William Dunn, Hess Oil Virgin Islands Corp. v. Hovic

Decision Date27 July 1993
Docket NumberNo. 91-3837,91-3837
Citation28 V.I. 467
CourtU.S. Court of Appeals — Third Circuit

[1 F.3d 1371]

Appeal by manufacturer from punitive damage award in asbestos litigation. The Third Circuit, Sloviter, J., vacated the award and remanded with instructions to enter new judgment for punitive damages in amount of $1,000,000.

[Headnotes Classified to Virgin Islands Digest]


BARRY S. SIMON (Argued); Paul Mogin (WILLIAMS & CONNOLLY), Washington, D.C., for appellant

JOEL H. HOLT (Argued) Christiansted, V.I.; PAUL S. MINOR (MINOR & GUICE), Biloxi, Mississippi, for appellee

BEFORE: SLOVITER, Chief Judge, MANSMANN and WEIS, Circuit Judges

Reargued In Banc February 2, 1993



SLOVITER, Chief Judge

Preliminary Note

Before us is the appeal of Owens-Corning Fiberglas Corporation (OCF) from the judgment of the district court of the Virgin Islands awarding William Dunn $500,000 in compensatory damages and $2 million in punitive damages. A panel of this court heard argument on OCF's appeal on April 22, 1992 and issued an opinion affirming the compensatory damages award and remitting the punitive damages award to $1 million. Thereafter, the court granted OCF's petition for rehearing in banc, limited to the punitive damages issue. The panel's original opinion on the compensatory damages issue, modified in minor respects to reflect the recent procedural events, is refiled contemporaneously with this opinion.1

In its petition for rehearing and at oral argument before the in banc court, OCF directed its argument to its contention that multi-ple awards of punitive damages in asbestos-related injury cases should be prohibited as a matter of Virgin Islands law or federal due process. Accordingly, this opinion essentially restates the opinion of the panel on the issues of the sufficiency of the evidence, Dunn's closing argument, and the jury charge, but contains a more extended discussion of OCF's challenge to the excessiveness of punitive damage awards in asbestos cases.


The availability of punitive damages is ordinarily determined by the local law of the relevant jurisdiction, in some instances by statute and in other instances by legal principles developed by courts. Under the Virgin Islands Code:

The rule of common law, as expressed in the restatements of the law approved by the American Law Institute, and to the extent not so expressed, as generally understood and applied in the United States, shall be the rules of decision in the court of the Virgin Islands in cases to which they apply, in the absence of local laws to the contrary.

V.I. Code Ann. tit. 1, § 4 (1967). Thus we turn to the Restatement for the prevailing standard.

Section 908(2) of the Restatement (Second) of Torts provides that "[p]unitive damages may be awarded for conduct that is outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others." In applying this section, we have previously stated that such conduct must be shown by clear and convincing evidence. Acosta v. Honda Motor Co., 717 F.2d 828, 839 (3d Cir. 1983). OCF argues that the evidence was insufficient to support the award of punitive damages or, in the alternative, that the verdict went against the clear weight of the evidence, requiring a new trial on whether punitive damages are appropriate.

In support of its argument, OCF points to evidence tending to show that prior to its decision to place warning labels on Kaylo boxes, the prevailing industry belief was that asbestos insulation products were safe. See App. at 1522-24. OCF argues that its Kaylo product was considered an improvement over prior insulation products because it contained a lower percentage of asbestos. It points to an independent study conducted by Union Carbide between 1961 and 1963 which concluded that Kaylo, unlike Johns-Manville and Philip Carey products, could be safely used within the 5 million particles per cubic foot threshold limit value (TLV) established by the American Conference of Governmental Industrial Hygienists in 1946. See App. at 1355-72, 2287-97.

Nevertheless, we conclude that Dunn presented more than sufficient evidence from which a jury could conclude that OCF acted "with reckless indifference" in failing to place adequate warnings on its Kaylo product. Dunn's evidence revealed the following: In the early 1940s, insulation workers threatened to demand higher wages when using OCF's fiberglass material because of perceived health threats. See App. at 725-26. In response to this threat, Edward Ames, OCF's public relations officer and an assistant to its president, developed a plan to resolve this problem. As Ames explained, OCF had learned by this time that exposure to asbestos fibers could cause asbestosis. App. at 726.

In a memorandum to OCF's president and executive vice-president dated January 7, 1942, Ames made the following recommendation to inform workers of the extent of the hazard posed by asbestos-containing materials:

Gather as a weapon-in-reserve an impressive file of photostats of medical literature on asbestosis. Available are two bibliographies covering medical literature to 1938, citing references to scores of publications in which the lung and skin hazards of asbestos are discussed. This file would cover five or six hundred pages . . . .

App. at 2151. This memorandum suggested that if OCF was unsuccessful in convincing union officials of the benefits of fiberglass as opposed to other asbestos-containing insulation products, then this "asbestosis weapon-in-reserve" would be sent to union workers to "let them stew." App. at 2152.

When asked if OCF's then-president, Harold Boeschenstein, knew that asbestos products might pose a hazard to the lungs, Ames answered, "Mr. Boeschenstein knew everything." App. at 727. In addition, OCF's attorney thought that Ames's plan was "a germ of a major strategy" and approved compiling an asbestosis file. App. at 729.

In 1943 Ames wrote another memorandum in which he criticized a proposal for adding asbestos to fiberglass, see App. at 732-33, writing:

In formulating our policy on admixtures with asbestos, we should keep on the alert because otherwise we will run the risk of smearing fiberglas [sic] with the hazards of exposure to asbestos. Fabrication of asbestos (in both textile and pre-textile form) is a dusty process, and exposure to asbestos fly involves the danger of asbestosis, a pathological lung condition . . . minimized by the use of hoods and . . . respirators.

App. at 2154.

In 1944 Ames received a letter from a physician informing OCF that a patient of his, who had worked as an insulator, had developed asbestosis from exposure to insulation products. The letter stated in pertinent part:

pipe coverer handling . . . asbestos . . . on industrial insulation jobs [was] suffering from asbestosis, a condition that results from exposure to asbestos dust. The disease is a well recognized form of lung pathology that manifests itself in a diminution of lung capacity resulting in dyspnea or shortness of breath.

App. at 2155.

OCF began distributing Kaylo products in 1953, and from 1958 until 1972 manufactured Kaylo insulation. App. at 1068. In the 1950s, Dr. Garret Schepers, head of the Saranac Laboratory in New York, warned OCF that Kaylo contained material that would be hazardous to human beings. App. at 1018. Dr. Schepers also wrote two letters to Dr. M.D. Burch, director of personnel and industrial relations at OCF at the time, advising him that "asbestos is fairly well incriminated as a carcinogen," App. at 2198, and that asbestos dust caused fibrosis. App. at 2207. Despite these warnings, OCF published brochures which repeatedly represented Kaylo as "nontoxic." App. at 2209, 2210, 2211, 2212, 2215. In addition, OCF touted Kaylo's "ease of application," see App. at 2211, and its "pleasant handling characteristics." App. at 2212. These brochures contained no warning of potential hazards.

A 1960 study of one of OCF's Kaylo manufacturing plants revealed that excessive asbestos dust exposure resulted from simply packing Kaylo into boxes. App. at 220-22. In 1963 the head of OCF's product development laboratory informed various corporate officers around the country that "[a]sbestos (as found in Kaylo) when breathed into the lungs causes asbestosis which often leads to lungcancer." App. at 2221. In 1964 the National Insulation Manufacturers Association, of which OCF's representative was a director, noted that Johns Manville had decided to place warnings on its asbestos products. App. at 2225. OCF, however, declined to do so, see App. at 2229, even though it knew that insulators had a six to seven times greater incidence of lung cancer than the general male population. App. at 2226.

In early 1965, Dr. F.H. Edwards of OCF wrote to OCF's medical director as well as other corporate officials urging that serious consideration be given to labelling Kaylo products since "the amounts requested [by claimants] are usually sizeable." App. at 2229. Dr. Edwards reiterated this suggestion in a memorandum dated August 6, 1966 in which he also acknowledged that "[i]t is impossible to guess the amount of dust created by the cutting, sawing, etc. of Kaylo. There are too many local factors involved." App. at 2230-31. Although OCF claimed that by December 1966 it had placed warning labels on its products,2 see App. at 1230, Dunn testified that he did not see warning labels on any of the cartons holding Kaylo that he observed in the Virgin Islands. App. at 870, 873. This testimony was echoed by...

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