Court Opinion

ID: 2963517
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:11:23.780305+00
Date Added: 2024-06-11T11:42:41.794906
License: Public Domain

USCA1 Opinion

	

                            United States Court of Appeals
                                For the First Circuit
                                 ____________________

        No. 95-1181

                                    RANDY JORDAN,

                                Plaintiff, Appellant,

                                          v.

              HAWKER DAYTON CORPORATION and EAST DAYTON TOOL & DIE CO.,

                                Defendants, Appellees.

                                 ____________________

                    APPEAL FROM THE UNITED STATES DISTRICT COURT 

                              FOR THE DISTRICT OF MAINE

                     [Hon. Morton A. Brody, U.S. District Judge]
                                            ___________________

                                 ____________________

                                        Before

                        Cyr, Boudin, and Lynch, Circuit Judges.
                                                ______________

                                 ____________________

            Laurie Ann Miller, with  whom N. Laurence Willey, Jr. and  Ferris,
            _________________             _______________________      _______
        Dearborn & Willey were on brief, for appellant.
        _________________
            Brent A.  Singer, with whom  David C. King  and Rudman  & Winchell
            ________________             _____________      __________________
        were on brief, for appellee Hawker Dayton Corporation.

                                 ____________________

                                   August 10, 1995
                                 ____________________

                      LYNCH,  Circuit Judge.   Randy  Jordan, an  injured
                      LYNCH,  Circuit Judge.
                              _____________

            worker, appeals,  asking us  to revisit the  law of  Maine on

            successor liability so  that he may  reach the Hawker  Dayton

            Corporation,  which purchased  the assets  of  a division  of

            another company  that had  manufactured  the machinery  which

            injured  Jordan's  hand.   Sitting  as a  court  in diversity

            jurisdiction under  Erie Railroad  v. Tompkins,  304 U.S.  64
                                _____________  __ ________

            (1938), we decline  to do so and affirm the  grant of summary

            judgment issued in favor of Hawker  Dayton Corporation by the

            district court. 

                                        FACTS
                                        _____

                      In  September  1991, the  appellant,  Randy Jordan,

            badly injured  his hand at  work while attempting to  unjam a

            doweling machine.  Jordan underwent medical and psychological

            treatment,  and filed this  products liability action  in the

            United States District Court for Maine against "Hawker Dayton

            Manufacturing Company."

                      The doweling  machine was manufactured  in 1973  by

            Hawker  Manufacturing  Company  ("Hawker  Manufacturing"),  a

            division of East Dayton Tool & Die Co. ("East Dayton").  East

            Dayton  also  manufactured  automobile  components and  other

            products.   Around  the time  that the  doweling machine  was

            manufactured, Dorothy Darrow,  the sole  shareholder of  East

            Dayton, sold  some of her  stock to family friends,  and East

            Dayton  redeemed  her   remaining  stock  for  cash   and  an

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            installment note.   The  company continued  its manufacturing

            operations and even added additional product lines.

                      In  August 1973, East Dayton sold to Harmon Darrow,

            the  president of Hawker Manufacturing, an option to purchase

            the  assets of Hawker Manufacturing at  their net book value.

            In  March 1974, Mr.  Darrow formed Hawker  Dayton Corporation

            ("Hawker Dayton"), conveyed  his option to that  company, and

            in   July  1974,  Hawker  Dayton  exercised  the  option  and

            purchased the Hawker  Manufacturing assets for  approximately

            $150,000.  Hawker  Dayton continued the operations  of Hawker

            Manufacturing and  continued to use  the Hawker Manufacturing

            trade name.  East Dayton continued to manufacture woodworking

            machines (including  doweling machines at  first), automobile

            dies and other specialized machinery for about two years.

                      In  1976, East Dayton defaulted  on its note to Ms.

            Darrow.  It then sold the  rest of its equipment for $925,000

            and its real property  for $650,000 to entities not  involved

            in this lawsuit, and made  payments out to Ms. Darrow  on the

            installment note for the next ten years.

                                  PROCEEDINGS BELOW
                                  _________________

                      On  June  14, 1993,  Jordan  filed this  suit.   In

            August, the district court issued a scheduling order giving a

            deadline   of  September  15,  1993,  for  amendment  of  the

            pleadings.   The judge  later amended  the scheduling  order,

            extending the deadline for amending pleadings by fifteen days

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            and extending the  discovery deadline by two months.   During

            discovery, Jordan learned,  inter alia, that East  Dayton was
                                        _____ ____

            the manufacturer of  the doweling machine.   On February  10,

            1994, five  days before discovery  was to be  completed under

            the scheduling order,  Jordan moved to correct  the corporate

            name  of the  defendant  from  "Hawker  Dayton  Manufacturing

            Corporation"  to "Hawker  Dayton  Corporation,"  to add  East

            Dayton as a defendant  and to include additional theories  of

            liability  against Hawker Dayton.  The district court granted

            the motion to correct the corporate name of the defendant and

            to add East  Dayton, but denied the motion  to add additional

            theories of liability.

                      Jordan filed a  motion for summary judgment  on the

            issue  of whether  Hawker  Dayton was  liable as  a successor

            corporation for  the debts  and liabilities  of East  Dayton.

            Hawker  Dayton objected,  and  in  its  response  asked  that

            summary  judgment  be  entered in  its  favor  instead.   The

            Magistrate Judge recommended that Jordan's motion be  denied,

            and the district  court adopted the recommendation.   Neither

            ruled  on the  issue of  whether summary  judgment should  be

            entered   on  behalf  of   Hawker  Dayton.     Hawker  Dayton

            subsequently  moved for  summary judgment,  and the  district

            court granted the motion.

                      Judgment  by  default  was   entered  against  East

            Dayton, after a hearing on damages, for $2,230,088.21.

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                      Jordan  appeals the  grant of  summary judgment  in

            favor of Hawker Dayton on the issue of successor liability.

                                      DISCUSSION
                                      __________

                      Four  years ago, albeit in a different context than

            a tort suit, the Supreme Judicial  Court of Maine held, as to

            corporate  successor   liability:     "[A]bsent  a   contrary

            agreement  by the parties, or an explicit statutory provision

            in  derogation  of   the  established  common  law   rule,  a

            corporation that purchases the assets  of another corporation

            in  a bona fide,  arm's-length transaction is  not liable for
                  _________

            the  debts or  liabilities  of the  transferor  corporation."

            Director  of Bureau  of Labor  Standards  v. Diamond  Brands,
            ________________________________________  __ ________________

            Inc., 588 A.2d 734, 736  (Me. 1991).  Diamond Brands involved
            ____                                  ______________

            interpretation  of the  term "employer"  in  a severance  pay

            statute.  Conceding  that there is  no contrary agreement  by

            the  asset purchase  parties and  no  statutory exception  to

            common  law here,  Jordan tries  to avoid the  Diamond Brands
                                                           ______________

            holding by arguing the  opinion does not foreshadow  what the

            Maine Court would do in a tort action. 

                       There  are two  responses.   First,  the rule,  as

            stated above, that  a mere asset purchase will  not give rise

            to  successor liability  is  articulated  by Maine's  highest

            court as being "the established common law rule."  That alone

            defeats  Jordan's  claim, as  he  has argued  that  Maine law

            applies.   This common law  rule is reinforced by  the social

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            policy judgment made by the Maine legislature, in the statute

            at  issue in Diamond Brands.  Maine  there decided that it is
                         ______________

            benefited  by not discouraging  purchases of assets  of Maine

            businesses  through  imposition  of  successor  liability  on

            purchasing corporations, thus keeping businesses going  which

            would otherwise  fail, and  so continuing  to have  employees

            benefit  from their continued  employment.   Id. at  737 n.7.
                                                         ___

            Jordan  points  to  no  legal  developments  in  the  law  of

            successor liability  in Maine  or in  any other  jurisdiction

            since Diamond  Brands to  suggest that  the Supreme  Judicial
                  _______________

            Court would change this law.   See Bernhardt v. Polygraph Co.
                                           ___ _________ __ _____________

            of America, 350 U.S. 198,  205 (1956) ("[T]here appears to be
            __________

            no confusion in the [Maine]  decisions, no developing line of

            authorities that casts a shadow over the established ones, no

            dicta,  doubts  or  ambiguities in  the  opinions  of [Maine]

            judges  on  the  question,  no legislative  development  that

            promises  to undermine the  judicial rule.").   Thus, Diamond
                                                                  _______

            Brands is  the law of Maine,  and this Court  must apply that
            ______

            law.

                      Secondly, plaintiff  chose a federal, rather than a

            state forum,  presumably cognizant of this  court's statement

            that "litigants  who reject a  state forum in order  to bring

            suit  in  federal court  under diversity  jurisdiction cannot

            expect  that new  trails  will  be blazed."    Ryan v.  Royal
                                                           ____ __  _____

            Insurance  Company of America,  916 F.2d  731, 744  (1st Cir.
            _____________________________

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                                          6

            1990).   Jordan  did not  file  a motion  that  the issue  be

            certified to  the state court.   Here Jordan has  suffered an

            injury and East Dayton appears  to no longer have assets with

            which to satisfy his claim.  But the complex policy arguments

            as  to whether  the common  law should  strive to  assure him

            recompense are left  to the state, not the  federal court, to

            decide.   Here  Maine has  made that  calculus and  given the

            greater weight  to the protection  of jobs through  limits on

            successor  liability.   It is  not  the role  of the  federal

            courts to "question the policy choices of states whose law we

            apply."   Krauss v. Manhattan  Life Insurance Company  of New
                      ______ __ _________________________________________

            York, 643 F.2d 98, 102 (2d Cir. 1981).
            ____

                      Jordan  argues  that  the  Supreme  Judicial  Court

            recently adopted a "majority rule" in another aspect  of tort

            law  and so  will adopt  the  majority rule  as to  successor

            liability.     Jordan  relies  on  Oceanside  at  Pine  Point
                                               __________________________

            Condominium Owners Association v. Peachtree Doors,  Inc., 659
            ______________________________ __ ______________________

            A.2d 267, 270 (Me. 1995), which held that a plaintiff did not

            state a  claim in  tort for a  defective product's  damage to

            itself,  thus  having  Maine  join that  rule  adopted  by  a

            majority  of jurisdictions.   Even were  we incorrect  in our

            understanding  that the law  of Maine on  successor liability

            has been determined  by its highest authority,  this argument

            would  not assist Jordan.   The Peachtree Doors decision does
                                            _______________

            not  expand plaintiffs' remedies, but reflects a rejection of

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            such an  expansion.   More tellingly, even  if Maine  were to

            adopt a  "majority rule"  as to  successor liability,  Jordan

            would still  not prevail.   Assuming the majority rule  to be

            that a corporation which purchases assets from another is not

            liable in tort  for the actions of the  transferor unless one

            of  four exceptions  is met,  see,  e.g., 1  American Law  of
                                          ___   ____     ________________

            Products  Liability   7:1  at  10-11  (3d  ed.  1990),  those
            ___________________

            exceptions avail  Jordan naught.   See  also  Ohio Bureau  of
                                               _________  _______________

            Workers' Compensation v. Widenmeyer Electric  Co., 593 N.E.2d
            _____________________ __ ________________________

            468,  470 (Ohio 1991); Ramirez v. Amsted Industries, Inc., 86
                                   _______ __ _______________________

            N.J. 332, 340, 431  A.2d 811, 815 (1981); Ray v.  Alad Corp.,
                                                      ___ __  __________

            19  Cal.3d  22, 28,  560  P.2d 3,  7  (1977).   There  was no

            agreement by Hawker Dayton, express or implied, to assume the

            liabilities of East Dayton Tool  and Die Co., and Jordan does

            not claim  that the  asset sale was  fraudulent, not  made in

            good  faith, or made without sufficient consideration.  There

            was  no  de facto  merger  nor  a  mere continuation  of  the

            predecessor  here  where  the  transferor  corporation,  East

            Dayton,  neither  dissolved nor  liquidated  after the  asset

            sale.   See,  e.g.,  1 American  Law  of Products  Liability,
                    ___   ____     _____________________________________

            supra,      7:10,   7:12,  7:14  &   7:15  (both  merger   or
            _____

            consolidation and  mere continuation exceptions  require that

            there be only one corporation at the end of the transaction).

            Indeed East Dayton sold less than 10% of its assets to Hawker

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                                          8

            Dayton, continued to  do business thereafter and paid  out on

            an installment note for twelve years after the asset sale.

                      Jordan's argument ultimately  is that the  "product

            line"  doctrine of  successor  liability should  be  adopted.

            Under the product line doctrine, a corporation that purchases

            all  or   substantially  all   of  the   assets  of   another

            corporation, continues the manufacturing operations and sells

            the  same product  line may  be strictly liable  for injuries

            caused  by defective  products in  that line.   See,  e.g., 1
                                                            ___   ____

            American Law of Products Liability,  supra,   7:25 at 42; see
            __________________________________   _____                ___

            also Ray, 19 Cal.3d 22, 560 P.2d 3; Ramirez, 86 N.J. 332, 431
            ____ ___                            _______

            A.2d 811 (1981); Dawejko v. Jorgensen Steel Company, 290  Pa.
                             _______ __ _______________________

            Super.   15,  434   A.2d  106   (1981);   Martin  v.   Abbott
                                                      ______  __   ______

            Laboratories, 102  Wash.2d 581, 689  P.2d 368 (1984).   It is
            ____________

            far from clear the product line doctrine would assist Jordan.

            See, e.g.,  Ray, 19 Cal.3d at 31; 560  P.2d at 9; Ramirez, 86
            ___  ____   ___                                   _______

            N.J.  at 358,  431 A.2d  at 825  (the product  line exception

            requires  that the  asset  purchase destroy  the  plaintiff's

            remedy,  for example, because all of the assets are purchased

            or because the purchase agreement requires the predecessor to

            liquidate).  This  doctrine is at most a  minority rule which

            has plainly not been adopted by Maine.

                      Finally, Jordan  makes a  procedural argument  that

            the  court was precluded  from entering summary  judgment for

            Hawker Dayton because  it failed to do so  when Hawker Dayton

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                                          9

            had  countered his  motion in  part  by saying  that it,  not

            Jordan,  was  entitled  to  entry of  judgment.    The  court

            originally  denied  Jordan's  motion and  took  no  action on

            Hawker  Dayton's counter request.   When Hawker  Dayton later

            filed a formal motion for  summary judgment in its favor, the

            court granted it, saying it  had not considered the merits of

            Hawker  Dayton's  request  when it  denied  Jordan's  motion.

            There was no error in this procedure and would have been none

            even  if  the court  had considered  the counter  request the

            first time around.   See Burns v. Massachusetts  Institute of
                                 ___ _____ __ ___________________________

            Technology, 394 F.2d 416, 418 (1st Cir. 1968).  Nor was there
            __________

            an abuse of  discretion in denying  Jordan's motion to  amend

            his complaint filed more than  four months after the deadline

            set  in the  scheduling  order  and only  a  few days  before

            discovery was to be completed.

                      The decision of the district court granting summary

            judgment to Hawker Dayton is affirmed.

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