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MITCHELL v. POWERMATIC CORPORATION

February 13, 2004.

MICHAEL J. MITCHELL and TAMMITHA M. MITCHELL, husband and wife, Plaintiffs
v.
POWERMATIC CORPORATION, a/k/a POWERMATIC, INC., JET EQUIPMENT & TOOLS, INC., and DEVLIEG-BULLARD, INC., a/k/a DEVLIEG-BULLARDII, INC. Defendants



The opinion of the court was delivered by: WILLIAM YOHN, JR., District Judge

MEMORANDUM and ORDER

Michael J. Mitchell and Tammitha M. Mitchell bring this action against Powermatic Corporation, a/k/a Powermatic, Inc.,*fn1 Jet Equipment & Tools, Inc. and DeVlieg-Bullard, Inc., a/k/a DeVlieg-Bullard II, Inc. for damages resulting from an injury sustained by Michael Mitchell while he was operating a Powermatic Model 27 shaper. DeVlieg-Bullard, Inc., a/k/a DeVlieg-Bullard II, Inc. previously filed a motion for summary judgment, which was granted without opposition from the plaintiff and all claims against it were dismissed on December 29, 2003. Currently pending before the court is the remaining defendants' motion for summary judgment. For the reasons set forth below, defendants' motion for summary judgment will be granted.

BACKGROUND Page 2

  On June 8, 2000, plaintiff Michael Mitchell ("plaintiff')*fn2 was severely injured while using a "shaper" in the course of his employment at Brubaker Kitchens. More specifically, plaintiff was feeding a work piece with both hands through the shaper when the cutters of the shaper violently pulled to the side and caused plaintiff's left hand to make contact with the rotating cutters. The unguarded cutters amputated plaintiff's thumb and parts of three fingers on his left hand. The shaper was a Powermatic, Model 27. Plaintiff claims the shaper was defective and that defendants should therefore be held strictly liable.

  Plaintiff believes (and defendants do not otherwise dispute) that the shaper in question was purchased from the Baer Supply Company on July 25, 1993. Def. Ex. D. The maintenance instructions and parts list for the specific shaper in question, which was produced by plaintiff, identifies "Powermatic, a division of DeVlieg-Bullard, Inc."*fn3 as the manufacturer of the shaper. Def. Ex. E. The copyright date on the instructions is 1991. Id. On July 15, 1999, DeVlieg-Bullard, Inc. ("DBI") filed for bankruptcy under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Ohio. Def. Ex. C-5. Pursuant to the reorganization of the company, substantially all of the assets of DBI's Powermatic division were sold under the direction of the presiding bankruptcy court. Id. Jet Equipment & Tools, Inc. ("Jet") was the prevailing bidder and agreed to pay a purchase price of $8.5 million in exchange for the Powermatic assets. Id. On October 15, 1999, Jet assigned its right to purchase the Powermatic assets from DBI to Powermatic Corporation, Def. Ex. C-6, a new corporation Page 3 incorporated in Delaware on October 5, 1999. Def. Ex. C-1; Pl. Ex. B. Powermatic Corporation purchased the Powermatic assets from DBI, pursuant to this assignment and the terms of the asset purchase agreement originally entered into by DBI and Jet. Def. Ex. C-7. In part of an unrelated merger, Jet changed its name to WMH Tool Group, Inc., and as part of a June 2001 merger, Powermatic Corporation went out of existence. Def. Br. 4; Pl. Ex. E. The parties agree WMH is now the successor of Powermatic Corporation for purposes of this action. Pl. Ex. I.

  Since the accident occurred in Pennsylvania, Pennsylvania tort law governs the instant cause of action, including its law on successor liability. Neither party disputes this.

  STANDARD OF REVIEW

  Either party to a lawsuit may file a motion for summary judgment, and the court will grant it "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). "Facts that could alter the outcome are `material,' and disputes are `genuine' if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct." Ideal Dairy Farms, Inc. v. John Lebatt, LTD., 90 F.3d 737, 743 (3d Cir. 1996) (citation omitted). When a court evaluates a motion for summary judgment, "[t]he evidence of the non-movant is to be believed," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986), and "all justifiable inferences are to be drawn in [the non-movant's] favor." Id. Additionally, "[s]ummary judgment may not be granted . . . if there is a disagreement over what inferences can be reasonably drawn from the facts even if the facts are undisputed." Ideal Dairy, 90 F.3d at 744 (citation omitted). However, "an inference based upon a speculation or conjecture Page 4 does not create a material factual dispute sufficient to defeat entry of summary judgment." Robertson v. Allied Signal, Inc., 914 F.2d 360, 382 n.12 (3d Cir. 1990).

  To defeat summary judgment, the non-moving party cannot rest on the pleadings, but rather that party must go beyond the pleadings and present "specific facts showing that there is a genuine issue for trial." FED. R. Civ. P. 56(e). Similarly, the non-moving party cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion. Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d Cir. 1989) (citing Celotex v. Catrett, 477 U.S. 317, 325 (1986)). Further, the non-moving party has the burden of producing evidence to establish prima facie each element of his claim. Celotex, 477 U.S. at 322-23. The non-movant must show more than "[t]he mere existence of a scintilla of evidence" for elements on which he bears the burden of production. Anderson, 477 U.S. at 252. Thus, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations omitted).

  DISCUSSION

  As defendants point out, "[i]n general, [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 a number of exceptions to this general rule. The exception at issue in the instant case, i.e. the only exception discussed by either plaintiff or defendants in their briefs regarding this motion for summary judgment, is the "product line" exception. Pennsylvania courts adopted this exception in Dawejko v. Jorgensen Steel Co., 434 A.2d 106 Page 5 (Pa. Super. 1981), and the Third Circuit has adopted Dawejko as the law of Pennsylvania. Kradel v. Fox River Tractor Co., 308 F.3d 328, 331-32 (3d Cir. 2002). The Dawejko court explained:
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.
Dawejko, 434 A.2d at 110 (quoting and adopting the standard from Ramirez v. Amsted Indus., Inc., 431 A.2d 811, 825 (N.J. 1981)). The Third Circuit also recognized in Kradel that Pennsylvania has adopted three factors as "prerequisites for the product line exception." Kradel, 308 F.3d at 332 (citing Hill v. Trailmobile, Inc., 603 A.2d 602, 606 (Pa. Super. 1992)). These three factors, commonly referred to as the Ray factors because they were originally articulated by the California Supreme Court in Ray v. Alad Corp., 560 P.2d 3 (Cal. 1977), 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 manufacturer'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 enjoyed by the successor in the continued operation of the business.
Hill, 603 A.2d at 606 (quoting Dawejko, 434 A.2d at 109 (quoting Ray, 560 P.2d at 9)). "It is thus clear that the inability to recover from an original manufacturer is a prerequisite in Pennsylvania to the use of the product line exception." Kradel, 308 F.3d at 332.

  The parties do not dispute that Mitchell is unable to recover from the original manufacturer. They focus, instead, on a wrinkle in the analysis of this factor that has yet to be addressed by either the Pennsylvania Supreme Court or the Third Circuit: whether the successor Page 6 caused the destruction of plaintiff's remedy against the original manufacturer.*fn4 Defendants argue that they were not responsible for the destruction of plaintiff's remedy because DBI, from whom Powermatic Corporation purchased the Powermatic assets, was already in bankruptcy when the sale occurred. In other words, defendants argue that DBI's filing for bankruptcy destroyed plaintiff's remedy against DBI and not Powermatic Corporation's acquisition of the Powermatic assets from DBI. Def. Br. 8-9 (citing Tracey v. Winchester Repeating Arms Co., 745 F. Supp. 1099 (E.D. Pa. 1990) in support of their argument). Plaintiff does not challenge defendants' contention that he has no remedy against DBI because it went bankrupt and no longer exists.

  However, plaintiff attempts to establish that the original manufacturer of the specific Powermatic shaper involved in the accident was not DBI, but rather Powermatic, Inc., a separate corporation doing business as "Powermatic Division of DeVlieg-Bullard, Inc." Pl. Br. 2-5. So, plaintiff argues that his remedy would be against Powermatic, Inc., the alleged original manufacturer, and that this remedy was destroyed by Powermatic Corporation when it acquired Page 7 the Powermatic assets from DBI because this sale directly led to the dissolution of Powermatic, Inc. Id. However, plaintiff has failed to provide sufficient evidence to allow a reasonable fact finder to conclude that Powermatic, Inc., a separate corporation, manufactured the Powermatic shaper in question.

  If one simply follows the paper trail of the business of making tools under the Powermatic name, which is summarized above, the name "Powermatic, Inc." is nowhere to be found. Plaintiff relies primarily on snippets of information about Powermatic, Inc. to support the inference that Powermatic, Inc. was a separate corporation which owned and operated the assets of the Powermatic division of DBI. First, plaintiff points out that Powermatic, Inc. was incorporated in Delaware on March 10, 1986, Def. Ex. C-2, and DBI (which was actually Stanwich Industries at that time)*fn5 acquired the Powermatic assets from Houdaille Industries, Inc. on April 4, 1986. Def. Ex. F at 19. However, at the time of that transaction, the Powermatic business was called "Powermatic Division of Houdaille Industries, Inc." Id. When Stanwich Industries purchased the Powermatic assets, the name simply changed to "Powermatic Division of Stanwich Industries, Inc." Id. Finally, when Stanwich Industries changed its name to DeVlieg-Bullard, Inc., the Powermatic business name changed to ...


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