Not surprisingly, there is little case law on this issue.
In Plaza Express Co. v. Middle States Motor Freight, Inc., 40 Ill. App. 2d 117, 189 N.E.2d 382, 385 (Ill. App. 1963), an individual proprietor transferred all of its assets to a corporation in exchange for a majority of stock. The court held that the rule of assumption of liability was applicable regardless of whether the business was originally conducted by an individual or a corporation. Id. Other state courts that have addressed this issue have found that the composition of the prior business entity has no bearing on the application of corporate liability laws.
Additionally, policy considerations alone militate against allowing an individual to escape liability by incorporating. LaBelle Printing Ltd. with Robert Schweizer as president is merely a continuation of Robert Schweizer d/b/a/ LaBelle Printing. Therefore, it is the proper defendant in this action.
LaBelle Printing Ltd. also fails on its argument attacking this Court's jurisdiction and the adequacy of service. Rule 12(h) of the Federal Rules of Civil Procedure states: "A defense of lack of jurisdiction over the person, improper venue, insufficiency of process, or insufficiency of service of process is waived" if it is not raised in a motion pursuant to Rule 12. Hence, because LaBelle did not raise these matters in a Rule 12 motion they are waived.
V. PRODUCT OR SERVICE
The second issue raised by LaBelle is whether the labels it provided were a product or a service. LaBelle contends the labels were a service to U.S. Polychemical and that strict liability is therefore inappropriate. This presents an interesting question on which there is no case law directly on point. Therefore, this Court must look to the criteria used by Illinois courts to categorize products and services and apply the criteria to the facts presently before the Court.
Under Illinois law, "an item will be considered a product for purposes of the cause of action if to do so will effectuate the policy basis for imposing strict liability in tort." Board of Educ. v. A, C and S, Inc., 131 Ill. 2d 428, 546 N.E.2d 580, 591, 137 Ill. Dec. 635 (Ill. 1989). Accordingly, "the social policy justifications underlying the adoption of strict liability, rather than a dictionary definition of the term product, should be determinative of that issue." Trent v. Brasch Mfg. Inc., 132 Ill. App. 3d 586, 477 N.E.2d 1312, 1315, 87 Ill. Dec. 784 (Ill. App. 1985). Some of the policy considerations to be considered include: 1) the public interest in life and health; 2) the invitations and solicitations of the manufacturer to purchase the product; 3) the justice of imposing the loss on the manufacturer who created the risk and reaped the profit; 4) the superior ability of the commercial enterprise to distribute the risk of injury as a cost of doing business; 5) the disparity in position and bargaining power that forces the consumer to depend entirely on the manufacturer; 6) the difficulty in requiring the injured party to trace back along the channel of trade to the source of the defect in order to prove negligence; and 7) whether the product is in the stream of commerce. Id. at 1315 (citations omitted). These considerations, when viewed in the context of this case, support the conclusion that LaBelle's labels are products.
First, the public interest in life and health favors the imposition of strict liability here given the severity of the injury involved. Second, excluding the unsupported conclusions of each party, there is nothing in the record that demonstrates whether LaBelle did or did not solicit U.S. Polychemical to purchase its product. Hence, this consideration does not favor either party. The third consideration "hinges on whether the party in question has any participatory connection, for personal profit or other benefit, with the injury-causing product and with the enterprise that created consumer demand for and reliance upon the product." Bittler v. White Inc., 203 Ill. App. 3d 26, 560 N.E.2d 979, 981, 148 Ill. Dec. 382 (Ill. App. 1990). Undoubtedly, LaBelle's participatory connection with the injury-causing product reaped it a profit. Warning labels are an essential part of dangerous chemical solvents. LaBelle's brief illuminates this point when it cites comment (f) of the Restatement (2d) of Torts, Sec. 402A (1965), which states: "One who enters into the business of supplying the general public with products, which may be dangerous, assumes a special responsibility for the public's safety." When LaBelle chose to print warning labels rather than letterhead, it assumed a special responsibility. Warning labels can be extremely dangerous when they provide wrong or inadequate information upon which the user will undoubtedly rely. Thus, because LaBelle chose to enter this field of printing and reaped a profit, it is just to impose on LaBelle the loss resulting from its enterprise.
Fourth, because LaBelle is a commercial enterprise and the plaintiff is an individual, it has superior ability to distribute the risk of injury as a cost of doing business. Fifth, the plaintiff was forced to rely entirely on the information contained in the warning label manufactured by LaBelle. Sixth, in this case, like many other in which multiple commercial entities contribute to a final product, it is inequitable to force an injured party to trace the defect to the negligent contributor. LaBelle states it printed the warning labels pursuant to the specifications provided by U.S. Polychemical. Perhaps U.S. Polychemical is at fault; perhaps LaBelle is at fault. Regardless of who is at fault, a party injured by a dangerously defective product is entitled to compensation for his injuries. The commercial entities that produced the injury-causing product can argue about indemnity.
Lastly, LaBelle argues that it did not place its labels into the stream of commerce. "To be in the stream of commerce does not require that the product be mass-produced or placed on the shelf at numerous locations. It is sufficient if the defendant is engaged in the business of selling the product. . . ." Skarski v. Ace-Chicago Great Dane Corp., 138 Ill. App. 3d 301, 485 N.E.2d 1312, 1316, 93 Ill. Dec. 102 (Ill. App. 1985). A defendant need not participate in the chain of distribution of a manufactured product to be strictly liable. Gilliland v. Rothermel, 83 Ill. App. 3d 116, 403 N.E.2d 759, 761, 38 Ill. Dec. 528 (Ill. App. 1980). "Participation in the profits from placing a defective product in the stream of commerce 'presents the same public policy reasons for the application of strict liability which supported the imposition of such liability on wholesalers, retailers and lessors." Id. (quoting Connelly v. Uniroyal Inc., 75 Ill. 2d 393, 410-11, 27 Ill. Dec. 343, 389 N.E.2d 155 (1979)). After considering the applicable policy justifications, this Court finds that LaBelle provided a product and strict liability is appropriate.
The only Illinois case even remotely on point that LaBelle cites to rebut this overwhelming indication that it provided a product is Appleby v. Miller, 197 Ill. App. 3d 533, 554 N.E.2d 773, 143 Ill. Dec. 838 (Ill. App. 1990), cert. denied, 133 Ill. 2d 551, 561 N.E.2d 685, 149 Ill. Dec. 315 (Ill. 1990).
In Appleby the defendant provided a medical form for a dentist to use during patient intake. The plaintiff alleged the form was defective in that it did not adequately address the patient's medical history. The plaintiff claimed she received inappropriate treatment because the dentist relied on the incomplete intake information. The Appleby court found the form to be a service to the dentist rather than a product subject to strict liability. The Court reasoned that "given the generality of the questions and the brevity of the form, we find that it would be unreasonable to expect that the form was intended to be a comprehensive inquiry as to a patient's medical history. 554 N.E.2d at 776. LaBelle's warning label, by contrast, was not a brief, general product warning to be supplemented by expert opinion. It was the complete and exclusive warning available, and it was not directed to an expert in the field but to the end user. In sum, it was not a service to U.S. Polychemical but, rather, a warning provided to the user.
Illinois law provides the substantive law for this cause of action because Illinois has the most significant relationship to the case. Under Illinois law, LaBelle Printing Ltd. is a successor corporation to Robert Schweizer d/b/a/ LaBelle Printing. As such, it is the proper defendant in this action. Additionally, LaBelle has waived its objection to personal jurisdiction and service by not raising these issues in a Rule 12 motion. Finally, labels provided by LaBelle are a product and strict liability is therefore applicable.
For the foregoing reasons, LaBelle's motion for summary judgment is denied.
James B. Zagel
United States District Judge
Date: AUG 31 1993