Court Opinion

ID: 4118904
Source: CourtListenerOpinion
Date Created: 2017-01-26 19:11:40.777596+00
Date Added: 2024-06-11T14:46:44.357410
License: Public Domain

J-A28042-16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

JACQUELINE S. WAGNER & THOMAS                     IN THE SUPERIOR COURT OF
WAGNER,                                                 PENNSYLVANIA

                            Appellants

                       v.

STANDARD STEEL, LCC,

                            Appellee                   No. 850 EDA 2016

                Appeal from the Order Entered February 18, 2016
              in the Court of Common Pleas of Philadelphia County
                         Civil Division at No.: 140703015

BEFORE: PANELLA, J., SHOGAN, J., and PLATT, J.*

MEMORANDUM BY PLATT, J.:                            FILED JANUARY 26, 2017

        Appellants, Jacqueline S. and Thomas Wagner, appeal from the order

of February 18, 2016, which granted the motion of Appellee, Standard Steel,

LCC, for summary judgment in this tort action arising out of Appellant Mrs.

Wagner’s alleged exposure to asbestos.         On appeal, Appellants claim that

the trial court erred in finding that a bankruptcy court order acted as a bar

to the instant action and in finding that Appellee did not owe a duty of care

to Appellant Mrs. Wagner. For the reasons discussed below, we affirm.

____________________________________________

*
    Retired Senior Judge assigned to the Superior Court.
J-A28042-16

      We take the underlying facts and procedural history in this matter

from the trial court’s April 20, 2016 opinion and our independent review of

the certified record.

            [Appellants] commenced this suit against [Appellee] by
      way of [c]omplaint on July 2[5], 2014, alleging [Appellant]
      Jacqueline Wagner was injured through exposure to asbestos in
      her household from fibers brought home on the asbestos-
      contaminated clothing of her husband, [Appellant] Thomas
      Wagner, from 1970 to 1972. During this [ ] period, [Appellant]
      Mr. Wagner worked as a laborer (material handler) and as a
      crane operator at a wheel and axle manufacturing facility located
      in Burnham, Pennsylvania (“the Burnham Facility”). In 1989,
      Freedom Forge Corporation (“Freedom Forge”) acquired the
      Burnham facility by means of a leveraged buyout. [Appellee] is
      the current owner and operator of the Burnham Facility, which it
      purchased from Freedom Forge in 2002 through a bankruptcy
      court asset auction. [Appellants] contend [Appellee] is liable as
      a successor-in-interest to Freedom Forge for [Appellant] Mrs.
      Wagner’s alleged secondary or “take-home” exposure to
      asbestos.[a] More specifically, [Appellants’ c]omplaint asserts
      [Appellee] “failed to exercise reasonable care to protect
      [Appellant] Mrs. Wagner and others similarly situated from the
      hazardous, dangerous and harmful conditions that existed on its
      property.” ([Appellants’] Compl., at ¶ 13.)[b] [Appellant] Mrs.
      Wagner was diagnosed with malignant mesothelioma in
      September of 2013.[c] Her deposition was taken in connection
      with the instant matter on August 14, 2014.        In addition,
      [Appellant] Mr. Wagner was deposed on January 28, 2015.
            [a]
               Following the lead of the Third Circuit Court of
            Appeals for the United States in In re Trans World
            Airlines, Inc., 322 F.3d 283, 289 (3rd Cir. 2003),
            [the trial court] refrains from speculating as to
            whether there is a basis for such liability on the
            present record. See TWA, [supra] at [288 n. 4]
            (“Here we decline to speculate as to whether there is
            a basis for successor liability and, instead, assume
            for purposes of our analysis that but for the [s]ale
            [o]rder, [A]ppellants could have asserted viable
            successor liability claims against American.”).
                                    -2-
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              [b]
                 This is not a “typical” asbestos appeal. In its
              motion papers, [Appellee] does not dispute that
              [Appellant]    Thomas    Wagner    was    regularly,
              frequently, and proximately exposed to asbestos at
              the Burnham facility. By the same token, [Appellee]
              does not appear to dispute that [Appellant]
              Jacqueline Wagner was exposed to and laundered
              her husband’s asbestos-laden work clothing for a
              period of two years.
              [c]
                 Mesothelioma is a rare form of cancer affecting
              “the mesothelial tissue surrounding the lung,” and
              few people develop the disease save for those who
              have been exposed to asbestos.           Sporio v.
              W.C.A.B., 717 A.2d 525, 527 (Pa. 1998). Moreover,
              the disease has been medically linked to exposure to
              asbestos or asbestine products. Gutteridge v. A.P.
              Green Services, Inc., 804 A.2d 643, 652 (Pa.
              Super. 2002)[, appeal denied, 829 A.2d 1158 (Pa.
              2003)].

              On December 15, 2015, [Appellee] filed two (2) separate
       [m]otions for [s]ummary [j]udgment.            [Appellants] filed
       [a]nswers to [Appellee’s] [m]otions for [s]ummary [j]udgment
       on January 8, 2016. [Appellee] filed [r]eplies to [Appellants’]
       [a]nswers on January 15, 2016. [Appellants] filed [s]ur-[r]eplies
       to [Appellee’s] [r]eplies on January 21, 2016. Subsequently, the
       [trial c]ourt held oral argument on both [m]otions for [s]ummary
       [j]udgment on February 16, 2016. Following oral argument, the
       [trial c]ourt granted [Appellee’s] [m]otions for [s]ummary
       [j]udgment on February 18, 2016.[d] This appeal followed.[1]
              [d]
                 The [trial c]ourt agrees with [Appellee] that the
              June 28, 2002 Order of the United States Bankruptcy
              Court for the District of Delaware effectively
              extinguished [Appellants’] successor tort claims.
              That issue disposes of the case. As such, the [trial
____________________________________________

1
 The trial court did not order Appellants to file a concise statement of errors
complained of on appeal. See Pa.R.A.P. 1925(b). The trial court filed an
opinion on April 20, 2016. See Pa.R.A.P. 1925(a).

                                           -3-
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           c]ourt’s [o]pinion will not address the viability of
           Appellee’s other argument that a Pennsylvania
           premises owner does not owe a legal duty to warn a
           third-party of potential asbestos exposure not
           occurring on its premises.

     Freedom Forge’s Bankruptcy Proceedings ([Appellants’]
     Exhibits D & E)

            In 1989, Freedom Forge . . . acquired the Burnham Facility
     through a leveraged buyout. Just as its predecessors had,
     Freedom Forge operated the plant under the “Standard Steel”
     name. In general terms, Freedom Forge was engaged in the
     business of “manufacturing and selling railway wheels, railway
     axles and other forged metal products from various facilities and
     locations in the United States.” ([Appellants’] Ex. E, ¶14, at
     8[])[.]

           In 2001, Freedom Forge filed for protection under Chapter
     11 of the United States Bankruptcy Code (“The Code”) in the
     United States Bankruptcy Court for the District of Delaware (“the
     Bankruptcy      Court”)     under    Case     No.    01-02399-01.
     Consequently, in 2002, Freedom Forge marketed the sale of
     substantially all its assets to potential purchasers, including the
     Burnham Facility, free and clear of all liens, interests,
     encumbrances and claims of third parties (the “Freedom Forge
     [a]ssets”). On April 27, 2002, Standard Steel, Inc. (“SS Inc.”)
     was formed as a Delaware corporation by a group of investors
     interested in purchasing the Freedom Forge [a]ssets pursuant to
     the Code. The same pool of investors then formed [Appellee] as
     a Delaware limited liability company on June 12, 2002.

           On June 13, 2002, SS Inc. and Freedom Forge entered into
     an [a]sset [p]urchase [a]greement (the “[a]sset [p]urchase
     [a]greement”) through which Freedom Forge agreed to sell, and
     SS Inc. agreed to purchase, the Freedom Forge [a]ssets. On
     July 22, 2002, SS Inc. assigned and transferred to [Appellee] all
     of SS Inc.’s rights and interests in the purchase of the Freedom
     Forge Assets under the terms detailed in the [a]sset [p]urchase
     [a]greement.

     Delaware Bankruptcy Court Order ([Appellee’s] Exhibit B-
     1)
                                    -4-
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             On June 28, 2002, the [b]ankruptcy [c]ourt entered an
       [o]rder approving the terms of the [a]sset [p]urchase
       [a]greement as well as the sale of Freedom Forge [a]ssets. 2 The
       [b]ankruptcy [c]ourt sitting in Delaware made the following
       findings and determinations in regards to this transaction:

                    • The sale price was fair and reasonable, and
              the transaction was undertaken at arm’s length.

                    • The sale agreement and the transactions
              contemplated pursuant to the agreement were
              negotiated by the parties without collusion and in

____________________________________________

2
    The order provided in pertinent part:

       20. All persons and entities (including, without limitation, any
       federal, state or local governmental agency, department or
       instrumentality) holding Liens or Claims against the Debtors’
       assets or the [p]urchased [a]ssets hereby are barred on and
       after the Closing from asserting such Liens and Claims of any
       kind and nature against the Buyer, its successors or assigns, of
       the [p]urchased [a]ssets, except as provided in the [[a]sset
       [p]urchase [a]greement] and the [modified labor agreement].

               21. To the greatest extent allowed by applicable law, the
       Buyer is not assuming nor shall it in any way whatsoever be
       liable or responsible, as successors or otherwise, for any
       liabilities, debt or obligations of the Debtors [Freedom Forge and
       the other bankruptcy debtors] (other than the [a]ssumed
       [l]iabilities as and to the extent expressly provided in the
       [[a]sset [p]urchase [a]greement]) or any liabilities, debts or
       obligations in any way whatsoever relating to or arising from the
       [p]urchased [a]ssets or the Debtor’s operations or use of the
       [p]urchased [a]ssets by virtue of the transfer or assignment of
       the [p]urchased [a]ssets, except as provided in the [[a]sset
       [p]urchase [a]greement] and the [term sheet describing the
       claims to be allowed and paid pursuant to the Freedom Forge
       [b]ankruptcy [c]ourt [o]rder.

(Order Pursuant to Section 1129 of the Bankruptcy Code, 6/28/02, at 14).

                                           -5-
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           good faith within the meaning of Section 363(m) of
           the Code.

                 • Save for the assumed liabilities expressly
           outlined in the sale agreement, the assets purchase
           was effectuated “free and clear” of all interests and
           claims.

                  • “A sale of the [p]urchased [a]ssets other
           than one free and clear of all claims . . . or interests
           would (i) materially and adversely impact Debtors’
           estates, and (ii) yield substantially less value for the
           . . ., estates with less certainty than the available
           alternatives.”

                 • Sufficient due notice of the sale confirmation
           hearing was provided in accordance with the Code
           and all Bankruptcy Rules.

(Trial Court Opinion, 4/20/16, at 1-4) (some record citations omitted).

     On appeal, Appellants raise the following questions for our review:

            [1] When the evidence is viewed in accordance with the
     applicable standards, did the trial court err in granting
     [Appellee’s] [m]otion for [s]ummary [j]udgment [b]ased on
     Bankruptcy Court [o]rder (Control No. 15122118) on the
     grounds that, as a matter of law, [Appellee’s] purchase of
     certain assets through a sale conducted pursuant to Section 363
     of the United States Bankruptcy Code (“the Bankruptcy Code”),
     11 U.S.C. § 363, acted as a complete bar to the claims of
     [Appellants] against [Appellee], even though, at the time of the
     sale, [Appellants] did not have any legal claims that could have
     been asserted against either the selling debtor or [Appellee], and
     [Appellee] is, as a matter of law, the successor-in-interest to the
     selling debtor?

           [2] When the evidence is viewed in accordance with the
     applicable standards, did the trial court err in granting the
     [m]otion for [s]ummary [j]udgment of [Appellee] [r]e: [n]o
     [l]egal [b]asis for [a]ny [c]laim (Control No. 15121988) on the
     grounds that, as a matter of law, [Appellee] did not owe any
     duty of care to persons outside its premises (such as [Appellant]
                                    -6-
J-A28042-16

      Jacqueline Wagner) with respect to activities conducted by
      [Appellee] on its premises where (a) [Appellee] knew, or with
      the exercise of reasonable care should have known, that such
      activities involved an unreasonable risk of harm to persons
      outside its premises and (b) the risk of injury to persons such as
      [Appellant] Jacqueline Wagner as a result of such activities was
      foreseeable by [Appellee]?

(Appellants’ Brief, at 5-6) (emphasis and citations omitted).

      On appeal, Appellants challenge the trial court’s grant of summary

judgment in favor of Appellee. (See Appellant’s Brief, at 21-48). We briefly

note our scope and standard of review.

            Our scope of review of an order granting summary
      judgment is plenary. We apply the same standard as the trial
      court, reviewing all the evidence of record to determine whether
      there exists a genuine issue of material fact. We view the record
      in the light most favorable to the non-moving party, and all
      doubts as to the existence of a genuine issue of material fact
      must be resolved against the moving party. Only where there is
      no genuine issue as to any material fact and it is clear that the
      moving party is entitled to a judgment as a matter of law will
      summary judgment be entered.

             Motions for summary judgment necessarily and directly
      implicate the plaintiff’s proof of the elements of his cause of
      action. Thus, a record that supports summary judgment will
      either (1) show the material facts are undisputed or (2) contain
      insufficient evidence of facts to make out a prima facie cause of
      action or defense and, therefore, there is no issue to be
      submitted to the fact-finder. Upon appellate review, we are not
      bound by the trial court’s conclusions of law, but may reach our
      own conclusions. The appellate court may disturb the trial
      court’s order only upon an error of law or an abuse of discretion.

Dibish v. Ameriprise Financial, Inc., 134 A.3d 1079, 1084-85 (Pa. Super.

2016), appeal denied, 141 A.3d 481 (Pa. 2016) (citation omitted).

                                     -7-
J-A28042-16

       The dispositive issue in the instant matter is whether the trial court

erred in finding that Appellants’ claims against Appellee are barred under the

United States Bankruptcy Code and, specifically, the bankruptcy court’s June

28, 2002 order. Appellants argue that,

       the trial court erred as a matter of law in its analysis of the
       controlling authorities relating to the extinguishment of claims by
       way of a Section 363 bankruptcy sale where the claim that is
       sought to be barred had not ripened and did not exist, as a
       matter of bankruptcy law, at the time of the asset sale.

(Appellants’ Brief, at 22-23). Conversely, Appellee maintains that,

       [Appellants’] tort action is barred by [Section] 363 of the
       Bankruptcy Code and the [B]ankruptcy [C]ourt order approving
       the “free and clear” sale of [Freedom Forge’s] assets. The
       parties agree that Third Circuit precedent controls, and the Third
       Circuit precedent has held that a bankruptcy court’s [Section]
       363 sale order cuts off third-party claims against an asset
       purchaser.       [Appellants’] reliance on other Third Circuit
       precedent is unavailing because none of those cases examined
       the viability of a tort action against an asset purchaser following
       a bankruptcy court approved [Section] 363 asset sale.

(Appellee’s Brief, at 9). After a thorough review of the relevant cases from

the United States Court of Appeals for the Third Circuit, 3 we agree with the

trial court that Section 363(f) of the Code bars Appellants’ claims.

____________________________________________

3
  We note “decisions of the federal district courts . . . are not binding on
Pennsylvania courts, even when a federal question is involved.
Nevertheless, these decisions are persuasive authority and helpful in our
review of the issue presented.” Dietz v. Chase Home Finance, LLC, 41
A.3d 882, 886 n.3 (Pa. Super. 2012); see also Kleban v. Nat. Union Fire
Ins. Co. of Pittsburgh, 771 A.2d 39, 43 (Pa. Super. 2001) (“While we
(Footnote Continued Next Page)

                                           -8-
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      Section 363(f) of the Code in relevant part provides:

      (f) The trustee may sell property under subsection (b) or (c) of
      this section free and clear of any interest in such property of an
      entity other than the estate, only if—

             (1) applicable nonbankruptcy law permits sale of
             such property free and clear of such interest;

             (2) such entity consents;

             (3) such interest is a lien and the price at which
             such property is to be sold is greater than the
             aggregate value of all liens on such property;

             (4) such interest is in bona fide dispute; or

             (5) such entity could be compelled, in a legal or
             equitable proceeding, to accept a money satisfaction
             of such interest.

11 U.S.C. § 363(f).         In determining that Section 363(f) bars Appellants’

claim, the trial court relied on the Third Circuit’s decision in TWA, supra.

(See Trial Ct. Op., at 6-9).

      The trial court cogently summarized TWA, supra, as follows:

            In TWA, the United States Court of Appeals for the Third
      Circuit carefully examined whether successor tort claims could
      properly be regarded as extinguished following a § 363(f) asset
      sale. [See] TWA, supra at 288-93. There, at the conclusion of
      a bankruptcy auction on February 28, 2001, American Airlines
      (“American”) tendered an offer to purchase substantially all of
      financially troubled Trans World Airlines, Inc.’s (“TWA”) assets
      for $742 million. [See] [i]d. at 286. TWA’s Board of Directors
      voted in favor of the sale.      [See] id.      But employment
                       _______________________
(Footnote Continued)

recognize that federal court decisions are not binding on this court, we are
able to adopt their analysis as it appeals to our reason.”) (citation omitted).

                                            -9-
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     discrimination claims were still pending against TWA before the
     EEOC at the time of the sale. [See] [i]d. In addition, TWA had
     previously settled a class action with roughly 2,000 of its flight
     attendants by offering them travel vouchers. [See] [i]d. at 285.
     Both the EEOC and the class action litigants lodged objections to
     the sale. [See id.] at 286-87. After holding an evidentiary
     hearing concerning those objections, the [b]ankruptcy [c]ourt
     approved the sale. [See] [i]d. at 287. The [b]ankruptcy
     [c]ourt’s [Section] 363 sale order expressly enjoined all persons
     from taking any action to recover against American as a
     successor-in-interest for TWA’s tortious conduct. [See] [i]d.

             Both the EEOC and the class action litigants appealed,
     arguing that the [b]ankruptcy [c]ourt sale order improperly
     extinguished their claims.        [See] [i]d. at 287-88.       More
     particularly, the EEOC and the class action litigants argued
     before the Third Circuit that the phrase “interests in property” as
     used in § 363(f) of the Code has a narrow or limited meaning.
     [See] [i]d. According to the appellants, such interests refer only
     to “liens, mortgages, money judgments, writs of garnishment
     and attachment, and the like, and cannot encompass successor
     liability claims arising under federal antidiscrimination statutes
     and judicial decrees implementing those statutes.” [Id.] at 288.
     The airlines, by contrast, maintained that, “while Congress did
     not expressly define ‘interest in property,’ the phrase should
     be broadly read to authorize a bankruptcy court to bar any
     interest that could potentially travel with the property being sold,
     even if the asserted interest is unsecured.” Id. (emphasis
     added). The airlines’ argument ultimately prevailed. [See] [i]d.
     at 288-93[.]

           The Third Circuit in TWA determined American could not
     be held liable for the undischarged employment discrimination
     claims of former TWA employers or for the travel vouchers
     awarded to TWA’s flight attendants. [See] [i]d. at 293. Its
     holding was based on the fact that § 363(f) expressly authorizes
     the sale of a bankruptcy estate’s assets free and clear of “any
     interest” whatever in the property, as opposed to merely “in
     rem” interests or liens. The TWA court noted that, if Congress
     intended to limit the reach of Section 363(f) to monetary claims,
     security interests and similar obligations, it could have easily
     selected more restrictive terminology: “Since ‘lien’ is a defined
     term under the Bankruptcy Code, it stands to reason that
                                    - 10 -
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       Congress would have used the term ‘lien’ instead of ‘interest,’
       had it intended to restrict the scope of § 363(f) to liens.” [Id.]
       at 290 (citations omitted). The TWA court further reasoned that
       the claims at issue qualify as “interests in property within the
       meaning of section 363(f) in the sense that they arise from the
       property being sold.” Id. It elaborated that: “[T]he assets of
       the debtor . . . gave rise to the claims. Had TWA not invested in
       airline assets, which required the employment of the EEOC
       claimants, those successor liability claims would have not have
       arisen.” Id. Accordingly, the TWA court concluded that the
       discrimination and voucher claims were extinguished by virtue of
       the assets sale. [See] [i]d. at 293.[e]
              [e]
                  In addition, the TWA court found that, even
              assuming these claims did not qualify as “interests in
              property,” the [b]ankruptcy [c]ourt’s order would not
              be disturbed because “the priority scheme of the . . .
              Code supports the transfer of TWA’s assets free and
              clear of the claims.” [Id.] at 291. It explained that:
              “[V]arious classes of creditors [are] . . . entitled to
              satisfaction before general unsecured creditors may
              access the pool of available assets.” Id. The EEOC
              and class action claimants would be treated or
              regarded as general unsecured creditors. [See] [i]d.
              By virtue of their low priority in the context of a
              bankruptcy, the TWA court concluded that “[t]o
              allow the claimants to assert successor liability
              claims against American while limiting other
              [secured] creditors’ recourse to the proceeds of the
              asset sales would be inconsistent with the . . . Code’s
              priority scheme.” Id. at 292.

(Trial Ct. Op., at 6-7).

       If one examines the facts in the instant matter, there is little to

distinguish this case from TWA.4               Appellants’ claim arose out Freedom

____________________________________________

4
  Appellants attempt to distinguish TWA by asserting that it only deals with
claims that were present at the time of the asset sale, while the instant
(Footnote Continued Next Page)

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Forge’s allegedly negligent conduct in the early 1970s. In 2002, prior to the

initiation of the instant action, Appellee purchased almost all of Freedom

Forge’s assets through a Section 363 asset purchase agreement.             The

bankruptcy court approved the sale and specifically found that Appellee:

paid a reasonable price in an arm’s length transaction; the sale and

agreement were negotiated without collusion and in good faith; the sale was

free and clear of all interests and claims; to do otherwise would impact the

debtor’s estates and result in less value for the estate; and there was

sufficient notice of the sale.       (See Order Pursuant to Section 1129 of the

Bankruptcy Code, 6/28/02, at 2-3, 7, 12-14, 20-23, 27).

      Further, because all of the allegedly negligent conduct occurred at the

Burnham site, Appellants’ tort action against Appellee “is connected to or

arises from” the assets that Appellee purchased from Freedom Forge in

2002. TWA, supra at 290. As the TWA court reasoned, if Freedom Forge

had declined to invest in factories which employed workers such as

Appellant, Thomas Wagner, and if Freedom Forge had not used asbestos in
                       _______________________
(Footnote Continued)

matter deals with future claims. (See Appellants’ Brief, at 31-32). This is
not correct. While the travel voucher settlement was a present claim, the
EEOC claims had not been filed in court and it was unclear at the time of the
TWA decision if any of the claims would be filed in court. See TWA, supra
at 285-86. The TWA court particularly noted that because the EEOC claims
were future claims, they were more likely than the travel voucher settlement
to cause a diminution in the value of TWA’s assets because the buyer would
be unable to estimate the “magnitude of the damages” in such claims. Id.
at 292-93.

                                           - 12 -
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such sites, Appellants’ successor tort claims would not exist.         See id.

Section 363(f) of the Code allows the sale of such assets “free and clear” of

interests like Appellants’ successor tort claims. See id. at 293. Thus, the

trial court did not abuse its discretion or commit an error of law in finding

that TWA bars Appellants’ successor tort claims.

      Moreover, we find Appellants’ contention that the instant matter is

controlled by the Third Circuit’s decisions in Matter of Frenville Co., Inc.,

744 F.2d 332 (3d Cir. 1984), cert. denied, 469 U.S. 1160 (1985), and the

subsequent cases interpreting it, In re: Grossman’s Inc., 607 F.3d 114 (3d

Cir. 2010) (en banc), and Wright v. Owens Corning, 679 F.3d 101 (3d Cir.

2012), cert. denied, 133 S.Ct. 1239 (2013), entirely misplaced.           (See

Appellants’ Brief, at 25-33).    As discussed by both the trial court in its

opinion (see Trial Ct. Op., at 10) and by Appellee in its brief (see Appellee’s

Brief, at 15-19), the Frenville line of cases concern an entirely separate and

distinct legal concept, the discharge of legal claims against a debtor, not

successor liability following an asset purchase sale.

      In Frenville, the creditors of the Frenville Company filed an

involuntary bankruptcy petition against it.        Frenville, supra at 333.

Avellino and Bienes (A & B), was a certified public accounting firm, which

had prepared certified financial statements for Frenville. See id. One year

after the filing of the bankruptcy petition, two banks filed suit against A & B,

claiming that the certified financial statements it prepared on behalf of
                                     - 13 -
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Frenville were fraudulent. See id.     A & B sought relief from the automatic

stay in order to bring a third-party complaint against Frenville. See id.

       In concluding that the automatic stay did not bar A & B’s complaint,

the Third Circuit engaged in a detailed legal analysis of the Section 362(a),

the automatic stay provision of the Code, as well as Congress’ intent in

enacting it, and the social policy concerns underlying it. See id. at 334-35.

Ultimately, the Court concluded that only “proceedings that could have been

commenced or claims that arose before the filing of the bankruptcy petitions

are automatically stayed.” Id. at 335. However, the Court concluded that

there was no claim until there was a “right to payment.” Id. at 335-36. The

Third Circuit found that, when applying the appropriate state law, A & B

could not have filed a third-party complaint against Frenville until after the

service of the answer in the underlying action. See Id. at 337. Thus, the

Court held that A & B’s claim had not arisen pre-petition, and, therefore,

could not be discharged in a Chapter 7 bankruptcy. See id. at 338.

       Some twenty-six years after the Frenville decision, an en banc panel

of the Third Circuit specifically over-ruled it.   See Grossman’s, supra at

121.    In so doing, the Court noted the almost universal disapproval of

Frenville by other federal courts of appeal and bankruptcy courts. See id.

at 120.     Like the instant matter, Grossman’s concerned the alleged

exposure to asbestos, in this case by a consumer who purchased home

remodeling products from Grossman’s, a home improvement store. See id.
                                     - 14 -
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at 117.       Approximately twenty years after the appellee purchased the

products, Grossman’s filed for Chapter 11 bankruptcy. In its reorganization

plan, it purported to discharge all claims which arose before the plan’s

effective date.     See id.   Roughly ten years later, appellee manifested

symptoms of mesothelioma, and filed suit against Grossman’s successor-in-

interest.     See id.   Following Frenville, the bankruptcy court found the

reorganization plan did not discharge the appellee’s claim because, while her

exposure pre-dated the plan, her claim did not arise under state law until

“the injury manifests itself.” Id. at 118 (citation omitted).

      The Third Circuit overruled Frenville, holding that its “accrual test . . .

imposes too narrow an interpretation of a ‘claim’ under the Bankruptcy

Code.”      Id. at 121. Instead, the Court held that a “claim arises when an

individual is exposed pre-petition to a product or other conduct giving rise to

an injury, which underlies a right to payment under the Bankruptcy Code.”

Id. at 125 (citation and internal quotation marks omitted). In so doing, the

Court specifically discussed Congressional concerns that “future claims by

presently unknown claimants could cripple the debtor’s reorganization.”

(See id. at 126-27).      However, the Third Circuit reiterated that before a

court could decide that a pre-petition claim was barred by reorganization,

the lower court must decide whether the claimant had adequate notice of

the bankruptcy proceedings. See id. at 127-28.

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      Approximately two years later, in Wright, supra, the Third Circuit

again revisited the Frenville and Grossman’s cases. Noting that Frenville

had been the law in the Third Circuit for a lengthy period, the Court found

that bankruptcy notices sent out during the Frenville period were not

adequate because, under Frenville, future plaintiffs did not have a claim at

that time. See Wright, supra at 108. Thus, the Court concluded that the

Frenville test should continue to apply to individuals who held claims based

upon exposure to a product or conduct pre-petition if the reorganization plan

was confirmed prior to the date of the decision in Grossman’s; and to

individuals who held claims based upon conduct or exposure post-petition

but pre-confirmation, if the reorganization plan was confirmed prior to the

date that the Court decided Wright. See Wright, supra at 109.

      Here, Appellants claim that because Freedom Forge’s liquidation plan

was confirmed prior to the decisions in Grossman’s and Wright, “the

Frenville test controls the issue of whether [Appellants’] claims are

barred[.]”    (Appellants’ Brief at 30; see also id. at 29-31).        However,

Appellants’ argument suffers from a fatal flaw.       As discussed above, the

Frenville line of cases arose out of debtor’s attempts to discharge claims,

including    future   claims   in   bankruptcy.   These   decisions   are   wholly

intertwined with those portions of the Code concerning discharge of claims

and with the social policy issues that attempt to balance Congressional

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concerns with allowing debtors to reorganize and make a fresh start, with

the rights of future claimants to due process.

       Appellee is not a debtor and Appellants were not harmed by exposure

to Appellee’s product or conduct. Appellants fail to cite to any case that has

applied Frenville outside of the discharge context and fail to cite to any

case that has even discussed Frenville as having any possible applicability

to an asset purchase sale under Section 363(f). (See Appellants’ Brief, at

25-35). Further, Appellants do not make any argument as to why we should

take Frenville out of context and apply it to the instant situation. (See id.).

Given this, and given the near-universal disapproval of Frenville, as

discussed by the Third Circuit in Grossman’s, see Grossman’s, supra at

120, we see no basis for importing the Frenville test into a case involving

an asset purchase sale. Thus, the trial court did not abuse its discretion or

commit an error of law in declining to apply the Frenville test to the instant

matter.5

____________________________________________

5
  Appellants also contend, based on the Frenville line of cases, that they did
not receive adequate notice of the bankruptcy proceedings.               (See
Appellants’ Brief, at 35-38). However, given that we have declined to apply
Frenville to the instant matter and that, as the trial court correctly noted,
(see Trial Ct. Op., at 9), the bankruptcy court found that there was
adequate notice, and Pennsylvania courts must give federal judgment full
faith and credit, we decline to address this issue. See Atiyeh v. Bear, 690
A.2d 1245, 1249–50 (Pa. Super. 1997), appeal denied, 698 A.2d 63 (Pa.
1997) (applying collateral estoppel doctrine to decision of bankruptcy courts,
and precluding relitigation of same issue in this Court).

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      Appellants also allege that the trial court erred finding that Appellee

had no duty of care to Appellant Mrs. Wagner. (See Appellants’ Brief, at 38-

47). However, because our holding that the trial court was correct in finding

that the asset purchase sale bars Appellants’ claims is dispositive, we need

not address this issue.

      For the reasons discussed above, we hold that the trial court neither

abused its discretion nor made an error of law in granting summary

judgment in this matter. See Dibish, supra at 1084-85. Accordingly, we

affirm.

      Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 1/26/2017

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