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Lefever v. Lull Industries Inc.

April 23, 1998

JUSTIN LEFEVER, PLAINTIFF-APPELLANT,
v.
LULL INDUSTRIES, INC., DEFENDANT-RESPONDENT, AND LULL ENGINEERING CO., INC., DEFENDANT, AND K.P. HOVNANIAN ENTERPRISES, INC., A/K/A HOVNANIAN AT BRIDGEWATER II, DEFENDANT/THIRD-PARTY PLAINTIFF,
v.
SLS, INC., T/A ARBE CONSTRUCTION COMPANY, DEFENDANT/THIRD-PARTY DEFENDANT, AND GILES & RANSOME, INC., T/A RANSOME LIFT, DEFENDANT-THIRD PARTY PLAINTIFF,
v.
LULL INDUSTRIES, INC., DEFENDANT/THIRD PARTY DEFENDANT.



Argued March 23, 1998

On appeal from Superior Court of New Jersey, Law Division, Middlesex County.

Before Judges Landau, Newman and Collester.

The opinion of the court was delivered by LANDAU, J.A.D.

This is an appeal by plaintiff Justin Lefever from the grant of summary judgment to defendant Lull Industries, Inc. on his complaint brought under the product line successor liability doctrine. See Ramirez v. Amsted Indus., Inc., 86 N.J. 332 (1981). Plaintiff was injured on January 17, 1989 when a Lull 644 forklift, originally manufactured by defendant Lull Engineering Company, Inc. (Lull Engineering I) tipped over as he operated it. In 1990, plaintiff filed a defective design complaint against "Lull Engineering Co., Inc.," also joining defendants Giles & Ransome, Inc. (the distributor), and K.P. Hovnanian Enterprises, Inc., owner of the worksite. The latter two defendants settled with plaintiff.

In 1973, Lull Engineering I sold its manufacturing assets to an entity which then changed its name to Lull Engineering Co. (Lull Engineering II). The stock of Lull Engineering II was sold in 1976 to another corporation, Stamatakis Industries, Inc., which contin-ued to engage in the same business. In 1986, the operating assets of Lull Engineering II (consisting of engineering data, dealers, inventory and work in process, and accounts receivable) were trans-ferred to "Lull Corporation," while fixed assets (including plant and manufacturing equipment) were placed in a company known as United Five Star Capital Corporation (Five Star). Each of the transferees were subsidiaries of Stamatakis Industries, Inc. Lull Corporation continued to make the same machines at the same location with the same employees, to sell to the same customers, and to use the logo and trademark used by the predecessors.

Since the transfer in 1986, Lull Engineering II has been dormant, with no assets. Lull Corporation had agreed, as part of the acquisition of assets, to assume responsibility for products liability actions brought in connection with machines manufactured by Lull Engineering II. As noted above, plaintiff initiated his products action against "Lull Engineering Co., Inc." *fn1 Deeming itself bound by its obligations under the transfer of assets, Lull Corporation undertook to defend the design defect claim.

On March 3, 1992, Lull Corporation filed in Minnesota for Chapter 11 bankruptcy protection, triggering a stay issued by the Bankruptcy Court, inasmuch as plaintiff's action was listed as a suit to which Lull Corporation was a party. Lull Corporation continued to market the same product line during the Chapter 11 proceedings. No proof of claim was filed by plaintiff, although his attorneys were notified of the bankruptcy proceedings.

With the approval of the Bankruptcy Court, the assets of Lull Corporation were sold in 1993 by the Trustee. At the same time, the plant, machinery and equipment Lull Corporation was leasing from Five Star were sold by Continental Bank, N.A., which had foreclosed upon Five Star's pledged security interest.

The purchaser, Badger R. Bazen Co. (Badger), thus acquired both Lull Corporation's assets and the physical manufacturing assets it had leased from Five Star. Under the terms of the purchase agreement, Badger did not assume any liability for product liability claims arising prior to the closing date.

In November 1993, immediately following the purchase, Badger assigned all the assets to a new corporation it formed for the purpose, defendant Lull Industries, Inc. (Lull Industries).

Due to the Chapter 11 bankruptcy filing by Lull Corporation on March 3, 1992, proceedings on plaintiff's Law Division complaint were "stayed pursuant to that bankruptcy" in March 1992. However, in January 1995, plaintiff's counsel "obtained a letter from William J. Fisher, the trustee in bankruptcy," which confirmed that the federal bankruptcy stay "did not apply to the Lefever case because the Lefever case was against Lull Engineering and not against Lull Corporation." As a result, plaintiff's Law Division complaint was "reactivated" in February or March 1995.

Eventually, plaintiff moved to file an amended complaint adding Lull Industries as a defendant, and Giles & Ransome moved for leave to file a third-party complaint against Lull Industries. Both motions were argued and granted on October 27, 1995. During the motion hearing, plaintiff's counsel indicated his prior awareness of the bankruptcy proceeding involving Lull Corporation *fn2 :

I . . . wrote to the Trustee in Bankruptcy in Minnesota. That correspondence has been filed with the Clerk of this Court. We learned that Lull, Inc. had filed for bankruptcy but that Lull Engineering was a predecessor corporation without assets which. . . never filed for bankruptcy and was not technically subject to the bankruptcy although we can petition to have it included which plaintiff elected not to do in light of the fact that there was a bankruptcy pending filed by the second corporation, Lull, Inc., which I understood had virtually no assets as well.

On October 30, 1995, the Judge entered an order granting plaintiff leave to file an amended complaint adding Lull Industries as a defendant. On the same date, he entered an order permitting Giles & Ransome to ...


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