## Facts

- John Ed Clay and Curtis T. Bailey (and their wives) brought products-liability claims alleging occupational exposure to asbestos-containing products manufactured by Johns-Manville Sales Corp. and Raybestos-Manhattan, Inc.
- The wives asserted derivative loss-of-consortium claims.
- After a joint trial in the Eastern District of Tennessee, the jury returned verdicts for the defendants.
- Plaintiffs sought to prove manufacturer knowledge of asbestos hazards and offered a deposition of Dr. Kenneth Wallace Smith, a longtime medical director for Johns-Manville.
- Dr. Smith had died before trial; his deposition had been taken in earlier asbestos litigation involving other asbestos manufacturers.
- The district court excluded the deposition as hearsay, reasoning that the earlier defendants were not Raybestos’s “predecessors in interest” for purposes of Federal Rule of Evidence 804(b)(1).
- The district court also instructed the jury on a Tennessee ten-year products-liability statute of repose, permitting a defense verdict if claims were brought beyond that period.
- While the appeal was pending, Johns-Manville filed a Chapter 11 petition; the court treated the appeal against Johns-Manville as subject to the automatic stay.

## Issues

1. Whether the district court erred by submitting a Tennessee ten-year products-liability statute of repose defense to the jury despite a legislative amendment excluding asbestos-related actions and related Tennessee authority on retroactive application.
2. Whether Dr. Smith’s deposition from prior asbestos litigation was admissible as former testimony under Federal Rule of Evidence 804(b)(1) against Raybestos based on a functional reading of “predecessor in interest.”
3. Whether the district court properly exercised discretion in denying plaintiffs’ request to apply offensive collateral estoppel against Raybestos based on prior asbestos litigation outcomes.

## Decision

- The appeal as to Johns-Manville was stayed under 11 U.S.C. § 362(a)(1) due to its bankruptcy filing.
- As to Raybestos, the court reversed the judgments and remanded for a new trial.
- The court held it was error to submit the statute-of-repose defense to the jury in light of Tennessee’s asbestos-specific amendment and Tennessee’s movement away from rigid “vested rights” protection for such defenses.
- The court held it was error to exclude Dr. Smith’s deposition; it fell within Rule 804(b)(1) because defendants in the earlier litigation had a sufficiently similar motive to examine him on industry knowledge and warnings.
- The court directed that offensive collateral estoppel be reconsidered on remand under proper standards, without ordering its automatic application.

## Legal Principles

- A bankruptcy petition automatically stays the continuation of judicial proceedings against the debtor, including an appeal, under 11 U.S.C. § 362(a)(1), even absent a motion requesting a stay.
- When state law removes asbestos-related claims from a general products-liability statute of repose and state doctrine does not rigidly protect repose defenses as “vested rights,” it is error to instruct a jury on that repose defense as applicable to such claims.
- Under Federal Rule of Evidence 804(b)(1), “predecessor in interest” in a civil case does not require strict privity; the key inquiry is whether the earlier party had an opportunity and a similar motive to develop the testimony.
- In mass-tort contexts where multiple manufacturers share aligned interests on common issues (e.g., industry knowledge of hazards and adequacy of warnings), prior testimony developed by similarly situated defendants can satisfy Rule 804(b)(1).
- Offensive collateral estoppel is committed to trial-court discretion and requires evaluation of fairness factors, including whether the defendant had adequate notice and a full and fair opportunity to litigate the issue previously.

## Conclusion

The Sixth Circuit stayed proceedings against Johns-Manville due to the automatic bankruptcy stay, but reversed and remanded as to Raybestos because the jury was improperly instructed on an inapplicable repose defense, a key deceased witness’s deposition should have been admitted as former testimony under a functional “predecessor in interest” analysis, and the offensive collateral estoppel request required renewed consideration under correct discretionary standards.


Clay v. Johns-Manville Sales Corp., 722 F.2d 1289 (6th Cir. 1983)