By Susan Engstrom
A Germany-based manufacturer of tractors could not escape design defect and failure-to-warn claims brought by the widow of an individual who sustained fatal injuries while operating a Deutz model 3006 tractor, a federal court in Mississippi ruled. Under German law, which governed the issue of successor liability in this case, the manufacturer had not transferred its product-related liabilities in a sale that took place in 1991 and 1992. The court dismissed the other three defendants in the action, finding that it lacked personal jurisdiction over one of them and that, in the absence of successor liability, the other two could not be held liable under the Mississippi Product Liability Act (Bouchillon v. SAME Deutz-Fahr, Group July 5, 2017, Brown, D.).
While using a tractor designed and manufactured by Deutz AG (Deutz), the operator was killed when the tractor came into contact with a tree sapling, causing the sapling to cinch down on top of his back. The operator’s spouse/estate representative filed a wrongful death products liability action alleging claims for design defect and failure to warn under the Mississippi Product Liability Act (MPLA) against Deutz, SAME Deutz-Fahr North America, Inc. (SAME America), SAME Deutz-Fahr, Group (SAME Group), and SAME Deutz-Fahr Deutschland GmbH (SAME Germany). According to the complaint, these companies had designed, manufactured, marketed, distributed, warranted, and sold the defective tractor. Deutz filed a motion for summary judgment, arguing that it had transferred all of the assets and liabilities of its tractor business in 1991 and 1992. SAME Group and SAME America filed their own motion for summary judgment, asserting that the 1991/1992 sale did not transfer Deutz’s liability. SAME Germany filed a motion to dismiss for lack of personal jurisdiction.
Corporate structure. Deutz, a German corporation with its headquarters in Germany, manufactured tractors from 1924 to 1992. In 1991, Deutz entered into a contribution agreement with another German corporation, KHD Agrartechnik GmbH (Agrartechnik). The agreement assigned to Agrartechnik "corporate and operational management" of Deutz’s tractor division and called for the transfer of the division’s "significant [a]ssets and [l]iabilities (moveable tangible assets and participations such as pension reserves)." In 1992, the two companies executed another contribution agreement transferring total control of the division, as well as the division’s remaining assets and liabilities. In 1995, Deutz sold its shares of Agrartechnik and its "industrial property rights" in the tractor business to the corporate predecessors of SAME Group. Agrartechnik subsequently merged with other companies to form SAME Germany.
Choice of law. A threshold issue in this case was whether Mississippi law or German law governed the issues of successor liability. The court determined that there was a conflict of laws because German law requires that an assumption of a future product liability be ratified by an obligee, whereas Mississippi law does not contain such a requirement. In addition, German law does not have a doctrine resembling Mississippi’s continuity of enterprise theory. According to the court, both conflicts of law were substantive for the purpose of Mississippi’s choice-of-law analysis.
With respect to issue classification, the decedent’s wife sought to impose successor liability based on: (1) the alleged assumption of liability in the contribution agreements; and (2) the alleged subsequent continued operation of Deutz’s corporate enterprise. By its very nature, the continuation of a corporate enterprise is not an act that can be performed by an individual. Thus, the issue of whether the subsequent operation of the enterprise gave rise to successor liability fell under the ambit of Restatement (Second) of Conflict of Laws §302. As such, it was properly characterized as an issue of corporate law. However, when an act of contracting brings an issue outside the scope of §302, the issue is properly characterized as an issue of contract. In this case, therefore, the court concluded that the issue of whether the contribution agreements transferred liabilities was one of contract.
Finally, the court determined that Germany had the most significant relationship to the issue of contract because the 1992 contribution agreement was executed in that country. Thus, German law governed the successor liability issues in this case.
Personal jurisdiction. Under the tort prong of Mississippi’s long-arm statute, personal jurisdiction is proper if any element of the tort takes place in Mississippi. Here, there was no dispute that the tractor was used in Mississippi and caused injury in that state. However, SAME Germany argued that because it did not design, manufacture, or sell the tractor at issue (i.e., did not commit the tort at issue), the long-arm statute did not apply. The widow countered that SAME Germany was subject to personal jurisdiction because "personal jurisdiction follows successor liability."
There was no dispute that the court had personal jurisdiction over Deutz, the predecessor company. Thus, the court had to determine whether SAME Germany could properly be deemed a successor to Deutz for the purpose of applying Mississippi’s long-arm statute. Based on the findings of a special master, the court concluded that SAME Germany would not be subject to successor liability under German law. Specifically, the contribution agreements did not transfer liability to the SAME entities because there was no ratification of the relevant transfers. German law would not recognize SAME Germany as a successor because the claims at issue in this case did not exist at the time of the transfer and because the transferred business was not continued under the original name. Because SAME Germany was not a successor to Deutz, the court could not impute Deutz’s alleged commission of the tort to SAME Germany for the purpose of applying the long-arm statute. Accordingly, the court granted SAME Germany’s motion to dismiss.
Successor liability. Deutz argued that it was not liable for the widow’s product liability claims because it had transferred the product-related liabilities through the 1991 and 1992 contribution agreements. As explained above, however, under German law, neither of the contribution agreements transferred liability for product-related liabilities from Deutz. Therefore, Deutz was not entitled to summary judgment.
In their own summary judgment motion, SAME Group and SAME America asserted that they were not liable for the product liability claims because they did not assume Deutz’s liabilities, were not responsible for the design or manufacture of the subject tractor, and could not be liable under a theory of successor liability. The parties did not dispute that Mississippi law should be applied to determine the ultimate issues of tort liability in this action, which involved injury to a Mississippi resident within the state of Mississippi. Under Mississippi law, in the absence of a recognized basis for successor liability, a successor corporation will not be liable for the torts caused by products manufactured by the corporation’s predecessor. Thus, in the absence of successor liability, the SAME entities would not be liable for the widow’s product liability claims, which were based on a product made by a predecessor corporation. Because the SAME entities were not subject to successor liability under German law, they were entitled to summary judgment.
The case is No. 1:14-CV-00135-DMB-DAS.
Attorneys: William Edward Ballard (Ballard Law, PLLC) for Judy Bouchillon. Jonathan Hoyt Still (Butler Snow LLP) for SAME Deutz-Fahr, Group and SAME Deutz-Fahr North America, Inc. David L. Ayers (Watkins & Eager) for Deutz AG.
Companies: SAME Deutz-Fahr, Group; SAME Deutz-Fahr North America, Inc.; Deutz AG
MainStory: TopStory JurisdictionNews SCLIssuesNews IndustrialCommercialEquipNews MississippiNews
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