Opinion
No. CV 06-5002633
December 7, 2009
MEMORANDUM OF DECISION RE Motion for Summary Judgment [243]
This court recently described this action:
"On October 8, 2008, the plaintiffs, Lisa Robbins, administratrix of the estate of Elijah Jamal Hezekia Robbins Martin, and Lisa Robbins, individually, filed a third amended two-count complaint sounding in medical malpractice against the defendants, Physicians for Women's Health, LLC (Physicians), Women's Health USA, Inc. (Women's Health), Shoreline Obstetrics Gynecology (Shoreline), Jonathan Levine, M.D. and Donna Burke Howes. The present action arises out of the death of the decedent, the plaintiff's son, shortly after his delivery at Lawrence Memorial Hospital on October 10, 2005. In both counts, the plaintiffs allege that the defendants "as successor entities, are liable for the actions of [Shoreline] and all their agents, employees, apparent agents, partners, joint venturers and/or contractors, including physicians, nurse midwives and staff members." In count one, the plaintiff, as administratrix of the decedent's estate, alleges that the defendants failed to exercise reasonable care and skill in the care and treatment provided to the plaintiffs, and that as a result of the defendants' carelessness and negligence, the decedent suffered serious, painful and permanent injuries, including death. In count two, the plaintiff, individually, alleges that as a result of the carelessness and negligence of the defendants, she suffered and continues to suffer severe psychological, physiological and emotional distress." (Footnote omitted.) Memorandum of Decision RE Motion for Summary Judgment, April 16, 2009, Martin, J., p. 1-2. [216]
The defendants, Donna Burke Howes (Burke Howes), a nurse midwife, and Jonathan Levine, M.D. (Dr. Levine), were the defendants actually present during the delivery on July 10, 2005. They were the "active" or "actual" tortfeasors. Burke Howes and Dr. Levine are alleged to be "servants, agents, apparent agents partners, joint venturers and/or employees of or with the co-defendants, PHYSICIANS FOR WOMENS HEALTH, LLC ("PWH"), WOMEN'S HEALTH USA, INC. ("WHU"), and/or SHORELINE OBSTETRICS AND GYNECOLOGY, P.C. ("SOG"). Third Amended Revised Complaint, October 8, 2008, Count One, ¶ 1 and Count Two, ¶ 1. [208]
Plaintiff alleges the corporate defendants, PHYSICIANS FOR WOMENS HEALTH, LLC (Physicians for Women's), WOMEN'S HEALTH USA, INC. (Women's Health), and SHORELINE OBSTETRICS AND GYNECOLOGY, P.C. (Shoreline Obstetrics) are vicariously liable for the actual, hands on malpractice of the defendants, Burke Howes and Dr. Levine. Id.
Plaintiff also alleges that Physicians for Women's and Women's Health, "as successor entities, are liable for the actions of [Shoreline Obstetrics] and all their agents, employees, apparent agents, partners, joint venturers and/or and contractors, including physicians, nurse midwives and staff members." Third Amended Revised Complaint, October 8, 2008, Count One, ¶ 1, and Count Two, ¶ 1. [208]
In July 2006 Physicians for Women's entered a contract with Shoreline Obstetrics to purchase the assets of Shoreline Obstetrics. See Asset Purchase and Sale Agreement, Exhibit C-3 to Danaher Affidavit.
With their Motion for Summary Judgment, Physicians for Women's and Women's Health submitted a Memorandum in Support thereof. [244] Attached thereto was an Affidavit of R. Cornelius Danaher, Jr., which had several documents attached as exhibits. Those documents/exhibits are referred to herein as "Exhibits to Danaher Affidavit."
In July 2008, Physicians for Women's and Women's Health filed a motion for summary judgment. In it, Physicians for Women's and Women's Health contended:
. . . at the time [July 2005] of the birth and death of Elijah Jamal Hezekia Robbins Martin, the undersigned defendants had no connection to the care and treatment rendered to the plaintiffs nor were they in a business or contractual relationship with the co-defendants, Jonathan Levine, M.D., Donna Burke-Howes, R.N. and Shoreline Obstetrics Gynecology, P.C. Motion for Summary Judgment, July 2, 2008, p. 1. [192]
The plaintiffs countered:
The plaintiffs oppose the defendants' motion for summary judgment on the basis that PWH's [Physicians for Women's] acquisition of Shoreline does not preclude its liability here since it is responsible for the acts of Shoreline's employees — Levine and Burke Howes — under the continuing enterprise doctrine. Plaintiffs' Memorandum in Opposition to the PWH Defendants' Motion for Summary Judgment, August 19, 2008, p. 1. [203]
This court held that whether a purchasing corporation is a mere continuation of the selling corporation is a question of fact. The evidentiary submissions of the parties show there remain significant genuine issues of material fact regarding the existence of successor liability in this case. This court denied the motion for summary judgment. Memorandum of Decision RE Motion for Summary Judgment, April 16, 2009, Martin, J. [216]
In its April 16, 2009 decision, this court did not hold that Physicians for Women's "is responsible for the acts of Shoreline's employees — Levine and Burke Howes."
The motion for summary judgment now before the court is the second by Physicians for Women's and Women's Health. The premise for this motion for summary judgment is simple:
[T]he PWH defendants submit that successor liability, if any, derives exclusively from and is coterminus with the liability [of] the predecessor. Thus, the PWH defendants can have no greater liability to the plaintiffs than their purported predecessor(s), Shoreline Obstetrics Gynecology, P.C. (`Shoreline') and Jonathan Levine, M.D. (`Dr. Levine'). Insofar as the plaintiffs have covenanted not to sue and completely discharged Shoreline, Dr. Levine and Donna Burke-Howes (`Nurse Burke-Howes') for their claims pertaining to the conduct of Dr. Levine and Nurse Burke-Howes, plaintiffs may not now proceed against the PWH defendants on the same claims. Motion for Summary Judgment, July 1, 2009, p. 1, [243]
The issue at the center of the present summary judgment motion is based on "successor liability. The United States Supreme Court has set forth the basics of same.
"We recognize . . . the general rule of corporate liability is that, when a corporation sells all of its assets to another, the latter is not responsible for the seller's debts or liabilities, except where (1) the purchaser expressly or impliedly agrees to assume the obligations; (2) the purchaser is merely a continuation of the selling corporation; or (3) the transaction is entered into to escape liability. See 15 W. Fletcher, Cyclopedia Corporations §§ 7122-23 (1961 rev. ed.); Kloberdanz v. Joy Mfg. Co., 288 F.Sup. 817 (Colo. 1968)." Golden State Bottling Co. v. NLRB, 414 U.S. 168, 182, n. 2 (1973).
To like effect, see Chamlink Corp. v. Merritt Extruder Corp., 96 Conn.App. 183, 187 (2006).
In this case, plaintiffs allege and rely upon the second exception contending the purchaser, Physicians for Women's, is merely a continuation of the selling corporation, Shoreline Obstetrics.
Physicians for Women's and Women's Health rely on several facts which are not disputed. They are:
1. Physicians for Women's and Women's Health did not treat or care for the plaintiff or plaintiff's decedent.
2. The plaintiffs' sole claim against Physicians for Women's and Women's Health is that, as a result of their purchase of Shoreline Obstetrics' assets, Physicians for Women's and Women's Health have successor liability for the liability of their predecessor, Shoreline Obstetrics.
3. The plaintiffs have covenanted not to sue and completely discharged Shoreline Obstetrics, Dr. Levine and Nurse Burke-Howes for all claims and liabilities arising out of the care and treatment they provided to plaintiff and plaintiff's decedent.
Memorandum of Law in Support of Motion for Summary Judgment, July 1, 2009, pp. 1-2. [244]
Plaintiffs do not dispute these facts. Plaintiffs do, of course, challenge the legal conclusions the moving defendants draw from these facts. Plaintiffs' Memorandum in Opposition to the PWH Defendants' Second Motion for Summary Judgment, July 6, 2009.
In latter half of 2008, the plaintiffs executed covenants not to sue [with] the defendants, Burke Howes, Dr. Levine, and Shoreline Obstetrics. According to the defendants, Physicians for Women's and Women's Health, the liability of Shoreline Obstetrics was thereby extinguished.
The plaintiffs' Covenant Not to Sue Shoreline Obstetrics is relevant here. It provided:
COVENANT NOT TO SUE
In full and complete consideration of the payment by Medical Professional Mutual Insurance Company (d/b/a ProMutual) and ProSelect Insurance Company of the sum of ___________________________; we, Lisa Robbins, Administratrix of the Estate of Elijah Hezekia Robbins Martin and Lisa Robbins, Individually (the "Covenantors"), jointly and severally, on behalf of ourselves and our heirs, executors, administrators and assigns, hereby covenant not to sue Johnathan Levine, M.D., Shoreline Obstetrics and Gynecology, PC, Medical Professional Mutual Insurance Company (d/b/a ProMutual) ProSelect Insurance Company, and their past, present and future officers, directors, partners, stockholders . . . This covenant not to sue does not effect claims against the Physicians for Women's Health LLC entities, which remain defendants in the pending action. We understand and affirm that by executing this covenant not to sue forever discharging the Covenantees from all claims, demands, actions, suits, debts, causes of action and liabilities of every name and nature, whether known or unknown, including but in no way limited to those arising from or in any way related to or growing out of, any care and treatment rendered by any or all of the Covenantees to Lisa Robbins and/or Elijah Jamel Hezekia Robbins Martin as well as those arising from or in any way related to the handling, defense, or settlement of the claim against the Covenantees. The discharged claims, demands, actions, suits, debts, causes of action and liabilities include but are in no way limited to those claims which were asserted or could have been asserted by the Covenantors against the Covenantees in the action entitled Lisa Robbins, Administrtrix of the Estate of Elijah Jamel Hezekia Robbins Martin and Lisa Robbins Individually, Docket No. KNL-CV-06-5002633-S, pending in the Judicial District of New London at New London. We understand and affirm that any injuries, damages or effects allegedly suffered by Elijah Jamel Hezekia Robbins Martin and/or Lisa Robbins may become worse in time, that Elijah Jamel Hezekia Robbins Martin and/or Lisa Robbins may have suffered injuries, damages or effects that may not now appear, that may not be known or suspected and that there is no reason to know or suspect, and that new injuries, damages or effects may arise after the date of the covenant not to sue. It is our intent to discharge any and all such claims, demands, actions, suits, debts, causes of action and liabilities against all Covenantees, and we hereby acknowledge that we have received consideration for the discharge of all such claims, demands, actions, suits, debts, causes of action and liabilities.
". . . We also understand and affirm that by executing this covenant not to sue, we are setting up a complete bar to any recovery at law or in equity for any and all of the claims, demands, actions, suits, debts, causes of action and liabilities against the Covenantees, and we are satisfied with the consideration that we have received in exchange for this covenant not to sue that we have given to all the Covenantees." Exhibit C-2 to Danaher Affidavit [244]
The court notes that in the covenant not to sue, the Covenantors (plaintiffs) unequivocally discharged Shoreline Obstetrics.
Specific expressions in the Covenant to that effect are-(1) "We understand and affirm that by executing this covenant not to sue forever discharging the Covenantees from all claims, . . ." (2) We also understand and affirm that by executing this covenant not to sue, we are setting up a complete bar to any recovery at law or in equity for any and all of the claims, . . . (3) "The discharged claims, demands, actions, suits, debts, causes of action and liabilities . . ."
Thus, it is beyond cavil that the covenant not to sue extinguished the liability of Shoreline Obstetrics. The court holds that the liability of Shoreline Obstetrics was extinguished by the covenant not to sue.
Shoreline Obstetrics was vicariously liable for the alleged tortious acts of its employees, Dr. Levine and nurse Burke Howes, during the delivery on August 10, 2005. Physicians for Women's is not vicariously liable for the acts Dr. Levine and nurse Burke Howes in August 2005. Physicians for Women's did not have any relationship with Shoreline Obstetrics, Dr. Levine, or Burke Howes until at least July 2006 when Physicians for Women's entered the Asset Purchase and Sale Agreement with Shoreline Obstetrics. Physicians for Women's cannot be vicariously liable for the acts of Shoreline Obstetrics' employees and/or agents, Dr. Levine and the Burke Howes, before July 2006.
Any claim by plaintiffs based on vicarious liability of Physicians for Women's for the acts of Dr. Levine and at Burke Howes in this case are not germane to whether Physicians for Women's has successor liability.
There is a significant body of law holding that successor liability does not attach if the predecessor's liability has been discharged or extinguished.
In a Bankruptcy Court action, the court set forth the law:
"Regardless the exception, successor liability does not create a new cause of action against the purchaser so much as it transfers the liability of the predecessor to the purchaser. Fletcher, supra, at § 7122; see Golden State Bottling Co., Inc. v. NLRB, 414 U.S. 168, 181-86, 94 S.Ct. 414, 423-26, 38 L.Ed.2d 388 (1973); see also Northern Ins. Co. of New York v. Allied Mut. Ins., 955 F.2d 1353, 1357 (9th Cir. 1992) (the liability of the predecessor is transferred to the successor); Clark Equipment Co. v. Dial Corp., 25 F.3d 1384, 1387 (7th Cir. 1994) (successor liability distinguished from personal and independent liability of the successor); Preyer v. Gulf Tank Fabricating Co., Inc., 826 F.Sup. 1389, 1395 (N.D. Fla. 1993) (successor liability does not create new rights in the plaintiff); Russell v. SunAmerica Securities, Inc., 1991 WL 352563 (S.D. Miss. 1991) (liability of successor is coterminous with liability of predecessor; if predecessor is not liable then neither is successor). The nature of the liability itself does not change. Thus, while successor liability may give a party an alternative entity from whom to recover, the doctrine does not convert the claim to an in rem action running against the property being sold. Nor does the claim have an existence independent of the underlying liability of the entity that sold the assets." (Footnote omitted.) In re Fairchild Aircraft Corporation, Debtor; Fairchild Aircraft Incorporated, Plaintiff v. Barbara M. Campbell, et al., Defendants, 184 B.R. 910 (1995); vacated on other grounds, 220 B.R. 909 (1998).
In the context of workers' compensation, the Michigan Court of Appeals stated:
"Simply being a successor in liability does not make a company liable — there must be an allegedly viable legal claim against the predecessor in order for the case to survive a motion for summary disposition. In addition, in determining the existence of a legal claim, we must also examine the defenses and immunities of the predecessor, since a company cannot inherit the liabilities without the defenses of the predecessor. It is inherently logical that a company cannot be liable if there was a legal defense or immunity to the allegedly tortious action, and in that case there would thus have been no liability for the successor to succeed." Herbolsheimer v. SMS Holding Company, Inc., et al., 239 Mich.App. 236, 608 N.W.2d 487 (2004).
In Russell v. SunAmerica Securities, Inc., et al., 1991 WL 352563 (S.D. Miss.), a federal district court applied the following rationale in deciding a case involving successor liability in a securities fraud case.
"Reason dictates that in an action such as this, where liability is sought to be imposed against a successor corporation for the torts of its predecessor, the successor's liability, if any, derives exclusively from and is coterminous with the liability to which the predecessor could have been subjected. Thus, SunAmerica can have no greater liability to plaintiffs than did Southmark. It has been said that [i]n a situation where . . . one person commits the tort and is primarily liable while the liability of the other person is derivative or secondary, . . . the releasor's acceptance of satisfaction from one, discharges the other as well, . . . and it has been held that this is true despite an attempted reservation of rights against the person secondarily liable. 76 C.J.S. Release § 50b (1976); see also Seaboard Air Line Railroad Co. v. Coastal Distributing Co., 273 F.Sup. 340, 343 (D.S.C. 1967) ("if he, through whom liability derives is exonerated, the only rational basis for liability against the party secondarily and derivatively liable is lost;" any other rule would be both "illogical and unjust")." Russell v. SunAmerica Securities, Inc., et al., 1991 WL 352563 (S.D. Miss.)
The court relies on these authorities; they are representative of the law. There is no Connecticut law on the question presented by the Physicians for Women's motion for summary judgment.
Plaintiffs chide the moving defendants for relying on foreign law. Plaintiffs state that Physicians for Women's and Women's Health argument is "supported solely by foreign law and devoid of proper citation to the controlling Connecticut precedent" and is "totally contrary to Connecticut law." Plaintiffs' Memorandum in Opposition to the PWH Defendants' Motion for Summary Judgment, August 19, 2008, p. 1. [203]
Apparently a reference to Herbolsheimer v. SMS Holding Company, Inc. and Russell v. SunAmerican Securities, Inc., quoted from above, which Physicians for Women's had cited in its Memorandum of Law in Support the Motion for Summary Judgment. [244]
Plaintiffs further state: "The plaintiffs and the settling defendants [Shoreline Obstetrics, Dr. Levine, and Nurse Burke Howes] specifically entered into Covenants Not to Sue in order to preserve the claims against [Physicians for Women's and Women's Health.] . . . Our law here — unlike in Mississippi or Michigan — permits the utilization of a covenant not to sue to allow an action against one secondarily or vicariously liable where the parties have reached a settlement with the primarily liable agent. See Alvarez v. New Haven Register, 249 Conn. 709, 725 n. 10 (1999) (at common law covenant not to sue did not absolve non-settling vicariously liable party." Id., pp. 1-2.
Plaintiffs rely on the provision in the covenant not to sue which purports to preserve their right of action against Physicians for Women's and Women's Health.
The following is an excerpt from the Covenant Not to Sue:
"This covenant not to sue does not effect claims against the Physicians for Women's Health LLC entities, which remain defendants in the pending action."
They rely on Alvarez v. New Haven Register.
Alvarez does not help plaintiffs. The Supreme Court summarized its holding: "The sole issue in this appeal is whether, notwithstanding General Statutes § 52-572e,fn1 a release executed in favor of an employee operates as a matter of law to release the employer whose sole liability is premised on the doctrine of respondeat superior. We conclude that the employer and employee are not joint tortfeasors pursuant to the statute and that, accordingly, the employer is released from any derivative liability." See Alvarez v. New Haven Register, 249 Conn. 709, 710-11 (1999).
fn1General Statutes § 52-572e provides: "Release of joint tortfeasor. (a) For the purposes of this section the term joint tortfeasors' means two or more persons jointly or severally liable in tort for the same injury to person or property whether or not a judgment has been recovered against all or any of them.
(b) A release by the injured person, or his legal representative, of one joint tortfeasor does not discharge the other tortfeasors unless, and only to the extent, the release so provides." Alvarez v. New Haven Register, 249 Conn. 709, 710-11 (1999).
Plaintiff, Alvarez, had sued Ziolo for injuries sustained as a result of a motor vehicle accident that occurred while Ziolo was acting within the scope of her employment with the New Haven Register. Plaintiff Alvarez' action against Ziolo ended when she (Alvarez) signed a full release of all claims. Plaintiff then brought this action against Ziolo's employer, the New Haven Register (Register). In this action against the Register, plaintiff claimed the Register was vicariously liable under the doctrine of respondeat superior for the alleged negligence of the its employee, Ziolo. The Register moved for summary judgment claiming that the release, which had been executed by the plaintiff in favor of Ziolo, discharged the Register from any vicarious liability. Plaintiff objected to the summary judgment motion claiming she had never intended to release the Register by signing the release and she had intended to pursue a claim against the Register. `The trial court determined, as a matter of law, that the Register and Ziolo were not joint tortfeasors under the common law, and that, consequently, § 52-572e does not abrogate the common-law principles regarding vicarious liability of a master and servant. Accordingly, the court rendered summary judgment for the Register, concluding that the release executed in favor of Ziolo operated, as a matter of law, to release the Register.'" Alvarez, at 713.
The Supreme Court held:
We conclude that the employer and employee are not joint tortfeasors pursuant to the statute [General Statutes § 52-572] and that, accordingly, the employer is released from any derivative liability.
Alvarez v. New Haven Register, 249 Conn. 709, 711 (1999).
The trial court decision was affirmed.
In Alvarez, there was only one corporation involved, The Register. There was no claim of successor liability.
The issue presented by the present motion for summary judgment is whether successor liability exists in this case. It is centered on the claim that the liability of the predecessor corporation, Shoreline Obstetrics, having been extinguished by the Covenant Not to Sue, the liability of the successor corporation(s), Physicians for Women's and Women's Health is likewise extinguished.
There is no doubt that Shoreline Obstetrics, the predecessor corporation, could successfully interpose the covenant not to sue as a complete defense if plaintiffs were to make a claim against Shoreline Obstetrics for the alleged malpractice during the August 10, 2005 delivery. Physicians for Women's and Women's Health, the successor corporations, may also do so with like result.
The Covenant Not to Sue discharged and extinguished the claim against Shoreline Obstetrics, the predecessor corporation. Therefore, there is no viable liability or claim against the successor corporations, Physicians for Women's and Women's Health.
Summary judgment is granted in favor of the defendants, Physicians for Women's and Women's Health, against the plaintiffs.