Corr v. Willamette Industries, Inc.

Pearson, J.

This case raises the issue of whether the workers' compensation act, RCW 51.04.010 et seq., provides the exclusive remedy for an employee injured by defective equipment designed and built by his employer's corporate predecessor. Under the facts of this case, we hold that the workers' compensation act is the exclusive remedy available to appellant.

Coreo, Inc., was an Ohio corporation engaged in the manufacture and sale of corrugated paper packaging and plastic packaging products. In 1977 Willamette Industries, Inc., absorbed Coreo in a corporate merger. Willamette acquired Corco's accounts receivable, accounts payable, physical plant, inventory, work in progress, finished goods, patents, trade name, customer lists, and goodwill.

Willamette also acquired substantially all of Corco's plant equipment, including two bulk bin compressor units. Coreo employees had designed and built only two such units, both of which Coreo had used in the manufacture of large cardboard boxes known as bulk bins. The two bulk bin compressor units never were sold or otherwise placed in the stream of commerce except as incident to the merger of Coreo and Willamette.

Pursuant to the terms of the merger agreement, and by virtue of statute, Willamette succeeded to all Corco's liabilities and obligations, RCW 23A.20.060(5), and continued the same line of business. Willamette used the two bulk bin compressor units without modification. Willamette never sold either of these units.

In April 1980, Western Kraft Paper Group, a wholly owned subsidiary of Willamette, employed Christopher Corr as a general laborer at its plant in Bellevue, Washington. On July 1, 1980, Corr suffered serious injuries while cleaning one of the bulk bin compressor units. Corr subsequently filed for, and received, workers' compensation benefits.

In October 1981, Corr initiated this products liability action against Willamette, the parent corporation of Western Kraft Paper Group. Corr also alleged that Willamette negligently failed to provide "a safe and helpful working environment". Willamette later moved for summary judgment on the ground that the workers' compensation act provides the exclusive remedy available to an injured employee. The trial court granted summary judgment in favor of Willamette and dismissed the action with prejudice. Corr appealed directly to this court.

I

The Legislature has abolished common law actions between employee and employer for personal injuries suffered by the employee in the workplace. RCW 51.04.010. The workers' compensation act provides the exclusive remedy in such cases. Spencer v. Seattle, 104 Wn.2d 30, 700 P.2d 742 (1985); Provost v. Puget Sound Power & Light Co., 103 Wn.2d 750, 696 P.2d 1238 (1985). However, if a third person not in the same employ as the injured employee causes the injury, the injured worker may seek damages from the third person. RCW 51.24.030. An election to proceed against a third person does not jeopardize the injured worker's right to receive benefits under the workers' compensation act. RCW 51.24.040.

Corr argues that Willamette is such a third person, subject to liability in that capacity for the injuries suffered by Corr. Two doctrines potentially support Corr's characterization of Willamette as a third person: (1) dual capacity, and (2) dual persona. As discussed below, this court has rejected the former and finds that the latter does not apply given the facts of this case.

II

The dual capacity doctrine has been defined as

that theory under which an employer who normally enjoys immunity from common-law and statutory liability under the exclusive remedy provision of workers' compensation law may become liable to an employee when acting in a capacity outside the employer-employee relationship, which capacity may impose obligations apart from those imposed as an employer.

Annot., Workmen's Compensation Act as Furnishing Exclusive Remedy for Employee Injured by Product Manufactured, Sold, or Distributed by Employer, 9 A.L.R.4th 873, 875 n.2 (1981). Corr argues that Willamette acted in a dual capacity as: (1) an employer with an obligation to provide a safe working environment; and (2) a manufacturer of a product used in the workplace, which subjects Willamette to products liability claims. If the doctrine of dual capacity were the law of this state, Corr arguably would have a cause of action against Willamette in its second capacity as a product manufacturer.

This court, however, recently rejected the dual capacity doctrine in Spencer v. Seattle, supra. In Spencer, this court held that the workers' compensation act barred suit against a city by an employee of its park department for injuries allegedly caused by the negligence of the road department. In rejecting the dual capacity doctrine, this court recognized that "[t]he 'dual capacity' doctrine has been subject to much criticism. Even Arthur Larson, who is given much credit for the doctrine's evolution, believes it should be jettisoned because of misapplication and abuse." (Citations omitted.) Spencer, at 32-33.

Many other jurisdictions have refused to apply the dual capacity doctrine to an employer also acting in the capacity of manufacturer. See 2A A. Larson, Workmen's Compensation § 72.83 (1983). Courts have rejected the dual capacity doctrine in the employer/manufacturer relationship because an employer's obligation to provide a safe workplace cannot be separated from the duty owed by an employer to his employees by reason of his manufacture of equipment with which employees must work. See 9 A.L.R.4th 873 (1981). We believe this rationale is sound and reiterate our rejection of the dual capacity doctrine.

Ill

The "dual capacity" doctrine, however, must be distinguished from the' doctrine of "dual persona". A Larson § 72.81. Professor Larson explains the "dual persona" doctrine thusly:

An employer may become a third person, vulnerable to tort suit by an employee, if — and only if — he possesses a second persona so completely independent from and unrelated to his status as employer that by established standards the law recognizes it as a separate legal person.

A. Larson § 72.81. The focus is not upon the degree of distinction between the second function and the first, but whether the second function generates obligations distinct from those related to the employment activity.

A leading example of dual persona is the case of Billy v. Consolidated Mach. Tool Corp., 51 N.Y.2d 152, 412 N.E.2d 934, 432 N.Y.S.2d 879 (1980). In Billy the court held that where, by corporate merger, the employer succeeds to the liabilities of the manufacturer of the equipment, the employer cannot avoid those liabilities merely because the workers' compensation law covered the decedent. Billy, at 162. The court in Billy reasoned that the decedent's representative was not suing the decedent's former employer, but rather was suing the successor to the liabilities of the alleged tortfeasor. The court concluded that the employer-employee relationship did not control because the obligation arose out of an independent business transaction between corporations, not out of the employment relationship. The court distinguished Billy from cases applying the "dual capacity" doctrine because in Billy third parties with no employment relationship with the decedent committed the tort, and not the decedent's employer or any of its agents.¹ Accordingly, the court ruled that the lower court erred in dismissing the cause of action merely because the defendant had been the decedent's employer.

Two additional jurisdictions also have adopted the dual persona doctrine in the context of corporate mergers. See Kimzey v. Interpace Corp., 10 Kan. App. 2d 165, 694 P.2d 907 (1985); Schweiner v. Hartford Accident & Indent. Co., 120 Wis. 2d 344, 354 N.W.2d 767 (Ct. App. 1984). The circumstances which supported imposition of dual persona liability in Billy, Kimzey and Schweiner are indistinguishable from those present in this case. The predecessor corporation, Coreo, manufactured the plant equipment which exposed Corr to the risk of injury. As manufacturer, Coreo might have had potential liability for injuries caused by the plant equipment. When Willamette and Coreo merged, Willamette succeeded to the liabilities and obligations of Coreo. Accordingly, under Billy, Kimzey and Schweiner, Corr arguably should be entitled to recover under the doctrine of dual persona.

These three decisions, however, fail to carry through the analysis of the dual persona doctrine to its reasonable conclusion. The doctrine rests on the premise that if the merging corporations had not merged, the injured claimant could have sued the manufacturing corporation as a third person tortfeasor. Billy, at 161-62; Kimzey, at 169-70; Schweiner, at 352-53; see also RCW 51.24.030. Under the facts of this case, however, an injured claimant never could have sued Coreo as a third person because Coreo had no liabilities or obligations flowing to Willamette's employees. The two bulk bin compressor units were not manufactured for resale or entry into the stream of commerce. From the time of installation until merger, both units remained in Corco's workplace.

Only by virtue of the merger did the defective plant equipment transfer from Coreo to Willamette. Thus, absent the merger, Corr could have been injured by this machinery only if he had been an employee of Coreo. As an employee of Coreo, however, Corr would be limited to the exclusive remedies of the workers' compensation act. Coreo never owed obligations or had liabilities to persons other than its own employees relative to these compressor units. Accordingly, Coreo never could be subject to third person liability. Because Coreo could not be subject to third person liability, such liability cannot be imposed upon Willamette simply because the two corporations merged.

Although we need not decide this issue, third person liability under the dual persona doctrine arguably should arise in the merger context only when the corporate manufacturer sells the defective equipment to the successor corporation prior to merger or otherwise places the defective product somewhere other than in its own workplace, i.e., in the stream of commerce. Under these circumstances, the corporate manufacturer would have existed as a third person subject to liability prior to the merger. Because an individual could have been injured by the defective machinery outside the manufacturer's workplace, an injured employee of the manufacturer's corporate successor arguably should be permitted to maintain a cause of action against his employer for resulting injuries.

Put simply, the formalities of a corporate merger should not extinguish the liability of the manufacturer whose assets and obligations have been transferred to another corporate entity. In this case, however, the injured claimant has not been precluded from bringing suit against the manufacturer of the product due to merger. No obligation or liability would have existed prior to the merger, and none should be created by the merger that could not have existed independently. Thus, although the court might apply the dual persona doctrine in the proper case, this is not such a case.

IV

Absent the dual persona doctrine, the dispositive principle in this case is that the workers' compensation act provides the exclusive remedy for an employee injured by defective equipment designed and built by his employer's corporate predecessor, unless the employer expressly waives the act's protection. See Brown v. Prime Constr. Co., 102 Wn.2d 235, 684 P.2d 73 (1984); Seattle-First Nat'l Bank v. Shoreline Concrete Co., 91 Wn.2d 230, 588 P.2d 1308 (1978). No express contractual waiver exists in this case, and we refuse to imply such a waiver from the statutory formalities of a corporate merger. Accordingly, we affirm the trial court.

Dolliver, C.J., and Utter, Brachtenbach, Andersen, Callow, Goodloe, and Durham, JJ., concur.

1 The court in Billy v. Consolidated Mach. Tool Corp., 51 N.Y.2d 152, 412 N.E.2d 934, 432 N.Y.S.2d 879 (1980) specifically rejected application of the traditional dual capacity doctrine to an employer acting in the capacity of the manufacturer. Billy, at 160.