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Guerrero v. Allison Engine Company3/22/2000
rs and the existence of only one corporation at the completion of the transfer. Id. at 1100 (citing Travis v. Harris Corp., 565 F.2d 443, 447 (7th Circuit 1977)).
Considering the same factors which precluded the application of the "de facto merger" exception, we held that Allied's purchase of its predecessor "did not qualify as a mere continuation of the seller's business." Id. Accordingly, we affirmed the trial court's grant of summary judgment in favor of Allied. Id.
In Travis v. Harris, 565 F.2d 443, the Seventh Circuit considered whether Indiana would adopt the product line exception. In Travis, the plaintiff injured his hand in a die press machine. Travis and his wife filed suit against Harris Corporation ("Harris"), as one of the alleged corporate successors to the manufacturer of the die press, seeking damages in strict liability and for negligence in the design, manufacture, and distribution of the die press. Id. at 445. After rejecting plaintiffs' "de facto merger" and "mere continuation" arguments, the court considered the product line exception. The Travis court found "no basis for adding to the laws of Ohio or Indiana a `product line' theory" on which Harris might be liable. Id. at 448. The Travis court held that the following language from Leannais v. Cincinnati, Inc., 565 F.2d 437, was equally applicable to the courts of Ohio and Indiana:
he record contained no indication that the courts of Wisconsin `have created, or would create, such a far-reaching exception to the non-liability of asset purchasers, so long the basis of economic decisions by its citizens.' Travis v. Harris, 565 F.2d at 448 (quoting Leannais v. Cincinnati, Inc., 565 F.2d at 441).
The Seventh Circuit revisited the product line exception in South Bend Lathe, Inc. v. Amsted Industries, Inc., 925 F.2d 1043 (7th Circuit 1991). In South Bend Lathe, Inc., the buyer of a business sued the seller pursuant to an indemnity provision in the purchase agreement for amounts buyer paid in product liability claims and attorney fees for defective products. On appeal, a part of seller's argument against indemnification was that buyer's claims arose under the product line exception, which had not been adopted by any state appellate court when the parties' purchase agreement was executed in 1975. Id. at 1044-45.
The Seventh Circuit focused upon the unambiguous language of the purchase agreement (and seller's failure to argue otherwise), in determining that it was "irrelevant that product line liability did not exist at the time that the parties executed the Agreement." Id. at 1046. Nevertheless, the court went on to consider the applicability of the product line exception. The court held that since the buyer's predecessor remained "a viable company capable of satisfying judgments against it," such fact would bar recovery under the product line exception. Id. at 1047. Accordingly, the Seventh Circuit ruled that it was the contractual language of the parties' purchase agreement that caused the seller to be liable for the product liability claims at issue. Id. at 1048.
(2) The Minority View - Case Law and Rationale
a. The Supreme Court of California
In Ray v. Alad, 560 P.2d 3, the plaintiff was injured when he fell off a defective ladder manufactured by the Alad Corporation ("Alad I"). By means of a cash transfer, the successor corporation ("Alad II") acquired all the assets of Alad I, and continued to manufacture the same product, using the same personnel and equipment, and soliciting the same customers. Shortly after the transfer, Alad I was dissolved. The court provided three justifications for imposing liability on Alad II:
The virtua
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