Folke Corporation Case Study

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The Franklin Business and Commerce Code §121 allows for an exception to the general rule of non-liability when a “party which acquires a manufacturing business and continues the output of its line previously manufactured or distributed by the entity from which the business was acquired.” If the Folke Corporation meets these two elements, then they can be held liable for Mr. Regan’s injuries. These two elements are: (1) “the virtual destruction of the plaintiff’s remedies against the original manufacturer is caused by the successor’s acquisition of the business”; (2) “the successor has the ability to assume the original manufacturer’s risk-spreading role.”
The Folke Corporation meets one of the elements of liability through this exception because
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Macintosh became the parent corporation in a takeover, which gave Macintosh effective control over Western Asbestos. The board members of Western Asbestos would later vote to dissolve the company. The court held that “There need be only a ‘causal connection’ between the successor’s acquisition and the unavailability of the predecessor as a potential defendant”. In Kramer, the causal connection was the acquisition that led to Macintosh’s complete control of Western Asbestos. The dissolution of Western Asbestos happened while Macintosh had this control. Therefore, Macintosh’s acquisition had a causal connection with the unavailability of the predecessor as a potential defendant. In Shatner v. Burger Company, the court found that the Burger Company did not cause the virtual destruction of Shatner’s remedies because it was not involved in the decision to dissolve the company. In Shatner, the Burger Company purchased the asbestos producing assets of the Oliver Corporation. The two corporations had no corporate overlap after the acquisition, which meant that they had no direct role in the decision to dissolve. Therefore, Burger was not the cause of the destruction of the plaintiff’s

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