Court Opinion

ID: 8911590
Source: CourtListenerOpinion
Date Created: 2022-11-27 03:13:29.722009+00
Date Added: 2024-06-11T17:08:34.774390
License: Public Domain

SAM D. JOHNSON, Circuit Judge,
dissenting:
This writer concurs in part III of the Court’s opinion and dissents from parts I and II. The Court’s opinion strikes the jury’s award of exemplary damages on two grounds. First, no evidence supports the jury’s finding that the defendant Freight-liner consciously disregarded the rights and welfare of others. Second, Freightliner’s compliance with industry custom in the design of truck fuel systems precludes an award of exemplary damages. This writer’s review of the record indicates that ample evidence supports the jury’s verdict. The Court’s opinion, however, makes no attempt whatsoever to analyze this evidence or to explain why it does not support the jury’s finding. The Court reaches its second basis for striking the jury’s award of exemplary damages, compliance with industry custom, with a similar lack of analysis.

Exemplary Damages in Products Liability

The Texas Constitution provides that, “Every person, corporation, or company, that may commit a homicide, through a wilful act, or omission, or gross neglect, shall be responsible, in exemplary damages, to the surviving husband, widow,” and heirs of the deceased. Tex.Const. art. XVI, § 26. The jury in this case awarded exemplary damages based on its finding of Freightliner’s gross negligence. Almost 100 years ago, Chief Judge Stay ton of the Texas Supreme Court defined gross negligence in a passage to which the Texas courts still refer today.
Gross negligence, to be the ground for exemplary damages, should be that entire want of care which would raise the belief that the act or omission complained of was the result of a conscious indifference to the right or welfare of the person or persons to be affected by it.
Missouri Pacific Railroad Co. v. Shuford, 72 Tex. 165, 10 S.W. 408, 411 (1888) (emphasis original).
The Court’s opinion in this case apparently accepts the proposition that a manufacturer can be liable for exemplary damages because of its gross negligence in designing, manufacturing, or marketing a product. The Texas Supreme Court has not addressed the issue, but two intermediate appellate courts have indicated that in the proper case they would allow the recovery of exemplary damages from a manufacturer liable for actual damages in products liability. In Heil Co. v. Grant, 534 S.W.2d 916, 926 (Tex.Civ.App. — Tyler 1976, writ *401ref’d n. r. e.) the court stated, “We believe that exemplary damages may be recovered under [article XYI, Section 26] of the Texas Constitution in a strict liability action for the death of the user of a defective product.” The district court in the instant case stated that the quoted language from Heil Co. v. Grant is dictum. 450 F.Supp. at 961. A close analysis of Heil Co. v. Grant, however, reveals that in the statement quoted above, the court was setting forth the law the trial court was to apply on remand. 534 S.W.2d at 926. The statement is not dictum. In Newding v. Kroger, 554 S.W.2d 15 (Tex.Civ.App. — Houston [14th Dist.] 1977), the court stated the plaintiff could recover exemplary damages in a products case, but then held that the plaintiff had failed to produce evidence of gross negligence.
Furthermore, a Texas district court has entered judgment on a jury’s award of punitive damages in a products liability case with facts similar to those of the instant case. Smith v. Cessna Aircraft Co., No. 70-9255-L, 193d Jud. Dist. Ct. Dallas Co., Texas, Nov. 26, 1972, noted in 16 Amer. Trial Law. Ass’n Newsletter 30 (1973) and Owen, Punitive Damages in Products Liability Litigation, 74 Mich.L.Rev. 1257, 1341-42 (1976). In Smith v. Cessna Aircraft Co., a plane manufactured by the defendant aborted its takeoff and crashed through a fence at a speed of less than 30 miles per hour. The crash itself did not injure the plane’s passengers. The crash, however, ruptured the plane’s fuel tank, and the fuel cascaded into the cabin, burning three passengers to death and injuring a fourth. The jury awarded $180,000 in punitive damages for the defendant’s gross negligence in failing to test the plane’s fuel system for crashworthiness.
The district judge in the instant case also concluded that the Texas courts would allow the recovery of exemplary damages in a products liability case. 450 F.Supp. at 962. He reasoned that the basis of products liability and the purpose of products liability differ from the basis of and the purpose of liability for exemplary damages, but that these differences were no obstacle to recovery on both grounds of liability in a single proceeding. The basis of recovery in products liability is the marketing of a defective product, and the purpose of products liability is to compensate an injured party for his loss and to redistribute his loss. Id. at 961. The basis for liability for exemplary damages is gross negligence. The purpose of liability for exemplary damages is to punish wrongdoers and to deter wrongful conduct in the future. Id.; Bennett v. Howard, 141 Tex. 101, 170 S.W.2d 709, 713 (1943); J. S. Abercrombie Co. v. Scott, 267 S.W.2d 206, 212 (Tex.Civ.App. — Galveston 1954, writ ref’d, n. r. e.). Exemplary damages can serve to punish and deter grossly negligent product manufacturers just as it punishes and deters other grossly negligent defendants. See Owen, supra, at 1261 (“punitive damages may be usefully employed in products liability litigation to punish and deter the marketing of defective products in flagrant disregard of the public safety”). Freightliner should be liable for exemplary damages in this case if it was gross negligence under Texas law.

Atlas Chemical

As stated above, gross negligence in Texas is simply that entire want of care that raises the inference that the defendant’s act or omission was the result of conscious indifference to or disregard for the right or welfare of others. Whether a defendant was grossly negligent depends on all the facts and circumstances surrounding that defendant’s acts or omissions. No single element of the defendant’s conduct is dis-positive. Siebenlist v. Harville, 596 S.W.2d 113, 115 (Tex.1980); McPhearson v. Sullivan, 463 S.W.2d 174, 176 (Tex.1971). The cases have never gone much further than Shu ford did in defining gross negligence. This is understandable because the definition of gross negligence must be sufficiently broad to encompass a great variety of conduct by defendants. In 1975 the Texas Supreme Court spoke, in Atlas Chemical Industries, Inc. v. Anderson, 524 S.W.2d 681 (Tex.1975), to settle two uncertainties in the law on gross negligence. Atlas Chemical established two propositions: (1) evidence of slight care on the part of a defendant *402does not preclude an award of exemplary damages; (2) exemplary damages will lie for an omission or a failure to act of the defendant. This Court recognized the import of Atlas Chemical in Knabe v. National Supply Division of Armco Steel, 592 F.2d 841 (5th Cir. 1979), a case the majority does not discuss.
In Atlas Chemical, a landowner sued the defendant chemical company for damage to his land caused by the company’s discharge of industrial waste upstream from the land. The jury awarded the plaintiff compensatory and exemplary damages. In its initial opinion, the Texas Supreme Court reversed the award of exemplary damages, holding that the evidence did not support a finding of gross negligence as defined in Shu ford. The court stressed the fact that the chemical company had reduced the amount of suspended solids in its discharge from 8,410 parts per million to 449 parts per million. On rehearing, seven justices changed their positions, and the court reversed itself.
At some point and under all the circumstances, the failure to make any correction to save downstream property owners from damage finally warrants a decision by the trier of fact that the managerial decision for this operation was made wholly without regard, and with conscious indifference to the rights of the property owners.
524 S.W.2d at 688. The court went on to note that for years the defendant “did nothing of any significance” to avoid damage to the property downstream from its plant. By reducing the suspended solids in its discharge, the defendant clearly exercised slight care to avoid injury to others. This alone was not enough to preclude liability for exemplary damages. Atlas Chemical establishes that a defendant is liable for exemplary damages if, in light of all the surrounding circumstances, it failed to exercise any care, or it exercised so slight a degree of care, that the fact finder could conclude that the defendant was consciously indifferent to the rights or welfare of others.
A simple linear scale illustrates the various degrees of care a defendant can exercise and the liability concomitant with those degrees. At the top of the scale is absolute care; a defendant who exercises absolute care is not liable in negligence. At the bottom of the scale is no care. The exercise of no care makes a defendant liable for actual damages based on negligence and for exemplary damages based on gross negligence. Reasonable care lies somewhere in the middle of the scale, and a defendant whose exercise of care places it above the reasonable care point on the scale is not liable for actual damages in negligence.
The final point on the scale falls below reasonable care and marks the exercise of so slight a degree of care that the defendant is grossly negligent and may be liable for exemplary damages. The grossly negligent point and the no care point are not identical. A defendant may have exercised some very slight degree of care and yet still have been consciously indifferent to the rights and welfare of others. No single element of a defendant’s conduct — even the exercise of slight care — conclusively determines whether the defendant was consciously indifferent.
This Court unfortunately resurrected the slight care defense to exemplary damages in Hernandez v. Smith, 552 F.2d 142 (5th Cir. 1977). The Hernandez opinion, however, did not cite Atlas Chemical. Instead, it relied on a Fifth Circuit case decided before Atlas Chemical, Ballenger v. Mobil Oil Corp., 488 F.2d 707 (5th Cir.), cert. denied, 416 U.S. 986, 94 S.Ct. 2390, 40 L.Ed.2d 763 (1974). The majority in this case also relies on Hernandez, ignoring both Atlas Chemical and a recent decision of this Court, Knabe v. National Supply Division of Armco Steel. In Knabe, this Court reinstated the jury’s award of exemplary damages, reversing the trial court’s grant of a judgment notwithstanding the verdict for the defendant. The Court recognized that under Atlas Chemical, the exercise of some slight care does not preclude the award of exemplary damages. “Although the evidence showed that National Supply, like Atlas [Chemical Company], had made some *403efforts to correct the problem, those efforts were neither thoroughgoing nor effective.” 592 F.2d at 845.
Atlas Chemical also clarified the proposition that exemplary damages can lie for a defendant’s failure to act. There had been cases that said exemplary damages would not lie for “passive or negative rather than positive or affirmative” negligence. See, e. g., Sheffield Division, Armco Steel Corp., 376 S.W.2d at 882. This is at odds with the constitutional provision that provides exemplary damages can lie for an omission of the defendant. Tex.Const. art. XVI, § 26. In Atlas Chemical the court stated that, “At some point . . ., the failure to make any correction . . . finally warrants a decision” that the defendant acted with conscious indifference to the rights of others. 524 S.W.2d at 688. Thus, in Atlas Chemical the Texas Supreme Court approved an award of exemplary damages based on the defendant’s failure to act.

The Standard of Review

In reviewing the grant of a judgment notwithstanding the verdict, this Court must consider all the evidence (not just the evidence supporting the verdict), making all reasonable inferences supporting the verdict. We must reverse the grant of a judgment notwithstanding the verdict if reasonable people in the exercise of impartial judgment might reach different conclusions whether exemplary damages were proper. Boeing Company v. Shipman, 411 F.2d 365, 374-75 (5th Cir. 1969) (en banc); Knabe, 592 F.2d at 844-45. In short, we must decide whether Freightliner exercised so slight a degree of care in designing its fuel system that the jury could reasonably infer that Freightliner was consciously indifferent to the rights and welfare of others.

The Evidence Supporting the Verdict

The plaintiffs in this ease alleged and the jury found that Freightliner was grossly negligent in designing the fuel system on its truck tractor. As the majority opinion in this case acknowledges, the Freightliner tractor carried 160 gallons of fuel in two lightweight aluminum “saddle” tanks strapped to the outside of the truck frame rails. Figures 1 and 2, as set out in the Appendix, show the location of the fuel tanks. Plaintiffs alleged and the jury found that the Freightliner fuel system was unreasonably dangerous. Plaintiffs’ expert testified that the fuel system was unreasonably dangerous because: the fuel tanks were placed in an anticipated impact area; the system was not designed to minimize spillage in the event of a puncture of a gas tank; and there was no barrier between the passenger cab and the fuel tanks to protect the cab’s occupants if the fuel caught on fire.
Plaintiffs’ expert testified that Freight-liner could have minimized the risk of harm to the occupants of its trucks by locating the fuel tanks away from anticipated impact areas on the truck. The expert proposed several alternative designs that would have reduced the chance a collision would rupture a fuel tank. These alternative designs are shown in Figures 3,4, and 5 in the Appendix. Alternatively, the expert stated that if Freightliner could not locate the fuel tanks outside of an impact area, that it could reduce the risk of a fire by equipping the tanks with flexible bladders and detachable couplings that would retain the fuel in the event of an impact and a rupture of a tank or a fuel line.
Freightliner does not challenge the jury’s finding that the fuel system was defective. The fuel system was defective because Freightliner failed to take steps to make it safer. Plaintiffs argued to the jury that Freightliner’s failure to take steps to design a safe fuel system made it liable for exemplary damages. This Court cannot overturn the jury’s verdict awarding exemplary damages unless, based on the evidence in the record, Freightliner acted with such a degree of care in designing its fuel system that the jury could not reasonably infer that Freightliner was consciously indifferent to the rights and welfare of others.
The evidence that makes such an inference reasonable includes the following:
1. In 1965, Freightliner conducted a drop test to determine the strength of fuel tanks like those on the truck in*404volved in this case. The drop test ruptured the tank, but Freightliner did nothing to modify the tank’s design or to conduct further tests.
2. Freightliner never crash tested any of its products before marketing them, and it did not even consider the costs of crash testing. Freightliner does not employ any crash safety experts on its staff despite the fact that it has annual sales of almost $300 million.
3. Freightliner knew that 43 percent of all accidents exposed tractor saddle tanks to impact, but it continued to design its trucks with the saddle tanks located within one inch of the outside edge of the tractor. Freightliner neglected to obtain government statistics showing the frequencies of fire in tractor trailer accidents. Freightliner refused to acknowledge that fuel tanks should not be placed in anticipated impact areas.
4. Freightliner did nothing to modify its fuel system even after litigation before this suit pointed out possible deficiencies in the fuel system.
5. Freightliner does not keep records indicating the frequency of fire or injuries in collisions involving its trucks.
6. Freightliner claimed it was unaware that fuel tank bladders were available, even though these bladders had been available since the 1940’s. Freight-liner knew nothing of alternative fuel system designs that had been discussed in engineering literature since the 1940’s.
7. Freightliner designed the fuel system to accommodate a fuel tank on the right side next to the exhaust pipe, an ignition source in the event of a rupture of the fuel tank.
In my view, this is ample evidence that makes reasonable the jury’s inference that Freightliner consciously disregarded the rights and welfare of others in designing and marketing its tractors and fuel systems. The majority in this case states simply that, “We are unable to discern from our reading of the record evidence of appellee’s [Freightliner’s] failure to use even ‘slight’ care.” In contrast, this writer fails to find evidence in the record indicating that Freightliner used any care whatsoever in designing its fuel system. Freightliner appears to have given no thought whatsoever to the fire hazards and the risks of personal injury created by its fuel system. The majority in this case has, it is respectfully submitted, improperly substituted its judgment for the jury’s.1

Compliance with Custom as Precluding an Award of Exemplary Damages

The district court did not hold that the plaintiffs failed to produce sufficient evidence from which the jury could reasonably infer that Freightliner acted with conscious indifference to the welfare of others in designing its fuel system. Instead, the district court held that compliance with industry custom precluded an award of exemplary damages on the facts of this case. The district court found that Freightliner’s design of its saddle tanks, including both the location and the absence of bladders, is common to the entire trucking industry.
The critical circumstance is that to sustain this award one must be prepared to hold that the entire automotive and trucking industry in the United States has “ . . . acted intentionally or will*405fully or with that degree of ‘gross negligence’ which approximates a fixed purpose to bringing about . . . injury Woolard v. Mobil Pipe Line Company, 479 F.2d 557, 565 (5th Cir. 1973). Refusing to do so on this record is not simply an expression of a more sanguine view of business and industry than was held by the jury. Nor is the refusal an expression of blind faith that the entire trucking and automotive industry cannot be at fault. It is to say that adopting a design common to all manufacturers and millions of vehicles for over thirty years is a sufficient effort at safety to preclude a finding that Freightliner acted with an intent which approximates a fixed purpose to bring about this injury-
450 F.Supp. at 964.2
Allowing compliance with industry custom as a defense to exemplary damages it is not only erroneous as a matter of law but is also bad policy. Such a rule allows an entire industry to consciously disregard the rights and welfare of others and thereby insulate itself from any liability for exemplary damages. Industry custom will frequently be an excuse for doing nothing. It can be a psychological excuse for inaction as, for example, when a manufacturer says, “No one else does this, why should I?” Industry custom can also be an economic disincentive to take action. For example, a manufacturer might reason that, “If I take steps to design my product safely, it will become more expensive than my competitors’ products and will not sell.” Industry custom may well deter safe product design. It can embody and preserve conscious disregard for the welfare of others.3
Texas law, as discussed above, allows the recovery of exemplary damages to punish and deter wrongdoers. The question of whether exemplary damages are ever appropriate against a manufacturer who has complied with industry custom becomes to me the question whether society will ever be served by deterring manufacturers from complying with industry custom. It is submitted that this case illustrates a situation in which the deterrent value of exemplary damages will serve society by deterring an industry from blindly following its custom. The truck manufacturing industry has designed its tractors with lightweight fuel tanks located where they are bound to be struck and punctured in a collision. This design, somewhat perversely, uses the fuel tanks to insulate the tractor’s structural beams from a collision. Even a weak imagination will grasp the concept that the tractor structural beams should insulate the fuel tanks from the impact of a collision. This is exactly what plaintiffs proposed in the alternative designs they offered. Freightliner’s apparent failure to give any consideration to alternative designs that might increase the safety of their product demonstrates conscious indifference and disregard for the rights and welfare of others. Allowing exemplary damages in this case would induce product manufacturers to consider how they can make their products safer.

Conclusion

The majority opinion in this case has three major vices. First, it misinterprets the Texas definition of gross negligence in derogation of prior cases from the Texas Supreme Court and this Court. Second, it overturns a jury verdict without any analysis or discussion of the evidence in the case. *406Third, it establishes a novel and questionable defense to exemplary damages. I dissent.

. As the district court noted, the verdict in this case was not “the product of passion or prejudice.” 450 F.Supp. at 966. The jury’s award of actual damages was very parsimonious. They awarded only $150,000 in actual damages to cover the pecuniary losses suffered by the nine and twelve year old children of the decedents. Furthermore, the jury denied any recovery whatsoever to Billy Maxey’s parents even though “a substantial sum would have been supportable.” Id.
Regrettably, the amount of the jury’s award of exemplary damages may have improperly influenced the result the majority reaches. The jury awarded $10 million in exemplary damages, 67 times its award of actual damages. Recent Texas cases establish that exemplary damages must be reasonably proportionate to actual damages and require a remittitur of a portion of the exemplary damages in this case. See, e. g., Parker v. McGinnes, 594 S.W.2d 550, 552 (Tex.Civ.App. — Waco, 1980) (“It is the settled rule in Texas that the amount of exemplary damages should be reasonably proportioned to the actual damages awarded.”).

. The district court applied an improper standard for the award of exemplary damages. Plaintiffs needed to show Freightliner’s gross negligence. They did not need to show Freight-liner acted with a fixed purpose to injure. The majority opinion concedes that the district court might have applied an improper standard and then goes on to apply its own “slight care” standard and to endorse the compliance with industry custom defense created by the district court.

. Conscious indifference to the welfare of others by an entire industry is not unprecedented. See U. Sinclair, The Jungle (1906), noted in N.Y. Times, Nov. 26, 1968 at 34, col. 4 (describing The Jungle as exposing “the grossly unsanitary practices in the Chicago meatpacking industry . . . [and leading] to the passage of the first Food and Drug Act”).