Products Liability Law Daily Successor to seller of defective conveyor not covered by product line exception
Tuesday, December 6, 2016

Successor to seller of defective conveyor not covered by product line exception

By Pamela C. Maloney, J.D.

A company that purchased some of the assets of a corporation that manufactured material handling equipment was not liable for injuries sustained by a conveyor line worker because there was no evidence to support application of the product line exception to the general rule of successor corporation non-liability, a federal district court in Pennsylvania ruled (McLaud v. Industrial Resources, Inc., December 5, 2016, Caputo, A.).

A factory worker’s right hand and forearm were seriously injured when her glove became caught in glue paper attached to the operating rollers of a two-chain driven line roller conveyor machine (CDLR) component of a short line machine as she attempted to remove a rat trap that had become caught in the roller. The CDLR was being used to repair wooden pallets for CHEP International, and there was some dispute as to whether CHEP or the worker’s employer, Millwood, Inc., had control over the CDLR’s operations. The machine, which had been manufactured by Omni Metal Craft Corp., had been sold to Industrial Resources of Michigan (IROM), which in turn sold it to Endless Warehouse, which then sold the machine to Millwood.IROM, which manufactured some of the components in the short line on which the worker had been working at the time of the accident, did not make any revisions or modifications to the CDLR machine after purchasing it from Omni. Five years before the accident, IR Ventures, Inc. (IR) was formed when a group of investors bought some of the assets of IROM.

After the accident, the worker filed a product liability lawsuit based on the allegedly defective design of the CDLR machine against a number of companies including IROM, IR, and CHEP. IR moved for summary judgment on the worker’s strict liability claims, arguing that as the successor to IROM by virtue of an asset purchase agreement, it did not assume the liability of its predecessor. CHEP also moved for summary judgment on the worker’s strict liability and negligence claims on the ground that it had not manufactured, distributed, or sold the CDLR. CHEP also moved for summary judgment on the worker’s negligence claims, arguing that they lacked evidentiary support.

Product line exception. The worker argued that the product line exception to the general rule of successor non-liability applied and, therefore, IR could be held strictly liable for any harms arising from alleged defects in the CDLR. The court rejected the worker’s argument finding as an initial matter that in Pennsylvania, the inability to recover from the original manufacturer was a prerequisite to liability under the product line exception. It was undisputed that the manufacturer of the CDLR was still a viable company which the worker elected not to sue.

In applying the other factors used by Pennsylvania courts to determine whether the exception applied, the court found that the evidence demonstrated that: (1) IR was owned by a different group of investors than IROM; (2) IR’s manufacturing operation was distinct from that of IROM; (3) IR serviced a different customer base; (4) IR used designs different from IROM’s for the material handling equipment it manufactured; and (5) IR had developed new products for sale. Moreover, the evidence showed that IR’s predecessor had not manufactured the allegedly defective CDLR, and there was no evidence to suggest that IR had a successor relationship with the actual manufacturer of the CDLR. Thus, the product line exception did not apply to circumvent IR’s protection as a successor corporation.

Claims against CHEP. The court also granted CHEP’s motion for summary judgment on the worker’s strict product liability design defect and failure-to-warn claims because there was no evidence that the company manufactured, distributed, or sold the CDLR in question.

Similarly, because there was no evidence that CHEP sold the CDLR or otherwise placed it into the stream of commerce, the negligence claims against CHEP could not survive the company’s motion for summary judgment. The most the evidence showed was that CHEP potentially owned the CDLR when the injury occurred. However, in order for CHEP to have had a duty to eliminate or minimize any dangers present in the machine before placing it into the stream of commerce, or to monitor the machine’s use, it must have been a manufacturer or seller of the CDLR. Finally, because CHEP could not recall a product that it did not manufacture or sell, and because Pennsylvania law does not recognize a duty on the part of a manufacturer/seller to retrofit its products, those negligence claims against CHEP also failed.

The case is Civil Action No. 3:14-CV-00737.

Attorneys: Gerard J. Jackson (Gerard J. Jackson, Attorney at Law) for Ashley McLaud. Douglas M. Grimsley (Dickie, McCamey, Chilcote, PC) for Industrial Resources, Inc. Drew L. Mallick (Post & Schell, P.C.) for CHEP International, Inc.

Companies: Industrial Resources, Inc.; Industrial Resources of Michigan, LLC; CHEP International, Inc.; IR Ventures, Inc.

MainStory: TopStory SCLIssuesNews DefensesLiabilityNews IndustrialCommercialEquipNews WarningsNews DesignManufacturingNews PennsylvaniaNews

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