Thought Leadership

Key Points:
• The “product line exception” in Pennsylvania is a multi-factored, flexible test wherein no one factor is mandatory or determinative.
• Practicality over technicality is key.
• Acquiring another company’s product line and goodwill comes at a two-fold price.

Generally, Pennsylvania law holds that when one corporation transfers all of its assets to a successor corporation, the successor is not responsible for the transferor’s  liabilities. Several exceptions to this general rule apply, like express/implied agreement or fraud. 

A more unique exception to this general rule is the “product line exception,”which is periodically raised in products liability cases.

This exception was adopted into Pennsylvania law in 1981 by the Superior Court in Dawejko v. Jorgen Steel Co., 434 A.2d 106 (Pa.Super. 1981). 

The Pennsylvania Supreme Court has never directly addressed the viability of the “product line exception” since its adoption into Pennsylvania law. Thus, the Superior Court’s evolving, flexible application holds.

Recently, the Superior Court attempted to clarify its flexible application of the “product line exception” in Burnley v. Loews Hotel, 355 A.3d 328 (Pa. Super. 2026).

In Burnley, the plaintiff, Dana Burnley, fell on a defective cable protector at the Loews Hotel in Philadelphia, PA, while attending a conference on September 26, 2014. Mrs. Burnley alleged serious personal injuries as a result. At trial, the jury awarded Mrs. Burnley and her husband, $18,111,250 (molded by the trial court to $6,037.083.33).

The cable protector was manufactured by Industrial Advanced Technologies, Inc. (“IAT”). IAT produced Firefly brand cable protectors by supplying molds to FallLine, who poured polyurethane into molds to form two pieces of the cable protector. An error occurred in the manufacturing process, which caused a batch of defective protectors to contain mismatched lengths of the protector sides. Some of these defective protectors was rented to Loews Hotel for the conference Mrs. Burnley attended in September of 2014.

Checkers Industrial Products, LLC (“Checkers”) acquired IAT’s cable protector business through an asset purchase agreement in April of 2015, approximately eight months after Mrs. Burnley’s fall. There was no evidence that Checkers knew about the defective batch at the time of the agreement.

Throughout litigation, Checkers argued it could not be liable because Checkers merely purchased the assets of IAT without assuming any of IAT’s debts or liabilities. The plaintiffs argued that the “product line exception” applied.

At trial, the jury heard the following evidence related to the transaction between Checkers and IAT: (1) Checkers purchased all of IAT’s equipment, customer lists, intellectual property, patents, trade shows, and trade names; (2) IAT entered into a non-compete preventing IAT from manufacturing, marketing, or selling cable protectors (3) Checkers publicly announced its purchase; (4) Checkers continued to use the IAT stamp and Firefly logo; (5) Checkers handled ongoing customer complaints about IAT/Firefly products (including those before its asset purchase of IAT); (6) IAT agreed to retain all liabilities before the sale, including “product liability”; (7) IAT remained in business after the sale; (8) IAT had no insurance with respect to its cable protector business; and (9) IAT’s only assets were the Firefly brand and associated inventory, trademarks, and intellectual property.

The jury returned a verdict, determining among other things, that Checkers was a successor corporation to which the “product line exception” applied. Checkers appealed to the Superior Court.

The Superior Court affirmed the judgment based on the core principle of the exception. It held that, when a successor purchases substantially all manufacturing assets of another company and continues the same operation, strict liability in the same product will apply.

The Superior Court explained that “several factors” are relevant to whether the exception is applicable. No one factor is mandatory or determinative, dubbed the “flexible” approach.

The Superior Court’s recitation of the factors in Burnley is lengthy, but boils down to the following considerations: the successor’s acquisition of goodwill and customer lists; continuation as ongoing enterprise; same product, name, management, personnel, and clients; and use of same equipment, molds, and/or designs.

Further, special consideration was given to the policy-based factors: virtual destruction of a plaintiff’s remedies against the original manufacturer; the successor’s ability to assume the risk; and the fairness of requiring the successor to assume responsibility.

In applying these factors, the Superior Court found that Checkers purchased IAT’s goodwill and customer lists; advertised as an ongoing enterprise of the Firefly product line; profited from this goodwill; used the same product, equipment, molds, and designs; solicited IAT customers; and IAT ceased its cable protector operation, while Checkers continued it.

More importantly, the Superior Court rejected Checkers’ argument that IAT technically remained in business after the sale and, therefore, a viable entity that the plaintiffs could recover from. However, IAT was in debt and financially unable to pay any judgment against it. Therefore, the jury was permitted to infer the destruction of the plaintiffs’ remedies against IAT and hold Checkers responsible under the “product line exception.” “Practicality over technicality” won the day.

A corporation must look beyond mere technicalities when defending against the “product line exception.” A fact-intensive analysis will apply, which will often be left at the feet of a jury. As a result, companies such as Checkers, who had no hand in manufacturing or distributing the defective product, or even any ownership interest in the company that made the product at the time of the accident, can still be found strictly liable.

This potential liability appears boundless. Checkers acquired the Firefly product line from IAT some eight months after Mrs. Burnley’s fall. However, no temporal consideration appears to have been baked into the Superior Court’s analysis. Thus, a plaintiff can viably argue the exception applies even multiple years removed from an incident or acquisition. Any time-based argument will be one of many non-dispositive factors considered by the jury.

Corporations should be on notice of the potential effect of the “product line exception” on corporate transactions. Asset purchasers cannot escape liability, even strict liability, through technical structures. And acquiring assets comes at a cost, sometimes a two-fold cost.

The majority’s holding in Burnley is not without criticism, with three judges dissenting. One dissenting judge, Mary Jane Bowes, advocated for a “wholesale rejection of the product line exception,” an issue that was not before the Superior Court due to Checkers’ failure to properly preserve it.

James is an Associate in our Pittsburgh, PA office. He can be reached at (412) 803-1159 or at JPCullen@mdwcg.com.