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Potwora v. Grip

March 18, 1999

CASMIR POTWORA, AN INCOMPETENT, BY HIS GUARDIAN, ANN MARIE GRAY, PLAINTIFF,
v.
JOHN A. GRIP, JR., AND MARY JEAN CLANCY-CHERRY, DEFENDANTS. CASMIR POTWORA, AN INCOMPETENT, BY HIS GUARDIAN, ANN MARIE GRAY, PLAINTIFF/APPELLANT,
v.
LAND TOOL CO., INC., ELVERT H. LAND, JR., KOSCO HARLEY DAVIDSON AND VECTOR SPORTS, DEFENDANTS/RESPONDENTS/THIRD-PARTY PLAINTIFFS, AND LEAR SIEGLER, DEFENDANT/RESPONDENT, AND ROYAL INDUSTRIES AND FRANCHINI HARLEY DAVIDSON, DEFENDANTS,
v.
MARY JEAN CLANCY-CHERRY, THIRD-PARTY DEFENDANT, AND JOHN A. GRIP, JR., THIRD-PARTY DEFENDANT/FOURTH-PARTY PLAINTIFF,
v.
MARY JEAN CLANCY-CHERRY, FOURTH-PARTY DEFENDANT.



Before Judges Wallace, Newman and Fall.

The opinion of the court was delivered by: Per Curiam

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted: January 21, 1999

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

Plaintiff Casmir Potwora sustained severe head injuries when his motorcycle ran into the back of an automobile driven by defendant John Grip. Plaintiff's motorcycle helmet shattered upon impact. Plaintiff, by his guardian, Ann Marie Gray, brought this products liability suit against Land Tool Co., Inc. (Land Tool), the manufacturer of the helmet; Elvert H. Land, Jr., the owner of Land Tool; Royal Industries, Inc. (Royal), the manufacturer of a helmet similar to plaintiff's helmet; Lear Siegler, Diversified Holdings Corporation (Lear Siegler), the purchaser of Royal; Vector Sports, a manufacturer of motorcycle helmets owned by Elvert Land's son; Kosco Harley Davidson (Kosco), the seller of the helmet; and Franchini Harley Davidson (Franchini), the purchaser of Kosco.

Plaintiff appeals from separate orders of the Law Division granting summary judgment in favor of Lear Siegler and Vector Sports. All other defendants were either voluntarily dismissed or were granted summary judgment. Plaintiff contends the motion Judge erred in granting the summary judgment motion of Lear Siegler because (1) the merger of Lear Siegler with Royal makes Lear Siegler liable for all of the liabilities of Royal by operation of the statutory merger laws and the agreement to assume all liabilities of Royal; (2) Royal sold helmet designs, specifications and manufacturing "know how" to Land Tool, and Royal's attempt to limit liability to helmets manufactured before 1975 was void as against public policy; (3) Lear Siegler, as successor-in-interest to all of the liabilities of Royal, is subject to liability on a design defect claim under the New Jersey Products Liability Act, N.J.S.A. 2A:58C-1 to -11, and under a common-law negligence theory; and (4) Lear Siegler, as successor-in-interest to all the liabilities of Royal, is subject to liability for a design defect claim since the design of the RG-9 and RG-4 helmets are identical. With regard to Vector Sports, plaintiff contends that Vector Sports is subject to successor liability under the product-line and continuation of enterprise theories of liability. We disagree and affirm.

I.

A. The Accident and Design of Helmet

On October 6, 1990, plaintiff was injured when his motorcycle struck the rear of the car driven by Grip. Plaintiff was thrown from his motorcycle and his helmet shattered upon impact with the street. Plaintiff was wearing an RG-4 helmet manufactured by Land Tool. He sustained serious head injuries which left him comatose.

On October 5, 1992, plaintiff filed a complaint against various defendants. He claimed that the RG-4 helmet (RG stands for Royal-Grant) he wore was essentially the same as the RG-9 helmet manufactured first by defendant Royal and later by Land Tool. A motorcycle helmet consists of two basic components, the outer rigid shell and an inner shock-absorbing liner. The liner compresses upon impact and serves to absorb the shock. The outer shell resists penetration of sharp objects and distributes the impact over a large area of the liner. The RG-9 helmet was designed by John King, the chief engineer of Grant Industries, a division of Royal. Royal began to manufacture the RG-9 in 1972.

B. Relationship Between Land Tool and Royal

Land Tool was formed on February 26, 1975, by Elvert Land. He and his wife, Peggy Land and their son, Joseph, were the directors. Elvert was chairman of the board and owned 90% of the stock while Joseph was president and owned 10% of the stock.

Elvert testified that the RG-9 came to his attention in 1973 when he heard that the Department of Transportation (DOT) had tested all current motorcycle helmets and the RG-9 was the only one that passed. In August 1975, Land Tool purchased Grant Industries from Royal and acquired the RG-9 mold. The agreement provided that Royal retain liability only for those products manufactured by Grant Industries prior to the sale in August 1975. The agreement also allowed Land Tool to continue use of the RG designation for helmets. After this purchase, Land Tool moved all of the equipment from Grant's facility in Los Angeles, California, to Land Tool's facility in Wichita, Kansas.

C. The Design of the RG-4

The RG-4 design was developed in 1976 by Land Tool. The Grant Division helmet line included a mold for a "shorty" helmet. Rather than use that mold, Elvert designed his own known as the RG-4. Elvert testified that he used the RG-9 shell as a pattern for the RG-4 shell, trimming away the lower portion to create a shorty design. The shells of both helmets were made of the same material, polycarbonate, in approximately the same thickness. Once the RG helmet shell was trimmed, a new mold was made. Land Tool also trimmed the polystyrene shock lines of the RG-9 so it would fit the new shorter RG-4 shell. Except for the length, the liners of the RG-9 and RG-4 were interchangeable. The chin strap of the RG-9 was redesigned to create a V-shaped dual strap to stabilize the shorter helmet. The chin strap of the RG-9 was redesigned to have a rather wide spread attachment point to stabilize the shorter helmet. Land Tool began manufacturing the RG-4 helmet in 1976 and continued until the company was shut down in January 1988. In total, Land Tool manufactured about 50,000 RG-4 helmets, including the helmet worn by plaintiff.

D. Relationship Between Lear Siegler and Royal

In 1977, Lear Siegler, Inc., a predecessor in interest to Lear Siegler, acquired the remainder of Royal which no longer had any helmet business. Lear Siegler assumed liability only for those helmets manufactured by Royal's former Grant Division before August 1975. In 1979, Royal was merged into Lear Siegler. The certificate of merger stated that Lear Siegler "shall succeed to and possess all the properties, rights, privileges, immunities, powers and purposes of Royal Industries, Inc. and shall assume all of the liabilities and obligations of Royal Industries, Inc."

E. Relationships Between Land Tool and Vector Sports

In the fall of 1986, Joseph resigned as president of Land Tool in order to start his own company, Norstar Recreation Products (Norstar) in Calgary, Alberta. Norstar manufactured snowmobile and motorcycle helmets. Joseph was the sole shareholder and president of Norstar and received no money from his father or from Land Tool for the start-up of Norstar. Joseph testified that he founded Norstar because he wanted to start a business on his own. He saw a business opportunity for making helmets in Canada after a dramatic change in the exchange rate made it impractical for United States companies to sell helmets in the Canadian market. Norstar began manufacturing helmets in early 1987. During the first two years of its operation, Norstar purchased some components for motorcycle helmets from Land Tool, such as shells, liners, chin straps and comfort pads. Norstar also purchased helmet molds of several other helmet manufacturers.

Joseph also formed Cheyenne Western Plastic, Limited. (Cheyenne). Cheyenne produced injection moldings for plastics, including component parts of motorcycle helmets such as molded shells and shields which it sold exclusively to Norstar.

After Land Tool closed in January 1988, Norstar leased Land Tool's assembly line and production equipment from Elvert, and Cheyenne leased its molds and presses from Elvert. Norstar manufactured the Mirage and the Mega I, II and III helmets, the same helmets manufactured by Land Tool, using molds obtained from Land Tool. The mold for the RG-9 had been scrapped because it was worn out before January 1988.

Sometime after January 1988, Elvert formed Land Tool Company, Limited (Land Limited), in Canada with Elvert and Joseph as officers. Land Limited was located half a block from Norstar. Norstar sold finished helmets to Land Limited, which marketed them in the United States to some of Land Tool's old accounts.

Norstar declared bankruptcy and closed operations in 1988. Elvert then purchased Vector Ballistics Research and began manufacturing and selling motorcycle helmets. Joseph was not actively involved in this business but may have been on the board of directors. Vector Ballistics leased equipment from Elvert that had originally been used by Land Tool. Vector Ballistics manufactured the Mirage and Mega I, II and III helmet styles, the helmets previously manufactured by Land Tool ...


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