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DALE v. WEBB CORP.

March 24, 2003

JULIUS DALE, JR., PLAINTIFF,
v.
WEBB CORPORATION, REED EQUIPMENT DIVISION, DEFENDANT.



The opinion of the court was delivered by: Eduardo Robreno, District Judge.

MEMORANDUM

Plaintiff Julius Dale, Jr. brought this action against defendant Webb Corporation seeking damages for injuries he sustained while operating a plate bending roll machine that was designed, manufactured and sold by Reed Engineering Company. The plaintiff alleges that Webb Corporation, as a successor in interest to Reed Engineering Company and under the Pennsylvania product line exception to the general rule of successor non-liability, is liable for his injuries. Presently before the court are cross-motions for summary judgment on this issue. For the reasons that follow, the defendant's summary judgment motion will be granted, plaintiff's motion for partial summary judgment will be denied and judgment will be entered in favor of the defendant.

I. BACKGROUND

The material facts of this case are uncontested. On September 1, 2000, plaintiff Julius Dale, Jr. ("Dale" or "plaintiff") was injured while operating a plate bending roll machine ("bending machine")*fn1 that was designed by Reed Engineering Company ("Reed"), and ultimately, manufactured and sold by Reed in the Spring of 1952.*fn2 At the time of the sale of the bending machine, Reed was owned by Lloyd Knost ("Knost") as a sole proprietorship.*fn3 In 1954 Knost entered into a five-year licensing agreement (the "1954 contract") with Webb Corporation ("Webb"), under which Knost granted Webb the exclusive right to manufacture, use and sell products formerly made by Reed, including Reed's bending machine product line. In 1959, Knost and Webb entered into a second contract (the "1959 contract"), under which Knost sold to Webb the product line which it had licensed to Webb under 1954 Contract. The bending machine that caused Dale's injury falls within the bending machine product line that Webb acquired from Reed.*fn4 At the time of the injury, Knost was no longer alive.

Dale filed a complaint against Webb, in its capacity as successor in interest to Reed, in the Court of Common Pleas of Philadelphia County seeking damages for his injuries under theories of negligence, strict liability and breach of warranties. Webb removed the case to this court where, by stipulation of the parties, plaintiff's breach of warranty claim and claim of negligence on the part of Webb were voluntarily withdrawn. Presently before the court are cross motions for summary judgment on the issue of Webb's liability as Reed's successor.

II. ANALYSIS

A. Summary Judgement Standard

Summary judgment may be granted "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). The role of the trial court is to determine whether there are material factual issues that merit a trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In making that determination, the court must give the nonmoving party the benefit of all reasonable inferences that might be drawn from the underlying facts. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538, (1986); Sempier v. Johnson and Higgins, 45 F.3d 724, 727 (3d Cir. 1995) (en banc). Summary judgment is appropriate if the court finds that the record "could not lead a rational trier of fact to find for the nonmoving party, [and] there is no `genuine issue for trial.'" Matsushita, 475 U.S. at 587, 106 S.Ct. 1348.

B. Corporate Successor Liability and the Product Line Exception under Pennsylvania Law

1. Successor liability in general

Generally, in Pennsylvania, "when one corporation sells or transfers its assets to a second corporation, the successor does not become liable for the debts and liabilities of the predecessor." LaFountain v. Webb Indus. Corp., 951 F.2d 544, 546-47 (3d Cir. 1991). There are, however, several traditional exceptions to this general rule. Philadelphia Elec. Co. v. Hercules, Inc., 762 F.2d 303, 308-09 (3d Cir. 1985); Hill v. Trailmobile, Inc., 412 Pa.Super. 320, 603 A.2d 602, 605 (1992). These exceptions apply where: "(1) the purchaser of assets expressly or impliedly agrees to assume obligations of the transferor; (2) the transaction amounts to a consolidation or de facto merger; (3) the purchasing corporation is merely a continuation of the transferor corporation; [ ] (4) the transaction is fraudulently entered into to escape liability;" or (5) the transfer was made without adequate consideration and no provisions were made for creditors of the selling corporation. Hercules, 762 F.2d at 308-09; Hill 603 A.2d at 605. None of these exceptions is applicable under the facts of this case. See LaFountain, 951 F.2d at 547.

2. The product line exception

Some courts, including the Superior Court of Pennsylvania, "have expanded on the traditional corporate law exceptions to [the] non-liability rule" by recognizing what is referred to as the "product line" exception. Id.; see Kradel v. Fox River Tractor Co., 308 F.3d 328, 331-32 (3d Cir. 2002); Hill, 603 A.2d at 606-08; Dawejko v. Jorgensen Steel Co., 290 Pa.Super. 15, 434 A.2d 106, 110 (1981). Under Pennsylvania law:*fn5

[W]here 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 ...

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