DiGuilio v. Goss International Corporation

SUPREME COURT CASES

Laws-info.com » Cases » Illinois » 1st District Appellate » 2009 » DiGuilio v. Goss International Corporation

State: Illinois

Court: 1st District Appellate

Docket No: 1-07-1584 Rel

Case Date: 04/30/2009

Preview:Fourth Division April 30, 2009

No. 1-07-1584

CARMEN S. DIGUILIO,

) ) Plaintiff-Appellant, ) ) v. ) ) GOSS INTERNATIONAL CORPORATION, a ) corporation, ) ) Defendant-Appellee, ) ) and ) ) GOSS GRAPHIC SYSTEMS, INC., n/k/a, CGSI ) Liquidation, Inc.; CGSI LIQUIDATION, INC.; ) ROCKWELL GRAPHIC SYSTEM, INC., a Corporation; ) ROCKWELL PMC, INC., f/k/a Baker Perkins PMC, ) Inc., an Illinois Corporation; ROCKWELL PMC, ) LTD., a Corporation; BAKER PERKINS FOOD ) MACHINERY, INC., f/k/a Baker Perkins PMC, Inc.; ) GARY HOCKLEY; and HOCKLEY MECHANICAL ) SERVICES, INC., an Illinois Corporation, ) ) Defendants. )

Appeal from the Circuit Court of Cook County.

05 L 2701

Honorable Kathy M. Flanagan, Judge Presiding.

JUSTICE NEVILLE delivered the opinion of the court: The plaintiff, Carmen S. Diguilio, filed a strict liability and negligence complaint against one defendant, Goss International Corporation (Goss International), for injuries he sustained on July 1, 2004, while using a printing press at work. Later, Diguilio named several additional defendants: Goss Graphic Systems, Inc., n/k/a CGSI Liquidation, Inc.; CGSI Liquidation, Inc.; Rockwell Graphic

1-07-1584 System, Inc., a corporation; Rockwell PMC, Inc., f/k/a Baker Perkins PMC, Inc., an Illinois corporation; Rockwell PMC, Ltd., a corporation; Baker Perkins Food Machinery, Inc., f/k/a Baker Perkins PMC, Inc.; Gary Hockley; and Hockley Mechanical Services, Inc., an Illinois corporation. The printing press that Diguilio was injured on was sold to his employer by Rockwell Graphic Systems, which became Goss Graphic Systems (Goss Graphic). Goss Graphic was liquidated after filing for bankruptcy in 2001. Goss International was formed in 2002 and purchased Goss Graphic's assets but did not purchase its liabilities. Goss International filed a motion for a summary judgment and argued that it had no liability as a successor corporation (1) because it was not incorporated until 2002, (2) because it did not design or manufacture the printing press, and (3) because it did not assume Goss Graphic's liabilities following the bankruptcy court's approval of the asset purchase agreement. The circuit court granted Goss International's motion for summary judgment. The sole issue on appeal is whether Goss International was entitled to summary judgment because, according to the asset purchase agreement, Goss International did not assume Goss Graphic's liability for Diguilio's injuries. For the reasons that follow, we affirm. BACKGROUND The Baker Perkins G14 printing press was originally designed and manufactured by Baker Perkins, LLP. Banta Corporation acquired Brookshore Lithographers in April 1988. Rockwell Graphic Systems, Inc., sold the Baker Perkins G14 press to Brookshore Lithographers on December 8, 1992, and installed it in 1993. Goss Graphic was the successor corporation to Rockwell Graphic Systems, Inc. Finally, the Banta Corporation has maintained ownership of the Baker Perkins G14 -2-

1-07-1584 press since it was purchased on December 8, 1992. On September 10, 2001, Goss Graphic filed a bankruptcy petition. In January 2002, Credit Suisse First Bank Global Partners, LP, later known as Matlin Patterson, placed a bid to repurchase the assets of Goss Graphic in a deal that would give (1) 67% of the shares of the new corporation to Matlin Patterson; and (2) the remaining 33% would be owned by investment banks, (a) J.P. Morgan Securities, Inc., (b) LBI Group, Inc., and (3) DK Acquisition Partners, L.P. In exchange for the ownership of their respective shares, Matlin Patterson contributed $50 million and the investment banks contributed $25 million to Goss International. Goss Graphic attempted to reorganize but, because it was unsuccessful, filed a motion in the bankruptcy court for permission to sell its assets to Goss Acquisition Corporation, which later changed its name to Goss International. When Goss Graphic petitioned the bankruptcy court for leave to sell its assets, its shareholders were (1) Stonington Capital Appreciation 1994 Fund L.P., (2) Rockwell International Corporation, (3) Donald Gustafson, and (4) Cede & Company. When Goss Graphic petitioned the bankruptcy court to sell its assets, Goss International's shareholders were (1) CFSB Global Opportunities Partners, L.P., (2) J.P. Morgan Securities, Inc., (3) LBI Group, Inc., an affiliate of Lehman Commercial Paper, Inc., and (4) DK Acquisition Partners, L.P. On February 8, 2002, the bankruptcy court approved the sale that was based on a proposed asset purchase agreement. In the bankruptcy court's order, the liabilities of Goss Graphic were specifically excluded from Goss International's purchase of its assets. The bankruptcy court's order was based on the asset purchase agreement which provided that Goss Graphic's liabilities arising out of the product litigation and related expenses were specifically excluded. In addition, the February -3-

1-07-1584 8, 2002, order provided (1) that the sale of assets "shall be free and clear of all interests," which was defined therein as "liens, claims, encumbrances or interests," and (2) that the asset purchase agreement was confirmed by the sale order. On July 1, 2004, Diguilio was injured while working as a printer for Banta Direct Marketing, Inc. (Banta Corporation), when his right hand became trapped in the rollers of the company's Baker Perkins G14 printing press. On March 9, 2005, Diguilio filed a strict liability and negligence complaint against Goss International and alleged that Goss International participated in the design, preparation, advertisement, distribution, supply, maintenance, alteration and sale of the Baker Perkins G14 printing press in 1992. On June 29, 2006, Diguilio amended his strict liability and negligence complaint and added Goss Graphic Systems, Inc., n/k/a CGSI Liquidation, Inc.; CGSI Liquidation, Inc.; Rockwell Graphic System, Inc., a corporation; Rockwell PMC, Inc., f/k/a Baker Perkins PMC, Inc., an Illinois corporation; Rockwell PMC, Ltd., a corporation; Baker Perkins Food Machinery, Inc., f/k/a Baker Perkins PMC, Inc.; Gary Hockley; and Hockley Mechanical Services, Inc., an Illinois corporation, as additional defendants. None of the additional defendants appeared, so Diguilio filed a motion for a default judgment against each of the additional defendants. The circuit court granted Diguilio's motion and entered a default judgment. On August 29, 2006, Goss International filed a motion for summary judgment (1) because Goss International was not incorporated until 2002, (2) because Goss International did not design or manufacture the Baker Perkins G14 printing press, and (3) because Goss International did not assume Goss Graphic's liabilities following the approval of the asset purchase agreement by the bankruptcy court. Therefore, Goss International argued that it had no liability. -4-

1-07-1584 Prior to responding to Goss International's motion for summary judgment, Diguilio filed a request for documents and took the deposition of Joseph Gaynor, the chief financial officer of Goss International. Gaynor testified that officers of Goss Graphic who were hired or elected as officers and directors of Goss International played no role in the credit bid process or the creation of the asset purchase agreement. According to Gaynor, Goss International assumed liabilities for the continuation of the business. Gaynor also testified that there was no cessation of Goss Graphic's business as a result of the asset purchase agreement. Gaynor and Brian Domer, an employee of Goss International, each testified that Goss International produced the same product lines, continued to do business with the same customers, and kept the same phone numbers. However, Gaynor also testified that the employees, officers and directors of Goss Graphic did not participate in the credit bid process of the asset purchase agreement because the negotiation was between senior secured creditors in the bankruptcy proceeding and Matlin Patterson, through the Global Opportunities Fund. Gaynor also testified (1) that the ownership interest that existed in Goss Graphic before the bankruptcy court had no economic value following the closing and liquidation, and (2) that Cede & Company, which was a stockholder in Goss Graphic before the bankruptcy, did not acquire an interest in Goss International. According to Gaynor, any money invested by entities that were constituent parts of Cede & Company when it owned stock in Goss Graphic was new money given in exchange for an ownership interest in the new company. Julius Pohlenz, general counsel for Goss International, also provided an affidavit that was filed in this case. In his affidavit, Pohlenz averred (1) that Goss International closed on the asset purchase agreement on February 14, 2002; (2) that the sole shareholder of Goss Graphic was Goss Holdings, -5-

1-07-1584 Inc., which consisted of (a) Cede & Company, (b) Donald Gustafson, (c) Rockwell International Corporation, and (d) Stonington Capital Appreciation 1994 Fund L.P. Pohlenz also averred (1) that Goss Graphic did not receive any stock in Goss International in exchange for its assets that were purchased, and (2) that no individual shareholder of Goss Graphic received any stock or other consideration for the assets purchased by Goss International. On March 9, 2007, Diguilio responded to Goss International's motion for summary judgment after taking Gaynor's deposition. On May 21, 2007, the circuit court granted Goss International's motion for summary judgment. The circuit court found that Goss International merely purchased the assets of Goss Graphic and did not assume the debts, liabilities or obligations of Goss Graphic. ANALYSIS I. Standard of Review The purpose of summary judgment is to determine whether a genuine issue of material fact exists, not to try a question of fact. Williams v. Manchester, 228 Ill. 2d 404, 417 (2008) (citing Bagent v. Blessing Care Corp., 224 Ill. 2d 154, 162 (2007), and Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511, 517 (1993)). Trial courts should only grant summary judgment where " `the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' " Williams, 228 Ill. 2d at 417, quoting 735 ILCS 5/2-1005(c) (West 2002). The trial court must strictly construe the pleadings, depositions, admissions and affidavits against the movant and liberally construe them in favor of the opponent. Williams, 228 Ill. 2d at 417. If material facts are in dispute, or if the material facts are undisputed but reasonable persons might draw different -6-

1-07-1584 inferences from the undisputed facts, a triable issue exists and summary judgment is inappropriate. Williams, 228 Ill. 2d at 417. The grant of summary judgment is a drastic means of disposing litigation and should only be granted if the right of the moving party is clear and free from doubt. Williams, 228 Ill. 2d at 417, citing Adams v. Northern Illinois Gas Co., 211 Ill. 2d 32, 43 (2004). This court reviews a trial court's summary judgment ruling de novo. Williams, 228 Ill. 2d at 417 (citing Bagent, 224 Ill. 2d at 163, and Roth v. Opiela, 211 Ill. 2d 536, 542 (2004)). II. Summary Judgment Diguilio argues that despite Goss International's purchase of Goss Graphic's assets without the assumption of its liabilities, Goss International is liable for his injuries as the successor corporation to Goss Graphic because Goss International was a mere continuation of Goss Graphic and carried on the business of Goss Graphic. Goss International argues that the circuit court correctly granted its motion for summary judgment because the asset purchase agreement and the express language of the bankruptcy court's February 8, 2002, order provided that the sale of assets "shall be free and clear of all interests," which was defined in the agreement as "liens, claims, encumbrances or interests." According to Goss International, the express language of the February 8, 2002, bankruptcy court's order 1 bars Diguilio's

1

Paragraph 8 of the February 8, 2002, bankruptcy court order provides: "[e]xcept as

expressly permitted or other specifically provided for in the Agreement or this Sale Order, except to the extent allowed by applicable environmental law, all persons and entities, including, but not -7-

1-07-1584 lawsuit against Goss International because it estopped and enjoined third parties from bringing an action, including a product liability or negligence action, against Goss International for transactions involving the operation of Goss Graphic's business (Goss Graphic's predecessor, Rockwell Graphic System, Inc., sold the Baker Perkins G14 press on December 8, 1992 to Brookshore Lithographers, which was owned by Banta Corporation, Diguilio's employer) prior to the February 8, 2002, order approving the asset purchase agreement. III. Strict Liability in Tort In Illinois, " '[t]he purpose of strict liability in tort is to place the loss caused by defective products on those who create the risk and reap the profit by placing such products in the stream of commerce, regardless of whether the defect was caused by "negligence" on the part of the manufacturer.' " Kaleta v. Whittaker Corp., 221 Ill. App. 3d 705, 713 (1991), quoting Johnson v.

limited to, all debt security holders, equity security holders, governmental, tax, and regulatory authorities, lenders, trade and other creditors holding Interests of any kind or nature whatsoever against or in the Debtors or the Acquired Assets (whether legal or equitable, secured or unsecured, matured or unmatured, contingent or non-contingent, liquidated or unliquidated, senior or subordinated), arising under or out of, in connection with, or in any way relating to, the Debtors, the Acquired Assets, the operation of the Debtor's businesses prior to the closing date, or the transfer of the Acquired Assets to the Purchaser, hereby are forever barred, estopped, and permanently enjoined from asserting against the Purchaser, its successors or assigns, its property, or the Acquired Assets, such persons' or entities' interests." -8-

1-07-1584 Marshall & Huschart Machinery Co., 66 Ill. App. 3d 766, 769 (1978). There is a threefold rationale underlying strict liability in tort: (1) that the demands of our public interest in human life and safety require the implementation of broad protection against the sale of products that are defective; (2) that manufacturers represent that their product is safe and suitable and solicit and invite the public to use the product; and (3) that the business that reaps profits by placing the defectively dangerous product into the stream of commerce should bear the losses. Kaleta, 221 Ill. App. 3d at 713, quoting Johnson, 66 Ill. App. 3d at 769. IV. Successor Corporations Nonliability A. Section 363 of the Bankruptcy Code Limits the Liability of the Purchaser Despite the public interest in discouraging businesses from placing defective products into the stream of commerce, section 363 of the Bankruptcy Code provides, in pertinent part, that a trustee may sell property free and clear of any interest in such property of an entity other than the estate, only if (1) applicable nonbankruptcy law permits the sale of such property free and clear of such interest; (2) such entity consents; (3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property; (4) such interest is in bona fide dispute; or (5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest. 11 U.S.C.

Download DiGuilio v. Goss International Corporation.pdf