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Chubb National Insurance Co. v. Watts Regulatory Co.

United States District Court, D. Massachusetts

July 6, 2017

CHUBB NATIONAL INSURANCE COMPANY
v.
WATTS REGULATOR COMPANY

          MEMORANDUM OF DECISION

          DATE RYA W. ZOBEL SENIOR UNITED STATES DISTRICT JUDGE

         In this subrogation action, plaintiff Chubb National Insurance Company (“Chubb”) seeks to hold defendant Watts Regulator Company (“Watts”) liable for damage caused to property of Chubb's insureds. Watts has moved for summary judgment on the basis that it has no liability as a matter of law. Docket # 24.

         I. Factual Background

         I summarize the relevant facts in the light most favorable to plaintiff, the non-moving party. See Planadeball v. Wyndham Vacation Resorts, Inc., 793 F.3d 169, 172 (1st Cir. 2015).

         Chubb, a company incorporated in Indiana with a principle place of business in New Jersey, provided an insurance policy to Carl and Sherry Hilbert for their property in Pennsylvania. Under the terms of the policy, Chubb would become subrogated to the Hilberts' claims and rights to the extent of payments Chubb made for losses caused by third parties.

         Around December 30, 2014, water leakage at the Hilberts' property caused substantial damage. The Hilberts submitted a claim to Chubb, and Chubb paid to or on behalf of the Hilberts a total of $462, 475.13. The damage was caused by the failure of a connector hose that had been used as a toilet water supply line. The hose was manufactured and sold by CalFlex Manufacturing, Inc. (“CalFlex”).

         As relevant to the instant motion, CalFlex was incorporated in Nevada, and through 2006, had its principal place of business in California. Around 2004, CalFlex became the wholly owned subsidiary of Barbour Corporation (“Barbour”), a Massachusetts corporation with its principal place of business in Massachusetts. Barbour and CalFlex entered into a Purchase and Sale Agreement (“P&S”) in 2006, under which substantially all of CalFlex's operating assets were sold to Watts.

         On August 26, 2016, Chubb, as the Hilberts' subrogee, brought an action against Watts alleging product liability. Watts moves for summary judgment.

         II. Legal Standard

         Summary judgment is appropriate when the moving party “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “An issue is ‘genuine' for purposes of summary judgment if ‘the evidence is such that a reasonable jury could return a verdict for the nonmoving party, ' and a ‘material fact' is one which ‘might affect the outcome of the suit under the governing law.'” Poulis-Minott v. Smith, 388 F.3d 354, 363 (1st Cir. 2004) (quoting Hayes v. Douglas Dynamics, Inc., 8 F.3d 88, 90 (1st Cir. 1993)).

         III. Analysis

         This case turns on which state's corporate successorship law applies. The parties agree that if Massachusetts law governs, Watts is entitled to summary judgment; if Pennsylvania law controls, the case continues. See Docket # 31.[1]

         Massachusetts “follow[s] the traditional corporate law principle that the liabilities of a selling predecessor corporation are not imposed upon the successor corporation which purchases its assets, unless” one of four exceptions applies. Guzman v. MRM/Elgin, 567 N.E.2d 929, 931 (Mass. 1991) (explaining the exceptions apply when “(1) the successor expressly or impliedly assumes liability of the predecessor, (2) the transaction is a de facto merger or consolidation, (3) the successor is a mere continuation of the predecessor, or (4) the transaction is a fraudulent effort to avoid liabilities of the predecessor”). Watts maintains that none of these exceptions apply and it is therefore not liable for the property damage under Massachusetts law.

         On the other hand, Pennsylvania courts have “recognized a ‘product-line' exception to the general rule against successor liability.” See Cont'l Ins. Co. v. Schneider, Inc., 873 A.2d 1286, 1291 n.8 (Pa. 2005). This exception “permits successor liability to be imposed for injuries caused by defective products manufactured by a predecessor if the successor continues to manufacture the product.” Id. Chubb contends that under Pennsylvania law, Watts can ...


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