ROBERT L. MILLER, Jr., District Judge.
This matter is before the court on a summary judgment motion filed by defendants Werner Co. d/b/a New Werner Co., and New Werner Holding Co. (DE), Inc. f/k/a New Werner Holding Co. (DE), LLC d/b/a Werner Holding Co. The Werner defendants argue there is no genuine issue of material fact as to the claims asserted by plaintiffs Jerry Fowler and Michele Fowler. The Fowlers oppose the motion. Argument was heard on August 21, 2014.
In July 2007, the Fowlers purchased a Type III six-foot aluminum Werner step ladder from a Lowe's store in Fort Wayne. On April 29, 2011, Mr. Fowler used the ladder for a painting project. During the course of the project, he claims the ladder's spreader or spreader arm broke, causing him to fall onto the ladder and the ground. As a result of the fall, Mr. Fowler sustained broken ribs, a lacerated spleen, damaged kidneys, and damaged vertebrae.
Werner Co. had designed and manufactured the ladder in 2001. In 2006, Werner Co. and three other companies
The Fowlers allege that the Werner defendants are liable for their injuries contractually, pursuant to the Indiana Product Liability Act, and under common law theories of negligence, gross negligence, and/or recklessness. The Fowlers also assert a claim under the Indiana Consumer Protection Act. The Werner defendants seek summary judgment and contend they aren't liable because they didn't expressly assume the liabilities of the company which manufactured the ladder and didn't design, manufacture, or market the ladder.
A movant is entitled to summary judgment if no genuine dispute as to any material fact exists and the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a). The court must construe all facts in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of the nonmoving party.
The Werner defendants first argue they didn't contractually assume the liabilities of the company that manufactured the ladder in 2001 when they purchased the assets of the bankrupt company six years later. They point to the provision in the bankruptcy court's order regarding the general assumption of liabilities created by the sale.
Bankruptcy Court Order Approving Sale, at ¶ 9. The Werner defendants conclude that based on the bankruptcy court's order, they can't be held liable as a matter of law. Such a blanket statement overlooks the exception to the general rule found in the first sentence of the provision — "Except as expressly provided in the [Asset] Purchase Agreement or the Ancillary Documents." Section 2.3 of the Asset Purchase Agreement contains the expressly assumed liabilities of the purchaser, and subsection (d) specifically addresses customer product liability. The purchaser assumed
Asset Purchase Agreement, at 16-17. The assumed liabilities fall within two categories: (1) product liability claims that existed prior to the sale for customers of Sellers listed on Schedule 2.3(d); and (2) allowed administrative expense claims for customers of Sellers not listed on Schedule 2.3(d). Schedule 2.3(d), titled
(Doc. No. 35-4, at 31). Lowe's was a customer, as the objection to this provision during the bankruptcy proceedings showed, and so included in the assumed product liability claims that existed prior to the sale closing. The Werner defendants argue, and the court agrees, however, that the Fowlers' claim didn't exist before the 2007 bankruptcy sale because the fall occurred years later, in 2011. Under the general sections of the bankruptcy court's order and the Asset Purchase Agreement, the Werner defendants didn't contractually assume liability for the Fowlers' claim.
The Fowlers respond that the Werner defendants expressly assumed liability for ladders sold at Lowe's stores and that liability stems from two different provisions in the bankruptcy court's order. First, the Fowlers refer to Section 2.3 of the Asset Purchase Agreement (approved by the bankruptcy court's order) that contains the expressly assumed liabilities of the purchaser. Pursuant to subsection (a), the purchaser assumed "[a]ll Liabilities of any Seller under the Seller Agreements . . . ." In Section 2.1(e), "Seller Agreements" are defined to be all contracts listed or described in Schedule 2.1(e), which includes "open, existing or on-going agreements and/or purchase orders with Sellers' service providers, vendors or customers." (Doc. No. 44-10, at 6). The Fowlers contend the Lowe's contracts with the bankrupt entities were open, existing or on-going agreements and the Werner defendants consequently assumed all liabilities related to ladders sold through Lowe's stores under the then existing Lowe's agreements.
Second, the Fowlers refer to a provision of the bankruptcy court's order they say resulted from an objection filed by Lowe's Companies, Inc. to the debtors' notice of intent to assume and assign certain leases and contracts in the sale. The objection referenced "a number of ongoing obligations from the Debtors to Lowe's under the Lowe's Contracts, including, without limitation, (i) Lowe's right of indemnification for product liability and other claims involving Debtors' products and (ii) customer product claims arising from Lowe's performance under the Lowe's Contracts" and sought confirmation that the purchaser/assignee would "honor any and all of the Debtors' obligations to indemnify Lowe's for Indemnity Claims, whether such claims involve accidents or conduct occurring before or after the Petition Date and whether such claims are allowed administrative claims or not." Lowe's Obj., at ¶¶ 4, 5(b). At a hearing, counsel for the debtors told the bankruptcy court the objection was resolved and changes were made to the proposed form of order accordingly. Transcript of Apr. 25, 2007 Hearing, at 10
Bankruptcy Court Order Approving Sale, at ¶ 15. The Fowlers claim the "Lowe's Master Standard Buying Agreement" dated February 19, 1996 (Doc. No. 47-2) is a "Lowe's Agreement," and as such, pursuant to paragraph 15, the purchaser must perform all obligations under the contract. Further, they argue that agreement contains a "Hold Harmless & Indemnity Policy."
The Werner defendants reply that any contractual indemnity obligation is to Lowe's as a customer and not end-user customers like the Fowlers. From this, the Werner defendants reason that they aren't directly liable to an enduser of a ladder purchased at a Lowe's store; they must simply indemnify Lowe's if it is found to be liable to an end-user. The Fowlers didn't have the opportunity to respond to this argument that was first raised in the reply. In the end, the parties agree the Werner defendants have contractually agreed to indemnify the Lowe's defendants for product liability claims. They differ in opinion as to the legal consequences of this contractual obligation. The Fowlers claim the Werner defendants are directly liable to end-users of the product through their liability to Lowe's. In their reply, the Werner defendants claim they are directly liable to Lowe's and Lowe's alone. Indiana law appears to be well-settled that an injured party has no right of direct action against the tortfeasor's indemnitor,
The court reaches this conclusion hesitantly. Given the way the briefing unfolded in this case, the Fowlers haven't had a chance to disagree with the proposition that Indiana law gives no right of direct action against indemnitors. The principle appears — to the court — too well settled to demand additional investment of attorney time and party expense through further briefing or motion practice. But if the Fowlers disagree, and think there is a right of direct action in Indiana, the court will welcome a motion to reconsider.
Another word is in order concerning the briefing of this motion. After reading the Werner defendants' brief and turning to the Fowlers' opposing brief, the court was surprised to learn the facts the Werner defendants omitted from their submission. Because it was left to the Fowlers to be the first to discuss the indemnification provision, they were left without a chance to respond to what the Werner defendants posited about the indemnification provision in their reply. Some of those challenges were ameliorated by oral argument, but the Werner defendants' cherry picking from the bankruptcy court's order and the Asset Purchase Agreement in their opening brief casts a long shadow over the Werner defendants' credibility with the court. As the court of appeals explained last month:
The Werner defendants further argue they can't be liable under Indiana law because when one corporation purchases the assets of another, the buyer doesn't assume the debts and liabilities of the seller.
The Werner defendants claim no exception can apply because the bankrupt predecessor entities still exist and they have provided the plaintiffs with the address for service of process and the contact information for the liquidating trustee's counsel. This argument isn't persuasive. The entities declared bankruptcy eight years ago and the sale of substantially all of their assets was completed seven years ago. For all intents and purposes, the bankrupt entities no longer exist. See
An implied or express agreement between the buyer and the seller to assume the obligation is a recognized exception to the general rule that a buyer doesn't assume the seller's liabilities.
The Fowlers alternatively argue that a "product-line exception" to the general rule could apply to the Werner defendants. In
The Werner defendants concede they contractually agreed to indemnify the Lowe's defendants, but that liability doesn't transfer to the Fowlers. The court declines to determine whether the product-line exception could apply in this situation because the exception has yet to be applied under Indiana law. No exception applies, so the Werner defendants are subject to the general rule; when they purchased the assets of the bankrupt company, they didn't assume its liabilities. It follows that the Werner defendants aren't liable under the Indiana Product Liability Act, common law theories of negligence, gross negligence, or recklessness (that, regardless, are subsumed by a Product Liability Act claim), the Indiana Consumer Protection Act, or a breach of a postsale duty to warn theory (that the court found didn't exist under Indiana law in the co-defendants' dismissal order).
For the foregoing reasons, the defendants' motion for summary judgment (Doc. No. 33) is GRANTED.
SO ORDERED.
