Volume 1999    Issue 3

Redesigning Successor Liability

Richard L. Cupp Jr.^*

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 liability 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 the 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.

* Professor of Law, Pepperdine University School of Law. B.A. 1983, Pepperdine University; J.D. 1987, University of California, Davis. The author is indebted to Professors Michael Green and James Henderson for insights generously provided in discussions and in their writings about successor liability issues; to Professors Anthony McDermott, Daniel Martin, Shelley Saxer, and Mark Scarberry for helpful comments at the author's presentation of his thesis at a Pepperdine University School of Law Scholars' Workshop; and to Patricia Cirucci and Brent Caslin for their outstanding research assistance. In June of 1998 the author presented a short speech addressing the recently adopted Restatement (Third) of Torts: Products Liability's section on successor liability at a conference for judges sponsored by the Law & Organizational Economics Center. His brief comments, along with those of speakers addressing other controversial aspects of the Restatement (Third), were published at 8 KAN. J.L. & PUB. POL'Y 113 (1998).