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Kirk v. Schaeffler Group USA, Inc.

United States Court of Appeals, Eighth Circuit

April 5, 2018

Jodelle L. Kirk Plaintiff-Appellee
Schaeffler Group USA, Inc.; FAG Bearings, LLC Defendants - Appellants

          Submitted: September 21, 2017

         Appeal from United States District Court for the Western District of Missouri - Joplin

          Before LOKEN, ARNOLD, and SHEPHERD, Circuit Judges.

          LOKEN, Circuit Judge.

         From 1973 to 1982, FAG Bearings Corporation released thousands of gallons of trichloroethylene (TCE), a volatile organic compound now classified as a hazardous substance, at its manufacturing facility in Joplin, Missouri. In 1991, the Missouri Department of Health and the Environmental Protection Agency (EPA) detected TCE contamination in residential wells in the Villages of Silver Creek and Saginaw, communities south of the FAG Bearings plant. Subsequent litigation established that FAG Bearings was solely responsible for the TCE contamination in Silver Creek and Saginaw. FAG Bearings began cooperating with EPA and Missouri Department of Health remediation, efforts that continued after Schaeffler Group USA acquired the facility in 2005.

         Janice and Stan Kirk moved to Silver Creek in 1987. Their daughter, plaintiff Jodelle Kirk (Kirk), was born the following year and spent her entire childhood in Silver Creek. In 2002, Kirk was diagnosed with autoimmune hepatitis (AIH), a liver disease that occurs when a person's immune system produces antibodies that attack liver proteins, creating inflammation that can lead to fibrosis and cirrhosis. Kirk remains on medication to manage her AIH and faces serious medical issues in the years ahead. In 2013, Kirk brought this diversity action against FAG Bearings, LLC[1]and Schaeffler Group USA (collectively, "Schaeffler"), seeking compensatory and punitive damages. Kirk alleged that Schaeffler's negligent release of TCE and failure to warn the community of TCE contamination caused her to develop AIH.

         After discovery, the district court denied Schaeffler's motion for summary judgment. As relevant here, the court concluded that Kirk presented sufficient evidence of causation for a jury to find defendants liable, and that Schaeffler Group USA is judicially estopped to deny it can be held responsible as successor for FAG Bearings' tortious conduct. After a lengthy trial, the district court instructed the jury to return a verdict for Kirk if it found that defendants' negligent "handling, use, or disposal of [TCE] at the Joplin plant, or [failure] to properly warn Plaintiff of the TCE contamination, " had directly caused or contributed to Kirk's injury. The jury awarded Kirk $7, 600, 000 in compensatory damages and, after submission of additional testimony and evidence addressing whether "Defendants' conduct showed complete indifference to or conscious disregard for the safety of others, " $13, 000, 000 in punitive damages. The district court denied Schaeffler's motions for judgment as a matter of law and a new trial. This appeal followed.

         On appeal, Schaeffler argues (i) the district court erred in concluding that judicial estoppel bars Schaeffler Group USA from denying that it is liable for FAG Bearings' pre-acquisition torts; (ii) the court abused its discretion by admitting Kirk's experts' opinions regarding whether TCE exposure caused Kirk's AIH, and evidence of regulatory standards governing safe levels of TCE in drinking water; and (iii) the court erred in denying judgment as a matter of law on the causation issue and on Kirk's failure to warn claim. We reverse the district court's judicial estoppel ruling and conclude that (i) Schaeffler Group USA was entitled to summary judgment on the successor liability issue, and therefore (ii) the jury's general verdict requires a new trial on Kirk's punitive damages claim against FAG Bearings, LLC.

         I. The Judicial Estoppel Issue.

         A. Kirk's complaint alleged that Schaeffler Group USA "owns the brand FAG and . . . took on, purchased or otherwise assumed all assets, properties and liabilities of FAG Bearings LLC, and/or FAG Bearings Corporation." Schaeffler's motion for summary judgment alleged that, after the 2005 conversion, FAG Bearings became Schaeffler Group USA's wholly owned subsidiary; that under Missouri law a parent corporation is not responsible for its subsidiary's actions unless it is the subsidiary's alter ego or plaintiff pierces the corporate veil; that Kirk has the burden to prove Schaeffler Group USA is responsible for FAG Bearings' actions; and that Kirk had no evidence to show that the corporate veil should be pierced or that the Schaeffler parent had any role in FAG Bearings' alleged pre-acquisition tortious acts.

         In response, Kirk argued that Schaeffler Group USA should be judicially estopped to deny successor liability because "it has taken the position in other litigation that its . . . purchase of FAG Bearings amounted to a merger of the two companies and that it is responsible for the . . . actions of FAG Bearings." Kirk cited a complaint Schaeffler Group USA filed against the United States before the United States Court of International Trade (CIT) in November 2006, and a February 2008 memorandum it filed in the District of Connecticut in unrelated litigation.

         The district court denied Schaeffler Group USA's motion for summary judgment, invoking judicial estoppel based on the allegation in its complaint to the CIT that FAG Bearings Corporation "by change of name and/or merger" was "absorbed into Schaeffler."[2] In applying judicial estoppel, the district court considered the three non-exhaustive factors identified by the U.S. Supreme Court in New Hampshire v. Maine, 532 U.S. 742, 750-51 (2001), and followed by this court in Stallings v. Hussmann Corp., 447 F.3d 1041, 1047 (8th Cir. 2006):

First, a party's later position must be clearly inconsistent with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled. Absent success in a prior proceeding, a party's later inconsistent position introduces no risk of inconsistent court determinations . . . . A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party.

         The district court ruled that Schaeffler Group USA's position before the CIT was "clearly inconsistent" with its position in this case because "it is black letter law that a parent corporation lacks standing to sue for injuries suffered by a subsidiary." The court noted that the CIT stated in an opinion rejecting Schaeffler Group USA's claim on the merits that the court "accepts [Schaeffler Group USA's] undisputed representation that it is the legal successor to . . . FAG Bearings Corp." Schaeffler Grp. USA, Inc. v. United States, 808 F.Supp.2d 1358, 1360 n.3 (Ct. Int'l Trade 2012). The district court ruled that judicial estoppel is appropriate because "Schaeffler would derive an unfair advantage if not estopped, because it would avoid any liability that it would otherwise have to [Kirk]."

         The parties on appeal, like the district court, argue the judicial estoppel issue based on the above-quoted standards from New Hampshire and Stallings, cases that were governed by federal law. However, in this diversity case, we apply the Missouri law of judicial estoppel. See Monterey Dev. Corp. v. Lawyer's Title Ins. Corp., 4 F.3d 605, 608-09 (8th Cir. 1993).[3] This raises the question whether the principles of judicial estoppel differ under Missouri and federal law, in which case the district court should have looked, as we must, to Missouri law. Judge Shepherd in dissent argues that the Supreme Court of Missouri has rejected the New Hampshire factors in favor of a "more general" standard: "[j]udicial estoppel will lie to prevent litigants from taking a position, under oath, in one judicial proceeding, thereby obtaining benefits from that position in that instance and later, in a second proceeding, taking a contrary position in order to obtain benefits . . . at that time." State Bd. of Accountancy v. Integrated Fin. Sols., L.L.C., 256 S.W.3d 48, 54 (Mo. banc 2008).

         We conclude the answer under Missouri law is not so simple. One month before the decision in State Board, the Supreme Court of Missouri ruled:

The doctrine of judicial estoppel provides that "[w]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him." Zedner v. United States, 547 U.S. 489[, 504] (2006), quoting Davis v. Wakelee, 156 U.S. 680, 689 (1895).

Taylor v. State, 254 S.W.3d 856, 858 (Mo. banc 2008). The passage in Zedner quoted in Taylor was itself a quotation from New Hampshire, and after that passage, the U.S. Supreme Court in Zedner quoted the three New Hampshire factors. Though the Supreme Court of Missouri did not cite Taylor in its State Board opinion, it denied rehearing in Taylor the same day it issued its opinion in State Board. This is clear indication the Supreme Court of Missouri has not rejected consideration of the New Hampshire factors the parties and the district court looked to in deciding the issue in this case. Cf. State v. Honeycutt, 421 S.W.3d 410, 422 (Mo. banc 2013), as modified ("Generally, this Court presumes, absent a contrary showing, that an opinion of this Court has not been overruled sub silentio."). Indeed, by our count, since Taylor and State Board were decided, the Missouri Courts of Appeals have considered the New Hampshire factors in a solid majority of the published opinions addressing various judicial estoppel issues.

         Both federal and Missouri courts have long considered judicial estoppel an equitable doctrine designed to protect the integrity of the judicial process, preserve the dignity of the courts, and insure order in judicial proceedings. See New Hampshire, 532 U.S. at 750-51; Edwards v. Durham, 346 S.W.2d 90, 101 (Mo. 1961). The doctrine "embodies the notions of common sense and fair play." Egan v. Craig, 967 S.W.2d 120, 126 (Mo. App. 1998). Because the issue is raised in numerous contexts, it is not a doctrine for which "inflexible prerequisites" are appropriate. New Hampshire, 532 U.S. at 751. In Taylor and State Board, very different claims of judicial estoppel were summarily rejected without the need for extensive analysis. We conclude that the Supreme Court of Missouri would consider the non-exclusive New Hampshire factors in other cases when they are relevant.

         When summary judgment is denied based on resolution of a preliminary legal issue such as estoppel, the ruling may be reviewed on appeal from the district court's final order entered after trial. See N.Y. Marine & Gen. Ins. Co. v. Cont'l Cement Co., 761 F.3d 830, 838 (8th Cir. 2014). We review the district court's application of judicial estoppel for abuse of discretion. Stallings, 447 F.3d at 1046.

         Under Missouri law, the first New Hampshire factor, whether a party's positions are "clearly inconsistent, " is "the threshold essential to a judicial estoppel defense." Imler v. First Bank of Mo., 451 S.W.3d 282, 292 (Mo. App. 2014). If a party's positions can be reconciled, there is no need to protect the integrity of the judicial process from inconsistent positions. Thus, Missouri courts routinely reject invitations to apply judicial estoppel upon determining that two positions are not clearly inconsistent. See, e.g., Parrott v. Severs Trucking, LLC, 422 S.W.3d 478, 486-87 (Mo. App. 2014). Determining whether two positions are "clearly inconsistent" requires interpreting the allegedly contrary representations in context, identifying the underlying legal positions they represent, and analyzing whether those positions can be reconciled. See Berger v. Emerson Climate Techs., 508 S.W.3d 136, 143-45 (Mo. App. 2016). Here, this requires analysis of the context in which Schaeffler Group USA represented to the CIT that FAG Bearings had been "absorbed" into Schaeffler Group USA "by change of name and/or merger."

         In its 2006 lawsuit, Schaeffler Group USA alleged that a 1989 Department of Commerce antidumping order declared the domestic ball-bearings industry materially injured by foreign competitors' dumping practices, and the U.S. Bureau of Customs and Border Protection began collecting antidumping duties. The Continued Dumping and Subsidy Offset Act (CDSOA), enacted in 2000, permitted "affected domestic producers" to claim a share of the antidumping duties, but limited this benefit to an "affected domestic producer" that "was a petitioner or interested party in support of the petition with respect to which an antidumping duty order . . . has been entered, and remains in operation." 19 U.S.C. § 1675c(b)(1)(A)-(B). FAG Bearings, though a member of the injured industry, had not supported the petition that led to the 1989 order. Schaeffler Group USA alleged that the CDSOA's petition-support requirement was unconstitutional and therefore it was entitled to FAG Bearings' "share of CDSOA disbursements for fiscal years 2004 and 2005." The CIT denied relief but accepted Schaeffler Group USA's representation that it would have been entitled to FAG Bearings' share had the claim prevailed.

         The district court concluded that Schaeffler Group USA's claim to recover antidumping duties to which FAG Bearings was entitled was necessarily a representation that Schaeffler Group USA is a legal successor to FAG Bearings, a representation "clearly inconsistent" with its position denying successor liability for Kirk's tort claims based on FAG Bearings' pre-acquisition conduct. As a general matter of corporate law, we find no clear inconsistency inherent in an acquiring corporation claiming that it has succeeded to the acquired company's claim to a government benefit and also claiming that it did not assume the acquired company's liabilities. Under Missouri law, even if all or substantially all of FAG Bearings' assets were acquired, this fact alone would not constitute a merger nor transfer FAG Bearings' liabilities to Schaeffler Group USA. See, e.g., Edwards v. Black Twig Mktg. & Commc'ns LLC, 418 S.W.3d 512, 520 (Mo. App. 2013); ARE Sikeston Ltd. P'ship v. Weslock Nat'l, Inc., 120 F.3d 820, 828 (8th Cir. 1997).

         In this case, the lack of a clear inconsistency becomes clear upon analysis of the CIT judicial proceeding. Customs regulations implementing the CDSOA provide:

In the case of a company that has succeeded to the operations of a predecessor company that appeared on the USITC list, the successor company may file a certification to claim an offset as an affected domestic producer on behalf of the predecessor company. In its certification, the company must name the predecessor company to which it has succeeded and it must describe in detail the duly authorized succession by which it is entitled to file the certification.

19 C.F.R. § 159.61(b)(1)(i) (emphasis added). The regulations do not further define "successor company" or what constitutes "authorized succession." The reference to "operations" suggests, consistent with the purpose of antidumping duties, that the successorship issue was focused more on domestic ball-bearing production assets than on the way those assets were acquired and owned. Consistent with that interpretation, in another case challenging the constitutionality of the petition-support requirement, the court described as "successor" an entity that, by acquisition, "became an affected domestic producer eligible to receive [CDSOA] distributions." SKF USA, Inc. v. U.S. Customs & Border Prot., 556 F.3d 1337, 1346 & n.11 (Fed. Cir. 2009), cert. denied, 560 U.S. 903 (2010). And in a case involving a different antidumping order, Customs denied a CDSOA claim, concluding claimant was not a successor because it could not identify what percentage of the production assets it had acquired, and failed to show it was legally entitled to claim its predecessor's CDSOA distributions. U.S. Customs & Border Prot., Re: Affected Domestic Parties, Continued Dumping and Subsidy Offset Act of 2000, HQ H121457, 2011 WL 7445504 at *3-*5 (Oct. 31, 2011).

         Schaeffler Group USA's unopposed representation "accepted" by the CIT in 2012 was not clearly inconsistent with the parent-subsidiary relationship claimed in this case. In substance, Schaeffler Group USA pleaded that it was entitled to assert FAG Bearings' claim because it acquired at least a substantial portion of the aggrieved domestic ball-bearing production assets, and FAG Bearings transferred or assigned its right to seek CDSOA distributions that FAG Bearings had been unlawfully denied. Cf. Vt. Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 773 (2000) ("the assignee of a claim has standing to assert the injury in fact suffered by the assignor"). Schaeffler Group USA did not explain what it meant by the ambiguous words "merger" and "absorbed." Given the focus of antidumping duties on domestic producing assets, that was doubtless of little importance to the CIT, particularly in an order denying relief on the merits. Had the issue been fully litigated under the Customs regulation, Schaeffler Group USA would have had to "describe in detail [its] duly authorized succession, " and the CIT would have determined whether Schaeffler Group USA was a "successor" to FAG Bearings' claim for CDSOA distributions, applying an antidumping law standard that would not necessarily make Schaeffler Group USA a successor to FAG Bearings' liability for pre-acquisition torts under Missouri law.

         The district court erred in applying judicial estoppel based on Schaeffler Group USA's pleading before the CIT. The court stated it is "black letter law" that a parent corporation has no standing to assert a subsidiary's claims. That is doubtless true in many contexts, but it is not "clearly" applicable to the unique regulatory claim at issue before the CIT. When a party's position is not clearly inconsistent with the position taken in another proceeding, "there is no reason to ...

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