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McCann v. Foster Wheeler LLC
Citations: 48 Cal. 4th 68; 225 P.3d 516Docket: S162435
Court: California Supreme Court; February 18, 2010; California; State Supreme Court
A choice-of-law issue arises in Terry McCann's lawsuit against Foster Wheeler LLC for damages related to mesothelioma allegedly caused by asbestos exposure. McCann was exposed during the installation of a boiler at an Oklahoma oil refinery in 1957 while working as an engineering sales trainee. After moving to California and being diagnosed with mesothelioma in 2005, he filed suit naming multiple defendants, including Foster Wheeler. The defendant sought summary judgment, arguing that an Oklahoma statute of repose barred the claim, as it requires lawsuits against designers or constructors to be filed within 10 years of substantial completion of the improvement. McCann countered that California's statute of limitations should apply and that the boiler did not constitute an improvement under Oklahoma law. The trial court initially ruled that Oklahoma law applied but found disputed facts regarding the statute's applicability. Subsequently, the court determined that Foster Wheeler qualified as a designer of an improvement under Oklahoma law, leading to the dismissal of Foster Wheeler as a defendant. The Court of Appeal determined that the trial court incorrectly applied Oklahoma law instead of California law in a case involving Foster Wheeler. The appellate court analyzed the choice-of-law issue using the 'governmental interest' approach and found that California has a significant interest in providing remedies for its residents suffering from asbestos-related injuries, while Oklahoma's interest in its statute of repose primarily aims to protect local defendants from liability for conduct in Oklahoma. Since Foster Wheeler is headquartered in New York, the Court of Appeal concluded that Oklahoma's statute of repose does not primarily benefit Foster Wheeler, making its interest less significant in this context. The appellate court reasoned that even if a conflict existed, California's interests would be more negatively impacted by applying Oklahoma law than Oklahoma's interests would be by not applying its law. Consequently, the Court of Appeal reversed the trial court's judgment favoring Foster Wheeler. Upon review, it was found that Oklahoma's interest in its statute of repose does extend to out-of-state companies involved in construction in Oklahoma. Furthermore, while California has an interest in providing remedies for its residents, past cases suggest that this interest is less compelling when the defendant's conduct occurred in another state, especially when that state's law governs liability. Ultimately, the conclusion was reached that Oklahoma law should apply to the case, as its interests would be more adversely affected by not applying its law than California's interests would be by applying Oklahoma law. The relevant facts noted include that Foster Wheeler's alleged liability stems from the plaintiff's exposure to asbestos in Oklahoma in 1957, with the diagnosis of mesothelioma occurring in 2005. In July 1957, the plaintiff, a recent college graduate and engineering sales trainee at Tulsa Refinery Engineering Company (TRECO), was involved in the construction of an oil refinery expansion for D'X Sunray Oil Company in Oklahoma. Sunray ordered a specially designed steam generator from Foster Wheeler, which was to be manufactured in New York and shipped disassembled to the refinery for assembly by TRECO, with guidance from a Foster Wheeler adviser. The generator was substantial, over 25 feet high and weighing multiple tons, requiring a specially prepared foundation by TRECO. The contract dictated that the generator was shipped without insulation, which Sunray was responsible for installing, hiring an independent contractor for the task. The plaintiff asserts that Foster Wheeler was aware of the need for insulation and the likelihood it contained asbestos. At the time, the plaintiff's role was to observe the construction process, and although he did not assist with the insulation installation, he witnessed aspects of the work, including the creation of dust clouds from mixing insulating cement. He estimated spending "two or three days" in proximity to the boiler. Following his brief tenure at the refinery, the plaintiff transitioned to office roles and later moved to Minnesota and Chicago, eventually becoming the executive director of Toastmasters International in California, where he worked until retiring in 2001. In April 2005, he was diagnosed with mesothelioma and subsequently filed a lawsuit in July 2005 against multiple defendants, including Foster Wheeler, which had filed for summary judgment prior to trial. The summary judgment motion argued for the application of Oklahoma law over California law regarding the timeliness of the plaintiff's lawsuit against Foster Wheeler, citing an Oklahoma statute of repose that mandates tort actions related to construction must be filed within 10 years of substantial completion. Since the plaintiff's suit was filed well beyond this period, Foster Wheeler sought dismissal of the action. The motion invoked a California "governmental interest" analysis to support the choice of Oklahoma law, referencing the case Ball v. Harnischfeger Corp., which upheld the applicability of the statute to manufacturers and designers of specialized equipment. In opposition, the plaintiff contended that California's borrowing statute (section 361) should apply, allowing for the use of California's statute of limitations despite the statute's general prohibition against maintaining actions barred by another state's law. The plaintiff argued they qualified for an exception under section 361, having been a California resident from the time the cause of action accrued. Additionally, the plaintiff asserted that applying the Oklahoma statute would impair California's governmental interest, as the cause of action originated in California due to the plaintiff's mesothelioma diagnosis. Finally, the plaintiff argued that even if Oklahoma law applied, Foster Wheeler should not be subject to the statute of repose, claiming it was merely a manufacturer of a defective product, not a designer of real property improvements as defined by the statute. The trial court ruled that Oklahoma law governs the timeliness of the action but denied Foster Wheeler's motion for summary judgment due to a triable issue regarding whether it qualified as a designer of an improvement to real property under the Oklahoma statute of repose. Foster Wheeler subsequently sought a determination on this factual question under Evidence Code section 402, a request supported by the plaintiff who wished for a judicial ruling instead of a jury trial. The court ultimately found that Foster Wheeler was a designer under the Oklahoma statute, leading to a judgment in favor of Foster Wheeler and dismissal of the plaintiff's action. On appeal, the plaintiff challenged this judgment on multiple grounds. The plaintiff argued that the trial court incorrectly applied Oklahoma law instead of California law, asserting that California's borrowing statute, section 361, should dictate the statute of limitations without requiring a governmental interest analysis. The plaintiff further contended that even if Oklahoma law applied, the trial court erred in classifying Foster Wheeler under the Oklahoma statute, claiming insufficient evidence to support that the boiler constituted an improvement to real property, notably citing Foster Wheeler's failure to demonstrate that the boiler was taxed as real property in Oklahoma. The Court of Appeal expressed skepticism towards the plaintiff's interpretation of section 361, indicating that while it allows for the application of California law, it does not mandate it in all circumstances. However, the Court of Appeal concluded that California's choice of law principles warranted the application of California law in this case, thereby sidestepping the need to resolve the broader question of section 361’s interpretation. The Court of Appeal outlined a three-step governmental interest approach to resolve the choice-of-law issue. First, it identified a difference between Oklahoma and California law regarding the statute of repose and statute of limitations applicable to the plaintiff's case involving asbestos-related injuries. Specifically, Oklahoma's statute would bar the plaintiff's claim due to the lapse of time, while California's statute permits claims to be filed within a year of discovering the injury. In the second step, the court examined whether a 'true conflict' exists. It expressed doubt, noting that California has a strong interest in providing remedies for its residents suffering from asbestos-related injuries. In contrast, Oklahoma's interest in protecting local defendants through time limitations on liability appeared less significant, especially since Foster Wheeler, the defendant, is not an Oklahoma citizen and the alleged tortious conduct occurred outside Oklahoma. Finally, in the third step, the court concluded that even if Oklahoma had a legitimate interest in its statute, California's interests would be more impaired if its law were not applied. The court highlighted California’s significant interest in allowing the plaintiff to seek compensation for his injuries, which were incurred as a California resident relying on local healthcare. It determined that California's interest in providing a remedy outweighed Oklahoma's interest in limiting liability for a nonresident defendant. Thus, the trial court's application of Oklahoma law was deemed erroneous. The Court of Appeal found that the trial court erred by not applying California law to determine the timeliness of the plaintiff's action against Foster Wheeler, leading to a reversal of the trial court's judgment in favor of Foster Wheeler. The court did not address the plaintiff's argument regarding the applicability of Oklahoma law and its statute of repose because it concluded that the action was timely under California law. The document also discusses California's choice-of-law rules, which have been traditionally shaped through judicial decisions rather than legislative acts. Over the past forty years, California courts have consistently employed the 'governmental interest' analysis for resolving these questions. While many states have adopted 'borrowing statutes' that require courts to apply the statute of limitations or repose from the relevant jurisdiction, California's approach has evolved from earlier common law principles that classified statutes of limitations as procedural, leading to the application of the forum state's laws irrespective of where the cause of action arose. This historical perspective explains the prevalence of borrowing statutes in other jurisdictions, which aim to address fairness in applying statutes of limitations. A situation arises when the statute of limitations in the forum state exceeds that of the state where the cause of action originated. This allows a plaintiff, who fails to file timely in the original state, to seek a longer statute of limitations in another jurisdiction, raising concerns about forum shopping. Borrowing statutes were created to address this issue, typically 'borrowing' the statute from the state where the cause of action accrued if it would be barred there. Many of these statutes exempt lawsuits filed by residents of the enacting state. California's borrowing statute, enacted in 1851 and codified as section 361 in 1872, stipulates that if a cause of action arises in another state and cannot be maintained there due to time limitations, it also cannot proceed in California, except for plaintiffs who were citizens of California at the time the cause of action accrued. This exception does not apply to individuals who became California citizens after the cause of action arose. The application of section 361 is straightforward in typical cases but becomes complex when the injury is discovered long after the conduct occurred, as seen in cases where the plaintiff's residence may influence whether the cause arose in Oklahoma or California. The determination of the plaintiff's citizenship at the time of accrual is also critical in applying the statute. The excerpt addresses the interpretation of California's section 361 concerning the application of statutes of limitations in cases with connections to both California and Oklahoma. It asserts that even if the cause of action arose in California or the plaintiff was a California citizen, section 361 does not mandate the automatic application of California's statute of limitations without considering the state’s choice-of-law principles. While historical choice-of-law doctrines may have favored California's statute in such cases, section 361 does not intend to restrict judicial authority to adapt these principles over time. The text emphasizes that the current governmental interest analysis should be applied to determine which jurisdiction's statute of limitations is appropriate when section 361 does not necessitate the application of another jurisdiction's law. This analysis involves three steps: assessing if the laws differ, evaluating each jurisdiction's interest in applying its own law, and, if a true conflict exists, deciding which state's interest would be more impaired if its law were not applied. The excerpt concludes with an agreement that the laws of Oklahoma and California differ significantly, particularly highlighting that Oklahoma's statute of repose would bar the plaintiff's cause of action after ten years, thus impacting the choice of law in this case. The Oklahoma statute allows for products liability actions against manufacturers and sellers of mass-produced goods, which means the plaintiff can sue companies that produced or sold the asbestos insulation related to his exposure. However, the Oklahoma Supreme Court interprets the statute of repose as protecting manufacturers or designers of specially designed improvements to real property. If a manufacturer acted as a designer, planner, or constructor, the statute applies. The plaintiff contends that the boiler in question was not an improvement to real property, but this issue was not addressed by the Court of Appeal, which determined that even if the statute applied, California law would govern under its choice-of-law principles. Assuming Oklahoma law applies, the plaintiff's action against Foster Wheeler would be untimely, as it was filed over 10 years after the completion of the improvement. Conversely, under California law, the action would be timely, as California's statute of repose for construction-related injuries applies only to property injuries, not personal injuries, and there exists a specific statute of limitations for asbestos-related illnesses. The plaintiff filed his action within months of his mesothelioma diagnosis, making it timely under California law. This analysis highlights a clear difference in the timeliness of the plaintiff's cause of action between Oklahoma and California. The next step in the legal analysis involves evaluating each jurisdiction's interest in applying its law to ascertain if there is a true conflict. Oklahoma law establishes a 10-year statute of repose for claims related to deficiencies in the design of real property improvements, creating a balance between the interests of injured parties seeking remedies and the need for builders and designers to have a clear time limit on liability. The Oklahoma Supreme Court has recognized that this statute aims to provide security for construction professionals and mitigate difficulties in proof arising from time delays. The Oklahoma Court of Appeal observed that the state's interest in this statute primarily protects local defendants, suggesting that this interest is less applicable to non-Oklahoma businesses involved in projects within the state. In the case at hand, Foster Wheeler, a Delaware corporation headquartered in New York, raised questions about Oklahoma's interest in applying its statute of repose to it. The appellate court concluded that Oklahoma's interest in enforcing this statute against out-of-state companies was weak due to the company's lack of local ties. However, it is argued that Oklahoma has a substantial interest in ensuring the statute applies equally to out-of-state businesses to promote economic activity and attract companies to the state. The court's prior ruling in Offshore Rental supports the view that a jurisdiction's business-friendly laws should apply to all companies operating within it, regardless of their state of incorporation or headquarters. The case involves a choice-of-law issue regarding the ability of a company to claim economic damages due to an injury to a key employee. California law allows such claims, while Louisiana law does not permit employers to pursue these damages, limiting claims to the injured employee's personal injury action. The defendant, a Delaware corporation based in New York, operated in Louisiana and other states. The California court, referencing the Offshore Rental case, recognized Louisiana's interest in maintaining its laws to promote investment and enterprise within its borders, even for out-of-state companies. The court concluded that Oklahoma had little interest in applying its law in this case because Foster Wheeler was not an Oklahoma company, citing precedents indicating that a state's interest in limiting damages is primarily local and tied to resident defendants. However, the appellate court incorrectly suggested that Oklahoma's interest was diminished by the fact that the boiler's design and manufacture occurred in New York. The statute of repose in question is meant to protect not only local construction businesses but also commercial entities engaged in design work, regardless of their location, as long as their liability arises from interactions with improvements in Oklahoma. Oklahoma has a vested interest in applying its statute of repose to Foster Wheeler's activities, even though some occurred outside the state. This interest remains significant despite arguments from the Court of Appeal. Concurrently, California also has a legitimate interest in applying its law, specifically Code of Civil Procedure section 340.2, which allows individuals to file claims for asbestos-related injuries within one year of discovering their disability. This statute, enacted in 1979, aims to provide adequate recovery opportunities for those affected by asbestos exposure, acknowledging the often lengthy time frames involved in these cases. The provision is not limited to injuries occurring within California, thus reinforcing California's interest in applying its law to residents diagnosed with asbestos-related conditions, regardless of where the exposure happened. Previous California case law supports this position, highlighting that injuries to California residents or businesses merit the application of California law, regardless of the injury's location. The implications for California's economy and tax revenues further accentuate the state's interest. In Castro, a California resident was injured in an Alabama traffic accident allegedly caused by the negligence of a driver of a rented truck owned by Budget Rent-A-Car. Under Alabama law, vehicle owners are generally not liable for the negligence of permissive users, whereas California law imposes vicarious liability on owners for such negligence. The court evaluated whether California had an interest in applying its law, noting that the primary purpose of California's permissive user statute—encouraging careful selection and supervision of permissive users—would not be served since the accident occurred in Alabama. However, the court recognized that California had a legitimate governmental interest in applying its permissive user statute due to the plaintiff's status as a California resident, as it would help ensure compensation for California residents injured in other states and reduce their dependency on California resources for medical and disability benefits. The court ultimately decided that Alabama law would apply under the comparative impairment analysis, which assesses the strength of each jurisdiction's interest in having its law applied. In this case, both California and Oklahoma have interests in the application of their laws, creating a "true conflict." The comparative impairment approach requires a careful evaluation of each jurisdiction's interests without determining which law reflects a better social policy. Balancing conflicting state policies within a federal system presents challenges, particularly regarding the allocation of law-making power among states rather than evaluating the merits of those policies. The focus is on determining which jurisdiction holds predominant law-making authority based on relevant state interests. In this case, failing to apply Oklahoma law would significantly undermine Oklahoma's interest, as the plaintiff’s alleged asbestos exposure occurred in Oklahoma while he was a resident there. The fact that Foster Wheeler is not an Oklahoma company does not diminish Oklahoma's interest in applying its statute of repose, which applies equally to both out-of-state and in-state businesses involved in property improvements within Oklahoma. California's current choice-of-law approach emphasizes that a jurisdiction has a predominant interest in regulating conduct within its borders. Should Foster Wheeler be denied the protections of Oklahoma's statute of repose and subjected instead to California's more lenient timeliness rules, it would undermine Oklahoma's legal interests based solely on the plaintiff's subsequent relocation to California. This move was not motivated by a desire to exploit California's more favorable laws, and therefore does not constitute forum shopping. Displacing Oklahoma law, which limits liability for conduct occurring within the state, in favor of the law of another jurisdiction to which a plaintiff has moved, even if done innocently, would undermine Oklahoma's interest in its statute of repose. If Oklahoma's statute is not applied due to a plaintiff's relocation to a state with less favorable laws for businesses, it would fail to assure both out-of-state and Oklahoma businesses that the statute's time limitations would protect them in the future. Businesses in Oklahoma cannot predict or control potential plaintiffs' future residency, making it detrimental to subject them to varying laws based on a plaintiff's move. In contrast, not applying California law in similar circumstances would have a lesser impact on California's interests. While California's liberal statute of limitations for asbestos-related injuries could be affected if its law is not applied, California's interest in facilitating recovery is diminished when the defendant's conduct occurred outside of its jurisdiction. Previous California decisions, such as Offshore Rental, illustrate a restrained approach to applying California law in cases involving conduct in other states, asserting that businesses entering another state should be subject to its legal risks without imposing unwarranted liabilities based on their actions in California. The plaintiff, a resident of Oklahoma at the time of asbestos exposure, cannot impose liability on Foster Wheeler under California law, as Oklahoma has a stronger interest in the case. It is argued that California's interest in applying its law is lesser since the exposure occurred in Oklahoma, paralleling the case of Castro where a California resident injured in Alabama sought recovery based on California's vicarious liability laws. The Alabama law, which limits owner liability for permissive users, is deemed more applicable, reflecting Alabama's interest in regulating conduct within its borders. The Castro court emphasized that while California has a legitimate interest in protecting its residents, that interest does not outweigh Alabama's authority to govern liability issues arising in its territory. Similar reasoning is supported by other cases, including Tucci and Arno, indicating that when a California resident is injured in another state, the law of that state typically takes precedence if it restricts or denies liability for the defendant's actions. Overall, California’s interests must yield to the legal framework of the state where the incident occurred, reinforcing the principle that a state’s authority over local matters is paramount. The allocation of "lawmaking influence" in this case favors Oklahoma over California, despite the presence of asbestos exposure in California. Generally, California would have a predominant interest in regulating conduct related to toxic substance exposure if the defendant's actions occurred within the state. Previous rulings, such as North American Asbestos Corp. v. Superior Court, support applying California law when exposure occurs there, regardless of the defendant's state of incorporation. However, the plaintiff argues that his case is similar to Kearney, where the defendant's out-of-state conduct directly affected a California resident. The court finds this analogy unpersuasive, distinguishing it from cases involving interstate interactions or products placed in commerce with foreseeable injury in California. The plaintiff's reliance on his California residency during the manifestation of his illness does not differentiate his situation from other cases, like Castro, where injuries occurred out of state but treatment took place in California. Past California choice-of-law decisions emphasize that the state where the injury-producing conduct occurred has the primary responsibility in determining liability, pointing to Oklahoma's regulatory interest in this instance. The legal decision emphasizes the application of Oklahoma law over California law in a choice-of-law analysis, particularly concerning statutes of limitations and repose. The court determined that Oklahoma's interest would be more adversely affected by not applying its statute of repose than California's interest would be by not applying its statute of limitations. Consequently, the Court of Appeal's ruling was reversed, and the case was remanded to address the plaintiff's argument regarding whether the boiler in question was categorized as an improvement to real property under Oklahoma law. Additionally, the case involved claims for damages due to the plaintiff's illness, alongside a loss of consortium claim from his wife, Lucille McCann. After the plaintiff, Terry McCann, passed away during the appeal, his wife was substituted as the successor in interest. A request for judicial notice regarding this substitution was denied since the relevant documents were already part of the court's record. The excerpt also briefly distinguishes between statutes of limitations and statutes of repose, noting that the latter imposes a time limit on bringing a claim that is independent of when the cause of action accrues or when the injury is discovered, making it a more stringent barrier to legal action than a statute of limitations. A cause of action arising in another state or foreign country cannot be maintained in this state if the local laws prevent it due to the statute of limitations, except for a citizen who has held the cause of action since it accrued. In Buttram v. Owens-Corning Fiberglas Corp., the complexities surrounding the accrual of a cause of action for asbestos-related mesothelioma are examined. Mesothelioma is a latent disease, often with decades between exposure to asbestos and the development of detectable tumors, complicating diagnosis and the determination of when the cause of action arises. The court noted that the unique nature of toxic substance cases, characterized by lengthy latency and diagnostic challenges, differs from traditional torts, which typically involve clear causation events. The determination of when a cause of action is considered to have "arisen" can vary based on legal context. In the current case, there are questions regarding whether the plaintiff's cause of action should be deemed to have arisen in Oklahoma (where exposure occurred) or California (where the illness was diagnosed and compensable damage occurred). Additionally, the citizenship of the plaintiff at the time the cause of action accrued is debated, particularly in relation to avoiding forum shopping by individuals exposed to toxic substances without immediate compensable injuries. Various jurisdictions have differing interpretations on where a cause of action has "arisen" or "accrued" concerning borrowing statutes. Section 109 stipulates that no tort action for damages related to deficiencies in the design, planning, supervision, or construction of real property improvements can be initiated more than ten years after the substantial completion of such improvements. This includes claims for property damage or personal injury, including wrongful death, arising from these deficiencies. Although Section 109 was enacted in 1978, Oklahoma case law confirms its applicability to tort claims related to improvements completed before the statute's enactment, affirming that it does not infringe on plaintiffs' rights. The Court of Appeal has not yet addressed whether the boiler qualifies as an improvement under Oklahoma law, prompting a remand for this issue to be considered. Additionally, the Oklahoma Legislature recently enacted laws affecting asbestos-related claims, stating that the limitations period for such claims does not begin until the claimant discovers, or should have discovered, their physical impairment due to asbestos exposure. However, this new provision only applies to claims not barred as of its effective date, meaning it does not retroactively impact claims that were previously barred by the statute of repose, which remains relevant for the current case. Lastly, the Code of Civil Procedure section 337.15 echoes the ten-year limit for actions against those involved in the development or improvement of real property, reinforcing the statute of repose's significance in these legal contexts. In civil actions for injury or illness due to asbestos exposure, California Code of Civil Procedure section 340.2 stipulates that claims must be initiated within one year of the plaintiff's first disability or knowledge of the causal link between the exposure and the disability. "Disability" refers to the inability to perform regular work due to exposure. The case Offshore Rental illustrates that Louisiana's legal standards aim to protect businesses from excessive liabilities related to employee service losses, applicable to all commercial entities operating in the state. The plaintiff argued that Foster Wheeler had a duty to warn about asbestos hazards, as it should have anticipated that its boilers would expose users to such materials. The communication of warnings was seen as necessary for the plaintiff in Oklahoma. A federal court expressed doubt about a state's right to allow a resident to claim damages based on actions occurring outside its borders, although recent Supreme Court rulings suggest that a state's interest in providing remedies to its residents, even for out-of-state conduct, is a legitimate consideration in choice-of-law analyses. Ultimately, it was determined that Oklahoma law should govern the case, rendering Foster Wheeler's arguments against applying California law unnecessary.