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LESANE v. HILLENBRAND INDUS.

April 21, 1992

SHERRI R. LeSANE, et al., Plaintiffs,
v.
HILLENBRAND INDUSTRIES, INC., et al., Defendants, v. MIDMARK CORP., et al., Third-Party Defendants.



The opinion of the court was delivered by: STANLEY S. HARRIS

 This case results from the death of plaintiffs' fourteen-month old daughter, Lindsey LeSane. While at Walter Reed Army Medical Center, the baby's neck allegedly became trapped between the top and the side rail of a crib distributed by Hill-Rom Company, Inc., a subsidiary of Hillenbrand Industries. The plaintiffs are suing Hill-Rom, Hillenbrand, and the United States for Lindsey's subsequent death. Hill-Rom and Hillenbrand, in turn, have filed third-party complaints against Midmark Corporation, Cambridge Scientific Industries (CSI), General Medical Corporation and its subsidiary General Medical Manufacturing Company, all manufacturers of cribs similar to the one in which Lindsey was injured, and the United States. *fn1" The United States has crossclaimed against Hill-Rom.

 Before the Court are several motions: (1) Hill-Rom's motion for partial summary judgment as to punitive damages; (2) third-party defendants Midmark's, CSI's, and General Medical's respective motions for summary judgment; and (3) plaintiffs' motion for a separate trial.

 Summary judgment is appropriate "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). "Findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12 or 56." Fed. R. Civ. P. 52(a). Nevertheless, in part because of the multiplicity of parties, the Court sets forth briefly its conclusions. *fn2"

 Punitive Damages

 Plaintiffs seek punitive damages from Hill-Rom. Punitive damages are not favored by the law. See BWX Electronics, Inc. v. Control Data Corp., 289 App. D.C. 114, 929 F.2d 707, 712 (D.C. Cir. 1991). To prevail at trial on the issue of punitive damages, plaintiffs would have to provide evidence sufficient to allow a trier of fact to find that Hill-Rom acted with wanton negligence which resulted in injury to Lindsey. *fn3" Mere or even gross negligence is insufficient to support an award of punitive damages. See Knippen v. Ford Motor Co., 178 App. D.C. 227, 546 F.2d 993, 1001 (D.C. Cir. 1976). Rather, plaintiffs would have to show "'evil motive, actual malice, deliberate violence or oppression . . . . willful and outrageous conduct . . . . or gross fraud.'" BWX Electronics, 929 F.2d at 712 (emphasis omitted) (quoting Boynton v. Lopez, 473 A.2d 375, 377 (D.C. 1984) (citations omitted)). Viewing the evidence in a light most favorable to plaintiffs, the Court finds that no reasonable jury could find wanton negligence by a preponderance of the evidence. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986) (noting that the standard for summary judgment "mirrors the standard for a directed verdict"). Therefore, the Court grants Hill-Rom's motion for partial summary judgment as to plaintiffs' claim for punitive damages.

 Third-party Defendants' Motions for Summary Judgment

 Hill-Rom asserts three theories to support liability as to third-party defendants. First, Hill-Rom alleges they are liable as successor manufacturers of the type of crib which allegedly injured Lindsey. Second, Hill-Rom claims that Midmark owed Hill-Rom a duty to warn which Midmark breached. Third, Hill-Rom claims that there is a genuine issue of fact for trial as to whether Hill-Rom or CSI manufactured the crib top attached to the crib in which Lindsey was injured. The Court addresses each of these issues in turn.

 Successor Liability

 Hill-Rom seeks indemnity and contribution from third-party defendants under a theory of successor liability. Hill-Rom alleges that third-party defendants are successors-in-interest to Hurlco Health Products Company, Inc., the now-defunct company which manufactured the crib in which the infant was injured. *fn4" The Court finds that successor liability is inapplicable under the facts of this case.

 Only one court has addressed the question of successor liability under District of Columbia law. See Rivas v. District Int'l Trucks, No. 85-3411, 1989 U.S. Dist. LEXIS 11859 (D.D.C. Oct. 5, 1989). In this relative absence of District of Columbia law, the Court must attempt to discern what law the courts of the District of Columbia would be likely to adopt. See Hull v. Eaton Corp., 263 App. D.C. 311, 825 F.2d 448, 453 (D.C. Cir. 1987) (citing 19 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4507, at 103 (1982)). To accomplish this, the Court refers to the law of Maryland for guidance. See Hull, 825 F.2d at 453-54. Maryland has followed the majority of the states, adopting "the general rule of nonliability of successor corporations, with its four well-recognized traditional exceptions." Nissen Corp. v. Miller, 323 Md. 613, 594 A.2d 564, 573 (Md. 1991). In so doing, the Maryland Court of Appeals expressly rejected a fifth exception adopted by a minority of jurisdictions, the "continuity of enterprise" exception. See id. at 573. In addition, although it did not reach the issue of whether Maryland would adopt a sixth exception, known as the "product line" exception, the Court of Appeals noted that such an exception had been rejected by many jurisdictions as "too far-reaching and radical." Id. at 567 n.1 (quoting 1 American Law of Products Liability 3d § 7:27, at 44 (Travers, rev. ed. 1990) (hereinafter Products Liability) (footnote omitted)). Moreover, this Court's Magistrate Judge Attridge declined to apply the "product line" exception in Rivas. See Rivas, 1989 U.S. Dist. LEXIS 11859, at *13-*16. Therefore, the Court finds that District of Columbia courts are unlikely to adopt either of the minority rules, but would instead adopt the general rule of nonliability with its four traditional exceptions.

 The general rule of nonliability, with its four exceptions, is that:

 "[A] corporation which acquires all or part of the assets of another corporation does not acquire the liabilities and debts of the predecessor, unless: (1) there is an express or implied agreement to assume the liabilities; (2) the transaction amounts to a consolidation or merger; (3) the successor entity is a mere continuation or reincarnation of the predecessor entity; or (4) the transaction was fraudulent, not made in good faith, or made without sufficient consideration."

 Nissen, 594 A.2d 565 at 565-66 (quoting Products Liability, supra, § 7:1, at 10-12 (footnotes omitted)).

 A. Liability of CSI

 Hill-Rom alleges that CSI is the first successor corporation to Hurlco. Therefore, the Court begins its analysis with CSI's potential liability. The question before the Court is whether the circumstances of the transfer render CSI liable as a successor to Hurlco under one of the four exceptions to the general rule of nonliability.

 Hurlco began making its crib in 1974. John Hurley, the founder of Hurlco, had designed the crib with the help of an engineer. From 1974 to 1976, Hurlco distributed the crib through a company known as Interroyal. Then, from 1976 until late 1977 or early 1978, Hill-Rom was Hurlco's exclusive distributor. In late 1977 or 1978, Bay Bank Norfolk Trust Company foreclosed on Hurlco's assets. In March of 1978, CSI purchased Hurlco's former assets from Bay Bank. These assets included work in progress, raw materials, and equipment. Although plaintiff contends that CSI bought these assets directly from Hurlco, the "General Assignment and Bill of Sale" between CSI and Bay Bank indicates that Bay Bank had good and marketable title to these assets. The evidence pointed to by plaintiffs to support their position, the depositions of John Hurley and Donald Holdt, is not sufficient to create a genuine issue of material fact. To the contrary, the depositions reveal that no genuine issue of fact exists. In his deposition, Hurley stated that he was "broke," that Bay Bank foreclosed on his assets, and that ...


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