Opinion
E070981
06-11-2020
WALTER SCOTT CLISSOLD et al., Plaintiffs and Appellants, v. FCA US LLC, Defendant and Respondent.
Esner, Chang & Boyer, Holly N. Boyer, Stuart B. Esner, Shea Sierra Murphy; Panish Shea & Boyle, Brian J. Panish, Alexander J. Behar and Daniel W. Dunbar, for Plaintiffs and Appellants. Nelson Mullins Riley & Scarborough, Philip R. Cosgrove and Ryan E. Cosgrove, for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVDS1614427) OPINION APPEAL from the Superior Court of San Bernardino County. Thomas S. Garza, Judge. Affirmed. Esner, Chang & Boyer, Holly N. Boyer, Stuart B. Esner, Shea Sierra Murphy; Panish Shea & Boyle, Brian J. Panish, Alexander J. Behar and Daniel W. Dunbar, for Plaintiffs and Appellants. Nelson Mullins Riley & Scarborough, Philip R. Cosgrove and Ryan E. Cosgrove, for Defendant and Respondent.
I.
INTRODUCTION
Plaintiffs and appellants, Walter and Kathy Clissold, were injured in 2014 while driving their 1979 Chrysler Jeep CJ-5, which was manufactured by American Motors Corporation (AMC), a now-defunct corporate entity. The Clissolds sued defendant and respondent, FCA US LLC (FCA), for products liability and negligence on the ground the Jeep was defectively designed. The trial court found that FCA could not be liable for the Clissolds' injuries because it was not the "manufacturer" of their Jeep and granted FCA's motion for summary judgment.
On appeal, the Clissolds argue the trial court erred because FCA assumed AMC's liabilities, including AMC's liabilities for design-defect claims, as part of a chain of corporate mergers and acquisitions. The Clissolds alternatively argue the trial court erred by denying their request to conduct further discovery to oppose FCA's summary judgment motion. We disagree with the Clissolds on both issues and affirm the judgment.
II.
FACTUAL AND PROCEDURAL BACKGROUND
A. Background of Corporate Entities
AMC manufactured the Clissolds' Jeep in 1979. In 1987, Chrysler Corporation acquired AMC as part of a merger. In 1998, Chrysler Corporation merged into another corporate entity, which merged into yet another corporate entity, Chrysler LLC, in 2007. Chrysler LLC later became Old Carco LLC (Old Carco). In 2009, Old Carco filed for bankruptcy. New Carco was converted into FCA in 2014.
For purposes of this appeal, New Carco and FCA are the same entity. Like the parties, we refer to them interchangeably.
B. Master Transfer Agreement
In April 2008, New Carco agreed to purchase "substantially all" of Old Carco's assets through a Master Transaction Agreement (MTA). The Bankruptcy Court's "Sale Order" approved the MTA on June 1, 2009 (the Closing Date). The Sale Order allowed New Carco to purchase Old Carco's assets free of liability for product liability any claim that arose after the Closing Date if it related to Old Carco's vehicles manufactured before the Closing Date. (See Bennett v. FCA US LLC (In re Old Carco) (Bankr. S.D.N.Y. 2018) 587 B.R. 809, 813-814 ["[T]he Sale Order . . . excluded any Liabilities, including Product Liability Claims, related to any vehicle manufactured by [Old Carco] unless it was sold by [New Carco]."]; In re Old Carco (Bankr. S.D.N.Y. May 2, 2013) WL 1856330, at *4 ["[A]s originally drafted, the MTA excluded all claims relating to vehicles sold prior to the closing date. Certain amendments carved out narrow exceptions."].)
A few months later, New Carco reversed course and announced that it would "accept product liability claims on vehicles manufactured by Old Carco before June 10 [2009] that are involved in accidents on or after that date." Through "Amendment No. 4," the parties amended the MTA, which provided in part that New Carco would assume liability for "Product Liability Claims arising from the sale on or prior to [the Closing Date] of motor vehicles or component parts, in each case manufactured by Sellers . . . to the extent such Product Liability Claims (A) arise directly from motor vehicle accidents occurring on or after [the Closing Date]." Amendment No. 4 defined "Sellers" as "Old Carco LLC, formerly known as Chrysler LLC . . . and the Subsidiaries of [Old Carco] identified on the signature pages" of the MTA.
C. The Clissolds' Case
In 2014, the Clissolds suffered injuries after their Jeep overturned. They sued FCA for products liability and negligence, alleging that their Jeep was defective. The Clissolds argued FCA was liable because it assumed AMC's liabilities under Amendment No. 4 to the MTA, which include liability for the Clissolds' claims.
FCA moved for summary judgment, arguing that it did not assume the liabilities of AMC, who manufactured the Clissolds' Jeep. FCA argued, among other things, that under Amendment No. 4 it assumed liabilities only for product-liability claims associated with vehicles "manufactured by" a discrete list of corporate entities, which did not include AMC. The Clissolds opposed the motion on the ground that Old Carco "manufactured" their Jeep as a matter of law due to AMC's merger with Chrysler Corporation, "an entity which ultimately became 'Old Carco.'" The Clissolds alternatively requested additional time to conduct further discovery to oppose FCA's motion under Code of Civil Procedure section 437c, subdivision (h).
The trial court agreed with FCA, denied the Clissolds' request for more time to conduct more discovery, and entered an order granting FCA's motion for summary judgment. The judgment was entered on June 28, 2018. The Clissolds timely appealed.
III.
DISCUSSION
The Clissolds argue the trial court erred by (1) denying their request for additional time to conduct discovery and (2) granting summary judgment to FCA. We disagree.
A. The Trial Court Correctly Granted FCA Summary Judgment
1. Additional Background
In opposing FCA's motion for summary judgment, the Clissolds argued FCA assumed AMC's liabilities through Amendment No. 4. Specifically, the Clissolds asserted Chrysler Corporation assumed AMC's liabilities when the two entities merged, Old Carco assumed Chrysler Corporation's liabilities through their merger, and FCA assumed Old Carco's liabilities through the MTA and Amendment No. 4. The Clissolds pointed to Amendment No. 4's language that FCA would assume liability for product-liability claims related to vehicles manufactured by "Sellers," which the MTA defined as Old Carco and its subsidiaries. Thus, according to the Clissolds, AMC is a "Seller" under Amendment No. 4 because FCA assumed AMC's liabilities through its purchase of Old Carco's assets because "Old Carco is Chrysler LLC and all of its predecessors, including AMC." In sum, the Clissolds argued liability for their claim flowed from AMC to Chrysler Corporation through their merger, then to Chrysler LLC/Old Carco through another merger, then to New Carco via the MTA and Amendment No. 4, and finally to FCA. The Clissolds claimed that, contrary to FCA's assertion, it was irrelevant whether New Carco was a successor to Old Carco because under Amendment No. 4 New Carco accepted liability for Old Carco, and "Old Carco was AMC for liability purposes" by operation of "principles of corporate merger and successor liability."
The trial court disagreed. The trial court reasoned that under Amendment No. 4, FCA "did not assume any liability on" the Clissolds' Jeep because Chrysler LLC (i.e., Old Carco) did not assume any successor liability to Chrysler Corporation, which merged with AMC. The trial court looked to the Sale Order, which, in the trial court's view, "specifically ordered that FCA was not a successor to Chrysler Corporation and could not be held liable under any theory of successor liability."
2. Summary Judgment Principles and Standard of Review
"The trial court properly grants a motion for summary judgment 'if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' (Code Civ. Proc., § 437c, subd. (c).)" (Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 639.) We independently review the trial court's ruling on the parties' cross-motions for summary judgment, "applying the same three-step analysis required of the trial court. [Citations.] First, we identify the issues framed by the pleadings . . . . [¶] Second, we determine whether the moving party . . . has established facts which negate the opponent's claim and justify a judgment in movant's favor. . . . [¶] . . . [T]he third and final step is to determine whether the opposition demonstrates the existence of a triable, material factual issue. [Citations.]" (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064-1065.) "[W]e construe the moving party's affidavits strictly, construe the opponent's affidavits liberally, and resolve doubts about the propriety of granting the motion in favor of the party opposing it." (Szadolci v. Hollywood Park Operating Co. (1993) 14 Cal.App.4th 16, 19.)
3. Analysis
The parties agree that the Clissolds' appeal hinges on whether the Clissolds' Jeep was "manufactured by" a "Seller" under Amendment No. 4. If so, FCA assumed AMC's liabilities—including liability for the Clissolds' claims—because Amendment No. 4 provides that FCA assumed liability for any product-liability claims "arising from the sale on or prior to [the Closing Date] of motor vehicles . . . manufactured by Sellers."
It is undisputed that the Clissolds' claim qualifies under Amendment No. 4 as a product-liability claim involving a vehicle sold before the June 2009 Closing Date that was involved in an accident after that date.
The Clissolds correctly note—and FCA does not dispute—that, under New York and California law, the surviving corporation in a merger assumes and is liable for the liabilities of the merged corporation. (See N.Y. Bus. Corp. Law, § 906 ["The surviving or consolidated corporation shall assume and be liable for all the liabilities, obligations and penalties of each of the constituent entities."]; Corp. Code, § 1107 ["Upon merger . . . the surviving corporation . . . shall be subject to all the debts and liabilities of each in the same manner as if the surviving corporation had itself incurred them."].) By merging with AMC, Chrysler Corporation is responsible for AMC's liabilities as if it had incurred them itself. (See Maudlin v. Pacific Decision Sciences Corp. (2006) 137 Cal.App.4th 1001, 1016; Everhome Mtge. Co. v. Pettit (N.Y. App. Div. 2016) 135 A.D.3d 1054, 1054, fn. 1 ["[A] successor corporation 'is vested with all of the rights and powers of the merged corporations, and is considered to have been named in any document taking effect before the merger.'"].) This includes AMC's tort liability. (See Petrini v. Mohasco Corp. (1998) 61 Cal.App.4th 1091, 1096 ["We need not decide [whether New York, Nevada, or California] law governs because they are all the same in recognizing corporate merger as a basis for imposing liability for torts of a predecessor corporation upon the surviving corporation."].)
The Clissolds argue California law applies, whereas FCA argues New York law does. We need not resolve the dispute because we agree with the Clissolds there is no material difference between the two. We note, however, that the record does not contain any details about the merger. The only evidence it contains is a declaration from an FCA employee, who stated that AMC discontinued making the model of Jeep the Clissolds owned in 1983 "before merging with Chrysler Corporation in 1987."
Chrysler Corporation therefore assumed liability for the Clissolds' tort claims against AMC. The question, then, is whether that liability transferred to FCA. Based on the plain language of Amendment No. 4, we conclude it did not.
Even if Chrysler Corporation assumed all of AMC's liabilities, and Old Carco then assumed those liabilities, it does not follow that FCA likewise assumed them. Amendment No. 4 provides that FCA assumed liability only for claims associated with vehicles "manufactured by" the "Sellers" (i.e., Old Carco and its subsidiaries). The Clissolds' Jeep was "manufactured by" AMC, who is not a Seller under the MTA or Amendment No. 4. The Clissolds assert this distinction is immaterial because FCA assumed Old Carco's liabilities, which includes Chrysler Corporation's liabilities—and by extension AMC's liabilities—through the MTA and Amendment No. 4.
However, Old Carco did not merge with FCA. FCA only purchased "substantially all" of Old Carco's assets. This distinction is critical—and dispositive here—because "the general rule [is] that a corporation which acquires the assets of another is not liable for the torts of its predecessor." (Schumacher v. Richards Shear Co., (1983) 59 N.Y.2d 239, 244; Franklin v. USX Corp. (2001) 87 Cal.App.4th 615, 621 [same].) There are exceptions to the general rule that a successor corporation that purchases another corporation's assets is not liable for the predecessor corporation's debts and liabilities. (See generally Franklin v. USX Corp., supra, at p. 621.) The Clissolds, however, do not argue any of exceptions to the general rule applies here, and they emphasize they "were not seeking to impose liability [on FCA] pursuant to a theory of successor liability but rather under the assumed liabilities as defined in Amendment 4."
FCA is not liable for Old Carco's (or its predecessor corporations') liabilities simply because FCA purchased Old Carco's assets. In structuring the transfer of those assets, the parties were free to negotiate which, if any, of Old Carco's liabilities FCA would assume as part of the deal. (See Franklin v. USX Corp., supra, 87 Cal.App.4th at p. 621.) As relevant here, FCA agreed to assume liability for only some of Old Carco's liabilities—claims associated with vehicles "manufactured by" Old Carco and its subsidiaries as "identified on the signature pages" of Amendment No. 4 (i.e., "Sellers"). (See United States ex rel. Ceas v. Chrysler Group LLC (2015) 78 F.Supp.3d 869, 875 [explaining Amendment No. 4 outlines "an exhaustive list" of FCA's "Assumed Liabilities," which did not include the plaintiff's fraud-based claims].)
The Clissolds argue Old Carco "manufactured" their Jeep as a matter of law because AMC, who actually "manufactured" it, merged with Old Carco, so the two entities are one and the same under the MTA and Amendment No. 4. We reject the Clissolds' argument for three reasons.
First, the Clissolds' argument contravenes the principle that we must interpret contract terms, such as the Amendment No. 4, according to their "plain and ordinary meaning." (Ronay Family Ltd. Partnership v. Tweed (2013) 216 Cal.App.4th 830, 841; accord, R/S Assocs. v. N.Y. Job Dev. Auth. (N.Y. 2002) 771 N.E.2d 240, 242 [when a contract is "'clear, unequivocal and unambiguous, the contract is to be interpreted by its own language.'"].)
The MTA and Amendment No. 4 are governed by New York law. (See MTA § 11.08; Amendment No. 4, para. 6.) However, we discern no material difference between New York law and California law on how courts interpret the plain language of a contract.
The "plain and ordinary" meaning of "manufactured by" in Amendment No. 4 means "made by." (See People v. Combs (1985) 165 Cal.App.3d 422, 427 ["The dictionary definition of 'manufacture' is 'the making of goods and articles by hand or, esp., by machinery.'"]; see also http://www.lexico.com/definition/manufacture [as of January 24, 2020] ["Make (something) on a large scale using machinery." "The making of articles on a large scale using machinery . . . 'the manufacture of armored vehicles.'"].) Under that plain and ordinary meaning, AMC, who physically assembled the Clissolds' Jeep, "manufactured" the Jeep.
Further, under Amendment No. 4, FCA assumed liability for vehicles manufactured and sold by Old Carco. (Bennett v. FCA US LLC (In re Old Carco LLC), supra, 587 B.R. at p. 814 ["Under the Amended MTA, New [Carco] assumed liability for post-Closing Date accidents involving vehicles manufactured and sold by Old [Carco] before the Closing Date."]; Dearden v. FCA US LLC (In re Old Carco LLC) (Bankr. S.D.N.Y. 2018) 582 B.R. 838, 841 (Dearden) ["As amended, New [Carco] assumed liability for post-Closing Date accidents involving vehicles manufactured and sold by Old Chrysler before the Closing"].) There is no dispute that AMC, not Old Carco, sold the Clissolds' Jeep. Thus, applying the plain and ordinary language of Amendment No. 4, the Clissolds' Jeep was manufactured and sold by AMC—not Old Carco.
Second, Amendment No. 4 defines "Sellers" as "Old Carco, LLC, formerly known as Chrysler LLC" and its subsidiaries "identified on the signature pages" of the MTA. As the Sale Order confirms, AMC is not identified as a "Seller." If the parties intended for FCA to assume liability for claims arising from vehicles manufactured by Old Carco's predecessor corporations, instead of only the enumerated list of "Sellers," Amendment No. 4's terms would have reflected that intent. The parties easily could have drafted Amendment No. 4 to provide that "Sellers" including Old Carco, its subsidiaries, and its predecessor corporations.
Third, to accept the Clissolds' argument, we would have to ignore a core term of the Sale Order, which holds that FCA cannot be liable for Old Carco's debts and liabilities—or those of its predecessor corporations, such as AMC—on a theory of successor liability. The Sale Order provides in relevant part that the sale of Old Carco's assets to New Carco (i.e., FCA) "shall not impose or result in the imposition of any liability or responsibility on [New Carco] . . . for any Claims . . . for any successor liability or any products liability for the sale of any vehicles by [Old Carco] or their predecessors . . . except as expressly identified as an Assumed Liability." By its plain terms, the Sale Order precludes any claims against FCA based on Old Carco's predecessor corporations' products unless expressly assumed through the MTA or Amendment No. 4. Although the Clissolds repeatedly state they are not attempting to impose liability on FCA on a theory of successor liability, that is effectively what they are trying to do by arguing Old Carco "manufactured" their Jeep vis-à-vis the merger between AMC and Old Carco.
Finally, we reject the Clissolds' suggestion that FCA conceded Old Carco "manufactured" their Jeep in a statement FCA made in a pleading early in the litigation. In its notice of removal to federal court (before the case was remanded to state court), FCA stated, without citing any evidence, that Old Carco was "the entity that actually manufactured and sold the subject 1979 Jeep CJ5." The Clissolds contend this statement shows FCA's position that Old Carco did not manufacture their Jeep is "disingenuous." But the Clissolds do not explain how or why FCA should be bound by its prior statement. More to the point, FCA's counsel's statement in a pleading is not evidence (Du Jardin v. City of Oxnard (1995) 38 Cal.App.4th 174, 179-180), and does not alter the terms of the MTA or Amendment No. 4, so it does not affect our analysis and conclusions above.
We likewise reject the Clissolds' argument that FCA's position is inconsistent with Dearden, supra, 582 B.R. 838. In Dearden, the plaintiff's sued FCA for compensatory and punitive damages after his parents were killed when their 1995 Jeep "burst into flames" in an accident. (Id. at pp. 839-840.) The Clissolds argue Dearden supports them because the Bankruptcy Court held the plaintiff's claim fell "within the Assumed Liabilities of Amendment 4" and "[t]here is no difference between a 1979 vehicle manufactured by AMC (a predecessor of Old Carco) and a 1995 vehicle manufactured by Chrysler Corporation (a predecessor of Old Carco)."
Dearden does not support the Clissolds' position. Dearden involved only FCA's motion to dismiss the plaintiff's request for punitive damages as barred by the Sale Order and MTA. (Dearden, supra, 582 B.R. at p. 843.) Thus, to resolve the motion, the Bankruptcy Court decided only whether the plaintiff impermissibly sought punitive damages, not whether the plaintiff's claim for compensatory damages was viable or covered by Amendment No. 4. Given the procedural posture and limited scope of FCA's motion to dismiss, the Dearden court had no occasion to decide whether FCA assumed liability for the plaintiff's claim. In short, Dearden did not address any of the issues presented here. (See Gomes v. County of Mendocino (1995) 37 Cal.App.4th 977, 985 [cases are not authority for propositions not considered].)
Because the Clissolds' Jeep was "manufactured by" AMC—not Old Carco or one of its subsidiaries—FCA did not assume liability for the Clissolds' claims through Amendment No. 4. The trial court therefore properly concluded FCA was not liable for the Clissolds' claims since FCA did not manufacture or assume liability for the claims.
B. The Trial Court Did Not Abuse its Discretion in Denying the Clissolds a Continuance
When opposing FCA's summary judgment motion, the Clissolds moved under Code of Civil Procedure section 437c, subdivision (h) for a continuance to conduct further discovery they claimed was necessary to oppose the motion. Specifically, the Clissolds sought to conduct additional depositions "to further rebut[] FCA's arguments." The Clissolds argued the depositions were necessary to obtain additional information about AMC's merger with Chrysler Corporation. The trial court denied the Clissolds' request on the ground that FCA's liability was an issue of law that could be decided on the evidence presented in FCA's summary judgment motion, namely, the MTA and Amendment No. 4.
We review the trial court's decision denying the Clissolds' request for a continuance under Code of Civil Procedure section 437c, subdivision (h) for an abuse of discretion. (Oldcastle Precast, Inc. v. Lumbermens Mut. Cas. Co. (2009) 170 Cal.App.4th 554, 556.) We conclude the trial court did not abuse its discretion because the trial court correctly determined that FCA's liability was an issue of law that was properly resolved on the evidence submitted with FCA's summary judgment motion. We do not find that allowing the Clissolds to conduct additional discovery about the AMC-Chrysler Corporation merger would change the outcome. Additional evidence about the merger would have no effect on the terms of the MTA or Amendment No. 4, which confirm that FCA was not liable for the Clissolds' claims.
Based on the foregoing, we affirm the order granting FCA's motion for summary judgment.
IV.
DISPOSITION
The judgment is affirmed. FCA shall recover its costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
CODRINGTON
J. We concur: McKINSTER
Acting P. J. FIELDS
J.