Case Provides Blueprint for Controlling Liability

The Seventh Circuit’s decision in Thornton v. M7 Aerospace, LP serves as a reminder to companies that purchase or succeed to assets of a product manufacturer that liability may follow if they do not act on a fully informed basis to protect themselves.

Thornton arose out of a plane crash in which fifteen people died. The estates of the deceased sued several companies and one individual in the Northern District of Illinois. The companies had successively purchased the assets of the plane’s bankrupt manufacturer. Plaintiffs argued duty-to-warn and voluntary undertaking.

The Seventh Circuit upheld a trial court’s decision for the defendants: Some jurisdictions impose a duty of care on a successor based solely on its acquisition and operation of a product line, but Illinois does not, and Illinois law was applicable.

Plaintiffs had no more success arguing that a duty to warn arose under the voluntary undertaking theory, because Illinois law requires proof of reliance – that is, proof that the operator relied on the defendant’s voluntary undertaking of a duty to warn.

The author provides some key takeaways, including the importance of choice of law. Application of Illinois law was critical to the Thornton decision, and the fact it was specifically referenced in the Asset Purchase Agreement was crucial. The manufacturer’s assets were acquired free and clear of any claims according to the Asset Purchase Agreement. This played a key role in determining the scope of successor liability.