GILBERT KOUBA, INDIVIDUALLY AND AS REPRESENTATIVE OF THE ESTATE OF AUDREY KOUBA, KAREN WILLIAMS AND CURTIS KOUBA, Appellants
NORTHLAND INDUSTRIES, INC. D/B/A MAGNUM FITNESS, JHTNA MANUFACTURING, L.L.C., AND JOHNSON HEALTH TECH NORTH AMERICA, INC., Appellees
Appeal from the 25th District Court Colorado County, Texas
Trial Court Case No. 241329-A
consists of Chief Justice Radack and Justices Goodman and
gym-goer died after sustaining injuries from falling off a
treadmill that allegedly "unexpectedly changed
speeds." Her surviving spouse and adult children sued
the treadmill's manufacturer, the entity that purchased
the manufacturer's assets before the gym-goer fell, that
asset purchaser's parent company, and other parties not
before us in this appeal. They pleaded several theories and
sought recovery for their damages and for the gym-goer's
pain, anguish, medical expenses, and funeral and burial
claims included a cause of action against the asset purchaser
and its parent for breach of the implied warranty of
merchantability for the treadmill. That claim is based on
provisions of the asset-purchase agreement under which the
manufacturer sold its assets, and transferred certain
liabilities, to the asset purchaser.
trial court granted summary judgment against the plaintiffs
on all claims against the manufacturer, asset purchaser, and
asset purchaser's parent company and severed the rest of
the suit, which involved the other defendants not before us.
The severance made the summary judgment a final judgment as
between the plaintiffs and the manufacturer, the asset
purchaser, and its parent.
plaintiffs appeal, contending that (1) the purchaser assumed
liability in the asset-purchase agreement for the implied
warranty of merchantability that arose out of the
manufacturer's sale of the treadmill to the gym and (2)
the purchaser's parent company is vicariously liable for
the implied warranty under either a joint-enterprise theory
or terms of the asset purchase agreement providing that the
parent would guarantee the purchaser's performance and
obligations under the agreement.
response, the manufacturer, asset purchaser, and its parent
contend that certain other provisions of the agreement
demonstrate that the asset purchaser did not agree to assume
any liability for the implied warranty and that the implied
warranty cannot arise out of the written warranty for the
treadmill but only out of a contract for its sale, which is
not present in the asset-purchase agreement. We affirm in
part and reverse and remand in part.
Northland Industries, Inc., d/b/a Magnum Fitness,
manufactured and sold treadmills. It sold a treadmill to a
gym that Audrey Kouba later visited. One day while using the
treadmill, she fell, striking her head. She later died due to
her injuries from the fall.
her fall, Magnum Fitness sold its assets to JHTNA
Manufacturing, L.L.C. ("JHTNA"). JHTNA purchased
the assets, and assumed certain of Magnum Fitness's
liabilities, under an asset-purchase agreement (the
"Agreement"). Also in the Agreement, JHTNA's
parent company, Johnson Health Tech North America, Inc.
("Johnson Health"), agreed to guarantee JHTNA's
performance of and obligations under the Agreement.
agreed to assume certain of Magnum Fitness's liabilities
under the following provisions:
2.5 Assumption of Liabilities. Subject to the terms
and conditions set forth herein at the Closing [JHTNA] shall
assume and agree to pay, honor and discharge when due only
the liabilities and obligations of [Magnum Fitness]
specifically identified below relating to the Assets existing
at or arising on or after the Closing Date (collectively, the
2.5.6. any Product Warranty Claim solely with respect to
claims arising with respect to and during the time periods
set forth in the written warranties of [Magnum Fitness]
attached hereto on Schedules 3.1.17(a)(i) and
3.1.17(a)(i) of the Agreement includes a "Commercial
Treadmill Warranty," which provides:
Magnum warrants to the ORIGINAL purchaser that their
treadmill will be free from defects for the time periods
listed in this form. Magnum will repair or replace the
defective part, at Magnum's option, during the warranty
period. Parts will be shipped free of charge within the USA.
Parts. Electronics, including motor, motor
controller, all PCB's. Mechanical components.
Deck and running bell
Warranty concludes, "There are no additional warranties;
either expressed or implied, arising out of the sale or this
product other than those contained herein. Warranty is only
for the repair or replacement of the product." The
Agreement provides that Wisconsin law governs its validity,
interpretation, and effect.
Audrey Kouba's death, her surviving spouse and her two
adult children-Appellants Gilbert Kouba, individually and as
representative of her estate; Karen Williams; and Curtis
Kouba (collectively, "Kouba")-sued Magnum Fitness,
JHTNA, and Johnson Health (collectively, the "JHT
Defendants"); the gym; and others. They alleged several
causes of action against the JHT Defendants, including
negligence, strict liability, and breach of the implied
warranty of merchantability for the treadmill. They pleaded
that Texas Business & Commerce Code section 2.314, which
is part of Texas's enactment of the Uniform Commercial
Code, gave rise to the applicable implied warranty.
Defendants moved for summary judgment on all claims against
them. They contended that the Commercial Treadmill Warranty
gave rise only to certain express warranties, and those only
to the gym as the treadmill's original purchaser.
Therefore, they argued, JHTNA assumed no implied warranty of
merchantability for the treadmill under the Agreement. They
also contended that provisions of the Agreement excluding any
liability to JHTNA for "product liability claims"
meant that JHTNA did not assume the implied warranty of
response to the motion for summary judgment, Kouba contended
that (1) JHTNA assumed liability for the implied warranty of
merchantability arising out of the sale of the treadmill to
the gym under the Agreement and either Texas or Wisconsin
law; (2) nothing in the Agreement waived the implied warranty
of merchantability; (3) JHTNA is liable for the implied
warranty of merchantability notwithstanding the lack of any
privity of contract between it and Kouba; and (4) Johnson
Health is liable for the implied warranty too either because
it engaged in a joint enterprise with its subsidiary, JHTNA,
or because it agreed in the Agreement to guarantee
JHTNA's performance and obligations under the Agreement.
trial court granted a complete summary judgment in the JHT
Defendants' favor. It then severed the claims against the
JHT Defendants from the rest of the suit, making the summary
judgment a final judgment as between Kouba and the JHT
challenges the trial court's conclusion that JHTNA is not
liable for any implied warranty of merchantability relating
to the treadmill. In both the summary-judgment briefing and
the briefing on appeal, Kouba's contentions are based
solely on the cause of action for breach of the implied
warranty of merchantability, ignoring the other causes of
action dismissed by the summary judgment.
only arguments for Johnson Health's liability are
vicarious-liability arguments that depend on JHTNA's
predicate liability. Thus, if JHTNA did not assume any
liability for the implied warranty, then its parent, Johnson
Health, is not liable on that claim either.
consider the relevant portions of the Agreement and the law
on the implied warranty of merchantability to review
Kouba's challenge to the summary judgment.