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FIRKIN v. U.S. POLYCHEMICAL CORP.

August 31, 1993

MAX FIRKIN, Plaintiff,
v.
U.S. POLYCHEMICAL CORPORATION, a Corporation, and LABELLE PRINTING, Defendants.


Zagel


The opinion of the court was delivered by: JAMES B. ZAGEL

Plaintiff Max Firkin filed a complaint sounding in negligence and strict liability against LaBelle. The defendant, LaBelle Printing, moves for summary judgment on all counts, contending it is the wrong defendant. Alternatively, LaBelle seeks summary judgment on the strict liability count, claiming it provided a service, not a product.

 I. SUMMARY JUDGMENT STANDARD

 Summary judgment is appropriate if "there is no genuine issue of material fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "In determining whether there are genuine issues of material fact, we draw all inferences in the light most favorable to the nonmovant." Bartman v. Allis-Chalmers Corp., 799 F.2d 311, 312 (7th Cir. 1986), cert. denied, 479 U.S. 1092, 107 S. Ct. 1304, 94 L. Ed. 2d 160 (1987). Because defendant LaBelle is moving for summary judgment, this Court draws all inferences in the light most favorable to the plaintiff.

 Plaintiff worked as a janitor for Wisconsin Can Company, n/k/a/ Rland, Inc. ("Wisconsin Can"). On December 7, 1989, plaintiff received burns to seventy percent of his body as a result of a fire in the locker room at Wisconsin Can. The fire occurred while plaintiff attempted to clean the locker room floor. Apparently, plaintiff applied a degreasing agent to the floor. Finding the degreasing agent ineffective, plaintiff applied a second product, and the floor ignited. Plaintiff claims the first product he used was Polychem 401 manufactured by U.S. Polychemical. He asserts that LaBelle manufactured the product label for Polychem 401 and that he read and relied on the information on the Product label. Plaintiff says that during the printing of the label, LaBelle incorrectly omitted the large printed word "flammable." Plaintiff claims that LaBelle's omission caused him to believe the product was nonflammable and therefore not dangerous to apply on top of the degreasing agent.

 III. CHOICE OF LAW

 Because this Court's jurisdiction is based on diversity, the fist issue is which state's law applies. Neither party addresses this issue. *fn1" A federal court sitting in diversity must apply the forum state's choice of law rules. International Adm'rs. v. Life Ins., 753 F.2d 1373, 1376 n.4 (7th Cir. 1985). In Illinois, the most significant relationship test determines the choice of law in tort cases. Miller v. Long Airdox Co., 914 F.2d 976, 978 (7th Cir. 1990). The most significant relationship test "seeks to find which state bears the most significant relationship to the occurrence and the parties involved in the action." Id. There is a presumption that the law of the state in which the injury occurred will govern unless another state has a more significant relationship to the occurrence or to the parties. Id. Here, the two states with the most significant relationship to the case are Illinois and New York. The injury occurred in Illinois. The plaintiff is from Illinois. Defendant's state of incorporation is New York. Because the injury occurred in Illinois and the plaintiff is domiciled in Illinois, defendant's status as a New York corporation does not overcome the presumption in favor of Illinois. Therefore, the substantive law of Illinois governs this case.

 IV. LABELLE OR LABELLE

 Defendant first argues that it is not a proper defendant in this action. Additionally, defendant asserts that "plaintiff has failed to sue, serve, and obtain the jurisdiction of this Court over the entity that printed certain labels for Polychem." LaBelle's argument is based on its relatively recent incorporation. When U.S. Polychemical ordered the labels in question from LaBelle, LaBelle was a sole proprietorship. Specifically, it was Robert Schweizer d/b/a/ LaBelle Printing. On July 23, 1991, LaBelle Printing incorporated, with Robert Schweizer named as president. When plaintiff filed suit it named "LaBelle Printing" as a defendant. LaBelle Printing Ltd. appeared and answered "on behalf of the defendant." And, LaBelle Printing Ltd. has acted as if it were a properly named defendant throughout this case by propounding and answering discovery. Now LaBelle Printing Ltd. maintains that it is the wrong defendant, and that Robert Schweizer d/b/a/ LaBelle Printing is the proper defendant. Moreover, LaBelle says the statute of limitations has run and plaintiff can no longer bring suit against Robert Schweizer doing business as LaBelle Printing.

 The law is not on LaBelle's side. "Successor corporate liability is determined under the choice of law provisions for products liability." Kramer v. Weedhopper of Utah, Inc., 204 Ill. App. 3d 469, 562 N.E.2d 271, 274, 149 Ill. Dec. 807 (Ill. App. 1990). Under Illinois law, a corporation is liable for the debts and liabilities of its predecessor if it is "merely a continuation of the seller." Id. LaBelle argues that corporate successor liability rules apply only in corporate to corporate or partnership to corporate transfers. 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. *fn2" 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. *fn3"

 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 ...


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