Fowler v. Werner Co.

• Decision Date: 18 September 2014
• Docket Number: CAUSE No. 1:13-cv-126-RLM-RBC
• Parties: JERRY J. FOWLER AND MICHELE FOWLER, PLAINTIFFS, v. WERNER CO. D/B/A NEW WERNER CO., A DELAWARE CORPORATION, NEW WERNER HOLDING CO. (DE), INC. F/K/A NEW WERNER HOLDING CO. (DE), LLC D/B/A WERNER HOLDING CO., A DELAWARE CORPORATION, LOWE'S COMPANIES, INC., A NORTH CAROLINA CORPORATION, AND LOWE'S HOME CENTERS, INC., A NORTH CAROLINA CORPORATION, DEFENDANTS.
• Court: U.S. District Court — Northern District of Indiana

JERRY J. FOWLER AND MICHELE FOWLER, PLAINTIFFS, v. WERNER CO. D/B/A NEW WERNER CO., A DELAWARE CORPORATION, NEW WERNER HOLDING CO. (DE),INC. F/K/A NEW WERNER HOLDING CO. (DE), LLC D/B/A WERNER HOLDING CO.,A DELAWARE CORPORATION, LOWE'S COMPANIES, INC., A NORTH CAROLINA CORPORATION,AND LOWE'S HOME CENTERS, INC., A NORTH CAROLINA CORPORATION, DEFENDANTS.

CAUSE No. 1:13-cv-126-RLM-RBC

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA FORT WAYNE DIVISION

September 18, 2014

OPINION and ORDER

This matter is before the court on a summary judgment motion filed by defendants Werner Co. d/b/a New Werner Co., and New Werner Holding Co. (DE), Inc. f/k/a New Werner Holding Co. (DE), LLC d/b/a Werner Holding Co. The Werner defendants argue there is no genuine issue of material fact as to the claims asserted by plaintiffs Jerry Fowler and Michele Fowler. The Fowlers oppose the motion. Argument was heard on August 21, 2014.

I. BACKGROUND

In July 2007, the Fowlers purchased a Type III six-foot aluminum Werner step ladder from a Lowe's store in Fort Wayne. On April 29, 2011, Mr. Fowler used the ladder for a painting project. During the course of the project, he claims the ladder's spreader or spreader arm broke, causing him to fall onto the ladder and the ground. As a result of the fall, Mr. Fowler sustained broken ribs, a lacerated spleen, damaged kidneys, and damaged vertebrae.

Werner Co. had designed and manufactured the ladder in 2001. In 2006, Werner Co. and three other companies¹ filed for Chapter 11 bankruptcy relief in the United States Bankruptcy Court for the District of Delaware. New Werner Holding Co. (DE), LLC² d/b/a Werner Holding Co., purchased the assets of the bankrupt entities for cash, a credit bid, and assumption of liabilities as limited and defined in the parties' Asset Purchase Agreement. Before the bankruptcy court approved the sale, Lowe's Companies, Inc. objected to the agreement's "Assumed Liabilities" provision and requested confirmation that the purchaser would be liable for "all of Lowe's product liability and indemnity claims." Limited Objection and Reservation of Rights by Lowe's Companies, Inc., together with its subsidiaries to Notice of Debtors' Intent to Assume and Assign Certain Leases and Executory Contracts and Fixing CureAmounts, at 3 In re Werner Holding Co. (DE), Inc., No. 06-10578 (KJC) (Bankr. D. Del. Apr. 25, 2007) (Doc. No. 44-11). The debtors later told the bankruptcy court the dispute was resolved and the proposed form of order altered accordingly. On April 25, 2007, the bankruptcy court approved the sale, Order: (1) Approving Sale of Substantially All of Debtors' Assets Free and Clear of All Liens, Claims, Interests and Encumbrances; (2) Authorizing and Approving the Purchase Agreement[;] (3) Approving Assumption and Assignment and Sale of Certain Contracts and Leases; (4) Authorizing the Exemption of the Sale from Stamp and Similar Taxes; and (5) Granting Related Relief In re Werner Holding Co. (DE), Inc., No. 06-10578 (KJC) (Bankr. D. Del. Apr. 25, 2007) (Doc. No. 35-4), and the related Asset Purchase Agreement, dated March 20, 2007 (Doc. No. 35-5), between the debtors and Werner Holding Co. (DE), Inc. The parties contend that different sections of the bankruptcy court's order — that point to the Asset Purchase Agreement and agreements between the Lowe's Companies and the Werner defendants — determine the Werner defendants' liability. The pertinent sections of the documents are reproduced as needed in the discussion that follows.

The Fowlers allege that the Werner defendants are liable for their injuries contractually, pursuant to the Indiana Product Liability Act, and under common law theories of negligence, gross negligence, and/or recklessness. The Fowlers also assert a claim under the Indiana Consumer Protection Act. The Werner defendants seek summary judgment and contend they aren't liablebecause they didn't expressly assume the liabilities of the company which manufactured the ladder and didn't design, manufacture, or market the ladder.

II. STANDARD OF REVIEW

A movant is entitled to summary judgment if no genuine dispute as to any material fact exists and the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a). The court must construe all facts in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The movant initially has the burden to show there is a lack of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If, based on the evidence of record, a reasonable factfinder could return a verdict for the nonmoving party, summary judgment must be denied. Kodish v. Oakbrook Terrace Fire Prot. Dist., 604 F.3d 490, 507 (7th Cir. 2010).

III. DISCUSSION

A. Contractual Liability

The Werner defendants first argue they didn't contractually assume the liabilities of the company that manufactured the ladder in 2001 when they purchased the assets of the bankrupt company six years later. They point to the provision in the bankruptcy court's order regarding the general assumption of liabilities created by the sale.

Except as expressly provided in the Purchase Agreement or the Ancillary Documents, Buyer is not assuming nor shall it or anyaffiliate of Buyer be in any way liable or responsible, as a successor or otherwise, for any liabilities, debts, or obligations of the Debtors in any way whatsoever relating to or arising from the Debtors' ownership or use of the Purchased Assets prior to the consummation of the transactions contemplated by the Purchase Agreement or the Ancillary Documents, or any liabilities calculable by reference to the Debtors or their operations or the Purchased Assets, or relating to continuing or other conditions existing on or prior to the Closing Date, which liabilities, debts, and obligations are hereby extinguished insofar as they may give rise to liability, successor or otherwise, against Buyer or any affiliate of the Buyer.

Bankruptcy Court Order Approving Sale, at ¶ 9. The Werner defendants conclude that based on the bankruptcy court's order, they can't be held liable as a matter of law. Such a blanket statement overlooks the exception to the general rule found in the first sentence of the provision — "Except as expressly provided in the [Asset] Purchase Agreement or the Ancillary Documents." Section 2.3 of the Asset Purchase Agreement contains the expressly assumed liabilities of the purchaser, and subsection (d) specifically addresses customer product liability. The purchaser assumed

[a]ll Liabilities of any Seller in respect of the product liability claims of the customers of Sellers listed on Schedule 2.3(d) . . . that exist as of immediately prior to the Closing; provided, however, Buyer will assume any Liability of Sellers to any customer of any Seller that is not listed on Schedule 2.3(d) (which would otherwise have been assumed by Buyer had such customer been listed on Schedule 2.3(d)), but only to the extent that such Liability is or becomes an allowed administrative expense claim of Sellers' estates pursuant to Section 503(b) of the Bankruptcy Code.

Asset Purchase Agreement, at 16-17. The assumed liabilities fall within two categories: (1) product liability claims that existed prior to the sale for customers of Sellers listed on Schedule 2.3(d); and (2) allowed administrativeexpense claims for customers of Sellers not listed on Schedule 2.3(d). Schedule 2.3(d), titled Assumed Customer Product Liability Claims, states, in its entirety:

All of Seller's customers with the exception of:

Home Depot

Kawan Lama

MAB Paints

Sears

(Doc. No. 35-4, at 31). Lowe's was a customer, as the objection to this provision during the bankruptcy proceedings showed, and so included in the assumed product liability claims that existed prior to the sale closing. The Werner defendants argue, and the court agrees, however, that the Fowlers' claim didn't exist before the 2007 bankruptcy sale because the fall occurred years later, in 2011. Under the general sections of the bankruptcy court's order and the Asset Purchase Agreement, the Werner defendants didn't contractually assume liability for the Fowlers' claim.

The Fowlers respond that the Werner defendants expressly assumed liability for ladders sold at Lowe's stores and that liability stems from two different provisions in the bankruptcy court's order. First, the Fowlers refer to Section 2.3 of the Asset Purchase Agreement (approved by the bankruptcy court's order) that contains the expressly assumed liabilities of the purchaser. Pursuant to subsection (a), the purchaser assumed "[a]ll Liabilities of any Seller under the Seller Agreements . . . ." In Section 2.1(e), "Seller Agreements" are defined to be all contracts listed or described in Schedule 2.1(e), which includes "open, existing or on-going agreements and/or purchase orders withSellers' service providers, vendors or customers." (Doc. No. 44-10, at 6). The Fowlers contend the Lowe's contracts with the bankrupt entities were open, existing or on-going agreements and the Werner defendants consequently assumed all liabilities related to ladders sold through Lowe's stores under the then existing Lowe's agreements.

Second, the Fowlers refer to a provision of the bankruptcy court's order they say resulted from an objection filed by Lowe's Companies, Inc. to the debtors' notice of intent to assume and assign certain leases and contracts in the sale. The objection referenced "a number of ongoing obligations from the Debtors to Lowe's under the Lowe's Contracts, including, without limitation, (i) Lowe's right of indemnification for product liability and other claims involving Debtors' products and (ii) customer product claims arising from Lowe's performance under the Lowe's Contracts" and sought confirmation that the purchaser/assignee would "honor any and all of the Debtors' obligations to...