*1 594 A.2d et al. NISSEN CORPORATION v. MILLER, Individually and
Warren G. t/a Atlantic Fitness Products et al. Term, Sept.
No. 110 1990. Appeals Maryland. Court Aug. 1991. *2 Trezise, Marshall, (Thomas Stephen E.
Daniel J. Moore M. brief), Towson, Semmes, Semmes, Bowen all on & petitioners. Gertner, brief), B. both on John (Nancy
A. Ronald Rubin (Carol Miller, M. Miles A. Kara & Stock- O’Day, B. Sinclair brief), Baltimore, respondents. bridge, all on MURPHY, C.J., ELDRIDGE, Argued before CHASANOW, JJ., RODOWSKY, and J. McAULIFFE HINKEL, of the Third Judge Administrative WILLIAM Assigned. of Maryland Specially Judicial Circuit CHASANOW, Judge. (Brandt) 31, 1981, pur- B. January Frederick Brandt
On (Atlantic) Products a treadmill chased from Atlantic Fitness manufactured, Ameri- and marketed designed, that was Tredex). (American same Corporation Tredex Later the can (Nissen) into July Corporation on Nissen entered year, American Tredex. Pur- purchase agreement an asset *3 name, agreement, purchased suant to that Nissen the trade and other assets of American Tredex. patents, inventory obligations American Tredex’s Nissen also assumed some of liabilities, expressly assump- and but the contract excluded from injuries arising any product previ- tion of ously by contemplated sold American Tredex. contract Tre- selling corporation, the continuation of the American dex, years during period for five and that that American name, AT by Corporation. Tredex would be known a new There is no reason to that this was not an arms believe (later length transaction or that American Tredex known as AT did not and retain full for its Corporation) receive value assets. While the record does not disclose the purchase $600,000 price, the contract did call for an advance of on its Nissen purchase price, agreed execution. addition to the period, to AT for a a fee of pay Corporation, 5-year 4% of net sales of treadmill models that were offered or any under American Tredex at the of the development by time purchase adaptations of assets or that were mere or modifi- of those also provided cations models. This clause that $100,000 amount of this be a minimum of to a payment $1,000,000 AT per year. Corporation maximum of also shipped sales arising from accounts receivable retained all further date. The contract inventory to the contract prior of its any nor Corporation] “ne ther provided [AT of the trade- any to use any right shall have shareholders theretofore used names, and marks, designs symbols trade or any its in connection with business by Tredex] [American or any designs similar thereto or trade names trademark imitative thereof.” symbols provid- sale, agreement expressly although
After the Tredex retain American required not was ed that Nissen American Tredex’s a few of Nissen did hire employees, and manufac- inventory relocated all It employees. former its and notified from Indiana to Iowa turing capabilities catalogs It provided acquisition. dealers customer as well as a new logo, by “Tredex Universal” to sell Nissen also continued at Nissen. number service sold that had been equipment parts replacement the sale of assets. American Tredex before treadmill, on purchase his after years Over five trying adjust 18, 1986, injured Brandt was while October later, on Decem- year than a treadmill. More running (then Corpora- as AT 1987, Tredex known 31, American ber his Brandt and wife dissolved. tion) administratively Tredex, American against September filed suit on Atlantic, damages for Nissen, seeking and Corporation, AT implied express breach of liability, strict negligence, Atlantic cross-claimed warranties, of consortium. and loss *4 Nissen filed and indemnity contribution. Nissen against granted by which summary judgment, a motion for pursuant a final judgment certified as court and trial appealed and Atlantic 2-602(b). Brandt Rule Maryland Corp., In Miller v. Nissen Appeals. Special the Court of (1990), Special the Court 575 A.2d Md.App. granted Nissen’s trial court. We reversed the Appeals it, as a the issue of whether certiorari on for writ of petition Tredex, for his is liable to Brandt American successor to injuries. issue the instant case is whether this Court adopt general
should rale of nonliability of successor corporations, with its four well-recognized traditional excep tions, or whether we should add a fifth exception “continuity of enterprise.”
The general or traditional rule of corporate successor liability has been stated by many cases and treatises: corporation which all acquires part or of the assets
“[A] of another corporation does not acquire the liabilities and (1) debts of the predecessor, unless: there is an express or implied agreement liabilities; (2) assume the transaction amounts to a (3) consolidation or merger; successor entity is a mere continuation or reincarnation of the predecessor (4) entity; the transaction was fraudu- lent, not in good faith, made or made without sufficient Thus, consideration. general rule is one of successor ” nonliability, subject to four ‘traditional’ exceptions.... (Footnotes omitted.) 1 American 7:1, Law Products M Liability at 10-12 §
(Travers, 1990); rev. ed. accord 1 L. Framer & M. Fried- man, (1989); Products Liability Fletcher, 15 W. § 2.06[2] Cyclopedia the Law Corporations Private (rev. perm. 1990). ed.
In Smith v. Navistar
Transp.
Intern.
Corp.,
F.Supp.
201, republished
corrected,
as
(D.Md.
“Some of the exceptions are expressly codified stat- ute in Maryland. 3-115(c) Section Corporations Article, Associations Maryland Code, Annotated pro- vides upon the transfer of all or substantially all assets, successor is liable for all the debts and ‘[t]he obligations of the transferror to the extent provided in the Articles of 3-114(e), Transfer.’ Section Corporations Article, and Associations Maryland Code, Annotated pro- vides that following a merger consolidation or suc- ‘[t]he cessor is liable for all debts and obligations of each
618
nonsurviving
These two statutes are
corporation.’
very
exceptions
similar to the first
two
to the traditional
rule____
Additionally, Maryland Uniform Fraudulent
Act,
Arti-
Conveyance
seq.,
15-201 et
Commercial Law
Code,
cle,
Annotated
Maryland
protects
rights
corporation
of a
transfers its assets with
creditors
which
in a
an intent to defraud
without fair consideration
to the
exception
manner similar
fourth
noted above.”
logic
applied by
Special
at 204. That
Court
Id.
Holtzman,
it decided Baltimore
v.
Appeals
Luggage
when
282,
(1989),
denied,
“Although
exception
adopted
this
is not codified or
law,
case
behind this
as
Maryland
policy
exception,
exceptions, permeates
Corps.
as the other
&
well
See,
Ass’ns and the
Articles.
3-114
e.g.,
Com. Law
§§
Art.,
Ass’ns
Md.
Corps.
and 3-115
&
Uniform
Act,
Fraudulent
and the Md. Bulk Transfers
Conveyance
Act____
that,
policy
The
is
whenever there is a transfer
assets,
rights
of a creditor must be
The
protected.
entity] exception
‘mere continuation’ [or
policy by allowing
reinforces this
creditor to recover
from the successor
whenever the successor is
predecessor.
the same as the
substantially
exception
a situation
designed
prevent
whereby
specific
is
purpose
acquiring
place
assets is to
those assets out of
words,
predecessor’s
reach of the
creditors.
other
the same or similar
purchasing corporation maintains
management
ownership
hat.’ Bud
but wears
‘new
Inc.,
Antle,
Foods,
758 F.2d
Inc. v. Eastern
(11th Cir.1985).
predecessor
escape
To allow the
liabili-
amount
to fraud.”
ty
merely changing hats would
All
296-97,
parties
In products warranty, of and negligence, breach generally involved: count of a negligence in tort. The liability strict tort longstanding common law comports claim liability contract of is a traditional warranty Breach principles. to developed in tort has been action, liability and strict imposed plain- sometimes where a the harsh result remedy and of warran- bringing negligence breach tiff is limited and unreason- caused a defective injuries claims for ty v. General Motors dangerous product. Phipps See ably 337, 352-53, (1976). The 363 A.2d 278 Md. Corp., has for the Third Circuit Appeals of United States Court continuity, of rationale ... recognized that “[t]he need large part postulated in on a rests enterprise theor[y] (Sec- under eligible compensate plaintiffs [.Restatement (1965) (strict Polius ond) liability) 402A Torts ].” [ ] [ ] § of (3rd Cir.1986). Co., 75, 802 F.2d Equipment v. Clark of- arguments generally public policy many Since products liability corpo- on a imposition fered to justify case, in successor, made this are arguments and the rate of the cause justify adoption offered arguments the same tort, in this will address liability opinion for strict of action adopt continuity should Maryland question whether setting. strict Obvious- liability enterprise theory continuity based on imposition if we ly, reject count, it follows that we in the strict enterprise counts as negligence warranty it in the and breach reject well. if we only be entitled to recover
Respondents would or traditional “mere continuation” expand the ” add the exception “continuity and entity general to the rule of exception nonliability corporate successors.1 The mere continuation of entity exception applies “there is a where continuation of directors and, management, cases, and shareholder interest in some consideration. The inadequate gravamen of the traditional exception ‘mere continuation’ is the continuation of the rather than continuation of the business Friedman, 1 Frumer supra, § operation.” 2.06[2][c], & (emphasis original, omitted); 2-182 to 2-183 footnote 3d, accord American Law Products Liability supra, 7:14, at 30. This exception focuses on the continuation of contrast, management ownership. the continuity of enterprise theory focuses on continuation of the business operation or enterprise where there is no continuation in *7 3d, American Law Liability Products ownership. of supra, 7:20, at 36. §
Respondents do not contend that Nissen is a “mere con- tinuation” of American Tredex or that the sale of assets in the instant case falls any within of the traditional excep- tions to the rule of nonliability successors, of corporate nor support argument. would the record such an if Only we expand exceptions the traditional to include “continuity of enterprise” exception Brandt proceed would be entitled to against Nissen. address, Respondents argue, do not and we need not
1. whether we recognize product theory, accepted should California, line which has been in Jersey, Pennsylvania Washington. New and 1 American 7:27, (Travers, Liability 1990). Law Products 3d and § rev. ed. The continuity enterprise product line theories have been distin- guished continuity enterprise as analysis follows: "[A] seeks to continuity pretransaction establish whether there is substantial and posttransaction resulting business activities from the use of the ac- assets, quired product analysis while a line seeks to establish whether products resulting there is a substantial in the from the pretransaction posttransaction predeces- and use of the assets” of the 7:20, corporation. added). (emphasis sor Id. product § at 37 line theory1 "departure reaching principles s from traditional has been found too far- courts, by product exception and radical some and the line 7:27, expressly rejected many jurisdictions." has been in Id. at 44 (footnote omitted). enterprise adopt urges that we Brandt limited, and proper pertinent “is it theory because personal injury has suffered a a consumer who rights argues He responsible.” held must be some which prevented the evasion logically “courts have chain” and manufacturing selling and any part should “not we that, public policy, in of this recognition the benefits purchase only major corporation allow its attendant denying while transaction purchase an asset where the consuming public, particularly to the liabilities as the public has held itself out to corporation Atlantic further causing entity.” injury sponsor rights protect rule evolved that the traditional argues context and is of creditors and shareholders plaintiffs and products liability in the case inapplicable acquisition not contemplating only corporation that “[a] also the continua- corporation, of another but of the assets accept of that must tion of the basic of such a transaction.” as well as the benefits the burdens that, American enjoyed contends because Nissen Atlantic itself out as the effective contin- goodwill Tredex’s and held Tredex, selling replacement parts, per- uation American contracts, retaining some honor- forming employees, some warranties, servicing customer ing existing 90-day accounts, it should the burden of American Tredex’s bear products. defective *8 part
Nissen counters that it was not “manufactur- chain”; it American Tre- ing selling merely purchased and includ- fully negotiated, dex’s assets. That transaction was predecessor corporation the the contin- ing requirement that sale, presumably in existence after the so that it would ue price such as this. The Nissen subject to suit cases contract, for the was based on the total paid business the retain all including provision predecessor the that liabili- defective sold it before injuries by products by caused ty argues Nissen that we should adhere purchase. the asset its longstanding general rule and well-defined “[t]he functioned well to exceptions” they limited because “have 622 successor rights corporations the of creditors and
balance
principles
traditional
law
by preserving
free
assets while
alienability
business
promoting
con-
for the interests of
maintaining adequate protection
unjust corporate
from fraudulent and
sumers and creditors
expansion
that
urges
Nissen
transactions.”
impose
would
Respondents propose
rule that
traditional
upon major corporation
“a
... where
liability
only
not
out to the
as the
public
has held itself
corporation
causing
upon
but also
injury
entity,”
sponsor
on a
that
assets and carries
purchases
small
defective,
predecessor’s
injury
its
business but abandons
practices.
causing designs
in a
corporate liability
of successor
question
this
by
not heretofore been addressed
liability case has
in 1988
the issue was
twice
Interestingly,
analyzed
Court.
of the United States District Court
judges
different
by two
Maryland
law.
Maryland,
applying
for the District
both
24, 1988,
Maryland
Judge Niemeyer,
May
predicted
on
v.
enterprise theory.
Smith
accept
would
201,
F.Supp.
repub-
687
Transp. Corp.,
Navistar
Intern.
corrected,
(D.Md.1988). Judge
F.Supp.
lished as
later,
not.
Smalkin,
predicted
one
we would
Giraldi
week
Co.,
(D.Md.1988).
Sears,
F.Supp.
v.
Roebuck &
in tort
the doctrine of strict
espoused
This Court
402A, in
(Second)
set forth in
Torts
as
Restatement
353,
We
the theory of strict liability in tort to fore
close the unfair result “where injured parties are forced to
with the
comply
proof requirements
negligence
actions
or are confronted with the procedural
requirements and
limitations of warranty actions.”
Id. at
363 A.2d at
added).
963 (emphasis
This rationale is echoed in our cases
since
In
Phipps.
Harig
Products,
v. Johns-Manville
70,Md.
(1978),
stated,
A.2d 299
we
“the theory of strict
liability does not mark a ‘radical departure’ from estab
lished tort concepts. Rather, ‘the major distinction between
an action in strict
in
tort and one founded on
negligence
traditional
theory relates to the
which
proof
”
presented
must be
plaintiff.’
83-84,
Id.
394 A.2d
at 306-07 (quoting Phipps,
350-51,
injury resulting
product. Rather,
use of his
of a defect in the
‘[pjroof
product at the time it
the
leaves
control of the seller
on the
implies
part of the seller
fault
sufficient to justify imposing liability
injuries
caused
”
added,
the
by
product.’
(Emphasis
omitted.)
citations
Id. at
It is that Maryland espoused clear the doctrine of strict in order liability plaintiffs tort to relieve of the burden of acts of proving specific negligence permitting by negligence implied plaintiffs to be where can prove product a is defec- tive and unreasonably dangerous placed when in the stream of commerce. While the “equity” shifting the risk of loss to those to it financially better able bear was a policy consideration, it was neither the sole predominant nor the factor. It is clear from our decisions that inherent in our recognition of strict products liability concept is the that place sellers who defective and unreasonably dangerous on the products market are at fault when a user injured is that activity should bear A responsibility. corporate successor is not a seller and bears no in bringing blame product together. and the user It seems patently unfair to require party such a to bear the cost of unassumed and uncontemplated products liability claims primarily because it is still in perceived business and is as a “deep pocket.” case, allegation 2. In this no has been made that Nissen knew or potential should have known of purchased tort at the time it Therefore, ques- American Tredex’s assets. we need not address the successor, purchase tion whether a which knew at the time of asset product against predecessor, may that there were claims note, however, be held liable for those claims. We that the fourth exception, fraudulently where the transaction was entered into Also, escape liability, may interesting cover such a situation. an enterprise theory suggested alternative to the has been may applicable approach that apply in such cases. That would purchaser” property "bona fide rules of where a successor is predecessor's products liability. theory, sued its Under that corporate successor would be products predecessor "liable for defective of its ... if it knew or rule, products. should have known of those defective Under this that, reaped Nissen because Respondent argues Atlantic Tredex, it would be goodwill of American benefits of paying American escape it to the burden permit unfair merit. It argument This lacks liabilities. Tredex’s tort do that, if American Tredex the fact overlooks loss Nissen suffer resultant cause will injuries, goodwill purchased. it value “not allow a Brandt contends that we should Although in an asset purchase only the benefits major corporation denying while its attendant liabilities purchase transaction fact he overlooks the consuming public,” to the *11 unfairly broad. remedy “injustice” may he seeks for this be only not would adopt continuity enterprise, we to Were it major “a but liability imposed upon corporation,” be operation imposed upon also the small business would be spread in a the risk or insure position not be may which Polius, explained in against it. As the Third Circuit Motors may “That a the size General among 402A its millions of spread able to cost of § shop not that a employing customers does mean machine similar And Gen- capabilities. five ten individuals has policies if are eral to self-insure no ability Motors’ premium its shop does not aid the machine when available get one) confiscatory can rises to policy (assuming for a it (Footnote omitted.) heights.” 81. 802 F.2d at not
Brandt also that he was “alerted complains prevent protee- internal which would corporate changes corporations may manipulate corporate longer no of their the form acquisitions predecessor’s potential attempt in an avoid the strict products liability. may put damper This a on some However, acquisitions. general corporate the rule is consistent with policies protect corporations law which seek to the successor from alienability promote in unknown liabilities order to free and stable predictability corporate acquisitions, is in since under the rule there omitted.) (Footnote liability only for known liabilities.” Comment, Policy Analysis Liability Corporation's A a Successor Acquired Has Its Predecessor’s Products When the Successor Defective Cash, 815, Marquette Assets L.Rev. 848-49 Predecessor’s (1988). properly product.” tion due to a consumer of a cannot We accept the proposition implied by argument this that con- retain in upon sumers reliance their to sue ability if problem a certain a develops product. notified of Brandt was the sale of American Tredex. Had that he he realized would not be to sue the successor if able injured, scrapped he was we doubt that he would have his and purchased treadmill a new one. Nissen did more than required of it the needed by providing replacement at Brandt’s The fact parts request. that Nissen maintained and, a network to service American Tredex customers fact, furnished to Brandt for his parts treadmill does not Furthermore, give liability.3 rise to successor should we penalize retaining not Nissen for of American Tre- few employees dex’s or for some of American Tre- assuming dex’s commitments. All of these actions on Nissen’s part important recognize have societal value. While we permitting societal value of consumers to recover from those responsible they injured by product, when are responsible Nissen is not one of those for Brandt’s injuries. (Second) 402A, upon Restatement Torts which based, strict Maryland tort law is Phipps, Md. at 363 A.2d at does not contemplate imposition *12 Giraldi, of successor liability upon corporations. See 687 though may corporation corporate 3. Even a not be liable as a succes- sor, courts, we note that several which otherwise adhere to the nonliability corporations, traditional rule of of successor have held may acquire independent duty that successor an "[a] predecessor’s products warn where defects in a come to its attention. despite This is so the nature of the transfer.’’ L. Frumer & M. Friedman, 2.06[5], (1960, 1989). Liability Products at 2-195 rev. For (E.D.Pa.1971) example, F.Supp. v. Hobam ”[i]n [332 Shane a] purchaser may acquire federal district court held that a of assets a duty predecessor’s profits prede- to warn its customers if it from the will, good represents enterprise, cessor’s itself as the same undertakes positive responsibilities predecessor servicing, certain such as knowledge and has actual or constructive of existence of a defect.” (footnote omitted). alleged Id. Neither Brandt nor Atlantic has of, of, any knowledge independent duty Nissen had or to warn a defect in the treadmill. in Third Circuit by As noted at 991. F.Supp. Polius, causal reaffirms notion Restatement
“[T]he plain- and the defendant’s acts relationship between the to tort law. concept that is fundamental injury—a tiff’s Michigan theories espoused successor and requirement this bedrock California brush aside and no connection had on entities which fact impose liability causing injury. the acts sells a defective or retailer who Even the wholesaler plaintiffs some causal connection with product has owner of a new cannot be said of the The same injury. defect-free, improved, an ver- manufactures business who from his purchased prede- in a facility of a product sion cessor. ... a new owner continuity enterprise theory,
Under the may be liable predecessor’s operations his who continues not all a number of items. if he some but manufactures ten but If continues to manufacture items the new owner dangerous, he one because it is too produce decides not to his prede- for claims which might nevertheless liable product.” through dangerous in motion cessor set omitted.) (Footnote that “the F.2d 81-82. The Polius court concluded an theory ... ill-con-
continuity enterprise proposes no having an causal extension of sidered at 82. relationship with harm.” Id. enterprise acceptance continuity
The status of as follows: reported has been doctrine to the enterprise general “The exception nonliability adopted rule of has been treated Alabama, Maryland [citing as valid under law Appeals case], decision in the instant Special Court of Ohio____ Michigan, Mississippi, exception has The status of the York, ... New ... New uncertainty been matter Carolina____” (Footnotes Hampshire ... South *13 [and] omitted.) 3d, 7:22, Law Products Liability supra, American A of the handful of on
at 38-39. brief review cases relied support enterprise the by Respondents may helpful. doctrine Co., Inc., v. B. & (1st Cir.1974),
Cyr
“a itself cannot act. It can conduct its busi- corporation The through employees. negli- ness its officers and only out that business is the gence employees carrying group If as a responsibility corporate body. of the continue, pause produce same without employees same plant, supervi- same in the same with the essen- sion, ownership entity of the which maintains deter- controlling the same name cannot be sole tially liability.” minant of a continuation
Id. Although at 1154. the successor was not predecessor analysis, of the under traditional on Cyr apparently justified imposition court it employees the successor because was owned The found a nexus predecessor. court between owners responsible plain- the successor and those injuries—the employees. tiffs’ leading adopting
The case Co., 397 Mich. doctrine is Turner v. Bituminous Cas. (1976), a 3-2 decision involving N.W.2d 873 worker hands as a result of a amputation who suffered both Turner refused to differ- power press injury. majority
629 of merger, a sale merger, a and between a de entiate facto case. products liability in the context of a for cash assets fast-develop- is reasoned, liability “Products law a court and formulated All rules have not been yet the ing area. matures, off law, it has shake as to concepts, associated with traditional impediments various are which, problems, inappropriate to other while relevant on 244 873 at Based new Id. N.W.2d 877. for this area.” rationale, if prod- the that court determined this nebulous it merger, in a merger de liability survived ucts facto the purchase in cash of a assets where also survive should not do uninterrupted. continued We operation business should be rules successor that traditional agree “impediments.” off” as Id. “shaken Co., 781 E. Sons 369 So.2d In Andrews v. John Smith’s it amputated his after (Ala.1979), plaintiff right the had arm The meat grinder. into meat caught pulled a sold corporation that later was manufactured grinder case, Supreme successor. In that the of its assets to a all “per- reasoning found the Turner of Alabama Court that, and stated where there was suasive” “estopped could enterprise, corporation successor be parties.” at 786. liability to innocent third Id. denying from Nevertheless, in favor judgment it affirmed summary corporation plaintiffs complaint successor because to the defendant no notice whatsoever that it “g[ave] [was] that corporation held liable the successor of as at 786.4 grinder.” manufactured meat Id. actually Co., Hobam, Holloway v. E. Smith’s Sons Div. John case, grinder meat is F.Supp. (D.S.C.1977), another unconvincing. the United States Holloway, likewise for the District of South Carolina followed District Court corporation and held that the successor could be liable Cyr Similarly, 4. complaint we that in the at bar fails note case being capacity notify Nissen it is sued in its as successor that summary affirming entry Since we are American Tredex. favor, judgment we not address this issue. Nissen’s need primarily because “continued at its same address virtually all of its previous employ- ees.” Id. at 456.
Respondents also cite Mozingo v. Correct Mfg. Corp., (5th Cir.1985), F.2d 168 applied law, which Mississippi support argument their expand we should the continui- ty entity exception to include enterprise. Although states that the trial Mozingo judge did not err in sending the continuity issue to the jury, *15 court’s reasoning illustrates that the successor corporation in that case was a in continuity entity, the traditional sense, predecessor. of the The court found that “[tjhere degree stockholders, was substantial identity of stock in the identity sense that the [predecessor’s] stock simply converted to stock.” at Id. [the successor’s] 176. There was no reason to expand the traditional mere continuation exception encompass the continuity enter- prise in that case theory because a entity could found.
Respondents’ reliance on Bonee v. L M& Const. Chemi- cals, F.Supp. (M.D.Tenn.1981) law), (applying Ohio is unpersuasive. also The Bonee court’s decision was based on its interpretation of prior corporate Ohio successor liabil- ity cases which “look form through to substance” in order protect “to the rights parties.” of third Id. at 380. Stating that courts recognized Ohio have the strict liability “[t]he policy spreading the risk of loss to all consumers of a product so the product that will bear the social and individu- defects,” al costs of id., its own the federal court concluded, “In order to give effect to that policy, Ohio courts through would look form to substance and attach liability to a successor corporation that continued the busi- operation ness or enterprise predecessor if prede- cessor was rendered effectively liquidated sale of assets.” A reading Id. careful through “look form indicates, to substance” cases however, cited Bonee applies Ohio the traditional exceptions to the rule of nonlia- of a bility corporate Furthermore, Bonee, successor. since on spoken has the issue Court of Ohio Supreme in a context. Co., 30 Ohio Mach. St.3d In v. Cone Automatic Flaugher line (1987), rejected product court N.E.2d 331 traditional discussing note 1. supra theory. See the court described without entity exception, of continuity,” it “the view expanded termed adopting what it. under the facts before inapplicable found that view but holding in Flaugher The ultimate at 336. Id. 507 N.E.2d adhere to the traditional probably Ohio would indicates that products liability cases: rule purchases the assets corporation that a which hold
“[W]e resulting from a injury is not liable for a manufacturer unless that manufacturer produced by machine defective assumption liability, of such express implied is or there an constituting the sale of assets amounts or the transaction consolidation, purchaser or or the merger a de facto corpora- of the seller is a mere continuation tion, escape attempt transaction is a fraudulent liability.”
Id. *16 130 Equip., Food Chemical v. Blaw-Knox &
Salvati
626,
(N.Y.Sup.Ct.1985),
242
is cited by
497 N.Y.S.2d
Misc.2d
York
adopted
that New
has
Respondents
proposition
the
fact,
enterprise theory.
In
New York
continuity
the
question.
this
authority appears
split
to be
on
Santa
Inc.,
848,
(1st
Owens-Illinois,
808
858 n. 11
v.
F.2d
Maria
law);
Cir.1986)
York
v.
(applying New
Diaz
South Bend
1
Inc.,
97,
(E.D.N.Y.1989).
102-03 n.
F.Supp.
707
Lathe
Co., Inc.,
239,
59 N.Y.2d
Schumacher v. Richards Shear
(1983),
437,
464
theory, the Monroe County Su- preme stated Schumacher Court that the court “refused to Inc., Radziul v. either rule.” Hooper, adopt 125 Misc.2d 362, 324, 479 N.Y.S.2d (N.Y.Sup.Ct.1984). 326 Under these circumstances, Salvati is not persuasive. our
Based on
examination
decisions
our sister
states
adopting
continuity of enterprise theory, we fail
compelling
find a
reason to deviate
from
traditional
successor
corporate
rule.5
For
reasons set forth in this
we
opinion,
reject
theory
states,
Like the
of our
liability.
sister
majority
we adhere
general
to the
rule of nonliability
corporations,
of successor
exceptions,
with its four traditional
in products
E.g.,
Florom v. Elliott
Mfg.,
(10th
cases.
633
(Minn.
strict must liability, tort there that, impose in order to principle inconsistent exception is fault. The continuity of “the for the because basis law Maryland policy or social public is one of largely enterprise exception that, irrespective of determined which it has been under acts of for the fault, respond held to should be party 3d, Liability Law Products another.” American contend, do not 7:21, Respondents at 37. Since supra, § disclose, is a that Nissen does not and the record under one of the traditional of American Tredex corpora nonliability rale of of successor to the exceptions fact. tions, as to material genuine dispute there is no granting err in did not City Baltimore Circuit Court judgment. summary Nissen’s motion for APPEALS THE OF SPECIAL OF COURT JUDGMENT IN THE AND IN THIS COURT REVERSED. COSTS PAID BY RE- BE APPEALS TO COURT OF SPECIAL SPONDENTS. HINKEL, dissenting: Judges,
ELDRIDGE and adoption majority We concur with to- corporations, of successor general non-liability rule of would, We exceptions. its four traditional gether with of enter- however, “continuity a fifth exception adopt *18 prise” regard Therefore, products. defective we dissent. A.2d
Stavroula ANDROUTSOS et al.
v.
FAIRFAX HOSPITAL. Term, Sept.
No. 1990. Appeals
Court of Maryland.
Aug. 1991.