On April 5, the U.S. Court of Appeals for the Eighth Circuit decided the case of Kirk v. Schaeffler Group USA, Inc., et al., a personal injury action commenced in the U.S. District Court for the Western District of Missouri alleging injury resulting from the release of thousands of gallons of trichloroethylene (TCE) at the FAG Bearings Corporation’s (FAG Bearings) facility in Joplin, MO. The Court of Appeals reversed the District Court’s judicial estoppel ruling on the successor liability issue and concluded that the jury’s verdict on compensatory damages stands but their general verdict requires a new trial on Plaintiff’s punitive damages claim against FAG Bearings.

According to the Court of Appeals, from 1973 to 1982, FAG Bearings released thousands of gallons of TCE, “a volatile organic compound now classified as a hazardous substance,” at its facility in Joplin. Subsequent litigation established that Fag Bearings was solely responsible for the TCE contamination that the Missouri Department of Health and the Environmental Protection Agency detected in residential wells in the Villages of Silver Creed and Saginaw communities south of the FAG Bearings plant.

In 2002, Jodelle Kirk (Plaintiff) was diagnosed with a pernicious liver disease, autoimmune hepatitis (AIH), and in 2103 she filed a complaint in federal court premised on diversity jurisdiction against FAG Bearings and its parent corporation, Schaeffler Group USA (Schaeffler), seeking compensatory and punitive damages. The District Court denied Schaeffler’s motion for summary judgment, which had argued that, as a corporate successor, it cannot be held responsible for FAB Bearings’ tortious conduct.

After discovery, the District Court ruled that Schaeffler was “judicially estopped” from making this defense because, in a trade dispute before the U.S. Court of International Trade (CIT), Schaeffler had argued that FAG Bearings had been absorbed into Schaeffler. In addition, the District Court held that Plaintiff presented sufficient evidence of causation for a jury to find the defendants liable. The jury awarded the Plaintiff $7M in compensatory damages and $13M in punitive damages.

On appeal, Schaeffler argued that the District Court erred when it held that Schaeffler was judicially estopped from arguing that it was not responsible for FAG Bearing’s pre-acquisition torts, and that the District Court abused its discretion in admitting the opinion evidence of the Plaintiff’s expert witnesses. The Eighth Circuit agreed with Schaeffler that Missouri law, which must be applied in a diversity action, does not permit the doctrine of judicial estoppel to curtail Schaeffler’s defense that it is not a liable party. The Court of Appeals found that the CIT litigation was not sufficiently similar to this case to trigger judicial estoppel. As a result, Schaeffler must be dismissed from this case because it is entitled to summary judgment on the successor liability issue.

The Court of Appeals also found that the jury’s general verdict (which did not distinguish between the liability of Schaefler and FAG Bearings) requires a new trial on the punitive damages claim against FAG Bearings. In contrast, it found that the dismissal of Schaeffler from the case does not affect the award of compensatory damages, which was based entirely on FAG Bearings conduct, and there was no error in admitting the expert evidence.