Mettinger v. Globe Slicing Mach. Co., Inc.

• Decision Date: 14 May 1998
• Citation: 709 A.2d 779,153 N.J. 371
• Parties: , Prod.Liab.Rep. (CCH) P 15,238 David METTINGER, Plaintiff, v. GLOBE SLICING MACHINE CO., INC., New Globe Parent, Inc., Daphne Horizon, Co., Inc., ABC 1-5 (Said Entities Being Fictitious and Unknown), and XYZ 1-5 (Said Entities Being Fictitious and Unknown Component Parts Manufacturers), Defendants, and W.W. LOWENSTEN, INC., Defendant and Third Party Plaintiff-Respondent, v. GLOBE FOOD EQUIPMENT COMPANY, Third Party Defendant-Appellant.
• Court: New Jersey Supreme Court

Page 371

153 N.J. 371

709 A.2d 779, Prod.Liab.Rep. (CCH) P 15,238

David METTINGER, Plaintiff, v. GLOBE SLICING MACHINE CO., INC., New Globe Parent, Inc., Daphne Horizon, Co., Inc., ABC 1-5 (Said Entities Being

Fictitious and Unknown), and XYZ 1-5 (Said Entities Being

Fictitious and Unknown Component Parts Manufacturers), Defendants, and W.W. LOWENSTEN, INC., Defendant and Third Party Plaintiff-Respondent, v. GLOBE FOOD EQUIPMENT COMPANY, Third Party Defendant-Appellant.

Supreme Court of New Jersey.

Argued Nov. 17, 1997.

Decided May 14, 1998.

Joel Schneider, Haddonfield, for third party defendant-appellant (Archer & Greiner, attorneys; George F. Kugler, Jr. and Sean T. O'Meara, on the briefs).

Michelle Wall, Paramus, for defendant and third party plaintiff-respondent (Melli & Wright, attorneys).

The opinion of the Court was delivered by

POLLOCK, J.

The ultimate issue is whether W.W. Lowensten, Inc. (Lowensten), a distributor, which sold and serviced a defective meat slicer that injured plaintiff, David Mettinger, is entitled to maintain an action for indemnification against Globe Food Equipment Company (Globe Food), the alleged successor to the product line of the manufacturer, Globe Slicing Machine Co. (Globe Slicing). The Law Division rejected Lowensten's claim for indemnification, and the Appellate Division reversed, 292 N.J.Super. 293, 678 A.2d 1115 (1996). We granted Globe Food's petition for certification, 149 N.J. 139, 693 A.2d 109 (1997), and affirm the judgment of the Appellate Division.

I.

The underlying action arose out of an accident that occurred on November 22, 1988, at a Quik-Check convenience store in Clifton, New Jersey. On that date, Mettinger, an assistant manager, accidentally cut his right hand on the unguarded blade of a "Globe Model 500" meat slicing machine (meat slicer).

The relevant facts may be summarized as follows. Mettinger instituted a products liability action against Globe Slicing, Lowensten, and several fictitious corporate defendants. He amended his complaint to name New Globe Parent, Inc. (New Globe), Daphne Horizon Co., Inc. (Daphne), and Mozley Manufacturing Co., Inc. (Mozley) as defendants. Mettinger alleged that in 1987, Globe Slicing sold its outstanding stock together with its assets and liabilities to New Globe. New Globe then sold Globe Slicing's meat-slicer assets to Mozley. Thereafter, New Globe changed its name to Daphne, and Globe Slicing merged into Daphne.

All defendants answered Mettinger's complaint. Lowensten asserted crossclaims against the other defendants. Globe Slicing, New Globe, Daphne, and Mozley failed to answer interrogatories. Pursuant to Rule 4:23-5, the Law Division dismissed their answers and entered defaults against them.

In December 1992, Lowensten asserted a third-party complaint against Globe Food. Lowensten claimed that Globe Food was a successor to the producers of the "Globe" meat-slicer product line, namely, Globe Slicing, New Globe, Daphne, and Mozley. Globe Food was incorporated in February 1991, and purchased Mozley's meat-slicer assets in May 1991. The asset-purchase agreement between Mozley and Globe Food required Mozley to indemnify Globe Food from, among other things, any liability arising out of product-liability actions brought against Globe Food or its indemnities related to products that were manufactured or sold before the date of purchase. Globe Food was aware of Mettinger's lawsuit before its purchase of Mozley.

Lowensten provided Globe Food with all discovery obtained in the matter before its appearance. Globe Food also participated in discovery. It answered Lowensten's interrogatories and requests for documents, and appeared at depositions, including that of Globe Food's president, Hilton Garner.

The Law Division granted Globe Food's motion for summary judgment dismissing Lowensten's third-party complaint seeking indemnification. The court found the existence of a genuine issue of material fact on the issue whether Globe Food had continued Globe Slicing's product line. It declined, however, to extend to Lowensten's benefit the product-line exception to successor liability adopted in Ramirez v. Amsted Industries, 86 N.J. 332, 431 A.2d 811 (1981). The court held that the product-line exception benefitted plaintiffs only. Because the court found that the statute of limitations had expired on Mettinger's claims against Globe Food, it granted Globe Food's motion for summary judgment dismissing Lowensten's third-party complaint for indemnification.

Mettinger proceeded to trial against Lowensten. The jury returned a verdict in favor of Mettinger in the amount of $350,000.

On Lowensten's appeal, the Appellate Division upheld the judgment for Mettinger, but reversed the grant of summary judgment in favor of Globe Food, holding that Lowensten could maintain an action for indemnification against Globe Food. The Appellate Division reasoned that Mettinger could have pursued an action against Globe Food as a successor to Globe Slicing. 292 N.J.Super. at 315-17, 678 A.2d 1115. It concluded that because both Globe Food and Lowensten were potentially liable to Mettinger, Mettinger's decision to sue only Lowensten should not predetermine whether Globe Food or Lowensten is ultimately liable. Id. at 317, 678 A.2d 1115.

The Appellate Division remanded the matter for trial on the issue whether Globe Food sufficiently continued the product line of Globe Slicing to justify the imposition of successor liability on it. Ibid. The court held, however, that Mettinger's judgment on liability and damages against Lowensten bound Globe Food. Id. at 318, 678 A.2d 1115. Consequently, the court refused to grant Globe Food a new trial on liability and damages if, on remand, Globe Food was found liable to indemnify Lowensten. Id. at 317-18, 678 A.2d 1115. The Appellate Division relied on N.J.R.E. 803(c)(26), which permits a judgment debtor seeking indemnity to introduce a final judgment entered against it in a prior action as conclusive evidence of the judgment debtor's liability, the facts on which the judgment is based, and the reasonableness of the damages recovered in that action, provided the defendant in the indemnification action had notice and an opportunity to defend the first action. Additionally, the Appellate Division held that Mettinger had timely sued Globe Slicing. Consequently, the statute of limitations pertaining to his personal injury claim, N.J.S.A. 2A:14-2, would not have barred Mettinger's claim against Globe Food. The court concluded that Mettinger's failure to join Globe Food "should not determine whether the burden of paying his damages should ultimately rest on Lowensten or on Globe Food[ ]." 292 N.J.Super. at 317, 678 A.2d 1115.

II.

Generally, liability for injuries caused by defective products extends from the manufacturer down the chain of distribution to distributors and retailers. Promaulayko v. Johns Manville Sales Corp., 116 N.J 505, 510-11, 562 A.2d 202 (1989). A consumer injured by a defective product may bring a strict liability action against any business entity in the chain of distribution. Id. at 511, 562 A.2d 202. The underlying public policy is that those engaged in the producing and marketing enterprise should bear the cost of marketing defective products. Nieves v. Bruno Sherman Corp., 86 N.J. 361, 371, 431 A.2d 826 (1981). Absent an agreement to the contrary, however, distributors and retailers are entitled to indemnification from the manufacturer. Promaulayko, supra, 116 N.J. at 511, 562 A.2d 202. The rationale is that the liability of distributors and retailers is merely vicarious, but the manufacturer's liability is primary. Ibid.

Traditionally, if the manufacturer sells or transfers its assets to another company, the successor is not liable either to injured parties or to distributors and retailers unless: (1) the purchaser expressly or impliedly agreed to assume such debts or liabilities; (2) the transaction amounts to a consolidation or merger of the seller and purchaser; (3) the purchasing corporation is merely a continuation of the selling corporation; or (4) the transaction is entered into fraudulently to escape the debt or liability. McKee v. Harris-Seybold Co., 109 N.J.Super. 555, 561, 264 A.2d 98 (Law Div.1970), aff'd, 118 N.J.Super. 480, 288 A.2d 585 (App.Div.1972). A fifth exception, sometimes incorporated in one of the preceding exceptions, arises from the absence of adequate consideration for the sale or transfer. Ibid. Thus, under traditional rules, neither plaintiffs nor distributors and retailers may maintain an action against a successor corporation unless they can establish one of the exceptions.

In Ramirez v. Amsted Industries, supra, however, this Court abandoned the traditional approach in the products liability context and adopted the "product-line exception" to successor corporation liability, holding:

[W]here one corporation acquires all or substantially all the manufacturing assets of another corporation, even if exclusively for cash, and undertakes essentially the same manufacturing operation as the selling corporation, the purchasing corporation is strictly liable for injuries caused by defects in units of the same product line, even if previously manufactured and distributed by the selling corporation or its predecessor.

[86 N.J. at 358, 431 A.2d

811.]

In Nieves v. Bruno Sherman Corp., supra, decided the same day as Ramirez, we extended the product-line exception. We permitted the plaintiff in Nieves to maintain an action against an intermediary successor corporation that acquired the original manufacturer's assets and continued its product line but sold those assets to another corporation before plaintiff's accident occurred. 86 N.J. at 368, 431 A.2d 826. By acquiring the business assets of the original manufacturer and continuing to manufacture and sell its product line, the intermediary successor "became 'an integral part of the overall producing and...