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Lafountain v. Webb Industries Corp.

argued: October 15, 1991.

TERENCE WAYNE LAFOUNTAIN, APPELLANT
v.
WEBB INDUSTRIES CORPORATION AND LLOYD H. KNOST, INDIVIDUALLY AND TRADING AS REED ENGINEERING COMPANY; TED REED, INDIVIDUALLY AND TRADING AS REED ENGINEERING COMPANY



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. (D.C. Civil No. 89-06069)

Before: Sloviter, Chief Judge, Cowen and Weis, Circuit Judges

Author: Weis

Opinion OF THE COURT

WEIS, Circuit Judge.

In this diversity action, we assume that Pennsylvania would adopt the product line exception to successor responsibility in product liability cases but conclude that the availability of a remedy against the original manufacturer makes the exception inapplicable. We also conclude that, in the absence of a commercial relationship, the successor corporation does not owe a duty to warn a customer of the predecessor. Accordingly, we will affirm the district court's grant of summary judgment to the defendant.

Plaintiff was injured while operating a roll bending machine at his place of employment on January 11, 1988. He brought suit against Webb Industries, Corp.; Lloyd Knost, individually, and trading as Reed Engineering Company; and Ted Reed, individually and trading as Reed Engineering Company. The complaint alleges negligence, strict liability, and breach of warranty.

The machine, designed and manufactured by the Reed Engineering Company of Carthage, Missouri, was sold in 1949 to the plaintiff's employer, Hauck Manufacturing Company, then located in Brooklyn, New York. In 1964, Hauck moved its plant and the machine to Pennsylvania.

At the time of the sale, Reed Engineering was a partnership operated by Knost and Reed. In 1950, Knost purchased Reed's interest in the company and operated it as a sole proprietorship, retaining the original name.

In 1954, Knost granted Webb Industries, Corp. the exclusive right to manufacture, use, and sell products formerly made by Reed Engineering, including roll bending machines. As part of the licensing arrangement, Webb received the right to patents, designs, drawings, patterns, goodwill, fixtures, and customer records. Knost agreed to discontinue manufacture of the products covered by the contract. Webb sold the products under the name of "Reed Equipment Division of Webb Corporation" and on at least one occasion advertised itself as selling "Reed" products, but did not specifically mention roll bending machines. In 1959, Knost sold to Webb the "Reed product line" which was the subject of the 1954 licensing agreement. Webb continues to manufacture products covered by the contract, including the same model roll bending machine designed by Reed Engineering. Knost continued in other business lines until he retired in 1966. He presently lives in Missouri and apparently is in very poor health.

Webb supplies replacement parts for roll bending machines. In 1973 and in 1980, it sold Hauck an "off the shelf" part described as a floating bronze bushing, at costs of $69.85 and $178.63, respectively. Hauck has in its files a manual entitled "Installation and Operating Instructions for Webb . . . Bending Rolls and Slip Roll Formers." Additionally, it possesses two parts lists for the roll bending machine, under the names of "Reed Equipment Division of the Webb Corporation" and "The Webb Corporation," respectively. Webb, however, never mailed any printed matter to Hauck and it is not known how this material came to be in its files.

In 1970, Webb redesigned the roll bending machine to incorporate certain safety features as standard equipment. In 1974 and 1976, Webb sent letters to its customers recommending that safety features be added to the product and enclosed a warning sign to be attached to the machines. These letters and signs were not sent to customers who bought machines from Reed Engineering before 1954, although Webb had been given records of those who had purchased between 1948 and 1954.

Webb did not continue any service contracts of Knost or Reed Engineering and none is mentioned in either the 1954 or 1959 agreements. Webb has not inspected, serviced, or repaired any of Hauck's machines, or even visited its plant. Nor has Webb solicited business from any customers who purchased machinery from Reed Engineering before 1954. Webb does not advertise to the general public and has a one person sales force.

Plaintiff asserted liability against Webb based on the "product line" exception to the general rule of successor non-liability and on an alleged failure to warn.

The district court entered summary judgment in favor of defendant Webb and dismissed the suit against defendant Knost for lack of personal jurisdiction.*fn1 The court noted that the Pennsylvania Supreme Court had not yet addressed the "product line" basis for successor liability, but assumed its acceptance arguendo. Despite that postulate, the court concluded that the plaintiff continued to have a remedy against ...


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