Jordan v. Hawker Dayton Corp.

• Decision Date: 03 August 1995
• Docket Number: No. 95-1181,95-1181
• Citation: 62 F.3d 29
• Parties: Prod.Liab.Rep. (CCH) P 14,299 Randy JORDAN, Plaintiff, Appellant, v. HAWKER DAYTON CORPORATION and East Dayton Tool & Die Co., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 29

62 F.3d 29

Prod.Liab.Rep. (CCH) P 14,299

Randy JORDAN, Plaintiff, Appellant, v. HAWKER DAYTON CORPORATION and East Dayton Tool & Die Co.,

Defendants, Appellees.

No. 95-1181.

United States Court of Appeals, First Circuit.

Heard Aug. 3, 1995.

Decided Aug. 10, 1995.

Laurie Ann Miller, with whom N. Laurence Willey, Jr. and Ferris, Dearborn & Willey, Brewer, ME, were on brief, for appellant.

Brent A. Singer, with whom David C. King and Rudman & Winchell, Bangor, ME, were on brief, for appellee Hawker Dayton Corp.

Before CYR, BOUDIN, and LYNCH, Circuit Judges.

LYNCH, Circuit Judge.

Randy Jordan, an injured worker, appeals, asking us to revisit the law of Maine on successor liability so that he may reach the Hawker Dayton Corporation, which purchased the assets of a division of another company that had manufactured the machinery which injured Jordan's hand. Sitting as a court in diversity jurisdiction under Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), we decline to do so and affirm the grant of summary judgment issued in favor of Hawker Dayton Corporation by the district court.

FACTS

In September 1991, the appellant, Randy Jordan, badly injured his hand at work while attempting to unjam a doweling machine. Jordan underwent medical and psychological treatment, and filed this products liability action in the United States District Court for Maine against "Hawker Dayton Manufacturing Company."

The doweling machine was manufactured in 1973 by Hawker Manufacturing Company ("Hawker Manufacturing"), a division of East Dayton Tool & Die Co. ("East Dayton"). East Dayton also manufactured automobile components and other products. Around the time that the doweling machine was manufactured, Dorothy Darrow, the sole shareholder of East Dayton, sold some of her stock to family friends, and East Dayton redeemed her remaining stock for cash and an installment note. The company continued its manufacturing operations and even added additional product lines.

In August 1973, East Dayton sold to Harmon Darrow, the president of Hawker Manufacturing, an option to purchase the assets of Hawker Manufacturing at their net book value. In March 1974, Mr. Darrow formed Hawker Dayton Corporation ("Hawker Dayton"), conveyed his option to that company, and in July 1974, Hawker Dayton exercised the option and purchased the Hawker Manufacturing assets for approximately $150,000. Hawker Dayton continued the operations of Hawker Manufacturing and continued to use the Hawker Manufacturing trade name. East Dayton continued to manufacture woodworking machines (including doweling machines at first), automobile dies and other specialized machinery for about two years.

In 1976, East Dayton defaulted on its note to Ms. Darrow. It then sold the rest of its equipment for $925,000 and its real property for $650,000 to entities not involved in this lawsuit, and made payments out to Ms. Darrow on the installment note for the next ten years.

PROCEEDINGS BELOW

On June 14, 1993, Jordan filed this suit. In August, the district court issued a scheduling order giving a deadline of September 15, 1993, for amendment of the pleadings. The judge later amended the scheduling order, extending the deadline for amending pleadings by fifteen days and extending the discovery deadline by two months. During discovery, Jordan learned, inter alia, that East Dayton was the manufacturer of the doweling machine. On February 10, 1994, five days before discovery was to be completed under the scheduling order, Jordan moved to correct the corporate name of the defendant from "Hawker Dayton Manufacturing Corporation" to "Hawker Dayton Corporation," to add East Dayton as a defendant and to include additional theories of liability against Hawker Dayton. The district court granted the motion to correct the corporate name of the defendant and to add East Dayton, but denied the motion to add additional theories of liability.

Jordan filed a motion for summary judgment on the issue of whether Hawker Dayton was liable as a successor corporation for the debts and liabilities of East Dayton. Hawker Dayton objected, and in its response asked that summary judgment be entered in its favor instead. The Magistrate Judge recommended that Jordan's motion be denied, and the district court adopted the recommendation. Neither ruled on the issue of whether summary judgment should be entered on behalf of Hawker Dayton. Hawker Dayton subsequently moved for summary judgment, and the district court granted the motion.

Judgment by default was entered against East Dayton, after a hearing on damages, for $2,230,088.21.

Jordan appeals the grant of summary judgment in favor of Hawker Dayton on the issue of successor liability.

DISCUSSION

Four years ago, albeit in a different context than a tort suit, the Supreme Judicial Court of Maine held, as to corporate successor liability: "[A]bsent a contrary agreement by the parties, or an explicit statutory provision in derogation of the established common law rule, a corporation that purchases the assets of another corporation in a bona fide, arm's-length transaction is not liable for the debts or liabilities of the transferor corporation." Director of Bureau of Labor Standards v. Diamond Brands, Inc., 588 A.2d 734, 736 (Me.1991). Diamond Brands involved interpretation of the term "employer" in a severance pay statute. Conceding that there is no contrary agreement by the asset purchase parties and no statutory exception to common law here, Jordan tries to avoid the Diamond Brands holding by arguing the opinion does not foreshadow what the Maine Court would do in a tort action.

There are two responses. First, the rule, as stated above, that a mere asset purchase will not give rise to successor liability is articulated by Maine's highest court as being "the established common law rule." That alone defeats Jordan's claim, as he has argued that Maine law applies. This common law rule is reinforced by the social policy judgment made by the Maine legislature, in the statute at issue in Diamond Brands. Maine there decided that it is benefited by not discouraging purchases of assets of Maine businesses through imposition of successor liability on purchasing corporations, thus keeping businesses going which would otherwise fail, and so continuing to have employees benefit from their continued employment. Id. at 737 n. 7. Jordan points to no legal developments in the law of successor liability in Maine or in any other jurisdiction since Diamond Brands to suggest that the Supreme Judicial Court would change this law. See Bernhardt v. Polygraphic Co. of America, 350 U.S. 198, 205, 76 S.Ct. 273, 277, 100 L.Ed. 199 (1956) ("[T]here appears to be no confusion in the [Maine] decisions, no developing line of authorities that casts a shadow over the established ones, no dicta, doubts or ambiguities in the opinions of [Maine] judges on the question, no legislative development that promises to undermine the judicial rule."). Thus, Diamond Brands is the law of Maine, and this Court must apply that law.

Secon...