there remain genuine issues of material fact as to B & M's relationship to Mudrick Machine Works' apparent successors. In support of its motion for summary judgment, B & M argues that neither the traditional theories for imposition of successor liability nor the recently adopted "product line exception" render it subject to liability based upon plaintiff's allegations. The traditional theories are inoperative, B & M argues, because its purchase of assets from Crompton & Knowles did not amount to a consolidation, merger, or continuation of the seller; because the sale was not effected to escape liability; and because B & M did not agree to assume the liabilities of the selling corporation. Plaintiff's claim under the product line exception fails, according to B & M, because B &M's purchase of assets from Crompton & Knowles' James Hunter division contemplated that the Hunter division, and not B & M, would continue to manufacture equipment of the type that injured plaintiff, because B & M did not purchase the assets or inventory used in the manufacture of machines of the type that caused plaintiff's injury, because B & M did not purchase the name or goodwill of the seller, and because B & M did not purchase all or substantially all of the seller's manufacturing assets.
In response, plaintiff argues only that B & M has failed to establish the inapplicability of the product line exception. To buttress that claim, plaintiff points to the initial agreement between B & M and the James Hunter division which required B & M to produce "MC type pickers" until Crompton & Knowles relocated the James Hunter division in Massachusetts. That agreement, plaintiff contends, viewed in light of B & M's purchase in 1972 of additional inventory from the James Hunter division in Los Angeles, compels the conclusion that B & M purchased sufficient assets to continue the manufacture of the Mudrick picker. Plaintiff further claims that the 1973 sale of the James Hunter division's manufacturing operation to the James Hunter Machine Company raises questions as to whether the latter ever resumed operations and whether B & M ever ceased manufacture of the allegedly defective machine.
Moreover, plaintiff contends that B & M's capacity, and at least temporary obligation, to manufacture the Mudrick picker product line, when considered in light of the uncertain volume of assets transferred to James Hunter Machine Company (and the uncertainty as to how those assets were used), leaves open the possibility that B & M became Crompton & Knowles' successor with respect to the allegedly defective product. Phrased differently, plaintiff argues that the current record does not foreclose the possibility that Crompton & Knowles sold all or substantially all of its assets for production of the product line to B & M.
Plaintiff also disputes B & M's contention that it never produced a picker of the type involved in plaintiff's accident. In this regard, plaintiff notes that B & M retained the right, under its contract with the James Hunter division, to manufacture an "F-6" picker, a device not distinguished on the record as it stood when plaintiff's memorandum was filed from the "M-2" type machine involved in plaintiff's accident. Plaintiff's Memorandum of Law at 5, n.1. And finally, in a status report submitted before argument on these motions, plaintiff asserts that B & M has admitted that it acted as the James Hunter division's "West coast representative for sales and service" after April 28, 1972.
Out of an abundance of caution, I have delayed ruling upon defendant B & M's motion for summary judgment, principally because of the substantial discovery problems encountered by plaintiff's counsel. However, after consideration of B & M's recently filed answers to plaintiff's interrogatories and the failure of any party to come forward with contradictory materials, I conclude that there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Reduced to its essence, the current record conclusively demonstrates that B & M did not purchase all or substantially all of the manufacturing assets of any predecessor legally responsible for plaintiff's injuries, and that it did not hold itself out to the public as the continuation of any liable transferor. Furthermore, B & M did not undertake to manufacture the product line which encompassed the machine involved in this case. Under these circumstances, it is abundantly clear that the product line exception to the traditional restriction of corporate successor liability cannot apply.
The general principle regarding the liability of corporations that acquire assets of other corporations, of course, "is that 'a mere sale of corporate property by one company to another does not make the purchaser liable for the liabilities of the seller not assumed by it. '" Knapp v. North American Rockwell Corporation, 506 F.2d 361, 363 (3d Cir. 1974), cert. denied, 421 U.S. 965, 44 L. Ed. 2d 452, 95 S. Ct. 1955 (1975), quoting, Shane v. Hobam, Inc., 332 F. Supp. 526, 527 (E.D. Pa. 1971) (citation omitted, applying New York law). Traditional exceptions to the rule charge the buyer with its transferor's obligations
when (1) the purchaser expressly or impliedly agrees to assume such obligations; (2) the transaction amounts to a consolidation or merger of the selling corporation with or into the purchasing corporation; (3) the purchasing corporation is merely a continuation of the selling corporation; or (4) the transaction is entered into fraudulently to escape liability for such obligations.
Knapp, at 363-364, quoting, Shane v. Hobam, Inc., 332 F. Supp. at 527-528 (citation omitted).
In recent years, an additional exception has been fashioned to impose successor liability on corporations that purchase the assets of a predecessor and continue to manufacture a product line previously made by the transferor. Under the product line exception
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.