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Simmons v. Mark Lift Industries10/24/2005
when the state law frustrates the federal purpose and creates an obstacle to the fulfillment of federal objectives. Michigan Canners & Freezers, 467 U.S. at 469.
I conclude § 363(f), which establishes the bankruptcy trustee's power to sell assets of the estate, does not preempt a state law which adjudicates a successor corporation's liability in a product liability claim. Section 363(f) does not expressly preempt such a state law, and the Bankruptcy Code does not so occupy the field of product liability that such a state law is impliedly preempted. Such a state law does not conflict with § 363(f) because compliance with both laws is possible and the state law does not frustrate or create an obstacle to federal bankruptcy laws. State successor liability law may co-exist with federal bankruptcy law because state law will not prevent asset sales or affect the trustee's authority to conduct such sales, but merely may subject the purchaser to successor liability. As explained in Question 1, a purchaser may consider any potential future liability in negotiating the sale of assets. See Wilkerson v. C.O. Porter Mach. Co., 567 A.2d 598 (N.J. Super. Law. 1989) (preemption would not preclude applying product line theory of successor liability to asset purchaser in bankruptcy sale; application of successor liability to product liability claim would not conflict with bankruptcy orders involving sale of assets).
At least two courts have held liability for a product liability claim may not be imposed on a successor who purchased assets at a court-approved bankruptcy sale, although the decisions were not based on a preemption analysis. See Nelson v. Tiffany Indus. Inc., 778 F.2d 533, 538 (9th Cir. 1985) (applying California law to hold the product line exception does not apply when there is a good-faith dissolution in bankruptcy which is not intended to avoid future tort claims against the predecessor; under such circumstances, the successor corporation has not caused the destruction of the plaintiff's remedies); In re White Motor Credit Corp., 75 B.R. 944 (Bankr. N.D. Ohio 1987) (imposition of liability on successor corporation for preconfirmation product liability claims against predecessor was precluded by order of sale approving parties' agreement that successor would not assume any liabilities of predecessor for personal injury or property damage because of alleged negligence or breach of warranty or under any other theory of product liability).
I find more persuasive the views expressed by several courts which have held that a successor may be held strictly liable in a state law product liability claim despite a bankruptcy court order or purchase agreement purporting to discharge such liability. See In re Savage Indus., Inc., 43 F.3d 714, 719-23 (1st Cir. 1994) (parties to an all-asset transfer in Chapter 11 bankruptcy, where purchase agreement purported to disclaim successor's liability for product liability claims not pending at time of sale, are not entitled to rely on protective jurisdiction of bankruptcy court to enjoin prosecution of a state-law based successor product-line liability action; court emphasized the importance of notice and procedural due process, which permeate the Bankruptcy Code); Zerand-Bernal Group, Inc. v. Cox, 23 F.3d 159, 161-64 (7th Cir. 1994) (bankruptcy court did not have power to enjoin state law product liability claim under successor doctrine despite language in order purporting to do so; court suggested that § 363(f) may not be used to extinguish successor product-line claims); Mooney Aircraft Corp. v. Foster, 730 F.2d 367, 373-75 (5th Cir. 1984) (bankruptcy court lacked jurisdiction to enjoin plaintiff's product liability suit against successor which purcha
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