37 Cal. App. 5th 187
Cal. Ct. App. 5th2019Background
- In 2004 an 11‑year‑old passenger, Janine Hernandez, was severely injured in a head‑on collision while riding in a 1992 Oldsmobile that had been used as a rental car years earlier.
- Hernandez sued Enterprise Rent‑A‑Car (and affiliates) in 2012 under a strict products‑liability theory, alleging National Car Rental System, Inc. (NCRS) placed the car in the stream of commerce and Enterprise is a successor to NCRS.
- Summary judgment evidence: NCRS used the Oldsmobile in 1992–93, sold it in 1993; NCRS sold its rental assets to a different entity (New NCRS) in 1995; NCRS (renamed) merged into General Motors in 1996; New NCRS later entered bankruptcy and Cerberus purchased assets in 2003; Enterprise is alleged to own assets purchased by Cerberus.
- Trial court granted summary judgment for Enterprise finding (1) NCRS’s strict‑liability exposure ended (or was not properly traceable) after asset sales, and (2) Enterprise did not acquire successor liability for any NCRS liability.
- The appellate majority affirms, resting its decision on lack of any triable issue that Enterprise acquired successor liability (two independent grounds: asset sale to New NCRS did not destroy remedies against NCRS/GM, and the bankruptcy sale to Cerberus did not impose successor liability).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a rental‑car lessor (or its successors) can be strictly liable for a vehicle defect introduced into the stream of commerce | Hernandez: NCRS put the Oldsmobile into the stream of commerce and strict liability applies (and Enterprise as successor should be liable) | Enterprise: any strict‑liability exposure ended when NCRS sold the car and subsequent transactions sever liability | Court did not decide strict‑liability reach fully but affirmed judgment because successor‑liability theory failed on other grounds |
| Whether New NCRS (asset purchaser in 1995) succeeded to Old NCRS's product liability under Alad product‑line successor test | Hernandez: New NCRS acquired liabilities when it bought the rental business | Enterprise: NCRS continued to exist and later merged into GM, so remedies against NCRS/GM remained available; Alad first prong (virtual destruction of remedies) fails | Court: New NCRS did not succeed to NCRS liability because remedies against NCRS (and then GM) remained; Alad not satisfied |
| Whether Cerberus (and therefore Enterprise) acquired successor liability when it bought New NCRS assets out of bankruptcy in 2003 | Hernandez: the 2003 APA and assumed‑liabilities provisions created a triable issue that Cerberus expressly assumed the liability (or otherwise should be successor liable) | Enterprise: New NCRS's bankruptcy—not the asset purchase—destroyed remedies; and the APA did not, as a matter of law, assume liability for a car sold in 1993 | Court: Stewart line controls—purchaser out of bankruptcy does not incur Alad successor liability absent evidence purchaser caused bankruptcy or expressly assumed liability; here no triable issue of assumption or causation |
| Whether the APA’s language created an express assumption of liability for the 1992 Oldsmobile | Hernandez: section 2.3(d)/(g) and related definitions can reasonably be read to include legacy vehicle liabilities | Enterprise: the Oldsmobile was not an acquired vehicle or vehicle of the business in 2003, so the APA did not assume such liability | Court: as a matter of law the Oldsmobile was not an Acquired Asset/vehicle of the business in 2003 and no admissible evidence showed express assumption; summary judgment proper |
Key Cases Cited
- Ray v. Alad Corp., 19 Cal.3d 22 (Cal. 1977) (announcing product‑line successor test for successor strict liability)
- Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826 (Cal. 2001) (California summary judgment burdens and standards)
- Price v. Shell Oil Co., 2 Cal.3d 245 (Cal. 1970) (strict liability may apply to large‑scale lessors who place vehicles in the stream of commerce)
- Petrini v. Mohasco Corp., 61 Cal.App.4th 1091 (Cal. Ct. App. 1998) (statutory merger causes surviving corporation to assume predecessor liabilities)
- Stewart v. Telex Communications, Inc., 1 Cal.App.4th 190 (Cal. Ct. App. 1991) (asset purchases out of bankruptcy generally do not trigger Alad successor liability where bankruptcy, not purchaser, destroyed remedies)
- Elliott v. GM LLC (In re Motors Liquidation Co.), 829 F.3d 135 (2d Cir. 2016) (limits on bankruptcy court "free and clear" sales and their ability to extinguish future tort claims)
- Kaminski v. Western MacArthur Co., 175 Cal.App.3d 445 (Cal. Ct. App. 1985) (successor liability may attach where purchaser's acquisition extinguished remedies against predecessor)
- Greenman v. Yuba Power Prods., 59 Cal.2d 57 (Cal. 1963) (foundational strict‑liability doctrine)
- Vandermark v. Ford Motor Co., 61 Cal.2d 256 (Cal. 1964) (expansion of strict liability and risk‑spreading policy)