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Warren v. Shelter Mutual Insurance Co.

Supreme Court of Louisiana

October 18, 2017

RON WARREN, INDIVIDUALLY AND ON BEHALF OF THE ESTATE OF DEREK HEBERT
v.
SHELTER MUTUAL INSURANCE COMPANY, ET AL.

         ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, THIRD CIRCUIT, PARISH OF CALCASIEU

          GUIDRY, JUSTICE.

         Ron Warren, individually and on behalf of the Estate of Derek Hebert, filed a petition for damages seeking to recover for the wrongful death of his son in a recreational boating accident under general maritime law and products liability. A jury found the defendant, Teleflex, Inc. ("Teleflex"), liable under the plaintiff's failure to warn theory of the case and awarded compensatory damages of $125, 000 and punitive damages of $23, 000, 000. The court of appeal affirmed. We granted Teleflex's writ application mainly to review whether the trial court properly granted the plaintiff a new trial and whether the award of punitive damages was excessive and resulted in a violation of the defendant's right to constitutional due process. For the reasons expressed below, we affirm the lower court's judgment in part, amend the judgment to award $4, 250, 000 in punitive damages to the plaintiff, and affirm as amended.

         FACTS AND PROCEDURAL HISTORY

         On May 7, 2005, Daniel Vamvoras was operating a 1998 Champion boat owned by his father, Glen Vamvoras, on navigable waters consisting of a former channel of the Calcasieu River. Derek Hebert was a passenger in the boat along with several other young people. As the boat was on plane, that is, travelling at a sufficiently high rate of speed to cause the hull to rise out of the water, the hydraulic steering system manufactured by the defendant Teleflex suddenly failed, causing the boat to turn violently, referred to as a "J-hook, " ejecting Derek and four of the other passengers from the boat. Because the kill switch had not been engaged, the boat spun around and its propeller struck Derek nineteen times, causing traumatic damage that resulted in his death. A dive team later recovered his body from the bottom of the lake.

         Derek's parents filed survival and wrongful death claims against various defendants, as well as a punitive damages claim under general maritime law. Those defendants included Glen Vamvoras and his son Daniel, as well as the operator of another boat that had collided with the Vamvoras boat after the latter lost steering, various marinas, insurers, and manufacturers. Derek's mother's claims were settled after mediation and her suit dismissed. Derek's father proceeded with his wrongful death and survival actions, seeking compensatory damages, punitive damages, and judicial interest thereon.

         This matter was tried twice, as explained herein. After years of litigation, the matter finally came to trial in 2014 against defendants Glen and Daniel Vamvoras and Teleflex. This trial was bifurcated as to the issues of liability and exemplary damages. At the close of the liability portion of that first trial, the district court granted the Vamvorases' motions for a directed verdict, dismissing them from the suit and leaving Teleflex as the only defendant on the verdict form. The first jury returned with a finding of no liability on the part of Teleflex; so, the trial court signed a judgment in September 2014 dismissing the plaintiff's claims. However, the trial court thereafter granted the plaintiff's motion for new trial based on what it believed to be prejudicial error during the first trial.

         The second trial, which involved only Teleflex as the defendant and which was not bifurcated as to liability and exemplary damages, resulted in a jury verdict in favor of the plaintiff. The jury found liability on the part of Teleflex and awarded compensatory damages of $125, 000 and exemplary damages of $23, 000, 000. Based on this verdict, the trial court signed a judgment in December 2014 awarding these amounts, as well as prejudgment interest on compensatory damages.[1]

         Teleflex sought a JNOV or, in the alternative, a motion for new trial or a remittitur on punitive damages. The trial court denied Teleflex's post-trial motions following a hearing. Thereafter, Teleflex filed a suspensive appeal. The court of appeal, as discussed more fully below, affirmed. Warren v. Shelter Mut. Ins. Co., 15-354 (La.App. 3 Cir. 6/29/16), 196 So.3d 776. We granted Teleflex's writ application to review that judgment. Warren v. Shelter Mut. Ins. Co., 16-1647 (La. 1/13/17), 215 So.3d 246.

         DISCUSSION

         In this court, Teleflex asserts six assignments of error.

1. The district court granted a new trial without determining whether the issue on which it based that grant was material to the verdict or had prejudiced the plaintiff, or properly determining that there had been a miscarriage of justice, and the appellate court erred in affirming that ruling.
2. The court of appeal erred in affirming the trial court's rejection of proposed jury instructions informing the jury that the duty of a component part manufacturer to warn differs from that of the manufacturer of an end product sold to the public.
3. The court of appeal erred in affirming the trial court's decision in the second trial to "un-bifurcate" and allow punitive damages evidence and argument to be presented during the trial of liability, and further erred in failing to address the substantial prejudice and unfairness to Teleflex caused by un-bifurcation.
4. The court of appeal erred in affirming the trial court's finding of liability for punitive damages despite a lack of evidence of reckless, wanton, or callous conduct.
5. The court of appeal erred in affirming the trial court's acceptance of the amount of punitive damages, which is grossly excessive as a matter of federal maritime and constitutional law.
6. The court of appeal erred in failing to scrutinize fully the fairness and propriety of the verdict and judgment in this punitive damages case in light of: (a) the lack of evidence supporting punitive damages; (b) introduction into the case of passion and prejudice resulting from the failure to bifurcate liability from punitive damages; (c) erroneous instructions on the duties of Teleflex; and (d) a grossly disproportionate punitive damages award.

         Liability and Compensatory Damages

         Before we address these individual assignments, we will summarize the basis on which the jury found liability on the part of Teleflex, which Teleflex specifically assigned as error in the court of appeal. Warren, p. 35, 196 So.3d at 799-800. The court of appeal found no manifest error in the jury's finding that Teleflex had breached a duty owed to the plaintiff and that such breach had caused the plaintiff's damages. Id., p. 36, 196 So.3d at 800. Although Teleflex challenges the process that resulted in that finding of liability as corrupted by the trial court's failure to bifurcate trial on the liability claim from trial on the punitive damages claim, and further corrupted by the trial court's refusal to instruct the jury on the duty of a component part manufacturer, the court of appeal nevertheless affirmed the jury's verdict on liability and compensatory damages for failure to warn.

         The plaintiff sought damages under general maritime law and the Louisiana Products Liability Act alleging Teleflex had failed to warn of the inherent danger in its product. The plaintiff's theory of liability at trial was that the steering system itself was defective due to an inherently dangerous risk that was not obvious to the user such that it required adequate warnings, and the warnings Teleflex had provided were not adequate. Teleflex's defense was that its product was not defective and that such warnings were not necessary, because the loss of fluid would result in tell-tale signs indicating to the operator that there was an issue with the steering system. Teleflex also asserted the leaks in the system in this case were caused by the replacement by an unknown party of one of the hydraulic hoses with a non-Teleflex hose, and that there were obvious signs of leaking fluid in the boat, which someone had attempted to resolve by using a pipe-wrench on the hose coupling.

         The court of appeal cited the law as follows, which Teleflex does not contest.

In considering whether a warning in an instruction manual is inadequate because it should have been placed on the product itself, a court must consider the nature and severity of danger to be warned against, likelihood that the product will be used by persons who have not read the manual, practicality and effectiveness of placing the warning on the product itself, and any other relevant factors.
Jaeger v. Auto. Cas. Ins. Co., 95-2448, pp. 8-9 (La.App. 4 Cir. 10/9/96), 682 So.2d 292, 297, writ denied, 96-2715 (La. 2/7/97), 688 So.2d 498 (citing Black v. Gorman-Rupp, 94-1494 (La.App. 4 Cir. 5/16/95), 655 So.2d 717).
In Pavlides v. Galveston Yacht Basin, Inc., 727 F.2d 330, 338 (5th Cir.1984) (footnote omitted), the federal Fifth Circuit stated:
It is a fundamental principle of the law of product liability in this Circuit that a manufacturer has a responsibility to instruct consumers as to the safe use of its product and to warn consumers of dangers associated with its product of which the seller either knows or should know at the time the product is sold. Borel [v. Fibreboard Paper Prods. Corp.], 493 F.2d [1076, 1088-90 (5th Cir.1973), cert. denied, 419 U.S. 869, 95 S.Ct. 127, 42 L.Ed.2d 107 (1974)]; see Restatement (Second) of Torts, Section 402 A. comment j. In assessing what hazards are foreseeable, a manufacturer is held to the status of an expert. Borel, 493 F.2d at 1089. The lack of adequate warnings renders a product defective and unreasonably dangerous even if there is no manufacturing or design defect in the product. Martinez v. Dixie Carriers, Inc., 529 F.2d 457, 465-66 (5th Cir.1976); Reyes [v. Wyeth Labs., ] 498 F.2d [1264, ] 1272- 73 [(5th Cir.1974), cert. denied, 419 U.S. 1096, 95 S.Ct. 687, 42 L.Ed.2d 688 (1974).]
In Hooker v. Super Products Corp., 98-1107, pp. 28-29 (La.App. 5 Cir. 6/30/99), 751 So.2d 889, 905, writs denied, 99-2911, 99-2947 (La.12/17/99), 751 So.2d 880, 884, the court stated:
Under the circumstances of this case, warnings should have been placed on the truck in such a manner that all operators could have been aware of the danger of being near the hose or hose shield on this particular vehicle. If there was any warning decal on the truck at all, it was definitely not on the side where plaintiff was working. The danger of being near a hose which could possibly rupture cannot be considered open and obvious, since handling a similar hose was part and parcel of plaintiff's usual occupation.
Once the trier of fact determines that the inherent danger is not obvious, and the consumer is not aware of or trained to detect that danger, then the warning, or lack thereof, must be scrutinized. Clark v. Jesuit High School of New Orleans, 572 So.2d 830 (La.App. 4th Cir.1990), writ denied, 576 So.2d 48 (La. 1991). Therefore, the warning must be: (1) properly worded to signify the intensity of the inherent danger in the product; (2) properly placed on the product so that the consumer cannot avoid seeing it; and (3) it must convey to the consumer that injury or damage can result from a normal or intended use of the product. Id. The manufacturer can then present evidence to show its product either did not require a warning or that the warning that was provided was adequately worded or placed. Id.
Asbestos Plaintiffs v. Bordelon, Inc., 96-525 (La.App. 4th Cir.10/21/98), 726 So.2d 926.
Plaintiff testified that had he read a warning about the hose, he would have heeded it. In the present case there was no warning for plaintiff to see.

Warren, pp. 39-40, 196 So.3d at 801-02.

         This summary of the applicable jurisprudence comports with the LPLA. In Jack v. Alberto-Culver USA, Inc., 06-1883, p. 4 (La. 2/22/07), 949 So.2d 1256, 1258, this court outlined a plaintiff's burden of proof in a products liability case, stating:

To maintain a successful products liability action under the LPLA, a plaintiff must establish four elements: (1) that the defendant is a manufacturer of the product; (2) that the claimant's damage was proximately caused by a characteristic of the product; (3) that this characteristic made the product "unreasonably dangerous;" and (4) that the claimant's damage arose from a reasonably anticipated use of the product by the claimant or someone else. La. R.S. 9:2800.54(A).

         "A product is 'unreasonably dangerous' under the LPLA if and only if the product meets at least one of [four] criteria, " one of which is that "the product is unreasonably dangerous because an adequate warning about the product has not been provided as provided in La. R.S. 9:2800.57." Id. In a failure to warn case, the claimant bears the burden of establishing that "at the time the product left the manufacturer's control, the product possessed a characteristic that may cause damage and the manufacturer failed to use reasonable care to provide an adequate warning of such characteristic and its danger to users and handlers of the product." La. R.S. 9:2800.57. The LPLA defines "adequate warning" as:

a warning or instruction that would lead an ordinary reasonable user or handler of a product to contemplate the danger in using or handling the product and either to decline to use or handle the product or, if possible, to use or handle the product in such a manner as to avoid the danger for which the claim is made. La.R.S. 9:2800.53(9).

Id. at 1258-59. Whether a product is unreasonably dangerous due to an inadequate warning is a question for the trier of fact that is reviewed under the clearly wrong/manifest error standard. Brooks v. State ex rel. Dep't of Transp. and Dev., 10-1908 (La. 7/1/11), 74 So.3d 187.

         In this case, the Louisiana Department of Wildlife & Fisheries (Wildlife & Fisheries) investigated the accident and determined that the boat, which had been purchased pre-owned by Glen Vamvoras, lost its steering because of a hydraulic oil/fluid leak in one of the steering system's hydraulic lines at a hose/nut or coupling assembly. Teleflex manufactured and supplied the boat's hydraulic steering system, SeaStar, but one of the original Teleflex hoses had been replaced by persons unknown with a non-Teleflex hydraulic hose.

         Teleflex's SeaStar hydraulic steering system consists of three major parts. The helm pump is mounted to the steering wheel (installed underneath or alongside it; here, underneath). Connected to the pump are two fluid-filled hydraulic hoses that run under the boat deck to the back of the boat. There, the hoses connect to either end of a cylinder that is mounted horizontally to the front of the outboard motor. When the wheel is turned left or right, additional hydraulic fluid is pumped into the corresponding hose, which then forces the cylinder's piston to move the motor. The SeaStar is a system designed to move fluid, not consume it. If there is fluid loss, there is a leak, which may eventually happen due to connections using metal couplings and rubber O-rings. Air then gets into the line and changes the steering response, causing what is referred to as a spongy feeling by the compression of air.

         At this point, the system can still be operated and the boat controlled, the court of appeal noted. But with enough fluid loss, control of the boat will be taken completely out of the hands of the driver, and the motor will go into a free spin, kicking completely to one side. The boat turns suddenly on its own axis, referred to in the industry as a "J-hook" or "kill spin." Occupants are often ejected and are immediately in danger of being struck by the spinning propeller, even if the throttle is shut down. The court of appeal found the evidence clearly revealed that Teleflex, a very sophisticated boating industry manufacturer, was well aware of this phenomenon.

         Eric Fetchko, Vice President and General Manager of SeaStar Solutions, Richmond, British Columbia, went to work for Teleflex in 1986, and invented the SeaStar hydraulic steering system. He testified that Teleflex knew about the fluid loss consequences but that they could not be designed out of the system. Teleflex had performed tests in 1989 and 2004 that confirmed that a very small loss of fluid in the hydraulic system could result in total failure of the steering system. There was a warning on the bottom of the steering cylinder, but the court of appeal found the warning did not warn of the risk of leaks, fluid loss, ejection, or death, nor was it visible from within the boat. Mr. Fetchko, and Teleflex expert Augusto Villalon, a consultant for the Coast Guard, each testified that "bumpy" or "mushy" steering should have adequately forewarned the Vamvorases of the imminent danger before noticing a leak in the hydraulic system. Mr. Fetchko testified he thought it had adequate warning in the noise and reduction and the degradation of steering. He stated the "mushy" feeling would be felt at the helm alerting the driver.

         Mr. Villalon testified that, given his background, he knew what to expect with fluid loss in a hydraulic steering system. He later conceded that a click or mushiness means different things to different people and that people who do not understand it as a warning lack experience.

         Stephen Killingsworth, an expert tendered and accepted in mechanical engineering, testified the "clicking" sound heard by the Vamvorases was normal according to Teleflex's own documents. He testified that, not only were these descriptive words subjective, but that the manual also failed to explicitly use any of these words to describe the malfunction indicators.

         Sgt. Liles of Wildlife & Fisheries, an experienced boating professional, testified that all of the Wildlife & Fisheries boats had this type of hydraulic steering system, and no one knew that this could happen. He indicated the department was going to cover this issue in its future teaching program because the motoring public was unaware of the danger.

         Glen and Daniel Vamvoras testified that they did not know of the danger from loss of fluid. Glen purchased the boat pre-owned; he testified that an owners' manual had not come with the boat, and that he had had the boat annually inspected. Glen stated that, while doing routine maintenance eight months prior to the accident, a friend suggested he add fluid to the system. Glen also stated that, though he added a few teaspoons of fluid, he did not believe this to be part of routine maintenance, and did not serve as an indicator of any issues with the steering system. Glen admitted that on more than one occasion the boat made an unidentifiable clicking sound, but only in reverse, and he had never had any issues with the steering system. Glen said that he never would have let his son Daniel drive the boat or put his friends in the boat if he had known of the danger. Daniel filed an affidavit stating that he would have heeded a warning if one had been provided.

         Daniel testified that on the day of the accident he had detected a leak at the point of connection between a hydraulic hose line and a mechanical housing at a nut on the boat's outboard motor. He stated he then tightened the nut, believing he had solved the problem, and proceeded to take the boat out for the day. Daniel admitted he had heard a clicking sound coming from the boat on the day of the accident, but denied knowing the source of the sound or having any other issues with the boat.

         In finding no manifest error in the jury's finding, the court of appeal noted that the American National Standard Product Safety Signs and Labels ("ANSI") publication provides guidance for manufacturers to alert users of their products to potential personal injury hazards inherent in their products. The court found the July 2006 manual, published a few months after this suit was filed, had partially complied with the 1991 ANSI standards, but concluded it was too late and too little to satisfy the warning requirements, because warnings in a manual are insufficient. The court of appeal concluded the warnings should have been on the steering system itself, citing the ANSI definitions and provisions.[2]

         The court of appeal noted that Mr. Killingsworth testified that, when a product has an inherently dangerous feature that cannot be designed out of the product, the manufacturer has a duty to warn of the specific danger. In this case, the court noted, the inherent danger was that a very small loss of fluid would result in loss of steering that could cause ejection and death. The court reasoned the warning needed to contain a signal or key word to get the user's attention, and the text needed to instruct the user to stop and repair fluid loss immediately to avoid the consequences. The court also found the warning needed to be placed where it would be seen and in proximity to the hazard. The court cited Mr. Killingsworth's testimony that Teleflex had a duty to put a sticker or decal on the front helm pump where the driver would see it at the wheel and where the oil is actually added. The court cited his testimony that another decal should be placed on the back cylinder of the steering system in a position so that it could be seen at the site of the leak. The court found such warning labels would have been consistent with the ANSI standards, and were required by applicable law.

         Here, the court reasoned, the driver of the boat attested that he would have heeded a warning had there been one, but the only text on the helm of the boat advised the operator to check the fluid level and hoses without any mention of the loss of steering resulting in ejection from the boat and possible death. The court of appeal found that, based on the evidence and the law presented, the jury was not manifestly wrong in finding that the Teleflex system had an inherent danger unknown to users, that Teleflex had a duty to warn users of such dangers, and that Teleflex was negligent in its failure to warn. Thus, the court of appeal affirmed the finding of liability for compensatory damages. Teleflex has not assigned error in the court of appeal's conclusion.

         New Trial

         We now turn to the issues raised by the defendant, which it claims infected the fact-finding process. With regard to the grant of the new trial, some background is in order. During the first trial, the plaintiff introduced a manual on the SeaStar steering system, which the plaintiff's expert used to refer to diagrams therein to explain his testimony about the hydraulic steering system. When that manual came to be introduced in evidence, there was some discussion as to which manual: the 1997 version that would have been supplied with the boat at its original sale in 1998, except that Mr. Vamvoras testified there was no manual in the boat when he purchased it used, or a 2006 revision. Counsel for Teleflex indicated the plaintiff could use either one. It was later determined the 2006 revision was the manual ultimately introduced in evidence as P-24, though there was no reference to the date of the manual at the time it was introduced. After the jury retired to deliberate, it sent in a written request for a copy of the SeaStar steering system manual and the ANSI guidelines. Approximately forty minutes later, the jury sent the judge a question asking whether it had been given the 1997 manual that would have been available with the original purchase of the boat in 1998. The trial court then called a bench conference, at which Teleflex's attorney assured the court that the jury had the manual provided with the boat in 1998. The jury foreman informed the trial court that the manual looked to be a 2006 revision and pointed out to the court the back of the manual, which had the following:

©1997 TELEFLEX CANADA LIMITED PARTNERSHIP PRINTED IN CANADA
FORM NO.296784 10000-07/06 Rev AK
The following exchange then occurred:
MR. FROHN: That's just a printer's code of ...

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