Facts
- In 1967, a lawnmower was manufactured and sold by Kee Manufacturing Company, a sole proprietorship owned by Flechas J. Kee.
- In 1972, new owners purchased the business’s assets for cash and incorporated as Kee Manufacturing Company, Inc. (Kee, Inc.), acquiring the plant, inventory, goodwill, and the right to use the name.
- The asset purchase provided that Kee, Inc. did not assume the predecessor’s liabilities or obligations, and the former owner retained no interest in Kee, Inc.
- Kee, Inc. continued manufacturing lawnmowers using the same factory personnel and trade name and continued the general product line; it also supplied replacement parts for the model involved, though it later discontinued that model.
- In 1976, James M. Bernard, Jr. was injured while using the 1967 mower.
- Bernard and his mother sued Kee, Inc. for negligence, implied warranty, and strict liability, asserting successor liability for an allegedly defective product made by the predecessor.
- The trial court granted summary judgment to Kee, Inc.; the Second District Court of Appeal affirmed, creating conflict with a Third District decision that suggested broader successor-liability considerations.
Issues
- Whether an asset purchaser that continues the seller’s product line under the same trade name can be liable for injuries caused by a product manufactured and sold by the seller, despite nonassumption of liabilities and no traditional exception applying.
- Whether Florida should adopt an expanded successor-liability theory in products cases, such as the “product line” theory.
- Whether a court may consider the predecessor’s financial responsibility to impose successor liability outside the traditional exceptions.
Decision
- The Florida Supreme Court approved the Second District’s affirmance of summary judgment for Kee, Inc.
- The court held Florida would not expand successor liability beyond the traditional corporate law rule and declined to adopt the product line theory.
- The court concluded none of the traditional exceptions to nonliability for asset purchasers applied on these facts.
- The court disapproved the conflicting approach to the extent it suggested broader successor liability, including reliance on the predecessor’s financial responsibility.
Legal Principles
- As a general rule, an asset purchaser is not liable for the seller’s liabilities unless: (1) the purchaser expressly or impliedly assumes the obligations; (2) the transaction is a de facto merger; (3) the purchaser is a mere continuation of the seller; or (4) the transaction is fraudulent and intended to avoid liabilities.
- Continuation of a product line, use of the same trade name, retention of employees, and ongoing parts support do not, by themselves, establish the “mere continuation” exception; the traditional test focuses on continuity of ownership or control.
- Expanded successor-liability doctrines in products cases, including product line liability, are policy choices not adopted judicially absent legislative action.
Conclusion
Florida applies the traditional asset-purchaser nonliability rule to products-liability claims and imposes successor liability only when one of the four established exceptions is satisfied; an asset purchaser that continues the seller’s product line is not liable for defects in products made and sold by the predecessor without such an exception.