Ruiz v. Blentech Corp.

• Decision Date: 27 June 1996
• Docket Number: No. 95-1446,95-1446
• Citation: 89 F.3d 320
• Parties: , Prod.Liab.Rep. (CCH) P 14,668 Felipe RUIZ, Plaintiff-Appellant, v. BLENTECH CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 320

89 F.3d 320

35 Fed.R.Serv.3d 1053, Prod.Liab.Rep. (CCH) P 14,668

Felipe RUIZ, Plaintiff-Appellant, v. BLENTECH CORPORATION, Defendant-Appellee.

No. 95-1446.

United States Court of Appeals Seventh Circuit.

Argued Nov. 3, 1995.

Decided June 27, 1996.

Robert P. Sheridan (argued), Chicago, IL, Keith A. Hebeisen (argued), Robert A. Clifford, Chicago, IL, Ronald W. Cobb, Jr., Lusak & Cobb, Chicago, IL, for Plaintiff-Appellant.

Michael Resis (argued), Querrey & Harrow, Chicago, IL, for Defendant-Appellee.

Before CUMMINGS, CUDAHY, and KANNE, Circuit Judges.

CUDAHY, Circuit Judge.

Felipe Ruiz's case turns on a rather mystifying choice-of-law problem. Ruiz, a citizen of Illinois, suffered an injury in his home state from an allegedly defective product manufactured in California by a California corporation. The manufacturer has dissolved, but another California corporation has followed in its footsteps by purchasing its principal assets and continuing its business. Ruiz seeks to make the successor corporation answer for his tort claims against the manufacturer. Illinois and California have different rules for determining when one corporation is responsible, as a successor, for the tort liabilities of its predecessors. The district court concluded that Illinois' rules, which are less favorable to Ruiz, should apply. As a consequence of this conclusion, it entered summary judgment against him. Ruiz appeals this judgment, arguing that the district court incorrectly resolved the conflict between the rules adopted, respectively, by Illinois and California. We affirm.

I.

Felipe Ruiz operated a screw conveyor in a food processing plant in Schiller Park, Illinois. On June 16, 1992, he somehow became entangled in the conveyor's machinery and sustained several grievous injuries, the most severe of which left him paralyzed. He soon filed a lawsuit in an Illinois state court, bringing claims of strict products liability and negligence, among others. The case was removed to the district court on the basis of diversity jurisdiction.

Ruiz eventually directed his case at five defendants, all of whom had some legally significant connection with the screw conveyor. Three of the five had been involved in the sale of the conveyor to Ruiz's employer. These defendants were Weiler and Company, a Wisconsin corporation, Weiler East, a New Jersey corporation, and Dan Schwerdtfeger, an agent for those two companies. Another defendant was Custom Stainless Equipment, the California corporation that had manufactured the conveyor in 1983 and had dissolved in 1986. The last defendant was an entity that Ruiz identified as the successor to Custom Stainless' liabilities in tort. When Custom Stainless dissolved, it sold all of its assets for cash to Blentech, another California corporation. Blentech continued to manufacture Custom Stainless' product lines under its own name, using the same product designs, the same factory, the same management and the same employees. Ruiz contended in the district court that California law defined the relationship between Custom Stainless and Blentech and, therefore, between Blentech and himself. According to Ruiz's interpretation of that law, Blentech's assimilation of Custom Stainless included an assumption of strict liability for any defective products that Custom Stainless had manufactured.

Schwerdtfeger and the two Weilers settled with Ruiz, and Ruiz won a default judgment against the defunct Custom Stainless. The fifth defendant, Blentech, resisted Ruiz's claim by arguing that it did not belong in the case at all. Blentech maintained that its purchase of Custom Stainless' assets had not involved a conveyance of Custom Stainless' tort liabilities, and it made this argument the basis for a motion for summary judgment. The district court held that Illinois law defined the relationship between Custom Stainless, Blentech and Ruiz, and that Illinois law would not permit Ruiz to sustain an action against Blentech. Therefore, the court granted summary judgment to Blentech. See Ruiz v. Weiler, 860 F.Supp. 602, 604-06 (N.D.Ill.1994).

II.

Ruiz appeals the entry of summary judgment in Blentech's favor. When considering a summary judgment, our review of matters both factual and legal is de novo. Apperson v. E.I. du Pont de Nemours & Co., 41 F.3d 1103, 1106 (7th Cir.1994). Of course there are not issues of fact; Ruiz only contests the district court's legal rulings. He contends that the district court erred by holding that Illinois tort law determined the nature of Blentech's liabilities as a successor to Custom Stainless. He believes that California corporate law should inform this determination and that it prescribes a result favorable to him. He also argues that, even if Illinois law applies, the district court misinterpreted its prescriptions regarding the products liability of successor corporations.

A.

As an initial matter, Blentech questions whether we have jurisdiction to consider these arguments. It maintains that the summary judgment in its favor is not the product of a final order under the terms of Federal Rule of Civil Procedure 54(b) and, as such, is not yet appealable.

When a case involves multiple claims against multiple parties, as this one does, Rule 54(b) provides that the district court can put in final form orders with respect to individual claims in one of two ways. When the court enters an order that disposes of a part of the case, it can make an express determination that the order is a final judgment. Alternatively, it can put in final form each of the orders involving individual claims by disposing of all of the claims together.

Blentech suggests that the district court did not put the summary judgment in Blentech's favor in final form through either of these means. The record shows that the district court has not expressly determined that the summary judgment is a final judgment; and Blentech contends that the district court has not yet disposed of Ruiz's companion claim against Custom Stainless. Although it acknowledges that the district court granted Ruiz's motion for a default judgment against Custom Stainless, Blentech believes that the district court had not fixed the damages to which Ruiz is entitled. As Blentech points out, our cases have held that an order fixing liability but not damages is not a final order. Mercer v. Magnant, 40 F.3d 893, 896 (7th Cir.1994); Kaszuk v. Bakery & Confectionery Union, 791 F.2d 548, 553 (7th Cir.1986).

But, in some situations, a district court can issue a final order granting a motion for a default judgment without explicitly fixing damages. When a party moves for a default judgment, presents substantial evidence supporting its request for damages and encounters no meaningful opposition, the district court's decision to grant the motion includes an implicit assessment of the damages in the requested amount. See O'Brien v. R.J. O'Brien & Assocs., Inc., 998 F.2d 1394, 1404-05 (7th Cir.1993).

This rule applies here. On December 7, 1994, Ruiz moved for a default judgment against Custom Stainless, requesting damages of $8 million and providing extensive evidence to substantiate that request. Blentech opposed this motion, but the district court concluded that it did not have standing to do so and therefore disregarded its arguments. In an order of January 19, 1995, the court granted Ruiz's motion for default judgment against Custom Stainless. This grant included an implicit assessment of damages against Custom Stainless of $8 million. This order is, therefore, final. Because the district court had also entered final orders against all of the other defendants, the order granting summary judgment for Blentech is final and appealable.

B.

Ruiz's challenge to the summary judgment for Blentech relies on his argument that the choice of state law governing the crucial issues in the case was in error. In a diversity case, of course, state law governs, and the district court determines what state law to apply in accordance with the choice-of-law principles of the state in which it sits. GATX Leasing Corp. v. National Union Fire Ins. Co., 64 F.3d 1112, 1114 (7th Cir.1995). The district court here was bound by the choice-of-law method defined by the Restatement (Second) of Conflicts of Law, which Illinois has adopted. Ingersoll v. Klein, 46 Ill.2d 42, 262 N.E.2d 593, 595 (1970).

The Second Restatement method is constructed around the principle that the state with the most significant contacts to an issue provides the law governing that issue. See id. at 42, 262 N.E.2d at 594-95. A court therefore conducts a separate choice-of-law analysis for each issue in a case, attempting to determine which state has the most significant contacts with that issue. International Adm'rs, Inc. v. Life Ins. Co. of North America, 753 F.2d 1373, 1376 n. 4 (7th Cir.1985). The Second Restatement enumerates specific factors that identify the state with the most significant contacts to an issue, and the relevant factors differ according to the area of substantive law governing the issue and according to the nature of the issue itself. See, e.g., Restatement (Second) at §§ 6, 145, 188. To properly apply the Second Restatement method, a court must begin its choice-of-law analysis with a characterization of the issue at hand in terms of substantive law. Id. at § 7. By prescribing this analytical approach, the Second Restatement follows the principle of depecage, ¹ which has been long applied in connection with various methods for choice of law. See Willis L.M. Reese, Depecage: A Common Phenomenon in Choice of Law, 73 Colum.L.Rev. 58 (1973).

With respect to Ruiz's claim against Blentech, the choice-of-law analysis had crucial importance. Only two states have significant contacts with the issues raised. California was the place of the legal relationship between Custom Stainless and Blentech; and Illinois was the place of Ruiz's residence and his injury. The decisive issue in...