## Facts

- Alad I manufactured ladders.
- In July 1968, Alad I sold its plant, equipment, inventory, trade name, and goodwill to a buyer that formed a new corporation, Alad II, under the same name.
- After the purchase, Alad II continued manufacturing the same ladder line under the “Alad” name using the same designs, equipment, and personnel and marketed to the same customers without outward indication of changed ownership.
- Alad I was dissolved after the asset sale and ceased to exist as a legal entity before the plaintiff’s injury.
- In March 1969, Herbert C. Ray fell from a ladder manufactured by Alad I before the sale and dissolution.
- Ray sued Alad II under strict products liability for injuries allegedly caused by a defect in the ladder.

## Issues

1. Whether a corporation that purchases a manufacturer’s assets and goodwill and continues the same product line may be held strictly liable for defects in products manufactured and sold by the predecessor that has since dissolved.

## Decision

- The California Supreme Court reversed summary judgment for Alad II and remanded.
- The court held that, under the circumstances presented, Alad II could be subject to strict products liability for injuries caused by defects in ladders manufactured by Alad I.
- The court recognized a narrow exception to the general corporate rule of nonliability for asset purchasers in the strict products liability context.

## Legal Principles

- General rule: a purchaser of corporate assets does not assume the seller’s tort liabilities absent traditional exceptions (e.g., assumption, merger/continuation, or fraud).
- Product-line exception (successor products liability): a successor that acquires a predecessor’s manufacturing business and goodwill and continues the same product line may be strictly liable for defects in units produced by the predecessor when:
  - the predecessor’s dissolution/liquidation leaves the injured plaintiff without an adequate remedy against the original manufacturer;
  - the successor has the ability to gauge and insure against, and to spread, the risk of injuries associated with the continued product line; and
  - the successor benefits from the predecessor’s goodwill associated with products previously marketed under that name, making it fair to attach the corresponding burden of defect liability.
- The exception is confined to strict products liability policy goals (consumer protection and enterprise loss-spreading) and does not broadly displace ordinary successor-liability rules outside that setting.

## Conclusion

The court held that a successor that continues the predecessor’s ladder product line and benefits from its goodwill may be held strictly liable for defects in ladders made by the dissolved predecessor, and it reversed the judgment insulating the successor from suit.


Ray v. Alad Corp., 560 P.2d 3 (Cal. 1977)