Opinion ID: 201784
Heading Depth: 2
Heading Rank: 4

Heading: Could the Bragas Have Brought a Third Party Claim Against Lightolier?

Text: 41 Although Gurry provides the question, it does not provide the answer. While the Supreme Judicial Court of Massachusetts alluded favorably to the [dual persona] theory in Gurry, it has never explicitly adopted it, much less established its scope or set parameters for it. Barrett v. Rodgers, 408 Mass. 614, 562 N.E.2d 480, 482 (1990). No Massachusetts court has considered whether Gurry should be extended to circumstances like these, where an employer's predecessor merely owned defective equipment when it merged with the employer and an employee was later injured by that equipment. 42
43 A federal court that faces an unresolved state law question is to `ascertain the rule the state court would most likely follow under the circumstances.' Braga I, 57 Fed.Appx. at 453 (quoting Blinzler v. Marriott Int'l, Inc., 81 F.3d 1148, 1151 (1st Cir.1996)). It is reasonable to assume that the state court will follow the rule that appears best to effectuate relevant policies. Moores v. Greenberg, 834 F.2d 1105, 1107 (1st Cir.1987) (internal quotation and modification omitted). We may seek guidance `in analogous state court decisions, persuasive adjudications by courts of sister states, learned treatises, and public policy considerations identified in state decisional law.' Braga I, 57 Fed.Appx. at 453 (quoting Blinzler, 81 F.3d at 1151). In so doing, we must exercise considerable caution when considering the adoption of a new application of state law that could expand [its] present reach. Doyle v. Hasbro, Inc., 103 F.3d 186, 192 (1st Cir.1996). A federal court sitting in diversity must take care not to extend state law beyond its well-marked boundaries in an area ... that is quintessentially the province of state courts. Markham v. Fay, 74 F.3d 1347, 1356 (1st Cir.1996). 44 Extrapolating from analogous decisions in sister states and policy pronouncements of Massachusetts courts, we conclude that Gurry should not be extended to permit suit here.
45 The Supreme Judicial Court of Massachusetts has described the very broad exclusivity provision of the workers' compensation scheme as its cornerstone. Berger v. H.P. Hood, Inc., 416 Mass. 652, 624 N.E.2d 947, 949 (1993). It has also cautioned courts against creating [a]ny change in compensation law which would permit a covered employee to recover compensation benefits and, in addition, permit litigation by the employee against his employer to recover for an injury clearly covered by the Workmen's Compensation Act. Longever v. Revere Copper & Brass Inc., 381 Mass. 221, 408 N.E.2d 857, 860 (1980). The instances in which a single legal entity ... will be liable under both the workers' compensation scheme and in a lawsuit for a single injury arising out of a single workplace incident are very rare. Barrett, 562 N.E.2d at 483. 46
47 With this Massachusetts background in mind, we turn to analogous decisions of our sister states. Any exception to the immunity that workers' compensation schemes provide employers must be narrowly construed to fit only the policy reasons that give rise to its inception, and not allowed to expand to envelop situations that [workers' compensation] was otherwise intended to cover. Herbolsheimer v. SMS Holding Co., 239 Mich.App. 236, 608 N.W.2d 487, 495 (2000); see id. (dual-persona doctrine should be interpreted more narrowly rather than more broadly where its scope is unclear). It is important that the dual persona doctrine not be used for the purpose of simply evading the exclusivity provision of the Workmen's Compensation Act. Kimzey v. Interpace Corp., 10 Kan.App.2d 165, 694 P.2d 907, 912 (1985); cf. Gurry, 550 N.E.2d at 131 (evaluating how suit would affect important aims of workers' compensation and corporate successorship principles). 48 The majority — and, we conclude, better-reasoned — view among courts that have considered circumstances akin to those here is that an employer cannot be held liable on the basis of a predecessor's mere ownership of defective equipment when it merged with the employer. See Corr v. Willamette Indus., Inc., 105 Wash.2d 217, 713 P.2d 92, 96 (1986) (No obligation or liability would have existed prior to the merger, and none should be created by the merger that could not have existed independently.); Vega v. Standard Mach. Co., 290 N.J.Super. 434, 675 A.2d 1194, 1197-98 (1996) (predecessor's ownership of defective machine at merger did not create liability, when merger did not render predecessor a seller or supplier and consequently predecessor had no duty to warn). The key question is whether the employer had a separate duty to the employee-claimant outside of the employment relationship. See Hatch v. Lido Co. of New Eng., 609 A.2d 1155, 1157 (1992) (predecessor's negligent pre-merger installation or maintenance of equipment in its own facility for its own use did not implicate a separate and unrelated duty for the post-merger entity, beyond that of an employer to its own employees); Herbolsheimer, 608 N.W.2d at 496-97 (question of liability hinged on whether predecessor had separate obligations to claimant). 49 The flaws in plaintiffs' approach are clearer when considering the continuity of the corporate entities. Plaintiffs are arguing in effect that, on the one hand, Genlyte-Thomas is a continuation of Lightolier/APC for the purpose of holding the successor corporation liable. On the other hand, plaintiffs argue that Lightolier/APC is so distinct and separate from its successors that its transfer of the Press via merger created new duties and liabilities. The latter view is inconsistent not only with the former, but with the very nature of a corporate merger: [T]he consolidation of two or more corporations is like the uniting of two or more rivers, neither stream is annihilated, but all continue in existence. A new river is formed, but it is a river composed of the old rivers, which still exist, though in a different form. Atlantic & B. Ry. v. Johnson, 127 Ga. 392, 56 S.E. 482, 484 (1907) (quoting Thompson on Corporations § 8341). The object of the consolidation of two or more solvent corporations into one is not usually to wind up the business of the old corporations but to continue as a unit that which theretofore had been separate. Proprietors of Locks & Canals on Merrimack River v. Boston & M.R.R., 245 Mass. 52, 139 N.E. 839, 841 (1923). It is the continuity of the constituent corporations that plaintiffs apparently fail to grasp in theorizing that the transfer of equipment through a merger can itself create third party liability. Where the transferor [] and transferee [] bec[o]me one and the same as of the moment of transfer, there is [i]n effect, ... no transfer (and therefore no duty owed) from one entity to another, since at the moment of transfer there was only one entity, the surviving corporation. Duvon v. Rockwell Int'l, 116 Wash.2d 749, 807 P.2d 876, 881 (1991) (describing rationale of Corr ). 50 Although the cases discussed above represent the majority view, the states have not taken a uniform approach to the present factual scenario. Plaintiffs rely heavily on Billy v. Consol. Mach. Tool Corp., 51 N.Y.2d 152, 432 N.Y.S.2d 879, 412 N.E.2d 934 (1980), in which the New York Court of Appeals permitted suit to go forward against an employer based on its status as successor to corporations that had designed and manufactured allegedly defective equipment for their own use. 2 The equipment passed to the successor corporation through a series of mergers. The court held that, but for the merger, plaintiff could have sued the predecessor corporations based on their design and manufacture of the defective equipment. The court concluded that this potential liability survived the merger, since the obligation upon which [the successor] is being sued arose not out of the employment relation, but rather out of [the] independent business transaction of the merger itself. Id. at 161, 432 N.Y.S.2d at 885, 412 N.E.2d at 940; see also Schweiner v. Hartford Accident & Indem. Co., 120 Wis.2d 344, 354 N.W.2d 767, 772-73 (1984) (holding that, but for merger, plaintiff could have sued predecessor that manufactured defective equipment as third party, but not analyzing basis for such a suit). 51 A strong dissent in Billy exposed the flaws in the majority's reasoning. The dissent noted that the inchoate tort liability the predecessor incurred after installation of the defective equipment for its own use was to anyone injured by the defect other than an employee, as to whom [workers'] compensation law immunized it from common-law liability. Billy, 432 N.Y.S.2d 879, 412 N.E.2d at 942 (Meyer, J., dissenting) (emphasis in original). The Billy dissent reasoned that the successor company inherited the predecessor's immunity from liability, including immunity from an employee's suit. As a result, the merger provided no basis for liability; it was not the equivalent of a sale or transfer of assets (with the concomitant legal obligations this would entail), and the act of merging itself did not, as a matter of law, create liability. Id. at 163-168, 432 N.Y.S.2d at 886-889, 412 N.E.2d at 942-44; see id. at 164, 432 N.Y.S.2d at 886, 412 N.E.2d at 942 ([E]ven under the most liberal application of the [dual persona] doctrine a manufacturer-employer is held protected by compensation immunity when the product was manufactured solely for his own use and not for distribution to the general public.).