Court Upholds Plumbing and Heating Employer’s Motion for Summary Judgment Finding No Successor-In-Interest Liability

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Superior Court of Pennsylvania, January 26, 2022

In these asbestos actions, Kelly Smith, the executrix of the estate if Daniel R. Harrity, and Maxine Rosenkeimer, the executrix of the estate of Arthur W. Rosenkeimer, appeal a December 2020 order dismissing all claims and parties and an August 2020 order granting summary judgment to Appellee Vanadium Enterprises Corporation. With regard to the August 2020 order, the court concluded that the record lacked insufficient evidence to support a finding that Vanadium was liable as a successor to the decedent’s former employers, Schneider, Inc. and one of its subsidiaries, Pittsburg Mechanical Systems, Inc. As background, the decedents worked as union plumbers between 1965 and 1975, working for various companies such as Schneider, Inc. and Pittsburgh Mechanical. In both complaints, Vanadium was named as a defendant while Schneider, Inc. and Pittsburgh Mechanical were not. Vanadium argued that they were improperly named in the suits because they are not liable as a successor-in-interest to Schneider, Inc. and its subsidiaries. Notably, these matters were decided separately in December 2020 and August 2020. However, because they were decided at a similar time and assert identical facts and arguments on appeal, the cases were head on appeal together.

In 1990 Schneider, Inc. was sold to Vanadium in a non-real estate asset purchase after years of financial difficulties. At the time of the sale, only four of the original 40 Schneider, Inc. entities remained. In the present action, the plaintiffs argue that the question of Vanadium’s liability as a successor-in-interest with regard to Schneider, Inc. and its subsidiaries was the subject of Continental Insurance Co. v. Schneider, Inc., a case argued in this court in 2002. While this court granted summary judgment in favor of Vanadium, finding that Vanadium was not a successor-in interest, the Pennsylvania Supreme Court found that this decision was made in error in 2005. Subsequently, this court reversed the 2002 grant of summary judgment.

In its August 2020 decision granting summary judgment in favor of Vanadium, the trial court noted that, in general, a purchaser of a corporation’s assets does not, for such reason alone, assume the debts of the selling corporation. However, the exceptions to this general rule are recognized when: (1) the purchaser expressly or implicitly agreed to assume liability; (2) the transaction amounted to a consolidation, or a de facto merger; (3) the purchasing corporation was merely a continuation of the selling corporation; (4) the transaction was fraudulently entered into to escape liability; or (5) the transfer was without adequate consideration and no provisions were made for the creditors of the selling corporation. At issue were recognized exceptions (2) and (3): whether the asset purchase of Schneider, Inc. by Vanadium represented a de facto merger or a mere continuation of Schneider, Inc. First, the court concluded that the evidence of record showed that a de facto merger was not present because: (1) the shareholders of Schneider, Inc. never held an ownership interest in Vanadium; (2) the only continuity of management was that a former Schneider, Inc. shareholder eventually was an employee for a Vanadium subsidiary; (3) Schneider, Inc. was never formally dissolved; and (4) the liabilities of Schneider, Inc. and Pittsburgh Mechanical were not assumed by Vanadium. The court further concluded there was insufficient evidence that Vanadium was a “mere continuation” of Schneider, Inc. and Pittsburgh Mechanical because Vanadium was engaged in distinct lines of businesses at the two companies. As such, the trial court found that Vanadium was improperly named in the complaint because it was not a successor-in-interest to Schneider, Inc. and granted summary judgment in favor of Vanadium.

In the instant action, the plaintiffs argue that the reversal of summary judgment in 2005 is binding precedent that requires the reversal of summary judgment here. Specifically, the 2005 case found that there was a genuine issue of material fact with regard to Vanadium’s liability as a successor-in-interest to Schneider, Inc. Moreover, the plaintiffs argue that the trial court should have considered a deposition taken of Frank Schneider during the Continental litigation prior to his death in 2002.

With regard to the 2005 Continental decision, the court noted that the Pennsylvania Supreme Court remanded the case because there was an issue of fact with regard to Vanadium’s potential liability as a successor-in-interest to Schneider, Inc. However, the court stated that on remand, the trial court never reached a summary judgment ruling on that particular issue because allocator was not granted on the successor-in-interest argument. In addition, the court noted that the business activities of Schneider, Inc. and Pittsburgh Mechanical were not at issue in the Continental litigation. As such, the court found that the trial court in making its August 2020 decision was not bound by the 2005 Continental decision.

Similarly, the court found that the trial court did not error in excluding the 2002 deposition testimony of Frank Schneider because successor liability as to Schneider, Inc. and Pittsburg Mechanical were not at issue in the prior action. Moreover, even if the deposition testimony was considered, the record would still lack sufficient evidence to show triable issues of fact as to Vanadium’s successor liability with regard to Schneider, Inc. and Pittsburg Mechanical. As a result, the court ultimately concluded that there was no remaining triable issue of fact to dispute the trial court’s August 2020 grant of summary judgment as to Vanadium. The order granting summary judgment was therefore affirmed.

Read the first decision here.

Read the second decision here.