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Simmons v. Mark Lift Industries10/24/2005
0 (discussing expansion of mere continuation exception); 1 American Law of Products Liability 3d ยงยง 7:10, 7:14, 7:19 (same); Phillip I. Blumberg, The Continuity of the Enterprise Doctrine: Corporate Successorship in the United States Law, 10 Fla. J. Intl. L. 365, 371 (1996) (listing cases for proposition that mere continuation doctrine applies "only where the successor has the same stockholders as the predecessor and conducts the same business with the same management, facilities, employees, products, and trade names").
I disagree with the majority that the certified questions may be resolved by relying exclusively on a general rule of corporate law set forth in Brown more than eighty years ago. The Brown court did not resolve the meaning of the mere continuation exception in South Carolina. Brown should be the starting point of our analysis, not the beginning and end of it.
Furthermore, Brown did not involve a bankrupt predecessor corporation or a defective product implicating modern product liability law. Brown was decided in the nascent days of product liability law, a time preceding widespread acceptance of basic product liability principles now well established in this state and elsewhere. In those days, the analysis of product liability cases was grounded primarily in negligence; the concept of strict liability in tort was not even a gleam in the eye of attorneys, judges, and professors who would develop and endorse the concept in the 1960s.
The mere continuation exception enunciated in Brown - while valid and sufficient under existing law in other settings such as a merger or consolidation - should be interpreted in a manner which encompasses product liability claims against a successor corporation in appropriate circumstances. An examination of the reasoning in Brown, as well as other precedent in this state, supports such an interpretation.
The basic rationale of the general rule expressed in Brown is obvious. "It would be manifestly unfair, unjust, and contrary to equity that [the successor] should thus acquire all of the assets of the other corporation, and its franchise, both to be, and to do, leaving no one to be sued by its creditors and no property to satisfy its debts and other liabilities, and not itself become responsible for such debts and other liabilities. If [the successor] takes the benefit, it must, as has so often been said, take the burden, which equitably attaches, with it." Brown 128 S.C. at 432, 123 S.E. at 99 (emphasis added).
In an earlier case involving the same successor corporation as in Brown, but where the predecessor corporation no longer existed and the successor had agreed to resolve outstanding loss and damage claims, this Court rejected the successor's effort to avoid the claims with unusually strong language.
The [successor's] position does not appeal to us; it is an attempt to dodge the damages that [the plaintiff] has sustained by a quirk and technical question of the law, and smacks too much of a skin game, and hand stacked and dealt to dealer from the bottom of the deck. . . . By its action [the successor] has allowed the [predecessor] to go out of existence and now proposes to let the [plaintiff] whistle for his money, and by its technicality, which would besmirch the character of any honest man, smacks its lips and licks its chops and congratulates itself on its shrewdness in avoiding its payment of a just claim.
Brabham v. Southern Express Co., 124 S.C. 157, 117 S.E. 368 (1922).
In a similar vein, this Court has applied a trust-fund doctrine to ensure creditors may reach assets in the hands of the successor corporation when a transaction amounts to a de facto merge
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