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Doren v. Coe Press Equipment Corp.

January 6, 2009

WALTER VAN DOREN, ET AL., PLAINTIFFS,
v.
COE PRESS EQUIPMENT CORP., ET AL., DEFENDANTS.



MEMORANDUM

I. BACKGROUND

From approximately 2004 to 2006, Plaintiff Walter Van Doren ("Van Doren") was an employee of Columbia Lighting LCA, Inc., in Bristol, Pennsylvania ("Columbia Bristol"). His duties included operating machines used to make housings for lights. One of the machines he operated was a straightener machine, a machine used to straighten large coils of metal. The machine had two large metal rolls between which the metal would be pulled in order to be straightened. On May 2, 2006, Van Doren suffered an accident at work in which both of his arms became trapped in the straightener machine. According to Van Doren, in the minutes preceding the accident he cleaned the machine in preparation for a project and then took a cigarette break. Upon returning from his break, Van Doren was walking in front of the machine when his right hand suddenly became trapped between the rolls of the machine. The machine lifted him off the ground and pulled him in. As he attempted to free his right hand using his left hand, his left hand, too, became entrapped in the machine. Van Doren screamed for help and eventually his co-workers came to his assistance. The workers attempted to extract Van Doren from the machine. When those efforts failed, a surgeon had to perform a field amputation, removing both of Van Doren's arms while he was still trapped inside the machine.

The straightener machine involved in the accident was manufactured by Sesco, Inc. The machine was originally built with a metal attachment called a stock support, which was used to guide material into the straightener. According to Manufacturer Defendants, the stock support also acted as a guard by ensuring that the machine operator remained approximately 18 inches away from the "pinch point," namely the space between the machine's two rolls. The machine's Operator's Maintenance Manual did not identify the stock support as a guard or safety feature. In 1981, Columbia Lighting in Spokane, Washington, ("Columbia Spokane") purchased the machine. At some point during the course of its ownership, Columbia Spokane removed the stock support from the machine and replaced it with a feeder tray. In 2002, Colombia Spokane transferred the straightener to Columbia Bristol. The straightener was conveyed with neither the stock support nor the feeder tray.

On June 28, 2006, Van Doren and his wife, Plaintiff Sandra Van Doren (together "Plaintiffs"), brought the present action in this Court. The complaint named two sets of defendants: a group referred to as the "Manufacturer Defendants" and a group referred to as the "Prior Owner Defendants." The Manufacturer Defendants are corporations that Plaintiffs allege were successors to the original manufacturer of the machine, Sesco, Inc. The Prior Owner Defendants are corporations that owned or had at some point acquired Columbia Spokane and Columbia Bristol.

The Manufacturer Defendants named in Plaintiffs' complaint are Coe Press Equipment Corporation, Sesco Corporation, and Sesco Products Group, Inc. In September 1999, Coe Press Equipment Corporation set up Sesco Acquisition Corporation, a wholly owned subsidiary, to purchase limited assets from Sesco, Inc. The purchase agreement included all the intellectual property of Sesco, Inc.; its customer, supplier, and advertising records; and a non-competition agreement. Sesco Acquisition Corporation also purchased other manufacturing assets outside of the Asset Purchase Agreement, including computer equipment, electrical and mechanical inventory parts, and certain inventory. Approximately one and a half years after the purchase, Sesco Acquisition Corporation transferred all of its acquired assets to Sesco Corporation. In 2002, Sesco Corporation changed its name to Sesco Products Group. Sesco Products Group remains a wholly-owned subsidiary of Coe Press Equipment.

The Prior Owner Defendants named in Plaintiff's complaint are Hanson PLC, Jacuzzi Brands, Inc., Columbia Spokane, Hubbell Lighting, Inc., and Hubbell Incorporated. On September 4, 2007, this Court issued an Order granting Defendant Hanson PLC's motion to dismiss for lack of personal jurisdiction. Jacuzzi Brands, Inc., was the parent company of Columbia Spokane and Columbia Bristol until April 2002. In April 2002, Columbia Spokane and Columbia Bristol were sold to another entity. In 2004, Columbia Spokane and Columbia Bristol, through a series of mergers, became part of Hubbell Lighting, Inc. Accordingly, Plaintiffs assert their negligence claims against Hubbell Lighting, Inc., as successor in interest to Columbia Spokane. Hubbell Incorporated is the sole shareholder of Hubbell Lighting, Inc.

Manufacturer Defendants and Prior Owner Defendants moved for summary judgment on all of Plaintiffs' claims.

II. LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 56(c), a court shall grant a motion for summary judgment if "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." The moving party bears the initial responsibility of identifying the portions of the record "which it believes demonstrate the absence of a genuine issue of material fact." El v. SEPTA, 479 F.3d 232, 237 (3d Cir. 2007). However, even if the moving party fulfills this requirement, "the non-moving party can defeat summary judgment if it nonetheless produces or points to evidence in the record that creates a genuine issue of material fact." Id. at 238 (citing Josey v. John R. Hollingsworth Corp., 996 F.2d 632, 637 (3d Cir. 1993)).

In evaluating a motion for summary judgment, "the court must neither resolve factual disputes nor make judgments of credibility; instead, all '[i]nferences should be drawn in the light most favorable to the non-moving party.'" Peloro v. U.S., 488 F.3d 163, 173 (3d Cir. 2007) (quoting Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1362 (3d Cir. 1992)).

If the non-moving party's evidence contradicts the movant's, "then the non-movant's must be taken as true." Big Apple BMW, Inc., 974 F.2d at 1363. A non-moving party may not rely solely on mere pleadings or allegations to identify unresolved genuine issues of material fact. Fed. R. Civ. P. 56(e)(1); SEPTA, 479 F.3d at 238 (citing Berckeley Inv. Group, Ltd. v. Colkitt, 455 F.3d 195, 201 (3d Cir. 2006)). However, a non-moving party's affidavit is enough to present a genuine issue of fact if it clearly asserts a specific fact in question. See Schoch v. First Fidelity Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990).

III. DISCUSSION

A. Manufacturer Defendants

We turn first to Manufacturer Defendants' Motion for Summary Judgment. The foregoing discussion will address four main issues. Part 1 will address the appropriate choice of law to be used in this case. Part 2 will discuss Plaintiffs' negligence, breach of warranty, and punitive damages claims. Part 3 will analyze Plaintiffs' strict liability claim. Finally, Part 4 will address whether Coe Equipment Corporation can be held liable under Plaintiffs' claims.

1. Choice of Law

The parties in this matter disagree over whether this Court should apply Pennsylvania law or Michigan law in assessing Plaintiffs' claims against Manufacturer Defendants. Accordingly, at the outset we must conduct a choice of law analysis. Because this is a diversity case, we apply the choice of law rules of the forum state, namely Pennsylvania. Hammersmith v. TIG Ins. Co., 480 F.3d 220, 226 (3d Cir. 2007). The first step in a choice of law analysis under Pennsylvania law is to determine whether there is "an actual or real conflict between the potentially applicable laws." Id. at 229-30. If the jurisdictions' laws differ in relevant ways, "then the court should examine the governmental policies underlying each law, and classify the conflict as a 'true,' 'false,' or an 'unprovided-for' situation." Id. The choice of law analysis continues past that point only if the Court finds that there is a "true" conflict, namely if "both jurisdictions' interests would be impaired by the application of the other's laws." Id. If a true conflict exists, then the court must determine "which state has the greater interest in the application of its law." Id. (internal citations omitted).

Both parties agree that there is a true conflict between Michigan law and Pennsylvania law in this case because the laws differ in the extent to which they recognize exceptions to the traditional successor non-liability principle in a strict liability case. (Manufacturer Defs.' Mot. 11-12; Pls.' Resp. to Manufacturer Def.'s Mot. 14.) Both states' laws recognize the general rule that a successor that acquires the assets of another company by purchasing them for cash does not automatically assume the predecessor's liabilities. Dawejko v. Jorgensen Steel Co., 434 A.2d 106, 107 (Pa. Super. Ct. 1981); Foster v. Cone-Blanchard Mach. Co., 597 N.W.2d 506, 509 (Mich. 1999). Both states' laws recognize five traditional exceptions to that principle.*fn1 We need not address those traditional exceptions here because both Plaintiffs and Manufacturer Defendants agree that they do not apply in this case. (Manufacturer Defs.' Mot. 11-12; Pls.' Resp. to Manufacturer Def.'s Mot. 17-21.) However, Pennsylvania recognizes an additional "product line" exception to successor non-liability principles. That exception dictates that:

[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 previously manufactured and distributed by the selling corporation or its predecessor.

Dawejko, 434 A.2d at 110. The social policy interests reflected in this exception have been articulated as follows:

[T]he manufacturer rather than the factory employee is in the better position both to judge whether avoidance costs would exceed foreseeable accident costs and to act on that judgment. . . . because the manufacturer transfers to its successor corporation the resources that had previously been available to the manufacturer for meeting its responsibilities to persons injured by defects in products it had produced . . . the successor rather than the user of the product is in the better position to bear accident-avoidance costs.

Ramirez v. Amsted Industries, Inc., 86 N.J. 332, 352 (N.J. 1981) (internal quotations omitted).*fn2

Michigan courts, on the other hand, have expressly rejected the product line exception in favor of the traditional, narrower "continuity of enterprise" exception, which states that:

[L]iability may attach to a corporation which acquires the manufacturer of the product where the totality of the acquisition demonstrates a basic continuity of the enterprise between the manufacturer and the acquiring corporation.*fn3

Pelc v. Bendix Machine Tool Corp., 314 N.W.2d 614, 618 (Mich. Ct. App. 1981). In rejecting the product line exception, the Court of Appeals of Michigan based its reasoning partly on the fact that Michigan "has not yet openly embraced strict liability as a theory of recovery for products liability." Id. The court therefore found that "continued adherence to the doctrine of successor liability as evaluated [under the traditional exceptions] will . . . assure a uniform evolution of this area of the law most consistent and harmonious with the law and policy considerations of our jurisdiction." Id. Therefore, it is clear that the laws of Pennsylvania and Michigan are directly at odds in their approach to the "product line" exception to successor non-liability. Accordingly, because each state's recognized interests would be hindered by the application of the other state's laws, we find that there is a true conflict between the laws of both jurisdictions.

When there is a true conflict, Pennsylvania choice of law rules require that we apply the Second Restatement of Conflict of Laws as a starting point and then apply Pennsylvania's flexible interest analysis to determine which state has the greatest interest in having its law applied. Berg Chilling Sys. v. Hull Corp., 435 F.3d 455, 463 (3d Cir. 2006) (applying Pennsylvania law). To do so, we must first "characterize the particular issue before the court as one of tort, contract, or corporate law -- or some hybrid -- in order to settle on a given section of the Restatement for guidance." Id. In the present case, Manufacturer Defendants contend that the issue of whether the product line exception should apply in this case should be characterized as a "contract/corporate law" issue because successor liability is "rooted in corporate law" and because there was a "lack of Third Circuit precedent on the issue." (Manufacturer Defs.' Mot. 13.) However, the case cited by Defendants for this proposition actually belies their argument. In Berg Chilling Sys. v. Hull Corp., the United States Court of Appeals for the Third Circuit found that "[w]hile the basic tenet of successor liability is based in corporate law, the exceptions span a loose substantive continuum from contract to corporate to tort law." 435 F.3d at 464. Although the Berg court declined to "characterize the substantive law of the product line exception," it did state that it was an "explicitly tort-based exception" that was "generally analyzed using torts choice of law principles." Id. at 465. The product line exception has indeed been traditionally analyzed as an issue of tort law. See, e.g., Kradel v. Fox River Tractor Co., 308 F.3d 328 (3d Cir. 2002). Also, we find persuasive the fact that at least one U.S. Court of Appeals has held that the product line exception is a matter of tort law, not corporate law. See Ruiz v. Blentech Corp., 89 F.3d 320, 327 (7th Cir. 1996). Accordingly, we hold that the issue of whether to apply the exception is a question of tort law.

Under the Pennsylvania choice of law approach, "for substantive tort law issues, . . . [courts use] a combination of the 'government interest' and 'significant relationship' approaches." Kirschbaum v. WRGSB Assocs., 243 F.3d 145, 150 (3d Cir. 2001) (citing Troxel v. A.I. duPont Inst., 636 A.2d 1179, 1181 (Pa. Super. Ct. 1994)). Under that approach, "a court applying Pennsylvania law should use the Second Restatement of Conflict of Laws as a starting point, and then flesh out the issue using an interest analysis." Berg, 435 F.3d at 463. The interest analysis requires us to "evaluate 'the extent to which one state rather than another has demonstrated, by reason of its policies and their connection and relevance to the matter in dispute, a priority of interest in the application of its rule of law.'" Kirschbaum, 243 F.3d at 150 (citing Troxel, 636 A.2d at 1181).

As the first step in our analysis, we consider the Restatement (Second) of Conflict of Laws § 145, which establishes the "general principles to be applied and contacts to be taken into account in choice of law determinations in tort actions." Blakesley v. Wolford, 789 F.2d 236, 239 (3d Cir. 1986). That section states:

(1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6 [Choice-of-Law Principles].*fn4

(2) Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place where the injury occurred,

(b) the place where the conduct causing the injury occurred,

(c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and

(d) the place where the relationship, if any, between the parties is centered.

Restatement (Second) of Conflict of Laws §145 (1971). We analyze each factor in turn.

In the present case, the injury occurred in Pennsylvania. The conduct allegedly causing the injury, namely the manufacture and sale of the defective machine, occurred in Michigan. The domicile of Plaintiffs is in Pennsylvania. The incorporation and the place of business of Manufacturer Defendants is in Michigan. There was no true relationship between Plaintiffs and Manufacturer Defendants. The only arguable "relationship" between the parties, namely Van Doren's use of the straightener machine produced by Manufacturer Defendant's alleged predecessor, Sesco, Inc., was based in Pennsylvania, where Van Doren worked. Therefore, the number of contacts for both states is roughly equal. However, under Pennsylvania law, it is not sufficient to conduct merely a "counting of contacts." Hammersmith, 480 F.3d at 231. Rather, we must apply Pennsylvania's "interests/contacts" analysis, which combines both the Restatement's analysis of the "contacts [between the States and the event] establishing significant relationships," and a "qualitative appraisal of the relevant states' policies with respect to the controversy." Id. This analysis requires a court to "weigh the contacts on a qualitative scale according to their relation to the policies and interests underlying the particular issue." Id. (internal citations omitted).

In the present case, we find that Michigan's interest in having its law applied is no greater than Pennsylvania's interest. The public policy behind strict products liability is to "ensure that the costs of injuries resulting from defective products are borne by the manufacturers . . . for the risk of injury can be insured by the manufacturer and distributed among the public as a cost of doing business." Dawejko, 434 A.2d 106 at 109. Courts have used that same rationale to support the product line exception because:

[T]he manufacturer transfers to its successor corporation the resources that had previously been available to the manufacturer for meeting its responsibilities to persons injured by defects in products it had produced . . . [and] the successor rather than the user of the product is in the better position to bear accident-avoidance costs.

Ramirez v. Amsted Industries, Inc., 431 A.2d 811, 821 (N.J. 1981). The Pennsylvania Superior Court decision that first recognized the product line exception embraced that rationale as articulated in Ramirez. 434 A.2d 106 at 111. We find that Pennsylvania has a strong interest in protecting its citizens from defective products by ensuring that successor corporations that enjoy the benefit of continuing a predecessor's product line take responsibility for the harms that products within that line may cause. On the other hand, the Michigan decision rejecting the product line exception identified the policy behind that decision as a desire to "assure a uniform evolution in this area of law" given Michigan's lack of recognition of strict products liability. Pelc, 314 N.W.2d at 620. Defendant's have further characterized Michigan's interest as a choice to "enhance the protection of its successor corporation at the expense of plaintiffs with product liability claims." (Manufacturer Defs.' Mot. 13.) Weighing the contacts on "a qualitative scale according to their relation to the policies and interest at issue," we find that Michigan's interest in protecting its local successor corporations from liability for an accident occurring in Pennsylvania is no greater than Pennsylvania's interest in protecting its citizens injured by a defective product manufactured by a Michigan corporation. In fact, we find that Michigan's interest in ensuring "a uniform evolution" in its local products liability law will not be greatly affected by an application in federal court of Pennsylvania law to an accident occurring in Pennsylvania and involving a Pennsylvania resident.

We also find that, given the great prevalence of inter-state commerce, Pennsylvania's interest in protecting its citizens against defective products will be greatly hindered if it is unable to hold out-of-state successor corporations liable for injuries suffered by its citizens resulting from accidents occurring within the state. Defendants cite Cipolla v. Shaposka, 267 A.2d 854 (Pa. 1970), for the proposition that "it is only fair to permit a defendant to rely on his home state's law when he is acting within that state." (Manufacturer Defs.' Mot. 16.) In Cipolla, the Pennsylvania Supreme Court declined the plaintiff's request to apply Pennsylvania law to an automobile collision that occurred in Delaware with a Delaware resident when the plaintiff was visiting Delaware. Cipolla encourages "a territorial view of torts" and discourages the withdrawal of "actions and affairs from the reach of domestic law because the persons (or at least one of the persons) participating in them are not domestic to the state." Cipolla, 267 A.2d at 857. That territorial approach actually supports a finding that it is only fair to permit a local plaintiff to rely on his home state's law when he is injured within that state, even if the injury is caused by a machine manufactured outside the state. Accordingly, we find that, under this territorial view, Pennsylvania's contacts with the event are qualitatively more important because Pennsylvania has a greater interest in protecting its citizens who are injured inside its territory by machines manufactured outside the state. Therefore, we will apply Pennsylvania law, which recognizes the product line exception.

2. Plaintiffs' Negligence, Breach of Warranty, and Punitive Damages Claims

Defendants argue that the product line exception to successor non-liability only applies to strict liability claims. (Manufacturer Defs.' Mot. 28.) Plaintiffs agree and assert that they will not be pursuing negligence, breach of warranty, or punitive damages claims against Manufacturer Defendants. (Pls.' Resp. to Manufacturer Defs.' Mot. 28.) Accordingly, we will grant summary ...


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