Redesigning Successor Liability
52 Pages Posted: 4 Jul 2010
Date Written: 1999
In his article, Professor Cupp takes a critical look at the current state of successor liability in products liability law. For many years, traditional corporate law principles dictated whether a successor corporation would be held responsible for the torts caused by products produced by its predecessor. These principles disallowed successor liability in many cases, even when the successor engaged in the same line of business or sold the same product line as its predecessor. The Restatement (Third) of Torts: Products Liability suggests that this continues to be the trend. Professor Cupp, however, through careful analysis of current case law, demonstrates that although many courts continue to follow the traditional approach, an increasing number of states have followed one of two less restrictive approaches, each resulting in more successor responsibility. Professor Cupp advocates adoption of these less restrictive approaches. The most persuasive rationale for adopting these alternative approaches is that they more effectively channel responsibility for products back to the predecessor corporation than does the traditional approach. They do so by forcing successor corporations to consider the projected cost of the predecessor’s products liability at the time the successor purchases the predecessor. After analyzing the “channeling back” justification for alternative approaches, Professor Cupp favorably analogizes courts’ application of one of the less restrictive approaches in CERCLA cases to products liability, as well as making fairness and efficiency arguments. Cupp further argues that the courts present a more realistic, appropriate, and logical avenue for the change than do state legislatures. Finally, Professor Cupp considers, in cases where the traditional approach is not abandoned, how the fraud exception to the traditional rule might often be used to achieve the same goals of the two alternative approaches.
Keywords: products liability, successor liability, tort, successor corporation, Restatement, channeling back, CERCLA, litigation, legislation, fraud exception
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