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Fuit v. Extreme Products Group, L.L.C.

United States District Court, D. Utah, Northern Division

April 13, 2018

RICHARD FUIT and KIMBERLY FUIT, Plaintiffs,
v.
EXTREME PRODUCTS GROUP, L.L.C., a Delaware corporation; BIG 5 CORPORATION, dba BIG 5 SPORTING GOODS; and XIAMEN HONG DAO TECHNOLOGY CO., LTD., a/k/a FITMASTER, Defendants. BIG 5 CORPORATION, d/b/a BIG 5 SPORTING GOODS, Cross-Claim Plaintiff,
v.
EXTREME PRODUCTS GROUP, L.L.C., Cross-Claim Defendant.

          MEMORANDUM DECISION AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT

          ROBERT J. SHELBY UNITED STATES DISTRICT JUDGE.

         Richard and Kimberly Fuit brought claims after an allegedly defective inversion table injured Mr. Fuit. The Fuits sued Extreme Products, Solo Sports, and Big 5, alleging that each of the three is a “designer, marketer, distributor and/or seller” of the inversion table at issue. Before the court are three Motions for Summary Judgment: (1) Extreme Products moves for summary judgment on both the Fuits' claims against it and Big 5's cross-claim, arguing it is not liable for any defect in the inversion table because it did not manufacture, design, or sell the table and it is not liable as Solo Sports's successor;[1] (2) the Fuits move for judgment on the issue of whether Extreme Products is liable as a successor to Solo Sports;[2] and (3) Big 5 seeks summary judgment that Extreme Products is Solo Sports's successor and thus contractually required to defend and indemnify Big 5.[3] For the reasons that follow, the court grants in part and denies in part Extreme Products's Motion. The Fuits' Motion and Big 5's Motion are both denied.

         BACKGROUND

         This case is about which, if any, party is liable for the Fuits' damages stemming from an alleged defect in the inversion table. Solo Sports, with input from Extreme Products, worked with manufacturer Xiamen Hong Dao Technology to design, engineer, test, and assemble the table in China.[4] Extreme Products was an independent sales representative for Solo Sports, although its lone member, Glenn Griffin, at times represented to clients that he was an officer of Solo Sports.[5] Solo Sports paid Extreme Products for sales of the inversion tables.[6] Big 5 ordered the inversion table at issue from Solo Sports in October 2010, and Mr. Fuit bought the table from Big 5 in March 2011.[7]

         In 2013, Solo Sports went out of business, transferred several of its assets to Extreme Products, and asked Extreme Products to take over its inventory. Big 5 then asked Extreme Products to fulfill its existing purchase orders with Solo Sports, and Extreme Products agreed to do so.[8]

         Several years after the Fuits bought the table, it broke while Mr. Fuit was using it, and he suffered severe injuries. The Fuits filed suit against Big 5; Solo Sports and its former president; Extreme Products; and Xiamen Hong Dao Technology.[9] At issue in the pending Motions are the Fuits' claims against Extreme Products and Big 5's cross-claim.

         LEGAL STANDARD

         Summary judgment is appropriate when “there is no genuine dispute as to any material fact” and the moving party is “entitled to judgment as a matter of law.”[10] A fact is material if it “might affect the outcome of the suit under the governing law, ” and a dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[11] In reviewing a motion for summary judgment, the court will “view the evidence and draw reasonable inferences therefrom in the light most favorable to the nonmoving party.”[12] “Cross-motions for summary judgment are to be treated separately; the denial of one does not require the grant of another.”[13]

         ANALYSIS

         The court first addresses whether Extreme Products is potentially liable as a designer, manufacturer, or seller of the inversion table, and then turns to the issue of successor liability.

         I. Passive retailer doctrine

         Extreme Products argues it is not liable because it did not manufacture, distribute, or sell the inversion table and is therefore outside the bounds of Utah's strict products liability laws. This argument was initially based on the passive retailer doctrine, which relieves retailers of liability if they did not participate in the manufacture or design of a defective product and the manufacturer is named in the suit.[14] After Extreme Products filed its opening brief, the Utah Supreme Court held in Bylsma v. R.C. Willey that Utah does not recognize the passive retailer doctrine.[15] Under Bylsma, strict liability applies to “every ‘seller' of the product- manufacturers, wholesalers, retailers, and any other party involved in the product's chain of distribution.”[16] Extreme Products acknowledges the Utah Supreme Court rejected the passive retailer doctrine, but nevertheless argues it is not liable because it does not fit in any of the roles listed in Bylsma. As the moving party, Extreme Products bears the burden of showing no genuine dispute of material fact exists as to any of the roles.

         Extreme Products first argues it is not a “seller” of the inversion table because it only received a commission for the sale. The court need not decide whether an entity that receives a commission is a “seller” under Bylsma, because a dispute of fact exists concerning how and why Extreme Products was actually compensated: by commission for the sale of the table, or by profit-sharing for its input during the design and manufacturing stage.[17] This factually dependent issue is material to determining whether Extreme Products was a “seller” under Bylsma.

         Additionally, a dispute of fact exists about the extent to which Extreme Products participated in the design and manufacture of the inversion table. Extreme Products contends it only gave input on the decision to initiate a line of fitness products and made three small design changes to the table's footplate, spring-loaded pull pin, and padding.[18] In contrast, the Fuits argue Extreme Products was a collaborator through the entire chain of production.[19] The Fuits point to, among other things, deposition testimony in which Griffin stated the decision to start producing inversion tables was “a collective effort” in which he provided Solo Sports with information about inversion tables from a prior company he worked for.[20] Griffin also stated that he “would certainly give his feedback” in most cases on design matters.[21] Based on the evidence before the court, a reasonable jury could conclude Extreme Products was a manufacturer or otherwise “involved in the product's chain of distribution.”[22]

         These factual disputes are material and preclude judgment as a matter of law. Extreme Products's Motion for Summary Judgment on the issue of strict products liability is denied.[23]

         II. Successor liability

         Extreme Products, the Fuits, and Big 5 all filed Motions for Summary Judgment on the issue of successor liability. The Fuits and Big 5 argue that Extreme Products is the successor of Solo Sports, which contractually agreed to defend and indemnify Big 5 against claims arising out of any personal injury resulting from a defect in the inversion table. The Fuits argue that, as a result, Extreme Products is liable to them for damages, and Big 5 argues that Extreme Products has assumed Solo Sports's duty to defend and indemnify it against the Fuits' claims. Extreme Products relies on the general rule that a successor is not liable for its predecessor's defective products, and argues that no exceptions to that rule apply to this case. The Fuits and Big 5 argue one exception to the general rule applies as a matter of law and that issues of fact preclude summary judgment as to three other exceptions.

         A. Choice of law

         The successor liability issue presents a choice-of-law question, as the approach differs among the states implicated in this case: Utah, where the Fuits reside; California, where Big 5 is domiciled; and Arizona and Delaware, where Extreme Products is domiciled.

         In general, the law “does not impose liability on a successor corporation that purchases the assets of a predecessor in an arm's length transaction.”[24] Utah, Arizona, and Delaware have adopted the Restatement (Third) of Torts, which recognizes exceptions to this rule where

(1) there is an express or implied agreement of assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is a mere continuation of the seller, or (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts.[25]

         California is the only state at issue that also recognizes the product line exception, in which a party that acquires a business and continues the output of its line of products under certain circumstances assumes strict liability for defects in those products.[26]

         When presented with a conflict between different states' laws, the court applies the choice-of-law principles of the forum jurisdiction.[27] Utah applies the “most significant relationship” test to determine which state's law should apply to an issue.[28] For tort claims, Utah law looks to “(a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered.”[29] The court must analyze these factors “according to their relative importance with respect to the particular issue.”[30] Because the issue of successor liability in this case centers around the relationship between Solo Sports and Extreme Products, the court finds the last two factors to be most helpful.

         Extreme Products is a Delaware LLC with its principal place of business in Arizona. Solo Sports was a California corporation with its headquarters in California. The transfer of Solo Sports's assets to Extreme Products and meetings between officers of the two companies occurred in California, as did the issuance of invoices and replacement purchase orders and the changing of labels on products. Additionally, the products at issue during the transition from Solo Sports to Extreme Products were shipped to and from California. Because the relationship between Solo Sports and Extreme Products was centered in California, the court finds that California has the most significant relationship to the issue of successor liability and thus California law applies to determine whether Extreme Products is liable under either the Restatement exceptions or the product line exception.

         Extreme Products argues that as a matter of law, it is not liable under any of the successor liability exceptions. The Fuits and Big 5 argue that Extreme Products is liable as a matter of law under the product line exception, and in the alternative, issues of material fact remain as to three other exceptions, thereby precluding judgment as a matter of law.

         B. Product line exception

         The product line exception applies where the moving party shows:

(1) the virtual destruction of the plaintiff's remedies against the original manufacturer caused by the successor's acquisition of the business, (2) the successor's ability to assume the ...

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