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Summary Judgment Not Warranted Where Issues of Material Fact Exist on Successor-Liability Issues 

Supreme Court of New York, County of Erie , August 25, 2022

In this asbestos action, plaintiff Eric Cislo alleged take-home exposure to asbestos from his father’s work with Bison boilers from 1969 until the early 1980s.  

Prior to 1969, Farrar and Trefts Inc. manufactured and sold Bison boilers, and underwent “a series of acquisitions, mergers, name changes, and successors,” becoming ADSCO Manufacturing Corp. Soon thereafter, ADSCO Manufacturing Corp. changed its name to Sterlstand Incorporated.  

Following several successive acquisitions, successions, and name changes, ADSCO Manufacturing Corp. became ADSCO Manufacturing LLC. 

ADSCO Manufacturing LLC moved for summary judgment, arguing that ADSCO Manufacturing LLC was not responsible for the alleged asbestos exposure from 1969 until the early 1980s. Under Schumacher v. Richards Shear Co., “a corporation that acquires the assets of another is not liable for the torts of its predecessor.” ADSCO Manufacturing LLC set forth that “it did not acquire tort or product liabilities in the January 1973 ADSCO Manufacturing Corp. contract with 20 Millburn Street Inc., soon thereafter known as ADSCO Manufacturing, Corp.” ADSCO also contends that the plaintiff has not shown that a Schumacher exception applies, including:  

               1.  The successor 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.   

               4.  The transaction was entered into fraudulently to escape tort obligations.  

The court ultimately found that genuine issues of material fact existed. With regard to the second exception, ADSCO Manufacturing LLC contended that there was no continuity of ownership between the 1973 selling corporation (ADSCO Manufacturing Corp.) into the buying corporation (20 Millburn Inc.). However, the court set forth that continuity of ownership is not the sole necessary factor as per Lippens v. Winkler Backereitechnik GMBH and Dutton v. Young Men’s Christian Association of Buffalo Niagara. Notably, the court stated that ADSCO Manufacturing LLC “would have to show that Sterlstand Inc. remained in existence in a meaningful way after the subject transaction closed and was not a “mere shell” whose legal existence may be disregarded for purposes of the de facto merger analysis.” Under the third de facto merger factor, whether the buyer assumed “the liabilities ordinarily necessary for the uninterrupted continuation of the seller’s business.” The court determined a question of material fact existed as to “whether 4979 Lake Avenue was ADSCO’s same address before and after the 1973 sale and purchase.” Further, the court deemed that the buying corporation purchased the assets of the selling corporation. A question of material fact also existed as to the third exception. Notably, the plaintiff stated that “the Defendant’s website states that the ADSCO company founded in 1877 is the same company operating today.” Thus, the court denied ADSCO’s motion.  

Read the full decision here