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Arevalo v. Saginaw Machine Systems

October 26, 2001

GERMAN AREVALO, PLAINTIFF-APPELLANT,
v.
SAGINAW MACHINE SYSTEMS, INC., AND SMS HOLDING CO., INC., DEFENDANTS, AND COLLINS & AIKMAN PRODUCTS CO., INC., DEFENDANT-RESPONDENT.



On appeal from Superior Court of New Jersey, Law Division, Essex County, L-8179-97.

Before Judges Pressler, Ciancia and Parrillo.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: October 2, 2001

Leave to appeal was granted plaintiff German Arevalo from summary judgment dismissing his product liability lawsuit against one of several defendants, Collins & Aikman Products Co., Inc. (C&A), on the ground that, as a successor company, C&A did not continue the line of the allegedly defective product manufactured by its predecessor-in-interest, the Wickes Corporation. We reverse because the product line exception established in Ramirez v. Amsted Industries, Inc., 86 N.J. 332 (1981), does not operate to shield C&A from strict liability in tort imposed by other well settled principles of law.

On April 29, 1996, plaintiff was injured while operating a diecasting machine on the premises of his employer, Abco Diecasters, in Newark, New Jersey. While trying to remove a casting that was stuck in the die, plaintiff pushed a wrong button with his left hand, causing the die to close on his right hand, mangling it. The machine involved, a Kux brand, horizontal metal diecasting machine, was manufactured by the Kux Division of the Wickes Corporation (Wickes). This division had at one time operated as an independent company, Wickes having purchased all its assets in 1963 and then continuing the manufacture of diecasting machines. The machine in question was manufactured by Wickes in 1971. In 1976, Wickes consolidated those operations into the Wickes Machine Division, which continued to manufacture and market Kux diecasting equipment. In 1981, Wickes further consolidated its several machine tool businesses into a single division known as the Wickes Machine Tool Group.

Sometime in 1981, Wickes experienced financial difficulties and planned to file for Chapter 11 bankruptcy. Because it was determined that the Wickes Machine Tool Group could function more effectively outside of the bankruptcy proceeding, immediately prior to the Wickes's Chapter 11 filing, the Wickes Machine Tool Group was "spun off" and incorporated as a separate, wholly-owned subsidiary corporation called the Wickes Machine Tool Group, Inc. (WMTG) on April 23, 1982. As noted, Wickes owned all the stock of WMTG. In this reorganization, WMTG acquired all the assets of the Wickes Machine Tool Group for diecasting machinery manufacture in exchange for an assumption of liabilities agreement.

About six months after the incorporation of WMTG and as part of the Chapter 11 bankruptcy, Wickes sought buyers for this subsidiary. Eventually, the managers of WMTG negotiated a leveraged buyout of the subsidiary from Wickes and organized a corporation, SMS Holdings Co., Inc. (SMS), for the purpose of buying the subsidiary. In a November 18, 1983 Stock Purchase Agreement, Wickes sold 100% of its stock in WMTG to SMS, and the subsidiary then became known as Saginaw Machine Systems, Inc. (Saginaw).*fn1 Thereafter Wickes remained in business but no longer manufactured the product in question.

Wickes emerged from Chapter 11 reorganization and, sometime between 1983 and 1986, changed its name to Wickes Companies, Inc. (Wickes II). In 1992, Wickes II changed its name once again to Collins & Aikman Group, Inc., and eventually acquired or created a wholly-owned subsidiary, Collins & Aikman Products Co., into which it statutorily merged in 1994. The surviving corporation was known as Collins & Aikman Products Co., Inc. (C&A). The product line of C&A never included diecasting machinery.

As a result of the injuries sustained, plaintiff sued Saginaw, its parent SMS, and C&A, seeking to recover damages on theories of strict liability in tort for defective design and manufacture and breach of the post-manufacture duty to warn. After discovery had been completed, all defendants moved for summary judgment on the ground that successor corporate liability does not attach because none of them continued the line of the allegedly defective product that caused plaintiff's injuries. As to defendant C&A, the motion judge agreed.*fn2 In its decision granting C&A summary judgment, the court found that C&A was a successor company, not liable to plaintiff as a matter of law:

After reviewing all the documents and facts submitted to the Court, the Court finds that as a matter of law that Collins & Aikman is a successor. It is not Wickes——it is not——it is still not Wickes Corporation. It is a successor. It's not the same entity and, therefore, based upon the case law and the facts before it, the Court finds that as a matter of law Collins & Aikman is a successor and is not liable under the theory of successor liability or under the post- manufacture duty to warn. So, therefore, the Court will grant summary judgment in favor of Collins & Aikman on both theories, successor liability and duty to warn.

In its decision denying plaintiff's motion for reconsideration, the court further explained that there is no assumption of liability under Ramirez, supra, when, prior to merger, the predecessor sells off the operational unit responsible for the allegedly defective machine and, after merger, the successor produces a different product line:

The Court finds, as the Court previously found, that Collins & Aikman, as a matter of law, is not the same corporation, and the Court bases that on the following facts. Accepting plaintiff's argument that these name changes were really just that and nothing more significant, . . . [i.e.] the name change to Wickes Company and the name change to Collins & Aikman, . . . those name changes did occur after Wickes Machine——Wickes Corporation sold Wickes Machine Tool Group to SMS. So, that part of the division was taken out prior to the name changes.

Then there's the merger, which occurred in 1994 when the Collins & Aikman Group merged into Collins & Aikman Product Company, and Collins & Aikman Product Company manufactured something totally different. It manufactures, if my ...


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