Baker v. AC&S, INC.

• Decision Date: 30 March 1999
• Citation: 729 A.2d 1140
• Parties: Suzanne BAKER, Administratrix of the Estate of Albert J. Baker, and Wife of Albert J. Baker, Appellants, v. AC&S, INC., et al., Appellee. Suzanne Baker, Administratrix of Estate of Albert J. Baker, and Wife of Albert J. Baker, Appellees. v. AC&S, Inc., et al., Appellant.
• Court: Pennsylvania Superior Court

729 A.2d 1140

Suzanne BAKER, Administratrix of the Estate of Albert J. Baker, and Wife of Albert J. Baker, Appellants, v. AC&S, INC., et al., Appellee.

Suzanne Baker, Administratrix of Estate of Albert J. Baker, and Wife of Albert J. Baker, Appellees. v. AC&S, Inc., et al., Appellant.

Superior Court of Pennsylvania.

Argued September 28, 1998.

Filed March 30, 1999.

R. Bruce McElhone, Philadelphia, for Baker.

Robert W. Rowan, Philadelphia, for AC&S, Inc.

Martin Greitzer, Philadelphia, for Greitzer and Locks, amicus curiae.

Anne E. Cohen, New York City, for Podesta and Cohen, amicus curiae.

Before McEWEN, President Judge, and CAVANAUGH, DEL SOLE, KELLY, EAKIN, JOYCE, STEVENS, SCHILLER and LALLY-GREEN, JJ.

SCHILLER, J.:

¶ 1 This case involves consolidated appeals from judgments against AC&S, Inc. entered in favor of Suzanne Baker, as administratrix of the estate of her deceased husband and in her own right. Mrs. Baker appeals from these judgments, alleging that the trial court erred in molding the verdict. AC&S cross-appeals from these judgments, alleging that there was insufficient evidence to establish its liability. For the reasons set forth below, we reverse in part, affirm in part and remand for further proceedings.

FACTS:

¶ 2 Albert J. Baker and his wife, Suzanne, filed a civil action under theories of strict liability and negligence against several manufacturers and/or sellers of asbestos-containing products, seeking damages resulting from Mr. Baker's exposure to asbestos and Mrs. Baker's loss of consortium. The Bakers' first complaint, filed on January 17, 1989, alleged that Mr. Baker had pleural plaques on his lungs; pursuant to this Court's holding in Giffear v. Johns-Manville Corp., 429 Pa.Super. 327, 632 A.2d 880 (1993) (en banc),¹ the Bakers' case was dismissed without prejudice in January, 1994. However, Mr. Baker later developed diffuse malignant mesothelioma and, with leave of court, the Bakers amended their complaint and reactivated their case on March 31, 1995. The trial was reverse-bifurcated, as are all asbestos actions in Philadelphia County. The damages phase was tried before the Honorable Charles Mirarchi, Jr. and a jury; on June 2, 1995, the jury awarded $2 million to Mr. Baker for his injuries and $200,000 to Mrs. Baker for loss of consortium.² Several defendants were dismissed from the case on motions for summary judgment; in addition, the Bakers settled with Owens-Corning Fiberglas Corporation, Pfizer, Inc., Asbestos Claims Management Corporation ("ACMC") (formerly National Gypsum), and the Manville Personal Injury Settlement Trust ("the Manville Trust") pursuant to joint tortfeasor releases.³ The liability phase was tried before the Honorable Victor J. DiNubile, Jr., sitting without a jury, on September 16 and 17, 1996. The only defendant present at the liability phase was AC&S, an insulation contracting company, against whom Mrs. Baker proceeded on a strict liability theory. Based on the evidence presented, the trial court found AC&S, Owens-Corning, Pfizer, ACMC, and the Manville Trust jointly liable for the Bakers' injuries.

¶ 3 The trial court molded the verdict to reflect the shares of the settling joint tortfeasors. In doing so, the trial court disregarded the terms of the Bakers' releases with respect to these tortfeasors. Instead, the trial court interpreted applicable state law, consistent with the terms of the Manville Trust settlement, to require that damages among strictly liable defendants be apportioned on a "pro rata" basis, with each defendant paying no more than its "pro rata" share.⁴ Accordingly, AC&S was required to pay only one-fifth of the total damages awarded to Mrs. Baker, or a total of $440,000. The trial court denied both parties' post-trial motions and entered judgment in the amount of $400,000 plus $17,386.30 in delay damages in favor of Mr. Baker's estate and $40,000 in favor of Mrs. Baker for loss of consortium.⁵ These timely cross-appeals followed.

DISCUSSION:

I. The Baker Appeal

¶ 4 Mrs. Baker presents an issue of first impression: whether in the context of a strict liability action, pursuant to the provisions of the Uniform Contribution Among Tortfeasors Act ("UCATA"),⁶ and applicable case law, a pro tanto release executed by the plaintiffs in favor of the Manville Trust should be enforced according to its express terms to reduce the plaintiffs' recovery against the non-settling tortfeasor.⁷ From this issue we discern a more fundamental question: whether under the unique circumstances of this case the plaintiffs or the non-settling tortfeasor should bear the burden of the shortfall between the consideration paid by the Manville Trust ($30,000) and its allocated share of the damages awarded to the plaintiff ($440,000), a difference of $410,000. Mrs. Baker argues that AC&S should pay this shortfall. Specifically, Appellant argues that the trial court erred in not enforcing the pro tanto release because it misinterpreted certain provisions of the Manville Trust Disposition Process ("TDP") and case law concerning allocation of liability and enforcement of releases. AC&S responds that AC&S should not be required to pay this shortfall because the provisions of the TDP and applicable state law require a pro rata set-off in a Pennsylvania strict liability asbestos action regardless of the terms of the release.⁸

The Manville Trust and the TDP

¶ 5 We begin our discussion by reviewing the historical background of the Manville Trust and the TDP.⁹ In 1988, the Manville Trust was created to pay all health claims brought against the Johns-Manville Corporation ("Manville") as a result of asbestos exposure. Beneficiaries of the Trust included present and future health claimants as well as other manufacturers of asbestos products with claims against Manville for contribution. It was estimated that approximately 83,000-100,000 claims would be filed against the Trust. However, because significantly more claims were filed (240,000 by December, 1994), and the value of the claims was higher than expected, the Trust became insolvent. In November, 1990, a class action began to restructure the Trust, and a proposed settlement agreement was reached. However, this settlement was challenged by some health claimants and co-defendants, and the matter was remanded for further proceedings.

¶ 6 Following remand, the court approved the designation of six subclasses consisting of present and future beneficiaries of the Trust, and a stipulation of settlement was approved on January 19, 1995.¹⁰ By that time, the Trust's liabilities were in excess of $6.7 billion, and the projected liability was estimated to be between $21 and $25 billion; the Trust assets, however, were no more than $2.5 billion. Without restructuring the Trust, it would not be able to pay equitable compensation to any of the Trust beneficiaries. The ultimate goal of the settlement was for all of the claimants to share equally in the burdens imposed by the Trust's limited fund status. The parties adopted a Trust Distribution Process ("TDP") to accomplish that goal by paying all claimants— whether asbestos health claimants, co-defendants or distributors—over time an equivalent share of their claims' values, and by reducing significantly the Trust's operating and litigation expenses in order to maximize the assets available to the Trust beneficiaries.

¶ 7 The parties agree that they are bound by the terms of the Manville Trust settlement and the TDP, and that the TDP applies to actions, such as the case sub judice, where the liability verdict was rendered after February 18, 1995. The TDP is relevant in this case because Appellee is seeking a reduction in the verdict to reflect the involvement of the Manville Trust as a responsible party. Pursuant to the Manville Trust settlement, the rights of the parties in that regard are governed by the provisions of the TDP. We therefore turn our analysis to a review of the applicable terms of the TDP.

¶ 8 Under Section H of the TDP, the beneficiaries agreed to dismiss all pending claims against the Trust. The TDP established a schedule ("matrix") of asbestos-related disease categories and values; a health claimant can obtain the scheduled value for a claim or can seek an individual claim valuation.¹¹ The TDP further provided that the Trust will pay a percentage of this value on a current basis.¹² Mr. Baker's claim for mesothelioma was rated in the highest category of scheduled values; pursuant to his settlement with the Trust, the liquidated value of his claim was $300,000, and he was paid $30,000, or 10% of that value.

¶ 9 The TDP also governs the rights of the health claimant and co-defendant asbestos manufacturers and distributors following a health claimant's settlement with the Trust, changing state law in some respects. First, a co-defendant has no right of contribution against the Trust, except in limited circumstances not applicable here.¹³ Second, in exchange for relinquishing its right to implead the Trust in any litigation with the health claimant, the co-defendant has the right to ask the court to treat the Trust as a "legally responsible tortfeasor" without the introduction of further proof.¹⁴ Third, if the health claimant obtains a verdict against the co-defendant, the co-defendant can obtain a "set-off" or reduction in verdict in respect to the Trust whether or not the claimant's direct claim against the Trust has been resolved.¹⁵ The set-off is measured by reference to applicable local law.¹⁶

¶ 10 Section H of the TDP creates five categories of states: (1) pro tanto, (2) pro rata, (3) allocation or apportionment, (4) several liability, and (5) multiple set-off rules. TDP, § H.3 (b), (c), (d), (e), and (f).¹⁷ The TDP does not expressly categorize Pennsylvania, or any other state. Indeed, the federal district courts specifically stated that the rights and duties of the parties under Section H of the TDP would be decided by the state courts...