*1 Attorneys Professional Responsibility to the Board of proceeding. disciplinary of this costs Attorney IT IS ORDERED Daniel P. FURTHER comply provisions McDonald with SCR 22.26 con- cerning requirements person whose license to practice law in has Wisconsin been revoked.
Emily Rodney Fish, Plaintiffs-Appellants, Fish corporation, Industries, a Delaware Amsted Inc., South Lathe, Inc., Bend corporation, an Indiana
Defendants-Respondents, Machinery Co., corporation, an Illinois Interstate
Defendant-Co-Appellant, Company, Michigan corporation D Square and Ameri Hospital Supply Corporation, corpo can an Illinois ration, Defendants.
Supreme Court Argued September No. 84-1254. 30, 1985. 26, 1985. Decided November (On appeals.) certification from the court of (Also reported 820.) in 376 N.W.2d *2 plaintiffs-appellants briefs For there were Davis, S.C., Gary Kuphall Habush, R. Habush & Milwaukee, argument Kuphall. and oral Mr. defendants-respondents
For brief there was Riordan, Carlson, Quereshi Donald H. Ahmed J. Crivello, Milwaukee, Carlson, Henderson, Mentowski & argument by and oral Donald H. Carlson.
DAY, appeal the cir- J. This is an from an order of H. cuit Fred county, court for Manitowoc Honorable *3 Defendants’, Hazelwood, judge, granting circuit Lathe, Industries, (Amsted) Amsted Inc. Bend and South (South summary judgment II), Inc. on Bend motion for Emily Rodney (Plaintiffs) Fish’s claim of liability. accepted upon successor We the case certifica- tion from the of appeals. This the fol- court case raises lowing “identity” issues: Is there sufficient between predecessor corporation alleged- which manufactured the ly punch press (Bontrager) defective or and either both corporations (Amsted of the successor Bend and South II) justify holding to corpora- either or both successor products liability alleged tions liable under law for the not, defect? If “product adopt should Wisconsin exception impose line” to either both of the corporations ? identity conclude that sufficient be- We there Bontrager II tween and either Amsted or South Bend justify holding predeces- them acts of their liable adopt “product sor. We decline to line” liability. the traditional of rule no successor Therefore, we affirm the decision the circuit court. Emily injured 8, 1979, severely October
On Fish was operating power press, while a “Johnson known as the Press,” while premises on Hamilton Mechanical employer. press Industries, her involved here was Bontrager Company manufactured Construction 1957, and was (Bontrager) in sold to Hamilton Indus- Machinery Co., Inc., by Interstate tries distributor presses. Presses were originally manu- Mechanical Johnson Company Machine the Johnson Press factured Elkhart, Indiana. In (Johnson) trans- in Johnson Bontrager. and liabilities to all of its assets John- ferred wholly subsidiary as exist son continued to owned longer Bontrager, presses. it no but manufactured outstanding stock in The sole share Johnson Cor- Bontrager assign poration was transferred order to Bontrager rights to Johnson all trade name. Bon- trager began manufacturing press the Johnson line at plant. the Elkhart Bontrager, acquired all the assets of Amsted (use
including of the Johnson all assets of Johnson Bontrager agreed to name) cash transfer. trade via a present employees to make its use its “best efforts” only agreed to assume to Amsted. Amsted available Bontrager necessary un- were those liabilities of Bon- interrupted business, and refused to assume trager’s arising tort liabilities out of defects Bontrager. Johnson or None *4 or officers or an officer directors Amsted were ever Bontrager However, Bon- director a Johnson. trager plant president employed vice was a Amsted as manager plant approximately four at the Elkhart for years following the transfer. through press
Amsted manufactured the Johnson wholly Lathe, subsidiary, its Inc. owned Bend South (South substantially I) plant, using at the Bend Elkhart manufacturing equipment that facilities and Bontrager However, were used South and Johnson. manufacturing implement general Bend I did its own policy, planning1 procedures standards, and and market- ing procedures. dissolved, July Bontrager 29,
On was 1964, and all of its assets were its distributed to shareholders. On Au- gust 2, 1965, by Amsted, Johnson was and dissolved its asset, sole stock, the Johnson distributed to Amsted. September 29, On its subsidiary, dissolved Amsted I, South Bend but operate it continued as an unincor- to porated division under the name Bend Lathe. South South Bend Lathe continued to the John- manufacture press. son In plant, Amsted sold the Elkhart and manufacturing transferred its operations South Bend, plant Indiana of South Bend Lathe. press Amsted sold the Johnson line business LWE, Inc., subsequent-
to an corporation, Indiana changed ly Lathe, its to name Bend Inc. South (South II). agreed indemnify Bend Amsted South any liability arising Bend II for claims of defects in out press the Johnson line. longer manufacturing
Amsted is no in the involved press (an entirely the Johnson line. South Bend II dif- entity ferent subsidiary from the South Bend Lathe Amsted) division of continues manufacture the John- press son line. brought claim
The Plaintiffs against sounding negli- II Bend Amsted South gence alleges liability. complaint and strict The as corporations and South Bend II are Amsted acts of their liable to the Plaintiffs manufacturing Bontrager, allegedly corporation, an press. defective summary judgment circuit Plaintiffs’ court denied find, asking law, as a matter of
motion
court
responsible
II
Amsted and
Bend were
as successor
South
predecessor corporation.
corporations
the acts
meaning
uncertainty
as
Based
its
term
“identity,”
Forage King
used
this court in
In
Tift
*5
72,
(1982)
dustries,
a
Wis.
N.W.2d
as
imposing liability
corporations,
basis for
on successor
granted
the circuit court
Amsted's
Bend IPs
and South
summary judgment, holding
they
motion for
that
could
liability.
not be liable for claims of
appeals
court,
appeal
The court of
certified
to this
raising
expanded
the issue
of whether
decision
Tift
the “mere continuation”
to the traditional
rule
corporation liability
of no successor
elucidated
Lean
v. Cincinnati, Inc.,
(7th
1977).
nais
tion or and seller merely (3) purchaser corporation a when the is con- corporation; (4) when the tinuation of seller fraudulently escape into lia- transaction entered obligations.” Leannais, bility F.2d at for such 439. (Amsted
Both the Plaintiffs and the defendants exceptions II) agree Bend the traditional South nonliability general apply to the do not suc- rule of in this Plaintiffs’ contention cession It is the case. excep- third expanded the second and decision Tift “identity.” setting concept tions forth injured Tift, plaintiff In on October using allegedly chopper box that was while an defective proprietorship do- sole 1961-1962 ing Forage King business as Industries. (the original proprietor person
sole and another owner business) shortly partnership formed a Forage “metamorphosed corporation,” into thereafter King Industries, (Forage King). proprietor Inc.
299 proprietor former cor- were the sole shareholders the poration employees, which manufac- retained the same tured and the name products, same retained sold proprietorship to the same dealers as had the sole allegedly chopper that box. manufactured the defective Tift, 1968, proprietor Wis. 2d 74. Late the sole King. Forage became the sole shareholder of On Janu- ary 30, purchased Corporation all Tester Forage King. brought plaintiffs stock an The in Tift against Forage King action Tester insurer, and Cor- its poration granted was not a defendant. The circuit court finding summary judgment, the defendant’s motion for general exceptions applied. that none of the rule question posed in the “whether case was Tift substantially acquired all of business predecessor proprietorship assets of a but which sole substantially organization is and the same business prede- manufactures its an almost identical as may injuries by cessor be liable caused defective predecessor.” Tift, manufactured question Wis. 2d at 73. This court answered affirma- tively. argue The Plaintiffs in this case that this court expanded exceptions general corporate suc- following language: cessor nonliability rule of “Exceptions rule demon- two three to the organization that, strate when it is the same business dealing with, by consolidation, that one it be whether merger, may continuation, be enforced. These identity.” Tift, are tests 2d at 79. Plain- Wis. argue tiffs court relied on two factors de- this identity if all termine whether the assets exists: acquired by corporation, were the successor being and whether the same was manufactured manufacturing substantially process same organizational throughout While a transformations. “identity” pro- definition of what constitutes was not Tift, plaintiffs argue vided in this case this Sheboygan Co., Machine Cody decision in court’s (1982) is instructive in 321 N.W.2d Wis. regard. this allegedly injured by an Cody, de- plaintiff
In Sheboygan by the drum fective sander Sheboygan I). Company (Sheboygan Machine all the assets of Locke, purchase of Inc. made a cash officers, identity of Sheboygan I. There was no common corpora- two these shareholders between directors *7 agreement purchase tions, was silent and Locke, Sheboygan corporation’s, issue of the successor agree- Inc.’s, assumption of liabilities. to the Pursuant changed Sheboygan I, predecessor corporation, ment, the be- Allester the successor name its II). (Sheboygan Sheboygan Company came Machine Sheboygan I dissolved 1968. Company,
In Monitor made cash Machine Inc. purchase Sheboygan II, including of real of the assets estate, lists, goodwill, Sheboygan customer and became III). Company, Inc., (Sheboygan express An Machine nonassumption clause was in the of liabilities contained agreement. Sheboygan III never the drum product Only Sheboygan possible sander line. lia- Ill’s bility Cody. at issue in was Cody, that this court concluded no iden- there tity organization Sheboygan of business I and between III, Sheboygan Sheboygan hold and refused to III liable. argue Plaintiffs, case, in this that the sole factual dif- Cody explains ference between the differ- Tift ing Cody results is that the successor predecessor. never manufactured the line of the Relying conclusion, on this claim the Plaintiffs that this expanded general exceptions court has cor- porate considering nonliability by successor rule of “identity” corporations. and successor Identity, according identity assets, Plaintiffs, to the is of operations and identity the product, rather than identity ownership. agree arguments
We with the advanced the de- fendant and hold that the Plaintiffs in error are in al- leging that the expanded decision has exceptions Tift nonliability. rule of expressly This court stated applying existing it was corporate rules to the fac- tual situation in Tift. “A spite merely court need determine that defendant, de- transformations, substantially business original as the application manufacturer. is the This existing sion law; governs and such law the deci- case, in this identity because it is clear that there is original
between the present manufacturer and the Forage King Industries, Tift, Inc.” Wis. 2d 79-80. (Emphasis added.) Identity identity ownership, identity refers to not existing corporate applied line. Since this court summary judgment, rules in to reverse the there Tift was no need to determine this court whether dissent, adopt exception. In his should *8 analyzed Callow Justice this and stated that recognize imposing he would refuse as a means of corporation. Tift, on a successor Wis. 2d at (Callow, J., dissenting). situation in Tift, with a In was confronted this court corporation, but rather predecessor not a which the was However, that this court held proprietorship. a this sole applied rules. was factor irrelevant and exceptions impos application of two or three Direct proprietorship this because when a sole is involved sible officers, and ownership directors form of does not have determining key whether in shareholders. The element merger merger is that occurred de facto has ownership in the successor of for stock transfer was 439; Leannais, F.2d at corporation rather than cash. J., dissenting). de- (Callow, In at 88 Tift, 2d 108 Wis. “continuation” of termining is the if the successor identity key a“is common corporation, element seller selling in officers, and stockholders of directors Leannais, corporations.” 565 F.2d purchasing and 440. the successor was
Thus, whether this court considered organization predecessor and as the same business Forage King Industries, Inc. “the was that concluded operated entity as a of as continuation the same Wiberg.” Tift, 2d at 80. proprietorship sole 108 Wis. management identity (Emphasis added). was of There throughout and from sole control the transformation Only corporation. proprietorship partnership to changed; substance, form the identical of the business organization product. continued to manufacture This court refused allow the successor escape liability corpora- when in substance the successor entity predecessor tion was the same as the sole proprietorship. Cody, companion case, this court concluded Tift’s identity organizations was there no be- of business predecessor corporations.
tween the and successor Though predecessor’s the successor shared the name and place business, en- the successor was an tirely corporation. repair job different It was a and shop, rather drum than manufacturer sanders. identity management There was no and control throughout ownership. Tift, the transfers Unlike parties corporations, both were there “no com- identity officers, directors, mon be- stockholders companies.” Cody, tween the two 108 Wis. at 108. When with a confronted factual situation which both corporations, and successor were this “identity” excep- court refused to hold that exists when *9 tions inapplicable. two three were Since of the none corporate exceptions applicable Sheboygan were III could not corporation. be liable a successor as apply existing
This
court continues to
law to
liability
See,
Roper
cases.
Parson v.
Whitney,
Inc.,
Supp.
(W.D. WI,
F.
1984).
undisputed
Since it is
that
the succession in this case
any
does
existing
not
exceptions
meet
to nonlia-
bility,
granting
the circuit court was
correct
the de-
summary judgment.
fendants’ motion for
Alternatively,
argue
the Plaintiffs
this court
adopt
“product
should
Ray
line”
of
v. Alad
Corp.,
22,
Rptr.
574,
Cal.
136 Cal.
The traditional exceptions prior developed rations and its were adoption law. 1 strict L. Frumer Friedman, Liability, (1982) ; and M. Products § 5.06[2] Hill, Liability Corporation- D. Successor Products Acquisition Will, Will” “Bad Good 32 Def. With L.J. (1983); Industries, Amsted Ramirez v. (1981) (involves 431 A.2d N.J. 815-816 situation). similar fact recognize rule the traditional come “Courts have of nonliability response in- developed liability actions, rather parties but terests of rights dis- protect creditors and commercial acquisitions, senting well as to determine successor tax assessments and following corporate as shareholders obligations prede- contractual (Citations Ramirez, 815-816. 431 A.2d at cessor.” omitted.) California, Jersey, Pennsylvania and states, New
Some general excep- Washington, found the rule its have *10 when tions narrow confronted with a strict to be too products liability purpose products The action. strict any injuries liability the insure that costs of re is to by sulting product of a defective are borne from the use placed who the manufacturer the defective market, by injured person. rather than the the Hick Thompson Co., Supp. 1282, man v. Thomas C. 592 F. (D. 1984); Ray, 8; Col. 560 P.2d at Greenman Products, Power Yuba 27 Cal. Cal. Rptr. 697, 701, Therefore, 377 P.2d adopted these states have the line nonliability, developed protect which has the interests parties products involved in a action. injured fell Ray, plaintiff was when he off the Corporation the Alad defective ladder (Alad transfer, I). By the successor means of a cash I, acquired (Alad II) of Alad all the assets including manu- Alad “Alad II continued to name. the name, under ‘Alad’ facture same line of ladders using equipment, designs, personnel, and the same soliciting through rep- I’s sales Alad customers the same change any no indication of resentatives with outward 5. ownership Ray, of the business.” 560 P.2d at transfer, The Shortly I dissolved. after Alad was Ray provided justifications imposing lia- court three bility II, corporation: on Alad the successor plaintiff’s “(1) remedies destruction of virtual against sor’s ity original the succes- manufacturer caused business, (2) acquisition abil- successor’s risk-spreading original manufacturer's assume rule, (3) requiring the successor fairness responsibility assume a for defective original necessarily a turer’s continued manufac- burden attached to the good in the being enjoyed by the successor will 9. Ray, P.2d at operation of the business.” held justifications, court California on these Based “acquires a manu- that a facturing output business and continues the of its line under presented the circumstances here as- sumes strict tort in units of defects previously manufactured and distributed entity from acquired.” which the business was Ray, *11 560 analyzing pros P.2d at 11. After the and cons of justifications the creating for product the line exception, we adopt decline to it. policy promoted by
The to be strict protection is the of otherwise defenseless victims de- fectively products. Ray, manufactured 8; 560 P.2d at Dawejko Jorgensen Co., Super. 520, v. Steel Pa. 290 434 106, (1981); Armstrong, A.2d 109 Hall v. 103 Wash. 2d 258, argued 787, P.2d 692 791 It is that it would be contrary policy to this corpora- to allow a successor extinguish rights tion plaintiff’s against a prede- the corporation, escape cessor then all plaintiff. Washington Supreme The Court asserted two justification Ray. rationales the first offered in First, product “necessity;” the line rule is one of with- plaintiff meaningful remedy. out it the is without a Second, argued impose liability it is it is fair to be- corporation's cause it is acquisition the successor of the predecessor unavailability prede- that caused the Hall, cessor as a defendant. 692 P.2d 791. plaintiff the that the has
Other courts reason that fact remedy against predecessor no one and has lost his justification for else to sue but the is not a suing successor, merely it a statement but rather is corpo- problem. remedy no “Plaintiff has because predecessor liable law be rate dictates cannot Ngyen Hung v. Manh Johnson because has dissolved.” 1104, Press, App. N.E.2d Mach. & 104 Ill. situation) ; (involves (1982) See a similar factual Products, Inc., also, Downtowner, Inc. v. Acrometal (N.D. 1984). N.W.2d just More than a state- problem required ment of the change justify law. injuries policy with that the cost accordance resulting by from should be borne defective placed manufacturer who the defective injured party, market rather than the court orig- Ray ability considered successor’s to assume the spreading inal justifi- manufacturer’s risk function as a imposing liability. Ray assigns cation for rationale responsibility injuries caused defective manufacturing the successor who has benefitted from predecessor. Tenneco, as the Gee (9th 1980). 615 F.2d Cir. “Similarly, to its manufacturer transfers because the previously had successor been available to sponsibilities it ‘the resources that meeting its re *12 manufacturer] [the injured by [products] persons in defects produced,’ the successor rather than the user had product position bear is in the better accident- Ramirez, (Citations avoidance omitted.) A.2d at costs.” 431 821. Corp., also, v. 86 See Nieves Bruno Sherman 361, (1981). 826, N.J. 431 A.2d 830 virtually ca- argued has is that the successor It injury risks of to estimate the pacity as the it predecessor and by the products manufactured from coverage or by obtaining insurance protect itself can Ramirez, A.2d 431 planning type of insurance. self some prod- Proponents 830. 822; Nieves, A.2d at 431 holding a successor problem have no exception uct line manufactured. not has product a it for defects liable upon fault —the liability is based not “Strict ‘morally’ for the defect responsible be need not successor Oliver, Inc., 97 Rawlings D.M. liability.” to incure 119, Rptr. 124 890, App. 159 Cal. 3d Cal.
307 Opponents product exception question line whether the responsible successor should spread- be ing injury the risk of and whether the successor can spread Ordinarily, risk. strict is not im- posed on a per- manufacturer unless it has created or petuated the Leannais, defect. 439; 565 F.2d at Jones v. Johnson Mach. Co., & Press Etc., Neb. N.W. (1982) (Similar situation). fact In Collins Lilly Co., v. Eli Wis. 2d 193-198, 342 N.W.2d (1984), this place court declined to drug who manufacturers could a be cause fact injury plaintiff. Collins, plaintiff’s injuries to the ingestion drug stemmed from her mother’s DES during pregnancy. plaintiff may This court held a against a produced commence suit who defendant type of DES taken the mother of plaintiff. However, escape liability a defendant can by proving that produce it did not or market the DES injury plaintiff. caused the utilized, liability product exception
If will is line something imposed be on a not for done, may it has rather be able to afford but because Downtowner, liability. Nguyen, 1111; 433 N.E.2d at courts that refuse N.W.2d at 124. Those adopt the suc- do so because: it di- cessor did not the risk nor did create rectly predecessor’s profit from the sale of defective product; it did not solicit the use of defective any representations safety; nor make nor is it as to its safety already able to enhance the *13 Inc., market; Mfg. Co., 2d Bernard v. Kee So. 409 1047, Works, (Fla. 1982); Domine v. Fulton Iron 1050 Jones, App. 76 Ill. 395 N.E.2d 23 484; Hydra-Tool Corp., 320 N.W.2d at Ostrowski v. 479 126, 127 (Vt. 1984). A.2d
308 question
Furthermore, opponents whether the succes “spread injuries. able to sor is of risk” imposition They as see an small “Because of economic threat businesses. assets, corporations small face finan their limited would liability imposition from for their cial destruction products. Bernard, predecessor’s . . .” 409 So. 2d at Ostrowski, also, at 127.1 see A.2d 479 problem obtain- have a difficult manufacturers “[S]mall impossible ing find it products insurance they raising prices have because cover the risks larger keep can compete price a liability can different manufacturers who with thing Additionally, that to assume down. it one against potential acquire insurance manufacturer can it its and another assume for own by a acquire such insurance for the made 1111 Nguyen, N.E.2d at manufacturer.” (citations also, omitted); Downtowner, See J., 124; Tift, (Callow, N.W.2d at 2d at 94-96 Wis. dissenting). Ray the suc- is that justification offered The final line as manufactures cessor who reputation goodwill and from the predecessor benefits should line and predecessor’s attributed to the predeces- any defect bear the costs corpora- if a product. offended would be sor’s “Justice company for particular as which holds itself out tion deny- sales, estopped from purposes not be would ing company purpose of determin- is that (Cita- liability.” Nieves, A.2d ing products at 830. requires who omitted.) a successor Fairness tions legitimate exploitation of has been benefitted manufacturing Approximately percent ninety nation’s Tift, (Cal at 94 enterprises corporations. 108 Wis. 2d are small Liability and Successor Products J., dissenting; Comment, low, Corporations: Protecting Manu and the the Product Small User Liability Availability Through Products Increased facturer Insurance, 1000,1003 (1980). L. Rev. U.C.D. *14 goodwill by predecessor’s product earned line should bear the burden of ordinarily costs which would borne be by predecessor. Hickman, 1285; Supp. 592 F. at Ramirez, 431 A.2d Furthermore, at 822. this considera- precludes tion predecessor might a windfall to the otherwise purchase result from an price paid enhanced predecessor if liability ignored, an liability by avoidance predecessor injuries caused after the transfer predecessor because the has “Thus, dissolved. price by reduction of the an sale amount compensate calculated to corpora- the successor potential tion for more, it has assumed ais less, accurate measure the true worth of the busi- Ramirez, 822; ness.” also, 431 A.2d at Ray, See P.2d at 11.
Opponents
argue
any
of the
line
through
goodwill
acquired
benefit
the successor
reputation
predecessor’s product
of the
line was consid-
negotiated
ered and
for at the time
the sale and con-
part
price.
stituted
of the sale
To hold the successor
prede-
liable for
defects
manufactured
forcing
cessor would
pay
be
the successor to
twice
goodwill
predecessor. Nguyen,
of the
N.E.2d
1112; Tift,
J., dissenting).
(Callow,
Another raised party of the defective from the sale who has benefitted It is predecessor and not the successor. is the reaped profits from the sale who has imposed product, should be thus the defective earned predecessor’s profits profits and not on the after the successor on Woody Engineering, acquisition. v. Combustion 1978); Supp. 817, (E.D. Tift, 108 Wis. F. Tenn. dissenting). (Callow, J., at 99 against arguments considering for and
After agree- exception, are in adoption we *15 arguments ex opposition in raised ment with the liability Although is “no-fault” ception. a strict liability imposes theory liability, manufacturers on it product placing the defective responsible who for are This injury the stream of commerce. that caused the into corporation. The suc not the with a successor is case place on the market cessor not manufacture nor did it did Ray injury. Furthermore, the that caused the citing authority and cases as have failed define it (Callow, See, Tift, 2d line. 108 at 102-103 Wis. J., dissenting) .2 position legislature is in a better that the
We conclude on public policy in based decisions actions to make broad liability Industries, law. Setco Holifield ques- 750, 758, (1969). The 2d 177 Wis. 168 N.W.2d manufacturing concerning busi- tions the on the effect strength ness, of suc- potential size and economic availability in- corporations, commercial cessor questions all of such insurance are surance and the cost questions type we answer. These are the cannot legislature position ascertain. is in a better change If a in law is to be made such basic change about would seem reasonable for the to come through legislation In rather than court decision. Leannais, prudently impose the seventh circuit refused theory liability upon newa successor and concluded: ill-equipped, however, equities are
“Courts among to balance forays plaintiffs can future and defendants. Such Rawlings, muddied the a California court further waters by imposing liability successor when manu factured in with was made accordance specifications not be construed customer. “Alad should narrowly general so as to create an exclusive only rule permitting for successor a similar result Rawlings, Rptr. an Alad clone.” Cal. at 124. wide-ranging result society, ramifications on the con- templation of precluded by exigencies of de- ciding particular presented case on a limited record developed by present parties. ... As the Wisconsin Supreme Court has recognized, policy such broad issues are legislatures best handled comprehen- with their machinery sive public input Leannais, and debate.” Supp 441; F. also, See Hernandez v. Johnson Corp., Press App. 70 Ill. 388 N.E.2d (Similar situation.) fact If corporations of successor is to be ex- panded, changes we conclude that such promul- should be gated by legislature. theory imposing liability
Another
aon
*16
corporation,
“expanded continuation,” was established
by Michigan Supreme
the
in Turner v. Bituminous
Court
Co.,
(1976).3
Cas.
397 Mich.
As with the products liability action, and is a Court held that this must be policy considerations thus reversing summary judgment, Michi- applied. In the the justifications gan for the same three court considered Ray. Turner, liability espoused N.W.2d imposing adopt go the not as far as to The court did 878-882. rather, expanded “con- product exception, it the line but successor traditional rule of tinuation” summary judgment incor plaintiffs, motion for The in their Ray Turner rectly line view and Turner as cases. both expanded theory, apply rather, did line but nonliability general of exception to the rule of the continuation corporations. successor removing nonliability by be- the distinction predecessor corporation of and
tween a sale for cash following a sale for court established the stock. The continuity guidelines to if determine there is sufficient corporations between the impose liability on the successor defects predecessor. “1) continuity enterprise of of the There was basic including, corporation, apparently, a retention seller assets, general key personnel, operations, and business name. even the Sheridan “2) ordinary op- seller ceased business The erations, liquidated, and dissolved after distribu- soon buying tion from consideration received
corporation. “3) purchasing corporation The assumed those liabili- obligations ordinarily necessary ties the seller operations the continuation of normal business corporation. seller “4) purchasing corporation held itself out world corpora- as the effective continuation the seller Turner, tion.” N.W.2d 883-884. adopt “expanded ex- continuation”
We decline to we de- ception nonliability for same reasons that exception. adopt clined By circuit court decision Court. —The *17 affirmed. agree CECI, (concurring). with the J. I
LOUIS J. briefly, majority. by I wish result to address reached however, possible upshot conclusion a dissents’ may corporation a liable for that a be held successor liability predecessor’s under defective law. holding justification generally for a is little
There predecessor’s product de- for its successor accountable justification fects. And it no such a conclusion to may reason protect that a small successor business itself liability by purchasing from insur- longer apparent ance. Insurance is no panacea may which it at have been one time: where insurance is high may available all, its prohibitively cost make it expensive average purchase. for the business to For ex- ample, (South Lathe, South Bend II) Inc. Bend most likely impossible would purchase have found it insur- protect ance to itself from for a power defective press was, which at the time of corpo- South Bend IPs succession, rate nearly twenty years earlier.
Where insurance is an unaffordable or unavailable protection alternative for from liability, busi- nesses will increasingly have an selling difficult time transferring terms, assets. In other if the dissents’ conclusion ever juris- becomes the law of this diction, resulting high cost of insurance will serve compelling a argument as for the enactment of federal products liability legislation. ABRAHAMSON, (dissenting).
SHIRLEY S. J. This question case raises previous- a which this court has not ly addressed: a buys Should the as- sets of manufacturing another and continues injury be liable caused corpora- was manufactured sold tion? 1979, Emily injured op- while
On October Fish was employer erating power Ham- press for her “Johnson” press in ilton was manufactured Industries. The Bontrager Company, its assets which sold Construction Industries, dissolved to Amsted “Bontrager” Amsted sold the assets 1964. Lathe, Inc., which continued to manufacture Bend South presses name. In 1978 and under the Johnson trade
314
1982, parts Indus- South Bend to Hamilton Lathe sold press for the in tries involved this case.
Applying a to this corporate traditional law rule case, majority Lathe, tort concludes Bend that South corporation, the successor Emily is not for Fish’s liable injuries.1 majority’s Because the decision contravenes underlying products liability rationale in law this state,2 I dissent. corporate corporation pur- law a
Under traditional chasing corporation liable the assets of another is not corporation. The the debts liabilities of the seller genesis was, part, protect least in this rule cor- porate pro- transferees from unassumed liabilities and to dissenting tect commercial creditors and shareholders corporate when traditional assets were transferred. The 1 By corporation successor refer this Bend we case to South pro which at the time the Lathe lawsuit was commenced ducing presses under name. Amsted’s lia Johnson trade bility agreement indemnify arises from its Bend Lathe South any liability arising claims out of defects in the Johnson Mechanical Press. 2 Johnson-Bontrager-Amsted-South Bend Lathe transfers raising subject of suc the issue cases have been the of several corporate liability. dis the Ramirez case cessor In addition to & Press majority, v. Johnson Machine Jones cussed Co., see (successor Etc., (1982) cor 724, 481 211 320 Neb. N.W.2d poration rule); corporate Korzetz not liable traditional under Mich., 1979) Industries, (E.D. Supp. v. Amsted 136 472 F. Hung Nguyen (successor Turner) ; Manh liable under Press, 1141, v. App. 433 Johnson Ill. 3d N.E.2d & 104 Mach. (1982) (successor corporation 1104 not under traditional liable Lathe, rule); Bend Ortiz v. South C.A.3d Rptr. (successor corporation (1975) liable under Cal. case) ; Ray corporate rule; expressly traditional overruled App. Co., Hernandez Ill. v. Johnson Press N.E.2d (1979) (successor corporation not traditional liable under Industries, corporate rule); (Massachusetts Inc. Perez Amsted Superior prod holding under Court liable Litiga Swartz, theory, uct Hazardous Products cited tion, 12/84). p. 93, Supp. sec.
315 developed rule outside the context of prior tort law and adoption products to the of liability modern law. question then arises whether the traditional rule applied products liability plaintiff. should be to a For forth, the corporate reasons set I conclude that the rule applied liability should be cases.3 First, possibly satisfying while the of the com- needs mercial creditors whose claims arise before soon after the transfer, corporate the unrespon- traditional rule is sive liability to the of plaintiff needs the whose may years claim arise purchased after the corporate transpired. transfer has Furthermore, corporate while the of may form the transfer have some contracting relevance to the parties, the commercial creditor shareholder, or the injured is irrelevant party.
Second, corporate the traditional rule of lia- successor bility principles contravenes the fundamental of Wiscon- products liability corporate sin’s law. The rule runs products liability concept placing counter to the party by spread- burden on the most able to bear the loss ing the risk. liability
Underlying law is a con- Wisconsin’s just injured hapless cern “about claims products. user or of industrial The doctrines consumer emptor given way of laissez nous faire and have caveat Dippel Sciano, to more humane considerations.” 443, 450, (1967). Wis. 2d This N.W.2d court has recognized that manufacturers and distributors of a product, injured person, than rather should bear injury. risk and distributors The manufacturers commentary For reference to the extensive law review corporate liability, generally applying critical Continuity rule, Phillips, traditional see Product Line Corporation Liability, 906, 906, and Successor L. Rev. N.Y.U. 1n. injury in the spread risk position
are in the best
reap a
product. Those who
benefit
cost of the
overall
injury
caused the
that has
from the sale
injury.
responsibility for the
bear
should
manufacturers,
principle
Applying this
to DES
though
manufacturers even
imposed
on the
court
pro-
prove
manufacturers
plaintiff
that the
could not
allegedly
drug
caused
or marketed the
duced
injury.
explained
imposition of
woman’s
We
*20
as follows:
injured plaintiff
possibly
the
and the
between
“[A]s
drug
drug company
in a bet-
responsible
company, the
is
drug
injury. The
position
ter
the
of the
to absorb
costs
against
liability,
along
company
sorb the
consuming
ab-
insure
can either
itself
damage award,
pass
the cost
business.
doing
public as a
conclude
cost
We
drug companies or consumers
to
of
is better
have the
injury
place
share the
the burden
cost
than
Co.,
solely
Lilly
plaintiff."
on
Collins v. Eli
the innocent
166, 190-192,
116 Wis.
A lia second of our bility damage may law that awards as an incentive act case, development products. for the of safe the DES justified drug imposing liability we on manufacturers damages because cost of an in “the awards will act as drugs drug companies adequately centive to test they place general on market for medical use.” Col Lilly supra Co., lins v. Eli 2d at 192. 116 Wis. While South Bend Lathe had not manufactured or alleged causing distributed the in- defective jury policy case, this discussed above for reasons imposing products liability strict on and manufacturers imposing support distributors on South Bend Lathe in apparently this case. South Bend Lathe ac- substantially quired manufacturing all the of the assets predecessor corporation. apparently Bend South Lathe substantially manufacturing opera- continued the same producing Bontrager’s tion Mechanical “Johnson Press.” appears benefited South Bend Lathe to have from Bon- trager’s good reputation will, accumulated business and If Lathe did established customers. South Bend in fact Bontrager by continue the established business con- tinuing press, the manufacture of South Bend integral marketing an part became and manufac- turing enterprise alleged put defective injuries the market and should re- bear cost sulting product. from the defective
Furthermore, imposing liability on South Bend Lathe can also an serve as incentive to the to im- prove product. oppor- South Bend Lathe had the tunity product, perceive any assess risks take and steps any to avoid risks. majority letting legislature opinion
The
favors
de-
impose liability
cide whether to
on a
purchases
predecessor corporation.
the assets
disagree.
developed through
I
Tort
law has been
growth
susceptible
common law.
common
law is
adaptation
situations;
to new circumstances
common law is not
adapts
immutable but flexible and
it-
*21
varying
Schulze,
self
In
v.
conditions.4
Bielski
16 Wis.
1, 11,
(1962),
the courts as the need to new situations principles of common law arose.” recognized based on cause of action a
This court first liability Dippel in in case. strict of strict of the common law doctrine evolution continuing to the liability concern has been a matter legislature “passing in this the buck” to the courts. develop case, responsibility its the court abdicates common law of this state. prod policies underlying
I modern conclude liability by majority’s apply law are not served ucts liability ing corporate rule should to decide whether imposed on a successor for a be predecessor corporation. I sold manufactured and “product rule of believe the court should fashion line” liability corporate and should reverse successor order of the circuit court and remand the case de For termine the defendants’ under a rule.5 such forth, I reasons set dissent. I am Chief Nathan authorized to state that Justice joins S. Heffernan this dissent. BABLITCH, (dissenting). A. The ma-
WILLIAM J. very thoroughly competing jority opinion forth the sets policy implicit presented. I considerations the issue imposition The defendants contend devastating successors have a on the would effect majority acknowledges transferability opinion of assets. The difficulty devising equitable a rule that be would injured party. Many successor and the of the con expressed majority might making any cerns be met corporate liability substantially prospective rule of operation. application This limitation on the new rule provide parties opportunity adjust would concerned their relationships future conduct and to take into consideration their *22 potential liability. Industries, Ramirez Amsted See 811, 824-26, (1981). 431 A.2d N.J. spell submit that those considerations are reasons out clearly “product line,” pre- what constitutes a but recovery against clude corporation a for in- successor juries by product caused a defective even when the suc- corporation cessor exactly continues to manufacture product. same person I Because conclude that a who injuries suffers defectively prod- due a manufactured uct injuries should not to bear have the cost of those corporation when product which manufactured the has dissolved but a successor continues to produce product line, respectfully I dissent.
In 1967 this
important
court
question
confronted the
injuries
who
should bear the cost of
a de-
caused
product,
injured person
fective
or the manufacturer
product?
the defective
wisely
This court
concluded
the manufacturer of the
product
defective
should
bear
Dippel
that cost.
v. Sciano,
37 Wis. 2d
(1967).
erations behind for manufacturers strict tort product. primary policy a defective consideration position than better manufacturers are users of the risks costs of to distribute the through appropriate created an defective pricing through insurance, system, purchase of through a form of self-insurance. *23 to a equally applicable policy is
This consideration of the same corporate manufacturer successor position in a is better The line. injury risk of of the the costs than a user to distribute purchase of system, in- through appropriate pricing an Perhaps im- most surance or a form of self-insurance. contingent lia- portantly, the extent those costs successor, can the successor are absorbed bilities negotiate predecessor’s business price for purchase which reflects them. retreat consequences inequitable
The of the court’s juxta- position easily illustrated from its earlier are posing hypothetical Hypothetical number situations. two widgets. Widget Corporation One 1: manufactures widgets injuries its is defective and causes severe Mary Hypothetical on the Smith. number 2 based day Mary except in- prior same facts Smith’s one Widget Corporation to XYZ juries, business sells its Corporation, Widget and XYZ continues dissolves widgets. hypothetical manufacture Under 1, Widget Corporation liability in tort for number bears Mary injuries. hypothetical Smith’s Under number be- today’s Widget majority opinion, cause of neither Cor- poration liability. Corporation nor XYZ bears such Mary injuries. Smith bears the costs of her inequities apparent. a result Because such are majority provides corpora- opinion that a successor contingent responsible tion is not tort liabilities con- predecessor’s past production, price nected with its only assets, receives will reflect contingent injuries for future its caused product. predecessor completes defective Once the an ongoing manufacturing opera- assets-for-cash sale of its may tions, proceeds distribute the to shareholders and Any person injured by dissolve. prede- subsequently product, go against cessor’s defective unable to the sue- cessor manufacturer product, of the will be without a remedy. circumstances, Under these hapless victim bears the injuries cost of associated with the defective product.
Adoption exception, other *24 hand, entity, help manufacturing would ensure that the injured and not user, injuries the of re- bears the costs sulting products. corpo- from use of defective Successor rations, requires on notice that the law them to answer product prede- defects in lines manufactured their they if produce lines, cessors continue to those would adjust purchase offers reflect insurance other and/or liability. equitable costs associated with this The result would be that the would receive fair value ongoing reflecting for its operations, both assets contingent posi- tort liabilities. would then be Successors provide adequate coverage tioned to for both insurance predecessor’s their production. turn, and their own In persons alleging injury from defective would be damages upon legitimate able to proof recover claim. majority authority marshalls the on both sides of adopting product the debate exception on the line in a thorough However, and fair manner. I believe that judgment by in adopting errs not product line ex- ception. grounds majority’s At least two for re- jecting are, my view, line in erroneous.
First, majority suggests ex- ception pose would an economic small business. threat Majority opinion pages at See also 309. Tift 94-5, Forage King Industries, 2dWis. (Callow, dissenting). (1982) J., The con- N.W.2d cannot ventional wisdom has been that small businesses coverage liability expo- find afford insurance arguably implicit exception. Although sure this conditions, may have been true market previous under changed have market conditions is there evidence law of any rate, substantive that, availability affecting major liability force legislation allows addition, federal recent insurance. cooperatives and in- to form self-insurance businesses manage groups costs. For purchasing to better surance Liability Risk of the Product a discussion the effects (1981), see, Act, 15 U.S.C. 3901-04 Retention Sections law—but whose Smith, Uniform Lawyer terms?, 5 Cal. change”
Second, majority argues that a “basic such magnitude “come about law of this should legislation through rather than court decision.” Ma- disregards page argument jority opinion at 310. This principle of the fact that no successor developed prior a common-law rule is itself adoption products liability principles. More strict *25 argument disregards duty importantly, of this this give I, court to effect to article sec. of the state con- stitution, provides, part, “[e]very person in remedy laws all is entitled a certain in- wrongs juries, may person, his which he receive in property interpreted or character.” This court has this provision authority adequate as for it to fashion remed- Lilly ies Collins v. Eli Co., where none exist. 2dWis. 166, 183, N.W.2d 37 It should exercise augment authority this case the common-law adopting to the rule of no suc- corporation liability. cessor reasons, For I the above would reverse the decision of the circuit court and remand this case for reconsidera- tion in accordance with this dissent.
I am authorized state that CHIEF JUSTICE joins NATHAN S. HEFFERNAN in this dissent.