Successor Liability in Louisiana Asbestos Cases: Why Corporate Structure Matters

When an industrial giant is sold or restructured, the victims of asbestos exposure are often left wondering: who is left to pay for my medical bills? Corporate sales agreements are often designed to shield new companies from the liabilities of the past. The case of Pichon v. Asbestos Defendants provides a vital road map for how Louisiana courts handle successor liability, proving that knowing who to sue is just as important as knowing why.

The Successor Liability Challenge: The Three-Part Test

In Louisiana, a company that buys another isn’t automatically liable for the “sins” of the seller. As the Pichon case highlights, the Fourth Circuit Court of Appeal uses a strict three-part test to determine if a successor company can be held responsible. To win, a plaintiff must show that the buying company expressly assumed the liability, the buyer was a “mere continuation” of the seller, or the deal was made specifically to dodge legal obligations.

In late 2010, the Court of Appeal of Louisiana, Fourth Circuit, shed some light on how the sale of a company may impact claims made by employees against the successor company in Pichon v. Asbestos Defendants AG. The plaintiffs in the case were the wife and children of the deceased Mr. Pichon. The plaintiffs alleged that Mr. Pichon was exposed to asbestos between 1955 and 2004. Mr. Pichon died in 2006 from Mesothelioma and Lung Cancer, which the plaintiffs argue was as a result of his exposure to asbestos. One of the defendants in the case was Detroit Diesel Corporation (DDC). DDC filed for summary judgment stating that there was no genuine issue of material fact and that it was entitled to a judgment as a matter of law. The Court broke its discussion down into two time periods: (1) Pre-1988 exposure by Mr. Pichon, before the creation of DDC, under which plaintiffs argued that DDC is liable under the theory of successor liability and (2) Post-1988, after the creation of DDC, under which plaintiffs argued that Mr. Pichon was exposed to asbestos as a result of DDC manufacturing.

In 1970, GM merged its Diesel Division with its Allision Division to create the Detroit Diesel-Allision Division. This division manufactured marine engines at Halter Marine. In 1988 GM and Penske formed DDC as a joint venture. Subsequently, DDC purchased the assets of most of the division that produced the marine engines. The sales agreement between DDC and GM stated that DDC would not be liable for GM’s conduct or for claims relating to products manufactured, distributed, or sold by GM prior to closing. The Court stated that there were three ways in which a successor company could be held liable for the actions of the selling company: (1) When the successor company clearly assumed the liability or obligations (2) When the buying company was merely a continuation of the selling company or (3) Where is it found that the transaction occurred only to avoid liability. The Court stated that it was clear that DDC expressly denied any pre-sale liability for the actions of GM. However, the plaintiffs argued that DDC’s liability was as a result of test number two, namely that DDC was a continuation of GM’s Diesel-Allision Division.

In response to plaintiffs argument concerning the second test for successor liability, the Court cited to a U.S. Supreme Court case that held that successor liability could be found on the basis of the buying company being a mere continuation of the selling corporation where the sale was for all of the company’s assets. The issue for the plaintiffs in this case was that DDC clearly did not purchase all of GM’s assets. Further, DDC did not even purchase all of GM’s assets concerning manufacturing of marine engines. DDC only purchase those assets relating to the Redford Operations. Because the plaintiffs were unable to provide evidence that DDC purchased all of GM’s assets, the Court granted DDC’s summary judgment on this claim and plaintiffs thus lost on this point.

Direct vs. Indirect Evidence: The Gasket Specification Trap

One of the most critical lessons from the Pichon case is the court’s requirement for direct evidence. The plaintiffs attempted to show exposure continued into the new company’s era using an old 1986 gasket specification sheet. However, the court ruled that “indirect evidence” cannot overcome a company’s “direct evidence”—such as internal policies proving they had phased out asbestos before the new company was even formed.

The Court next turned to the claim that Mr. Pichon was exposed to asbestos after the creation of DDC. DDC provided the Court with evidence that GM had put in place a policy in 1980 that called for the eventual elimination of the use of asbestos. Further, DDC provided the Court with evidence that the use of asbestos by GM was completely eliminated by 1987, prior to the creation of DDC. DDC argued that there was no evidence that there was a continuation of the use of asbestos after the creation of DDC. The plaintiffs put forth evidence showing that there was a gasket specification sheet from 1986 that called for the use of asbestos. The plaintiffs argued that since there was no evidence of a gasket specification sheet subsequent to 1986 that showed that asbestos was not used, that it should be assumed that the use of asbestos continued post-1986 and into the period after DDC was created. The Court held that the indirect evidence provided by the plaintiffs did not negate the direct evidence provided by DDC that showed that there was a policy implementation and eventual phase out of the use of asbestos prior to the creation of DDC. The Court granted DDC’s motion for summary judgment and the plaintiffs lost on this point as well.

Corporate Mergers: Protecting Your Legal Rights

When companies merge or sell assets, worker safety records and liability often get buried in the paperwork. For employees exposed to hazardous materials, these sales agreements can be the difference between a successful claim and a dismissed case. If the company you worked for has been bought or renamed, you need a mesothelioma attorney who can untangle corporate history to find the responsible party.

The Pichon case is a good example of the precautions that workers should take in the workplace. If you have worked in an environment where asbestos was used, it is imperative that you seek medical and legal advice. If you work in any environment in which you deal with hazardous chemicals or materials you should frequently visit your doctor to make sure that you remain healthy. If the company for which you work is being bought, or is purchasing another company, or its division, you should seek legal advice as to how your rights will be impacted by the sale. Further, if you or a loved one suspects they have been exposed to asbestos, consulting with an attorney about their legal rights is a must.

Corporate restructuring shouldn’t be a ‘get out of jail free’ card for companies that poisoned their workers. While the Pichon case shows how difficult it is to prove successor liability, it also highlights the need for early medical and legal intervention. If you worked in an environment with hazardous materials and your employer has since changed hands, don’t wait for your rights to expire. Contact the Berniard Law Firm today for a deep-dive investigation into your claim.