Gurry v. Cumberland Farms, Inc.

• Decision Date: 12 February 1990
• Citation: 406 Mass. 615,550 N.E.2d 127
• Parties: John GURRY, Jr., et al. 1 administrators, 2 v. CUMBERLAND FARMS, INC.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 127

550 N.E.2d 127

406 Mass. 615

John GURRY, Jr., et al. ¹ administrators,² v. CUMBERLAND FARMS, INC.

Supreme Judicial Court of Massachusetts Plymouth.

Argued Oct. 4, 1989.

Decided Feb. 12, 1990.

Michael Avery, Newton, (Francis Marini, Hanson, with him), for plaintiffs.

DeLane E. Anderson, Jr., Boston, for defendant.

Before LIACOS, C.J., and WILKINS, NOLAN, LYNCH and GREANEY, JJ.

LYNCH, Justice.

The plaintiffs brought this wrongful death action under G.L. c. 229, § 2 (1988 ed.), on the basis of a claim that the negligent design, manufacture and maintenance of a machine by two predecessor corporations of the defendant Cumberland Farms, Inc. (Cumberland), caused Kevin Gurry's death. As a result of the merger of the alleged tortfeasors, only one of which had employed Kevin Gurry, into the new entity, Cumberland, the plaintiffs argue that Cumberland succeeds to their liabilities. G.L. c. 156B, § 80(b ) (1988 ed.). A Superior Court judge granted the defendant's motion for summary judgment, Mass.R.Civ.P. 56(b), 365 Mass. 824 (1974). We allowed the plaintiffs' application for direct appellate review, and now reverse.

The following undisputed facts were before the judge when he granted summary judgment. Kevin Gurry was killed on the job on January 11, 1985, while operating a sanding "buggy" on a cranberry bog owned and operated by the defendant, Cumberland, his employer at the time. The sanding buggy in which Kevin Gurry was killed was one of several constructed around 1983 for the company which then owned and operated the Hanson bog, United Cranberry Growers Associates, Inc. (Cranberry Growers). Cranberry Growers, a Massachusetts corporation, was a wholly-owned subsidiary of Delaware Food Store, Inc., a Delaware holding company. One of Cranberry Growers' sibling subsidiaries was Cumberland Farms Dairy, Inc. (Dairy), a Rhode Island corporation primarily in the business of operating dairy farms and bread bakeries. However, as another part of its function, Dairy provided, for a regularly billed fee, administrative and managerial services to a number of fellow Delaware Food Store subsidiaries, including Cranberry Growers. It was Dairy's vice president of operations, John Peck, who commissioned a local craftsman, William P. O'Donnell, to build the sanding buggies for Cranberry Growers' cranberry bog business in 1983.

Peck selected O'Donnell, communicated with him about the design of the buggy, and gave him a model to follow. No one else directed or had contact with O'Donnell on the buggy construction project. Cranberry Growers paid O'Donnell and supplied him with materials. Peck continued to draw his salary from Dairy and no other source. In its next routine "administration fee" payment to Dairy, Cranberry Growers covered the management services rendered by Peck and other Dairy corporate executives, as well as record keeping services. The payment did not itemize or distinguish the portion that went for Peck's work on the sanding buggy project, as opposed to his and other executives' services on other jobs.

In general, the interrelationship among those corporations existing at the time of the sanding buggy's design and manufacture was rather complex. Essentially, the products of Cranberry Growers and Dairy were sold to the public through the chain of "Cumberland Farms" convenience stores, operated by yet other Delaware Food Store subsidiaries.

The eight or nine sanding buggies built by O'Donnell had been in use for one season when Kevin Gurry was hired to work for Cranberry Growers on March 6, 1984. He continued to be employed by that entity until September 30, 1984. On that day, in accordance with a plan for corporate reorganization, both Cranberry Growers and Dairy merged into Delaware Food Store, which in turn merged into Cumberland, a Delaware corporation created just two weeks earlier. The sanding buggy was owned by Cranberry Growers until that company ceased to exist. Kevin Gurry continued at his job, now employed by Cumberland, until he died on January 11, 1985, on his first morning back at work after having been laid off. Kevin Gurry had never been employed by Dairy.

Cranberry Growers and Dairy, along with thirty-five "owned or controlled subsidiary entities" and shareholders owning fifty percent or more of the Cumberland Farms-Haseotes family related corporations, ³ were named insureds on a single workers' compensation insurance policy. Payments in accordance with G.L. c. 152, § 65, were made by this insurance carrier to the entitled beneficiaries shortly after Kevin Gurry's death.

The plaintiffs originally named Dairy and Cranberry Growers as defendants. After a motion to dismiss was allowed because those entities had ceased to exist, the plaintiffs amended their complaint to name Cumberland.

In its motion for summary judgment, Cumberland raised a number of arguments as to why the workers' compensation statute barred the plaintiffs' suit. First, Cumberland argued that because it was Kevin Gurry's employer at the time of his accident, it is immune from suit under G.L. c. 152, § 24, for the death that resulted in the course of that employment. In the alternative, Cumberland asserted that, as a successor to Cranberry Growers, it acquired the workers' compensation defense Cranberry Growers would have had. Accordingly, Cumberland states (1) because Peck was a loaned servant of Cranberry Growers at the time of the alleged negligence; or (2) because Cranberry Growers and Dairy were a "single insured employer" under G.L. c. 152, § 1(5), the plaintiffs remain barred by c. 152. The plaintiffs opposed this motion and moved for partial summary judgment. In order for summary judgment in favor of the defendant to be correct, Cumberland must be without liability in its own right as the employer of the decedent, or it must have acquired immunity from Cranberry Growers or Dairy as a result of the mergers. We examine each of those theories.

1. Corporate successor liability for workplace accidents. Liability to an employee injured on the job as a result of negligence of the employer's corporate predecessors raises a question of law that no Massachusetts court has previously addressed. The answer depends on the interrelationship of two statutes: the business corporation law, G.L. c. 156B, ⁴ and the workers' compensation act, c. 152.

Under G.L. c. 156B, § 80(b ), the effect of a merger is that the "resulting or surviving corporation shall be deemed to have assumed, and shall be liable for, all liabilities and obligations of each of the constituent corporations in the same manner and to the same extent as if such resulting or surviving corporation had itself incurred such liabilities or obligations." By the same token, under § 80(a )(5), the new corporation that results from a merger also inherits "all of the estate, property, rights, privileges, powers and franchises of the constituent corporations...." This court has repeatedly construed the word "liabilities" broadly, "to express obligations sounding in contract or tort," and "undoubtedly" reaching "contingent obligations." Boston Elevated Ry. v. Metropolitan Transit Auth., 323 Mass. 562, 568, 83 N.E.2d 445 (1949). See Xtra Inc. v. Commissioner of Revenue, 380 Mass. 277, 280, 402 N.E.2d 1324 (1980); Rose-Derry Corp. v. Proctor & Schwartz, Inc., 288 Mass. 332, 338, 193 N.E. 50 (1934). Encompassed within the meaning of the word "privilege," on the other hand, is an immunity or exemption, created by the law for a particular class or purpose, from liability that would otherwise exist in those general circumstances. See Black's Law Dictionary 1077 (5th ed. 1979).

Because of G.L. c. 156B, § 80, Cumberland stood in the shoes of Cranberry Growers and Dairy at the close of business on September 30, 1984, inheriting any liabilities for tortious conduct, as well as any privileges in the form of statutory immunities, that those predecessors would have had. See Levitt v. Bouvier, 287 A.2d 671 (Del.1972) (holding a successor corporation would be liable, after merger, for a predecessor corporation's fraudulent misrepresentation, but that it also inherited an estoppel defense that the predecessor may have had). As the alleged negligent design, manufacture, and maintenance of the sanding buggy by Dairy and Cranberry Growers in this case occurred prior to their merger into Cumberland, any liability or privilege those entities possessed is lodged by law in Cumberland. Dairy was never Kevin Gurry's employer, and would have been susceptible to a third-party claim as a tortfeasor outside of the protection of workers' compensation. G.L. c. 152, § 15 (1988 ed.). However, Cranberry Growers would have been immune from suit since all the acts and omissions alleged against Cranberry Growers arose out of the direct employment relationship which existed between Cranberry Growers and Kevin Gurry. Therefore, the plaintiffs' rights as against Cranberry Growers would have been limited to benefits available under G.L. c. 152.

While Cumberland claims Cranberry Growers' immunity from suit for Kevin Gurry's death, it denies inheriting Dairy's liability for third-party negligence because it was Kevin Gurry's employer at the time of the accident.

It makes little sense to read c. 152 as insulating an employer from obligations it inherited through corporate merger simply because of the immunity for its own negligence it possessed as the employer of the insured employee. To avoid such a result, other courts and text writers have adopted the "dual persona" theory. Under this theory, if an employer's liability to an injured worker derives from a "second persona so completely independent from and unrelated to his status as employer that by established standards the law recognizes it as a separate legal person," the employer is not immunized under the workers' compensation law, but is rather regarded as a third party. 2A A. Larson, Workmen's Compensation § 72.80 at 14-229 (1988 ed.). Billy...