Court Opinion

ID: 9669832
Source: CourtListenerOpinion
Date Created: 2023-08-24 03:09:49.114909+00
Date Added: 2024-06-11T18:16:00.585661
License: Public Domain

Brickley, J.
(dissenting). Because I disagree both with the majority’s interpretation of the relevant law, and with its view of the facts in the record, I respectfully dissent.
*710I
Contrary to the majority, I believe that the successor liability issue in this case is controlled by Turner v Bituminous Casualty Co, 397 Mich 406; 244 NW2d 873 (1976). In Turner, this Court stated that “there may be a cause of action [for the plaintiff] where the totality of the transaction demonstrates a basic continuity of the enterprise.” Id. at 411. This statement demonstrates that Turner's continuity of enterprise doctrine does not simply seek to guarantee that the plaintiff has some source of recovery, nor is it based on principles of strict liability, as the majority apparently believes. Indeed, Turner has nothing to do with determining whether an injury was negligently inflicted. Rather, the test in Turner is designed to determine whether the company (or “enteiprise”) involved in the lawsuit is essentially the same company that was allegedly negligent in designing or manufacturing the offending product.
In making this determination, the Turner Court recognized that a corporation is susceptible to changes in ownership and structure that simply cannot occur in the life of a human tortfeasor.1 Id. at 419-420. Thus, the Turner Court eschewed reliance upon the legal *711formalities of corporation law, and sought to determine, by examining the relevant criteria, whether the corporate defendant was, in essence, a continuation of the corporation that was allegedly negligent in designing or manufacturing the product at issue, or whether it was a stranger to the allegedly negligent corporation. Id. at 423-424, quoting Ray v Alad Corp, 55 Cal App 3d 855; 127 Cal Rptr 817, 820 (1976) (“does a manufacturer’s responsibility for its defective products survive a change in ownership, where the manufacturing business, as such, maintains its identity and continues to operate as before ‘at the same old stand’ ”).2
We explained that the policy basis of this “continuity of the enterprise” requirement “ ‘is that the enterprise, the going concern, ought to bear the liability for the damages done by its defective products.’ ” Turner, supra at 414, quoting Shannon v Samuel Langston Co, 379 F Supp 797, 802 (WD Mich, 1974). We also reasoned that such an enterprise enjoys certain continuing benefits, such as goodwill and expertise, and therefore must also accept continuing responsibility for the costs that the enterprise has imposed on society through its negligence. Turner at 425.
This reasoning is not inconsistent with our insistence upon fault-based products liability theory in Prentis v Yale Mfg Co, 421 Mich 670, 681; 365 NW2d *712176 (1985), where we stated that “[w]hen the societal goal of holding manufacturers accountable for the safety of their products has been threatened by the interposition of technical rules of law, it has been the rules that have gradually given way.” While it would be an aggressive version of strict liability that would hold a corporation hable for injuries caused by the defective product of a different corporation, Turner sought to answer a different question altogether: whether the defendant corporation was the same enterprise as the allegedly offending corporation, or a corporate stranger.
The traditional rule of successor liability arose from technical rules of law “developed not in response to products liability problems, but largely in the areas of creditors’ protection, . . . and of tax assessments, ... or, in the case of the de facto merger, in the context of shareholder rights.” Turner, supra at 418. In Turner, we rejected reliance on these technical rules when deciding whether a defendant enterprise was, as a matter of practical fact, a mere continuation of the allegedly negligent enterprise. Id. at 426 (“[T]o say Old Sheridan is a stranger to New Sheridan, and vice versa, is to honor form over substance. . . . Continuity is the purpose, continuity is the watchword, continuity is the fact”).
For these reasons, I cannot agree with the majority that Turner's applicability depends on whether there has already been a recovery in the case in question. Nor can I agree that Turner's reasoning was based on notions of strict liability. While many of the cases that Turner cited were strict liability cases, Turner's central rationale is consistent with this Court’s observation that “[w]hen the societal goal of holding manu*713facturers accountable for the safety of their products has been threatened by the interposition of technical rules of law, it has been the rules that have gradually given way.” Prentis, supra at 681.
Because the question presented in this case is who is responsible for the alleged negligence, rather than whether there actually was negligence, I would hold that Turner's continuity of the enterprise test is the controlling test in this case.
n
The Court in Turner adopted the following guidelines to determine if there was sufficient continuity between a successor corporation and its predecessor to justify imposing liability on the successor. “If there is such continuity, then the transferee must accept the liability with the benefits.” Turner, supra at 430. These guidelines examine whether:
“(1) There is a continuation of the enterprise of the seller corporation, so that there is a continuity of management, personnel, physical location, assets, and general business operations.
“[2] The seller corporation ceases its ordinary business operations, liquidates, and dissolves as soon as legally and practically possible.
“[3] The purchasing corporation assumes those liabilities and obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations of the seller corporation.” [Id. at 420, quoting Shannon, supra at 801, in turn citing McKee v Harris-Seybold Co, Div of Harris-Intertype Corp, 109 NJ Super 555, 563-567; 264 A2d 98 (1970), aff’d 118 NJ Super 480; 288 A2d 585 (1972).]
*714The Turner Court included one additional factor: whether “[t]he purchasing corporation held itself out to the world as the effective continuation of the seller corporation.” Id. at 430. Application of these guidelines to the evidence before the Court demonstrates that numerous questions of material fact remain for decision by a jury.
The first factor examines whether Pneumo Dynamics and Cone-Blanchard “continued] the enterprise of the seller corporation.” The sales contract shows that when Cone-Blanchard bought Pneumo’s machine tool division in 1972, it took over what had been Cone I’s “entire plant facilities, equipment, machinery, inventory and patents.”
The sales contract lists all Cone I’s assets that Pneumo sold to Cone-Blanchard. These assets include, among other things, accounts receivable, raw materials and other inventory, machinery, equipment, tools, real property, trademarks and patents, leases, customer books, and files and records. Furthermore, Cone-Blanchard assumed all the contracts with unionized employees serving Cone I’s plant. It assumed the obligations of Pneumo’s hourly and salaried employee pension programs, expressly granting employees pension credit for time served under both Pneumo and Cone I. While the contract does not expressly provide for retention of “management” personnel, it is a reasonable inference that the “salaried employees” include management employees. A jury could find on these facts that Cone-Blanchard purchased Cone I from Pneumo as a continuing enterprise.
The second criterion examines whether “[t]he seller corporation ceases its ordinary business operations, liquidates, and dissolves as soon as legally and practi*715cally possible.” Id. at 420. Pneumo has neither liquidated nor dissolved, but, under the facts of this case, this criterion is irrelevant to determining whether Cone-Blanchard purchased Cone I from Pneumo as a going concern. Pneumo sold its entire machine division to Cone-Blanchard, and executed a covenant not to compete “anywhere in the world in the manufacture, sale or service of, machines or parts of a nature similar to those manufactured, serviced or sold by the Machine Tool Group at any time on or before the Closing Date [of the sale to Cone-Blanchard].” For all practical purposes, Pneumo has “liquidated and dissolved” in the relevant industry and sold its Machine Tool Group and Cone I as a folly operational continuing enteiprise.
The third criterion examines whether the “purchasing coiporation assumes those liabilities and obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations of the seller corporation.” Turner, supra at 420. In the contract of sale between Cone-Blanchard and Pneumo, Cone-Blanchard expressly assumed “liabilities incurred ... in the ordinary course of business in operating the Business,” “obligations and liabilities . . . under all open sales contracts and purchase contracts,” and “obligations and liabilities . . . under all other contracts, plans, agreements and commitments,” such as labor, pension, and insurance agreements. Unquestionably, these are the types of continuing liabilities and obligations a buyer must assume if the purchased corporation is to be operated as a going concern. Cone-Blanchard’s assumption of the liabilities and obligations of Pneumo’s machine tool group, as well as Pneumo’s complete exit from the *716machine tool industry, as evidenced by the covenant not to compete, shows that Cone-Blanchard did buy this division of Pneumo as a continuing business enterprise.
The fourth factor, whether the purchasing corporation holds itself out as “the effective continuation of the seller corporation,” merits little discussion. By its very name and the name of its product, it is clear that Cone-Blanchard capitalizes on the Cone name. The evidence shows that Pneumo did so, as well: not only did it use Cone I’s product trade name (Conomatic), but it also continued to use the original company’s corporate trade name, describing it in a product manual as the Cone Automatic Machine Company: A Division of Pneumo Dynamics Corporation.
There are numerous triable questions of material fact regarding whether Cone-Blanchard is the corporate successor of Cone I. The Court of Appeals should be affirmed with respect to this issue.
m
The majority holds that a successor corporation may have an independent duty to warn of defects in its predecessor’s products, where there is a “special relationship” between the defendant and the victim or the defendant and the third party who caused the injury. Ante, pp 706-707, quoting Murdock v Higgins, 454 Mich 46, 54; 559 NW2d 639 (1997). According to the majority, the
[r]elevant indicia of a “special relationship” include: a successor’s actual or constructive knowledge of a defect in its predecessor’s product, a continuing relationship with the predecessor’s customer, service agreements between the successor and the predecessor’s customer relating to the *717machine in question, and evidence that the successor had actually serviced the machine in question. [Ante, pp 707-708.]
Under the majority’s test, drawing all reasonable inferences from the given evidence in the plaintiff’s favor, Cone-Blanchard had an independent duty to warn.
The majority, however, dismisses the plaintiff’s claims that the defendant had constructive knowledge of the defect in the machine that injured the plaintiff. The plaintiff alleged that in two previous lawsuits against Cone-Blanchard, one in 1979 and one in 1982, an individual sued after being scalped by a Conomatic Feed Screw Machine. These cases involved the same type of machines and the same type of injury as are involved in the instant case. The majority asserts, however, that in neither case was the machine proved to be defective. Therefore, the defendant had no constructive knowledge of any defect in the machine in question. Id., p 708.
In so holding, the majority fails to observe the proper standard for judging evidence on a summary judgment motion. From the fact of these two lawsuits, a jury could reasonably find that the defendant had knowledge that these machines might cause this injury. Giving the plaintiff the benefit of all reasonable inferences, two lawsuits alleging the same injury from the same machine are sufficient notice to the defendant that there may be a defect in that type of machine, worth investigating further. “If one by exercise of reasonable care would have known a fact, he is deemed to have had constructive knowledge of such fact . . . .” Black’s Law Dictionary (6th ed), p 314. A jury could reasonably find that the defend*718ant, “by exercise of reasonable care,” would have known of the alleged defect.3
With respect to Cone-Blanchard’s contact with the owner of the machine that injured the plaintiff, the majority again fails to look at the evidence in a light most favorable to the plaintiff, and fails to draw reasonable inferences in the plaintiffs favor. The majority acknowledges that “Cone-Blanchard had access to Cone I’s customer lists and that [plaintiff’s] employer possessed a Cone-Blanchard business card on its premises,” but states that “while Cone-Blanchard may have solicited continuing business from Cone I’s customers, such evidence alone is insufficient to support a ‘special relationship.’ ” Ante, pp 708-709.
To infer from this evidence that Cone-Blanchard was merely “soliciting” business from the plaintiffs employer is an inference from the evidence in favor of the defendant, which is not proper on summary disposition. Chandler v Dowell Schlumberger Inc, 456 Mich 395, 397; 572 NW2d 210 (1998). A jury could reasonably find, from the evidence acknowledged by the majority, that an agent of Cone-Blanchard had specifically examined the machine in question and had a “special relationship” with the plaintiff’s employer, whether or not the purpose of that relationship was solicitation.
A jury could reasonably find from the evidence before the Court that Cone-Blanchard had constrac*719five knowledge of a defect in its predecessor’s machine, and that it had been in contact with the plaintiff’s employer about the machine in question. Whether this contact was for purposes of inspection, repair, or replacement is purely speculative, and this Court may not speculate in favor of the defendant in reviewing this motion for summary disposition. Chandler, supra. This evidence presents material questions of fact regarding whether Cone-Blanchard had a duty to warn.
IV
The Turner test is applicable to the facts of the instant case, and under that test, the evidence presented by the plaintiff is more than adequate to go to a jury regarding whether Cone-Blanchard is a corporate successor to Cone I. The plaintiff has also submitted evidence sufficient to raise questions of fact regarding whether Cone-Blanchard had a duty to warn the plaintiff of the dangers presented by the machine in question. For these reasons, I respectfully dissent, and would affirm the judgment of the Court of Appeals.
Cavanagh and Kelly, JJ., concurred with Brickley, J.

 Corporations can be merged, spun-off, and otherwise sold in a variety of ways. If the corporation is sold as a going concern, however, it continues to exist as the same enteiprise in a relevant sense. For example, if a wholly owned subsidiary of a large corporation manufactured a defective product in 1943 which injured someone in 1999, that subsidiary would remain potentially liable for the injury. But, if in the interim, the subsidiary had been bought and sold several times, and still continued as a wholly owned subsidiary of a different large corporation, is it any less “at fault” for the defective product that it manufactured? Is the subsidiary any less “at fault” if it merges with a large corporation, becoming an independent division that continues to operate as it always had? Is this any different from a small independent corporation that becomes an independent *711division of one large corporation, and then another, as long as the enterprise continues to operate “at the same old stand”?

 The Alad case was vacated by the California Supreme Court after our opinion in Turner was issued. 19 Cal 3d 22; 136 Cal Rptr 574; 560 P2d 3 (1977). Regardless, the quoted language is a clear statement of the issue presented.

 According to the minority’s theory, a successor defendant would never have constructive notice of a defect in its predecessor’s product. Such cases would always be dismissed on summary disposition, and therefore the allegations of injury would never give notice to the defendant to investigate the potential problem. The number of injuries allegedly caused by the defect is irrelevant to the majority.