Gower v. Savage Arms, Inc.
166 F.Supp.2d 240 (2001)
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Rule of Law:
Under the product-line exception to the general rule of successor non-liability, a corporation that acquires the manufacturing assets of another and continues its product line may be held strictly liable for injuries caused by defects in products manufactured by the predecessor corporation. This exception does not extend to claims of negligence or breach of warranty.
Facts:
- In 1987, Savage Industries, Inc. manufactured a Savage Model 99C lever action rifle.
- In February 1988, Savage Industries filed for bankruptcy.
- In July 1989, Savage Industries sold its Model 99 product line, including machinery, trademarks, and goodwill, to a newly formed company, Savage Arms.
- In October 1989, John Gower purchased the specific rifle manufactured by Savage Industries from a sporting goods store without its original box or safety manual.
- After the acquisition, Savage Arms continued to produce and market the Model 99 rifle line under the 'Savage' name.
- On December 15, 1997, while Gower was hunting, the rifle inadvertently discharged and shot him in the foot.
- At the time of the incident, the rifle's safety mechanism was engaged but was not working properly, requiring more than the usual force to be placed in the 'safe' position.
- An expert inspection after the incident confirmed the rifle's safety mechanism was not working properly at the time of the accident.
Procedural Posture:
- John and Debra Gower filed a lawsuit against Savage Arms, Inc. and Savage Sports Corporation in the U.S. District Court for the Eastern District of Pennsylvania.
- The plaintiffs' complaint included causes of action for strict liability, negligence, misrepresentation, breach of warranty, and loss of consortium, seeking both compensatory and punitive damages.
- The defendants filed a motion for summary judgment, asking the court to dismiss all of the plaintiffs' claims before trial.
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Issue:
Does the product-line exception apply to hold a successor corporation strictly liable for injuries caused by a defective product manufactured by its predecessor, where the successor acquired the predecessor's product line, trademarks, and goodwill and continued the manufacturing operation?
Opinions:
Majority - McLaughlin, District Judge.
Yes, the product-line exception can apply to hold a successor corporation strictly liable. A successor corporation that continues the product line of its predecessor may be held strictly liable for injuries caused by the predecessor's defective products when it is just to impose such liability. The court adopted the 'product-line exception' as articulated in Dawejko, which is designed to implement the social policies underlying strict products liability. Applying the Dawejko factors, the court found that Savage Arms acquired the Model 99 product line, its associated tools, plant, and goodwill, and continued producing the same product under the same name. These facts support the application of successor liability. The court also held that this exception is limited to strict liability claims and does not apply to negligence or breach of warranty claims. Furthermore, the court determined that punitive damages were not appropriate against the successor corporation because there was not a sufficient 'degree of identity' between the management and ownership of Savage Arms and its predecessor, Savage Industries.
Analysis:
This decision solidifies the application of the 'product-line exception' for successor liability within the Third Circuit's interpretation of Pennsylvania law. It serves as a crucial precedent by affirming that a successor corporation cannot simply acquire the goodwill and profitable assets of a predecessor without also potentially inheriting its strict liability tort obligations. The case clarifies the narrow scope of this exception, limiting it to strict liability claims and excluding negligence and warranty actions. This distinction is critical for future litigation, as it channels successor liability claims into a specific legal theory and protects successors from broader forms of liability for the actions of their predecessors.
