2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-24-2002

Kradel v. Fox River Tractor Co

Precedential or Non-Precedential: Precedential

Docket No. 99-4069

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2002

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 2002 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Recommended Citation

"Kradel v. Fox River Tractor Co" (2002). 2002 Decisions. Paper 666.

http://digitalcommons.law.villanova.edu/thirdcircuit_2002/666
PRECEDENTIAL 

 Filed October 24, 2002 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

Nos. 99-4069 / 00-3146 

HARRY T. KRADEL; MARILENE KRADEL, his wife, 

 Appellants 

v. 

FOX RIVER TRACTOR COMPANY, a foreign corporation; 

FOX CORPORATION, a foreign corporation; PIPER 

INDUSTRIES, INC., a foreign corporation; HINIKER 

COMPANY, a foreign corporation; CERTIFIED PARTS, a 

foreign corporation; AMCA/KOEHRING COMPANY; KENT 

REYNOLDS, as escrow agent on behalf of the former 

shareholders of defendant Piper Industries, Inc. 

(Intervenor/Defendant in D.C.) 

v. 

HINIKER COMPANY, 

 Third Party Plaintiff 

v. 

AMCA/KOEHRING COMPANY, 

 Third Party Defendant 

Appeal from the United States District Court 

for the Western District of Pennsylvania 

(D.C. Civil Action No. 96-1808) 

District Judge: Honorable Alan N. Bloch 

 

Argued December 12, 2000 

Questions Certified to Supreme Court 

of Tennessee February 6, 2001 

Response of Supreme Court of Tennessee 

to Certified Questions November 27, 2001 

Before: SCIRICA, and AMBRO, Circuit Judges, and 

POLLAK, District Judge.** 

(Opinion filed: October 24, 2002) 

 Matthew L. Kurzweg (ARGUED) 

 445 Fort Pitt Boulevard 

 Fort Pitt Commons Building, 

 Suite 400 

 Pittsburgh, PA 15222 
 Attorney for Appellants 

 Wayne W. Ringeisen (ARGUED) 

 Arnd N. von Waldow 

 Reed Smith Shaw & McClay 

 435 Sixth Avenue 

 Pittsburgh, PA 15219 

 Attorney for Appellee Kent 

 Reynolds, as Escrow Agent on 

 Behalf of the Former Shareholders 

 of Piper Industries, Inc. 

 Clem C. Trischler (ARGUED) 

 Pietragallo, Bosick & Gordon 

 301 Grant Street 

 One Oxford Centre, 38th Floor 

 Pittsburgh, PA 15219 

 Attorney for Appellee Hiniker 

 Company 

_________________________________________________________________ 

** Honorable Louis H. Pollak, Senior United States District Judge for the 

Eastern District of Pennsylvania, sitting by designation. 

 2 

 

OPINION OF THE COURT 

AMBRO, Circuit Judge. 

Harry Kradel was injured in 1994 while operating a 

forage harvester. He and his wife, Marilene Kradel, filed this 

product liability suit in Pennsylvania state court in 1996, 

naming, inter alia, the original manufacturer and its 

corporate successors, Piper Industries, Inc. ("Piper") and 

the Hiniker Company ("Hiniker"), as defendants. The case 

was removed to the United States District Court for the 

Western District of Pennsylvania based on diversity of 

citizenship. 28 U.S.C. S 1332. The District Court granted 

summary judgment in favor of Hiniker and Piper on the 

grounds that (1) under Pennsylvania tort law, Hiniker is not 

liable because it does not fall within the "product line" 

exception to Pennsylvania’s bar on successor liability, and 

(2) under Tennessee corporate law, Piper--which dissolved 

in 1986--is not liable for injuries caused by its products 

eight years after its dissolution. 

The Kradels ask us to reverse the District Court’s ruling 

in favor of Hiniker and Piper. We conclude that the District 

Court correctly ruled that Hiniker is not liable for the 

Kradels’ injuries under Pennsylvania’s successor liability 

law. Because the claim against Piper raised unsettled 

questions of Tennessee corporate law, we certified it--in the 

form of five questions--to the Supreme Court of Tennessee. 

That Court has resolved each of the certified questions 

against the Kradels.1 Accordingly, we affirm the District 

Court’s judgment in favor of Piper as well. 

I. Facts and Procedural History 
Harry Kradel lost part of his right leg in 1994 in an 

accident involving a 1970 model Fox forage harvester (with 

_________________________________________________________________ 

1. Those questions and the answers to them are set out in II(B) of this 

opinion. We express our gratitude to the Tennessee Supreme Court for 

entertaining our certified questions and for responding so clearly and 

comprehensively. 

 3 

 

a Fox corn head attachment) on his farm in western 

Pennsylvania. In 1970, Fox brand farm equipment was 

manufactured by the Koehring Company ("Koehring").2 In 

1981, Koehring sold, inter alia, its Fox line to Piper. A 

provision of that asset sale agreement required Piper to 

assume Koehring’s product liability claims. 

Piper, in turn, sold the Fox line to Hiniker in 1986 by an 

agreement that expressly provided for no adoption of 

liabilities by Hiniker. Piper then dissolved under Tennessee 

law on December 31, 1986 by filing Articles of Dissolution. 

After selling its farm equipment business, Koehring 

merged with another company in 1981 to become the 

AMCA/Koehring Company, which continues to operate 

today. AMCA/Koehring settled with the Kradels on October 

5, 1998 for $450,000. The "released parties" under the 

AMCA/Koehring settlement agreement include "the present 

and former parents, subsidiaries, predecessors, affiliates, 

officers, directors, employees, agents, servants. . . , 

including but not limited to the Fox Tractor Division of 

Koehring Company; Koehring Company; AMCA/Koehring 

Company; . . . ." 

This appeal is from the grant of summary judgment in 

favor of Hiniker, Piper, and Kent Reynolds, an escrow agent 

who holds assets for the benefit of Piper shareholders.3 We 

have jurisdiction under 28 U.S.C. S 1291 (which permits 

appeals from final decisions of the district courts), and we 

_________________________________________________________________ 

2. We found nothing in the parties’ briefs or the portions of the record 

included within the parties’ appendices that explains the involvement of 

Fox Corporation and Fox River Tractor Company, who were initially 

named as defendants in this action. It seems likely that these companies 

were the original manufacturers of the Fox line, and sold the line, with 

the accompanying "Fox" trademark, at some time prior to 1970, to the 

Koehring Company. 

3. Reynolds remains in this case because the Kradels have sued him 

under the trust fund doctrine as an alternate way to recover from Piper. 

We treat the claim against him as part of the claim against Piper. The 

other defendants have all been dismissed. Fox River Tractor Company 

was eliminated for failure of service. Fox Corporation was dismissed 

pursuant to a motion by the plaintiff. Certified Parts was dismissed by 

stipulation of the parties. 
 4 

 

review the District Court’s grant of summary judgment de 

novo. American Medial Imaging Corp. v. St. Paul Fire and 

Marine Ins. Co., 949 F.2d 690, 692 (3d Cir. 1991). 

II. Discussion 

A. The Hiniker Claim 

The District Court found Hiniker not liable under 

Pennsylvania law for injuries allegedly caused by Koehring’s 

forage harvester and corn head attachment.4 The Kradels 

argue that they can reach Hiniker under the "product line" 

exception to the general rules of successor liability. 

Because the Kradels successfully recovered a settlement 

from the original manufacturer, however, this argument is 

unavailing. 

Under Pennsylvania’s successor liability doctrine,"[i]n 

general, when one corporation sells or transfers its assets 

to a second corporation, the successor does not become 

liable for the debts and liabilities of the predecessor." 

LaFountain v. Webb Indus. Corp., 951 F.2d 544, 546-47 (3d 

Cir. 1991). One exception to this rule is the "product line" 

exception, which Pennsylvania courts adopted in Dawejko 

v. Jorgensen Steel Co., 434 A.2d 106 (Pa. Super. Ct. 1981), 

because the successor liability doctrine left some plaintiffs 

who were injured by defective products without recourse. 

See Hill v. Trailmobile, Inc., 603 A.2d 602, 606 (Pa. Super. 

Ct. 1992) (explaining that "[p]laintiffs injured by products 

manufactured by predecessor corporations purchased by 

multiple corporations, or which shared no identity of 

corporate structure were, unfortunately, left without a 

remedy in strict liability"). 

When the Pennsylvania Superior Court first adopted the 

product line exception in Dawejko, it considered various 

formulations employed in other states. It then borrowed 

_________________________________________________________________ 

4. It is uncontested that Pennsylvania law governs the Kradels’ suit 

against Hiniker. Thus we follow (or predict if necessary) what the 

Pennsylvania Supreme Court would do and, in so doing, we may rely on 

opinions of intermediate appellate courts. See Glenn Distributors Corp. v. 

Carlisle Plastics, Inc., 297 F.3d 294, 300 n.3 (3d Cir. 2002); Borse v. 

Piece Goods Shop, Inc., 963 F.2d 611, 614 (3d Cir. 1992). 

 5 

 

from New Jersey the most general statement of the 

exception: 

 [W]here one corporation acquires all or substantially all 

 the manufacturing assets of another corporation, even 

 if exclusively for cash, and undertakes essentially the 

 same manufacturing operation as the selling 

 corporation, the purchasing corporation is strictly 
 liable for injuries caused by defects in units of the 

 same product line, even if previously manufactured 

 and distributed by the selling corporation or its 

 predecessor. 

Dawejko, 434 A.2d at 110 (quoting and adopting the 

standard from Ramirez v. Amsted Indus., Inc., 431 A.2d 

811, 825 (N.J. 1981)). The Kradels argue from this 

formulation that the product line exception clearly confers 

liability on Hiniker. On its face, the exception quoted from 

Dawejko seems to support their argument. But the Kradels 

err in relying solely on this statement of the product line 

exception without considering the entire Dawejko opinion 

and its progeny. 

The Dawejko court looked in part to Ray v. Alad Corp., 

560 P.2d 3 (Cal. 1977), for guidance in formulating its 

statement of the product line exception. The California 

Supreme Court in Ray announced three requirements 

before the exception would apply: 

 [S]trict liability should be imposed upon a successor to 

 a manufacturer if three circumstances were shown:‘(1) 

 the virtual destruction of the plaintiff’s remedies 

 against the original manufacturer caused by the 

 successor’s acquisition of the business, (2) the 

 successor’s ability to assume the original 

 manufacturer’s risk-spreading rule, and (3) the fairness 

 of requiring the successor to assume a responsibility 

 for defective products that was a burden necessarily 

 attached to the original manufacturer’s good will being 

 enjoyed by the successor in the continued operation of 

 the business.’ 

Dawejko, 434 A.2d at 109 (citing Ray, 560 P.2d at 8-9). 

Requirement (1) is most relevant for our purposes because 

the Kradels received a $450,000 settlement from 

 6 

 

AMCA/Koehring, which, as will be discussed below, is 

effectively a recovery from the original manufacturer. 

Dawejko characterized the three Ray factors as advisory 

only and expressly excluded them from its formulation of 

the product line exception. Dawejko, 434 A.2d at 111. 

Thus, were Dawejko the last statement on the issue, it 

would be unclear whether in Pennsylvania a recovery from 

the original manufacturer bars the Kradels from recovering 

from Hiniker, a successor corporation, under the product 

line exception. 

The Pennsylvania Superior Court, however, has revisited 

this issue. In Hill, the Court recast the three factors in Ray 

as requirements.5 Hill, 603 A.2d at 606 ("The [Dawejko] 

court also stated that the product-line exception to the 

general rule of no liability for successor corporations may 

only be applied when the following three circumstances 

have each been established: [listing the three Ray 
factors].")(emphasis omitted). While Hill arguably read more 

into Dawejko than is there, it nevertheless elevated the Ray 

factors into prerequisites for the product line exception.6 

Furthermore, the rule that the product line exception is 

unavailable when the plaintiff has recourse against the 

original manufacturer has been adopted subsequently in 

_________________________________________________________________ 

5. Before the Pennsylvania Superior Court decided Hill, we twice 

predicted that Pennsylvania courts would require the lack of remedy 

against an original manufacturer as a prerequisite to the product line 

exception. See Conway v. White Trucks, Div. of White Motor Corp., 885 

F.2d 90, 95 (3d Cir. 1989) ("We predict, however that [Pennsylvania 

courts] would not apply [the product line] exception in cases where the 

claimant had a potential remedy against the original manufacturer, but 

failed to exercise all available means to assert his or her claim."); La 

Fountain v. Webb Indus. Corp., 951 F.2d 544, 547 (3d Cir. 1991) (noting 

that "[n]othing has happened since Conway was decided to indicate any 

weakening of its holding"). 

6. Hill went on to explain why the failure to recover from the original 

manufacturer was a prerequisite to use of the exception. 603 A.2d at 

607 ("The product-line exception is a remedy which was created to afford 

relief to plaintiffs, victims of manufacturing defects who, due to the sale 

or transfer of the manufacturing corporation, otherwise would have no 

avenue of redress for injuries caused by defective products.")(emphasis 

omitted). 

 7 

 

another Pennsylvania case, Keselyak v. Reach All, Inc., 660 

A.2d 1350, 1354 (Pa. Super. Ct. 1995). Though the court in 

Keselyak did not cite to Hill, it relied on the two cases from 

this Court predicting its holding on this issue, Conway and 

LaFountain. See supra n.5. It is thus clear that the inability 

to recover from an original manufacturer is a prerequisite 

in Pennsylvania to the use of the product line exception. 

The Kradels assert that their recovery from 

AMCA/Koehring is not a recovery from an original 

manufacturer. We are not persuaded. First, it is obvious 

that the Kradels have treated AMCA/Koehring as the 

original manufacturer throughout this litigation. Hiniker 

references several court documents in which the Kradels 

refer to AMCA/Koehring as the original manufacturer. See 

Br. of Hiniker at 27-28. For example, the Kradels stated the 

following in their brief in opposition to summary judgment 

for Hiniker: "Plaintiffs also agree that they have already 

asserted a claim against the original manufacturer, 

Koehring Company, currently doing business as 

‘AMCA/Koehring Company,’ and misnamed ‘Koehring 

Corporation’ in Plaintiff’s Complaint (hereinafter collectively 

‘Koehring’)." Hiniker’s Supp. Appendix at 231. Hiniker 

argues that the doctrine of judicial estoppel prevents the 

Kradels from asserting inconsistent positions as to whether 

AMCA/Koehring is the same entity as the original 

manufacturer. 

We need not look to judicial estoppel, however, to bind 
the Kradels to their earlier representations. Adequate 

evidence that the Kradels had a remedy against the original 

manufacturer exists in the definition of "released parties" 

contained in AMCA/Koehring’s settlement agreement with 

them. Hinker’s Appendix at 255. The Kradels settled their 

claim with an entity known as "Koehring Company" when 

they settled with AMCA/Koehring. As noted above, the 

released parties included "AMCA/Koehring and the present 

and former parents, subsidiaries, predecessors, affiliates, 

officers, directors, employees, agents, servants and insurers 

of each, including but not limited to the Fox Tractor 

Division of Koehring Company; Koehring Company; 

AMCA/Koehring Company; AMCA International." Id. Thus, 

both in the release of "predecessors" and in the explicit 

 8 

 

mention of "Koehring Company," the "released parties" with 

whom the Kradels settled included the entity that merged 

with and ultimately became the current AMCA/Koehring. 

We thus reject the Kradels’ argument that they have not 

recovered from the original manufacturer, and we shall not 

permit them to rely on the product line exception. The 

District Court properly granted summary judgment in 

Hiniker’s favor. 

B. The Piper Claim 

The District Court concluded that Piper could not be 

liable for claims against it arising eight years after its 

dissolution and therefore granted summary judgment in its 

favor. Whether that decision was correct depends on which 

version of Tennessee’s corporation code--the one in place 

until January 1988 or the current one--applies to this 

case, whether Piper properly complied with the relevant 

dissolution laws, and whether a trust fund action is 

available against Reynolds to circumvent the effect of 

Piper’s dissolution on its post-dissolution tort liabilities. 

These were at least partly unsettled matters of Tennessee 

corporate law. Accordingly, pursuant to Tennessee Supreme 

Court Rule 23, we certified the following five questions to 

the Tennessee Supreme Court: 

 1) What law governs the making of claims arising in 

 1994 against a corporation which filed Articles of 

 Dissolution in 1986--the law of 1986 or those revisions 

 to the law effective January 1, 1988, Tenn. Code Ann. 

 Section 48-24-101, et seq.? More specifically, do the 

 saving provisions of Tenn. Code Ann. Section 48-27- 

 103(a)(2), stating that the repeal of the pre-1988 law 

 does not affect liabilities incurred under the statute 

 before its repeal, support the contention that a liability 

 incurred after the law’s effective date is governed by the 

 1988 revisions? 

 2) If the pre-1988 law applies, do the provisions of 

 Tenn. Code Ann. Section 48-1-1013(a) [repealed] apply 

 to liabilities incurred after Piper filed Articles of 

 Dissolution and, if not, does the common law of 
 Tennessee bar such actions? See Great American Ins. 

 Co. v. Byrd & Watkins Constr., Inc., 630 F.2d 460, 461 

 9 

 

 (6th Cir. 1980); Cf., Hunter v. Fort Worth Capital Corp., 

 620 S.W.2d 547, 549 (Tex. 1981). 

 3) Did Piper comply with Tenn. Code Ann. Section 48- 

 1-1007 [repealed]? If not, does the manner in which 

 Piper failed to comply invalidate an otherwise lawful 

 corporate dissolution and permit a cause of action 

 accruing almost eight years after the dissolution was 

 filed? Cf. Swindle v. Big River Broadcasting Corp., 905 

 S.W.2d 565, 567 (Tenn. Ct. App. 1995). 

 4) Do the pre-1988 Tennessee dissolution statutes 

 require provision for unforeseen future liabilities or 

 that the process of asset distribution to shareholders 

 be final? See Blankenship v. Demmler Mfg. Co. , 411 

 N.E.2d 1153, 1155 (Ill. App. Ct. 1980). 

 5) Could Kradel’s claims proceed under the "trust fund" 

 doctrine established in Voightman & Co. v. Southern 

 Ry. Co., 131 S.W. 982, 983 (Tenn. 1910) and Bean v. 

 Commercial Sec., Inc., 156 S.W.2d 338, 346 (Tenn. Ct. 

 App. 1942), in the absence of corporate insolvency, if 

 other remedies are unavailable to Kradel for the claims 

 against Piper? See Ottarson v. Dobson & Johnson, Inc., 

 430 S.W.2d 873, 878 (Tenn. Ct. App.1968). 

The Tennessee Supreme Court accepted the certified 

questions and resolved them thoroughly in Kradel v. Piper 

Ind., Inc., 60 S.W.3d 744 (Tenn. 2001). Its answers, taken 

directly from its opinion, are as follows: 

 [I]n answer to the first question certified, the General 

 Corporation Act, which was in effect before January 1, 

 1988, governs the propriety of Piper’s dissolution and 

 the scope of the petitioner’s remedies available against 

 Piper. 

 . . . 

 [I]n answer to the second question certified, Tennessee 

 Code Annotated section 48-1-1013(a) (repealed) does 

 apply to limit the liabilities incurred by Piper after it 

 filed its Articles of Dissolution. 

 . . . 

 10 

 

 [I]n answer to the third question certified, Piper fully 

 complied with the dissolution provisions of the 

 Tennessee General Corporation Act, effective prior to 

 January 1, 1988. 
 . . . 

 [In answer to the fourth question:] Because we have 

 already discussed the answers to this question in 

 addressing the third question certified, we answer 

 respectfully, and without further comment, that the 

 General Corporation Act does not require that adequate 

 provisions be made for unforeseen future liabilities to 

 effect a proper dissolution under the statute. In 

 addition, we answer that the General Corporation Act 

 does require a final distribution of corporate assets to 

 shareholders "in accordance with their respective rights 

 and interests," a requirement that appears to have 

 been satisfied under the facts as certified. 

 . . . 

 [I]n answer to the [fifth] question certified, the trust 

 fund doctrine has been applied to solvent corporations 

 under Tennessee law, but the application of that 

 doctrine in this case is necessarily limited by the 

 provisions of Tennessee Code Annotated section 48-1- 

 1013(a) (repealed). 

Kradel, 60 S.W.3d at 750-58. In short, the Tennessee 

Supreme Court has, with minor caveats, decided each of 

the certified questions against the Kradels. Accordingly, the 

Kradels’ claims against Piper and the escrow agent for 

Piper’s shareholders, Reynolds, cannot succeed. 

* * * * * * * 

For the foregoing reasons, the District Court’s judgment 

is affirmed. 

A True Copy: 

Teste: 

 Clerk of the UnitedStates Court of Appeals 

 for the Third Circuit 

 11