## Facts

- Eddie M. Brown, Jr., age 16, worked part-time as a cook in Great Bend, Kansas.
- On July 23, 1976, Brown severely injured his hand while using a Kleen Kut meat grinder (Model No. 5132A), requiring amputation at the wrist.
- The grinder had been manufactured by Kleen Kut Manufacturing Company, an Ohio corporation.
- On December 15, 1955, Toledo Scale Corporation (also an Ohio corporation) purchased Kleen Kut’s assets for adequate consideration, including inventory, parts, raw materials, the “Kleen Kut” name, and a factory lease.
- The asset purchase did not involve acquisition of Kleen Kut stock and expressly disclaimed assumption of Kleen Kut’s liabilities.
- Kleen Kut dissolved in 1956.
- Toledo Scale later merged into Reliance Electric and Engineering Company (1967), which merged into Reliance Electric Company (1969).
- In 1978, Brown filed a Kansas strict products-liability action against Kleen Kut and the successor corporations.
- The district court dismissed Kleen Kut based on Ohio dissolution law and granted summary judgment to the successor corporations on successor-liability grounds.

## Issues

1. Which state’s law governs (a) the capacity to sue a dissolved predecessor corporation and (b) successor-corporation liability when the injury occurs in Kansas but the corporations and transactions are in Ohio?
2. Under the governing dissolution law, may a plaintiff sue the dissolved manufacturer about twenty-two years after dissolution?
3. Under the governing successor-liability law, do the asset purchaser and later merger successors bear liability for product-related claims arising from the predecessor’s pre-sale manufacturing?

## Decision

- The Kansas Supreme Court affirmed the dismissal of Kleen Kut and the grant of summary judgment for the successor corporations.
- The court held that Ohio corporate law governed the dissolution and successor-liability questions because Ohio was the place of incorporation and the site of the relevant asset transfer and mergers.
- Applying Ohio law, the court held that suing Kleen Kut approximately twenty-two years after dissolution was not within a “reasonable” time permitted for post-dissolution litigation.
- The court held the successor corporations were not liable because none of the recognized exceptions to the general rule of nonliability for asset purchasers applied.

## Legal Principles

- The law of the state of incorporation and of the corporate stock/asset transfer governs liability questions involving a dissolved predecessor corporation and successor corporations; the forum state’s tort law governs the nature of the tort cause of action arising from an in-state injury.
- Under Ohio dissolution law as applied, a dissolved corporation’s continued existence for litigation is limited to a “reasonable” period; an action filed roughly twenty-two years after dissolution is untimely.
- A corporation that purchases another’s assets is generally not liable for the seller’s debts and liabilities unless one of these exceptions applies:
  - The purchaser expressly or impliedly assumes the liabilities.
  - The transaction amounts to a consolidation or merger.
  - The purchaser is a mere continuation of the seller (focused on continuity of ownership/corporate identity).
  - The transaction is fraudulent and intended to escape liability.
- Continuation of a product line, without meeting an exception, does not establish successor liability under the traditional rule applied.

## Conclusion

The Kansas Supreme Court held that Ohio corporate law controlled whether a dissolved Ohio manufacturer and its successors could be sued for a Kansas injury, barred the claim against the dissolved manufacturer as brought an unreasonable time after dissolution, and applied the traditional four-exception framework to reject successor liability following an arm’s-length asset purchase.


Brown v. Kleen Kut Mfg. Co., 238 Kan. 642 (1986)