Law School Case Brief
Ruiz v. Blentech Corp. - 89 F.3d 320 (7th Cir. 1996)
Illinois mandates that, as a general rule of corporate law, a corporation that purchases the principal assets of another corporation does not assume the seller's liabilities arising from tort claims or from any other kind of claims. There are four exceptions and the purchasing corporation assumes the seller's liabilities when: (1) it expressly agrees to assume them; (2) the asset sale amounts to a de facto merger; (3) the purchaser is a mere continuation of the seller; (4) the sale is for the fraudulent purpose of escaping liability for the seller's obligations.
Plaintiff claimant who operated a screw conveyor in a food processing plant in Illinois became entangled in the conveyor's machinery and sustained several grievous injuries, the most severe of which left him paralyzed. Plaintiff filed an action for strict products liability and negligence, among others against defendant corporation, a California company, which bought over the original manufacturer of the product and continued to manufacture the same in its own name. The trial court, applying Illinois tort law granted summary judgment to defendant. Plaintiff argued that the trial court erred in not applying California corporate law on succession of corporations, which prescribed a favorable result to him.
Did the trial court err in not applying California corporate law on succession of corporations, which prescribed a favorable result to him?
The court affirmed the trial court's decision, holding that plaintiff could maintain his case against defendant only if the "products line" exception applied. This "products line" exception applies in cases involving tort claims where: (1) the plaintiff lacks an adequate remedy against the seller/manufacturer; (2) the purchaser knows about product risks associated with the line of products that it continues; and (3) the seller transfers good will associated with the product line. The court ruled that because the exception was a matter of California tort law rather than corporate law, it did not apply to plaintiff's case.
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