USCA1 Opinion
United States Court of Appeals
For the First Circuit
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No. 95-1181
RANDY JORDAN,
Plaintiff, Appellant,
v.
HAWKER DAYTON CORPORATION and EAST DAYTON TOOL & DIE CO.,
Defendants, Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Morton A. Brody, U.S. District Judge]
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Before
Cyr, Boudin, and Lynch, Circuit Judges.
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Laurie Ann Miller, with whom N. Laurence Willey, Jr. and Ferris,
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Dearborn & Willey were on brief, for appellant.
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Brent A. Singer, with whom David C. King and Rudman & Winchell
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were on brief, for appellee Hawker Dayton Corporation.
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August 10, 1995
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LYNCH, Circuit Judge. Randy Jordan, an injured
LYNCH, Circuit Judge.
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worker, appeals, asking us to revisit the law of Maine on
successor liability so that he may reach the Hawker Dayton
Corporation, which purchased the assets of a division of
another company that had manufactured the machinery which
injured Jordan's hand. Sitting as a court in diversity
jurisdiction under Erie Railroad v. Tompkins, 304 U.S. 64
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(1938), we decline to do so and affirm the grant of summary
judgment issued in favor of Hawker Dayton Corporation by the
district court.
FACTS
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In September 1991, the appellant, Randy Jordan,
badly injured his hand at work while attempting to unjam a
doweling machine. Jordan underwent medical and psychological
treatment, and filed this products liability action in the
United States District Court for Maine against "Hawker Dayton
Manufacturing Company."
The doweling machine was manufactured in 1973 by
Hawker Manufacturing Company ("Hawker Manufacturing"), a
division of East Dayton Tool & Die Co. ("East Dayton"). East
Dayton also manufactured automobile components and other
products. Around the time that the doweling machine was
manufactured, Dorothy Darrow, the sole shareholder of East
Dayton, sold some of her stock to family friends, and East
Dayton redeemed her remaining stock for cash and an
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installment note. The company continued its manufacturing
operations and even added additional product lines.
In August 1973, East Dayton sold to Harmon Darrow,
the president of Hawker Manufacturing, an option to purchase
the assets of Hawker Manufacturing at their net book value.
In March 1974, Mr. Darrow formed Hawker Dayton Corporation
("Hawker Dayton"), conveyed his option to that company, and
in July 1974, Hawker Dayton exercised the option and
purchased the Hawker Manufacturing assets for approximately
$150,000. Hawker Dayton continued the operations of Hawker
Manufacturing and continued to use the Hawker Manufacturing
trade name. East Dayton continued to manufacture woodworking
machines (including doweling machines at first), automobile
dies and other specialized machinery for about two years.
In 1976, East Dayton defaulted on its note to Ms.
Darrow. It then sold the rest of its equipment for $925,000
and its real property for $650,000 to entities not involved
in this lawsuit, and made payments out to Ms. Darrow on the
installment note for the next ten years.
PROCEEDINGS BELOW
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On June 14, 1993, Jordan filed this suit. In
August, the district court issued a scheduling order giving a
deadline of September 15, 1993, for amendment of the
pleadings. The judge later amended the scheduling order,
extending the deadline for amending pleadings by fifteen days
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and extending the discovery deadline by two months. During
discovery, Jordan learned, inter alia, that East Dayton was
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the manufacturer of the doweling machine. On February 10,
1994, five days before discovery was to be completed under
the scheduling order, Jordan moved to correct the corporate
name of the defendant from "Hawker Dayton Manufacturing
Corporation" to "Hawker Dayton Corporation," to add East
Dayton as a defendant and to include additional theories of
liability against Hawker Dayton. The district court granted
the motion to correct the corporate name of the defendant and
to add East Dayton, but denied the motion to add additional
theories of liability.
Jordan filed a motion for summary judgment on the
issue of whether Hawker Dayton was liable as a successor
corporation for the debts and liabilities of East Dayton.
Hawker Dayton objected, and in its response asked that
summary judgment be entered in its favor instead. The
Magistrate Judge recommended that Jordan's motion be denied,
and the district court adopted the recommendation. Neither
ruled on the issue of whether summary judgment should be
entered on behalf of Hawker Dayton. Hawker Dayton
subsequently moved for summary judgment, and the district
court granted the motion.
Judgment by default was entered against East
Dayton, after a hearing on damages, for $2,230,088.21.
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Jordan appeals the grant of summary judgment in
favor of Hawker Dayton on the issue of successor liability.
DISCUSSION
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Four years ago, albeit in a different context than
a tort suit, the Supreme Judicial Court of Maine held, as to
corporate successor liability: "[A]bsent a contrary
agreement by the parties, or an explicit statutory provision
in derogation of the established common law rule, a
corporation that purchases the assets of another corporation
in a bona fide, arm's-length transaction is not liable for
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the debts or liabilities of the transferor corporation."
Director of Bureau of Labor Standards v. Diamond Brands,
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Inc., 588 A.2d 734, 736 (Me. 1991). Diamond Brands involved
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interpretation of the term "employer" in a severance pay
statute. Conceding that there is no contrary agreement by
the asset purchase parties and no statutory exception to
common law here, Jordan tries to avoid the Diamond Brands
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holding by arguing the opinion does not foreshadow what the
Maine Court would do in a tort action.
There are two responses. First, the rule, as
stated above, that a mere asset purchase will not give rise
to successor liability is articulated by Maine's highest
court as being "the established common law rule." That alone
defeats Jordan's claim, as he has argued that Maine law
applies. This common law rule is reinforced by the social
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policy judgment made by the Maine legislature, in the statute
at issue in Diamond Brands. Maine there decided that it is
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benefited by not discouraging purchases of assets of Maine
businesses through imposition of successor liability on
purchasing corporations, thus keeping businesses going which
would otherwise fail, and so continuing to have employees
benefit from their continued employment. Id. at 737 n.7.
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Jordan points to no legal developments in the law of
successor liability in Maine or in any other jurisdiction
since Diamond Brands to suggest that the Supreme Judicial
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Court would change this law. See Bernhardt v. Polygraph Co.
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of America, 350 U.S. 198, 205 (1956) ("[T]here appears to be
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no confusion in the [Maine] decisions, no developing line of
authorities that casts a shadow over the established ones, no
dicta, doubts or ambiguities in the opinions of [Maine]
judges on the question, no legislative development that
promises to undermine the judicial rule."). Thus, Diamond
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Brands is the law of Maine, and this Court must apply that
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law.
Secondly, plaintiff chose a federal, rather than a
state forum, presumably cognizant of this court's statement
that "litigants who reject a state forum in order to bring
suit in federal court under diversity jurisdiction cannot
expect that new trails will be blazed." Ryan v. Royal
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Insurance Company of America, 916 F.2d 731, 744 (1st Cir.
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1990). Jordan did not file a motion that the issue be
certified to the state court. Here Jordan has suffered an
injury and East Dayton appears to no longer have assets with
which to satisfy his claim. But the complex policy arguments
as to whether the common law should strive to assure him
recompense are left to the state, not the federal court, to
decide. Here Maine has made that calculus and given the
greater weight to the protection of jobs through limits on
successor liability. It is not the role of the federal
courts to "question the policy choices of states whose law we
apply." Krauss v. Manhattan Life Insurance Company of New
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York, 643 F.2d 98, 102 (2d Cir. 1981).
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Jordan argues that the Supreme Judicial Court
recently adopted a "majority rule" in another aspect of tort
law and so will adopt the majority rule as to successor
liability. Jordan relies on Oceanside at Pine Point
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Condominium Owners Association v. Peachtree Doors, Inc., 659
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A.2d 267, 270 (Me. 1995), which held that a plaintiff did not
state a claim in tort for a defective product's damage to
itself, thus having Maine join that rule adopted by a
majority of jurisdictions. Even were we incorrect in our
understanding that the law of Maine on successor liability
has been determined by its highest authority, this argument
would not assist Jordan. The Peachtree Doors decision does
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not expand plaintiffs' remedies, but reflects a rejection of
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such an expansion. More tellingly, even if Maine were to
adopt a "majority rule" as to successor liability, Jordan
would still not prevail. Assuming the majority rule to be
that a corporation which purchases assets from another is not
liable in tort for the actions of the transferor unless one
of four exceptions is met, see, e.g., 1 American Law of
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Products Liability 7:1 at 10-11 (3d ed. 1990), those
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exceptions avail Jordan naught. See also Ohio Bureau of
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Workers' Compensation v. Widenmeyer Electric Co., 593 N.E.2d
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468, 470 (Ohio 1991); Ramirez v. Amsted Industries, Inc., 86
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N.J. 332, 340, 431 A.2d 811, 815 (1981); Ray v. Alad Corp.,
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19 Cal. 3d 22, 28, 560 P.2d 3, 7 (1977). There was no
agreement by Hawker Dayton, express or implied, to assume the
liabilities of East Dayton Tool and Die Co., and Jordan does
not claim that the asset sale was fraudulent, not made in
good faith, or made without sufficient consideration. There
was no de facto merger nor a mere continuation of the
predecessor here where the transferor corporation, East
Dayton, neither dissolved nor liquidated after the asset
sale. See, e.g., 1 American Law of Products Liability,
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supra, 7:10, 7:12, 7:14 & 7:15 (both merger or
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consolidation and mere continuation exceptions require that
there be only one corporation at the end of the transaction).
Indeed East Dayton sold less than 10% of its assets to Hawker
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Dayton, continued to do business thereafter and paid out on
an installment note for twelve years after the asset sale.
Jordan's argument ultimately is that the "product
line" doctrine of successor liability should be adopted.
Under the product line doctrine, a corporation that purchases
all or substantially all of the assets of another
corporation, continues the manufacturing operations and sells
the same product line may be strictly liable for injuries
caused by defective products in that line. See, e.g., 1
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American Law of Products Liability, supra, 7:25 at 42; see
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also Ray, 19 Cal. 3d 22, 560 P.2d 3; Ramirez, 86 N.J. 332, 431
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A.2d 811 (1981); Dawejko v. Jorgensen Steel Company, 290 Pa.
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Super. 15, 434 A.2d 106 (1981); Martin v. Abbott
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Laboratories, 102 Wash.2d 581, 689 P.2d 368 (1984). It is
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far from clear the product line doctrine would assist Jordan.
See, e.g., Ray, 19 Cal. 3d at 31; 560 P.2d at 9; Ramirez, 86
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N.J. at 358, 431 A.2d at 825 (the product line exception
requires that the asset purchase destroy the plaintiff's
remedy, for example, because all of the assets are purchased
or because the purchase agreement requires the predecessor to
liquidate). This doctrine is at most a minority rule which
has plainly not been adopted by Maine.
Finally, Jordan makes a procedural argument that
the court was precluded from entering summary judgment for
Hawker Dayton because it failed to do so when Hawker Dayton
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had countered his motion in part by saying that it, not
Jordan, was entitled to entry of judgment. The court
originally denied Jordan's motion and took no action on
Hawker Dayton's counter request. When Hawker Dayton later
filed a formal motion for summary judgment in its favor, the
court granted it, saying it had not considered the merits of
Hawker Dayton's request when it denied Jordan's motion.
There was no error in this procedure and would have been none
even if the court had considered the counter request the
first time around. See Burns v. Massachusetts Institute of
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Technology, 394 F.2d 416, 418 (1st Cir. 1968). Nor was there
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an abuse of discretion in denying Jordan's motion to amend
his complaint filed more than four months after the deadline
set in the scheduling order and only a few days before
discovery was to be completed.
The decision of the district court granting summary
judgment to Hawker Dayton is affirmed.
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