Sunday, May 31, 2009

Pennsylvania Supreme Court Grants Petition for Appeal to Address Two Important Strict Product Liability Issues

I thank James Beck, Esquire of the Philadelphia office of the Dechert, LLP law firm for advising me of the Pennsylvania Supreme Court's May 27, 2009 Order granting a Petition for Allowance of Appeal in the case of Schmidt v. Boardman Company, et al., 2009 WL 1471119 (Pa. 2009). I note that Attorney Beck is the co-writer of an excellent legal blog entitled Drug and Device Law found at http://www.druganddevicelaw.blogspot.com/. I invite you to check out his blog.

In the Schmidt case, various plaintiffs filed strict products liability claims against successor corporations that purchased the assets of the original manufacturer of an allegedly defective fire truck that was involved in an accident that injured a number of persons.

More specifically, as the fire truck was responding to a call, unbeknownst to the firemen, there was a fire hose dangling from the side of the truck. Along the way the nozzle of the fire hose ran under a parked car, became taut when it got caught. The force was so great that it lifted the parked car as the nozzle broke free. The nozzle then careened like a missile and struck three plaintiffs standing nearby, killing one of them. Some additional plaintiffs, who did not sustain any physical injuries from this accident, brought emotional distress claims under a theory that they were bystanders who witnessed injuries to their close relatives.

After a jury found the fire department 50 percent liable and the successor corporations (who purchased the assets of the original manufacturer of the fire truck) 50 percent liable under an approximately $4.5 million dollar verdict, the successor corporations filed an appeal to the Superior Court.

At the Superior Court level, the court acknowledged the general rule that, with respect to successor liability, when one company sells or transfers all of its assets to another company, the purchasing or receiving company is not responsible for the debts and liabilities of the selling company simply because it acquired the seller's property. See Schmidt v. Boardman Company, et al., 958 A.2d 498, 504 (Pa.Super. 2008).

However, the Superior Court upheld the trial court's application of the product line exception to the rule of successor non-liability under which exception the plaintiff may recover from the successor if a number of factors are proven that essentially work together to show that the successor corporation acquires all or substantially all of the assets of the original company and continues essentially the same manufacturing operation as the selling company that originally made the product. Id. at 504-505.

The Superior Court also rejected the successor corporation's appellate argument that the recoveries allowed on the claims for infliction of emotional distress at the trial level should not have been allowed because the underlying tort alleged was under a strict product liability theory and not a negligence theory. The corporation more specifically argued that the emotional distress plaintiffs had not alleged or established any physical injury and that, in the absence of any physical injury, Pennsylvania law does not permit a recovery for emotional distress damages under a theory of strict product liability.

The Superior Court found this argument to be devoid of merit. The Court noted that the courts of Pennsylvania have long abandoned the "impact rule" previously required for a plaintiff to recover under an emotional distress claim. Id. at 518. The Superior Court noted that the law has been extended to allow for a bystander to recover so long as there is a close personal relationship between the physically injured party and the bystander who witnessed the injury.

In rejecting the defendant's argument, the Superior Court emphasized that the law has always focused on the nature of the relationship between the victim of the injury and the bystander rather than the type of the underlying tort. In this case, both the trial court and the Superior Court felt that under the horrific facts of a mother struck by the same projectile that killed her daughter after which the mother watched "her daughter's life drain from her body," the emotional distress sustained "is the inescapable byproduct of any underlying tort which caused the injury and thus, should be compensated." Id. at 519 [emphasis added]. This same analysis was applied to the other emotional distress plaintiff who witnessed the severe physical injuries sustained by her sister.

As such, the Superior Court affirmed the rulings of the trial court in favor of the plaintiffs. Now the successor corporation defendants' appeal to Supreme Court has been granted. In its May 27, 2009 Order, the Supreme Court noted that the following issues would be considered:

(1) Whether the plaintiff must prove a physical injury in order to be entitled to recover under a strict product liability theory?

(2) Whether the product-line exception to the general rule against successor liability should be a part of Pennsylvania's strict product liability jurisprudence?

(3) If the product line exception is recognized as part of Pennsylvania's strict product liability jurisprudence, whether the exception should be formulated to strictly require proof of the following before successor liability can be imposed: (1) the successor corporation purchased all or substantially all of the assets of the manufacturer of the product at issue; (2) the successor undertook essentially the same manufacturing operation as the manufacturer of the product alleged to have caused the plaintiff's injuries and then continued to manufacture the same product line; and (3) the transaction between the successor and the manufacturer of the product at issue caused the destruction of the plaintiff's remedies against the manufacturer?

The parties were also ordered by the Supreme Court to address whether the second issue noted above has been waived.

Given the strong wording of the Superior Court's opinion and the compelling rationale that both the trial court and Superior Court offered in support of their respective decisions, it would appear likely that the Supreme Court will affirm the decisions of the lower courts on these issues (assuming they have not been deemed to have been waived).

No comments:

Post a Comment