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Guerrero v. Allison Engine Company3/22/2000
981); Ramirez v. Amstead Indus., Inc., 86 N.J. 332, 431 A.2d 811 (1981).
(1) The Majority View - Case Law and Rationale
As noted by Allison, the majority of courts have rejected the product line exception. (Appellee's Brief at 6.) The rationales supporting the rejection of the product line exception were summarized as follows by the Colorado Court of Appeals, in Johnston v. Amsted Industries, Inc., 830 P.2d 1141 (Colo. Ct. App. 1992).
Strict liability should not be imposed because: the successor corporation did not create the risk nor did it directly profit from the predecessor's sale of the defective product; it did not solicit the use of the defective product nor make any representations as to its safety; and it is not able to enhance the safety of a product that is already on the market. Id. at 1144 (citing Bernard v. Kee Mfg. Co., 409 So.2d 1047 (Fla. 1982), Domine v. Fulton Iron Works, 76 Ill.App.3d 253, 32 Ill.Dec. 72, 395 N.E.2d 19 (1979), Jones v. Johnson Machine & Press Co., 211 Neb. 724, 320 N.W.2d 481 (1982), Ostrowski v. Hydra-Tool Corp., 144 Vt. 305, 479 A.2d 126 (1984), Fish v. Amsted Industries, Inc., 126 Wis.2d 293, 376 N.W.2d 820 (1985)).
The Johnston court further recognized case law holding that the product line exception was inconsistent with the principles of strict liability and resulted in the imposition of liability without a corresponding duty. Supporting case law further states that the product line exceptions to successor corporation non- liability should be left to the legislature and that this exception threatens the viability of small successor businesses. (Citing Guzman v. MRM/Elgin, 409 Mass. 563, 567 N.E.2d 929 (1991), Downtowner, Inc. v. Acrometal Products, Inc., 347 N.W.2d 118 (N.D. 1984), Fish v. Amsted Industries Inc., 376 N.W.2d 820, Leannais v. Cincinnati, Inc., 565 F.2d 437 (7th Cir. 1977), and Bernard v. Kee, 409 So.2d 1047.) In determining whether to adopt the product line exception in this case, this Court looks to the factors we consider when applying the "traditional" exceptions to successor non-liability and those reasons driving the application of the product line exception in other jurisdictions.
In Sorensen v. Allied Products Corporation, 706 N.E.2d 1097 (Ind. Ct. App. 1999), the estate of a mechanic who had died from asbestos exposure brought a products liability suit against Allied Products Corporation ("Allied") which had acquired the assets of the bankrupt manufacturer of the same brakes and clutches which exposed the mechanic to asbestos. The estate argued that the transaction between Allied and the bankrupt manufacturer amounted to a de facto merger, and as such Allied was liable via an exception to the general rule of successor non-liability.
We held that the estate failed to establish the requisite elements of the "de facto merger" exception, noting that the predecessor's "shareholders never held any stock in Allied," that there was not "continuity of management, personnel, and physical location" between Allied and its predecessor, and the predecessor "shareholders never dissolved that corporation." Id. at 1099-1100. We next discussed the applicability of another exception to the successor non-liability rule, namely the "assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the predecessor," and articulated the following test:
The test for a mere continuation of the seller[']s business is not the continuation of the business operation, but rather the continuation of the corporate entity. An indication that the corporate entity has been continued is a common identity of stock, directors, and stockholde
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