that California law applied because California had a strong interest in compensating its longtime resident, while Oklahoma had little interest in protecting a company headquartered outside Oklahoma whose design work occurred outside the state. The California Supreme Court granted review, reversed the Court of Appeal, and remanded for that court to decide whether the boiler actually qualified as an improvement to real property under Oklahoma law.

Issues

Issue #1

Whether California’s borrowing statute, Code of Civil Procedure section 361, requires application of California’s limitations law whenever a plaintiff was a California citizen when the cause of action accrued.

Holding

No. Section 361 does not displace California’s ordinary governmental-interest choice-of-law analysis when the statute itself does not mandate borrowing another jurisdiction’s time bar.

Reasoning

Section 361 generally bars an action in California when the cause of action arose elsewhere and is time-barred there, but it excepts a plaintiff who was a California citizen and held the claim from the time it accrued. In a latent-disease case, however, determining where a claim arose and when it accrued is difficult because exposure, injury, diagnosis, and compensable harm may occur decades apart and in different states.

Even assuming McCann fell within section 361’s exception, the exception merely removes the statute’s command to apply foreign law. Nothing in the text or history of section 361 shows that the Legislature meant to freeze older common-law conflicts rules and require California limitations law whenever the exception applies.

Because California now uses the governmental-interest approach for choice-of-law questions, that approach governs the selection between California and foreign limitations or repose rules whenever section 361 does not itself require application of the foreign rule.

Issue #2

Whether California and Oklahoma had a true conflict concerning the timeliness of McCann’s claim against Foster Wheeler.

Holding

Yes. The states’ laws differ, and each state had a legitimate interest in applying its own law to these facts.

Reasoning

The laws produced opposite results. Oklahoma’s statute of repose would bar McCann’s claim more than 10 years after completion of the refinery improvement, while California’s asbestos statute would allow the claim because McCann sued within months of his mesothelioma diagnosis.

Oklahoma’s statute of repose reflects a policy choice to balance injured persons’ access to a remedy against providing architects, designers, builders, and similar businesses a definite end to liability. It promotes commercial security and avoids the evidentiary difficulties that arise after long periods of time.

Oklahoma’s interest was not confined to businesses incorporated or headquartered there. A state that limits liability for commercial activity within its borders has an equal interest in affording that protection to out-of-state businesses that undertake covered work there. Otherwise, the state could not reliably encourage companies from elsewhere to do business within the state.

Nor did Foster Wheeler’s New York design and manufacturing work eliminate Oklahoma’s interest. The alleged exposure and the improvement itself were in Oklahoma, and any duty to warn about the insulation would have had to operate there. On the assumed premise that Foster Wheeler was a covered designer of an Oklahoma real-property improvement, Oklahoma had a genuine interest in applying its repose statute.

California also had a legitimate interest. Its asbestos limitations statute recognizes the exceptionally long latency of asbestos disease and seeks to give persons a fair opportunity to recover after disability and causal knowledge emerge. Applying that rule to a California resident diagnosed in California may help secure compensation and reduce the chance that the resident will need California public resources.

Issue #3

Whether California’s limitations statute or Oklahoma’s statute of repose should govern under the comparative-impairment stage of California’s governmental-interest analysis.

Holding

Oklahoma law governs because Oklahoma’s interest would be more impaired if its statute of repose were displaced than California’s interest would be if its asbestos limitations statute were not applied.

Reasoning

Comparative impairment does not ask which state has the better policy. Instead, it allocates lawmaking authority by determining which state’s policy would suffer more if subordinated in this multistate setting.

The conduct for which McCann sought to hold Foster Wheeler liable occurred in Oklahoma in 1957, while McCann was present in Oklahoma and was an Oklahoma resident. Oklahoma therefore had the predominant interest in regulating the risks and liabilities created by commercial activity at an Oklahoma improvement to real property.

If California law applied merely because McCann later moved to California, Oklahoma could not assure businesses operating in its territory that its liability limitation would protect them. A company cannot control or predict where a potential plaintiff may relocate decades after an alleged exposure. That uncertainty would substantially undermine Oklahoma’s policy of providing a predictable endpoint to liability.

California’s interest in facilitating recovery by a current resident was real but narrower here because the alleged injury-producing conduct occurred wholly outside California. California precedent generally gives the state where the conduct and risk occurred the stronger claim to set the liability rules, even when the injured person later returns to California, receives treatment there, and incurs expenses there.

This was not a case in which out-of-state conduct directly injured a person in California, nor one in which a product entered California’s stream of commerce and caused injury there. McCann instead sought to impose liability for alleged asbestos exposure in Oklahoma. Accordingly, Oklahoma’s policy of regulating that conduct and limiting related liability had the stronger claim to application.