November 12, 2014

New York Law Journal / Written by: Harvey M. Stone, Peter R. Schlam

In the U.S. District Court for the Eastern District of New York, Judge Jack B. Weinstein held that the government contractor defense bar recent claims by Vietnam veterans against manufacturers of Agent Orange. Judge Charles P. Sifton held that the Department of Education guidelines for holiday displays in public schools do not violate the Establishment Clause. And Judge Arthur D. Spatt declined to dismiss claims against Nassau County under the Individuals With Disabilities Education Act.

Contractor Defense

In Isaacson v. Dow Chemical Company, 98 CV 6383, and Stephenson v. Dow Chemical Company, 99 CV 3056, all part of the "Agent Orange" Product Liability Litigation, MDL 381 (EDNY, Feb. 9, 2004), Judge Weinstein applied the government contractor defense to dismiss claims by Vietnam veterans and their families against manufacturers of Agent Orange, a herbicide used in the 1960s by U.S. armed forces to reduce foliage that could hide the enemy.

Plaintiffs allege that they suffer from serious diseases, only recently apparent, caused by the negligence of certain manufacturers in delivering to the government Agent Orange containing dioxin, an unnecessary toxic substance.

In earlier decades the courts concluded that the evidence did not show a probable connection between Agent Orange and disease (except for a curable form of skin irritation). Congress has now provided for payments to veterans of compensation for diseases "presumptively" caused by Agent Orange, even though no "cause" in a legal sense was ever shown for purposes of mass tort liability.

Some $350 million was distributed to veterans and their families from an Agent Orange Fund resulting from a class action settlement. Defendants here paid $180 million into the Fund to terminate any present or future claims against them.

Plaintiffs Isaacson and Stephenson allege that they discovered their diseases (respectively, non-Hodgkin's lymphoma and multiple myeloma) after the Fund had been fully expended and it was too late to apply for payment as a class member, and that the 1984 class action settlement did not bind them. Their claims are based on theories of strict products liability in tort.

The appellate courts have now held that these post-Fund-discovery plaintiffs are not bound by the settlement that created the Fund.

Rather than moving for summary judgment on the ground that plaintiffs could not show causality–a complex and highly time consuming issue to resolve–defendants chose to rely in the first instance solely on the government contractor defense.

To set the context, Judge Weinstein extensively summarized the massive Agent Orange litigation from the 1970's to date. Slip op. 10--33. Cases pending in state and federal court throughout the country were transferred to the Eastern District by the Judicial Panel on Multidistrict Litigation (MDL Panel) for consolidation of pretrial proceedings.

In this, the third wave of litigation, plaintiffs' recent state court claims, in New Jersey and Louisiana, were transferred by the MDL Panel to Judge Weinstein.

Plaintiffs' claims, Judge Weinstein concluded, are barred by the government contractor defense as developed in Boyle v. United Technologies Corp., 487 U.S. 500 (1988). There the Supreme Court stated:

Liability for design defects in military equipment cannot be imposed, pursuant to state law, when (1) the United States approved reasonably precise specifications; (2) the equipment conformed to those specifications; and (3) the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not to the United States.

As Judge Weinstein observed, the defense is "warranted by the uniquely federal interest in procurement and a significant conflict between federal policy and state tort law." The defense is grounded, moreover, on the Federal Tort Claim Act exemption for discretionary government functions.

Here, each element of the government contractor defense was established. No juror could fail to find:

1. As to the "design defect claim', the government approved precise specifications for the Agent Orange; the product delivered by defendants conformed to these specifications; and the government knew more about the dangers of Agent Orange as it intended to, and did, use it, than any or all of the defendants combined.

2. As to the "failure-to-warn-claim', the government had control over the product markings, and forbade placement of warnings on the barrels; defendants conformed to the government's orders in this regard; and the government knew more than defendants about the possible dangers in light of the intended and actual use.

3. As to the "manufacturing defect claim', not only did defendants conform to the government's precise specifications, but the government was aware of alternative manufacturing processes that might mitigate the presence of dioxin. And, "[i]n its quest for maximum production of Agent Orange as a tool of war, the government's benign connivance failed to specify another production process, sanctioning defendants' use of the then-existing technology, leading inexorably to some dioxin in Agent Orange."

Judge Weinstein recapitulated the compelling policy underlying the result in this case:

Failure to apply the government contractor defense in cases such as this one would substantially inhibit the United States from obtaining equipment and products for its armed forces in time of emergencies or war. Failure to afford this defense would have the potential of enormously increasing the cost to the government of purchasing such materials because suppliers would have to include in the price the cost of almost unlimited and unknowable possible liability for future tort claims. Added to costs of such prospective suits would be the difficulty of resolving many claims through a global settlement protecting against future claims–a problem illustrated by this very litigation and the overhanging huge numbers of potential future like suits.

Judge Weinstein stayed the decision until Oct. 12, 2004 and gave plaintiffs until Aug. 10, 2004 for additional discovery should they decide to revisit the issues relating to the government contractor defense.

The decision here, Judge Weinstein noted, does not foreclose plaintiffs' remedies since the legislature has already "stepped into the breach" "through a presumptive schedule of V.A. compensation for ill veterans–including the present plaintiffs."

Establishment Clause

In Skoros v. City of New York, 02 CV 6439 (EDNY, Feb. 18, 2004), Judge Sifton, after a consolidated preliminary injunction hearing and a bench trial, rejected plaintiffs' challenges, under the First and Fourteenth Amendments and section 1983, in connection to the holiday displays policy of the New York City public schools.

Plaintiff Skoros is the mother of two elementary school students, who are being raised as Roman Catholics. In November 2001, the Department of Education (DOE) issued a "Holiday Displays memorandum" to its superintendents and principals setting forth guidelines for displaying holiday, cultural and seasonal symbols in the City's public schools. The memo defines New York City as a multi-cultural community and emphasizes the need for educators to foster mutual understanding and respect for the many beliefs and customs stemming from the City's diverse heritage. Urging educators to be mindful of the Constitution's prohibition against endorsing a particular religion or belief system, the memo provides the following guidelines:

1. The display of secular holiday symbol decorations is permitted. Such symbols include, but are not limited to, Christmas trees, Menorahs, and the Star and Crescent.

2. Holiday displays shall not appear to promote or celebrate any single religion or holiday. Therefore, any symbol or decoration which may be used must be displayed simultaneously with other symbols or decorations reflecting different beliefs or customs.

3 All holiday displays should be temporary in nature.

4. The primary purpose of all displays shall be to promote the goal of fostering understanding and respect for the rights of all individuals regarding their beliefs, values and customs.

As implemented by the DOE, the memo does not permit the public display of a crCyche alone or as part of a holiday or seasonal display in the public schools. The holiday displays in the schools attended by plaintiff's children included menorahs, Christmas trees, stars and crescents, and other holiday symbols. Classrooms, hallways and other areas in those schools also displayed student artwork depicting dreidels, kinaras (lit during Kwanza celebrations), snowflakes, Christmas wreaths, Santa in a sleigh, a Christmas tree topped with a Star of Bethlehem, and the like.

A bulletin board in one classroom displayed cards describing Kwanza, Christmas, Ramadan and Chanukah.

Plaintiffs alleged that the DOE's policy regarding holiday displays, on its face and as applied, violates the Establishment Clause. According to plaintiffs, the menorah and the star and crescent are religious symbols, and their inclusion, without a crCyche, impermissibly endorses Judaism and Islam at the expense of Christianity. The city contended that, unlike the crCyche, which is a religious symbol, the items displayed here, and permitted by the Holiday Displays memorandum, serve the secular educational purpose of promoting cultural understanding while avoiding the promotion or endorsement of a particular faith.

Rejecting the facial challenge to the memo, Judge Sifton found, first, that the DOE policy has a valid secular purpose. That policy, the court stated, is "a neutral accommodation of the multiculturalism of New York City's public school children which protects minority views and adequately safeguards a diversity of religious and non-religious beliefs.'

The court also found that the "primary effect" of the policy does not advance or inhibit religion. In fact, the "principal effect" of the policy and its interpretation is the advancement of its secular purpose."

Nor does the policy show an "impermissible hostility" towards Christianity. As the court noted, the policy suggests the inclusion of a Christmas tree. Even without the Star of Bethlehem, a Christmas tree has religious and secular connotations. In addition, "the policy does not single out the crCyche but, rather, distinguishes between symbols with secular dimensions that are permissible and 'purely religious' symbols that are not permissible." As interpreted, the policy prohibits anything considered purely religious, including excerpts from religious texts or illustrations of deities.

Nor, Judge Sifton found, does the policy foster an "excessive entanglement" with religion.

For similar reasons, the court saw no merit in plaintiffs' claim that the policy, as applied, violates the Establishment Clause. The message presented by the displays here, Judge Sifton stated, must be reviewed as perceived by Christian children in particular, "but not one hyper-sensitive Catholic child.'

Judge Sifton also rejected plaintiff's "Free Exercise" and "Parental Rights" claims.

Disabilities Education Act

In Andree v. County of Nassau, 02 CV 688 (EDNY, Mar. 26, 2004), Judge Spatt denied defendants' motion to dismiss claims that Nassau County violated the Individuals with Disabilities Education Act ('IDEA'), Equal Protection Clause and procedural due process by seeking to recoup payments from personal injury awards for expenses related to educating children with disabilities.

Nassau County, which maintains Medicaid programs under the New York State Social Services Law, also uses Medicaid funds to pay claims by local school districts for services furnished to Medicaid recipients. As children with disabilities from Nassau County, plaintiffs Ashley Andree and Franklin Moronta received both Medicaid benefits for medical treatment and related educational services.

In 1999, Ashley won a medical malpractice judgment against the attending physician at her birth in the amount of $5,473,338. The Nassau County Department of Social Services (DSS) filed a lien of $92,451.98 on the proceeds of the judgment. Franklin settled with the owner of the building where he had contacted lead poisoning and received $235,000. DSS sought $56,634 against the proceeds of the settlement. Plaintiffs alleged that DSS improperly inflated its Medicaid liens to cover educational expenses to be provided at no cost under the IDEA, and that DSS violated IDEA, the Rehabilitation Act, due process and equal protection.

Congress passed the IDEA to ensure that children with disabilities receive "a free appropriate public education that emphasizes special education and related services designed to meet their unique needs and prepare them for employment and independent living ...." 20 U.S.C. § 1400(d)(1)(A). Free appropriate education includes education at public expense that meets the standards of the State educational agency and conforms to an Individualized Education Program ('IEP').

As Judge Spatt stated, to the extent the DSS lien on proceeds from personal injury lawsuits included monies paid for "related services" required by the IDEA, plaintiffs were deprived of a "free appropriate education."

Each state receiving federal education funds under the IDEA must prepare an IEP for each child, specifying the child's present performance level, goals and objectives, specific services that will permit the child to achieve those goals, and evaluation criteria and procedures to evaluate whether the child has met the goals. Moreover, the state legislature has determined that "related services" should be provided free of charge to disabled students.

Judge Spatt therefore found that "DSS's placement of a lien on settlement or personal injury awards received by a disable student to pay for services that are mandated to be provided free of charge to such students is a violation of IDEA.'

Judge Spatt also saw no reason to require exhaustion of state administrative review where the asserted claims alleged that the DSS had adopted a policy contrary to law. Such allegations fall within one of the exceptions to IDEA's exhaustion requirements.

In denying defendants' motion to dismiss the Equal Protection claim, Judge Spatt stated: targeting qualified children with disabilities who are also "successful tort litigants," may be irrational given the clear language of the IDEA and the fact that the Court can not conceive, nor have the defendants offered, any rationale for this alleged classification.

The court declined to dismiss the procedural due process claims because plaintiffs were entitled to the proceeds of the personal injury actions, and DSS had provided no warning or notice prior to filing the liens.

Judge Spatt dismissed plaintiffs' claims under the Rehabilitation Act, which protects disabled individuals from discrimination in public service, because the complaint failed to allege that Ashley and Franklin were denied access to free appropriate education because of their disability. Instead, plaintiffs alleged that they faced discrimination because of their status as successful tort litigants. Judge Spatt also dismissed plaintiffs' substantive due process claim for failing to allege that defendants' actions were arbitrary, conscience-shocking or oppressive, and "anything worse than incorrect or ill-advised."

Peter R. Schlam and Harvey M. Stone are partners at Schlam Stone & Dolan.

[This article is reprinted with permission from the April 9, 2004, issue of the New York Law Journal. Copyright © 2007 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]