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COMPANY WHICH PURCHASED MANUFACTURER OF ALLEGEDLY DEFECTIVE LADDER NOT LIABLE, COMPANY DID NOT CONTINUE MANUFACTURER’S BUSINESS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the Bauer defendants’ motion for summary judgment in this products liability action should have granted. The Bauer defendants were successors in interest to the company (Babcock) which manufactured the allegedly defective ladder. However. the Bauer defendants demonstrated they did not continue the manufacturer’s business:

… [A]s a general rule, a corporation which acquires the assets of another corporation is not liable for the predecessor’s tortious conduct, including a defective and dangerous product manufactured by the predecessor … . There are four exceptions to this general rule against successor liability. A corporation may be held liable for the torts of its predecessors if (1) the successor corporation expressly or impliedly assumed the predecessor’s tort liability, (2) there was a consolidation or merger of seller and purchaser, (3) the purchasing corporation was a mere continuation of the selling corporation, or (4) the transaction was entered into fraudulently to escape such obligations … .

Here, the Bauer defendants established their prima facie entitlement to summary judgment with evidence that they did not make or sell the subject ladder, that they were not liable pursuant to the general rule against successor liability, and that none of the exceptions to the general rule applied here. In opposition, the plaintiffs failed to raise a triable issue of fact with respect to any of the exceptions to the general rule, including the two they contested: that Babcock Co., the purchasing corporation, was allegedly a mere continuation of Old Babcock, and that the Bauer defendants impliedly assumed Old Babcock’s tort liability.

With respect to the mere continuation exception, the underlying theory is that, if a corporation goes through “a mere change in form without a significant change in substance, it should not be allowed to escape liability” … . Thus, this exception applies where “it is not simply the business of the original corporation which continues, but the corporate entity itself”… . A continuation envisions something akin to a corporate reorganization, rather than a mere sale, with “a common identity of directors, stockholders and the existence of only one corporation at the completion of the transfer”… .

* * * The mere fact that some … former employees worked for [defendant]. was insufficient to raise a triable issue of fact … . Wass v County of Nassau, 2017 NY Slip Op 06317, Second Dept 8-23-17

 

PRODUCTS LIABILITY (COMPANY WHICH PURCHASED MANUFACTURER OF ALLEGEDLY DEFECTIVE LADDER NOT LIABLE, COMPANY DID NOT CONTINUE MANUFACTURER’S BUSINESS (SECOND DEPT))/CORPORATION LAW (PRODUCTS LIABILITY, COMPANY WHICH PURCHASED MANUFACTURER OF ALLEGEDLY DEFECTIVE LADDER NOT LIABLE, COMPANY DID NOT CONTINUE MANUFACTURER’S BUSINESS (SECOND DEPT))

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