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CONWAY EX REL. ROADWAY EXPRESS, INC. v. WHITE TRUC

July 27, 1988

NEIL CONWAY AND JOAN CONWAY, his wife, and NEIL CONWAY TO THE USE OF ROADWAY EXPRESS, INC., Plaintiffs,
v.
WHITE TRUCKS, A DIVISION OF WHITE MOTOR CORPORATION; VOLVO WHITE TRUCK CORPORATION, SUCCESSOR CORPORATION TO WHITE TRUCKS, A DIVISION OF WHITE MOTOR CORPORATION; AND NATIONAL SEATING COMPANY AND JOHN DOE CORPORATION, Defendants



The opinion of the court was delivered by: CONABOY

 RICHARD P. CONABOY, UNITED STATES DISTRICT JUDGE.

 INTRODUCTION

 This Memorandum addresses the post trial motions of Defendant Volvo White which seek this Court to amend its earlier judgment on the issue of successor liability, and moves for a judgment notwithstanding the verdict or for new trial on the questions of liability and damages. Because this Court is persuaded by Volvo White's arguments that it may not be held liable under the circumstances of this case on any theory of successor corporate liability, this Court will vacate the earlier judgments entered against Volvo White and will direct that judgment be entered in its favor.

 FACTS AND PROCEDURAL HISTORY

 On March 22, 1982, the Plaintiff, Neil Conway, was operating a tractor trailer for Roadway Express on U.S. Route 22/78 in Northampton county, Commonwealth of Pennsylvania. The tractor trailer was manufactured by White Motor Corporation and contained a seat manufactured by National Seating. While driving, the Plaintiff struck a pothole in the road causing the seat to dislodge and propel him forward into the dash area causing injuries to the Plaintiff, including an abrasion of the right knee which developed into a traumatic chondromalacia of the patella.

 Based on this incident, Neil and Joan Conway initially filed suit in the Court of Common Pleas of Lackawanna county in January of 1984. This action was subsequently filed against White Motor Corporation, National Seating Company and Volvo White Truck Corporation, basing liability on Section 402A of the Restatement (Second) of Torts. Plaintiffs maintain that the seat and truck were defectively designed and that there was insufficient clearance for the driver's knees in the event of a foreseeable seat malfunction. The Plaintiffs aver that Volvo-White Truck Corporation is liable under Pennsylvania law as a successor corporation because it continued to market the same product line and because of a continuity of operations.

 Because the relationship between Volvo White and White Motor Corporation is fundamental to the understanding of this Memorandum, the factual circumstances underlying the transfer of various assets from White Motor Corporation to Volvo White Truck Corporation follow.

 Of initial significance is the fact that White Motor Corporation manufactured the White Road Boss II Tractor Trailer which was involved in the accident in the instant case and that Volvo-White played no part in the manufacture and design of the tractor trailer. The vehicle was sold by White in 1977. White and its affiliates filed for reorganization under Chapter XI of the Bankruptcy Reform Act of 1978 ("Code"), 11 U.S.C. § 1101 et seq., on September 4, 1980. *fn1"

 In the course of White Motor Corporation's reorganization, A.B. Volvo, a Swedish Corporation, purchased various truck manufacturing facilities of White Motor Corporation on July 9, 1981. A.B. Volvo is the parent corporation of Volvo White Truck Corporation. The assets purchase agreement between A.B. Volvo and White dated June 9, 1981, stated in paragraph 2.02 that "Volvo will not under any circumstances assume any liabilities of White (i) for personal injury or property damage because of alleged negligence or breach of warranty or under any other theory of product liability or (ii) to pay damages (other than the purchase price of goods or services provided to White) by reason of any breach of any obligation or any other act or admissions of White. Purchase Agreement, Article II, Section 2.02. By order of July 27, 1981, known claimants, shareholders, debenture holders and persons requesting notice, were mailed notice of hearings on the proposed sale. On August 13, 1981, the Bankruptcy Court for the Northern District of Ohio determined the sale was appropriate outside the context of a plan of reorganization and issued an order approving the purchase agreement "in all respects." A final agreement entered into between A.B. Volvo and White on June 15, 1983, provided that Volvo would assume White's product liability for accidents occurring between May 1, 1983 and December 31, 1992, involving vehicles assembled prior to September 1, 1981. The supplemental agreement was approved by Court Order of June 29, 1983.

 On August 1, 1983, the United States Bankruptcy Court for the Northern District of Ohio entered an Order fixing August 30, 1983, as the last day by which holders of any and all claims against White Motor Corporation could file Proofs of Claim with the Bankruptcy Court or be forever barred from voting or receiving distributions in connection with said claims, pursuant to that Court's authority under Bankruptcy Rule 3003 (c)(3). Notice of the bar date was provided to potential claimants through direct mail contact and by national publications, including the Wall Street Journal and the New York Times.

 In addition to a claimant's obligation to file a proof of claim, the Honorable Ann C. Aldrich of the United States District Court for the Northern District of Ohio, filed an Order dated February 17, 1984, which provided that any party having filed a timely proof of claim or later permitted to do so, who had not commenced a civil action against White, would be permitted to do so within 30 days of the date of that Memorandum and Order. Thus, even those who had filed a proof of claim were also required to commence suit by March 18, 1984 or be barred from proceeding with that suit against White Motor Corporation.

 On September 2, 1983, White Motor Corporation filed its second modified plan of reorganization, which was amended on November 16, 1983. This plan of reorganization was approved by the United States Bankruptcy Court for the Northern District of Ohio on November 18, 1983. That plan made provisions for the disposition of product liability claims pending against White Motor Corporation and created a trust and trust fund to administer and provide for outstanding claims.

 Plaintiffs, Neil and Joan Conway, made no attempt to file any proof of claim with the Bankruptcy Court at any time. Roadway Express, Inc. did not file a Proof of Claim until after the period of time designated by the Bankruptcy Court had expired.

 By the agreement of the parties and pursuant to an Order entered by the Honorable William J. O'Neill of the United States Bankruptcy Court for the Northern District of Ohio, the objection of the trustee to the attempt of Roadway Express, Inc., to file a late Proof of Claim in this matter was sustained, with prejudice to Roadway's right to refile any direct claim against White Motor Corporation. *fn2"

 As previously noted, White Motor's modified plan of reorganization was confirmed on November 18, 1983. On confirmation, White Motor was discharged "from any debt that arose before the confirmation date . . . ." Plan of Reorganization, Article VI, Section 6.1.

 In emerging from the bankruptcy reorganization White changed its named to Northeast Ohio Axle, Inc. ("NEOAX"). NEOAX continued White's Truck axle manufacturing operation in Cleveland, Ohio as well as its recreation vehicle productions. NEOAX further branched into manufacturing parts for piston aircraft engines, components for nuclear submarines and landing gears for heavy truck trailers. Having emerged from the reorganization, NEOAX is insulated from being pursued by creditors of White Motor. Instead, any judgment against White would not result in personal liability to NEOAX; rather, White's insurers, its co-defendants, and the reserve fund established in the reorganization were to be responsible for such liability.

 Volvo White Truck Corporation's post trial brief described this situation as relates to the circumstances of Plaintiffs' case:

 
As part of the White bankruptcy reorganization plan, the proceeds of the sale of White's other assets were placed into a trust generally used to make distribution payments to claimants (N.T. 1/29 p. 126). A settlement was effected between Roadway and the trust on the claim filed by Roadway in October, 1984 (N.T. 1/28 p. 131-137). Although the trustee's consultant for products liability matters (N.T. 1/28 p. 120, 126) notified plaintiff Conway's attorneys that a proof of claim had to be filed in connection with this case (N.T. 1/28 p. 129-131), plaintiff Conway filed no such proof of claim (N.T. 1/28 p. 131). Funds were available to satisfy accident claims such as plaintiff Conway's, and plaintiff Conway might have been able to proceed with his claim against White had he filed the proof of claim required by the trustee (N.T. 1/28 p. 128-131, 148-149, 156-157, 160-161).
 
Plaintiff Conway did not file a proof of claim with the trustee . . . .

 Document 150, pp. 9-10.

 As mentioned previously, Plaintiffs filed the above-captioned action on March 21, 1984. Named as Defendants in this action were Volvo White Truck Corporation, White Motor Corporation, National Seating Company, and John Doe Corporation. The various counts in the complaint may be summarized as follows:

 
Count 1 and 2 : Plaintiffs v. White Motor Corporation pursuant to Section 402(a) of the Restatement of Torts (Second).
 
Count 2 : Plaintiffs v. White Motor Corporation alleging negligence in the design, installation, and manufacturer of the tractor trailer.
 
Count 3 : Plaintiffs v. Volvo White Truck Corporation alleging that Volvo White was a successor corporation to White Motor Corporation.
 
Count 4 : Plaintiffs v. National Seating Company pursuant to Section 402(a) Restatement of Torts (Second).
 
Count 5 : Plaintiffs v. a fictitious "John Doe Corporation" based on negligence.
 
Count 6 : Plaintiffs v. White Motor Corporation based upon breach of express warranties.
 
Count 7 : Plaintiffs v. White Motor Corporation claiming breach of an implied warranty of merchantability and implied warranty for fitness for a particular purpose.
 
Count 8 : Plaintiffs v. Volvo White Truck Corporation claiming that it is a successor corporation of White Motor Corporation and is therefore responsible for and assume the liabilities of the Defendant, White Motor Corporation.
 
Count 9 : Plaintiffs v. National Seating Company alleging a breach of express warranties.
 
Count 10 : Plaintiffs v. National Seating Company alleging a breach of an implied warranty of merchantability and an implied warranty for fitness for a particular purpose.
 
Count 11 : Plaintiffs v. a fictitious "John Doe Corporation" alleging breach of express warranties.
 
Count 12 : Plaintiffs v. National Seating Company alleging negligence on National's part in the design and installation of the seat assembly.
 
Count 13 : Plaintiffs v. All Defendants seeking damages for Plaintiff Joan Conway for the loss of her husband's assistance and society.

 Following service of the complaint, the Defendants filed answers and discovery commenced. Thereafter, on July 29, 1985, the Defendant White Motor Corporation filed a motion for summary judgment. White Motor Corporation predicated their motion on the fact the Plaintiffs had failed to timely file a proof of claim with the United States Bankruptcy Court for the Northern District of Ohio with regard to their claims against White Motor Corporation and that such a failure barred any proceeding against White Motor Corporation. Plaintiffs did not oppose the grant of White's dismissal from this case and this Court entered an Order dated September 30, 1985 granting White Motor Corporation's motion for summary judgment.

 On July 31, 1985, Volvo-White Truck Corporation filed a motion for summary judgment asserting that it did not fit into any of the traditional four exceptions to the general rule of non-liability for a successor corporation; and that the product line exception to the general rule was inapplicable since White Motor Corporation was not required, nor did it, dissolve after the sale of assets to Volvo-White. Instead, it continues to exist as a viable, ongoing concern under the name change of Northeast Ohio Axle, Inc. Additionally, Volvo-White alleged that it did not purchase all or substantially all of the assets of ...


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