Court Opinion

ID: 9678130
Source: CourtListenerOpinion
Date Created: 2023-08-24 06:12:15.580129+00
Date Added: 2024-06-11T18:17:02.062267
License: Public Domain

WILLIAM A. BABLITCH, J.
(dissenting). The majority opinion very thoroughly sets forth the competing policy considerations implicit in the issue presented. I *319submit that those considerations are reasons to spell out clearly what constitutes a “product line,” but not to preclude recovery against a successor corporation for injuries caused by a defective product even when the successor corporation continues to manufacture exactly the same product. Because I conclude that a person who suffers injuries due to a defectively manufactured product should not have to bear the cost of those injuries when the corporation which manufactured the product has dissolved but a successor corporation continues to produce the same product line, I respectfully dissent.
In 1967 this court confronted the important question of who should bear the cost of injuries caused by a defective product, the injured person or the manufacturer of the defective product? This court wisely concluded that the manufacturer of the defective product should bear that cost. Dippel v. Sciano, 37 Wis. 2d 443, 458, 155 N.W.2d 55 (1967). See also Greiten v. La Dow, 70 Wis. 2d 589, 595, 235 N.W.2d 677 (1975).
Today the majority retreats from that position. It refuses to adopt the product line exception to the common-law rule of no successor corporation liability. Its refusal shifts the costs of injuries caused by a defectively manufactured product from the entity which placed the product on the market to the injured person. This is an unnecessary and unwise retreat from the sound public policy underlying products liability law enunciated in Dippel.
In Dippel we noted a number of public policy considerations behind strict tort liability for manufacturers of a defective product. The primary policy consideration was that manufacturers are in a better position than users of the product to distribute the costs of the risks created by a defective product through an appropriate pricing system, through the purchase of insurance, or through a form of self-insurance.
*320This policy consideration is equally applicable to a successor corporate manufacturer of the same product line. The successor corporation is in a better position than a user to distribute the costs of the risk of injury through an appropriate pricing system, purchase of insurance or a form of self-insurance. Perhaps most importantly, to the extent those costs and contingent liabilities are absorbed by the successor, the successor can negotiate a purchase price for the predecessor’s business which reflects them.
The inequitable consequences of the court’s retreat from its earlier position are easily illustrated by juxtaposing two hypothetical situations. Hypothetical number 1: Widget Corporation manufactures widgets. One of its widgets is defective and causes severe injuries to Mary Smith. Hypothetical number 2 is based on the same facts except that one day prior to Mary Smith’s injuries, Widget Corporation sells its business to XYZ Corporation, Widget dissolves and XYZ continues to manufacture the same widgets. Under hypothetical number 1, Widget Corporation bears liability in tort for Mary Smith’s injuries. Under hypothetical number 2, because of today’s majority opinion, neither Widget Corporation nor XYZ Corporation bears such liability. Mary Smith bears the costs of her injuries.
The inequities of such a result are apparent. Because the majority opinion provides that a successor corporation is not responsible for contingent tort liabilities connected with its predecessor’s past production, the price the predecessor receives will reflect only the assets, not the contingent liability for future injuries caused by its defective product. Once the predecessor completes an assets-for-cash sale of its ongoing manufacturing operations, it may distribute the proceeds to shareholders and dissolve. Any person subsequently injured by the predecessor’s defective product, unable to go against the sue-*321cessor manufacturer of the product, will be without a remedy. Under these circumstances, the hapless victim bears the cost of injuries associated with the defective product.
Adoption of the product line exception, on the other hand, would help ensure that the manufacturing entity, and not the injured user, bears the costs of injuries resulting from use of defective products. Successor corporations, on notice that the law requires them to answer for defects in product lines manufactured by their predecessors if they continue to produce those lines, would adjust purchase offers to reflect insurance and/or other costs associated with this liability. The equitable result would be that the predecessor would receive fair value for its ongoing operations, reflecting both assets and contingent tort liabilities. Successors would then be positioned to provide adequate insurance coverage for both their predecessor’s and their own production. In turn, persons alleging injury from defective products would be able to recover damages upon proof of a legitimate claim.
The majority marshalls the authority on both sides of the debate on adopting the product line exception in a thorough and fair manner. However, I believe that it errs in judgment by not adopting the product line exception. At least two of the majority’s grounds for rejecting the product line exception are, in my view, erroneous.
First, the majority suggests that the product line exception would pose an economic threat to small business. Majority opinion at pages 308, 309. See also Tift v. Forage King Industries, Inc., 108 Wis. 2d 72, 94-5, 322 N.W.2d 14 (1982) (Callow, J., dissenting). The conventional wisdom has been that small businesses cannot find or afford insurance coverage for the liability exposure implicit in the exception. Although arguably this may have been true under previous market conditions, *322there is evidence that market conditions have changed and that, at any rate, the substantive law of products liability is not a major force affecting the availability of insurance. In addition, recent federal legislation allows businesses to form self-insurance cooperatives and insurance purchasing groups to better manage costs. For a discussion of the effects of the Product Liability Risk Retention Act, 15 U.S.C. Sections 3901-04 (1981), see, Smith, Uniform product liability law — but on whose terms?, 5 Cal. Lawyer 34, 36 (1985).
Second, the majority argues that such a “basic change” in corporate law of this magnitude should “come about through legislation rather than court decision.” Majority opinion at page 310. This argument disregards the fact that the principle of no successor corporation liability is itself a common-law rule developed prior to the adoption of strict products liability principles. More importantly, this argument disregards the duty of this court to give effect to article I, sec. 9 of the state constitution, which provides, in part, that “[e]very person is entitled to a certain remedy in the laws for all injuries, or wrongs which he may receive in his person, property or character.” This court has interpreted this provision as authority for it to fashion adequate remedies where none exist. Collins v. Eli Lilly Co., 116 Wis. 2d 166, 183, 342 N.W.2d 37 (1984). It should exercise that authority in this case to augment the common-law by adopting a product line exception to the rule of no successor corporation liability.
For the above reasons, I would reverse the decision of the circuit court and remand this case for reconsideration in accordance with this dissent.
I am authorized to state that CHIEF JUSTICE NATHAN S. HEFFERNAN joins in this dissent.