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Pearson v. National Feeding Systems11/21/2002
TO BE PUBLISHED
AFFIRMING
This appeal is from an opinion of the Court of Appeals which affirmed a summary judgment entered by the circuit court in favor of National Feeding Systems, Inc., in a products liability lawsuit brought by Pearson on a theory of successor-in-interest liability.
The questions presented are whether the exceptions to the successor-in-interest rule impose liability on National Feeding Systems, Inc. ; whether the corporation contracted to assume liability for the debts and liabilities of a predecessor corporation ; whether the transaction between National and a predecessor corporation falls into the merger/consolidation exception or the continuation exception, and whether this Court should adopt the product-line exception to the general rule of non-liability.
On November 16, 1996, 13-year-old Justin Pearson was feeding dairy cattle on his stepfather's farm when the silo unloader became clogged. He climbed into the silo and attempted to clear an augur but his leg became entangled in the saw teeth when the auger suddenly started again. As a result of the accident, Justin lost the bottom portion of his right leg.
Carolyn Trent, his mother, initiated this lawsuit against National Feeding Systems, Inc. Although National did not design, manufacture or sell the product that injured Justin, it now manufactures and advertises silo unloaders under its predecessor's brand name, Silo-Matic, and continues to use the same logo. The suit was based on two theories of liability. One was under the successor-in-interest principle ; and the other was, in the alternative, a product-line exception under the same principle.
The circuit judge granted summary judgment in favor of National Feeding relying on American Railway Express Co. v. Commonwealth, 190 Ky. 636, 228 S.W. 433 (1920) and Conn v. Fales Division of Mathewson Corp., 835 F.2d 145 (6th Cir. 1987). He rejected the product-line theory for two reasons. First, the Sixth Circuit refused to recognize the theory in Conn, supra. Second, this was a new theory of potential liability and as such it needed to be adopted by a Kentucky appellate court. The Court of Appeals affirmed and this Court accepted discretionary review.
We find it necessary to review the history related to the manufacture of the unloaders in question. In 1956, Van Dusen and Company, Inc., registered a trademark for the name "Silo-Matic" with the United States Patent Office and manufactured and sold unloaders under the Silo-Matic trade name until the early 1980s. It manufactured the unloader involved in this accident. In the early 1980s, Van Dusen was purchased by Joan Olson and Joyce Van Dusen who subsequently sold the business or business assets to Dynamatic Feeding Systems, Inc. In 1989 or 1990, Dynamatic filed bankruptcy and was discharged from liability to its creditors or potential future creditors.
On January 8, 1990, National Feeding purchased some of Dynamatic's assets through a bankruptcy sale for $850,000, and in return, received its accounts receivables, inventories, prepaid expenses and fixed assets, including its trademark. We realize that Pearson strongly contests the fact of bankruptcy, but it is supported by an uncontroverted affidavit.
I. Standard of Review
The standard of review on appeal of a summary judgment is whether the circuit judge correctly found that there were no issues as to any material fact and that the moving party was entitled to a judgment as a matter of law. Summary judgment is appropriate where the movant shows that the adverse party could not prevail under any circumstances.
The function of summary judgment is
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