MEMORANDUM AND ORDER
October 26, 1994
Presently before the Court are the plaintiffs' Motion for Sanctions and Renewed Motion for Partial Summary Judgment and Injunctive Relief, defendants Terry Duggins, H.V.R. Parts, Inc., and H.V.R. Machine Tools' response and Renewed Motion for Summary Judgment and defendant Kurt Manufacturing, Inc.'s Renewed Motion for Summary Judgment.
I. FACTUAL BACKGROUND
This product liability action arises out of an accident which occurred on November 15, 1990 while plaintiff, Anthony Morgan, was operating a Press-Rite punch press. As a result of the accident, plaintiff sustained serious injuries. The press involved in Mr. Morgan's accident was manufactured by Havir Manufacturing Company ("Havir"). Havir dissolved and ceased operating in 1977.
Plaintiffs allege that defendants H.V.R. Parts, Inc., H.V.R. Manufacturing Company, and Terry Duggins ("HVR defendants") and Kurt Manufacturing, Inc., are the legal successors to Havir's Press-Rite punch press product line and thus, can be held liable under the product line exception to the general rule that a successor is not liable for the torts of the predecessor recognized by the Pennsylvania Superior Court in Dawejko v. Jorgensen Steel Co., 290 Pa. Super. 15, 434 A.2d 106 (1981). The various motions for summary judgment before the Court involve the issue of whether any of the defendants is the successor of Havir's Press-Rite punch press product line.
Also before the Court is the plaintiffs' Motion for Sanctions, which asserts that the HVR defendants have not complied with this Court's July 18, 1994 Order. The Order directed defendants to fully respond to plaintiffs' Supplemental Interrogatories and Second Request for Production of Documents. The procedural history leading up to this Court's July 13, 1994 Order is as follows.
On March 4, 1994, the plaintiffs served upon the defendants, Supplemental Interrogatories and a Second Request for Production of Documents. These discovery requests were directed primarily toward discovering information pertaining to the plaintiffs' claim that the defendants are liable under a corporate successor liability theory. The defendants failed to timely respond to the plaintiffs' discovery requests. Accordingly, on April 7, 1994, the plaintiffs filed a Motion to Compel. Thereafter, on April 14, 1994, the defendants served upon the plaintiffs their answers to the outstanding discovery, in which they failed to respond substantively to many of the interrogatories and requests for production, asserting boilerplate objections that the discovery sought was either unduly burdensome, irrelevant or otherwise objectionable.
A. The Standard For Summary Judgment
The purpose of summary judgment is to avoid a pointless trial in cases where it is unnecessary and would only cause delay and expense. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038, 50 L. Ed. 2d 748, 97 S. Ct. 732 (1977). When considering a motion for summary judgment, this Court shall grant such motion "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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). When reviewing a motion for summary judgment, this Court will resolve all reasonable doubts and inferences in favor of the nonmoving party. Arnold Pontiac-GMC, Inc. v. General Motors Corp., 700 F. Supp. 838, 840 (W.D. Pa. 1988).
The inquiry into whether a "genuine issue" of material fact exists has been defined by the Supreme Court as whether "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). "As to materiality, the substantive law will identify which facts are material." Id.
The Supreme Court articulated the allocation of burdens between a moving and nonmoving party in a motion for summary judgment in Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). The Court held that the movant had the initial burden of showing the court the absence of a genuine issue of material fact, but that this did not require the movant to support the motion with affidavits or other materials that negated the opponent's claim. Id. at 323. The Court also held that Rule 56(e) requires the nonmoving party to "go beyond the pleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions, on file,' designate 'specific facts showing that there is a genuine issue for trial.'" Id. at 324 (quoting Fed.R.Civ.P. 56(e)).
The Supreme Court further elaborated on the type of evidence that the nonmoving party is required to adduce in order to withstand a motion for summary judgment:
We do not mean that the nonmoving party must produce evidence in a form that would be admissible at trial in order to avoid summary judgment. Obviously, Rule 56 does not require the nonmoving party to depose her own witnesses. Rule 56(e) permits a proper summary judgment motion to be opposed by any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves, and it is from this list that one would normally expect the nonmoving party to make the showing to which we have referred [a genuine issue of material fact].
B. Applicable Law
"The laws of the several states, except where the Constitution or treaties of the United States or acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply." 28 U.S.C. § 1652. The Supreme Court has held that the judicial decisions of the state courts are "laws" of the states within the meaning of the above statute. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 82 L. Ed. 1188, 58 S. Ct. 817 (1938). Thus, when this court sits in diversity, it must apply the substantive law of the forum in which it is located. Id.
The federal courts are to follow the decisions of the Supreme Court of the state where the state's high court has spoken. See Commissioner of Internal Revenue v. Estate of Bosch, 387 U.S. 456, 465, 18 L. Ed. 2d 886, 87 S. Ct. 1776 (1967). In addition, when the highest court of a state has not ruled on a certain issue, "'an intermediate appellate state court . . . is a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise.'" Id. (quoting West v. American Tel. & Tel. Co., 311 U.S. 223, 237, 85 L. Ed. 139, 61 S. Ct. 179 (1940)).
C. The Product Line Exception
Under Pennsylvania law it is a "well settled rule of corporate law [that] where one company sells or transfers all of its assets to another, the second entity does not become liable for the debts and liabilities, including torts, of the transferor." Conway v. White Trucks, A Div. of White Motor Corp., 885 F.2d 90, 93 (3d Cir. 1989) (citing 15 W. Fletcher, Cyclopedia of the Law of Private Corporations, § 7122 (Perm. Ed. 1983)). Beginning in 1975, however, the Pennsylvania courts began creating several exceptions to the general rule against successor liability.
In 1981, the Pennsylvania Superior Court was faced with the issue of whether to extend the successor liability doctrine beyond the five exceptions it created in Husak to include strict products liability. In Dawejko v. Jorgensen Steel Co., 290 Pa. Super. 15, 434 A.2d 106 (Pa. Super. Ct. 1981), the court held that Pennsylvania would adopt the "product line exception," which bases liability on the continued marketing by the successor of the predecessor's product. Id. at 107-08; See also Conway, 885 F.2d at 93; Olejar v. Powermatic Div. of DeVlieg-Bullard Inc., 808 F. Supp. 439, 441-44 (E.D. Pa. 1992) (Hutton, J.).
When the Superior Court adopted the product line exception it embraced the reasoning of the New Jersey Supreme Court in Ramirez v. Amsted Inds., Inc., 86 N.J. 332, 431 A.2d 811 (N.J. 1981). The test that the Dawejko court adopted provides:
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.
434 A.2d at 110 (citing Ramirez, 431 A.2d at 825). Factors to be considered when analyzing whether to apply the product line exception are: (i) whether the successor corporation advertised itself as an ongoing enterprise; (ii) whether the successor maintained the same product, name, personnel, clients, and property; (iii) whether the successor acquired the predecessor's name and good will; and (iv) whether it required the predecessor to dissolve. Dawejko, 434 A.2d at 111.
In Dawejko, the Pennsylvania Superior Court also directed courts to consider the tripartite test for application of the Product Line exception outlined by the California Supreme Court in Ray v. Alad Corp., 19 Cal. 3d 22, 560 P.2d 3, 136 Cal. Rptr. 574 (1977). Before reviewing the Ray Court's test, it is important to note that this Court has made clear that the Ray test is only to weigh in on a court's analysis and does not set firm requirements that must be satisfied by the party moving for the application of the product line exception. Olejar, 808 F. Supp. at 443; see also Dawejko, 434 A.2d at 111. The considerations outlined by the Ray Court are:
(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 manufacture's risk-spreading rule, 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 employed by the successor in the continued operation of the business."