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Potwora v. Grip

319 N.J. Super. 386, 725 A.2d 697 (App. Div. 1999)

CORPORATIONS; SUCCESSOR LIABILITY—A successor to a product designer does not have product line liability for a defective product allegedly made from the original design; ordinary negligence principles will dictate liability.

A motorcycle rider, wearing a model RG-4 helmet, sustained severe head injuries when, in an accident, the helmet shattered upon impact. The RG-4 helmet was manufactured by a company based upon a design that had been used by a company whose assets the manufacturer had purchased. The predecessor company designed and sold a full size helmet which was in full production at the time it sold the assets of its motorcycle helmet business. The manufacturer of the RG-4 helmet adapted the design it had inherited to create a “shorty” model, which it designated RG-4. A considerable time after the predecessor company had its sold its motorcycle helmet business, it was acquired by another company.

The injured driver sued the company that had acquired the original helmet manufacturer under the theory that the original helmet manufacturer could be considered the designer of the RG-4 helmet because that helmet was very similar to the model it had manufactured and that the design was defective. The driver alleged that the company that bought the original helmet manufacturer was liable because it was the successor to all of the liabilities of the business it had bought, even those that arose after the original manufacturer divested itself of its helmet business.

The Court addressed only the driver’s contention that the original manufacturer was responsible for the RG-4 helmet subsequently manufactured by the company that had purchased its product line. In its mind, the issue was whether “a manufacturer who designs a motorcycle helmet but later sells the manufacturing assets of its helmet division may still be held liable for injuries caused by a helmet manufactured by the successor corporation.” The question was not one of successor liability of the subsequent helmet manufacturer, but whether the selling company, and its successor, may be held liable for a product subsequently manufactured by the company which bought its manufacturing assets. Clearly, the original manufacturer neither manufactured nor sold the helmet involved in the accident. At most, it designed it. Consequently, under the New Jersey Products Liability Act, the original manufacturer could not be held strictly liable in tort because that Act only covers manufacturers or sellers of products. Therefore, the Court examined the common law to understand the meaning of “manufacturer or seller” within the context of the Act. Further, as a rule, successor corporations are responsible for damages caused by defects and products manufactured by predecessors and not the other way around. Lastly, in the Court’s view the original manufacturer did not place the helmet within the stream of commerce and consequently it was not the manufacturer or seller of the helmet. Therefore, it was found not to be liable under the Act. The driver then argued, in the alternative, that the original manufacturer should be held responsible under a common law negligence theory. The Court, however, would not permit recovery under that theory because it runs contrary to the Act which, by its language, encompasses “any claim or action brought by a claimant for harm caused by a product, irrespective of the theory underlying the claim, except actions for harm caused by breach of an express warranty.” This made it clear that common-law actions for negligence or breach of warranties are subsumed within the statutory causes of action. Lastly, although the predecessor company’s ultimate owner would have been liable for any defective helmets actually made by the company it acquired, the acquiring company was neither the manufacturer nor the seller of the subject motorcycle helmet. Therefore, the ultimate owner of the original manufacturer was not responsible for the injury caused by the helmet manufacturer that had bought the product line in the first place.

The RG-4 helmet manufacturer ultimately filed for bankruptcy. Another company then leased its assembly line, production equipment, molds, and presses. It did not however, manufacture the RG-4 helmet or the helmet upon which the RG-4 was modeled. This is because the mold used to manufacture those models were scrapped before any of the equipment was leased. While the driver was able to demonstrate that this other company continued manufacturing many of the same helmets as were made by the RG-4 manufacturer, there was no evidence that it continued the RG-4 line. With these facts in mind, the Court would not hold that this independent company had continued the product line of the company that manufactured the RG-4 helmet and, consequently, it too, was found not to be liable for the driver’s injuries.


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