THE NEW JERSEY SUPREME COURT
EXTENDS PRODUCT LIABILITY TO OEM MANUFACTURERS AND DISTRIBUTORS FOR INJURY ALLEGED FROM REPLACEMENT PARTS MANUFACTURED BY OTHERS

June 5, 2020
As we continue the HKMP Case Alerts, we hope that you, your loved ones and your colleagues are all doing well navigating these unprecedented times. Today, HKMP would like to alert you to a significant New Jersey Supreme Court decision of first impression in New Jersey product liability law. Although the June 3, 2020 New Jersey Supreme Court decision in Whelan v. Armstrong International , Inc. , __ N.J. __ (2020) involved an asbestos case, it will likely have wide ranging implications in product liability matters whether those matters are governed by the New Jersey Product Liability Act (“PLA”) or whether they fall within the exception to the PLA, such as toxic tort matters. This decision is unequivocally a game changer in New Jersey product liability law, especially toxic tort litigation.

A divided New Jersey Supreme Court held that, as a matter of law, an original equipment manufacturer and/or original equipment distributor (collectively “OEM”) may be liable for asbestos-containing replacement component parts manufactured and/or distributed by unrelated third parties, under a failure to warn theory, if the OEM incorporated asbestos-containing components in the original product and certain other criteria are met under this new standard. Whelan , __ N.J. at 42-43 This extension of liability for defective component parts to the OEM , despite the fact that the OEM did not manufacture or distribute the component replacement part, is a significant shift favoring plaintiffs in New Jersey products liability toxic tort matters.

In contrast, the dissent, written by Justice Anne M. Patterson and joined by Justice Faustino J. Fernandez-Vina asserted that the majority opinion unfairly imposed liability on OEMs and that "the majority's new standard requires no showing that the plaintiff has made the slightest attempt to identify the proper defendant." Whelan, __ N.J. (Dissent at 19). This decision potentially poses significant exposure for OEMs.
 
In recognition of this developing law, the New Jersey Supreme Court articulated a new four-prong test, to provide lower court guidance in the determination of whether an OEM may be held liable for an injury allegedly resulting from third party aftermarket replacement components:

  1. Plaintiff must prove that “the manufacturers or distributors incorporated asbestos-containing components in their original products”;
  2. Plaintiff must prove that "the asbestos components were integral to the product and necessary for it to function:,
  3. Plaintiff must prove that "routine maintenance of the product required replacing the original asbestos components with similar asbestos-containing components", and
  4. Plaintiff must prove that "the exposure to the asbestos-containing components or replacement components was a substantial factor in causing or exacerbating the plaintiff's disease."

Whelan , __ N.J. at 9, 42-43. Applying this new test, the Supreme Court reversed summary judgment that had been granted to the OEM defendants in the Whelan case and remanded this asbestos matter to the trial court.

The Supreme Court in Whelan also resolved the Appellate Division conflict on the issue of whether an OEM can be held liable for exposure to a product manufactured and distributed by an aftermarket third-party manufacturer, effectively overruling the 2014 Appellate Division decision that upheld OEM summary judgment in Hughes v. A.W. Chesterton Co ., 435 N.J. Super. 326, 343-346 (App. Div. 2014) and affirming the 2018 Appellate Division decision that reversed summary judgment in Whelan v. Armstrong International. Inc ., 455 N.J. Super. 569 , 579 (App. Div. 2018).
 
In evaluating the conflict between the Hughes appellate panel decision in 2014 and the Whelan appellate panel decision in 2018, the Whelan Supreme Court majority addressed the product – defect causation and medical causation standards in toxic tort strict liability failure to warn cases, which are adjudicated under the common-law as an exception to the PLA, and which require the plaintiff to prove product-defect causation and medical causation . To prove product-defect causation plaintiff must demonstrate that “the defect in the product -- the lack of warnings or inadequate warnings -- was a proximate cause of the asbestos-related injury” and to prove medical causation plaintiff must demonstrate “that the injury was ‘proximately caused by exposure to defendant’s asbestos product,’ that is, ‘the exposure [to each defendant’s product] was a substantial factor in causing or exacerbating the disease’” such that the exposure was of “sufficient frequency, with a regularity of contact, and with the product in close proximity to the plaintiff.” Whelan , __ N.J. at 26.
 
In Hughes , on the product defect element, the Appellate Division extended the duty to warn not only to workers who were exposed to the products as originally manufactured, but also to "those workers who came into contact with the component parts as part of regular maintenance"; however, on the medical causation element the Hughes court narrowly interpreted the term “product” as being the final product, i.e. a pump, as opposed to all of the component parts and declined to extend liability to an OEM when “plaintiffs did not ‘produce evidence they had any contact with friable asbestos in replacement parts that were manufactured or sold by [the defendant]’”. Hughes , 435 N.J. Super. at 341-342 and 346. The Whelan Supreme Court majority opined that such ruling in Hughes “effectively rendered unenforceable the duty to warn about the defendant’s pumps’ inherently dangerous replacement components.” Whelan, __ N.J. at 16-17.
 
Conversely, the Appellate Division in Whelan , 455 N.J. Super. at 579, held that a duty to warn exists when the manufacturer's product contains asbestos components, which are integral to the function of the product, and the manufacturer is aware that routine periodic maintenance of its product will require the replacement of those components with other asbestos-containing parts; more specifically, on the product-defect causation issue, the Appellate Division ruled that the “duty to warn extend[ed] to any danger created by those replacement parts” necessary for their products to function, regardless of whether a third party manufactured or distributed the replacement parts” and on the medical causation issue the “defendants could be held strictly liable for the failure to warn about a third party’s asbestos-containing replacement components essential to the functioning of the product” provided that plaintiff establishes “exposure to the third party’s asbestos-containing replacement components sufficiently contributed“ to the injury . Whelan , 455 N.J. Super. at 592-606.

The Supreme Court in Whelan , considered the divergence on the issue of medical causation and accepted the Whelan Appellate Division’s broad definition of “product”, namely, “‘the complete manufactured item as delivered by the manufacturer to the consumer, not just the asbestos contained in one of the product's components’". Whelan , __ N.J. at 15, 16 18. In expanding liability, the majority opinion analyzed New Jersey toxic tort product liability precedential case law, Whelan , __ N.J. at 31-35, and analyzed out-of-state law on the issue of OEM liability for third-party replacement parts, Whelan , __ N.J. at 36- 39. The Supreme Court also reaffirmed the presumption that a worker who receives an adequate warning of the dangers of a product will heed the instructions and take the suggested precautionary steps. Whelan , __ N.J. at 27.
 
Justice Barry T. Albin, writing for the majority, recognized the groundbreaking nature of this decision and articulated that the public policy goals of strict liability jurisprudence, “risk spreading”, as well as case law precedent supporting the principal that "[t]he burden of illness from dangerous products such as asbestos should be placed upon those who profit from its production and, more generally, upon society at large, which reaps the benefits of the various products our economy manufactures." Whelan , __ N.J. at 28-29. In closing, the majority opinion pronounced that [“O]ur developing common law jurisprudence, guided by principles of public policy and equity, dictates that defendants who manufacture or distribute products that, by their design, require the replacement of asbestos-containing components with other asbestos-containing components during the ordinary life of the product have a duty to give adequate warnings to the ultimate user." Whelan , __ N.J. at 40.

It is anticipated that this comprehensive Supreme Court decision of first impression will not only be cited in asbestos cases but also toxic tort cases and Product Liability Act cases for many years to come. Hardin Kundla McKeon & Poletto has been at the forefront of toxic tort and product liability litigation for decades. If you have any questions regarding this Supreme Court decision or any toxic tort or product liability matter, please contact us at www.hkmpp.com .

As always, we appreciate the chance to catch up with you. Stay safe everyone!
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