Forever Liability Harms Texas Manufacturing

The Texas Supreme Court should clarify state law and give effect to legislative efforts limiting liability for real estate improvements.

Imagine that you own a manufacturing plant and you have decided to improve safety at the plant by designing a customized mechanical system.  That system will replace an old process where employees would handle potentially harmful chemicals in the production process.  Six years pass without a hitch, but over time economics change and you sell your plant to a competitor.  You move on and the new owner runs the factory for eight more years.  Then something terrible happens, a new employee is injured while using the machinery you originally designed and constructed.  There is more bad news, the current owner is bankrupt and you are the target of litigation that could cost your company millions of dollars.

The Texas Supreme Court could rule on such a case if it decides to review a dangerous precedent set by the Texas Court of Appeals in Occidental Chem. Corp. v. Jenkins (Case No. 13-0961).  The Texas Court of Appeals has held a manufacturer forever liable for third-person injuries resulting from the use of a customized system, which was deemed to be a real estate improvement.  Not only was the machinery designed by licensed engineers fourteen years prior to the injury, but the plant was sold to another company and the previous owner retained no control, possession, or ownership of any part of the facility.  The previous owner could no longer maintain, repair, or even touch the machinery.  They could do nothing precisely because they retained no ownership interest whatsoever.  Moreover, the Texas legislature addressed this very issue in statutes that limit liability for persons who construct and retain no control over real estate improvements designed by licensed engineers, and require claims to be filed within ten years.  However, the Court of Appeals denied these statutes effect in precisely the circumstances they were intended to correct.  This type of unbounded liability and utter disregard of legislative action is deeply concerning.  Even the procedural aspects of this case speak to the confusion within the court, with three different opinions from the Court of Appeals and a dissenting Justice in the denial of en banc rehearing.  This is a hard case, but it cannot justify bad law.

If left to stand, this decision threatens to stifle innovation, make work places less safe, and erode manufacturing jobs.

Thomas C. Kirby is a Legal Fellow for the Manufacturers’ Center for Legal Action, the leading voice of manufacturers in the courts. To read more about the Manufacturers’ Center for Legal Action, please click here.

 

 

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