Mbii v. Psi

California Court of Appeal Oct 27, 1999 No. G021030Published

Before: Sills

AI Brief

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Holding. The court held that the 'product line' exception to the general rule of successor non-liability, established in Ray v. Alad Corp., is limited to claims of strict products liability and does not extend to claims for ordinary negligence.

Issues

Whether the 'product line' exception to successor non-liability applies to claims for ordinary negligence.

Disposition. affirmed

Quotations verified verbatim against the opinion

“This appeal invites us to extend the so-called product line exception, which allows the imposition of strict liability for a defective product on the purchaser of the manufacturer's assets, to claims for mere negligence. We decline the invitation.”

“The exception was based entirely on the policies underlying strict tort liability, not the policies of general negligence.”

“The Ray court clearly intended the product line exception to be limited to the circumstances presented in that case, and we decline to extend the rationale to other circumstances.”

89 Cal.Rptr.2d 778 (2000) 75 Cal.App.4th 1213 MONARCH BAY II, Plaintiff and Appellant,

PROFESSIONAL SERVICE INDUSTRIES, INC., Defendant and Respondent.

No. G021030. Court of Appeal, Fourth District, Division Three.

October 27, 1999. Irell & Manella, Steven L. Sloca, Richard J. McNeil, Los Angeles, and Joseph M. Freeman, Atlanta, GA, for Plaintiff and Appellant.

Schaffer & Lax, Clifford L. Schaffer and Amy L. Lewis, Los Angeles, for Defendant and Respondent.

OPINION

SILLS, P.J.

This appeal invites us to extend the so-called product line exception, which allows the imposition of strict liability for a defective product on the purchaser of the manufacturer's assets, to claims for mere negligence. We decline the invitation.

Monarch Bay II (MBII) is the owner of an apartment complex in Laguna Niguel that was severely damaged by a landslide. Alleging negligence on the part of the geotechnical engineering firms that certified the building site, MBII sought to recover from Professional Service Industries, Inc. (PSI), who purchased all of one engineering firm's assets. The trial court granted summary judgment against MBII, finding it could not recover from PSI because the asset purchase did not fall within the exceptions to nonliability enumerated in Ray v. Alad Corp. (1977) 19 Cal.3d 22, 136 Cal.Rptr. 574, 560 P.2d 3. We affirm.

[779] BACKGROUND

In the 1980s, a 450-unit luxury apartment complex was developed on the bluffs of Laguna Niguel. South Coast Geologic Services, Inc. provided soils engineering services on the project from 1986 to 1989, issuing a final compaction report and certifying the sites for the construction of three of the apartment buildings. After the buildings were built and occupied, PSI purchased all the assets of South Coast, including goodwill. PSI assumed South Coast's equipment and building leases and hired South Coast's two shareholders and principal geotechnical professionals, Maire Thornton and Carl Schrenk, as well as the rest of its employees. Thornton and Schrenk were told to encourage South Coast's customers to do business with PSI, and both signed a covenant not to compete for a two-year period.

Mbii v. Psi

AI Brief

OPINION

SILLS, P.J.

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DISCUSSION

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