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Montana Supreme Court

Montana continues to be an outlier in its approach to personal jurisdiction, to the point that the U.S. Supreme Court has stepped in to address the growing controversy. The Montana Supreme Court also expanded asbestos liability, allowed duplicative litigation against insurers, and continued to sidestep deciding the constitutionality of the state’s limit on punitive damages.

PERSONAL JURISDICTION OPINION CATCHES U.S. SUPREME COURT’S ATTENTION

According to U.S. Supreme Court precedent, for a state court to decide a case involving a corporate defendant, the business must either be incorporated or headquartered there (known as general jurisdiction) or the lawsuit must involve the defendant’s conduct that occurred in that state (known as specific jurisdiction). Without one of these forms of personal jurisdiction, a court cannot hear a case without violating due process.

Nevertheless, the Montana Supreme Court has shown a willingness to exercise personal jurisdiction without any link between conduct that occurred in Montana and the plaintiff’s injuries. This occurred in a case in which a Montana resident died after the tread on her car’s tires came undone and the car rolled into a ditch. After a product liability action was filed in a Montana state court, the car’s manufacturer, Ford, asked the court to dismiss the suit because it is headquartered in Michigan, incorporated in Delaware, and the vehicle was not designed, manufactured, assembled, or originally sold in Montana. The trial court denied this motion, which was affirmed by an appeals court and the Montana Supreme Court. In reaching this decision, the Montana Supreme Court, in a July 2019 ruling, found that merely conducting business in a state by placing a product in the stream of commerce is sufficient to satisfy due process. Contrary to the U.S. Supreme Court’s ruling, the Montana Supreme Court found that a “direct connection” is not needed between the defendant’s conduct in the state and the specific plaintiff’s injury for a court to exercise personal jurisdiction.

While in some cases the Montana Supreme Court has required a nonresident defendant to have engaged in some transaction or conduct in the state, it has expanded the standard to include whether the defendant has made a compelling case that exercising specific jurisdiction would be unreasonable.

The U.S. Supreme Court has granted certiorari in Ford Motor Company v. Montana Eighth Judicial District Court  to review the Montana Supreme Court’s inconsistency. The high court heard oral arguments in   the case on October 7, 2020. The standard Montana courts applied would eviscerate the due process limits on  personal jurisdiction the U.S. Supreme Court has established and could well expose corporations that do business nationwide to lawsuits in all fifty States. And plaintiffs’ lawyers  will, of course, choose to bring these cases in Judicial Hellholes.

ASBESTOS LITIGATION

Asbestos litigation has bankrupted scores of companies, leaving plaintiffs’ lawyers to continually search for new solvent targets to sue. In March 2020, the Montana Supreme Court opened the door to lawsuits against workers’ compensation insurers, finding that, although they did not make or sell asbestos, or employ those who were exposed, they may have had a duty to warn of the risks of exposure.

In Maryland Casualty Co. v. Asbestos Claim Court, former mine workers sued their employer’s workers’ compensation insurer. The employees claimed exposure to asbestos at a W.R. Grace work site. This work site had been inspected by the employer‘s workers‘ compensation insurer, and Grace had consulted with the insurer about the “ongoing asbestos dust problem.” The employees claimed that the insurer had a duty to warn employees of this risk. The Montana Supreme Court held that although the harm was caused by a third party, Grace, the workers’ compensation insurer had a duty to warn because it engaged in an affirmative undertaking– it had assumed responsibility by advising Grace with how to address asbestos risks and providing employee- specific medical evaluations.

COURT EXPANDS UNDERINSURED MOTORIST COVERAGE

The Montana Supreme Court also has expanded liability by allowing individuals who are in auto accidents to seek damages from their own underinsured motorist coverage even after litigation between the drivers establishes that the damages did not exceed the at-fault driver’s policy limits.

In Reisbeck v. Farmers Insurance Exchange, Kirk Reisbeck sued Darrell King after King rear-ended him. King was only insured for $50,000, so Reisbeck asked for additional coverage from Farmers Insurance under his underinsured motorist (UIM) policy. Farmers refused to pay, so Reisbeck filed a separate lawsuit against Farmers. At the trial between Reisbeck and King, a jury awarded Reisbeck just $10,000, but before judgment was entered, the parties settled for $50,000, King’s policy limit. Farmers then moved for summary judgment because the litigation between the drivers had established that Reisbeck’s damages did not exceed his insurance, providing no basis for UIM coverage.

While the trial court dismissed the UIM case, the Montana Supreme Court reversed, holding that the outcome of the personal injury lawsuit between the drivers did not affect the driver’s lawsuit against his own insurer. As the dissent recognized, this decision gives parties a “second bite at the apple” by allowing them to relitigate the amount of damages in a lawsuit against an insurer that a jury already decided in prior litigation. It will result in unnecessary, duplicative litigation that wastes judicial resources, exposes insurers to unwarranted liability, and may increase the cost of auto insurance for drivers.

U.S. SUPREME COURT REINS IN MONTANA SUPREME COURT’S APPROACH TO ENVIRONMENTAL LITIGATION

Last year, the Montana Supreme Court in a controversial case held that state courts are free to impose additional liability on companies that are complying with EPA orders and regulations to clean up contaminated land.

The U.S. Supreme Court in part reversed that decision in an April 20, 2020, opinion. The Court held that the Montana Supreme Court had erred in finding that the landowners who sued Atlantic Richfield were not “potentially responsible parties” under the Comprehensive Environmental Response, Compensation, and Liability Act. As owners of polluted property, they fell within this classification. While those who are not potentially responsible parties may take remedial action, those who are potentially responsible parties must get EPA approval before doing so. The Court did not reach the issue of whether the plan developed under the federal Superfund statute preempted the state court-ordered restoration plan because the plaintiff landowners had not gone through the EPA-approval process.

Since then, the EPA has lodged a $150 million settlement with Atlantic Richfield to clean up the Butte Priority Soils Operable Unit site. The consent decree was filed in the U.S. District Court for the District of Montana on June 8, 2020. After a public comment period, the federal court approved the agreement on September 16.

GUIDANCE STILL NEEDED ON CONSTITUTIONALITY OF PUNITIVE DAMAGE LIMIT

The Montana Supreme Court continues to duck the issue of the constitutionality of the state’s statutory limit on punitive damages. A Montana statute limits punitive damage awards to no more than $10 million or three percent of a defendant’s net worth, whichever is less, to avoid excessive punishment and jackpot justice. In September 2019, the Court heard oral arguments in a case in which plaintiffs’ lawyers sought to invalidate that limit.

But in January 2020, the Court reversed the underlying verdict entirely for other reasons, and therefore, did not reach the constitutional issue. The Court previously ducked the issue back in 2015 when it ruled that Michigan law applied to the case before it and that state’s law did not allow for punitive damages.

Montana trial court judges have split on whether to apply the statutory limit, some finding it violates the right to jury trial or due process. These rulings are contrary to courts in the vast majority of states, which recognize that setting constraints on punishment is firmly within the legislature’s policymaking authority.

It is up to the Montana high court to issue a definitive ruling, finding that the law is constitutional. ATRF will watch closely in the hopes the Court will uphold the reasonable punitive damages limit enacted by the legislature.

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