Kaminski v. Western MacArthur Co.
220 Cal. Rptr. 895, 175 Cal.App.3d 445, 1985 Cal. App. LEXIS 2847 (1985)
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Rule of Law:
A successor corporation that acquires the business of a predecessor and continues its product line can be held strictly liable for injuries caused by the predecessor's defective products, even if the predecessor was a distributor rather than a manufacturer.
Facts:
- In 1942, Jack Kaminski was exposed to asbestos products while working at Bethlehem Shipyard.
- Western Asbestos Company was the primary distributor of Johns-Manville asbestos products and supplied virtually all asbestos products used at Bethlehem Shipyard during that time.
- By 1965, Western Asbestos was in financial distress and its directors sought a buyer, contacting the MacArthur Company.
- In August 1965, MacArthur Company entered into a 'Memorandum of Agreement' with Western Asbestos, giving MacArthur complete operational and management control over Western Asbestos.
- In March 1967, under MacArthur's control, Western Asbestos's board voted to cease operations and dissolve.
- MacArthur then formed a new corporation, Western MacArthur Company, which acquired Western Asbestos's inventory, outstanding contracts, customer lists, and goodwill.
- Western MacArthur hired 45 of Western Asbestos's 50 employees, continued distributing the same products from the same supplier (Johns-Manville), and used a similar name, representing continuity to former customers.
- In 1982, Jack Kaminski was diagnosed with malignant mesothelioma as a result of his 1942 asbestos exposure.
Procedural Posture:
- Jack and Rose Kaminski sued Western MacArthur Company and others in a state trial court for personal injuries and loss of consortium.
- The issue of successor liability was tried separately to the court without a jury, resulting in a finding that Western MacArthur Company was the corporate successor to Western Asbestos Company.
- The remaining issues of product liability and damages were then tried to a jury, which returned a verdict in favor of the Kaminskis.
- The trial court entered a judgment on the jury's verdict.
- Western MacArthur Company (appellant) appealed the judgment to the California Court of Appeal, First District.
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Issue:
Does the product line successor liability doctrine, which holds a successor corporation liable for its predecessor's defective products, apply to a successor of a product distributor, not just a manufacturer?
Opinions:
Majority - Low, P. J.
Yes, the product line successor liability doctrine applies to distributors. The policies underlying strict liability, particularly the 'stream of commerce' approach, extend liability to all entities in the marketing enterprise who should bear the social cost of defective products. The court reasoned that holding the rule from Ray v. Alad Corp. inapplicable to distributors would contradict the core policy of compensating injured plaintiffs. The court applied Ray's three-prong test and found it was met: (1) Western MacArthur's acquisition of the business caused the destruction of the plaintiff's remedy against the original distributor, Western Asbestos; (2) Western MacArthur had the ability to assume the risk-spreading role by estimating risks and obtaining insurance; and (3) it was fair to impose liability because Western MacArthur benefited from the goodwill and continued business operations of its predecessor.
Analysis:
This case significantly expands the scope of the 'product line' exception for successor corporate liability established in Ray v. Alad Corp. By extending liability to successors of distributors, not just manufacturers, the court reinforced that the underlying public policies of strict products liability—victim compensation and risk-spreading—are paramount. This decision makes it more difficult for corporations to use asset purchases and dissolutions to shed liability for defective products, ensuring that plaintiffs have a greater chance of recovery from a successor entity that continues the predecessor's business enterprise, regardless of its specific role in the chain of distribution.
