A Pennsylvania appeals court issued has upheld an important statutory reform, a law limiting the liability of Pennsylvania-based businesses that have merged with companies facing a risk of asbestos liability. See James Markovsky, et al. v. Crown Cork & Seal Co., et al., No. 2755 EDA 2013 (Pa. Super. 12/22/14).

A 2001 law imposed a limitation on successor asbestos-related liabilities, such that the cumulative successor asbestos-related liabilities of a domestic business corporation which was incorporated in the Commonwealth prior to May 1, 2001, shall be limited to the fair market value of the total assets of the transferor determined as of the time of the merger or consolidation, and such corporation shall have no responsibility for successor asbestos-related liabilities in excess of such limitation. Defendant was alleged to be liable based on successor liability, and obtained summary judgment based on the statutory cap, and plaintiff appealed, arguing that the act was unconstitutional, inter alia, because the legislation containing the relevant Section 1929.1 supposedly violated Sections 1 (original purpose) and 3 (single subject) of the Pennsylvania Constitution. 

The court noted that It is well-settled that a statute may be deemed per se unconstitutional if, under the classification, the class consists of one member and is closed to future membership. See Pa. Tpk. Comm'n v. Commonwealth, 899 A.2d 1085, 1098 (Pa. 2006); accord Harrisburg Sch. Dist. v. Hickok, 761 A.2d 1132, 1136 (Pa. 2000) (“[A] classification is per se unconstitutional when the class consists of one member and it is impossible or highly unlikely that another can join the class.”). Here, Section 1929.1 was not per se constitutionally infirm because it does not contain an apparent class consisting of one member that is closed or substantially closed to future membership.  Moreover, based on the record, Appellant had not offered any relevant evidence suggesting that Section 1929.1 is limited to the defendant and that no other company could avail itself of the benefits of the law.  The Appellant carries a heavy burden of proof for purposes of challenging the constitutionality of the act. The statute’s legislative history reflected that its sponsors used the defendant as an example of the statute’s purpose, all the while emphasizing the potential benefit to other similarly situated corporations throughout the Commonwealth.  More importantly, Appellant did not show it is impossible or highly unlikely for other corporations to enjoy the statute’s protection.

The panel also rejected arguments that the law ran afoul of the equal protection provision of the U.S. Constitution by subjecting out-of-state corporations to disparate treatment. Thus, the trial court did not err as a matter of law in granting the motion for summary judgment. 

A common sense decision, as the legislature clearly saw important policy benefits in terms of merger activity and protection of local employers.