McCann v. Foster Wheeler LLC

48 Cal.4th 68

TERRY McCANN et al., Plaintiffs and Appellants, v. FOSTER WHEELER LLC, Defendant and Respondent.

No. S162435.

Supreme Court of California.

February 18, 2010.

Waters & Kraus, Waters Kraus & Paul, Paul C. Cook and Michael B. Gurien for Plaintiffs and Appellants.

Sedgwick, Detert, Moran & Arnold, Frederick D. Baker; Gordon & Rees and James G. Scadden for Defendant and Respondent.

National Chamber Ligation Center, Inc., Robin S. Conrad; Shook, Hardy & Bacon and Patrick J. Gregory for American Tort Reform Association, Coalition for Litigation Justice, Inc., Chamber of Commerce of the United States of America, American Chemistry Council, American Insurance Association, National Association of Mutual Insurance Companies, Property Casualty Insurers Association of America, National Association of Manufacturers and the State Chamber of Oklahoma as Amici Curiae on behalf of Defendant and Respondent.

Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae on behalf of Defendant and Respondent.

Gordon & Rees, Michael Pietrykowski and Don Willenburg for Ingersoll-Rand Company and Leslie Controls, Inc., as Amici Curiae on behalf of Defendant and Respondent.

OPINION

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 adviser 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...