Cincinnati, Inc., id. at 440; Lopata v. Bemis Co., supra; Kloberdanz v. Joy Manufacturing Co., 288 F. Supp. 817, 821 (D.Colo.1968); Wilson v. Fare Well Corp., 140 N.J.Super. at 485-86, 356 A.2d at 464 (citations omitted). In the present case, there was no such identity. Plaintiff has therefore failed to satisfy the traditional test for "continuation."
Plaintiff relies upon Cyr v. B. Offen & Co., 501 F.2d 1145 (1st Cir. 1974) (New Hampshire law). In Cyr, key employees and an outside financier purchased the predecessor corporation shortly after its owner died. The same employees continued without pause to produce the same products in the same plant, with the same supervision in the same way. Moreover, the purchasers assumed the old service obligations without notifying the previous customers that a new business was beginning. Indeed, the new corporation advertised itself as an ongoing enterprise, and even claimed that it was a forty-year old business. "Facial and substantive continuity were the essence of the bargain." Id. at 1152. The court therefore held that the successor was not immune from liability. Cyr is inapposite because here the California corporation had a different plant, different employees, different supervisors, and different customers. Nor did the California corporation hold itself out as the same enterprise.
Turner v. Bituminous Casualty Co., 397 Mich. 406, 244 N.W.2d 873 (1976) is likewise distinguishable. In Turner, the predecessor and successor were not " "corporate strangers.' " Id. at 425, 244 N.W.2d at 881. On the contrary, the successor deliberately maintained the same product, personnel, policy, properties, operations, and clients in order "to incorporate (the predecessor) into its system with as much the same structure and operation as possible. Continuity (was) the purpose, continuity (was) the watch word, continuity (was) the fact." Id. at 426, 244 N.W.2d at 882. In the present case, however, such continuity was not "the consideration for the whole deal," id. at 429, 244 N.W.2d at 883, since the California corporation only bought some assets from an inactive corporation,
and then moved them across the country in order to start a company in a different physical location with different employees, a different policy, and different management. In short, the California corporation was a different "operation." See also Andrews v. John E. Smith's Sons Co., 369 So.2d 781, 785 (Ala.1979) ("basic continuity" between predecessor and successor because, inter alia, the same products were manufactured by the same employees in the same place; moreover the successor held itself out as the predecessor "an old established company" in dealings with its customers).
I hold that the California corporation was not a continuation of the Connecticut corporation. Therefore, none of the four traditional exceptions to the general rule of the non-liability of a successor corporation applies in this case.
4. Product Line
Plaintiff asserts that the policies underlying strict tort liability for defective products compel a fifth exception to the general rule. See Ray v. Alad Corp., 19 Cal.3d 22, 136 Cal.Rptr. 574, 560 P.2d 3 (1977); Ramirez v. Amsted Industries, Inc., supra. Contra, Rhynes v. Branick Manufacturing Corp., 629 F.2d 409 (5th Cir. 1980) (Texas law); Travis v. Harris Corp., supra (Ohio and Indiana law); Leannais v. Cincinnati, Inc., supra (Wisconsin law); Freeman v. White Way Sign & Maintenance Co., 82 Ill.App.3d 884, 403 N.E.2d 495, 38 Ill. Dec. 264 (1980). I will assume arguendo that this extension of the law of successor liability governs this action.
Nevertheless, I conclude that under the circumstances presented here, the California corporation is not liable under the product line test.
Ray held that the policies underlying strict tort liability compel a special exception to the traditional rules of corporate successor liability.
Justification for imposing strict liability upon a successor to a manufacturer under the circumstances here presented rests upon (1) the virtual destruction of the plaintiff's remedies against the original manufacturer caused by the successor's acquisition of the business, (2) the successor's ability to assume the original manufacturer's risk-spreading role, and (3) the fairness of requiring the successor to assume a responsibility for defective products that was a burden necessarily attached to the original manufacturer's good will being enjoyed by the successor in the continued operation of the business.
19 Cal.3d at 31, 136 Cal.Rptr. at 579-80, 560 P.2d at 8-9 (emphasis in original). But Ray did not establish a per se rule. Rather, these three rationales must be considered in the particular circumstances of each case. See id. at 31 & 34, 136 Cal.Rptr. at 580 & 582, 560 P.2d at 9 & 11. The Ray court did conclude on the facts before it that it was appropriate to hold the successor strictly liable for defects in products manufactured and distributed by its predecessor. The circumstances here, however, are distinguishable.
In Ray, the plaintiff faced "insuperable obstacles," id. at 32, 136 Cal.Rptr. at 580, 560 P.2d at 9, in recovering a judgment from the predecessor corporation. In this case, plaintiff likewise would face formidable barriers if he attempted to obtain satisfaction of a judgment against the Connecticut corporation since it was dissolved more than ten years ago. Thus, the first justification for the special exception applies in the present case.
In considering the second justification, Ray looked to the transaction by which the predecessor transferred its assets to the successor: "the transaction by which (the successor) acquired the (predecessor's) name and operating assets had the further effect of transferring to (the successor) the resources that had previously been available to (the predecessor) for meeting its responsibilities to persons injured by defects in (products) it had produced." Id. at 33, 136 Cal.Rptr. at 581, 560 P.2d at 10. These resources included the same physical plant, manufacturing equipment, inventories of raw materials, work in progress, finished goods, manufacturing designs, factory personnel, general manager, sales representatives, and customers. Id. at 24-25 & 33, 136 Cal.Rptr. at 576 & 581, 560 P.2d at 5 & 10. Moreover, there was no outward indication of any change in the ownership of the business. Id. at 25, 136 Cal.Rptr. at 576, 560 P.2d at 5. By contrast, the California corporation's "resources" were quite different from the Connecticut corporation's: there was a different plant, manufacturing equipment, inventories, personnel, management, and sales representatives; furthermore, when Matheson came to Stamford to pick up the Connecticut corporation's assets, there was no work in progress, finished goods, or raw materials to take back with him. Thus the acquisition in the present case
did not give the California corporation "the opportunity formerly enjoyed," id. at 33, 136 Cal.Rptr. at 581, 560 P.2d at 10, by the Connecticut corporation to pass on to its customers the costs of meeting the risks of manufacturing defects. Cf. Cyr v. B. Offen & Co., 501 F.2d at 1154. ("If as a group the same employees continue, without pause(,) to produce the same products in the same plant, with the same supervision, the ownership of the entity which maintains essentially the same name cannot be the sole controlling determinant of liability."). Therefore the second justification for the product line exception does not apply in the instant case.
The Ray court next considered the fairness of imposing successor liability in light of the circumstances of the acquisition. The court concluded that it was indeed fair and equitable to impose such liability because in that case the successor acquired its predecessor's trade name, good will, customer lists, and its continuing ability to produce the same product. 19 Cal.3d at 34, 136 Cal.Rptr. at 581, 560 P.2d at 10. Moreover, it held itself out to potential customers as the same enterprise, id.; for instance, its sales representatives were not instructed to notify customers of the change in ownership. Id. at 28, 136 Cal.Rptr. at 577-78, 560 P.2d at 6-7.
In the present case, the California corporation did acquire its "predecessor's" trade name and good will. However, it did not receive customer lists; nor did it have the same ability to produce the same product. Furthermore, it did not hold itself out to potential customers as the same enterprise. On the contrary, trade journals publicized that there had been a change in the company that manufactured the tip tank systems for Bonanza aircraft. Deposition of Robert B. Matheson at 29.
Plaintiff refers to Matheson's deposition and argues that "(n)othing was done to indicate to past or future customers that the (California) corporation was anything more than a continuation of the original manufacturing enterprise." Plaintiff's Memorandum in Opposition to Defendant Flight Extenders, Inc.'s Motion for Summary Judgment at 9. Yet the deposition belies this conclusory statement. Matheson did state that the California corporation held itself out as building the same product that had been built in Connecticut. Deposition of Robert B. Matheson at 29. However, there is no evidence that the California corporation held itself out as being the same manufacturing entity as the Connecticut corporation. But this latter type of holding out as the same entity is the relevant factor in the product line test. See Ray v. Alad Corp., 19 Cal.3d at 34, 136 Cal.Rptr. at 581, 560 P.2d at 10 ("the same enterprise").
There is another flaw in plaintiff's argument: the Connecticut corporation was not a going concern at the time of the sale of its assets; therefore, the California corporation would have been unable in any event to "exploit," see id., the Connecticut corporation's reputation as a going concern. Rather, the California corporation was relegated to publicizing that it would build the same quality product that had been built in Connecticut. See Deposition of Robert B. Matheson at 30.
Plaintiff has the burden of demonstrating that he fits within the Ray product line exception. Yet he has not pointed to any evidence relevant to his argument. Under these circumstances, it would be unfair to impose product line liability on the California corporation. Ray requires that the successor "continue( ) the predecessor's commercial activity in an essentially unchanged manner," Ramirez v. Amsted Industries, Inc., 171 N.J.Super. at 269-70, 408 A.2d at 823, or, at the very least, that the successor hold itself out as the same manufacturing enterprise, see Ray v. Alad Corp., 19 Cal.3d at 34, 136 Cal.Rptr. at 581, 560 P.2d at 10. In this case, the California corporation resumed the manufacture and sale of a product after an almost three year hiatus; it did so under drastically changed circumstances; and it did not hold itself out as the same entity. To impose liability here would undermine the three-prong Ray test and lead rather to the imposition of product line liability without regard to the relationship of the predecessor and successor corporations. I therefore conclude that plaintiff has failed to satisfy the third facet of the Ray test. Since he has also failed to satisfy the second requirement of this test, I hold that plaintiff cannot impose product line liability on the California corporation.
Plaintiff cites Ramirez v. Amsted Industries, Inc., supra in support of his product line argument. However, Ramirez is similarly distinguishable since there was continuity between the two manufacturing entities. See Ramirez v. Amsted Industries, Inc., 171 N.J.Super. at 266, 408 A.2d at 821 (the contract between the two corporations "clearly contemplate(d) the transfer of a viable, operating manufacturing company to the (successor)"); id. at 269-70, 408 A.2d at 823 (the more liberal rules of successor liability apply "where the successor has acquired and has continued the predecessor's commercial activity in an essentially unchanged manner"); id. at 278, 408 A.2d at 827 (the successor corporation "continue(d) essentially the same manufacturing operation as the predecessor corporation"); see also Wilson v. Fare Well Corp., 140 N.J.Super. at 490, 356 A.2d at 466 ("The more a corporation physically resembles its predecessor ... the more reasonable it is to hold the successor fully responsible.").
The product line theory of successor liability is an exception to the general rule that a successor corporation is not liable for tort liabilities of its transferor. Were I to agree with plaintiff under the present circumstances, this exception would eviscerate the general rule. Thus the California corporation cannot be held liable under any of the five exceptions to the general rule. I will therefore grant the California corporation's motion for summary judgment with respect to this basis of liability.
B. Duty to Warn
As a second basis for holding the California corporation liable, plaintiff states that the California corporation is liable under traditional tort principles because it breached its duty to warn past purchasers of tip tanks of any defects which subsequent testing disclosed, or should have disclosed, between the date of the purchase of the Connecticut corporation's assets and the time of the accident.
A successor corporation can be held independently liable for a failure to warn of preexisting defects. Gee v. Tenneco, Inc., supra; Travis v. Harris Corp., supra; Leannais v. Cincinnati, Inc., supra; Fehl v. S. W. C. Corp., supra; Shane v. Hobam, Inc., supra; Andrews v. John E. Smith's Sons Co., supra; Wilson v. Fare Well Corp., supra. However, this theory is inapplicable here.
Succession alone does not impose a duty to warn of recently discovered defects. Gee v. Tenneco, Inc., 615 F.2d at 866. Rather this duty arises only when there is succession to, or assumption of, a predecessor's service contracts, coverage of the particular product under the service contract, service of that machine by the successor, and knowledge of defects and of the location or owner of the machine. Travis v. Harris Corp., 565 F.2d at 449; Leannais v. Cincinnati, Inc., id. at 442; Fehl v. S. W. C. Corp., 433 F. Supp. at 949; Shane v. Hobam, Inc., 332 F. Supp. at 529-30; Andrews v. John E. Smith's Sons Co., 369 So.2d at 784-85; Wilson v. Fare Well Corp., 140 N.J.Super. at 492, 356 A.2d at 467-68.
There can be no such duty here since the California corporation did not continue the Connecticut corporation's service contract; indeed there was none. Moreover, there is no evidence that the California corporation ever serviced or repaired a tip tank that had been manufactured by the Connecticut corporation. At most, past purchasers may have contacted Matheson in order to ask questions or to get some spare parts. Deposition of Robert B. Matheson at 33-34. Such contact may have been of some "potential economic advantage," W. Prosser, Law of Torts 339 (4th ed. 1971), because it was a further way of publicizing the resumption of the manufacturing of tip tanks. See Deposition of Robert B. Matheson at 33. However, there is no evidence that these contacts brought, or should have brought, to its attention defects in its predecessor's products. I therefore conclude that such benefit, if any, is insufficient to extend the liability for any alleged nonfeasance, see generally W. Prosser, Law of Torts 339 (4th ed. 1971), especially because the California corporation did not actively seek out these past customers in order to sell spare parts. Otherwise, a duty to warn would arise in any circumstance in which a successor has any dealings with its predecessor's customers. This is not the test, however.
Plaintiff relies on Shane v. Hobam, Inc., supra and Wilson v. Fare Well Corp., supra. Both cases are inapposite. In Shane, the successor continued to have the responsibility for servicing equipment previously manufactured and serviced by its predecessor. Judge Higginbotham held that if plaintiff were successful in establishing both that the successor serviced the allegedly defective machine, and that the successor knew it was defective, a duty to warn then, and only then, would arise. He therefore denied the successor's motion for summary judgment pending further discovery on these latter two issues. Wilson v. Fare Well Corp. is likewise distinguishable because the successor continued servicing products that had been manufactured and serviced by its predecessor. 140 N.J.Super. at 482, 356 A.2d at 461. Counsel has not cited, nor have I found, any case in which there was a duty to warn in the absence of a continued servicing arrangement. See Gee v. Tenneco, Inc., 615 F.2d at 866 (successor's knowledge of defects does not raise a duty to warn absent continuation of relationship between successor and the customers of the predecessor); Travis v. Harris Corp., 565 F.2d at 448-49 (special relationship required before there can be a duty to warn); Leannais v. Cincinnati, Inc., supra. See Andrews v. John E. Smith's Sons Co., supra; Fehl v. S. W. C. Corp., supra; see also Holloway v. John E. Smith's Sons Co., 432 F. Supp. 454, 456 n.1 (D.S.C.1977) (alternative holding).
I therefore conclude that the California corporation did not have a duty to warn past purchasers of recently discovered defects. I shall grant the California corporation's motion for summary judgment with respect to this alternative basis of liability.
Plaintiff cannot impose successor liability on the California corporation; nor can it impose liability based on the California corporation's failure to warn. I will grant the motion for summary judgment in full and enter judgment for the California corporation and against the plaintiff.