308 F.3d 328 | 3rd Cir. | 2002
Before: SCIRICA, and AMBRO, Circuit Judges, and(cid:13) POLLAK, District Judge.**(cid:13) (Opinion filed: October 24, 2002)(cid:13) Matthew L. Kurzweg (ARGUED)(cid:13) 445 Fort Pitt Boulevard(cid:13) Fort Pitt Commons Building,(cid:13) Suite 400(cid:13) Pittsburgh, PA 15222(cid:13) Attorney for Appellants(cid:13) Wayne W. Ringeisen (ARGUED)(cid:13) Arnd N. von Waldow(cid:13) Reed Smith Shaw & McClay(cid:13) 435 Sixth Avenue(cid:13) Pittsburgh, PA 15219(cid:13) Attorney for Appellee Kent(cid:13) Reynolds, as Escrow Agent on(cid:13) Behalf of the Former Shareholders(cid:13) of Piper Industries, Inc.(cid:13) Clem C. Trischler (ARGUED)(cid:13) Pietragallo, Bosick & Gordon(cid:13) 301 Grant Street(cid:13) One Oxford Centre, 38th Floor(cid:13) Pittsburgh, PA 15219(cid:13) Attorney for Appellee Hiniker(cid:13) Company(cid:13) _________________________________________________________________(cid:13) ** Honorable Louis H. Pollak, Senior United States District Judge for the(cid:13) Eastern District of Pennsylvania, sitting by designation.(cid:13) 2(cid:13) OPINION OF THE COURT(cid:13) AMBRO, Circuit Judge.(cid:13) Harry Kradel was injured in 1994 while operating a(cid:13) forage harvester. He and his wife, Marilene Kradel, filed this(cid:13) product liability suit in Pennsylvania state court in 1996,(cid:13) naming, inter alia, the original manufacturer and its(cid:13) corporate successors, Piper Industries, Inc. ("Piper") and(cid:13) the Hiniker Company ("Hiniker"), as defendants. The case(cid:13) was removed to the United States District Court for the(cid:13) Western District of Pennsylvania based on diversity of(cid:13) citizenship. 28 U.S.C. S 1332. The District Court granted(cid:13) summary judgment in favor of Hiniker and Piper on the(cid:13) grounds that (1) under Pennsylvania tort law, Hiniker is not(cid:13) liable because it does not fall within the "product line"(cid:13) exception to Pennsylvania’s bar on successor liability, and(cid:13) (2) under Tennessee corporate law, Piper--which dissolved(cid:13) in 1986--is not liable for injuries caused by its products(cid:13) eight years after its dissolution.(cid:13) The Kradels ask us to reverse the District Court’s ruling(cid:13) in favor of Hiniker and Piper. We conclude that the District(cid:13) Court correctly ruled that Hiniker is not liable for the(cid:13) Kradels’ injuries under Pennsylvania’s successor liability(cid:13) law. Because the claim against Piper raised unsettled(cid:13) questions of Tennessee corporate law, we certified it--in the(cid:13) form of five questions--to the Supreme Court of Tennessee.(cid:13) That Court has resolved each of the certified questions(cid:13) against the Kradels.1 Accordingly, we affirm the District(cid:13) Court’s judgment in favor of Piper as well.(cid:13) I. Facts and Procedural History(cid:13) Harry Kradel lost part of his right leg in 1994 in an(cid:13) accident involving a 1970 model Fox forage harvester (with(cid:13) _________________________________________________________________(cid:13) 1. Those questions and the answers to them are set out in II(B) of this(cid:13) opinion. We express our gratitude to the Tennessee Supreme Court for(cid:13) entertaining our certified questions and for responding so clearly and(cid:13) comprehensively.(cid:13) 3(cid:13) a Fox corn head attachment) on his farm in western(cid:13) Pennsylvania. In 1970, Fox brand farm equipment was(cid:13) manufactured by the Koehring Company ("Koehring").2 In(cid:13) 1981, Koehring sold, inter alia, its Fox line to Piper. A(cid:13) provision of that asset sale agreement required Piper to(cid:13) assume Koehring’s product liability claims.(cid:13) Piper, in turn, sold the Fox line to Hiniker in 1986 by an(cid:13) agreement that expressly provided for no adoption of(cid:13) liabilities by Hiniker. Piper then dissolved under Tennessee(cid:13) law on December 31, 1986 by filing Articles of Dissolution.(cid:13) After selling its farm equipment business, Koehring(cid:13) merged with another company in 1981 to become the(cid:13) AMCA/Koehring Company, which continues to operate(cid:13) today. AMCA/Koehring settled with the Kradels on October(cid:13) 5, 1998 for $450,000. The "released parties" under the(cid:13) AMCA/Koehring settlement agreement include "the present(cid:13) and former parents, subsidiaries, predecessors, affiliates,(cid:13) officers, directors, employees, agents, servants. . . ,(cid:13) including but not limited to the Fox Tractor Division of(cid:13) Koehring Company; Koehring Company; AMCA/Koehring(cid:13) Company; . . . ."(cid:13) This appeal is from the grant of summary judgment in(cid:13) favor of Hiniker, Piper, and Kent Reynolds, an escrow agent(cid:13) who holds assets for the benefit of Piper shareholders.3 We(cid:13) have jurisdiction under 28 U.S.C. S 1291 (which permits(cid:13) appeals from final decisions of the district courts), and we(cid:13) _________________________________________________________________(cid:13) 2. We found nothing in the parties’ briefs or the portions of the record(cid:13) included within the parties’ appendices that explains the involvement of(cid:13) Fox Corporation and Fox River Tractor Company, who were initially(cid:13) named as defendants in this action. It seems likely that these companies(cid:13) were the original manufacturers of the Fox line, and sold the line, with(cid:13) the accompanying "Fox" trademark, at some time prior to 1970, to the(cid:13) Koehring Company.(cid:13) 3. Reynolds remains in this case because the Kradels have sued him(cid:13) under the trust fund doctrine as an alternate way to recover from Piper.(cid:13) We treat the claim against him as part of the claim against Piper. The(cid:13) other defendants have all been dismissed. Fox River Tractor Company(cid:13) was eliminated for failure of service. Fox Corporation was dismissed(cid:13) pursuant to a motion by the plaintiff. Certified Parts was dismissed by(cid:13) stipulation of the parties.(cid:13) 4(cid:13) review the District Court’s grant of summary judgment de(cid:13) novo. American Medial Imaging Corp. v. St. Paul Fire and(cid:13) Marine Ins. Co., 949 F.2d 690, 692 (3d Cir. 1991).(cid:13) II. Discussion(cid:13) A. The Hiniker Claim(cid:13) The District Court found Hiniker not liable under(cid:13) Pennsylvania law for injuries allegedly caused by Koehring’s(cid:13) forage harvester and corn head attachment.4 The Kradels(cid:13) argue that they can reach Hiniker under the "product line"(cid:13) exception to the general rules of successor liability.(cid:13) Because the Kradels successfully recovered a settlement(cid:13) from the original manufacturer, however, this argument is(cid:13) unavailing.(cid:13) Under Pennsylvania’s successor liability doctrine,"[i]n(cid:13) general, when one corporation sells or transfers its assets(cid:13) to a second corporation, the successor does not become(cid:13) liable for the debts and liabilities of the predecessor."(cid:13) LaFountain v. Webb Indus. Corp., 951 F.2d 544, 546-47 (3d(cid:13) Cir. 1991). One exception to this rule is the "product line"(cid:13) exception, which Pennsylvania courts adopted in Dawejko(cid:13) v. Jorgensen Steel Co., 434 A.2d 106 (Pa. Super. Ct. 1981),(cid:13) because the successor liability doctrine left some plaintiffs(cid:13) who were injured by defective products without recourse.(cid:13) See Hill v. Trailmobile, Inc., 603 A.2d 602, 606 (Pa. Super.(cid:13) Ct. 1992) (explaining that "[p]laintiffs injured by products(cid:13) manufactured by predecessor corporations purchased by(cid:13) multiple corporations, or which shared no identity of(cid:13) corporate structure were, unfortunately, left without a(cid:13) remedy in strict liability").(cid:13) When the Pennsylvania Superior Court first adopted the(cid:13) product line exception in Dawejko, it considered various(cid:13) formulations employed in other states. It then borrowed(cid:13) _________________________________________________________________(cid:13) 4. It is uncontested that Pennsylvania law governs the Kradels’ suit(cid:13) against Hiniker. Thus we follow (or predict if necessary) what the(cid:13) Pennsylvania Supreme Court would do and, in so doing, we may rely on(cid:13) opinions of intermediate appellate courts. See Glenn Distributors Corp. v.(cid:13) Carlisle Plastics, Inc., 297 F.3d 294, 300 n.3 (3d Cir. 2002); Borse v.(cid:13) Piece Goods Shop, Inc., 963 F.2d 611, 614 (3d Cir. 1992).(cid:13) 5(cid:13) from New Jersey the most general statement of the(cid:13) exception:(cid:13) [W]here one corporation acquires all or substantially all(cid:13) the manufacturing assets of another corporation, even(cid:13) if exclusively for cash, and undertakes essentially the(cid:13) same manufacturing operation as the selling(cid:13) corporation, the purchasing corporation is strictly(cid:13) liable for injuries caused by defects in units of the(cid:13) same product line, even if previously manufactured(cid:13) and distributed by the selling corporation or its(cid:13) predecessor.(cid:13) Dawejko, 434 A.2d at 110 (quoting and adopting the(cid:13) standard from Ramirez v. Amsted Indus., Inc., 431 A.2d(cid:13) 811, 825 (N.J. 1981)). The Kradels argue from this(cid:13) formulation that the product line exception clearly confers(cid:13) liability on Hiniker. On its face, the exception quoted from(cid:13) Dawejko seems to support their argument. But the Kradels(cid:13) err in relying solely on this statement of the product line(cid:13) exception without considering the entire Dawejko opinion(cid:13) and its progeny.(cid:13) The Dawejko court looked in part to Ray v. Alad Corp.,(cid:13) 560 P.2d 3 (Cal. 1977), for guidance in formulating its(cid:13) statement of the product line exception. The California(cid:13) Supreme Court in Ray announced three requirements(cid:13) before the exception would apply:(cid:13) [S]trict liability should be imposed upon a successor to(cid:13) a manufacturer if three circumstances were shown:‘(1)(cid:13) the virtual destruction of the plaintiff’s remedies(cid:13) against the original manufacturer caused by the(cid:13) successor’s acquisition of the business, (2) the(cid:13) successor’s ability to assume the original(cid:13) manufacturer’s risk-spreading rule, and (3) the fairness(cid:13) of requiring the successor to assume a responsibility(cid:13) for defective products that was a burden necessarily(cid:13) attached to the original manufacturer’s good will being(cid:13) enjoyed by the successor in the continued operation of(cid:13) the business.’(cid:13) Dawejko, 434 A.2d at 109 (citing Ray, 560 P.2d at 8-9).(cid:13) Requirement (1) is most relevant for our purposes because(cid:13) the Kradels received a $450,000 settlement from(cid:13) 6(cid:13) AMCA/Koehring, which, as will be discussed below, is(cid:13) effectively a recovery from the original manufacturer.(cid:13) Dawejko characterized the three Ray factors as advisory(cid:13) only and expressly excluded them from its formulation of(cid:13) the product line exception. Dawejko, 434 A.2d at 111.(cid:13) Thus, were Dawejko the last statement on the issue, it(cid:13) would be unclear whether in Pennsylvania a recovery from(cid:13) the original manufacturer bars the Kradels from recovering(cid:13) from Hiniker, a successor corporation, under the product(cid:13) line exception.(cid:13) The Pennsylvania Superior Court, however, has revisited(cid:13) this issue. In Hill, the Court recast the three factors in Ray(cid:13) as requirements.5 Hill, 603 A.2d at 606 ("The [Dawejko](cid:13) court also stated that the product-line exception to the(cid:13) general rule of no liability for successor corporations may(cid:13) only be applied when the following three circumstances(cid:13) have each been established: [listing the three Ray(cid:13) factors].")(emphasis omitted). While Hill arguably read more(cid:13) into Dawejko than is there, it nevertheless elevated the Ray(cid:13) factors into prerequisites for the product line exception.6(cid:13) Furthermore, the rule that the product line exception is(cid:13) unavailable when the plaintiff has recourse against the(cid:13) original manufacturer has been adopted subsequently in(cid:13) _________________________________________________________________(cid:13) 5. Before the Pennsylvania Superior Court decided Hill, we twice(cid:13) predicted that Pennsylvania courts would require the lack of remedy(cid:13) against an original manufacturer as a prerequisite to the product line(cid:13) exception. See Conway v. White Trucks, Div. of White Motor Corp., 885(cid:13) F.2d 90, 95 (3d Cir. 1989) ("We predict, however that [Pennsylvania(cid:13) courts] would not apply [the product line] exception in cases where the(cid:13) claimant had a potential remedy against the original manufacturer, but(cid:13) failed to exercise all available means to assert his or her claim."); La(cid:13) Fountain v. Webb Indus. Corp., 951 F.2d 544, 547 (3d Cir. 1991) (noting(cid:13) that "[n]othing has happened since Conway was decided to indicate any(cid:13) weakening of its holding").(cid:13) 6. Hill went on to explain why the failure to recover from the original(cid:13) manufacturer was a prerequisite to use of the exception. 603 A.2d at(cid:13) 607 ("The product-line exception is a remedy which was created to afford(cid:13) relief to plaintiffs, victims of manufacturing defects who, due to the sale(cid:13) or transfer of the manufacturing corporation, otherwise would have no(cid:13) avenue of redress for injuries caused by defective products.")(emphasis(cid:13) omitted).(cid:13) 7(cid:13) another Pennsylvania case, Keselyak v. Reach All, Inc., 660(cid:13) A.2d 1350, 1354 (Pa. Super. Ct. 1995). Though the court in(cid:13) Keselyak did not cite to Hill, it relied on the two cases from(cid:13) this Court predicting its holding on this issue, Conway and(cid:13) LaFountain. See supra n.5. It is thus clear that the inability(cid:13) to recover from an original manufacturer is a prerequisite(cid:13) in Pennsylvania to the use of the product line exception.(cid:13) The Kradels assert that their recovery from(cid:13) AMCA/Koehring is not a recovery from an original(cid:13) manufacturer. We are not persuaded. First, it is obvious(cid:13) that the Kradels have treated AMCA/Koehring as the(cid:13) original manufacturer throughout this litigation. Hiniker(cid:13) references several court documents in which the Kradels(cid:13) refer to AMCA/Koehring as the original manufacturer. See(cid:13) Br. of Hiniker at 27-28. For example, the Kradels stated the(cid:13) following in their brief in opposition to summary judgment(cid:13) for Hiniker: "Plaintiffs also agree that they have already(cid:13) asserted a claim against the original manufacturer,(cid:13) Koehring Company, currently doing business as(cid:13) ‘AMCA/Koehring Company,’ and misnamed ‘Koehring(cid:13) Corporation’ in Plaintiff’s Complaint (hereinafter collectively(cid:13) ‘Koehring’)." Hiniker’s Supp. Appendix at 231. Hiniker(cid:13) argues that the doctrine of judicial estoppel prevents the(cid:13) Kradels from asserting inconsistent positions as to whether(cid:13) AMCA/Koehring is the same entity as the original(cid:13) manufacturer.(cid:13) We need not look to judicial estoppel, however, to bind(cid:13) the Kradels to their earlier representations. Adequate(cid:13) evidence that the Kradels had a remedy against the original(cid:13) manufacturer exists in the definition of "released parties"(cid:13) contained in AMCA/Koehring’s settlement agreement with(cid:13) them. Hinker’s Appendix at 255. The Kradels settled their(cid:13) claim with an entity known as "Koehring Company" when(cid:13) they settled with AMCA/Koehring. As noted above, the(cid:13) released parties included "AMCA/Koehring and the present(cid:13) and former parents, subsidiaries, predecessors, affiliates,(cid:13) officers, directors, employees, agents, servants and insurers(cid:13) of each, including but not limited to the Fox Tractor(cid:13) Division of Koehring Company; Koehring Company;(cid:13) AMCA/Koehring Company; AMCA International." Id. Thus,(cid:13) both in the release of "predecessors" and in the explicit(cid:13) 8(cid:13) mention of "Koehring Company," the "released parties" with(cid:13) whom the Kradels settled included the entity that merged(cid:13) with and ultimately became the current AMCA/Koehring.(cid:13) We thus reject the Kradels’ argument that they have not(cid:13) recovered from the original manufacturer, and we shall not(cid:13) permit them to rely on the product line exception. The(cid:13) District Court properly granted summary judgment in(cid:13) Hiniker’s favor.(cid:13) B. The Piper Claim(cid:13) The District Court concluded that Piper could not be(cid:13) liable for claims against it arising eight years after its(cid:13) dissolution and therefore granted summary judgment in its(cid:13) favor. Whether that decision was correct depends on which(cid:13) version of Tennessee’s corporation code--the one in place(cid:13) until January 1988 or the current one--applies to this(cid:13) case, whether Piper properly complied with the relevant(cid:13) dissolution laws, and whether a trust fund action is(cid:13) available against Reynolds to circumvent the effect of(cid:13) Piper’s dissolution on its post-dissolution tort liabilities.(cid:13) These were at least partly unsettled matters of Tennessee(cid:13) corporate law. Accordingly, pursuant to Tennessee Supreme(cid:13) Court Rule 23, we certified the following five questions to(cid:13) the Tennessee Supreme Court:(cid:13) 1) What law governs the making of claims arising in(cid:13) 1994 against a corporation which filed Articles of(cid:13) Dissolution in 1986--the law of 1986 or those revisions(cid:13) to the law effective January 1, 1988, Tenn. Code Ann.(cid:13) Section 48-24-101, et seq.? More specifically, do the(cid:13) saving provisions of Tenn. Code Ann. Section 48-27-(cid:13) 103(a)(2), stating that the repeal of the pre-1988 law(cid:13) does not affect liabilities incurred under the statute(cid:13) before its repeal, support the contention that a liability(cid:13) incurred after the law’s effective date is governed by the(cid:13) 1988 revisions?(cid:13) 2) If the pre-1988 law applies, do the provisions of(cid:13) Tenn. Code Ann. Section 48-1-1013(a) [repealed] apply(cid:13) to liabilities incurred after Piper filed Articles of(cid:13) Dissolution and, if not, does the common law of(cid:13) Tennessee bar such actions? See Great American Ins.(cid:13) Co. v. Byrd & Watkins Constr., Inc., 630 F.2d 460, 461(cid:13) 9(cid:13) (6th Cir. 1980); Cf., Hunter v. Fort Worth Capital Corp.,(cid:13) 620 S.W.2d 547, 549 (Tex. 1981).(cid:13) 3) Did Piper comply with Tenn. Code Ann. Section 48-(cid:13) 1-1007 [repealed]? If not, does the manner in which(cid:13) Piper failed to comply invalidate an otherwise lawful(cid:13) corporate dissolution and permit a cause of action(cid:13) accruing almost eight years after the dissolution was(cid:13) filed? Cf. Swindle v. Big River Broadcasting Corp., 905(cid:13) S.W.2d 565, 567 (Tenn. Ct. App. 1995).(cid:13) 4) Do the pre-1988 Tennessee dissolution statutes(cid:13) require provision for unforeseen future liabilities or(cid:13) that the process of asset distribution to shareholders(cid:13) be final? See Blankenship v. Demmler Mfg. Co. , 411(cid:13) N.E.2d 1153, 1155 (Ill. App. Ct. 1980).(cid:13) 5) Could Kradel’s claims proceed under the "trust fund"(cid:13) doctrine established in Voightman & Co. v. Southern(cid:13) Ry. Co., 131 S.W. 982, 983 (Tenn. 1910) and Bean v.(cid:13) Commercial Sec., Inc., 156 S.W.2d 338, 346 (Tenn. Ct.(cid:13) App. 1942), in the absence of corporate insolvency, if(cid:13) other remedies are unavailable to Kradel for the claims(cid:13) against Piper? See Ottarson v. Dobson & Johnson, Inc.,(cid:13) 430 S.W.2d 873, 878 (Tenn. Ct. App.1968).(cid:13) The Tennessee Supreme Court accepted the certified(cid:13) questions and resolved them thoroughly in Kradel v. Piper(cid:13) Ind., Inc., 60 S.W.3d 744 (Tenn. 2001). Its answers, taken(cid:13) directly from its opinion, are as follows:(cid:13) [I]n answer to the first question certified, the General(cid:13) Corporation Act, which was in effect before January 1,(cid:13) 1988, governs the propriety of Piper’s dissolution and(cid:13) the scope of the petitioner’s remedies available against(cid:13) Piper.(cid:13) . . .(cid:13) [I]n answer to the second question certified, Tennessee(cid:13) Code Annotated section 48-1-1013(a) (repealed) does(cid:13) apply to limit the liabilities incurred by Piper after it(cid:13) filed its Articles of Dissolution.(cid:13) . . .(cid:13) 10(cid:13) [I]n answer to the third question certified, Piper fully(cid:13) complied with the dissolution provisions of the(cid:13) Tennessee General Corporation Act, effective prior to(cid:13) January 1, 1988.(cid:13) . . .(cid:13) [In answer to the fourth question:] Because we have(cid:13) already discussed the answers to this question in(cid:13) addressing the third question certified, we answer(cid:13) respectfully, and without further comment, that the(cid:13) General Corporation Act does not require that adequate(cid:13) provisions be made for unforeseen future liabilities to(cid:13) effect a proper dissolution under the statute. In(cid:13) addition, we answer that the General Corporation Act(cid:13) does require a final distribution of corporate assets to(cid:13) shareholders "in accordance with their respective rights(cid:13) and interests," a requirement that appears to have(cid:13) been satisfied under the facts as certified.(cid:13) . . .(cid:13) [I]n answer to the [fifth] question certified, the trust(cid:13) fund doctrine has been applied to solvent corporations(cid:13) under Tennessee law, but the application of that(cid:13) doctrine in this case is necessarily limited by the(cid:13) provisions of Tennessee Code Annotated section 48-1-(cid:13) 1013(a) (repealed).(cid:13) Kradel, 60 S.W.3d at 750-58. In short, the Tennessee(cid:13) Supreme Court has, with minor caveats, decided each of(cid:13) the certified questions against the Kradels. Accordingly, the(cid:13) Kradels’ claims against Piper and the escrow agent for(cid:13) Piper’s shareholders, Reynolds, cannot succeed.(cid:13) * * * * * * *(cid:13) For the foregoing reasons, the District Court’s judgment(cid:13) is affirmed.(cid:13) A True Copy:(cid:13) Teste:(cid:13) Clerk of the UnitedStates Court of Appeals(cid:13) for the Third Circuit(cid:13) 11