Evidence surrounding an earlier sale of equipment is relevant to a later purchaser's claim for punitive damages in a product liability action

ABSTRACT: Evidence regarding the design, manufacture, and first sale of a drilling-rig to the Army Corp of Engineers is relevant to the knowledge element of Plaintiff's punitive damages claim arising from a second sale.

Missouri manufacturers, distributors, sellers, and resellers of equipment have scored an important victory in the Missouri Court of Appeals. In Ormsby v. Central Mine Equipment Co, the Missouri Court of Appeals, Southern District, affirmed admission of evidence regarding the design, manufacture, and first sale of a commercial drilling rig as relevant to the defense of a strict liability claim arising from a subsequent sale when punitive damages are claimed. 

Generally, a plaintiff can recover under a strict product liability claim if he can prove the product was inherently defective when sold and that the defect in the product caused the injury or damage, regardless of whether the defendant did everything possible to prevent the defect. In Ormsby, the Plaintiff sought to preclude evidence of the initial design, manufacture, and sale of a commercial drilling rig as irrelevant to whether the rig had an inherent defect when the second sale occurred. The trial court admitted the evidence as relevant to the defense, primarily because Plaintiff sought punitive damages on the strict liability claim. 

Plaintiff lost fingers and mangled his hand after reaching into a running drill rig. The incident occurred, and the underlying lawsuit arose, after a subsequent second sale of the mining drill by the CME.

Central Mine Equipment Company (“CME”) built and sold a commercial drilling rig to the U.S. Army Corp of Engineers in 1976. CME built the drill to design specifications provided by the Corps, and the Corps inspected and accepted the drilling rig pursuant to the Corps’ quality-assurance procedures. After using the drill for 25 years, the Corps traded the drilling rig back to CME for a credit on a replacement.  CME then sold it to Plaintiff’s employer, who inspected, purchased and relocated the pre-owned unit in 2001, without CME ever seeing, inspecting, or taking possession of the used unit.

In 2013, Plaintiff and a helper picked up the drill rig from a mechanic who had repaired the rig’s throttle cable. After starting the engine to check the mechanic’s work, Plaintiff could not shut the rig off. Plaintiff reached into the motor compartment in an attempt to maneuver the throttle linkage and governor to idle the engine to a stop. Before Plaintiff’s helper could get the motor shut down, Plaintiff caught his hand in the mechanism causing the loss of multiple fingers. 

Plaintiff filed a lawsuit against CME alleging claims for negligence and strict liability, and requesting a punitive damages award under both theories. On the eve of trial, hoping to preclude evidence regarding design, manufacture and first sale of the drill, Plaintiff dismissed his negligence claim, but did not withdraw his request for punitive damages. Nevertheless, Plaintiff sought to preclude evidence that CME designed the drill pursuant to specifications provided by the Corps, and that the Corps inspected the drill to ensure it passed quality assurance standards before taking possession.

Plaintiff sought to preclude the evidence as irrelevant to the litigation, claiming that because strict liability claims do not require proof of knowledge as an element to recovery. But the trial court allowed CME to present evidence of the original design, manufacture, and sale because compliance with an industry standard evidences that a party did not act with a culpable state of mind, which is required to support punitive damages.

The Missouri Court of Appeals affirmed the trial court’s decision to admit the disputed evidence, finding Plaintiff did not meet his burden in demonstrating the trial court ruled incorrectly. The Court found that so long as punitive damages were alleged, compliance with industry standard and custom goes to prove whether defendant acted with a nonculpable state of mind, hence, to negate an inference of complete indifference and conscious disregard for the safety of others – proof punitive damages requires.

The Court’s decision is a positive development for Missouri manufacturers, designers, sellers, and resellers in defending against claims for punitive damages in product liability cases.