Guerrero v. Allison Engine Co., 49A02-9905-CV-362.

• Decision Date: 22 March 2000
• Docket Number: No. 49A02-9905-CV-362.,49A02-9905-CV-362.
• Citation: 725 N.E.2d 479
• Parties: Ramiro GUERRERO, as Administrator of the Estate of Carlos Guerrero, Deceased, Appellants-Petitioners, v. ALLISON ENGINE COMPANY, Appellee-Respondent.
• Court: Indiana Appellate Court

725 N.E.2d 479

Ramiro GUERRERO, as Administrator of the Estate of Carlos Guerrero, Deceased, Appellants-Petitioners, v. ALLISON ENGINE COMPANY, Appellee-Respondent.

No. 49A02-9905-CV-362.

Court of Appeals of Indiana.

March 22, 2000.

David C. Krahulik, Yosha Krahulik & Levy, Indianapolis, Indiana, Attorney for Appellants.

Lloyd H. Milliken, Jr., Nicholas C. Pappas, Julia Blackwell Gelinas, Locke Reynolds, Indianapolis, Indiana, Attorneys for Appellee.

OPINION

BAILEY, Judge

Case Summary

Daniel Laguna ("Laguna"), and the estate of Carlos Guerrero ("Guerrero"), appeal the trial court's Order entering summary judgment in favor of Allison Engine Company ("Allison").

Issue

The sole issue is whether Indiana should recognize the "product line exception" in product liability cases brought by injured persons against successor corporations.

Facts/Procedural History

The facts in this case are not in dispute. On July 20, 1994, Guerrero and Laguna were involved in a helicopter accident at Fort Campbell, Kentucky. In this accident Guerrero died and Laguna was injured. The helicopter, an AH-6, was equipped with an Allison 250-C30 enhanced diffuser engine. Guerrero and Laguna allege that the helicopter stalled while in flight, causing it to crash to the ground. Guerrero and Laguna claim that Allison was negligent in the design and manufacture of the engine system. Further, Guerrero and Laguna claim that the engine system was defective and unreasonably dangerous. Guerrero and Laguna also assert a breach of implied warranty.

General Motors Corporation ("GM"), through its Allison Gas Turbine Division ("GM/Allison"), manufactured and sold the helicopter's engine on September 30, 1986. On March 31, 1990, a Commercial Engine Bulletin ("CEB 72-3176") was issued by GM/Allison, which called for the installation of enhanced engine diffuser assemblies on model 250-C30 engines. The enhanced engine diffuser assembly was installed into the subject engine on October 5, 1993, by Airwork, an independent company that was a GM authorized maintenance facility.

On December 1, 1993, Allison paid cash for the assets of GM/Allison. No stock was transferred as a part of the consideration of the sale. No members of GM's Board of Directors became members of Allison's Board of Directors. The sale of GM/Allison to Allison represented a relatively small percentage of GM's total assets. As part of the purchase agreement, Allison assumed no liability for claims of damage, injury, or death arising from or relating to any product designed, manufactured, acquired, marketed or sold prior to the closing date of the asset sale.

After the asset sale, GM and Allison were separate and distinct companies. GM remained in business and was not dissolved. Allison adopted a new corporate logo and the GM logo was removed from equipment, vehicles, and signs purchased by Allison and FAA nameplates were changed. Allison used a different tax identification number and government cage code than that used by GM. Allison also obtained a new classified clearance from the United States government. Allison continued to manufacture the 250-C30 engine. Allison also continued to work on the enhanced diffuser changes to 250-C30 engines.

Following the parties' summary judgment hearing, the trial court denied Plaintiffs' Motion for Leave to File Amended Complaint against Allison, but granted Plaintiffs leave to file an Amended Complaint as to GM. Thereafter, Guerrero and Laguna amended their complaint to include a claim for damages against GM. GM answered Plaintiffs' Amended Complaint. Guerrero and Laguna appeal the trial court's Order entering summary judgment against them on their complaints for personal injuries against Allison.¹

Discussion

Guerrero and Laguna contend that Indiana should recognize the "product line exception" in product liability cases brought by injured parties against successor corporations. Specifically, Guerrero and Laguna argue the following:

The fact that [Allison] continued to sell and service the identical product line with the same personnel at the same facility should result in its being liable to Laguna and Guerrero for the defect in the enhanced diffuser which allegedly caused the helicopter crash at issue. Under such facts the "product line exception" to the general rule of successor non-liability should apply.

(Appellant's Brief at 9.)

A. Standard of Review

In reviewing a motion for summary judgment, this court applies the same standard as the trial court. We must determine whether there is a genuine issue of material fact and whether the law has been correctly applied by the trial court. Summary judgment is appropriate only if no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Neither the trial court, nor the reviewing court, may look beyond the evidence specifically designated to the trial court. Once the movant for summary judgment has established that no genuine issue of material fact exists by submission of materials contemplated by T.R. 56, the nonmovant may not rest on his pleadings but must set forth specific facts, using supporting materials contemplated under the rule, which show the existence of a genuine issue for trial. A trial court's grant of summary judgment is `clothed with a presumption of validity,' and the appellant bears the burden of demonstrating that the trial court erred.

Stevenson v. Hamilton Mut. Ins. Co., 672 N.E.2d 467, 470-71 (Ind.Ct.App.1996) (internal citations and quotation omitted).

B. The Indiana Product Liability Act—Strict Liability

The Indiana Product Liability Act provides the following grounds for action:

Sec. 1. Except as provided in section 3 of this chapter, a person who sells, leases, or otherwise puts into the stream of commerce any product in a defective condition unreasonably dangerous to any user or consumer or to the user's or consumer's property is subject to liability for physical harm caused by that product to the user or consumer or to the user's or consumer's property if:

(1) that user or consumer is in the class of persons that the seller should reasonably foresee as being subject to the harm caused by the defective condition;

(2) the seller is engaged in the business of selling the product; and

(3) the product is expected to and does reach the user or consumer without substantial alteration in the condition in which the product is sold by the person sought to be held liable under this article.

IND.CODE § 34-20-2-1. Indiana's Product Liability Act is a codification of the common law of products liability. Whittaker v. Federal Cartridge Corp., 466 N.E.2d 480, 482 (Ind.Ct.App.1984).

An action for strict liability in tort against sellers and manufacturers of defective products is governed by Indiana Code § 34-20-2-3, which reads as follows:

A product liability action based on the doctrine of strict liability in tort may not be commenced or maintained against a seller of a product that is alleged to contain or possess a defective condition unreasonably dangerous to the user or consumer unless the seller is a manufacturer of the product or of the part of the product alleged to be defective.

One purpose of this section is to deter manufacturers from producing products that are unreasonably dangerous to foreseeable users. See Maxon Corp. v. Tyler Pipe Industries, Inc., 497 N.E.2d 570, 578 (Ind.Ct.App.1986)

. "While a manufacturer is under no duty to produce accident proof products, it is legally bound to design and build products which are reasonably fit and safe for the purpose for which they are intended." Liberty Mutual Ins. Co. v. Rich Ladder Co., Inc., 441 N.E.2d 996, 999 (Ind.Ct.App.1982).

C. The Indiana Product Liability Act and Freedom of Contract

In a product liability suit, it is not dispositive that an agreement exists between a successor corporation and its predecessor that the successor is not to assume the predecessor's liabilities. Lucas v. Dorsey Corp., 609 N.E.2d 1191, 1201 (Ind.Ct.App.1993). In McGraw-Edison Co. v. Northeastern Rural Electric Membership Corp., 678 N.E.2d 1120 (Ind.1997), our supreme court addressed the question of whether a disclaimer of liability in a purchase agreement barred a strict liability claim brought under Indiana's Product Liability Act.

We are interpreting the interplay between the provisions of the Uniform Commercial Code—Sales, IND.CODE § 26-2-2-719, which generally supports the enforceability of limitations of liability in commercial transactions, and the Indiana Product Liability Act, IND.CODE § 33-1-1.5-3, which codified strict liability and makes some of these choices that would otherwise be left to the court.

Id. at 1122. The Indiana Supreme Court reasoned and concluded as follows:

The General Assembly enacted the Product Liability Act against that background of its judicial patina and commentary as they sat in 1978 ... that climate was hostile to disclaimers.... [W]e conclude that the legislature has chosen to override the considerations of freedom of contract in the interest of encouraging safety of products and responsibility for products that are defective under the standards imposed by the statute. That is a judgment the legislature can make, and in Indiana our General Assembly has made it.

Id. at 1124-25. Justice Sullivan, in his dissent, summarized the rule of law announced in McGraw-Edison Co., as follows: "the Product[s] Liability Act mandates that any disclaimer as to products liability with respect to a product covered by the Act will be ineffective unless there has been a `knowing waiver' of the purchaser's rights thereunder." Id. at 1125.

D. Successor Corporation Non-Liability—General Rule and Exceptions

When one corporation purchases the assets of another, the buyer does not assume the debts and liabilities of the seller. Sorenson v. Allied Products Corp., 706 N.E.2d 1097, 1099 (Ind.Ct.App.1999) (citing Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d...