Court Opinion

ID: 9763677
Source: CourtListenerOpinion
Date Created: 2023-08-29 02:52:00.207201+00
Date Added: 2024-06-11T07:29:47.911277
License: Public Domain

SCHREIBER, J.,
concurring.
The Court today has fashioned a remedy for persons injured due to a defective product against a successor to the manufac-. turer of the product, irrespective of the form of that succession. I agree with the functional approach embraced by the majority. The central thesis of this methodology is premised on the elimination by the successor of an effective remedy. That is an essential condition precedent to recovery.
*359It is with the retrospectiveness of the new rule that I have difficulty. It is inequitable to saddle, as the majority does, all previous purchasers of assets, who have not assumed the liabilities arising out of defects of previously manufactured products, with those liabilities when the accident occurs after November 15, 1979. This injustice is apparent.
A crucial element in a product liability action against a manufacturer is that it placed a defective product in the stream of commerce. Yet here the defendant manufacturer is completely innocent. When its purchase contract was made, it had no responsibility for the product, and it in no way contributed to the accident. (We are not concerned herein with the duty to advise of improvements or subsequently discovered defects.) On the other hand, frequently a plaintiff will not be free of any fault, so that the classic situation concerning which of two innocent parties should bear the loss will often not be present.
Moreover, the purchaser of the manufacturing assets has entered into a contract in good faith fully relying upon the law that it would not be responsible for defective products made by the seller. When the price of acquisitions, whether by merger, consolidation or purchase of assets, is determined, the parties in fixing value consider, among other things, the liabilities which the buyer is assuming. One factor motivating acquisition of the seller’s assets rather than its securities has been to avoid known and unknown liabilities. See McGaffey, Buying, Selling, and Merging Businesses 1-2 (1979); Kadens, “Practitioner’s Guide to Treatment of Products Liabilities in Assets Acquisitions,” U.Tol. L.Rev. 1, 32-44 (1978); Stephan, “Acquisition Trouble Spots,” 21 Bus.Law 401, 401-402 (1966). Obviously and as the majority recognizes, whether liabilities, contingent or otherwise, are assumed or not has an effect on the purchase price.1 See ante at *360353-354. See also Juenger and Sehulman, “Assets Sales and Products Liability,” 22 Wayne L.Rev. 40, 55-56 (1975).
Lastly, it is unfair to impose the economic monetary consequences on the purchaser. Not only has the purchaser paid more than it would have, it has also been deprived of any opportunity for contractually providing for indemnification from the seller or for some other protective device, such as an escrow. Thus the purchaser will have the cumulative loss of overpaying for the assets and of satisfying the claims of injured persons. Moreover, it is questionable whether purchasers may realistically be able to acquire insurance policies covering them for future accidents caused by defective products made and sold prior to acquisition. See Senate Select Comm. on Small Business, 28th Annual Rept, ch. 18, “Impact of Product Liability on Small Business,” 167-171, S.Rept.No. 629, 95th Cong., 1st Sess. (1977); Dep’t of Commerce, Interagency Task Force on Product Liability: Final Report at VI-2 to VI-38 (1977). For testimony to the effect that 21.6% of those businesses seeking products liability insurance could not obtain it, see Products Liability Insurance: Hearings Before the Subcomm. on Capital, Investment and Business of the House Comm. on Small Business, 95th Cong., 1st Sess. (Part 1) 4 (1977). See also Kadens, supra, 10 U.Tol.L.Rev. at 22-25; Comment, “Products Liability and Successor Corporations: Protecting the Product User and the Small Manufacturer Through Increased Availability of Products Liability Insurance,” U.Calif.D.L.Rev. 1000, 1002-1004, 1022-1024 (1980). There is nothing in the record which is of assistance in answering this question. If such a policy may not feasibly be obtainable, the exposures of many small and moderate size companies would be immense. The economic consequences could be disastrous as well as inequitable and unjust.
*361On the other hand, the injured persons may not have been left totally unrecompensed. Workers’ compensation, accident and health insurance policies, and liability of the manufacturer of the defective product or its insurer are some monetary sources which may be available to compensate the injured plaintiff.
An equitable resolution of retrospectiveness should focus on the date of acquisition rather than the date of the accident. Thus only purchasers of assets whose contracts were entered into after November 15, 1979 should be subject to the rule announced today. On balance, I would respect the parties’ contracts entered into on or before November 15, 1979 in the absence of some compelling reason to the contrary.
Except as stated herein, I join in the opinion.
SCHREIBER, J., concurring in the result.
For affirmance — Justices SULLIVAN, PASHMAN, CLIFFORD, SCHREIBER, HANDLER and POLLOCK — 6.
For reversal — None.

 lnterestingly, the Legislature has recognized the legal difference between a transfer of assets with and without an assumption of the seller’s liabilities. Compare the requirements when a “bulk transfer” is made and liabilities are not assumed, N.J.S.A. 12A:6-103(6), (7), with those when an assumption is *360made, N.J.S.A. 12A:6-104 to -111. Only creditors of the transferor or seller holding claims based on transactions or events occurring before the bulk transfer are protected. N.J.S.A. 12A:6-109.