JANET F. DAVALA v. MID-HUDSON CLARKLIFT OF NEW JERSEY, INC.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2578-03T12578-03T1

JANET F. DAVALA,

Plaintiff-Appellant,

v.

MID-HUDSON CLARKLIFT OF NEW JERSEY,

INC.,

Defendant-Respondent,

and

SONY ELECTRONICS, INC., JOHN HUDSON

CLARKLIFT OF NEW JERSEY, INC.,

CLARKLIFT OF NORTH JERSEY, INC.,

ATLANTIC MATERIAL HANDLING, ATLANTIC

MATERIAL HANDLING CORP. and/or

ATLANTIC MATERIAL HANDLING, INC.,

CLARK EQUIPMENT COMPANY, TEREX

MATERIAL HANDLING CORP., CLARK

MATERIAL HANDLING COMPANY,

Defendants.

____________________________________

 

Submitted January 9, 2006 - Decided January 27, 2006

Before Judges Lintner and Gilroy.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County,

L-7388-96.

Rafano & Wood, attorneys for appellant (Christopher Wood, on the brief).

No brief was filed on behalf of respondent.

PER CURIAM

Plaintiff, Janet F. Davala, appeals from a Law Division order entered on September 24, 1999, granting summary judgment in favor of Mid-Hudson Clarklift (Mid-Hudson). Plaintiff, an employee of Sony Electronics, Incorporated (Sony), was injured at work on June 10, 1996, when she was struck by a three-wheel clamp unit manufactured in 1988 by Clark Material Handling Company's predecessor, Clark Material Systems Technology (collectively referred to as Clark). A clamp unit is similar to a forklift but utilizes clamps instead of forks. Plaintiff, who was inventorying shipments, was struck while the operator of the clamp unit was backing up. The clamp unit was not equipped with a back-up alarm or strobe light device to warn pedestrians that it was backing up nor did it have rear view mirrors.

On July 23, 1996, plaintiff filed her initial complaint against Clark, seeking damages for personal injuries, alleging product defect and failure to warn. An amended complaint followed, naming Clarklift of New Jersey (Clarklift) and Mid-Hudson as additional defendants and alleging theories of negligence and products liability.

Mid-Hudson moved for summary judgment. The facts established that the clamp unit in question was sold by Clark in December 1988 to its dealer-distributor, Clarklift. Pursuant to its dealership relationship with Clark, Clarklift leased the clamp unit to Sony. Clarklift lost its dealership with Clark sometime in 1992 and Clark took back the lease to the unit in question. Thereafter, Clarklift changed its name to Atlantic Material Handling. Meanwhile, Mid-Hudson, which was formed in 1992, entered into a dealership relationship with Clark. Sometime in 1994, Mid-Hudson became the holder of the lease to the clamp unit in question, pursuant to its dealership relationship with Clark.

Salvatore L. Ungaro, a former employee of Clarklift and co-owner of Mid-Hudson, testified at depositions that when he worked at Clarklift he recommended and sold kits for the installation of audible alarms and strobe lights and that it was "our job to notify the customer of all . . . options that are available." Back-up alarms were available from the factory or through after-market suppliers. He testified that customers commonly asked for back-up alarms and strobe lights. Clark's Dealer Information System reference materials for salesmen, regarding "Safety Considerations in the Sale or Lease of New or Used Equipment," provided in pertinent part:

As the direct link to the ultimate user, you are essential to the accomplishment of the safety goal. Your continued face-to-face communication with your customers allows you intimate knowledge of the people and actual applications involved.

Regardless of whether the equipment you sell or lease is new or used, you can take a number of steps to maximize safety, and minimize accidents and litigation. . . .

Following the three steps outlined below will go far toward promoting the maximum degree of safety in the operation of the trucks you sell or lease:

1. Verify that each truck you sell conforms

to applicable standards and

specifications. . . .

. . . .

2. Inform your customer of currently

available safety equipment and training

and provide copies of at least the

following literature:

. . . .

d. Safety Feature Brochure.

In its motion for summary judgment, Mid-Hudson relied on the decision in Lally v. Printing Machinery Sales and Services Co., 240 N.J. Super. 181, 186-87 (App. Div. 1990), that a defendant that provides routine maintenance services to a machine subsequent to its manufacture and sale is not liable for failing to provide safety devices. Following oral argument on Mid-Hudson's motion, the judge found that although there was a question of fact as to whether Sony refused to pay for the back-up alarm kit, Mid-Hudson did not in the course of its business sell the clamp unit and was not the predecessor of Clarklift, the company that initially leased the unit to Sony. Finding that Mid-Hudson was "nothing more than a servicing agency," the judge determined that Mid-Hudson had no responsibility for either the manufacture or design of the product. He also found that Mid-Hudson had not distributed the product to Sony but instead "all of a sudden they pick up this contract . . . to service" for the clamp unit. Concluding that there was nothing to suggest that Mid-Hudson negligently serviced the unit, the judge granted the motion.

On November 25, 2003, an order of dismissal was entered as to all remaining defendants, reciting that Clark and its successors had settled the case with plaintiff with the understanding that upon payment a stipulation of dismissal with prejudice would be entered. On January 5, 2004, plaintiff filed her appeal. On September 30, 2004, we dismissed the appeal because Mid-Hudson had filed for bankruptcy under Chapter 11. The appeal was reinstated by Order of August 17, 2005.

On appeal, plaintiff asserts that the facts establish a case of liability sufficient to withstand Mid-Hudson's motion for summary judgment. Plaintiff also asserts that Mid-Hudson is also potentially liable based upon successor liability because a jury could find that it assumed the debts and liabilities of Clarklift. We address plaintiff's contentions in reverse order.

Our analysis begins with N.J.S.A. 2A:58C-9c, which provides:

The product seller shall be subject to strict liability if:

(1) The identity of the manufacturer given to the plaintiff by the product seller was incorrect. Once the correct identity of the manufacturer has been provided, the product seller shall again be relieved of all strict liability claims, subject to subsection d. of this section; or

(2) The manufacturer has no known agents, facility, or other presence within the United States; or

(3) The manufacturer has no attachable assets or has been adjudicated bankrupt and a judgment is not otherwise recoverable from the assets of the bankruptcy estate.

A product seller is defined as "any person who, in the course of a business conducted for that purpose: sells; distributes; leases; installs; prepares or assembles a manufacture's product according to the manufacturer's . . . design . . . ." N.J.S.A. 2A:58C-8 (emphasis added). The general rule is that "when a company sells its assets to another company, the acquiring company is not liable for the debts and liabilities of the selling company simply because it has succeeded to the ownership of the assets of the seller." Lefever v. K.P. Hovnanian Enters., 160 N.J. 307, 310 (1999). The product-line exception to the general rule, adopted by our courts and other jurisdictions, provides that a corporation that continues to manufacture and market the same product line after purchasing a substantial part of the previous manufacturer's assets may be exposed to strict liability in tort for defects in the predecessor's products. Ibid.

Mid-Hudson was not the manufacturer of the product but instead a seller, as it took over the lease of the clamp unit. Indeed, at the time of plaintiff's accident, the successor manufacturer continued in business manufacturing the same product line and designating Mid-Hudson as its servicing agent. Because Mid-Hudson was a seller and not a manufacturer, it could not be liable as a successor based upon the product line exception. Even if a seller could be subject to successor liability, Mid-Hudson, under the circumstances of this case, would be relieved from liability pursuant to N.J.S.A. 2A:58C-9c(1). The existence and identification of the successor manufacturer, Clark Material Handling Company, relieved Mid-Hudson as seller from any vicarious liability based upon successor liability.

We move on to plaintiff's contention that the judge erred in granting summary judgment because there were sufficient facts in the record to establish a genuine issue of material fact respecting its liability for plaintiff's injuries. N.J.S.A. 2A:58C-9d provides:

A product seller shall be liable if:

(1) The product seller has exercised some significant control over the design, manufacture, packaging or labeling of the product relative to the alleged defect in the product which caused the injury, death or damage; or

(2) The product seller knew or should have known of the defect in the product which caused the injury, death or damage or the plaintiff can affirmatively demonstrate that the product seller was in possession of facts from which a reasonable person would conclude that the product seller had or should have had knowledge of the alleged defect in the product which caused the injury, death or damage; or

(3) The product seller created the defect in the product which caused the injury, death or damage.

Thus, the provisions of N.J.S.A. 2A:58C-9d attempt to eliminate necessity for a vicariously responsible seller to remain a party to a products liability case. See William A. Dreier et al., New Jersey Products Liability & Toxic Tort Law 12:1-1 (2001). The statute, however, makes it clear that a seller can nevertheless be held directly and independently liable under common law theories if, by its acts, it (1) exercised significant control over the defective design or manufacture of the product, (2) created the defect, or (3) knew, or should have known, or possessed facts sufficient for a reasonable person to conclude it had or should have had knowledge of the defect causing the injury.

In Calderon v. Machinenfabriek Bollegraaf Appingedam BV, 285 N.J. Super. 623, 631 (App. Div. 1995), certif. denied, 144 N.J. 174 (1996), we held that a distributor of an industrial machine could be held independently liable on a theory of failure to warn where it periodically serviced the machine and saw itself as responsible for pointing out dangers to the owner. In Lally, we held that, absent negligence, a repair company that restored a press machine to operational status by providing a new metal jacket was not responsible for the manufacturer's failure to provide a guard at the machine's nip point. Lally, supra, 240 N.J. Super. at 187. Unlike the circumstances here and in Calderon, Lally did not deal with a lessor, or manufacturer's servicing agent, but instead an independent repair company that provided a single instance of "routine maintenance," which we described as akin to an auto mechanic changing a tire. Ibid.

Viewing "the facts that may be inferred from the pleadings and discovery in the light most favorable to plaintiff[]," we conclude that the judge erred in granting Mid-Hudson's motion for summary judgment. Strawn v. Canuso, 140 N.J. 43, 48 (1995). Plaintiff's expert, Vincent Gallagher, opined in his report dated September 16, 1998, essentially that the failure to include a back-up alarm rendered Clark's product defective. He also opined that Mid-Hudson knew that some if its customers elected to equip its trucks with safety devices, was aware that such devices prevent injuries, and that it would be dangerous not to equip the units with such devices. He concluded that, under the circumstances, Mid-Hudson failed to take appropriate steps to insure that the unit in question was so equipped.

The record here was sufficient to establish that Mid-Hudson, as lessor of the equipment in question, performed routine service on the clamp unit for plaintiff's employer, was aware of the existence of both factory and aftermarket back-up safety alarms, and that its customers often inquired into the availability of such alarms. Moreover, Mid-Hudson's job responsibilities as a servicing dealer for Clark included informing its customers of currently available safety equipment. Indeed, the judge acknowledged that there was a factual question presented whether Sony expressly declined to have back-up alarms installed on its units, thus potentially relieving Mid-Hudson of liability. He mistakenly concluded that Mid-Hudson's status as a servicing agent that suddenly picked up the service contract relieved it from liability. As a lessor, Mid-Hudson was a seller under both case law and the Products Liability Act. Contrary to the judge's findings, there were sufficient facts to withstand Mid-Hudson's motion based upon the theory that it failed to warn or otherwise take appropriate steps to advise Sony of the dangers associated with the clamp unit, which was not equipped with an available and appropriate back-up alarm.

 
Reversed and remanded.

Three additional amended complaints were filed by plaintiff.

The stipulation also indicated that plaintiff's complaint was to be dismissed with prejudice as against Clarklift and its successor, Atlantic Material Handling Corporation. Additionally, a stipulation without prejudice would be entered as to Sony, subject to the terms and conditions set forth in a stipulation of settlement between plaintiff and Sony. The stipulation of settlement between plaintiff and Sony is not included in the appendix on appeal.

In July 2004, plaintiff's counsel advised us that Mid-Hudson had filed for bankruptcy under Chapter 11, as had its insurance carrier, Legion Insurance. According to the letter, the carrier had come out of reorganization in Pennsylvania and, thereafter, declared bankruptcy. The letter also advised that the matter was referred to the New Jersey Guaranty Fund. Neither the Guaranty Fund nor Mid-Hudson has filed a response to plaintiff's appeal.

(continued)

(continued)

11

A-2578-03T1

January 27, 2006