By Leah S. Poniatowski, J.D.
The trial court’s choice-of-law analysis and its interpretation of the purchase agreement between Black & Decker and the parent company of the table saw manufacturer was not erroneous.
An individual injured in Texas when using a table saw manufactured by Delta International Machinery Corporation (Delta) could not show that the lower court erred when it ruled that Texas law applied to the tort claim against Stanley Black & Decker or that the agreement in which Black & Decker acquired Delta did not include Black & Decker’s assumption of Delta’s liabilities, the U.S. Court of Appeals for the Tenth Circuit ruled in an opinion affirming the lower court and designated as not binding precedent (Lopez v. Stanley Black & Decker, Inc., February 27, 2019, Phillips, G.).
The individual filed a state-court lawsuit against Delta and other related entities, which removed the case to the federal district court in New Mexico. That court largely dismissed all the defendants on personal jurisdiction grounds, except for Stanley Black & Decker, Inc. and Black & Decker (U.S.), Inc. The court granted the Black & Decker parties summary judgment, finding that they could not be held liable for negligence and strict liability claims because the Black & Decker companies did not supply the saw, did not sufficiently control the manufacturer of the saw to justify the court’s piercing the corporate veil, and did not expressly assume liability for the table saw when they acquired Delta.
Acquisitions timeline. The table saw at issue had been manufactured by Delta in 2001. Three years later, in 2004, Black & Decker Corp. entered into an acquisition agreement with Pentair, Inc., the parent of Delta, for the subsidiary and others. By 2010, Black & Decker became a wholly-owned subsidiary of The Stanley Works, later known as Stanley Black & Decker, Inc. Black & Decker (U.S.) Inc. is also a subsidiary of Black & Decker Corp. The individual was injured in 2012.
Applicable law. With respect to the successor-liability issue, the appellate court explained that there were three possible states whose law governed the matter: Texas, where the injury occurred; New Mexico, the forum state; or Delaware, pursuant to the forum selection clause in the purchase agreement between Black & Decker and Pentair. The laws in the three states differ significantly as to the circumstances when a successor company is liable for the predecessor’s debts, with Texas allowing only one exception to the general non-liability rule in the event of express assumption of liability. Delaware and New Mexico law recognize several other exceptions.
Following the forum court’s choice-of-law rules, the substantive area of law must first be determined, then the applicable choice-of-law rule of the forum state would be applied to sort out which state’s substantive law governs the issue. In the present case, the individual’s claims were based in tort, and pursuant to New Mexico’s tort-based conflict-of-law rule, the governing law is that of the state where the incident giving rise to the lawsuit occurred, which is Texas. Further, the appellate court explained that it also was necessary to determine which state’s law applied to the successor liability issue. Under New Mexico law, the characterization of successor liability was not clearly delineated as it reflects both tort and contract principles.
The lower court, predicting what the New Mexico high court would do, correctly relied on a case holding that successor liability issues "turn on the viability of the underlying tort claim and not on principles of contract enforcement." The Tenth Circuit concurred, clarifying that the contractual issues impacting the manufacturer’s liability were insufficient in the present case to shift the characterization from being tort-based. Moreover, the individual could file "an ordinary products liability action" against Delta.
Express assumption. According to Texas law, a successor corporation may be liable for the predecessor only under one exception—when the successor company has expressly assumed the predecessor’s liabilities. The appellate court determined that Delaware law applied on the issue of interpreting the purchase agreement, i.e. whether the terms of the purchase agreement were ambiguous under Delaware law. The purchase agreement contained sections describing "Transferred Subsidiaries," "Transferred Liabilities," and "Indemnified Liabilities,"—which the lower court read as maintaining Delta as a distinct legal entity—specifying that the liabilities transferred with the subsidiaries, and that the non-indemnified liabilities remained the subsidiaries’ obligation. The Tenth Circuit agreed that the purchase agreement was unambiguous and that no liability transferred to Black & Decker. Further, the individual did not present any evidence to permit piercing the corporate veil or to interpret the agreement otherwise, or any evidence that the lower court abused its discretion when it granted the summary judgment motion. Thus, the lower court’s ruling in favor of Stanley Black & Decker was affirmed.
The case is No. 18-2055.
Attorneys: Joseph G. Isaac (Scherr Legate PLLC) for Ismael Lopez. Donald A. Decandia (Modrall Sperling) for Stanley Black & Decker, Inc., Black & Decker (U.S.), Inc. and Delta International Machinery Corp.
Companies: Stanley Black & Decker, Inc; Black & Decker (U.S.), Inc; Delta International Machinery Corp.
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