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Winsor v. Glasswerks PHX2/4/2003
relationship to both the parties and the occurrence with respect to this products liability action. Arizona law applies.
2. Successor Liability in Products Liability Actions.
A. Teeters, the Restatement, and the Majority Rule.
The general rule of successor liability in Arizona, as contained in Teeters, is that a sale of the principal assets of a corporation does not result in imposition of successor liability unless (stated generally) there is (1) an agreement, (2) a merger or consolidation, (3) a "mere continuation" or (4) fraud. Teeters described the rule and exceptions as follows:
hen a corporation sells or transfers its principal assets to a successor corporation, the latter will not be liable for the debts and liabilities of the former unless[:]
(1) there is an express or implied agreement of assumption,
(2) the transaction amounts to a consolidation or merger of the two corporations,
(3) the purchasing corporation is a mere continuation [or reincarnation] of the seller, or
(4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts. Teeters, 172 Ariz. at 329, 836 P.2d at 1039 (citations omitted).
Winsor claims that Teeters is neither persuasive nor binding as it did not involve policy considerations unique to products liability. This argument, however, must be tempered with the realization that the rule specifically formulated for successor liability in products liability actions, Restatement (Third) of Torts: Products Liability (1998) (Restatement) § 12, is essentially the same as that announced earlier in Teeters. Restatement § 12 provides:
A successor corporation or other business entity that acquires assets of a predecessor corporation or other business entity is subject to liability for harm to persons or property caused by a defective product sold or otherwise distributed commercially by the predecessor if the acquisition:
(a) is accompanied by an agreement for the successor to assume such liability; or
(b) results from a fraudulent conveyance to escape liability for the debts or liabilities of the predecessor; or
(c) constitutes a consolidation or merger with the predecessor; or
(d) results in the successor becoming a continuation of the predecessor.
Not only does Restatement § 12 parallel the rule announced in Teeters, it represents the position that a majority of jurisdictions have taken on this issue. See Restatement § 12, Reporters' note cmt. c. (listing jurisdictions rejecting product line and continuity of enterprise exceptions to the general rule). With regard to this issue, as noted, we do not write on a clean slate. At least thirty-one jurisdictions have considered successor liability in some manner in a products liability setting. Id. While we decline to enter into the debate as to exactly how many jurisdictions have rejected the proposed exceptions, the substantial majority have concluded that an approach similar to Teeters and the Restatement is appropriate.
The key principles on which the majority rule and the Restatement are based, and with which Teeters is consistent, are (1) the fundamental principle that those who are responsible for manufacturing and marketing the product -- placing the product into the stream of commerce -- bear liability for its defects, (2) long established principles of corporate liability, upon which commerce relies, should be given thorough consideration, and (3) a solution to the successor liability issue is best left to the legislature.
B. Product Line and Con
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