Court Opinion

ID: 2759002
Source: CourtListenerOpinion
Date Created: 2014-12-09 22:05:16.852045+00
Date Added: 2024-06-11T12:45:43.476834
License: Public Domain

J-A12018-14

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

DANIELLE FISHER                            :     IN THE SUPERIOR COURT OF
                                           :          PENNSYLVANIA
           v.                              :
                                           :
A.O. SMITH HARVESTORE PRODUCTS,            :
INC.; A.O. SMITH CORPORATION; A.O.         :
SMITH (HARVESTORE PRODUCTS);               :
HARVESTORE SYSTEMS, T/D/B/A                :
HARVESTORE; COLUMBIAN TEC TANK;            :
CST INDUSTRIES, INC.; AND PENN             :
JERSEY PRODUCTS, INC.                      :
                                           :
APPEAL OF: CST INDUSTRIES, INC.            :     No. 727 EDA 2013

                Appeal from the Order Entered February 8, 2013,
                 In the Court of Common Pleas of Bucks County,
                        Civil Division, at No. 2011-03913.

DANIELLE FISHER                            :     IN THE SUPERIOR COURT OF
                                           :          PENNSYLVANIA
           v.                              :
                                           :
A.O. SMITH HARVESTORE PRODUCTS,            :
INC.; A.O. SMITH CORPORATION; A.O.         :
SMITH (HARVESTORE PRODUCTS);               :
HARVESTORE SYSTEMS, T/D/B/A                :
HARVESTORE; COLUMBIAN TEC TANK;            :
CST INDUSTRIES, INC.; AND PENN             :
JERSEY PRODUCTS, INC. AND LEONARD          :
P. KRESGE, INDIVIDUALLY AND D/B/A          :
PROVIDA DAIRY FARM                         :
                                           :
APPEAL OF: CST INDUSTRIES, INC.            :     No. 1960 EDA 2013

                 Appeal from the Order Entered June 13, 2013,
                In the Court of Common Pleas of Bucks County,
                       Civil Division, at No. 2011-03913.

__________________
*Retired Senior Judge assigned to the Superior Court.
J-A12018-14

DANIELLE FISHER                              :    IN THE SUPERIOR COURT OF
                                             :         PENNSYLVANIA
            v.                               :
                                             :
A.O. SMITH HARVESTORE PRODUCTS,              :
INC.; A.O. SMITH CORPORATION; A.O.           :
SMITH (HARVESTORE PRODUCTS);                 :
HARVESTORE SYSTEMS, T/D/B/A                  :
HARVESTORE; COLUMBIAN TEC TANK;              :
CST INDUSTRIES, INC; AND PENN                :
JERSEY PRODUCTS, INC.                        :
                                             :
APPEAL OF: CST INDUSTRIES, INC.              :    No. 2000 EDA 2013

                  Appeal from the Order Entered June 13, 2013,
                 In the Court of Common Pleas of Bucks County,
                        Civil Division, at No: 2011-03913.

BEFORE: SHOGAN, STABILE and PLATT*, JJ.

CONCURRING and DISSENTING MEMORANDUM BY SHOGAN, J.:

FILED DECEMBER 09, 2014

      I agree with the learned majority’s interpretation of Illinois law.      I

further agree that A.O. Smith was not entitled to recover attorney’s fees.

However, upon review of the plain language of the Asset Purchase

Agreement (“APA”) between A.O. Smith and CST, Industries, Inc. (“CST”), I

do not agree that a genuine issue of material fact exists with regard to CST’s

obligation to indemnify A.O. Smith. Thus, I must respectfully dissent from

the majority’s position on the indemnification issue.

      The record confirms that A.O. Smith sold its Harvestore Division

automated products line, including roller mills, to Recknell Industries, Ltd. in

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September 1996 but retained its liabilities, including pending or potential

litigations   involving   automated   products   manufactured   before   1996.

Recknell Agreement, 9/3/96, at ¶ 3.1.

      A.O. Smith dissolved the Harvestore Division, transferring its assets

and liabilities in July 1997 to a new division of A.O. Smith, Engineered

Storage Products Company (“ESPC”).           Upon acquiring the assets and

liabilities of the Harvestore Division, ESPC entered the business of designing,

manufacturing, and selling liquid and dry bulk storage tanks.      Among the

liabilities ESPC acquired were those A.O. Smith retained as part of the

Recknell Agreement:       pending or potential claims for damages related to

Harvestore automated products manufactured before 1996, including the

roller mill at issue, which was produced in 1981.

      In December 2000, pursuant to the APA, A.O. Smith sold substantially

all of ESPC’s operating assets and certain liabilities to CST. APA, 12/15/00,

at Preamble.     The APA includes among the liabilities assumed by CST a

category entitled “Products Liability.” APA §§ 1.2.1, 1.5(o), 2.13, 2.22, and

Exhibits 2.13, 2.22.      Itemized under that broad heading were six cases:

Item 2 involved a Harvestore silo; item 3 involved a sugar silo; item 4

involved a storage tank; item 5 involved a roller mill; item 6 involved a leaky

tank; and item 7 involved an auger. N.T. (Wagner Deposition), 9/21/12, at

108–112.

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      Unlike the majority, I do not consider dispositive of the indemnification

issue ESPC’s status as a division or the fact that it is not in the roller mill

business. Pursuant to the definition of “Assumed Liabilities,” CST acquired:

      the following liabilities of the Seller relating to the Division
      [ESPC] ...(A) the current portion of all liabilities of the Division
      as set forth on the face of the Closing Balance Sheet... (B) all of
      the Division’s obligations and liabilities arising under the
      “Contracts”... (C) all liabilities in the nature of product
      liability, including, without limitation, any liability for claims
      made for injury to person, damage to property or other damage
      arising from, caused by or arising out of any product designed,
      manufactured, assembled, installed, sold, lease or licensed, or
      any service rendered by the Division, prior to the Closing Date...

APA, 12/15/00, at ¶ 1.2.1 Definitions (emphasis supplied). In light of the

broad sweep of this definition, CST’s argument that it is not responsible for

the Ms. Fisher’s roller mill liability because it did not make the roller mill

relies on too narrow a perspective.     The definition of “Assumed Liabilities”

refers to “all liabilities in the nature of product liability” and includes as a

specific example “any liability for claims . . . arising out of any product . . .

designed, manufactured, assembled, installed, sold, lease or licensed by the

Division, prior to the closing date.” APA, 12/15/00, ¶ 1.2.1. Inclusion in the

definition of the specific example of product liability claims related to an

ESPC product or service does not negate the general reference to “all

liabilities in the nature of product liability, including, without limitation,”

those involving roller mills and augers. In short, the plain language of the

APA indicates that CST was acquiring from ESPC the broad category of

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product-liability-based liabilities, not liabilities based on specific products,

i.e., tanks, silos, augers, or roller mills.   As the trial court concluded, the

APA’s language “indicates the parties’ intent to transfer product liability

cases, as a group, to CST.” Trial Court Opinion, 10/1/13, at 7.

      A.O. Smith’s performance pursuant to section 11.1(vi) of the APA

supports this interpretation.     As the trial court explained, that section

obligated A.O. Smith “to cover any litigation liability assumed by CST within

the first three years of the contract date.” Trial Court Opinion, 10/1/13, at 9

(underscore in original; citing APA, 12/15/11, § 11.1(vi)). A.O. Smith paid

damages out of its reserves to settle two of the itemized liabilities before

December 15, 2003: Smith, which involved a Harverstore roller mill, and

Woods, which involved a Harvestore auger. “In contrast, Fisher was settled

on February 4, 2013, well outside of A.O. Smith’s reimbursement obligation

period.” Id. (citing APA § 11.7(e) (“… that in no event shall [A.O. Smith]

have any liability under Section 11.1(vi) for claims for any liability or

obligation which arises more than three years from the closing date.”)).

A.O. Smith made these settlement payments because the claims sounded in

product liability, not because of the nature of the specific product involved.

Notably, although it is in the storage tank business, CST agreed that it

assumed liability for the auger case, Woods.           A.O. Smith’s Motion for

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Summary Judgment on Crossclaim, Exhibit 4 (Deposition of John Farris at

12:9–17, 44:15–20).

      Similarly sounding in product liability, Ms. Fisher’s claim falls under the

broad coverage of section 2.22 as a liability assumed by CST.          However,

because it arose after A.O. Smith’s payment obligation ended, CST was

responsible for indemnifying A.O. Smith for payments made in settlement of

Ms. Fisher’s product liability claim.     The fact that her particular claim

involved a roller mill is not relevant to CST’s obligation to indemnify A.O.

Smith for product liability claims in general.

      Based on the foregoing, I would affirm the trial court’s order granting

summary judgment to A.O. Smith on the issue of indemnification.

Moreover, I would affirm on the basis of the trial court’s sound reasoning.

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