Florom v. Elliott Mfg., 86-1656

• Decision Date: 06 February 1989
• Docket Number: No. 86-1656,86-1656
• Citation: 867 F.2d 570
• Parties: Prod.Liab.Rep.(CCH)P 12,042 George W. FLOROM, Plaintiff-Appellant, v. ELLIOTT MANUFACTURING, a Nebraska Corporation, and Elliott Equipment Corporation a Nebraska Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 570

867 F.2d 570

Prod.Liab.Rep.(CCH)P 12,042

George W. FLOROM, Plaintiff-Appellant, v. ELLIOTT MANUFACTURING, a Nebraska Corporation, and Elliott

Equipment Corporation a Nebraska Corporation,

Defendants-Appellees.

No. 86-1656.

United States Court of Appeals, Tenth Circuit.

Feb. 6, 1989.

James A. Cederberg, Bragg & Dubofsky, P.C., Denver, Colo. (John W. Hornbeck, Bragg & Dubofsky, P.C., Denver, Colo., was also on the brief), for plaintiff-appellant.

John M. Lebsack, White and Steele, P.C., Denver, Colo. (John M. Palmeri, White and Steele, P.C., Denver, Colo., was also on the brief), for defendants-appellees.

Before HOLLOWAY, Chief Judge, MOORE, Circuit Judge, and RUSSELL, District Judge ^*.

HOLLOWAY, Chief Judge.

This appeal arises from the plaintiff's claim that the defendant, a successor corporation, is liable for the injuries suffered while the plaintiff was using a hydraulic crane manufactured and sold by the defendant's predecessor corporation. The plaintiff-appellant, George W. Florom (Florom), filed an action based on theories of strict liability, negligence, and breach of implied warranties against the defendant-appellee, Elliott Equipment Co. (New Elliott) as the successor to Elliott Manufacturing Co. (Old Elliott), which manufactured and sold the crane to Florom's employer, and against Old Elliott. Old Elliott's motion for summary judgment was granted by Chief Judge Finesilver, and in a separate order he granted summary judgment for New Elliott, which was appealed. 629 F.Supp. 1145. We affirm in part and reverse in part.

I

A.

Florom was injured on January 23, 1981 while using a Hi Reach hydraulic crane ("cherry picker") during the course of his employment. He was ejected from the basket of the hydraulic crane while working on electrical transmission lines and fell 85 feet to the ground. As a result of the fall, Florom is a paraplegic.

Old Elliott manufactured and sold the crane at issue to Florom's employer, Crawford Electric Company, in July 1969, prior to July 1972 when New Elliott purchased the assets of Old Elliott. Brief of Defendant-Appellee Elliott Equipment Corporation at 3; see Undisputed Facts stated by the magistrate. I R. Item 8 at 1. Pursuant to a court-supervised sale of Old Elliott, the two corporations entered into a purchase and sale agreement. This transaction was between Old Elliott and the corporation which was formed explicitly for this acquisition purpose by Maynard Weaver (Weaver) and Stuart Borg. The successor corporation was originally named the same as the predecessor, Elliott Manufacturing Co. In 1975, New Elliott changed its name to Elliott Equipment Co.

Under the terms of the purchase and sale agreement, Old Elliott sold "its assets consisting of machinery, inventory, tools, supplies, manufacturing plant and real estate on which it is located, goodwill, patents and copyrights." Exhibit 1, 1. The agreement stipulated that prior to closing the seller would furnish the purchaser a statement that all debts of the transferor had been paid in full or otherwise provided for, which statement would cause the purchaser to waive any requirement that the seller comply with Article 6 of the Nebraska Uniform Commercial Code pertaining to bulk transfers. The agreement designated New Elliott as the purchaser and Weaver signed in his capacity as the President of New Elliott. Id. at 3 and Exhibit 7. Old Elliott received in consideration the sum of $601,000.

New Elliott received all work in progress, customer accounts and records, and the liabilities necessary to carry on the day to day transaction of business. New Elliott closed the business for ten days to two weeks for inventory and then reopened. It continued the business using the same employees, sales force, facilities, stationery, and invoices. At this time New Elliott also used the same name as the Old Elliott. New Elliott did not retain the corporate officers, board of directors, or stockholders of Old Elliott; no stock was provided to any Old Elliott stockholders, directors, or officers as part of the purchase and sale transaction. New Elliott did not inform its sales force, customers, or sales distributors that there had been an ownership change.

Old Elliott assigned and transferred to New Elliott "all contracts and obligations incurred by Elliott Manufacturing Co. [Old Elliott] in the normal course of business." Exhibit 8 and Schedule A. This included "[a]ll warranty obligations arising under the terms of the product warranty" issued by Old Elliott. Id. at Schedule A, p 4, also Exhibit 41. Under the purchase and sale agreement, Old Elliott agreed to a five year covenant not to compete. Old Elliott was incorporated under the laws of Nebraska. After its assets were sold with judicial approval, Old Elliott filed articles of dissolution with the Secretary of State of Nebraska on July 12, 1972. According to its attorney, Old Elliott "was dissolved on July 19, 1973." Exhibit 28.

When New Elliott and Old Elliott completed their sale transaction, the cherry picker model EHE-75 used by Florom was not being manufactured. Subsequent to the sale transaction, New Elliott produced and sold a different model of the hydraulic crane while using the trade name "Hi Reach" and the patent rights, copyrights, and royalty agreements associated with the model EHE-75. New Elliott continued to service and provide replacement parts for the cranes produced by Old Elliott. It is undisputed that New Elliott provided service and replacement parts for the unit involved in Florom's injuries.

B.

Florom filed this diversity action in the district court. Western Fire Insurance Company (Western) was a co-plaintiff as it insured Florom's employer for workmen's compensation coverage. At issue in this appeal are claims which Florom alleged in his amended complaint. Both Old and New Elliott were named as defendants. Florom asserted claims on theories of negligence, strict liability for a defective product, breach of implied warranty of fitness for a particular purpose, breach of implied warranty for merchantability, and workmen's compensation subrogation for Western.

Both defendants filed motions for summary judgment. New Elliott and Florom objected to Old Elliott's motion. These two motions were addressed by a magistrate who recommended that both motions be granted on his proposed findings and conclusions. Florom objected to the Magistrate's recommendations.

After review, the district judge concluded that both defendants' motions should be granted, though on reasoning different from the Magistrate's. The district judge determined that for conflicts of law purposes, the action presented a tort law problem. Because the most significant contacts occurred in Colorado, the court held that Colorado law would govern.

The court granted New Elliott's motion for summary judgment, holding: (1) Colorado continues to adhere to the traditional corporate law view of successor nonliability; (2) Florom failed to come within any of the four exceptions to the corporate successor nonliability rule; and (3) Colorado law, as articulated by state courts and the Colorado Products Liability Act (CPLA), has not adopted the theories of product line and continuity of enterprise exceptions for strict liability claims. Florom filed a motion to alter or amend the judgment and to certify the questions of law on successor corporate liability to the Supreme Court of Colorado, which was denied. ¹

Florom's timely appeal challenges only the summary judgment for New Elliott. Florom argues that the district court erred when it (1) concluded that there was no issue of material fact as to whether New Elliott, as a successor corporation, expressly or impliedly agreed to assume Old Elliott's liabilities; (2) held that New Elliott, as a successor corporation, was not liable under the product line theory for injuries caused by defective products manufactured by its predecessor; (3) held similar nonliability under a continuity of enterprise theory for its predecessor's defective product; and (4) rejected, without discussion, Florom's claim that the successor corporation, New Elliott, had an independent duty to warn of unreasonable dangers associated with the products placed on the market by Old Elliott.

We will first address the theories recognized by Colorado law, the exception to successor corporate nonliability where the successor has expressly or impliedly agreed to assume the predecessor's liabilities and a successor's independent duty to warn which may arise from relationships between the successor and the predecessor's customers.

II

Florom argues that on two theories recognized under Colorado law there were disputed material facts and that the district court improperly granted summary judgment to New Elliott on those claims. We agree. First, on the claim that New Elliott expressly or impliedly assumed liability for Old Elliott's liabilities, neither the contract documents nor the record of New Elliott's post-acquisition conduct show that there is no genuine issue of fact and that the moving party is entitled to a judgment as a matter of law. Rule 56(a), Fed.R.Civ.P. Second, the district court did not address the issue whether New Elliott had a duty to warn Old Elliott's customers because of service relationships which were maintained with those customers. We likewise conclude there is a genuine fact question on this theory.

When reviewing a summary judgment, we must examine the record to determine whether any genuine issue of material fact pertinent to the ruling remains, and if not, whether the substantive law was correctly applied. Western Casualty & Surety Co. v. National Union Fire Insurance Co., 677 F.2d 789, 791 n. 1 (10th Cir.1982). Under Rule 56, the movant must demonstrate that he is entitled to a summary judgment beyond a reasonable doubt. Madison v. Desert Livestock Co., 574 F.2d 1027, 1037 (10th Cir.1978). In making this evaluation, pleadings and documentary...