Opinion
DOCKET NO. A-2869-12T4
01-10-2014
DENISE DINIELLI, Plaintiff-Appellant, v. TROPICANA HOTEL AND CASINO, Defendant-Respondent.
Sophia M. Shalaby argued the cause for appellant (Hobbie, Corrigan & Bertucio, P.C., attorneys; Ms. Shalaby, on the briefs). Gerard W. Quinn argued the cause for respondent (Cooper Levenson April Niedelman & Wagenheim, P.A., attorneys; Mr. Quinn, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Yannotti and St. John.
On appeal from Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-9081-11.
Sophia M. Shalaby argued the cause for appellant (Hobbie, Corrigan & Bertucio, P.C., attorneys; Ms. Shalaby, on the briefs).
Gerard W. Quinn argued the cause for respondent (Cooper Levenson April Niedelman & Wagenheim, P.A., attorneys; Mr. Quinn, on the brief). PER CURIAM
Plaintiff Denise Dinielli appeals from an order entered by the Law Division on January 4, 2013, dismissing her complaint against defendant, Tropicana Atlantic City Corp., which was named in the complaint as Tropicana Hotel and Casino. We affirm.
On October 5, 2011, plaintiff filed a complaint against defendant, in which she alleged that she slipped and fell on the premises of the Tropicana Hotel and Casino in Atlantic City on January 4, 2010. Among other things, plaintiff claimed that she fell as a result of the negligence and carelessness of defendant and its "administrators, agents, employees, servants and/or representatives."
On the date of the alleged accident, the Tropicana Hotel and Casino was owned by Adamar of New Jersey (Adamar). However, previously, on April 29, 2009, Adamar filed a petition for bankruptcy in the United States Bankruptcy Court for the District of New Jersey. On November 4, 2009, the bankruptcy court entered an order approving the purchase agreement, which transferred substantially all of Adamar's assets to defendant "free and clear of all liens, claims, encumbrances and interests." The closing on the transaction took place on March 8, 2010.
On May 1, 2012, defendant filed a motion to dismiss plaintiff's complaint on the ground that it was not the owner of the premises on January 4, 2010, when plaintiff allegedly fell, and it was not liable for any claims asserted against the former owner of the premises. Plaintiff opposed the motion.
The trial court heard argument on the motion on June 15, 2012, and thereafter filed a memorandum of decision in which it concluded that defendant could not be liable on plaintiff's claim because it had acquired the premises on March 8, 2010, free and clear of any liens, claims, encumbrances and interests. The court entered an order dated January 4, 2013, dismissing plaintiff's complaint in its entirety. This appeal followed.
Plaintiff argues that (1) the trial court erred by granting defendant's motion to dismiss since defendant is not insulated from liability under the purchase agreement; and (2) the court should not have granted defendant's motion since discovery was ongoing. We find no merit in either argument.
It is undisputed that on January 4, 2010, when plaintiff allegedly fell, Adamar was the owner of the premises. Adamar had previously filed a petition in bankruptcy and, on November 4, 2009, the bankruptcy court entered an order approving an agreement whereby defendant acquired substantially all of Adamar's assets "free and clear of all encumbrances, claims and interests, except those explicitly and expressly assumed." Among other things, the purchase agreement between defendant and Adamar provided that the purchaser of Adamar's assets shall not "be liable for any claims, demands or causes of action of any kind or nature, whether legal or equitable, secured or unsecured, prepetition or postpetition, matured or unmatured, fixed or contingent, liquidated or unliquidated, known or unknown[.]"
Plaintiff argues, however, that the bankruptcy court approved the sale of Adamar's assets to defendant pursuant to 11 U.S.C.A. § 363(f), and the bankruptcy court's approval of the sale did not relieve defendant of personal injury claims of the sort she has asserted in this litigation. Plaintiff claims that approval of the sale of a debtor's assets pursuant to 11 U.S.C.A. § 363(f) only relieves the purchaser of in rem claims. We do not agree.
11 U.S.C.A. § 363(f) provides:
The trustee may sell property . . . free and clear of any interest in such property of an entity other than the estate, only if—
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
In In re Trans World Airlines, Inc., 322 F.3d 283 (3d Cir. 2003), the court considered whether the bankruptcy court's approval of the sale of the assets of Trans World Airlines (TWA) to American Airlines (American) pursuant to 11 U.S.C.A. § 363(f) was free and clear of any liability for employment discrimination claims against TWA and a travel voucher program that TWA had agreed to in settlement of a prior class action. Id. at 285.
The court held that the term "any interest in property" in 11 U.S.C.A. § 363(f) is not limited to in rem interests and applied to "'obligations that are connected to, or arise from, the property being sold.'" Id. at 289 (quoting Folger Adam Sec., Inc. v. DeMatteis/MacGregor, 209 F.3d 252, 259 (3d Cir. 2000)). The court stated that the employment discrimination and travel voucher claims arose from the property being sold because TWA's assets gave rise to those claims. Id. at 289-90. The court noted that, if TWA had not invested in the airline assets, the claims would not have arisen. Id. at 290.
Here, plaintiff's claim is one in which plaintiff has an "interest in property" within the meaning of 11 U.S.C.A. § 363(f). Plaintiff alleges that she slipped and fell on Adamar's property. Had Adamar not invested in the hotel and casino assets, the claim would not have arisen. Thus, the bankruptcy court's order approving the sale of Adamar's assets to defendant pursuant to 11 U.S.C.A. § 363(f) relieved defendant of any liability for plaintiff's personal injury claim.
Plaintiff relies, however, on the decision in Lefever v. K.P. Hovnanian Enterprises, Inc., 160 N.J. 307 (1999). In that case, the plaintiff was injured in a forklift accident. Id. at 311. The manufacturer of the forklift had sold its assets but the purchaser subsequently filed for bankruptcy protection, and the trustee in bankruptcy later conveyed substantially all of the purchaser's assets to another entity. Ibid.
The plaintiff brought a personal injury action against the final purchaser, who filed a motion to dismiss the claim on the ground that the bankruptcy sale was free and clear of any interests in the property, including any corporate successor-liability claims. Ibid. The trial court granted the motion, and we reversed. Id. at 311-12. The Supreme Court affirmed. Id. at 327.
The Court noted that, generally, the company that acquires a corporation's assets is not liable for the selling company's debts and liabilities, except if (1) the successor expressly or impliedly assumes the liabilities; (2) there is an actual or de facto consolidation or merger of the two companies; (3) the purchaser is a "mere continuation" of the seller; or (4) the transaction was entered into fraudulently to escape liability. Id. at 310 (citing 15 William & Fletcher, Cyclopedia of the Law of Corporations § 70, 122 nn.9-15 (1990)).
The Court noted, however, that New Jersey and other jurisdictions have adopted a "product-line exception" to this general rule. Ibid. Under this exception, a company that acquires a substantial part of a manufacturer's assets and continues to market goods in the same product line "may be exposed to strict liability in tort for defects in the predecessor's products." Ibid.
In Lefever, the Court considered whether federal bankruptcy law precludes the application of these common law principles to claims against a successor-business enterprise that has acquired its assets through a bankruptcy sale. Id. at 316. The Court stated that, while the answer to the question of successor liability was not clear, a bankruptcy sale agreement providing that the purchaser will not assume any of the debtor's liabilities would not insulate the buyer from successor liability when principles of law require otherwise. Id. at 319. The Court held that liability could be imposed upon the successor company pursuant to the product-line exception to the general rules pertaining to corporate successor liability. Id. at 327.
We are convinced that plaintiff's reliance upon Lefever is misplaced. In that case, the court imposed successor liability upon the purchaser of the bankrupt debtor's assets pursuant to the product-line exception. That exception is not applicable here. Furthermore, successor liability is not warranted under the general principles governing such liability. Defendant did not expressly or impliedly assume Adamar's liability for personal injury claims; there is no actual or de facto consolidation or merger of the companies; defendant is not a "mere continuation" of Adamar; and the purchase was not undertaken fraudulently to avoid liability. Id. at 310.
Plaintiff also relies upon Arevalo v. Saginaw Machine Systems, Inc., 344 N.J. Super. 490 (App. Div. 2001). There, the plaintiff was injured while operating a machine on his employer's premises. Id. at 492. The machine was manufactured in 1971 by Wickes Corporation (Wickes). Ibid. In 1981, Wickes filed for bankruptcy. Id. at 493. Before the bankruptcy, a portion of the company was "spun off" and incorporated as a separate, wholly-owned subsidiary called Wickes Machine Tool Group, Inc. (WMTG). Ibid.
In 1983, Wickes sold 100% of the shares in WMTG to Saginaw Machine Systems (Saginaw). Ibid. Wickes remained in business but did not continue to manufacture the machine that the plaintiff was using when he was injured. Ibid. Wickes emerged from bankruptcy, changed its name several times, and acquired or created a wholly-owned subsidiary with which it merged in 1994. Id. at 494. The surviving corporation was known as Collins & Aikman Products Co., Inc. (C & A). Ibid.
The plaintiff brought suit against Saginaw, its parent and C & A, seeking to recover for his personal injuries on the basis of defective design and manufacture, and breach of the post-manufacture duty to warn. Ibid. The defendants filed a motion for summary judgment, arguing that corporate successor liability did not attach. Ibid.
The trial court determined that C & A was not liable on plaintiff's claims, finding that the product-line exception did not apply because the successor company did not continue the product line. Ibid. We reversed, holding that, in the product liability context, C & A was the same entity as Wickes and was responsible for liability claims arising from defects in Wickes' products. Id. at 495-96.
Like Lefever, the Arevalo decision pertains to products liability claims and the product-line exception to corporate- successor liability. This case involves a personal injury claim, unrelated to any particular product. The product-line exception has no application to this dispute. Thus, plaintiff's reliance upon Arevalo is misplaced.
Plaintiff additionally argues that the trial court erred by dismissing her complaint because discovery was not complete. We disagree.
Summary judgment should not be granted when discovery is not complete if there are critical facts that are peculiarly within the moving party's knowledge. Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 193 (1988). However, the party opposing the motion "has an obligation to demonstrate with some degree of particularity the likelihood that further discovery will supply the missing elements of the cause of action." Auster v. Kinoian, 153 N.J. Super. 52, 56 (App. Div. 1977).
Here, plaintiff has not shown that discovery would have had a bearing on the issue of corporate successor liability, which was the basis on which the trial court dismissed her complaint. Indeed, the essential facts upon which that decision turned were not in substantial dispute.
Plaintiff nevertheless contends that further discovery would have established that "there were essentially no changes in the staff or operations" after defendant purchased the hotel and casino. Continuity of operations is not, however, a sufficient basis upon which to find for purpose of successor liability that a corporation is a mere continuation of the company from whom it has purchased the assets. Woodrick v. Jack J. Burke Real Estate, Inc., 306 N.J. Super. 61, 74 (App. Div. 1997). Therefore, further discovery would not have resulted in the imposition of successor liability in this case.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION