Opinion
00 civ. 0327 (RWS)
June 14, 2001
OPINION
On January 1, 2001, Defendant Coxline, Inc. ("Coxline") noticed a motion for summary judgment in the above captioned case. The matter was marked fully submitted on March 31, 2001 and oral argument was heard. For the reasons stated herein, Coxline's Motion for Summary Judgment is Denied.
Facts
The plaintiff, Angel Luis Figueroa ("Figueroa") brought suit against Coxline on or about January 24, 2000, alleging that he was severely injured by a machine manufactured by Wells Manufacturing Corp. The plaintiff asserts he was injured by a machine which had identifying markings "Wells Metal band saw", "type 8-M-41", "serial no 2783", and "manufactured by Wells Manufacturing Corp., Three River Mich. U.S.A." This machine was built in 1941. It is alleged in the complaint that the machine was defective in design or manufacture. Wellsaw was a product line of Wells Management, Inc. ("Wells Management"), which was purchased by Robot Research Corp. ("Robot Research") in a bankruptcy sale on August 21, 1986.
Robot Research subsequently changed its name to Wellsaw, Inc. on September 4, 1992. Wellsaw, Inc. is a wholly owned subsidiary of Coxline. In his Complaint, Figueroa asserts that Coxline was responsible for the machine's defect and should be held strictly liable for his injuries. He also brought a breach of warranty claim and failure to warn causes of action.
There is no dispute as to these facts.
In addition to the above facts, which are not disputed, Figueroa has introduced evidence that among the items obtained by Robot were: the Debtor's "Wellsaw" metal cutting band saw product line consisting of patterns, tooling, assembly, and test equipment, engineering documentation, patents (consisting of one patent for a blade tensioning device and one patent for a blade guide device), the trade name "Wellsaw" for metal cutting band saws and "Tiger's Tooth" trade name for metal cutting band saw blades, goodwill, parts inventory, and customer files.
Figueroa has also provided evidence that Coxline is doing business in Michigan as Wellsaw, Inc. and in advertising refers to itself as "Wellsaw" and as the "Original Designers and Mfrs. Of the Hinge Style Horizontal Band Saws For Industrial Use." Additionally, evidence has been provided that Coxline refers to itself as "The original . . . since 1925." Conclusions 1. Standard for Summary Judgment Rule 56(c) of the Federal Rules of Civil Procedure provides that a motion for summary judgment may be granted when "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The Second Circuit has repeatedly noted that "as a general rule, all ambiguities and inferences to be drawn from the underlying facts should be resolved in favor of the party opposing the motion, and all doubts as to the existence of a genuine issue for trial should be resolved against the moving party." Brady v. Town of Colchester, 863 F.2d 205, 210 (2d Cir. 1988) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 330 n. 2 (1986) (Brennan, J., dissenting)); see Tomka v. Seiler Corp., 66 F.3d 1295, 1304 (2d Cir. 1995); Burrell v. City Univ., 894 F. Supp. 750, 757 (S.D.N.Y. 1995). If, when viewing the evidence produced in the light most favorable to the non-movant, there is no genuine issue of material fact, then the entry of summary judgment is appropriate. See Burrell, 894 F. Supp. at 758 (citing Binder v. Long Island Lighting Co., 933 F.2d 187, 191 (2d Cir. 1991)).
Materiality is defined by the governing substantive law. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "[T]he mere existence of factual issues — where those issues are not material to the claims before the court — will not suffice to defeat a motion for summary judgment." Quarles v. General Motors Corp., 758 F.2d 839, 840 (2d Cir. 1985).
For a dispute to be genuine, there must be more than "metaphysical doubt." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted).
Summary Judgment is Denied The traditional rule set forth by the Michigan Supreme Court 25 years ago is that a purchasing corporation is not liable for obligations of the selling corporation. Turner v. Bituminous Cas. Co., 397 Mich. 406., 418 (1976). The Second Circuit has expressed that it has adopted the general rule set forth in Turner. See, Goodrich v. Betkoski, 99 F.3d 505, 520 (2d Cir. 1996).
There is an issue of whether New York or Michigan law applies in this case. Because Michigan and New York law produce the same results on this motion for summary judgment, no conflict is presented. See, Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487.
There are, of course, exceptions to the general rule.
A purchasing corporation may be held liable for the obligations of a selling corporation in certain instances such as: 1) where there is an express or implied assumption of liability, (2) where the transaction amounts to a consolidation or merger, (3) where the transaction was fraudulent, (4) where some of the elements of a purchase in good faith were lacking, or where the transfer was without consideration and the creditors of the selling corporation were not provided for, or (5) where the purchasing corporation was a mere continuation or reincarnation of the old corporation. See Turner, 397 Mich. at 418. The analysis under Turner is essentially the same as the analysis under New York law for a finding of de facto merger. See, Hadar v. Concordia Yacht Builders, Inc., 886 F. Supp. 1082. There is no dispute that there was never an express or implied assumption of liability. The third and fourth exceptions to the general rule are not applicable either. There is no evidence to suggest that the transaction between Wells Manufacturing and Robot Research was fraudulent. There is, however, a dispute regarding whether the transaction at issue in this case was a "continuation of enterprise" or "de facto merger." Whether a transaction constitutes a de facto merger depends on the following four factors: (1) whether there is a continuation of the enterprise of the seller corporation, such that the management, personnel, physical location, assets and general business operations are the same as they were when owned by the seller corporation, (2) whether there is a continuity of shareholders which results from the purchasing corporation paying for the acquired assets with shares of its own stock, this stock being held by shareholders of the seller corporation, (3) whether the seller corporation ceases its ordinary business operations, liquidates and dissolves immediately thereafter, and (4) whether the purchasing corporation assumes those obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations of the seller corporation. Hadar v. Concordia Yacht Builders, Inc., 886 F. Supp. 1082, 1090; Foster v. Cone-Blanchard Machine Co., 597 N.W.2d 506, 510 (1999). Not all of these factors are required to demonstrate the existence of a de facto merger and these factors are only indicators. Hadar v. Concordia Yacht Builders, Inc. at 1090; Korzetz v. Amsted Industries, Inc., 472 F. Supp. 136, 143 (E.D.Mich. 1979).
New York law treats the second and fifth exceptions to the Turner rule as the same analysis. See, Hadar v. Concordia Yacht Builders, Inc., 886 F. Supp. 1082, 1090. As the court did in Hadar, the second and fifth exceptions will be considered together.
As Figueroa points out, there is evidence of a continuity of assets and general business operations. Indeed, evidence has been offered that Coxline obtained the assets of Wells Management, continued its general business operations and continues to make clear in its advertising that it continues to this day to identify itself with the Wellsaw line of band saws. No evidence has been provided by either party with respect to the makeup of management and personnel, aside from bare assertions because discovery has not taken place. There is also some evidence, settling all inferences in favor of the non-moving party, Figueroa, that Coxline continued at least the servicing of obligations of Wells Management since it obtained the warranty cards and service documentation. In its Reply Brief, Coxline misstates holding of Howard v. Clifton Hydraulic Press Co., 830 F. Supp. 708, 710 (E.D.N Y 1983) in stating that the court in that case held that different management and personnel between a selling corporation and a purchasing corporation was dispositive to a finding that continuity of enterprise did not exist. In Howard, the court noted that "only the physical location of the two companies shows continuity" and explicitly found that the buyer did not acquire the assets of the seller. Id. at 711. The case is therefore not helpful to Coxline's position. It should also be noted that the mere fact that Coxline purchased Wells Management's assets at a bankruptcy sale does not preclude it from being liable without consideration of the Turner guidelines. In Pelc v. Bendix Machine Tool Corp. ( 111 Mich. App. 343, 314 N.W.2d 614, 618-619), the court analyzed successor liability by examining the Turner factors despite the fact that the successor obtained assets from the predecessor corporation at a bankruptcy sale. Successor liability was not found in that case because the successor obtained less than 8% of the assets sold by the Bankruptcy estate, did not purchase accounts receivable as here, the predecessor was in straight bankruptcy (rather than having filed under Chapter 11 as here), and no liabilities or obligations were assumed. Conclusion Based on these factual issues, and settling all inferences in favor of the non-moving party, summary judgment is inappropriate. There is a genuine issue of material fact as to whether the factors determining a de facto merger are satisfied in this case. Accordingly, Coxline's Motion for Summary Judgment is DENIED.