Court Opinion

ID: 6768555
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:40:33.031851+00
Date Added: 2024-06-11T16:02:42.538834
License: Public Domain

A. William Sweeney, J.,
dissenting. While I concur in the conclusion of the majority that the traditional exceptions to successor corporate liability are *351applicable to actions for breach of contract, I nevertheless find persuasive the argument that the third exception to nonliability should embrace what has been referred to as the expanded continuity-of-enterprise doctrine. I do so largely for the reasons stated in the majority opinion in Flaugher v. Cone Automatic Machine Co. (1987), 30 Ohio St.3d 60, 30 OBR 165, 507 N.E.2d 331. In Flaugher the majority set forth the features which distinguish the mere-continuation theory from the expanded continuity-of-enterprise theory:
“ ‘The gravamen of the traditional “mere continuation” exception is the continuation of the corporate entity rather than continuation of the business operation.’ (Emphasis sic.) 1 Frumer & Friedman, supra, at 70.58(12), Section 5.06[2][c]. The exception has been narrowly construed to protect corporations from unassumed liabilities. Id. at 70.58(13), Section 5.06[3]. Those courts which have expanded this exception have done so on the basis of significant shared features between the buyer and the seller, such as the same employees, a common name, or the same management. See, e.g., Cry v. B. Offen & Co. (C.A. 1, 1974), 501 F.2d 1145, 1153-1154 (same employees continued after transfer of ownership to produce same product, in same plant, with same supervision); Turner v. Bituminous Cas. Co. (1976), 397 Mich. 406, 244 N.W.2d 873 (retention of key personnel and trade name). The reasoning behind this expanded view of continuity is that where the successor corporation shares significant features with its predecessor, no basis exists for treating a purchase of assets differently from a de facto merger. Id. at 423, 244 N.W.2d at 880. The cases have required that the predecessor be dissolved or liquidated soon after the transfer of assets. Id. at 419-420, 244 N.W.2d at 878-879; Bonee v. L & M Constr. Chemicals (M.D.Tenn. 1981), 518 F.Supp. 375, 381.” (Emphasis added.) Id. at 64-65, 30 OBR at 169, 507 N.E.2d at 336.
I agree with the rationale that the sharing of significant features between successor and predecessor corporations eliminates any basis “for treating a purchase of assets differently from a de facto merger.” However, I would part company with those decisions which require the dissolution of the predecessor as a condition precedent to the application of the expanded continuity-of-enterprise doctrine. My disagreement with this requirement is based on the view that it invites the avoidance of liability based on the mere expedient of maintaining a shell corporation in the place of the predecessor enterprise. Liability should not be dependent upon such a facile maneuver.
Instead, I would measure whether the successor corporation was a continuation of its predecessor based upon the following factors:
1. Continuity of management, personnel, physical location and assets;
2. Assumption of the ordinary business obligations and liabilities by the successor; and
*3523. The successor’s presentation of itself as the continuation of the predecessor.
These factors cannot be resolved by summary judgment based upon the state of the record below. Genuine issues of material fact exist as to whether the factors are present in this case. I . would therefore affirm the court of appeals and remand the cause for a trial on the merits.
My embrace of the expanded continuity-of-enterprise exception is limited to those actions involving issues of corporate, contract and tax law. I continue to adhere to the product line theory as the appropriate rule of law to be applied in the context of products liability. See Flaugher, supra, 30 Ohio St.3d at 68, 30 OBR at 172, 507 N.E.2d at 338, A.W. Sweeney, J., dissenting; Davis v. Loopco Industries, Inc. (1993), 66 Ohio St.3d 64, 67, 609 N.E.2d 144, 146, A.W. Sweeney, J., concurring.
Douglas, J., concurs in the foregoing dissenting opinion.