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Appeals Court Affirms NYCAL Judge’s Denials of Motions to Dismiss on Successor Liability Grounds

Court: Supreme Court of New York, Appellate Division, First Department

Defendant P.B. Heat previously moved to dismiss multiple complaints in New York City Asbestos Litigation (NYCAL) cases. NYCAL Coordinating Judge Adam Silvera denied each of these motions. Asbestos Case Tracker covered one of Judge Silvera’s previous decisions where he denied P.B. Heat’s motion in the Catapano matter. P.B. Heat appealed the multiple denials to dismiss.

The court discussed two arguments on appeal. First, P.B. Heat contended that there were no factual allegations setting forth the respective plaintiffs’ theories of P.B. Heat’s successor liability from Peerless Industries. However, the Appeals Court rejected this contention as plaintiffs are only required to file a standard complaint with general allegations for all claims and a short-form case-specific complaint that incorporates by reference the standard complaint’s allegations as per the NYCAL Case Management Order (CMO). As such, the court held that “plaintiffs have adequately pleaded claims for successor liability, as the allegations in the standard form complaints sufficiently put P.B. Heat on notice of their respective successor liability claims.”

Second, P.B. Heat contended that the respective complaints should be dismissed under N.Y. C.P.L.R. 3211(a)(1). In New York, a successor corporation is not generally liable for the torts of its predecessor. However, there are four exceptions to this rule under Schumacher v. Richards Shear Co.:  “(1) [the corporation] expressly or impliedly assumed the predecessor’s tort liability, (2) there was a consolidation or merger of seller and purchaser, (3) the purchasing corporation was a mere continuation of the selling corporation, or (4) the transaction is entered into fraudulently to escape such obligations.” The Appeals Court noted that Pennsylvania’s “product-line exception” applied to these cases as P.B. Heat’s documents contained a choice-of-law provision. Under this exception, “a successor corporation is liable for injuries caused by defects in products manufactured and distributed by its predecessor where the corporation acquires all or substantially all the manufacturing assets of [the predecessor] corporation . . . and undertakes essentially the same manufacturing operation as the [predecessor] corporation.”

The Appeals Court held that P.B. Heat’s documents “did not utterly refute the applicability of each of these exceptions.” The court also found “issues of fact exist as to whether the reorganization that led to P.B. Heat’s formation was contemplated to fraudulently extinguish the Peerless family of companies’ liability for its asbestos-containing boilers.” Thus, the court affirmed the trial court’s decisions. 

Read the full decision here.