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AMADER v. PITTSBURGH CORNING CORP.

July 26, 1982

THOMAS A. AMADER, JR., and DOROTHY D. AMADER, his wife, Plaintiffs
v.
PITTSBURGH CORNING CORPORATION, Defendant



The opinion of the court was delivered by: TROUTMAN

 HON. E. MAC TROUTMAN, District Judge.

 THE COURT: We now turn to the product line exception. In this asbestos case, plaintiffs have, on the eve of trial, filed an in limine motion seeking admission of evidence relating to the product line exception to successor liability together with appropriate jury instructions, should the plaintiffs succeed at trial in establishing the necessary basis and the requirements for the application of said exception. The defendant, Pittsburgh Corning, objects contending that the exception is not the law of Pennsylvania and that the basis for its application does not here exist.

 Concerned, as we are, with the product Unibestos, a high-temperature insulation product, plaintiff intends to establish in the course of the trial that as of July 1, 1962 Pittsburgh Corning acquired all assets including all real estate and fixtures relating to Unarco plants located in Tyler, Texas and Bloomington, Illinois which were used for the manufacture of Unibestos. Included within this acquisition was all equipment and machinery located at these plants for the production of Unibestos, inventories of Unibestos located at these plants which had not yet been sold by Unarco, business records relating to sale and distribution of Unibestos, all contracts, leases, licenses, patents and patent applications relating to Unibestos as well as raw amosite fiber on hand for the continuation of the Unibestos product line. The acquisition was so complete, plaintiff contends, that in addition to the above, Pittsburgh Corning also acquired the good will of Unarco relating to Unibestos as well as all trademarks and tradenames concerning the product, loan of scientific, technical and sales people from Unarco to assist Pittsburgh Corning Corporation in the transition of the product line, transfer of all employees of Unarco who were located at plant facilities which manufactured Unibestos as well as transportation facilities to move the Unibestos from the plants to potential customers. With regard to the sales of Unibestos by Pittsburgh Corning, it also acquired all customer lists of Unibestos purchasers as well as the ability to utilize distributors and contractors located throughout the United States who had previously been used by Unarco for the purpose of distributing the Unibestos product.

 Unarco, therefore, continued as a viable operating corporation thus precluding the application of the traditional approach to successor liability which generally required the dissolution of the predecessor corporation or at least its cessation of business activity.

 Thus, in the diversity case in which the plaintiffs are New Jersey residents and the applicable law is that of the Commonwealth of Pennsylvania, we are obliged to determine or predict Pennsylvania law.

 The inquiry regarding corporate successor liability commences with Pennsylvania law, for it controls the outcome of the diversity suit. See Erie Railroad Company v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938). The requirements of Pennsylvania law are easily summarized: "Ordinarily, when one company sells or transfers all its assets to another company, the latter is not liable for the debts and liabilities of the transferor simply by virtue of its succession to the transferor's property. In order to find that this general rule is not applicable and that the transferee does require such liability, one of the following must be shown: (1) the purchaser expressly or impliedly agrees to assume such obligation; (2) the transaction amounts to a consolidation or merger; (3) the purchasing corporation is merely a continuation of the selling corporation; or (4) the transaction is fraudulently entered into to escape liability." See Husak v. Berkel, Inc., 234 Pa. Super. 452, at pages 456-57, 341 A.2d 174, at 176 (1975). See also Knapp v. North American Rockwell Corporation, 506 F.2d 361 (3d Cir. 1974), cert. denied, 421 U.S. 965, 44 L. Ed. 2d 452, 95 S. Ct. 1955 (1975). Thus the historical law of the Commonwealth of Pennsylvania may be summarized.

 Now, the motion before the Court is premised upon a theory of law first explored in Ray v. Alad Corporation, 19 Cal. 3d 22, 136 Cal. Rptr. 574, 560 P.2d 3 (1977) which holds a successor corporation liable where there is: "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." See also Jacobs v. Lakewood Aircraft Service, Inc., 512 F. Supp. 176 at page 183 (E.D.Pa. 1981), an opinion written by the then Chief Judge Lord.

 New Jersey adopted this same rule, that is, the "product line exception" in Ramirez v. Amsted Industries, Inc., 86 N.J. 332, 431 A.2d 811 (1981) and described the application of the rule as follows: "Where one corporation acquires all or substantially all the manufacturing assets of another corporation, even if exclusively for cash, and undertakes essentially the same manufacturing operation as the selling corporation, the purchasing corporation is strictly liable for injuries caused by defects in units of the same product line, even if previously manufactured and distributed by the selling corporation or its predecessor."

 The Superior Court of Pennsylvania recently adopted the product line exception in Dawejko v. Jorgensen Steel Company, 290 Pa. Super. 15, 434 A.2d 106, 110-12 (1981). Dawejko, an intermediate appellate court decision, must be given "proper regard" in determining whether the Pennsylvania Supreme Court will adopt the product line exception. See Commissioner of Internal Revenue v. Estate of Bosch, 387 U.S. 456, 465, 18 L. Ed. 2d 886, 87 S. Ct. 1776 (1966); King v. Order of Travelers, 333 U.S. 153, 160-61, 92 L. Ed. 608, 68 S. Ct. 488 (1948); West v. A.T.&T., 311 U.S. 223, 85 L. Ed. 139, 61 S. Ct. 179 (1940). Importantly, the district courts in this circuit were recently cautioned that changes in "basic tort law" should emanate from the Supreme Court and not the Superior Court. See Vargus v. Pitman Manufacturing Company, 675 F.2d 73, 76 (3rd Cir. 1982).

 With this in mind, and upon evaluation of the Pennsylvania decisions in the light of "other relevant data," see McKenna v. Ortho Pharmaceuticals Corporation, 622 F.2d 657, 663 (3rd Cir. 1980), we conclude that the Pennsylvania Supreme Court will follow the well-reasoned and documented decision in Dawejko and adopt the "product line exception." Moreover, we conclude that its application under the facts alleged is therefore warranted in the case at bar.

 In making this determination, we have carefully considered but necessarily rejected Pittsburgh Corning's attempt to narrowly confine Dawejko to its specific facts. Instead, we rest our ruling upon the "social policies underlying strict products liability" and take care not to construe the product line exception "too tightly." See the Dawejko case 434 A.2d at page 111.

 The pertinent factors which we consider are listed in Dawejko: whether the successor corporation advertised itself as an ongoing enterprise; whether it maintained the same product name, personnel, property and clients; whether it acquired the predecessor corporation's name and good will and required the predecessor to dissolve. We also consider whether the Ray v. Alad Corporation, supra test has been met and the factors considered by the Ramirez v. Amsted Industries, Inc., supra, court. Among the factors which support the imposition of successor liability are the fact that upon Pittsburgh Corning's purchase of the Unibestos product line, Pittsburgh Corning maintained the same product, the same name, personnel, property, and apparently many of the same clients. Although Unarco, the predecessor corporation, did not dissolve upon Pittsburgh Corning's purchase of the Unibestos product line, it, Unarco, ceased to manufacture Unibestos.

 Moreover, the Ramirez standard which Dawejko specifically adopted has been met here. Pittsburgh Corning acquired all or substantially all of the Unibestos manufacturing assets of Unarco, and it undertook to ...


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