The Texas Supreme Court has determined that a law retroactively affecting the common-law liability of a defendant in a pending asbestos lawsuit is unconstitutional. Robinson v. Crown Cork & Seal Co., No. 06-0714 (Tex., decided October 22, 2010). While the decision generated one dissenting and two concurring opinions, the majority had sufficient votes to establish a new test for determining whether retroactive legislation is valid under the constitution. The touchstone for the court’s analysis is the constitution’s protection of settled expectations and prevention of legislative power abuses.

The case involved the claims of a man who was occupationally exposed to asbestos for many years. He and his wife sued a number of defendants in 2002, alleging that he had contracted mesothelioma as a result of the exposure. He died several days after the trial court determined that defendant Crown Cork & Seal Co. could not be sued because of a tort reform measure that the state legislature adopted in 2003, while the lawsuit was pending. Referred to as Chapter 149, the law limits the asbestos liability of successor corporations “to the fair market value of the total gross assets of the transferor determined as of the time of the merger or consolidation,” where the merger occurred before May 1968 and the successor did not continue in the asbestos business after the merger. The law expressly applied the provision to lawsuits pending when it was enacted.

According to the court, the legislative history for Chapter 149, a provision added on the House floor during debate, was sparse, but when it was before the Senate Committee on State Affairs, a legislator stated, “This, members, is the Crown Cork and Seal asbestos issue. What we have put in this bill is what I understand to be an agreed arrangement between all of the parties in this matter.” In effect, the provision applied to Crown Cork & Seal only and to no other company in the state.

Crown Cork & Seal was a successor to the corporation that made some of the asbestos to which the plaintiff had been exposed. That corporation was acquired by a New York company, Crown’s predecessor, for about $7 million in 1963. Crown’s predecessor was reincorporated in Pennsylvania in 1989. Under the laws of New York and Pennsylvania, successor corporations assume their predecessor’s liabilities, and, thus, in the absence of Chapter 149, Crown Cork & Seal could be held liable for the plaintiff’s injuries. Because Crown Cork & Seal had already paid more than $413 million in asbestos settlements by 2003 and estimated its future liability at $239 million or more when the Texas Legislature enacted Chapter 149, it had already paid far in excess of the limitation imposed by the new law.

The majority expressed dissatisfaction with prior tests for constitutionality that relied on determining whether a right affected by retroactive legislation had “vested.” Under the vested rights test, the two dissenting justices opined that a right does not vest until judgment, and because the case had not gone to judgment before the law was enacted, the provision did not impair a vested right and was, accordingly, constitutional. The majority rejected that approach, stating “What constitutes an impairment of vested rights is too much in the eye of the beholder to serve as a test for unconstitutional retroactivity,” and noting, the test “thus comes down to this: a law is unconstitutionally retroactive if it takes away what should not be taken away.”

Instead, the court held that, when determining whether a statute violates the constitutional prohibition against retroactive laws, “courts must consider three factors in light of the prohibition’s dual objectives: the strength of the public interest served by the statute as evidenced by the Legislature’s factual findings; the nature of the prior right impaired by the statute; and the extent of the impairment.” The court also indicated that only a “compelling public interest” can “overcome the heavy presumption against retroactive laws.” The court then found that the plaintiffs’ common-law cause of action was substantial and that Chapter 149 was enacted to help only Crown and no one else, thus precluding a finding that it serves a substantial public interest. Without a compelling reason for this retroactive law, the court found that “the constitution prohibits it.”