Regine Fitzner v. New Werner Holding Co. Inc., New Werner Holding (DE), LLC. Werner Co., Gallows Bay Hardware, Inc., and Orgill, Inc.

Opinion

SUPERIOR COURT OF THE VIRGIN ISLANDS

DIVISION OF ST CROIX

REGINF FITZNER

Case No SX 09 CV 00400

P! AINTIFF,

Action for Negligence, Product Liability, V Breach of Warranty, and Personal Injuries

NEW WERNER HOLDING CO INC NEW WERNER HOLDING (DE) LLC T WERNER C0 GALLOWS BAY LL"3‘ —— Demand

“r ed

HARDWARE INC AND ORGILL INC CITED AS 2021 VI SUPER 6P

DEFENDANTS

Appearances

John K Dema, Esq 1236 Strand Street Suite 103 Christiansted St Croix V100823 5008 For Plamnfl

Richard H Hunter, Esq 1138 King Sheet Christiansted V100820 For Defendant

MEMORANDUM OPINION & ORDER

f“ Willocks, Presiding Judge <|[1 THIS MATTER is before the Court on a Motion for Summary Judgment filed on June

11 2015 by Defendant (hereinafter New Werner ) An Opposition was filed on July 1 2015 by

P1aintiff(hereinafter Fitzner ) The Court will GRANT Defendant 5 Motion for Summary

Judgment for the reasons stated herein

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I Findings of Fact

(112 In 2006 Werner Co and several related entities filed for Chapter 11 Bankruptcy relief in

the United States Bankruptcy Court for the District of Delaware (See Plaintiff’s Response to

Defendant 8 Statement of Undisputed Material Facts) The April 25 2007 Bankruptcy Order

approved an internally referenced Asset Purchase Agreement dated March 20 2007 Id New

Werner DE punchased the assets of the bankruptcy entities for cash a credit bid and an

assumption of certain liabilities as limited and defined in the parties Asset Purchase Agreement

Id

‘I[3 Notably Section 2 3(d) of the APA provides that the Buyer and New Werner DE would

assume only the following liabilities All liabilities of any Selle1 in respect of the product

liability claims of the customers of Sellers listed on Schedule 2 3(d) that exist as of

immediately prior to the Closing provided however that Buyer will assume any Liability of

Sellers to any customer of any Selle: that is not listed on Schedule 2 3(d) but only to the extent

that such Liability is or becomes an allowed administrative expense claim of Sellers estates

pursuant to Section 503(b) of the Bankruptcy Code Id

11 Procedural History ‘][4 On September 5 2019 this Court held a Status Conference Hearing During the hearing

the Court granted leave to file supplements to their Summary Judgment briefs On November 8

2019 a Motion to Strike was made by Plaintiff A Reply to the Motion to Strike was filed on

December 19 2019 On September 10 2020 the Court had a hearing and ordered the parties to

file stipulated Exhibits to enter or contest by email no later than September 29 2020 The Court

then heard oral arguments on this matter on October 22 2020 via Zoom conference call At that

Flt Her t New Werner Holding Co er al 2021 VI SUPER 6U SX 09 CV 400 ORDER Page 3 of 8

hearing the issue involving the Motion to Strike was resolved and withdrawn Thus the Court

will only discuse the Motion for Summary Judgment The Court will GRANT Defendant 5

Motion for Summary Judgment for the reasons stated herein

[II Summary Judgment Standard (115 Because summaly judgment is a drastic remedy 1‘66 N635 v Marshall, 660 F 2d 517 519

(3d Cir 1981) it should be granted only when the pleadings the discovery and disclosure

materials on file and any affidavits show there is no genuine issue as to any material fact and

that the movant is entitled to judgment as a matter of law Williams v Untied Corp 50 V I 191

(V I 2008) (citing Fed R Civ P 56(c)) The moving party must identify those portions of the

record that demonstrate the absence of a genuine issue of material fact at which point the burden

shifts to the non moving party to present affirmative evidence from which a jury might

reasonably return a verdict in his favor Chapman 1 Cornwall 58 V I 431 (V I 2013) (citing

Celotex Com 1 Curran 477 U S 317 322 25 106 5 Ct 2548 91 L Ed 2d 265 (1986))

1H6 lmp01tantly in its analysis the court may not itself weigh the evidence and determine the

tluth of the competing allegations rather it decides only whether there is a genuine issue for trial

such that a reasonable jury could return a verdict for the non moving party Kennedy t Fundmg

Inc 1 GB Pmpertzes Ltd 2020 VI 5 (V I May 20 2020) (citing Anderson t Libert) Lobby

Inc 477 U S 242 (VI 1986))

IV Banks Analysis 917 When confronted with issues of common law that have yet to be addressed or in the

absence of controlling precedence within the Virgin Islands jurisdiction the Court shall conduct

21 Banks analysis to determine applicable law DzamondRock Hospztalzry Co v Certain

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Underwriters at Lloyd 5 ofLondon 72 V I 185 (Super Ct 2019) The Banks analysis requires

the balancing of thiee non dispositive factors (1) whether any Virgin Islands courts have

previously adopted a particular rule (2) the position taken by a majority of courts from other

jurisdictions and (3) determine which approach represents the soundest rule for the Virgin

Islands [d

‘][8 Under the first Banks factor this Court notes the absence of any specific law within this

jurisdiction regarding this interpretation issue Considering the second Banks factor the Court

has found a majority of courts from other jurisdictions presented with the same or simiiai issue

have held in favor of New Werner C0 Those jurisdictions are Alabama Oklahoma and Texas

Accordingly the Court has taken these holdings into consideration when deciding the soundest

rule for the Virgin Islands

‘19 In 30mm 12 Werner C0 the Court held in favor of summary judgment because there was

no evidence or assertion that Borum 5 product liability claims against Werner Co (DE)

a wholly

owned subsidiary of the New Werner Co are allowed administrative expense claims of the

bankrupt Old Werner C0 30mm v Werner C0 2020 U S Dist LEXIS 78545 (Alabama Dist

Ct 2012)

(mo Further in Doyle v New Werner Holding Co the Court held that New Werner had

adduced evidentiary materiais demonstrating that it did not design the ladder did not

manufacture the ladder and did not place the ladder in the stream of commerce Doyle v New

Werner Holding Co 2013 OK CIV APP 66 (Civil Appeals 2013) In short the Court held that

New Werner did not design or distribute Plaintiff s ladder and did not agree in writing to assume

F[I ner v New Werner Holdmg C0 et (II 2021 VI SUPER 6U

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liability for any such claims against Old Ladder Co Id Therefore summaxy judgmen t was a

proper remedy for New Werner Holding Co

(][11 In Hams v New Werner Holding Co the Court held in favor of summary judgment for

New Werner Holding Co because nothing in the record established New Werner expressl

y

assumed any of Old Ladder 3 obligations or liability Harm t Ne» Werner Holdmg C0 2009

U S Dist LEXIS 84043 (Texas Northern Dist Ct 2009)

‘][12 Finally pursuant to the third Banks factor thie Court considers the public policy

rationale It would be counterintuitive to hold otherwise considering othet jurisdictions have

interpreted the issue similarly and have held in favor of summary judgment f0: New Werner The

Court does not want litigants to forum shop in the Virgin Islands against New Werner Further

holding for New Werner upholds the successor liability rules further discussed in detail below

Thus the Court finds that this public policy rationale makes this rule favorable for the Virgin

Islands

tH13 Weighing all the Banks analysis factors the Court finds it proper to follow the majority

ofjuriedictions and adopt as the soundest rule for the Virgin Islands that Plaintiff 5 do not have

a claim against New Werner because New Werner did not assume liability from Old Werner

Co pursuant to the language of the APA agreement Thus the Court finds that other

jutisdiction s interpretations coupled with public policy weigh in favor of summary judgmen t for

New Werner

V The issue is whether Summary Judgment is an appropriate remedy when Defendant and Plaintiff are in dispute over whether there was an assumption of liability depends on the language of the APA approved by the Bankruptcy Court in Delaware

Fl! ner l Ne» Werner Holding Co et a!

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‘H14 The Court will grant Defendant 5 Motion for Summary Judgment because the Court finds

that Defendant has met the initial burden of showing that there are no genuine issues as to any

material fact that exists concerning Plaintiff 5 claims The Court is persuaded by how other

jurisdictions have held on this issue

‘1115 The Court in Palms ruled that it is a well settled rule of corporate law where one

company sells or transfers all of its assets to another the second entity does not become liable for

the debts and liabilities including torts of the transferor Peters v VI Water & Power

Author”) 58 V I 49 (Super Ct 2013) (Citing Palms t Claik Equip C0 802 F 2d 75 78 (3d

Cir 1986))

‘fll6 This lute of successor liability has four generally recognized exceptions under which the

purchasing corporation may be liable (1) if it assumes liability (2) if it merges 0r consolid ates

with the selling corpomtion (3) where the sale of assets is fraudulent and done with the intention

to escape liability and (4) when the purchasing corporation is a mere continuation of the selling

corporation Id at 57

W7 First through the myriad of Exhibits that were submitted, the APA and the Older from

the Bankruptcy Court of Delaware are important to the Court 5 analysis for summar y judgment

See Plaintiff 5 Ex C and p l7(c) of Plaintiff’s Ex 4 For instance as the Court cannot weigh the

evidence pursuant to Kennedy to make a determination of the truth of the allegati ons albeit the

Court must resolve all disputes in favor of the non moving party

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(}{18 Here Plaintiff makes the assertion that pursuant to APA Schedule 2 3(d) the Werner

Defendants were not listed as an exception 1 Schedule 2 3 (d) is titled Assumed Customer

P1 oducts Liability Claims The language states All of Seller 5 customers with the exception of

Home Depot Kawan Lama MAP Paints and Sears 7 In support of these arguments Plaintiff’s

attorney submitted an affidavit that Exhibit 1 is a true copy of the Notice of Filing of Section

2 3(d) to the APA that was filed in the Bankruptcy Court for the District of Delaware ‘

‘1119 However and importantly Section 2 3(d) ends with but only to the extent that such

Liability is or becomes an allowed administrative expense claim of Sellers estates pursuant to

Section 503(b) of the Bankruptcy Code 4 When looking at 11 USCS § 503 (b) and taking all the

Exhibits affidavits and other submissions together there is no evidence that Plaintiff 8 claims

are allowed administrative expense claims of the bankrupt Werner Co Therefore the Court

cannot hold in favor of Plaintiff due to the language of the APA that was entered into by both

parties and pursuant to Section 503(b) of the Bankruptcy Code

(1120 After conducting a Bank 9 analysis this Court 5 holding represents the soundest rule for

the Virgin Islands and is consistent with other jurisdiction 5 holdings The Court is persuaded by

1 APA p l7 Qection (d) Customer Product Liability states All Liabilities of any Selim in respect of the product liability claims oi the customers of gellers listed on Schedule 2 3(d) that exist as of immediately prior to the dosing provided however Buyer will assume any Liability of Sellers [0 any customer of any Seller that is not listed on Schedule 2 3(d) (which would otherwise have been assumed by Buyer has such customer been listed on Schedule 2 3(d) but only to the extent that such Liability is or becomes an allowed administrative expense claim of Sellers’ estates pursuant to Section 503(b) of the Bankruptcy Code ) ’ There is no issue for trial unless there is sutficient evidence favoring the nonmming party for a jury to return a verdict for that party Saldaml 1 Kmart Corp 260 F 3d 228 4? VI 361 164 (V I 2001) ‘ See Plaintiff s Supplement to Opposition to Defendant 5 Motion for Summary Judgment Ex B 4 See 30mm 1 Wernel C0 where the Court held in favor of summary judgment because there was no evidence or assertion that Borum s product liability claims acainst Warner Co (DE) a wholly ow ned subsidiary oi the New Werner Co are allowed administrative expense claims 01 the bankrupt Old Werner Co 80mm 1 Werner C0 2020 U S Dist LEXIS 78545 (Alabama Dist Ct 2012) The Court held that Old Werner Co and Werner C0 (DE) assumed no liability as a wholly owned subsidiary of the successor company New Werner Holding Co (DE) LLC and Plaintiff‘s claims tailed as a matter 01 law

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other jurisdictions interpretation of the APA agreement Thus the Court will GRAN

T

Defendant 5 Motion for Summary Judgment for the reasons stated herein

It is hereby

ORDERED that Defendant 5 Motion for Summary Judgment is GRANTED it is further

ORDERED that New Werner Holding Co Inc New Werner Holding (DE) LLC and

Werner Co are DISMISSED it is further

ORDERED that the parties are to initiate mediation proceedings with the remaini ng

Defendants Gallows Bay Hardware Inc and Orgiil Inc within forty five (45)

days from

the date of entry of this Order and to SERVE and FILE status notices every thirty (30)

days thereafter until mediation has concluded

4M

DONE and so ORDERED this )5 day of EM? M 5 2021

N / .3 y ?\x / a J/ / / / HAR LD W L WILLOCKS

Presiding Judge of the Superior Court