Facts
- Frederick Brandt bought a treadmill that had been designed, manufactured, and marketed by American Tredex Corporation (Tredex).
- Nissen Corporation entered into an arm’s-length agreement to buy Tredex’s assets and to assume only certain specified obligations and liabilities.
- The asset-purchase agreement expressly excluded liability for injuries caused by products that Tredex had sold before the closing.
- The agreement contemplated that Tredex would continue operating for five years after the transaction.
- Brandt was later injured by the treadmill.
- More than a year after the injury, Tredex was administratively dissolved.
- About a year after Tredex’s dissolution, Brandt sued Tredex and Nissen, seeking to hold Nissen liable as Tredex’s successor based on Nissen’s continuation of Tredex’s business operations.
- The trial court granted summary judgment to Nissen; Brandt appealed, and the intermediate appellate court reversed.
Issues
- Whether an asset purchaser that expressly disclaimed liability for the seller’s pre-sale products may nevertheless be held liable for injuries caused by those products on a successor-liability theory based on continuation of the seller’s business operations.
Decision
- The trial court granted summary judgment for Nissen.
- The intermediate appellate court reversed the summary judgment.
- The Court of Appeals of Maryland granted certiorari, reversed the intermediate appellate court, and reinstated summary judgment for Nissen.
- The court held that Maryland would not impose successor liability on these facts beyond the traditional, limited exceptions to the general rule that an asset purchaser is not responsible for the seller’s liabilities.
- The court concluded that the record did not support applying any traditional exception (such as assumption of liability, de facto merger, mere continuation, or fraud) to make Nissen liable for injuries caused by Tredex’s pre-acquisition treadmill.
Legal Principles
- In Maryland, a corporation that purchases another corporation’s assets generally is not liable for the seller’s debts and tort liabilities.
- An asset purchaser may be held liable only if one of the traditional exceptions applies: (1) the purchaser expressly or impliedly assumed the liability; (2) the transaction amounted to a de facto merger or consolidation; (3) the purchaser is a “mere continuation” of the seller (which requires more than continuing operations and typically requires continuity of ownership/identity); or (4) the transaction was fraudulent and intended to escape liability.
- A purchaser’s continuation of the seller’s product line or business operations, standing alone, does not satisfy the “mere continuation” or de facto merger exceptions when there is no continuity of ownership and no merger in substance.
- Courts will enforce an arm’s-length asset-purchase agreement that specifically excludes liability for injuries arising from products sold before the sale, absent proof fitting a traditional exception.
- The seller’s later dissolution does not, by itself, shift products-liability exposure to an asset purchaser that did not assume that liability and does not otherwise meet an exception.
Conclusion
The Court of Appeals of Maryland reinstated summary judgment for Nissen, holding that Nissen’s purchase of Tredex’s assets—paired with an express contractual exclusion of liability for injuries from Tredex’s previously sold products and the absence of any traditional exception such as assumption, de facto merger, mere continuation, or fraud—did not make Nissen liable as a successor for the plaintiff’s treadmill injury.