New York Court of Appeals building. Photo: Rick Kopstein/NYLJ.

The New York Court of Appeals heard arguments Thursday about whether a decades-old settlement release signed by an individual can be enforced to prohibit that person from bringing a second lawsuit against the company after he developed mesothelioma.

The court will be tasked with deciding whether a section of the Federal Employers' Liability Act nullifies a settlement release signed by the plaintiff nearly 20 years ago, which would allow him to sue the company a second time over claims of injury resulting from asbestos exposure.

The employee, Mason South, sued Texaco in 2014 after he developed mesothelioma that was allegedly caused by his exposure to asbestos while he served as a seaman in the Merchant Marine for nearly four decades. South died of his mesothelioma in 2015 and his wife was substituted as the plaintiff in the case.

It's the second time South had been involved in litigation against the company. He was first part of a group of more than 100 defendants who sued Texaco in federal court in the 1990s for damages that allegedly resulted from their exposure to asbestos and second-hand smoke on merchant ships. South was suing over a pulmonary injury at the time.

Texaco settled that case with South and the other defendants, who also signed a release as part of the settlement. According to Texaco, part of the release included an acknowledgement from South that he “understands that the long term effects of exposure to asbestos … may result in obtaining a new and different diagnosis from the diagnosis as of the date of this release.”

The release also said South was “giving up the right to bring an action against [Texaco] in the future for any new or different diagnosis” related to asbestos exposure, according to the company. Texaco was represented before the Court of Appeals by Meir Feder, a partner at Jones Day in Manhattan.

“The decision below should be reversed because the release here was a straightforward settlement of Mr. South's asbestos claims that he'd asserted in a lawsuit,” Feder said.

But even though the release appeared to prohibit South from bringing litigation based on a future diagnosis, his attorneys argue that the agreement is unenforceable under federal law. Louis Bograd, a member at Motley Rice in Washington, D.C., said a section of FELA prohibits contracts that would exempt a company from liability before an injury is known. South was not diagnosed with mesothelioma until more than a decade after the first settlement.

Bograd also argued that, outside of FELA, the release itself shouldn't preclude South from suing over the newly diagnosed mesothelioma.

“There's also the facts of this release, which never mentions cancer and never mentions mesothelioma,” Bograd said. “This is a boilerplate release that Texaco put forward in the case. Texaco said, 'Well, as long as we're settling that case, why don't we also exempt ourselves from any potential future liability?'”

Feder, meanwhile, argued that the release was valid regardless of FELA. He said the language of the agreement was clear that Texaco intended to exclude itself from future liability claims brought by South based on the same alleged conduct.

“When you have a less serious injury based on tortious conduct, you can still settle anything arising out of that conduct, including future, more serious injury,” Feder said.

The lower courts have sided with South in the case. Manhattan Supreme Court Justice Peter Moulton said FELA barred Texaco from enforcing the settlement release and that federal court precedent prevented such an agreement from exempting liability for future, unknown risks.

Moulton, in his decision said Texaco “offered no proof … that Mason South intended to release a future claim for mesothelioma.”

The Appellate Division, First Department affirmed that decision last year, saying that at the time of the settlement, there was no way to know whether South would develop mesothelioma and that, as a result, the release wasn't enforceable under FELA.

“Rather, the lack of an actual diagnosis reveals the language in the release as mere boilerplate, and not the result of an agreement the parameters of which had been specifically negotiated and understood by South,” the panel wrote.

A decision in the case is expected to be handed down in February.

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