Brief Fact Summary. American Tredex Corporation, AT Corporation, and Nissen Corporation, (Petitioners), appeal a trial court decision holding them liable for personal injuries sustained by Frederick Brandt and allegedly caused by a treadmill manufactured by American Tredex Corporation.
Synopsis of Rule of Law. Successor corporations do not acquire the debts and liabilities of the predecessor even where there is a continuation of the business operation or enterprise but no continuation in ownership.
If as a group the same employees continue, without pause to produce the same products in the same plant, with the same supervision, the ownership of the entity which maintains essentially the same name cannot be the sole controlling determinant of liability.View Full Point of Law
Issue. Whether this court should adopt a fifth exception for continuity of enterprise to the general rule of nonliability of successor corporations.
Held. No. The court rejects the continuity of enterprise exception to the general rule of nonliability of successor corporations.
Dissent. The court should adopt the continuity of enterprise exception to the general rule of nonliability of successor corporations.
Discussion. A corporate successor is not a seller and bears no blame in bringing the product and the user together. It is unfair to require such a party to bear the cost of unassumed and uncontemplated products liability claims because it is still in business. The fact that Nissen maintained a network to service American Tredex customers does not give rise to successor liability. Further, Nissen should not be penalized for retaining some of the American Tredex’s employees or assuming some of American Tredex’s obligations. The continuity of enterprise theory proposes an ill-considered extension of liability to an entity having no causal relationship with the harm.