Jeffrey v. Rapid American Corp.

• Decision Date: 15 March 1995
• Docket Number: Docket Nos. 96953,No. 4,4
• Citation: 529 N.W.2d 644,448 Mich. 178
• Parties: JEFFREY et al., Plaintiffs-Appellees, v. RAPID AMERICAN CORPORATION, Defendant-Appellant. to 97009. Calendar
• Court: Michigan Supreme Court

Page 644

529 N.W.2d 644

448 Mich. 178

JEFFREY et al., Plaintiffs-Appellees, v. RAPID AMERICAN CORPORATION, Defendant-Appellant.

Docket Nos. 96953 to 97009.

Calendar No. 4.

Supreme Court of Michigan.

Argued Dec. 7, 1994.

Decided March 15, 1995.

Joel I. Persky, Terrence M. O'Brien, James J. Bedortha, James M. Hession, Goldberg, Persky, Jennings & White, P.C., Saginaw, Michael B. Serling, Michael B. Serling, P.C., Birmingham, Tybe A. Brett, Goldberg, Persky, Jennings & White, P.C., Pittsburgh, PA, for plaintiffs-appellees.

John J. Schutza, Kazul & Associates, P.C., Detroit, Paul H. Aloe, Rubin Baum Levin Constant & Friedman, New York City, for defendant-appellant.

Opinion

MICHAEL F. CAVANAGH, Justice.

I

The issue in this case ¹ is whether a Michigan court can exercise personal jurisdiction over a nonresident corporation because of the imputation of a predecessor corporation's contacts with the state. We hold that it can when the exercise of jurisdiction is both fair and reasonable. The exercise of limited personal jurisdiction over this defendant is properly exercised pursuant to M.C.L. § 600.715; M.S.A. § 27A.715 and comports with traditional notions of fair play and substantial justice.

II

The facts are largely undisputed although somewhat complex. The plaintiff claims he suffers from personal injuries caused by exposure to asbestos contained in products sold in Michigan by The Philip Carey Manufacturing Company (old Carey). Old Carey maintained offices in Detroit and Saginaw through which asbestos-containing products were distributed in Michigan.

Through a series of mergers, defendant Rapid American Corporation became a corporate successor to old Carey. Old Carey was incorporated in Ohio in 1888. On June 1, 1967, old Carey merged with the Glen Alden Company, which was at that time a wholly owned subsidiary of Rapid American Corporation. The merger agreement provided that the surviving corporation (Glen Alden Corporation)

shall succeed to and shall possess and enjoy all the rights, privileges, powers, franchises, immunities and interest, both of a public and private nature, and be subject to all restrictions, debts, liabilities and duties of each of the Constituent Corporations [i.e., The Philip Carey Manufacturing Company and Glen Alden Company]. ... [A]ll debts, liabilities, restrictions, and duties of either of the Constituent Corporations shall thenceforth attach to the Surviving Corporation and may be enforced against it to the same extent as if they had been incurred or contracted by it. [Emphasis added.]

On the same day of the merger between old Carey and Glen Alden, all assets and liabilities of old Carey were assigned by the Glen Alden to its own independent subsidiary, the Philip Carey Manufacturing Company (new Carey).

On April 17, 1972, Glen Alden sold new Carey ² to the Celotex Corporation. Celotex assumed all of new Carey's assets and liabilities, including those remaining from old Carey. Shortly after shedding new Carey, Glen Alden merged into its parent, Rapid American to form a Delaware corporation called Rapid American Corporation. The merger agreement, dated November 3, 1972, provides:

[B]ut all rights of creditors and all liens upon any property of any of the Constituent Corporations [Glen Alden and Rapid] shall be preserved unimpaired, and all debts, liabilities and duties of the Constituent Corporations shall thenceforth attach to the Surviving Corporation [Rapid] and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it. [Emphasis added.]

Celotex was eventually named as a defendant in numerous asbestos-related personal injury actions because of its own alleged liability as well as that of old Carey and the various incarnations of new Carey. Celotex filed bankruptcy in 1990. Shortly thereafter, and apparently as a response to the Celotex bankruptcy, Rapid American was added as a defendant in these actions filed against Celotex.

Rapid American filed a motion for summary disposition pursuant to MCR 2.116(C)(1), arguing that Michigan could not exercise limited personal jurisdiction over it solely because it is the corporate successor to old Carey. ³ The plaintiff countered that jurisdiction arises because old Carey's contacts are imputed to the defendant because Rapid American assumed old Carey's liabilities when it merged with Glen Alden. The trial court denied the motion, holding that Rapid American is subject to personal jurisdiction in Michigan.

The Court of Appeals affirmed the decision of the trial court:

By merging with Glen Alden and assuming the liabilities of that corporation, and agreeing to the enforcement measures as stated in the agreement, Rapid, a sophisticated national corporation, clearly and unambiguously assumed the liabilities of Old Carey that remained in Glen Alden. Glen Alden could not have failed to contemplate the assumption of liabilities from any damages caused by Old Carey's manufacture and distribution in Michigan of products containing asbestos. Rapid expressly assumed the liabilities of Glen Alden and the above-referenced means of enforcement; therefore, it cannot be said that Rapid lacked warning that it would be subject to suit in forums in which Old Carey, the predecessor to a former Glen Alden subsidiary, did business and would have been liable to suit.

* * * * * *

However, in these cases, Rapid's express and unequivocal assumption of Glen Alden's liabilities, which included the remaining liabilities of Old Carey, give it sufficient contacts with Michigan to make it amenable to suit in this forum. [200 Mich.App. 150, 154-155, 503 N.W.2d 720 (1993).]

III

The appellate standard of review when examining jurisdictional rulings is de novo. Williams v. Bowman Livestock Equipment Co., 927 F.2d 1128, 1130 (C.A. 10, 1991). The plaintiff bears the burden of establishing jurisdiction over the defendant, Mozdy v. Lopez, 197 Mich.App. 356, 359, 494 N.W.2d 866 (1992), but need only make a prima facie showing of jurisdiction to defeat a motion for summary disposition. Bowman Livestock at 1131. The affidavits, together with any other documentary evidence submitted by the parties, must be considered by the court. MCR 2.116(G)(5). All factual disputes for the purpose of deciding the motion are resolved in the plaintiff's (nonmovant's) favor. See Wiles v. B.E. Wallace Products Corp., 25 Mich.App. 300, 303-305, 181 N.W.2d 323 (1970); Bowman Livestock at 1130.

When analyzing whether the exercise of limited personal jurisdiction over a given defendant is proper, a two-step inquiry is generally applied. First, the exercise of limited personal jurisdiction must be consistent with the requirements of due process. Witbeck v. Bill Cody's Ranch Inn, 428 Mich. 659, 665-666, 411 N.W.2d 439 (1987); Mozdy 197 Mich.App. at 358, 494 N.W.2d 866. Second, defendant must come within the terms of M.C.L. § 600.715; M.S.A. § 27A.715. Witbeck 428 Mich. at 666, 411 N.W.2d 439. However, in this case, the Court must make an additional inquiry: Can the jurisdictional contacts of a corporate predecessor be imputed to its successor in order to satisfy the first two inquiries? Despite the fact that this additional inquiry is the primary focus of this opinion, we begin with the first inquiry in order to create the framework within which the primary discussion may occur.

A

The Due Process Clause of the Fourteenth Amendment limits the jurisdiction of state courts to enter judgments affecting the rights or interests of nonresident defendants. Kulko v. California Superior Court, 436 U.S. 84, 91, 98 S.Ct. 1690, 1696, 56 L.Ed.2d 132 (1978). As a result, a valid judgment affecting a nonresident's rights or interests may only be entered by a court having personal jurisdiction over that defendant. Int'l Shoe v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 159, 90 L.Ed. 95 (1945). A court may acquire personal jurisdiction over a nonresident when the nonresident defendant's relationship with the forum is such that it is fair to require the defendant to appear before the court. Id.

It is fair to require a defendant to appear before the court when the defendant possesses "minimum contacts" with the forum. A defendant must "have certain minimum contacts with [the forum] such that maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " Int'l Shoe at 316, 66 S.Ct. at 158. Whether sufficient minimum contacts exist between a defendant and Michigan to support exercising limited personal jurisdiction is determined by applying a three-pronged test:

First, the defendant must have purposefully availed himself of the privilege of conducting activities in Michigan, thus invoking the benefits and protections of this state's laws. Second, the cause of action must arise from the defendant's activities in the state. Third, the defendant's activities must be substantially connected with Michigan to make the exercise of jurisdiction over the defendant reasonable. [Mozdy 197 Mich.App. at 359, 494 N.W.2d 866.]

The requirement of minimum contacts serves two purposes: (1) it protects a defendant from litigating in distant or inconvenient forums, and (2) it ensures that a state does not extend its judicial power beyond the limits imposed on all states by our federal system of government. World-Wide Volkswagen v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980). Of the two, however, the overriding purpose of due process is to protect the individual liberty interests encompassed within its scope as opposed to furthering concepts of federalism. Burger King v. Rudzewicz, 471 U.S. 462, 472, n. 13, 105 S.Ct. 2174, 2182, n. 13, 85 L.Ed.2d 528 (1985). Nevertheless, both purposes work in tandem to give our legal system a degree of predictability that provides potential defendants with the opportunity to structure their affairs so as to provide some assurance regarding where ...