may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
Supreme Court decisions mandate that: "when the nonmoving party bears the burden of persuasion at trial, the moving party may meet its burden on summary judgment by showing that the nonmoving party's evidence is insufficient to carry its burden of persuasion at trial." Brewer v. Quaker State Oil Refining Corp., 72 F.3d 326, 329-330 (3d Cir. 1995) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1987)). However, "the nonmoving party creates a genuine issue of material fact if it provides sufficient evidence to allow a reasonable jury to find for him at trial." Brewer, 72 F.3d at 330 (citing Anderson, 477 U.S. at 248). Once the moving party has carried its burden of establishing the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). Thus, if the non-movant's evidence is merely "colorable" or is "not significantly probative," the court may grant summary judgment. Anderson, 477 U.S. at 249-50.
B. Corporate Successor Liability
Traditionally, New Jersey corporate law provided that "where one company sells or otherwise transfers all its assets to another company the latter is not liable for the debts and liabilities of the transferor, including those arising out of the latter's tortious conduct." Ramirez v. Amsted Indus., Inc., 86 N.J. 332, 340, 431 A.2d 811 (1981). There were four exceptions to this general rule. Those exceptions called for transferee liability "where (1) the purchasing corporation expressly or impliedly agreed to assume such debts and liabilities; (2) the transaction amounts to a consolidation or merger of the seller and purchaser; (3) the purchasing corporation is merely a continuation of the selling corporation, or (4) the transaction is entered into fraudulently in order to escape responsibility for such debts and liabilities." Id. at 340-41.
In Ramirez, the New Jersey Supreme Court analyzed the traditional successor liability approach and criticized it as "unresponsive to the legitimate interests of the products, liability plaintiff." Id. at 341. The court therefore "adopted substantially" the "product line" analysis that had been developing in California case law. Id. at 348. Under the product line approach, "a party which acquires a manufacturing business and continues the output of its line of products . . . assumes strict tort liability for defects in units of the same product line previously manufactured and distributed by the entity from which the business was acquired." Ray v. Alad Corp., 19 Cal. 3d 22, 560 P.2d 3, 11, 136 Cal. Rptr. 574 (Cal. 1977).
A threshold issue to be resolved in this case is whether the product-line exception found in Ramirez was meant to coexist with or supplant the four traditional exceptions to the rule of no liability for corporate successors. A close reading of Ramirez, and an understanding of the fact that the Ramirez court aimed to expand and not restrict the remedies available to products liability plaintiffs, indicate that the New Jersey Supreme Court would hold that the traditional exceptions remain good law. To an extent, the second and third traditional exceptions were subsumed by the broader product-line approach and thus have become less significant. However, there is no indication that the New Jersey Supreme Court would hold that express agreement, the first and most basic of the traditional exceptions, is no longer grounds for corporate successor liability. See Leo v. Kerr-McGee Chemical Corp., 37 F.3d 96, 99 n.3 (3d Cir. 1994) (dicta); Pacius v. Thermtroll Corp., 259 N.J. Super. 51, 53-54, 611 A.2d 153 (Law Div. 1992) (recognizing that traditional exceptions may still be basis for corporate successor liability).
Returning to the facts of the case presently before the Court, the Court finds that the express-agreement exception applies in this case and permits plaintiffs to seek damages from Fisher. Section 2 of the Transfer and Assumption Agreement ("Agreement") between Fisher and Quaker contains a broad assumption-of-liabilities clause, which provides in relevant part:
Fisher-Price agrees to assume . . . and pay, comply with and discharge all contractual and other obligations and liabilities . . . associated with [Quaker's toy business] . . . whether accrued, absolute, contingent or otherwise, and whether due or to become due . . . , whether existing on the date hereof or arising at any time or from time to time after the date hereof . . . .
(Pl. Ex. A). Defendants respond by pointing to Section 20(b) of the Agreement, which states, "Nothing in this Agreement shall give any person not a party hereto any rights that it would not otherwise have." Defendants argue that Section 20(b) makes clear that Section 2 merely allocates liability between Quaker and Fisher, and does not enable plaintiffs to sue Fisher directly.
The Court does not share defendants' interpretation of the Agreement. Significantly, Section 5 of the Agreement provides that Fisher has a duty to indemnify Quaker for any future toy-related losses sustained by Quaker. Thus, Section 5 performs the purpose that defendants attempt to attribute to Section 2. In the Court's view, Section 2 should not be read as a superfluous restatement of the Agreement's indemnification provisions, but rather as providing that Fisher assumes direct responsibility and liability for claims relating to Quaker's toy business. The Court finds that Section 20(b) was not meant to compel plaintiffs to sue Quaker and then wait for Quaker to implead Fisher. The plain language of Section 2 contemplates a more direct obligation on the part of Fisher, and, indeed, provides that Fisher is the assignee of Quaker's toy-related liability. There can be no more explicit statement of Fisher's status as successor to Quaker's toy-related liabilities arising from the Fisher-Price line.
In support of the Court's conclusion, the Court notes that this is not a case in which one corporate entity caused injury and passed on its liability to a second, unrelated and innocent corporate entity. It was a Fisher product carrying the Fisher brand name that caused the alleged injuries in this case. Thus, Fisher not only is Quaker's successor, it also is the de facto manufacturer of the product in question.
Moreover, this is not a case in which two defendants are at odds concerning their respective responsibility for an allegedly tortious act of the predecessor. The same attorney is presently representing Quaker and Fisher, and, at oral argument, defense counsel conceded that there will not be any legal action between Quaker and Fisher to apportion between those two parties any damages assessed by the trier of fact in this case. Because Quaker and Fisher view the apportionment of liability between them as inconsequential, they cannot allege that they will be prejudiced by allowing plaintiffs to proceed directly against Fisher.
In fact, it is apparent to the Court that defendants have argued against successor liability solely to attempt to seize upon plaintiffs' allegedly deficient pleadings and service of process. Defense counsel contends that Quaker is the only party that plaintiffs may sue for their injuries, and, further, that Quaker has not been properly named as a defendant and served with process in this case. In this way, defendants aim to convince the Court to dismiss all of plaintiffs' claims. However, in this case in which Fisher produced the allegedly defective toy in question, packaged that toy with Fisher's name stamped on the box, and subsequently assumed all of Quaker's liabilities stemming from its toy business, this Court will not dismiss plaintiff's case on the basis of the technicality urged by defendants.
Lastly, defendants contend that Section 2 of the Agreement may not be enforced as written because the "express agreement" exception and the other exceptions to the traditional rule of non-liability for corporate successors do not apply where the "predecessor" corporation remains an extant legal entity. In support of that argument, defendants point to cases stating that the Ramirez product-line exception does not apply in such a situation. However, this case involves an express assumption-of-liability agreement. Although no New Jersey case holds that the express agreement exception continues to apply where the corporation committing the tort remains in business, neither are there any cases standing for the contrary proposition. Indeed, the contention that New Jersey products liability law precludes the contractual assignment of liability in such an instance strikes the Court as absurd. To determine, as this Court does, that Fisher-Price, Inc., is the successor in liability to the Quaker Oats Company with respect to the Fisher-Price product line of toys, is to state the obvious terms of the assumption agreement between these entities, and Fisher shall be estopped from claiming otherwise. It would be both unfair and impractical to find that suit may not be brought against Fisher merely because Quaker transferred only its toy division to Fisher, and thereby remained an ongoing corporate enterprise, in the face of this explicit assumption of liabilities by Fisher.
No material facts are in dispute on this point, and plaintiffs are entitled to prevail on this issue as a matter of law. Plaintiffs' motion for partial summary judgment on the issue of corporate successor liability is granted, and Fisher's motion on that issue is denied.
II. Quaker's Motion to Dismiss
Plaintiffs inform the Court that if the Court grants partial summary judgment to plaintiffs on the issue of corporate successor liability, plaintiffs need not and will not seek to bring any claims against Quaker in this case. (Pl. Br. at 54). Plaintiffs note that Quaker is a New Jersey corporation and plaintiffs are New Jersey residents, and thus keeping Quaker out of this case removes a threat to the Court's diversity jurisdiction over the parties' dispute. (Id.).
Because of the Court's grant of plaintiffs' summary judgment motion, and plaintiffs' resulting willingness to forego proceeding against Quaker, it is not necessary to reach Quaker's motions concerning whether plaintiffs' complaints properly named Quaker as a defendant in this case and whether Quaker was served with process in a timely manner. Plaintiffs' cross-motions to extend the time period for service of process and to amend the pleadings to name Quaker as a defendant also have become moot.
Plaintiffs are hereby instructed to submit to this Court an amended complaint within fourteen days of the date of this Opinion. In that amended complaint, plaintiffs shall correct the current complaints' ambiguous language that refers to the defendant(s) as "Fisher-Price, Inc., a Delaware corporation formerly a division of the Quaker Oats Company, now a division of Mattel, Inc." Specifically, the amended complaint shall make clear that Quaker and Mattel, Inc. are not parties to this case, and that the proper defendant is Fisher-Price, Inc. Because Fisher had knowledge of this claim within the limitations period of 120 days following the filing of the complaint, this amendment relates back to the date of filing the complaint under Rule 15(c), Fed. R. Civ. P., and the naming of Fisher-Price, Inc., is timely. Finally, plaintiffs have demonstrated that this Court has subject-matter jurisdiction arising in diversity of citizenship, 28 U.S.C. § 1332.
III. Plaintiffs' Motion to Name Plaintiffs' Former Counsel as a Defendant in this Case
In view of New Jersey's entire controversy doctrine, plaintiffs have requested that they be permitted to amend their complaints to name their former attorney as a defendant in this case. Plaintiffs state that if the Court grants defendants' motions and dismisses all of plaintiffs' claims against Fisher and Quaker, plaintiffs will seek to recover malpractice damages from their former attorney. However, as noted above, plaintiffs' claims against Fisher remain intact. Thus, at this point, plaintiffs have not suffered any legally cognizable injury as a result of the actions of plaintiffs' former counsel, and any malpractice claims by plaintiffs are premature at this time. The Court will therefore exercise its discretion to deny plaintiffs' motion. That denial is issued without prejudice to plaintiffs' ability to bring the motion again in an appropriate forum if it appears that any cause of action has accrued in favor of plaintiffs and against their former attorney.
Partial summary judgment is granted to plaintiffs on the issue of corporate successor liability. Specifically, the Court holds that Fisher is the legal successor to Quaker's toy division and may be sued directly for the injuries allegedly sustained by plaintiffs in this case. Because of that holding and plaintiffs' resulting willingness to forego proceeding against Quaker, Quaker's motion to dismiss plaintiffs' claims against Quaker is dismissed as moot. Similarly, plaintiffs' motions to extend the time for service of process on Quaker and to amend their complaints to name Quaker as a defendant in this case are dismissed as moot. Lastly, plaintiffs' motion to include plaintiffs' former attorney as a defendant in this case is dismissed as premature.
The accompanying Order is entered.
JEROME B. SIMANDLE
U.S. District Judge
This matter having come before the Court upon the Quaker Oats Company's motion to dismiss, as well as upon plaintiffs' motion for partial summary judgment, as well as upon Fisher Price, Inc.'s motion for summary judgment, as well as upon plaintiffs' motions to amend the pleadings, as well as upon plaintiffs' motion to extend the time for serving process on the Quaker Oats Company ("Quaker"); and the Court having considered the submissions of the parties; and the Court having heard oral argument on October 4, 1996; and for the reasons stated in the Opinion of today's date;
IT IS this 16th day of October, 1996, hereby
ORDERED that the motion of plaintiffs is GRANTED insofar as plaintiffs seek partial summary judgment on the issue of corporate successor liability, and the Court finds that Fisher-Price, Inc. ("Fisher") is the legal successor to Quaker's toy division; and it is
FURTHER ORDERED that the motion of Fisher is DENIED insofar as that party seeks summary judgment on the ground that it is not the legal successor to Quaker; and it is
FURTHER ORDERED that the motion of Quaker is DISMISSED as moot, insofar as Quaker seeks dismissal of the claims against it on the grounds that it was not properly named as a defendant and served process in this case; and it is
FURTHER ORDERED that the motion of plaintiffs is DISMISSED as moot, insofar as plaintiffs seek to amend the pleadings to name Quaker as a defendant in this case; and it is
FURTHER ORDERED that the motion of plaintiffs is DISMISSED as moot, insofar as plaintiffs seek an extension of time to serve process on Quaker; and it is
FURTHER ORDERED that the motion of plaintiffs is DENIED without prejudice to bring the motion again at an appropriate time, insofar as plaintiffs seek to amend the pleadings to bring a malpractice claim against plaintiffs' former attorney; and it is
FURTHER ORDERED that plaintiffs will, within fourteen days of the date of this Order, submit to this Court an amended complaint that makes clear that plaintiffs are bringing claims against Fisher-Price, Inc., only, and not against Quaker or Mattel, Inc.
JEROME B. SIMANDLE
U.S. District Judge
© 1992-2004 VersusLaw Inc.