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McCann v. Foster Wheeler LLC

February 18, 2010

TERRY MCCANN ET AL., PLAINTIFFS AND APPELLANTS,
v.
FOSTER WHEELER LLC, DEFENDANT AND RESPONDENT.



Ct.App. 2/8 B189898 Los Angeles County Super. Ct. No. BC336869 Judge: Jon Michael Mayeda.

The opinion of the court was delivered by: George, C. J.

This case presents a choice-of-law issue arising in a lawsuit filed by plaintiff Terry McCann (plaintiff) to recover damages for an illness, mesothelioma, allegedly caused by his exposure to asbestos. Although the complaint seeks recovery from numerous defendants, the issue before us relates solely to the potential liability of a single defendant, Foster Wheeler LLC (Foster Wheeler), a company that specially designed, manufactured, and provided advice regarding the installation of a very large boiler at an oil refinery in Oklahoma in 1957. At the time the boiler was being installed at the Oklahoma refinery, plaintiff, then an Oklahoma resident and a newly hired engineering sales trainee employed by the construction company that was installing the boiler, allegedly was exposed to asbestos at various times over a two-week period while he observed the application of asbestos insulation to the boiler by an independent insulation contractor.

Eighteen years later, in 1975, after working at various jobs in Minnesota and Illinois, plaintiff moved to Dana Point, California to take a position as executive director of Toastmasters International. In 2005, after having retired from his Toastmasters position in 2001 and continuing to reside in California, plaintiff was diagnosed with mesothelioma. A few months later, plaintiff filed this action in California, naming numerous defendants, including Foster Wheeler.

Prior to trial, Foster Wheeler moved for summary judgment on various grounds, including that plaintiff's action against it was governed by, and barred under, an Oklahoma statute of repose that required any cause of action against a designer or constructor of an improvement to real property to be filed within 10 years of the substantial completion of the improvement. In opposing the motion, plaintiff contended, first, that his cause of action for an injury or illness caused by exposure to asbestos should be governed by the relevant California statute of limitations (under which the action would have been timely filed), rather than by Oklahoma law, and, second, that in any event Foster Wheeler's boiler was not an improvement to real property within the meaning of the relevant Oklahoma statute of repose.

After the trial court initially determined that Oklahoma, rather than California, law should apply to the timeliness issue but that there were disputed questions of fact regarding whether the action against Foster Wheeler fell within the reach of the Oklahoma statute of repose, the parties agreed that the trial court, instead of a jury, should determine whether the Oklahoma statute applied. After considering the declarations filed by each party and a number of judicial decisions interpreting the Oklahoma statute, the trial court found that Foster Wheeler was a designer of an improvement to real property within the meaning of the Oklahoma statute of repose and entered judgment dismissing Foster Wheeler as a defendant in plaintiff's underlying action.

On appeal, the Court of Appeal concluded that the trial court erred in determining that Oklahoma law rather than California law should apply in these circumstances; as a consequence, the Court of Appeal did not reach the question whether the trial court erred in finding that the action against Foster Wheeler fell within the reach of the applicable Oklahoma statute of repose. In analyzing the choice-of-law issue under the "governmental interest" approach endorsed by the governing California decisions, the Court of Appeal reasoned that California "has an obvious interest in providing a remedy to its long-term residents who sustain asbestos-related injuries," but that Oklahoma's interest in the application of its statute of repose "is substantially . . . an interest in protecting Oklahoma defendants from liability for conduct occurring in Oklahoma." Because Foster Wheeler's corporate headquarters was located in New York rather than in Oklahoma, the Court of Appeal found that Foster Wheeler was not "among the defendants in whose favor Oklahoma's statute of repose is primarily directed" and consequently that "any significant interest of Oklahoma in the application of its statute of repose . . . is difficult to discern." The Court of Appeal further concluded that even if it were assumed a "true conflict" exists in this case, the interests of California would be more impaired by the application of Oklahoma law than would be the interests of Oklahoma by the failure to apply its law. Accordingly, the appellate court held that the trial court erred in applying the Oklahoma statute of repose to McCann's claim against Foster Wheeler, and reversed the trial court's judgment in favor of Foster Wheeler.

On petition by Foster Wheeler, we granted review primarily to consider whether the Court of Appeal was correct in determining (1) that Oklahoma's interest in the application of its statute of repose is substantially limited to application of the statute to companies headquartered in Oklahoma and does not equally encompass out-of-state companies who design or construct improvements to real property located in Oklahoma, and (2) that California's interests, rather than Oklahoma's interests, would be more impaired by the failure to apply the respective state's law on the facts presented here.

For the reasons discussed more fully below, we conclude that the decision of the Court of Appeal should be reversed. As we explain, prior California choice-of-law decisions demonstrate that, contrary to the conclusion reached by the Court of Appeal, Oklahoma's interest in the application of its statute of repose applies as fully to out-of- state companies that design and construct improvements to real property in Oklahoma as to Oklahoma companies that design and construct such improvements. Further, although California has a legitimate interest in affording a remedy to a resident of California whose asbestos-related illness first manifests itself when the individual is a California resident, past California cases indicate that it is generally appropriate for a court to accord limited weight to California's interest in providing a remedy for a current California resident when the conduct of the defendant from whom recovery is sought occurred in another state, at a time when the plaintiff was present in (and, in the present situation, a resident of) that other state, and where that other state has its own substantive law, that differs from California law, governing the defendant's potential liability for the conduct that occurred within that state. Taking these factors into consideration, we conclude that Oklahoma's interest would be more impaired by the failure to apply its law in these circumstances than would be California's interest by the failure to apply its law, and thus that the law of Oklahoma, rather than the law of California, should apply to the issue presented here.

I.

A.

The facts relevant to the choice-of-law issue before us are not in dispute.

As noted, Foster Wheeler's asserted liability for plaintiff's illness is based upon plaintiff's alleged exposure to asbestos in Oklahoma over a two-week period in July 1957, nearly 50 years prior to the time plaintiff was diagnosed with mesothelioma in 2005.

In July 1957, plaintiff, then an Oklahoma resident and a recent college graduate, was a newly hired engineering sales trainee employed by Tulsa Refinery Engineering Company (TRECO), an oil refinery construction company that was engaged in constructing an expansion of an oil refinery owned by D-X Sunray Oil Company of Tulsa, Oklahoma (Sunray). In connection with the expansion, Sunray had ordered a specially designed steam generator from Foster Wheeler, a corporation headquartered in New York. The generator consisted of a custom-designed and extensively engineered boiler and related equipment that was to be designed and manufactured by Foster Wheeler in New York, and shipped in a disassembled condition to the refinery in Oklahoma, where it was to be assembled and installed by TRECO at the refinery, in consultation with an advisor employed by Foster Wheeler. The boiler in question was "huge" - more than 25 feet high and weighing many tons - and was to be installed on a specially poured foundation constructed by TRECO.

Pursuant to the terms of the contract between Sunray and Foster Wheeler, the generator was shipped to Sunray without insulation. The responsibility for installing the necessary insulation for the generator was to be borne by Sunray. Sunray hired an independent contractor - a company other than TRECO but not identified in the record - to install the insulation around the boiler. Plaintiff maintains that Foster Wheeler specified the need for insulation and knew or should have known the insulation was likely to contain asbestos.

As noted, at the time of the alleged exposure plaintiff was a newly hired engineering sales trainee employed by TRECO. Plaintiff testified at his deposition that his job responsibility at that time was simply to observe the ongoing construction at the refinery and to learn all there was to know about building a refinery. When plaintiff began work with TRECO, the assembly and installation of the Foster Wheeler boiler had been largely completed, and the independent contractor was in the process of installing insulation around the boiler and related equipment. Plaintiff acknowledged he did not assist in the actual application or installation of the insulation, but stated he observed the installation work for brief periods and occasionally stepped inside the boiler to take a look. He recalled observing the sawing of block insulation, the preparation and installation of insulating cement on the boiler, and the rising of dust clouds created by the mixing of the cement. In response to a question concerning the total amount of time he had been around the Foster Wheeler boiler, plaintiff stated that a "wild guess" would be "two or three days in total."

Construction of the generator and its insulation was completed within a few weeks of plaintiff's arrival at the Sunray refinery. After observing other aspects of the construction of the refinery expansion for more than a year, plaintiff moved to an office job in TRECO's Oklahoma headquarters in Tulsa.

In 1965, plaintiff left Tulsa and moved to Minnesota, where he began working in the advertising industry. In 1967, plaintiff moved to Chicago, Illinois to take a job as manager of education for a food industry trade association. While in Chicago, he earned an MBA degree from Loyola University Chicago.

In 1975, plaintiff moved to Dana Point, California, accepting the position of executive director of Toastmasters International, a nonprofit organization that assists individuals in becoming more competent and comfortable in public speaking. He remained director of Toastmasters for 26 years until retiring in 2001.

In April 2005, plaintiff, who continued to reside in California, was diagnosed with mesothelioma. He filed the complaint in the underlying action in July 2005, naming numerous defendants, including Foster Wheeler.*fn1

B.

As noted above, prior to the commencement of trial Foster Wheeler filed a motion for summary judgment. Among other contentions, the summary judgment motion asserted that the timeliness of the action should be governed by Oklahoma law, rather than California law, and that under Oklahoma law plaintiff's cause of action against Foster Wheeler was barred by an Oklahoma statute of repose*fn2 providing that any tort action for injury arising from "the design, planning, supervision, or observation of construction or construction of an improvement to real property" must be brought within 10 years of the "substantial completion" of the improvement. (Okla. Stat. tit. 12, § 109 (hereafter section 109).) Because plaintiff's lawsuit was filed long after the 10- year period specified in the Oklahoma statute of repose had expired, Foster Wheeler maintained that the action against it must be dismissed.

In support of this contention, the summary judgment motion first maintained that under the "governmental interest" analysis generally applied by California courts in resolving choice-of-law issues, the application of Oklahoma law rather than California law is appropriate. Thereafter, to support its claim that section 109 - the Oklahoma statute of repose - applies to the facts of this case, the summary judgment motion relied upon an Oklahoma decision that determined the statute was applicable to the manufacturer and designer of a very large, specially designed piece of equipment installed in an industrial building. (Ball v. Harnischfeger Corp. (Okla. 1994) 877 P.2d 45 [holding § 109 applied to designer and manufacturer of large crane specially designed for installation in a particular building].) The motion attached a declaration of an engineer describing in detail the size and features of the boiler in question and the extensive engineering efforts that were entailed in designing and constructing the boiler to meet the particular specifications of the Sunray refinery.

In his opposition to the motion for summary judgment, plaintiff first maintained that section 361 of the Code of Civil Procedure (section 361) - California's so-called "borrowing statute," which we discuss below (post, pp. 15-20) - requires application of the California statute of limitations in this case without consideration of the governmental interest analysis that ordinarily governs the resolution of choice-of-law issues under California law. Although section 361 provides that, in general, a cause of action arising in another state cannot be maintained in California if the other state's law bars the action due to a lapse of time, this statute contains an exception for a person "who has been a citizen of this State, and who has held the cause of action from the time it accrued." The opposition to the summary judgment motion argued that plaintiff fell within this exception and that, as a consequence, section 361 mandated application of the relevant California statute of limitations without regard to the governmental interest analysis.

Plaintiff further argued that even if section 361 did not preclude resort to the governmental interest analysis, under a proper application of that analysis California law, rather than Oklahoma law, should be found applicable. Plaintiff maintained that California's governmental interest would be significantly impaired by application of the Oklahoma statute of repose to bar plaintiff's action against Foster Wheeler, whereas Oklahoma had no interest in barring a cause of action that, plaintiff claimed, arose outside Oklahoma's borders because plaintiff first incurred the symptoms and effects of mesothelioma while he was a longtime resident of California. Finally, plaintiff contended that even if Oklahoma law were applicable, Foster Wheeler did not fall within the reach of the Oklahoma statute of repose, because Foster Wheeler was merely the manufacturer of a defective product and should not be considered the designer of an improvement to real property within the meaning of the Oklahoma statute.

In ruling on the summary judgment motion, the trial court, although agreeing with Foster Wheeler's argument that Oklahoma law, rather than California law, should govern the timeliness of the action, nonetheless denied Foster Wheeler's motion for summary judgment, on the ground that there was a triable issue of fact concerning whether Foster Wheeler was a designer of an improvement to real property for purposes of the Oklahoma statute of repose.

Thereafter, Foster Wheeler filed a motion under Evidence Code section 402, seeking to have the trial court determine the "narrow factual question" whether Foster Wheeler was a designer of an improvement to real property under the terms of the Oklahoma statute of repose. Plaintiff joined in the request to have this question resolved by the trial court rather than by a jury, asking the trial court to rule in its favor on this issue and to preclude Foster Wheeler from bringing any evidence relating to the Oklahoma statute of repose before the jury.

After considering the evidence and legal argument presented by both parties on this issue, the trial court found that Foster Wheeler was a designer of an improvement to real property within the meaning of the Oklahoma statute of repose. Accordingly, the trial court entered judgment in favor of Foster Wheeler, dismissing plaintiff's action against Foster Wheeler.

C.

In the Court of Appeal, plaintiff on a number of grounds challenged the trial court's judgment in favor of Foster Wheeler.

First, plaintiff asserted the trial court erred in failing to conclude that the timeliness of plaintiff's action should be governed by California law, rather than Oklahoma law. Plaintiff again argued initially that application of the California statute of limitations was compelled under the provisions of section 361, California's borrowing statute, without any need to consider the governmental interest analysis generally applicable to choice-of-law issues. Further, plaintiff maintained that even if the governmental interest analysis were applied, under that ...


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