Opinion ID: 1689947
Heading Depth: 2
Heading Rank: 1

Heading: whether the product line theory should be adopted, holding a successor corporation strictly liable for the torts of its predecessor.

Text: ¶ 9. Huff urges us to adopt the product line theory of products liability so that a successor corporation may be held liable for injuries caused by defective products manufactured by its predecessor corporation. The theory was originally put forth by the California Supreme Court in Ray v. Alad Corp., 19 Cal.3d 22, 136 Cal.Rptr. 574, 560 P.2d 3 (1977), and has since been adopted by several other states. ¶ 10. The general rule has been that a corporation which acquires all of the assets, but no stock, of another corporation does not also acquire the debts and liabilities of the original. Mozingo v. Correct Mfg. Corp., 752 F.2d 168, 174 (5th Cir. 1985). However, under the product line theory, successor corporations which undertake the manufacture of the same products as the predecessor are liable for injuries caused by defects in that product and inherit the liabilities associated with the product even if sold and manufactured by the predecessor corporation. Ramirez v. Amsted Indus., Inc., 86 N.J. 332, 431 A.2d 811, 825 (1981). Under the product line theory, manufacturers (both predecessor and successor corporations) are in a better position to insure against defective products, and the compensation of innocent victims is spread throughout society. Hickman v. Thomas C. Thompson Co., 592 F.Supp. 1282, 1284 (D.Colo.1984). ¶ 11. There is one significant hurdle to traverse before the merits of the products line theory may be properly considered. Shopsmith argues that the product line theory has been found applicable only in states where strict liability is still a valid theory of recovery and that Mississippi's adoption of Miss.Code Ann. § 11-1-63 (Supp.2000) is an abandonment of strict products liability. Shopsmith misinterpreted the holding of the trial court or, at the least, takes it a step too far. With the adoption of § 11-1-63, common law strict liability, as laid out in State Stove Mfg. Co. v. Hodges, 189 So.2d 113 (Miss.1966), is no longer the authority on the necessary elements of a products liability action. However, the concept of strict liability is still quite alive within the statute, and the principles in State Stove are a driving force in products liability actions even after adoption of the statute. Wolf v. Stanley Works, 757 So.2d 316, 319-20 (Miss.Ct. App.2000). Whether an action is labeled statutory products liability or strict liability matters little since the basic precepts are largely the same. ¶ 12. Even under the product line theory, certain elements must be present to subject a successor corporation to liability for the products of a predecessor. The successor must produce the same product under a similar name, have acquired substantially all of the predecessor's assets leaving no more than a corporate shell, hold itself out to the public as a mere continuation of the predecessor, and benefit from the good will of the predecessor. Ray, 136 Cal.Rptr. 574, 560 P.2d at 8-11. ¶ 13. There is no question that Shopsmith produces the same product as did Magna, and the name remains unchanged. Although Shopsmith argues to the contrary, there is also little doubt that Shopsmith benefitted from the good will of Magna. Through various advertising media, Shopsmith often points to the reliability, craftsmanship, and longevity of the Mark V. ¶ 14. A problem arises as to the other two necessary elements. Although Shopsmith makes references that the Mark V has been around since 1954, the corporation also makes clear that it was not the inventor nor original manufacturer of the Mark V. In fact, the Shopsmith web page (http://www.shopsmith.com) tells the long and involved story of how it came to make the Mark V. There is no definitive evidence that Shopsmith holds itself out to the public as a mere continuation of Magna, Magna Engineering, or any other corporation. As for the final requirement, when Shopsmith acquired Magna's assets, it did not acquire substantially all of them and certainly did not leave Magna a mere corporate shell. Shopsmith acquired only the power tools aspect of Magna's enormous enterprise. Magna remained a viable corporate entity for nearly 16 years after the agreement with Shopsmith. Therefore, even though we view the product line theory as a viable basis for recovery, the present situation does not meet the standards utilized by other courts that have adopted the theory.