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Brotherton v. Celotex Corp.

Decided: March 15, 1985.


Van Sciver, J.s.c.

Van Sciver

This is an asbestos-related personal injury action. Plaintiffs, in addition to compensatory damages, seek to recover punitive damages against various defendants, including the Celotex Corporation. The claim against Celotex is based upon activities by its predecessor corporation to conceal knowledge concerning the health risks posed by exposure to asbestos.

In this motion for partial summary judgment, Celotex seeks a ruling that it cannot be held liable for punitive damages arising out of acts or omissions of its predecessor corporation. Celotex's objections to a punitive damage award are three-fold: (1) It contends that punitive damages are not available against a successor corporation under New Jersey law; (2) It questions the appropriateness of a punitive damage award under the facts of this case; (3) It urges that the imposition of punitive damages in multi-jurisdictional/multi-claimant litigation is both inappropriate and unconstitutional.

After careful consideration of the matter, I reject those arguments submitted by defendant and hold that punitive damages are recoverable against a successor corporation in a multi-jurisdictional products liability action.

The Celotex Corporation is the survivor of two mergers. On April 10, 1970, Philip Carey Corporation merged into Briggs Manufacturing Company. The survivor of that merger changed its name to Panacon Corporation. Panacon continued to operate Philip-Carey as a division which manufactured and sold roofing and insulation materials but which had no separate corporate or legal existence. On April 17, 1972, Celotex purchased seventy-five percent of the stock of Panacon. Panacon Corporation merged into Celotex Corporation on December 29,

1972. Celotex continued to operate Philip-Carey in the same form that it existed under Panacon until the end of 1973.

Philip-Carey Corporation started to distribute asbestos insulation products in 1906. This practice continued until Philip-Carey ceased to exist. Celotex Corporation first became involved in the manufacture and sale of asbestos-containing products when it merged with Panacon in 1972, and continued to manufacture asbestos-containing cement until 1977.

Plaintiff in this action was employed from 1939 until 1973 by Public Service Electric and Gas in Burlington, New Jersey, where he allegedly came into contact with materials containing asbestos which were supplied, manufactured or sold by Celotex.

A discussion of the defendant moving party's argument follows:

Availability of Punitive Damages

New Jersey law governs the liability of Celotex for business transacted within this state. Chicago Title & Trust Co. v. Young, 90 N.J. Eq. 27, 34 (1919); Baldwin v. Berry Automatic Lubricator Corp., 99 N.J. Eq. 57, 60 (1926), mod., 100 N.J. Eq. 362 (1926). Pursuant to N.J.S.A. § 14A:10-6(e) a survivor corporation is liable for all the obligations and liabilities of each of the corporations with which it has merged. A survivor corporation is the single corporation that is formed by the parties to a plan of merger and is so designated by that plan. Id. § 14A:10-6(a). The effect of this statute is to impose liability on a successor corporation for any obligation incurred by its predecessor so long as a merger took place.

A merger between Celotex and Panacon is established by the facts in this case. On December 29, 1972, Articles of Merger were filed with the Secretary of State for the State of Ohio. According to its terms, Celotex Corporation was to be the survivor of a merger between itself and the Panacon Corporation. This document complied in all respects with the requirements for merger set forth in relevant Ohio statutes.

Ohio Rev.Code Ann. §§ 1701.79-1701.82 (1978).*fn1 By executing these Articles of Merger, Celotex became statutorily bound to absorb all the liabilities of Panacon, including any potential claims for punitive damages.

Articles of Merger were viewed similarly by the United States District Court in Tretter v. Rapid American Corp., 514 F. Supp. 1344 (E.D.Miss.1981). In Tretter, a worker allegedly injured by exposure to asbestos filed suit against Rapid American Corporation, the successor of Philip Carey Manufacturing Corporation, (Old Carey). Rapid American assigned all the assets and liabilities it acquired from Old Carey to a newly-formed subsidiary, New Carey. Relying on the common law rule that a transferee assumes its predecessor's liabilities when a merger occurs, the court held that Rapid American assumed liability for ...

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