Court Opinion

ID: 6767166
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:38:45.298968+00
Date Added: 2024-06-11T16:02:41.768391
License: Public Domain

A. William Sweeney, J.,
concurring. I concur in the well-reasoned opinion and judgment of the majority. I write separately to address the certified issue presented by this case. As concisely stated in the majority opinion, the parties to this action are in disagreement regarding the import of the decision of this court in Flaugher v. Cone Automatic Mach. Co. (1987), 30 Ohio St.3d 60, 30 OBR 165, 507 N.E.2d 331.
In Flaugher, supra, a majority of the court concluded that, in a sale-of-assets acquisition of one company by another, the successor corporation is generally not liable for the torts of its predecessor. However, the court recognized the following exceptions to the rule:
“(1) the buyer expressly or impliedly agrees to assume such liability;
“(2) the transaction amounts to a de facto consolidation or merger;
“(3) the buyer corporation is merely a continuation of the seller corporation; or
“(4) the transaction is entered into fraudulently for the purpose of escaping liability.” Id. at 62, 30 OBR at 167, 507 N.E.2d at 334.
The parties to the instant action disagree as to the breadth of the Flaugher decision with respect to the third exception to the rule. Appellant maintains that liability thereunder occurs only where the successor corporation is a “mere continuation” of its predecessor. Thus, liability under this exception would apply only where the successor constitutes a continuation of the corporate entity. In contrast, appellees maintain that the Flaugher court adopted the “continuity of enterprise” or “expanded mere continuation” doctrine under the third exception to the rule. Thus, appellees contend that the exception would apply if certain factors are present in a particular case. These factors include the following:
“(1) [Continuity of management, personnel, physical location, and assets;
“(2) [Dissolution of the predecessor;
“(3) [Assumption of the ordinary business obligations and liabilities by the successor; and
“(4) [T]he successor’s presentation of itself as the continuation of the predecessor.” 15 Fletcher, Cyclopedia of the Law of Private Corporations (1990 Rev.) 275, Section 7123.06.
Inasmuch as I believe that neither theory adequately addresses the public policy concerns which underpin the law of products liability, I continue to adhere to the view expressed in my dissent in Flaugher, supra, at 68, 30 OBR at 172, 507 N.E.2d at 338, that the product line theory should be adopted as the common law of Ohio.
*68The facts of the present case illustrate the wisdom of the aforementioned approach. As stated by the majority, Old Loopco was acquired by an entity known as Withrow Enterprises, Inc. for the purpose of continuing the Loopco product line — including the coil slitting machinery that allegedly injured David Davis. One may ask why Withrow decided to acquire Old Loopco rather than undertake the manufacture of coil slitting machinery as a new corporate enterprise. Two reasons are immediately apparent. As an initial matter, Withrow sought to rely on the accumulated good will that Old Loopco had established in the marketplace. Second, Withrow could rely on the expertise developed by Old Loopco in the years that it manufactured such machinery.
Moreover, one must wonder why, immediately after the acquisition, With-row Enterprises assumed the persona of its predecessor through adoption of its name. Clearly, it was to represent itself as the heir of the Loopco enterprise.
Given its Herculean efforts to assume the mantle of the Loopco corporate image and to benefit thereby, New Loopco should be estopped from denying its acquired identity for the purpose of products liability.
Accordingly, while I agree with the majority that a genuine issue of fact remains regarding whether New Loopco voluntarily assumed the liability of its predecessor, I would not predicate liability on that basis alone. Regardless of the nature of the agreement between Old Loopco and Withrow Enterprises, liability need not arise exclusively as a matter of contract law. It is axiomatic that, in the context of tort law, two parties are not permitted to contract away the rights of another which arise as a matter of public policy. Likewise, Old Loopco and Withrow Enterprises should not be permitted to agree to foreclose the rights of David Davis. Indeed, to permit such behavior encourages the drafting of contractual provisions which absolves both parties of liability for their tortious acts. This occurs where liability is shifted to the predecessor corporation in order to allow the successor to escape liability while the predecessor is dissolved — thereby making it judgment-proof. The result is to leave an innocent and injured third party with no remedy and no recourse. Such machinations have no place in the law.
Accordingly, for the additional reasons stated in my dissent in Flaugher, I would affirm the court of appeals.