Smith v. A.O. Smith Corp.
| Decision Date | 26 January 2022 |
| Docket Number | 3 WDA 2021 |
| Citation | 270 A.3d 1185 |
| Parties | Kelly SMITH, Executrix of the Estate of Daniel R. Harrity, deceased, Appellant v. A.O. SMITH CORPORATION, et al. |
| Court | Pennsylvania Superior Court |
Jason T. Shipp, Pittsburgh, for appellant.
Amy K. Pohl, Pittsburgh, for appellee.
Kelly Smith ("Plaintiff"), the executrix of the estate of Daniel R. Harrity ("Decedent"), appeals from the December 1, 2020 order dismissing all claims and parties in this action in which Plaintiff seeks damages related to Decedent's alleged exposure to asbestos. In this appeal, Plaintiff challenges the August 11, 2020 order of the trial court granting the summary judgment motion of Appellee Vanadium Enterprises Corporation ("Vanadium"); the trial court concluded that the record lacked sufficient evidence to support a finding that Vanadium was liable as a successor to Decedent's former employers, Schneider, Inc. and one of its subsidiaries, Pittsburgh Mechanical Systems, Inc. ("Pittsburgh Mechanical"). We affirm.1
Decedent worked for Schneider, Inc. and Pittsburgh Mechanical as a union plumber from 1966 to 1975. Vanadium Motion for Summary Judgment Based on Lack of Successor Liability ("Motion"), Exhibit 5 (Decedent's employment records). Specifically, Decedent worked for Schneider, Inc. from 1968 through 1971 and for Pittsburgh Mechanical from 1966 through 1975, eventually rising to the level of Vice President of Pittsburgh Mechanical. Id. According to his complaint, Decedent was diagnosed with mesothelioma
in March 2019. On April 23, 2019, he initiated this action against various entities who allegedly exposed him to asbestos. Vanadium was named as one of the defendants in this lawsuit, while Schneider, Inc. and Pittsburgh Mechanical were not. Decedent died on May 23, 2019, and Plaintiff, Decedent's daughter and the executrix of his estate, was substituted as plaintiff in the trial court.
Decedent's employers, Schneider, Inc. and Pittsburgh Mechanical, were two of approximately 40 corporate entities founded by Frank Schneider that we refer to collectively in this opinion as the "Schneider Companies." Over time, various Schneider Companies ceased operations or experienced financial difficulties, and the assets of the remaining four operational Schneider Companies were sold in 1990 to Vanadium. The question of Vanadium's potential successor liability for the obligations of the four Schneider Companies whose assets it purchased was the subject of a prior lawsuit brought by Continental Insurance Company ("Continental Insurance") in the trial court. This earlier litigation ultimately produced opinions both of this Court, Continental Insurance Co. v. Schneider, Inc. , 810 A.2d 127, 130 (Pa. Super. 2002), and our Supreme Court, Continental Insurance Co. v. Schneider, Inc. , 582 Pa. 591, 873 A.2d 1286 (2005).2 Plaintiff's principal argument on appeal is that our reversal of the summary judgment grant in favor of Vanadium in Continental I is binding precedent that requires us to also reverse the grant of summary judgment here.
In Continental II , our Supreme Court explained the events that led to Vanadium's purchase of the assets of the four Schneider Companies as follows:
During the mid-to-late 1980s, the Schneider Companies fell upon severe financial difficulties, such that by 1989, they had accumulated $35 million in debt to their three secured creditors, Pittsburgh National Bank (now PNC Bank), Mellon Bank and Equitable Bank (now National City Bank) (collectively, the "Banks"), who held blanket security interests in virtually all of the assets of the companies. As a result, Schneider, in coordination with the Banks, began shutting down or selling off most of the Schneider Companies. By April of 1990, only four of the Schneider Companies were still conducting any business and after May of 1990, even those four were nothing more than empty shells.
873 A.2d at 1288 (footnote omitted).
The four Schneider Companies that were still operating in 1990 and whose assets were sold to Vanadium were Schneider Engineers, Schneider Services International, Inc. ("SSI"), Jones-Krall, Inc. ("Jones-Krall"), and Construction Rental and Supply ("CRS"). Continental I , 810 A.2d at 130. In early 1990, Schneider delivered all of the non-real estate assets of Schneider Engineers, SSI, Jones-Krall, and CRS to its secured creditors, the Banks. Continental II , 873 A.2d at 1288. The Banks sold the assets of these four companies to Vanadium for $15 million at a consensual private foreclosure sale, pursuant to Section 9–504 of the Uniform Commercial Code ("UCC").3 Id. In the transaction, Vanadium served as a holding company for four of its subsidiaries which individually purchased the assets of Schneider Engineers, SSI, Jones-Krall, and CRS.4 Id. at 1288 & n.3. Neither Vanadium nor its subsidiaries assumed any of the obligations of the four Schneider Companies. Continental I , 810 A.2d at 130.
The four Schneider Companies whose assets were purchased by Vanadium were involved in distinct lines of business: Schneider Engineers was an engineering design firm, SSI performed facility and property management services, Jones-Krall was an electrical contractor, and CRS was an equipment rental company. Motion, Exhibit 16 (Matthew Schneider Deposition), at 40-41, 117-18. These lines of business continued at the four Vanadium subsidiaries after the asset sale. Id. at 98. By contrast, Vanadium did not purchase any assets related to the plumbing and mechanical contracting work Decedent was engaged in at Schneider, Inc. and Pittsburgh Mechanical. Id. at 38, 115-18.
In addition to its operational role as a plumbing and mechanical contractor, Schneider, Inc. also was a holding company and parent of Jones-Krall and, through another subsidiary, SSI. Plaintiff's Response in Opposition to Vanadium's Motion for Summary Judgment Based on Lack of Successor Liability ("Response"), Exhibit D (Organization Chart of Schneider Companies); Motion, Exhibits 12-13 (Jones-Krall and SSI Asset Sale Agreements). However, Schneider, Inc.’s own assets were not sold to Vanadium, and the company had not dissolved as of the date of the summary judgment motion. Motion, Exhibit 16, at 135; id. , Exhibit 15 (Pennsylvania Department of State Business Document Search Report).
Vanadium was formed by managers at the four Schneider Companies whose assets it purchased. Motion, Exhibit 16, at 31, 37, 55-62, 65-66. Neither of the shareholders of Schneider, Inc.—Frank Schneider and his brother, Edward Schneider—ever had an ownership interest in Vanadium or its subsidiaries. Id. at 69, 131, 133-34, 172. Frank Schneider did, however, later come to work for one of the Vanadium subsidiaries until his death in 2002. Id. at 25, 108-10. In addition, Frank's son, Matthew Schneider, borrowed $2.05 million from his parents at the time of the 1990 asset sale, and he invested the money in Vanadium through a company he formed, Capital Diverse Venture Corporation. Id. at 30-32, 68-69, 81, 106-107. At first, Matthew was a passive investor in Vanadium holding non-voting stock, but he ultimately became the president and chief executive officer and sole voting shareholder of Vanadium in 1995. Id. at 71, 84-85, 87. Matthew, however, had very limited work experience at only one of the Schneider Companies (CRS) prior to his investment in Vanadium and none at Schneider, Inc. or Pittsburgh Mechanical; furthermore, Matthew never worked in the plumbing and mechanical contracting business. Id. at 103-104, 123-24.
In the present matter, Vanadium filed a motion for summary judgment on February 28, 2020, in which it asserted that it lacked successor liability for Schneider, Inc. and Pittsburgh Mechanical. On August 11, 2020, after oral argument, the trial court entered an order granting summary judgment in favor of Vanadium and dismissing all claims against Vanadium. Plaintiff ultimately settled with or discontinued litigation against all remaining parties, and on December 1, 2020, the trial court entered an order disposing of all outstanding claims and parties to the lawsuit. Plaintiff filed a timely notice of appeal, citing her objection to the earlier grant of summary judgment in favor of Vanadium.
On May 28, 2021, the trial court filed an opinion explaining its reasons for granting summary judgment.5 In its opinion, the trial court concluded that the evidence of record showed that none of the elements of the de facto merger standard were met because (i) Frank Schneider and his brother Edward never held an ownership interest in Vanadium; (ii) the only continuity of management was that Frank Schneider was an employee for one of Vanadium's subsidiaries; (iii) Schneider, Inc. has not dissolved; and (iv) the liabilities of Schneider, Inc. and Pittsburgh Mechanical were not assumed by Vanadium or its subsidiaries. Trial Court Opinion, 5/28/21, at 8; see also Fizzano Brothers Concrete Products, Inc. v. XLN, Inc. , 615 Pa. 242, 42 A.3d 951, 962 (2012) (). While recognizing that Matthew Schneider had borrowed funds from his father to invest in Vanadium, the court noted that the source of funds for an investment is not a factor in the de facto merger standard and further that Matthew had no interest in or relationship with Schneider, Inc. or Pittsburgh Mechanical. Trial Court Opinion, 5/28/21, at 8-9. The trial court further concluded that, while the Schneider Companies were related and had business dealings with each other, they were not a single entity, and in any event, inter-billing between the Schneider Companies shows that corporate formalities between the various entities were observed. Id. at 9.
The trial court additionally found that there was insufficient evidence that Vanadium was a "mere continuation" of Schneider, Inc. and Pittsburgh Mechanical because Vanadium was engaged in...
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