On Feb. 18, 2014, the American Association for Justice (AAJ), along with the New Jersey Association for Justice (NJAJ), filed an amicus brief in a case of substantial interest to product liability attorneys, Aaroma Holdings, LLC v. Diacetyl Plaintiffs, No. 13-1467 (3rd Cir.).  Emoral Inc. was a manufacturer of diacetyl, a chemical for food flavorings, such as butter flavor for theater popcorn. Plaintiffs are employees of flavoring manufacturers who developed serious and permanent lung damage caused by exposure to the chemical. Emoral sold its assets to Aaroma Holdings, which has continued much of Emoral’s operations, and declared bankruptcy.  The bankruptcy trustee then entered into a settlement that released Aaroma from any claims that were part of the bankruptcy estate. A number of lung-injury plaintiffs pursued their cause of action in New Jersey state courts, contending that Aaroma could be held liable as a “mere continuation” of Emoral. Aaroma moved the federal bankruptcy court to enforce the settlement agreement and enjoin the state court actions. The bankruptcy court denied the motion, but the district court reversed, and the Third Circuit affirmed. The court of appeals held that the injured workers’  claims were generalized claims similar to other creditors of Emoral and were thus settled by the Trustee’s settlement.

The amicus brief supports plaintiffs’ motion for rehearing or rehearing en banc. The brief, prepared by David J. Molton, New York, NY, with assistance from CCL’s Jeffrey White, argues that the personal injury claims are individual claims that belong to the plaintiffs, rather than to the bankruptcy estate. To hold otherwise undermines the strong public policy behind successor liability which preserves legal redress for wrongful injury and shifts the costs of injury to the corporation that profits from the continuation of Emoral’s business and could spread the costs of the injuries caused by that business.