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Simmons v. Mark Lift Industries10/24/2005
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I conclude the law should not allow such an obviously inequitable result, which does not comport with the sound public policies of this state with regard to corporate successor liability or product liability law. This Court long has maintained that the burdens follow the benefits in the arena of successor liability under appropriate circumstances. Brown 128 S.C. at 432, 123 S.E. at 99. Moreover, as the Court aptly observed sixty-six years ago, " he corporate fiction and the rules surrounding it have been of inestimable service in the affairs of business, but they must be applied in such a manner as to promote justice, not to hinder or defeat it." Long, 190 S.C. at 377, 3 S.E.2d at 50.
The Court has not previously had the opportunity to determine the meaning of the mere continuation exception set forth in Brown, 128 S.C. 428, 123 S.E. 97, in this context, and I would decline to interpret that exception as narrowly as other courts have. The general rule and mere continuation exception are sufficiently flexible to encompass successor liability in the context of a product liability action. I conclude that a successor corporation which acquires all or substantially all of the assets of a predecessor, whether through a transfer of stock or a transfer of assets for cash or the equivalent, may be held liable in a product liability claim arising from a unit previously manufactured and distributed by the predecessor when the successor is determined to be, in effect, a mere continuation of the defunct predecessor.
In determining this issue, a court should consider factors such as (1) whether the successor, taking lawful advantage of the predecessor's accumulated goodwill and reputation, held itself out to the world as a continuation of the predecessor through continued use of the predecessor's corporate identity, trade names, advertising, or other intellectual property; (2) whether the successor continued to manufacture substantially the same product line as the predecessor, recognizing that manufacturing activity by its nature involves modification of product lines and elimination of unprofitable items; (3) whether the successor retained the predecessor's managers, employees, or sales force; (4) whether the successor continued to use the predecessor's equipment, supplier, dealer, or customer lists; (5) whether the successor assumed those liabilities and obligations of the predecessor ordinarily necessary for the continuation of normal business operations of the predecessor; and (6) whether the successor's officers, directors, or shareholders are substantially the same as the predecessor's. No one factor can be dispositive in this fact-intensive analysis. Again, the overarching principle in the analysis is that a successor which stands to benefit from exploitation of the predecessor's identity and accumulated goodwill and reputation may not avoid the burden of the predecessor's product liability claims.
This approach best comports with the policies and goals of both corporate law and product liability law in South Carolina. It is well established that a successor corporation in appropriate circumstances obtains the benefits and accompanying burdens in the contract or creditor-debtor setting. The same ought to be true in a product liability action involving a corporation which is found to be a mere continuation of the predecessor.
" trict liability for manufacturers exists in large part as a deterrent and a method of allocating the risk of loss among those best equipped to deal with it." Madison v. American Home Products Corp., 358 S.C. 449, 454, 595 S.E.2d 493, 496 (2004). The approach I propose is consistent with the notion that manufacturers - whether they are the origin
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