Takeaway
In short, the Sixth Circuit stayed the case against bankrupt Johns-Manville, vacated the defense verdicts against Raybestos because Tennessee's asbestos exemption controlled, and directed a retrial with Dr. Smith's prior testimony available and collateral estoppel left to the trial court's discretion.
John Ed Clay and Curtis Bailey, joined by their wives, sued Johns-Manville Sales Corporation and Raybestos-Manhattan, Inc. in federal district court in Tennessee. They alleged products-liability injuries from exposure to asbestos-containing products manufactured by the defendants. A jury returned verdicts for both defendants.
On appeal, the plaintiffs challenged several trial rulings. The Sixth Circuit addressed the effect of Johns-Manville's Chapter 11 filing, the Tennessee products-liability limitations statute, the exclusion of testimony from a deceased former Johns-Manville physician, and the plaintiffs' effort to use offensive collateral estoppel against Raybestos. Because Johns-Manville had entered bankruptcy, the court considered the merits only as to Raybestos.
Issue #1
Whether Johns-Manville's Chapter 11 filing required a stay of the appeal against that company.
Holding
Yes. The appeal against Johns-Manville was automatically stayed under 11 U.S.C. § 362(a)(1).
Reasoning
Section 362(a)(1) provides that filing a bankruptcy petition operates as a stay of the commencement or continuation of judicial proceedings against the debtor. Johns-Manville's Chapter 11 reorganization filing therefore stayed this appeal as to Johns-Manville, even though the company had not moved for a stay in the Sixth Circuit.
The court ordered the clerk to place the Johns-Manville portion of the appeal in inactive status pending further action by the parties or the bankruptcy court. The court proceeded to resolve the issues involving the remaining defendant, Raybestos-Manhattan.
Issue #2
Whether Tennessee's 1979 amendment excluding asbestos-exposure actions from the ten-year products-liability statute applied, despite the defendant's asserted vested right in the earlier limitations defense.
Holding
Yes. The asbestos exclusion applied, and the district court erred by allowing the jury to bar the claims under the ten-year statute.
Reasoning
The district court instructed the jury that the plaintiffs could not recover if they discovered, or should have discovered, their asbestosis during the one-year period when Tennessee's ten-year statute applied to all products-liability actions. The later 1979 amendment expressly removed asbestos-exposure actions from that ten-year ceiling.
The Sixth Circuit treated its recent decision in Murphree v. Raybestos-Manhattan as controlling. Murphree concluded that Tennessee's constitutional prohibition on retrospective laws did not preserve a defendant's vested right to use the former ten-year limitation against an asbestos claimant after the legislature enacted the exclusion.
Although Ford Motor Co. v. Moulton had previously applied a vested-rights theory to prevent a liberalized limitations rule from operating retroactively, later Tennessee decisions—especially McCroskey v. Bryant Air Conditioning Co.—showed that Tennessee had rejected limitations rules that extinguish claims before an injured person can discover them. The Sixth Circuit predicted that the Tennessee Supreme Court would no longer follow Moulton's vested-rights approach in this setting.
Statutes of limitations concern legislative policy about the availability of a remedy, rather than a fundamental entitlement to avoid suit. The 1979 amendment could therefore eliminate the harsh ten-year bar for asbestos claims without unconstitutionally impairing a protected right of Raybestos. The erroneous instruction required vacatur and a new trial.
Issue #3
Whether the deposition testimony of the deceased Dr. Kenneth Wallace Smith from an earlier asbestos case was admissible under Federal Rule of Evidence 804(b)(1).
Holding
Yes. The deposition should be admitted on retrial because the defendants in the earlier case had a similar motive and adequate opportunity to examine Dr. Smith.
Reasoning
Dr. Smith had spent much of his career as Johns-Manville's only full-time physician and possessed unusually relevant knowledge about what asbestos-product manufacturers knew about asbestos hazards during the period of the plaintiffs' alleged exposure. Because he had died before trial, he was unavailable as a witness.
Rule 804(b)(1) permits former testimony when the party against whom it is offered, or that party's predecessor in interest in a civil case, had an opportunity and similar motive to develop the testimony through examination. The court rejected a narrow, privity-based understanding of the phrase 'predecessor in interest.'
Following Lloyd v. American Export Lines, the court adopted a practical approach: a prior party qualifies when it had a like motive to examine the unavailable witness about the same material matters. The defendants in DeRocco had the same practical incentive Raybestos had here—to challenge Dr. Smith's evidence concerning industry knowledge and asbestos-related dangers—and had an adequate opportunity for objections and searching cross-examination.
Issue #4
Whether the plaintiffs were entitled to summary judgment estopping Raybestos from disputing its knowledge of asbestos dangers based on Borel v. Fibreboard Paper Products Corp.
Holding
No. The plaintiffs had not established an entitlement to collateral estoppel against Raybestos, but the district court could consider offensive collateral estoppel on remand under Parklane Hosiery's standards.
Reasoning
Collateral estoppel generally prevents a party from relitigating an issue that was actually and conclusively determined against that same party after a full and fair opportunity to litigate. Raybestos was not a party to Borel, so Borel alone did not establish a proper basis for summary judgment against Raybestos.
Parklane Hosiery permits, but does not require, offensive use of collateral estoppel. On remand, the plaintiffs could attempt to prove that the doctrine should apply, but the district judge retained broad discretion to deny its use if the plaintiffs could easily have joined the earlier action or if applying estoppel would otherwise be unfair to Raybestos.