Flores v. U.S. Repeating Arms Co. , 19 F. App'x 795 ( 2001 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
SEP 26 2001
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
ROBERT FLORES, individually;
KELLY FLORES, individually;
PIONEER BANK & TRUST, as
Trustee for Michael Flores, a minor,
Plaintiffs-Appellants,
v. Nos. 00-6324 & 01-6076
(D.C. No. 00-CV-66-A)
U.S. REPEATING ARMS (W.D. Okla.)
COMPANY, INC., d/b/a Winchester,
d/b/a Winchester Arms; OLIN
CORPORATION, d/b/a Olin Arms
Corporation,
Defendants-Appellees.
ORDER AND JUDGMENT *
Before HENRY , BRISCOE , and MURPHY , Circuit Judges.
After examining the briefs and appellate records in these related appeals,
this panel has determined unanimously to grant the parties’ request for a decision
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
on the briefs without oral argument. See Fed. R. App. P. 34(f); 10th Cir. R.
34.1(G). These cases are therefore ordered submitted without oral argument.
Michael Flores, a minor, was shot and permanently injured when
a Winchester 30-30 caliber repeating rifle (the “Rifle”) accidently discharged.
Plaintiffs, Michael’s parents and trustee, claim the Rifle had a defective safety
mechanism and filed a products liability and negligence action against defendants,
seeking to hold them liable for Michael’s injuries.
Defendant Olin Corporation owns and licenses the Winchester trademark.
However, it sold its firearm manufacturing business in 1981 to a Connecticut
corporation then known as U.S. Repeating Arms Company, but later known as
CARSU, Inc. (“CARSU”). It is undisputed that CARSU manufactured the Rifle
in 1983, while it was still named U.S. Repeating Arms Company. CARSU filed
for bankruptcy in 1986 and, upon confirmation of the plan of reorganization,
changed its name to CARSU. As part of its 1987 plan of reorganization,
a majority of CARSU’s assets were sold to the other defendant in this case,
New Haven Arms Company, a Massachusetts corporation, which changed its
name to U.S. Repeating Arms Company (“USRAC”). CARSU was dissolved
in 1990.
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Appeal No. 00-6324
On cross-motions for summary judgment, the district court, sitting in
diversity and applying Oklahoma law, granted defendants’ motion for summary
judgment, finding that neither defendant manufactured, distributed or sold the
Rifle, that USRAC was not liable under any theories of successor liability, and
that Olin was not liable under general partnership law. 1
We review a district
court’s determinations of state law in a diversity case such as this de novo. Salve
Regina Coll. v. Russell , 499 U.S. 225, 231 (1991). Further, “[w]e review the
district court’s grant of summary judgment de novo, applying the same legal
standard used by the district court.” Simms v. Okla. ex rel. Dep’t of Mental
Health & Substance Abuse Servs. , 165 F.3d 1321, 1326 (10th Cir. 1999).
Summary judgment is appropriate “if the pleadings, depositions, answers to
interrogatories, 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.” Fed. R. Civ. P. 56(c).
Under Oklahoma law, the general rule is that “where one company sells or
otherwise transfers all its assets to another company, the latter is not liable for the
1
Although plaintiffs identify Olin as an appellee, they do not claim on
appeal that the district court erred in granting summary judgment in favor of Olin.
Thus, plaintiffs waived any right to appellate review of that judgment. See State
Farm Fire & Cas. Co. v. Mhoon , 31 F.3d 979, 984 n.7 (10th Cir. 1994).
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debts and liabilities of the transferor.” Pulis v. United States Elec. Tool Co. ,
561 P.2d 68, 69 (Okla. 1977). In Pulis , the Oklahoma Supreme Court recognized
four exceptions to this general rule:
(1) Where there is an agreement to assume such debts or liabilities
(2) Where the circumstances surrounding the transaction warrant a
finding that there was a consolidation or merger of the corporations,
or (3) that the transaction was fraudulent in fact or (4) that the
purchasing corporation was a mere continuation of the selling
company.
Id.Plaintiffs claim on appeal that the fourth exception applies in this case:
that although USRAC did not manufacture, distribute or sell the Rifle, it should
nevertheless be liable for Michael’s injuries because it is a “mere continuation”
of CARSU, the Rifle’s manufacturer. 2
To determine whether a corporation has
successor liability under the mere continuation exception, Oklahoma courts
examine whether the selling corporation ceased to exist after the sale of assets to
the purchasing corporation, and whether there was a common identity of directors,
officers and stockholders before and after the sale. See id . at 71.
USRAC filed a motion for summary judgment contending that it was not a
mere continuation of CARSU. It presented an affidavit from its president, Don
2
Plaintiffs argued before the district court that the first, second and fourth
Pulis exceptions applied, but on appeal plaintiffs claim only that the district court
erred in rejecting their “mere continuation” theory of liability.
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Gobel, which stated that CARSU “continues to exist with assets in excess of
$1,000,000,” and that “[i]n comparing the current [USRAC] to the former
[USRAC, now CARSU], there is independent management; different employees
[and] no common officers or directors.” Aplt. App., Vol. II at 468.
Plaintiffs responded and filed a cross-motion for summary judgment.
Although plaintiffs alleged there were common officers and employees, the only
supporting evidence they presented was a statement in CARSU’s 1987 plan of
reorganization stating that USRAC intended to offer the position of executive
vice-president to Richard Pelton, who, in 1987, was the president and chief
executive officer of CARSU. Plaintiffs did not present any evidence, however,
indicating that Mr. Pelton accepted the offer or ever became an officer of
USRAC. Indeed, plaintiffs failed to present any evidence demonstrating
a common identity of directors, officers and stockholders between CARSU and
USRAC. Further, although plaintiffs presented evidence that CARSU had been
dissolved in 1990 for failing to file certain reports, they did not dispute that
CARSU continued to exist for several years after the sale of its assets, nor did
they dispute USRAC’s evidence that CARSU had $1,000,000 in assets after the
1987 sale of assets to USRAC. The district court granted USRAC’s motion for
summary judgment because plaintiffs failed to present evidence that USRAC was
a mere continuation of the CARSU corporate entity, that is, they failed to present
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evidence that CARSU ceased to exist after the sale of assets to USRAC or
evidence of a common identity of directors, officers and stockholders between
CARSU and USRAC.
On appeal, plaintiffs contend the district court erroneously considered
USRAC’s evidence that USRAC did not currently have any common officers or
directors and failed to consider whether there had been directors and officers in
common immediately following the sale of assets. Yet, in none of their summary
judgment pleadings did plaintiffs ever present any evidence to the district court
indicating that there were common officers or directors at any time following the
sale. Further, plaintiffs did not challenge or contradict Mr. Gobel’s affidavit.
As the district court stated, the record “reflects no effort by plaintiffs to depose
Mr. Gobel” concerning his testimony or to depose “Mr. Pelton concerning his
relationship with USRAC.” Aplt. App., Vol. I at 16.
Plaintiffs contend it was error for the district court to grant summary
judgment in the absence of evidence concerning any commonality of management
immediately following the sale. They cite Pulis , in which the Oklahoma Supreme
Court refused to grant summary judgment in favor of the defendant corporation
because the record was “void of any specific information about the seller
corporation’s business activities after the sale.” 561 P.2d at 72. Plaintiffs further
claim they should not be faulted for not supplying such evidence because USRAC
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is in a better position to provide specific information regarding the factors
enumerated in Pulis .
These arguments are unavailing. Unlike the facts in Pulis , the record
before the district court was not “void” of information concerning the activities
of CARSU after the sale. Plaintiffs did not present any evidence disputing
USRAC’s evidence that CARSU retained $1,000,000 in assets, had independent
management, and remained in existence for several years after the sale. Thus, the
undisputed evidence in front of the district court demonstrated that CARSU and
USRAC “were distinct corporate entities after the sale,” Goucher v. Parmac, Inc. ,
694 P.2d 953, 954 (Okla. Ct. App. 1984), that CARSU continued to exist and
function after the sale of assets, and that the sale was not a mere reorganization of
the selling corporation, see Pulis , 561 P.2d at 71. On this basis, the district court
properly concluded that USRAC had met its burden of demonstrating it was
entitled to judgment as a matter of law and that plaintiffs failed to meet their
burden.
While the [summary judgment] movant bears the burden of showing
the absence of a genuine issue of material fact, the movant need not
negate the non-movant’s claim, but need only point to an absence of
evidence to support the non-movant’s claim. If the movant carries
this initial burden, the non-movant may not rest upon its pleadings,
but must set forth specific facts showing a genuine issue for trial as
to those dispositive matters for which it carries the burden of proof.
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Kaul v. Stephan , 83 F.3d 1208, 1212 (10th Cir. 1996) (quotation and citation
omitted). We agree with the district court’s conclusion that “[p]laintiffs’ failure
to respond to USRAC’s summary judgment [motion] with sufficient facts to
create a genuine issue as to the applicability of the continuation exception entitles
USRAC to entry of summary judgment in its favor.” Aplt. App., Vol. I at 19.
Plaintiffs next assert the district court erred in denying their request for
additional discovery. Federal Rule of Civil Procedure 56(f) allows a district court
to order discovery when the affidavits of a party indicate that the party
“cannot . . . present by affidavit facts essential to justify the party’s opposition
[to summary judgment].” Id.However, Rule 56(f) does not operate automatically. Its
protections must be invoked and can be applied only if a party
satisfies certain requirements. . . . A prerequisite to granting relief
[pursuant to Rule 56(f)] . . . is an affidavit furnished by the
nonmovant. Although the affidavit need not contain evidentiary
facts, it must explain why facts precluding summary judgment cannot
be presented. This includes identifying the probable facts not
available and what steps have been taken to obtain these facts. In
this circuit, the nonmovant also must explain how additional time
will enable him to rebut movant’s allegations of no genuine issue
of fact.
Price ex rel. Price v. W. Res., Inc. , 232 F.3d 779, 783 (10th Cir. 2000) (quotations
omitted). Essentially, the party must show precisely how additional discovery
will lead to a genuine issue of material fact. See Jensen v. Redevelopment Agency
of Sandy City , 998 F.2d 1550, 1554 (10th Cir. 1993). “Furthermore, if the party
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filing the Rule 56(f) affidavit has been dilatory, . . . no extension will be
granted.” Id.We review a denial of a Rule 56(f) motion for an abuse of discretion.
Price, 232 F.3d at 783. We have reviewed the record and agree with the district
court’s conclusion that plaintiffs failed to comply with Rule 56(f)’s requirements.
The cursory affidavit filed by plaintiffs’ counsel requesting additional time to
depose Messrs. Gobel and Pelton failed to explain why plaintiffs had not
previously deposed these witnesses and failed to explain with any specificity how
additional time would enable them to rebut USRAC’s motion. It appears from our
review of the record that plaintiffs did little if any discovery while this case was
pending. They failed to pursue their few outstanding discovery requests, which
were served six months prior to USRAC’s motion for summary judgment, and
made no attempt to depose key witnesses until more than two months after
USRAC filed its summary judgment motion. We agree with the district court that
plaintiffs had “ample opportunity to discover all facts necessary to their claims
during the one-year pendency of this case.” Aplt. App., Vol. I at 16 (footnote
omitted). Thus, we hold that the district court did not abuse its discretion in
denying relief under Rule 56(f).
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Appeal No. 01- 6076
More than four months after the district court granted summary judgment,
and while their first appeal was pending, plaintiffs filed a motion for new trial
under Fed. R. Civ. P. 60(b). Plaintiffs presented an affidavit from Mr. Pelton
stating that, immediately following the sale of assets to USRAC, CARSU was not
involved in any business activities, had no remaining assets, no employees, and
did not function as a corporation. He also stated that CARSU and USRAC had
at least six common officers immediately following the sale.
Plaintiffs claim they are entitled to a new trial under Rule 60(b)’s first three
grounds for relief: “(1) mistake . . .; (2) newly discovered evidence which by due
diligence could not have been discovered in time to move for a new trial . . . ;
[and] (3) fraud . . ., misrepresentation, or other misconduct of an adverse party.”
Id. They claim the fact that Mr. Gobel’s affidavit was stated in the present tense
misled them and the district court to mistakenly conclude that CARSU and
USRAC did not have common officers immediately before and after the sale of
assets.
We review the district court’s denial of Rule 60(b) relief for abuse of
discretion. Massengale v. Okla. Bd. of Exam’rs in Optometry , 30 F.3d 1325, 1330
(10th Cir. 1994). “Relief under Rule 60(b) is extraordinary and may only be
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granted in exceptional circumstances.” Bud Brooks Trucking, Inc. v. Bill Hodges
Trucking Co. , 909 F.2d 1437, 1440 (10th Cir. 1990).
To prevail on a Rule 60(b)(3) motion, a movant must prove the adverse
party committed the alleged fraud, misrepresentation, or misconduct by clear and
convincing evidence. Anderson v. Dep’t of Health & Human Servs. , 907 F.2d
936, 952 (10th Cir. 1990). Further, the movant must show that the alleged
misrepresentations prevented him from fully and fairly presenting his case. See
Walsh v. McCain Foods Ltd ., 81 F.3d 722, 726 (7th Cir. 1996); 11 C HARLES A.
W RIGHT , A RTHUR R. M ILLER & M ARY K AY K ANE , F EDERAL P RACTICE AND
P ROCEDURE § 2860 (2d ed. 1995). Plaintiffs have not shown either requirement.
Mr. Gobel’s affidavit was clearly stated in the present tense and he plainly made
no representation as to existence of any common officers or directors immediately
following the sale. Plaintiffs were in no way prevented from investigating his
statements, from deposing him in order to further probe his knowledge, or from
conducting their own discovery.
Plaintiffs also failed to show that, with due diligence, they could not have
deposed Mr. Gobel, located and deposed Mr. Pelton, or obtained corporate
records to establish the identity of any common officers or directors before and
after the sale or to ascertain whether CARSU continued to exist and function as
a separate corporate entity after the sale. Thus, plaintiffs did not establish
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mistake or surprise under Rule 60(b)(1). See Yapp v. Excel Corp. , 186 F.3d 1222,
1231 (10th Cir. 1999) (“the kinds of mistakes remediable under a Rule 60(b)(1)
motion are litigation mistakes that a party could not have protected against”).
Nor can the evidence submitted in plaintiffs’ Rule 60(b) motion be considered
“newly discovered” under Rule 60(b)(2); plaintiffs could have acquired it earlier
had they been properly diligent. See Harris v. Illinois-California Express, Inc. ,
687 F.2d 1361, 1375 (10th Cir. 1982) (holding that failure to exercise due
diligence precludes relief under Rule 60(b)(2)). Thus, the district court did not
err in denying plaintiffs’ Rule 60(b) motion.
AFFIRMED.
Entered for the Court
Mary Beck Briscoe
Circuit Judge
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