
USCA1 Opinion

	




                            United States Court of Appeals                                For the First Circuit                                 ____________________        No. 95-1181                                    RANDY JORDAN,                                Plaintiff, Appellant,                                          v.              HAWKER DAYTON CORPORATION and EAST DAYTON TOOL & DIE CO.,                                Defendants, Appellees.                                 ____________________                    APPEAL FROM THE UNITED STATES DISTRICT COURT                               FOR THE DISTRICT OF MAINE                     [Hon. Morton A. Brody, U.S. District Judge]                                            ___________________                                 ____________________                                        Before                        Cyr, Boudin, and Lynch, Circuit Judges.                                                ______________                                 ____________________            Laurie Ann Miller, with  whom N. Laurence Willey, Jr. and  Ferris,            _________________             _______________________      _______        Dearborn & Willey were on brief, for appellant.        _________________            Brent A.  Singer, with whom  David C. King  and Rudman  & Winchell            ________________             _____________      __________________        were on brief, for appellee Hawker Dayton Corporation.                                 ____________________                                   August 10, 1995                                 ____________________                      LYNCH,  Circuit Judge.   Randy  Jordan, an  injured                      LYNCH,  Circuit Judge.                              _____________            worker, appeals,  asking us  to revisit the  law of  Maine on            successor liability so  that he may  reach the Hawker  Dayton            Corporation,  which purchased  the assets  of  a division  of            another company  that had  manufactured  the machinery  which            injured  Jordan's  hand.   Sitting  as a  court  in diversity            jurisdiction under  Erie Railroad  v. Tompkins,  304 U.S.  64                                _____________  __ ________            (1938), we decline  to do so and affirm the  grant of summary            judgment issued in favor of Hawker  Dayton Corporation by the            district court.                                         FACTS                                        _____                      In  September  1991, the  appellant,  Randy Jordan,            badly injured  his hand at  work while attempting to  unjam a            doweling machine.  Jordan underwent medical and psychological            treatment,  and filed this  products liability action  in the            United States District Court for Maine against "Hawker Dayton            Manufacturing Company."                      The doweling  machine was manufactured  in 1973  by            Hawker  Manufacturing  Company  ("Hawker  Manufacturing"),  a            division of East Dayton Tool & Die Co. ("East Dayton").  East            Dayton  also  manufactured  automobile  components and  other            products.   Around  the time  that the  doweling machine  was            manufactured, Dorothy Darrow,  the sole  shareholder of  East            Dayton, sold  some of her  stock to family friends,  and East            Dayton  redeemed  her   remaining  stock  for  cash   and  an                                         -2-                                          2            installment note.   The  company continued  its manufacturing            operations and even added additional product lines.                      In  August 1973, East Dayton sold to Harmon Darrow,            the  president of Hawker Manufacturing, an option to purchase            the  assets of Hawker Manufacturing at  their net book value.            In  March 1974, Mr.  Darrow formed Hawker  Dayton Corporation            ("Hawker Dayton"), conveyed  his option to that  company, and            in   July  1974,  Hawker  Dayton  exercised  the  option  and            purchased the Hawker  Manufacturing assets for  approximately            $150,000.  Hawker  Dayton continued the operations  of Hawker            Manufacturing and  continued to use  the Hawker Manufacturing            trade name.  East Dayton continued to manufacture woodworking            machines (including  doweling machines at  first), automobile            dies and other specialized machinery for about two years.                      In  1976, East Dayton defaulted  on its note to Ms.            Darrow.  It then sold the  rest of its equipment for $925,000            and its real property  for $650,000 to entities not  involved            in this lawsuit, and made  payments out to Ms. Darrow  on the            installment note for the next ten years.                                  PROCEEDINGS BELOW                                  _________________                      On  June  14, 1993,  Jordan  filed this  suit.   In            August, the district court issued a scheduling order giving a            deadline   of  September  15,  1993,  for  amendment  of  the            pleadings.   The judge  later amended  the scheduling  order,            extending the deadline for amending pleadings by fifteen days                                         -3-                                          3            and extending the  discovery deadline by two months.   During            discovery, Jordan learned,  inter alia, that East  Dayton was                                        _____ ____            the manufacturer of  the doweling machine.   On February  10,            1994, five  days before discovery  was to be  completed under            the scheduling order,  Jordan moved to correct  the corporate            name  of the  defendant  from  "Hawker  Dayton  Manufacturing            Corporation"  to "Hawker  Dayton  Corporation,"  to add  East            Dayton as a defendant  and to include additional theories  of            liability  against Hawker Dayton.  The district court granted            the motion to correct the corporate name of the defendant and            to add East  Dayton, but denied the motion  to add additional            theories of liability.                      Jordan filed a  motion for summary judgment  on the            issue  of whether  Hawker  Dayton was  liable as  a successor            corporation for  the debts  and liabilities  of East  Dayton.            Hawker  Dayton objected,  and  in  its  response  asked  that            summary  judgment  be  entered in  its  favor  instead.   The            Magistrate Judge recommended that Jordan's motion be  denied,            and the district  court adopted the recommendation.   Neither            ruled  on the  issue of  whether summary  judgment should  be            entered   on  behalf  of   Hawker  Dayton.     Hawker  Dayton            subsequently  moved for  summary judgment,  and the  district            court granted the motion.                      Judgment  by  default  was   entered  against  East            Dayton, after a hearing on damages, for $2,230,088.21.                                         -4-                                          4                      Jordan  appeals the  grant of  summary judgment  in            favor of Hawker Dayton on the issue of successor liability.                                      DISCUSSION                                      __________                      Four  years ago, albeit in a different context than            a tort suit, the Supreme Judicial  Court of Maine held, as to            corporate  successor   liability:     "[A]bsent  a   contrary            agreement  by the parties, or an explicit statutory provision            in  derogation  of   the  established  common  law   rule,  a            corporation that purchases the assets  of another corporation            in  a bona fide,  arm's-length transaction is  not liable for                  _________            the  debts or  liabilities  of the  transferor  corporation."            Director  of Bureau  of Labor  Standards  v. Diamond  Brands,            ________________________________________  __ ________________            Inc., 588 A.2d 734, 736  (Me. 1991).  Diamond Brands involved            ____                                  ______________            interpretation  of the  term "employer"  in  a severance  pay            statute.  Conceding  that there is  no contrary agreement  by            the  asset purchase  parties and  no  statutory exception  to            common  law here,  Jordan tries  to avoid the  Diamond Brands                                                           ______________            holding by arguing the  opinion does not foreshadow  what the            Maine Court would do in a tort action.                        There  are two  responses.   First,  the rule,  as            stated above, that  a mere asset purchase will  not give rise            to  successor liability  is  articulated  by Maine's  highest            court as being "the established common law rule."  That alone            defeats  Jordan's  claim, as  he  has argued  that  Maine law            applies.   This common law  rule is reinforced by  the social                                         -5-                                          5            policy judgment made by the Maine legislature, in the statute            at  issue in Diamond Brands.  Maine  there decided that it is                         ______________            benefited  by not discouraging  purchases of assets  of Maine            businesses  through  imposition  of  successor  liability  on            purchasing corporations, thus keeping businesses going  which            would otherwise  fail, and  so continuing  to have  employees            benefit  from their continued  employment.   Id. at  737 n.7.                                                         ___            Jordan  points  to  no  legal  developments  in  the  law  of            successor liability  in Maine  or in  any other  jurisdiction            since Diamond  Brands to  suggest that  the Supreme  Judicial                  _______________            Court would change this law.   See Bernhardt v. Polygraph Co.                                           ___ _________ __ _____________            of America, 350 U.S. 198,  205 (1956) ("[T]here appears to be            __________            no confusion in the [Maine]  decisions, no developing line of            authorities that casts a shadow over the established ones, no            dicta,  doubts  or  ambiguities in  the  opinions  of [Maine]            judges  on  the  question,  no legislative  development  that            promises  to undermine the  judicial rule.").   Thus, Diamond                                                                  _______            Brands is  the law of Maine,  and this Court  must apply that            ______            law.                      Secondly, plaintiff  chose a federal, rather than a            state forum,  presumably cognizant of this  court's statement            that "litigants  who reject a  state forum in order  to bring            suit  in  federal court  under diversity  jurisdiction cannot            expect  that new  trails  will  be blazed."    Ryan v.  Royal                                                           ____ __  _____            Insurance  Company of America,  916 F.2d  731, 744  (1st Cir.            _____________________________                                         -6-                                          6            1990).   Jordan  did not  file  a motion  that  the issue  be            certified to  the state court.   Here Jordan has  suffered an            injury and East Dayton appears  to no longer have assets with            which to satisfy his claim.  But the complex policy arguments            as  to whether  the common  law should  strive to  assure him            recompense are left  to the state, not the  federal court, to            decide.   Here  Maine has  made that  calculus and  given the            greater weight  to the protection  of jobs through  limits on            successor  liability.   It is  not  the role  of the  federal            courts to "question the policy choices of states whose law we            apply."   Krauss v. Manhattan  Life Insurance Company  of New                      ______ __ _________________________________________            York, 643 F.2d 98, 102 (2d Cir. 1981).            ____                      Jordan  argues  that  the  Supreme  Judicial  Court            recently adopted a "majority rule" in another aspect  of tort            law  and so  will adopt  the  majority rule  as to  successor            liability.     Jordan  relies  on  Oceanside  at  Pine  Point                                               __________________________            Condominium Owners Association v. Peachtree Doors,  Inc., 659            ______________________________ __ ______________________            A.2d 267, 270 (Me. 1995), which held that a plaintiff did not            state a  claim in  tort for a  defective product's  damage to            itself,  thus  having  Maine  join that  rule  adopted  by  a            majority  of jurisdictions.   Even were  we incorrect  in our            understanding  that the law  of Maine on  successor liability            has been determined  by its highest authority,  this argument            would  not assist Jordan.   The Peachtree Doors decision does                                            _______________            not  expand plaintiffs' remedies, but reflects a rejection of                                         -7-                                          7            such an  expansion.   More tellingly, even  if Maine  were to            adopt a  "majority rule"  as to  successor liability,  Jordan            would still  not prevail.   Assuming the majority rule  to be            that a corporation which purchases assets from another is not            liable in tort  for the actions of the  transferor unless one            of  four exceptions  is met,  see,  e.g., 1  American Law  of                                          ___   ____     ________________            Products  Liability   7:1  at  10-11  (3d  ed.  1990),  those            ___________________            exceptions avail  Jordan naught.   See  also  Ohio Bureau  of                                               _________  _______________            Workers' Compensation v. Widenmeyer Electric  Co., 593 N.E.2d            _____________________ __ ________________________            468,  470 (Ohio 1991); Ramirez v. Amsted Industries, Inc., 86                                   _______ __ _______________________            N.J. 332, 340, 431  A.2d 811, 815 (1981); Ray v.  Alad Corp.,                                                      ___ __  __________            19  Cal.3d  22, 28,  560  P.2d 3,  7  (1977).   There  was no            agreement by Hawker Dayton, express or implied, to assume the            liabilities of East Dayton Tool  and Die Co., and Jordan does            not claim  that the  asset sale was  fraudulent, not  made in            good  faith, or made without sufficient consideration.  There            was  no  de facto  merger  nor  a  mere continuation  of  the            predecessor  here  where  the  transferor  corporation,  East            Dayton,  neither  dissolved nor  liquidated  after the  asset            sale.   See,  e.g.,  1 American  Law  of Products  Liability,                    ___   ____     _____________________________________            supra,      7:10,   7:12,  7:14  &   7:15  (both  merger   or            _____            consolidation and  mere continuation exceptions  require that            there be only one corporation at the end of the transaction).            Indeed East Dayton sold less than 10% of its assets to Hawker                                         -8-                                          8            Dayton, continued to  do business thereafter and paid  out on            an installment note for twelve years after the asset sale.                      Jordan's argument ultimately  is that the  "product            line"  doctrine of  successor  liability should  be  adopted.            Under the product line doctrine, a corporation that purchases            all  or   substantially  all   of  the   assets  of   another            corporation, continues the manufacturing operations and sells            the  same product  line may  be strictly liable  for injuries            caused  by defective  products in  that line.   See,  e.g., 1                                                            ___   ____            American Law of Products Liability,  supra,   7:25 at 42; see            __________________________________   _____                ___            also Ray, 19 Cal.3d 22, 560 P.2d 3; Ramirez, 86 N.J. 332, 431            ____ ___                            _______            A.2d 811 (1981); Dawejko v. Jorgensen Steel Company, 290  Pa.                             _______ __ _______________________            Super.   15,  434   A.2d  106   (1981);   Martin  v.   Abbott                                                      ______  __   ______            Laboratories, 102  Wash.2d 581, 689  P.2d 368 (1984).   It is            ____________            far from clear the product line doctrine would assist Jordan.            See, e.g.,  Ray, 19 Cal.3d at 31; 560  P.2d at 9; Ramirez, 86            ___  ____   ___                                   _______            N.J.  at 358,  431 A.2d  at 825  (the product  line exception            requires  that the  asset  purchase destroy  the  plaintiff's            remedy,  for example, because all of the assets are purchased            or because the purchase agreement requires the predecessor to            liquidate).  This  doctrine is at most a  minority rule which            has plainly not been adopted by Maine.                      Finally, Jordan  makes a  procedural argument  that            the  court was precluded  from entering summary  judgment for            Hawker Dayton because  it failed to do so  when Hawker Dayton                                         -9-                                          9            had  countered his  motion in  part  by saying  that it,  not            Jordan,  was  entitled  to  entry of  judgment.    The  court            originally  denied  Jordan's  motion and  took  no  action on            Hawker  Dayton's counter request.   When Hawker  Dayton later            filed a formal motion for  summary judgment in its favor, the            court granted it, saying it  had not considered the merits of            Hawker  Dayton's  request  when it  denied  Jordan's  motion.            There was no error in this procedure and would have been none            even  if  the court  had considered  the counter  request the            first time around.   See Burns v. Massachusetts  Institute of                                 ___ _____ __ ___________________________            Technology, 394 F.2d 416, 418 (1st Cir. 1968).  Nor was there            __________            an abuse of  discretion in denying  Jordan's motion to  amend            his complaint filed more than  four months after the deadline            set  in the  scheduling  order  and only  a  few days  before            discovery was to be completed.                      The decision of the district court granting summary            judgment to Hawker Dayton is affirmed.                                         -10-                                          10
