Zavala vs Avibank Manufacturing Products Liability
$175,000 Recovered for a California Worker
Zavala vs Avibank Manufacturing Case Settlement Review:
While Setareh Law Group now concentrates exclusively on employment law and protecting workers’ rights, Mr. Setareh has achieved significant victories in other areas of law earlier in his career. The following case represents a remarkable example of overcoming seemingly impossible legal obstacles in a products liability matter. Demonstrating the innovative legal strategies and relentless advocacy that now benefit our employment law clients.
Though we no longer handle personal injury or products liability cases, this case showcases the type of creative problem-solving and determination we bring to every employment dispute we handle.
Due to confidentiality, party names and docket details aren’t public.
Zavala vs Avibank Manufacturing Case Settlement Review Products Liability Victory: 3 Shocking Obstacles Overcome to Win $175K From Defunct Company
The Case at a Glance
Defying the Impossible: Recovering from a Defunct Manufacturer
Mr. Setareh represented a factory employee who suffered serious hand injuries caused by a defective industrial machine manufactured by an out-of-state company. What appeared to be a straightforward products liability case quickly became one of the most complex and challenging legal battles of Mr. Setareh’s career. Requiring creative legal strategies to overcome obstacles that would have defeated most attorneys.
The Injury
Mr. Setareh’s client was a hardworking factory employee operating industrial machinery as part of his daily job duties. During the course of his work, a defectively designed or manufactured machine caused severe injuries to his hand. Injuries that would affect his ability to work and his quality of life permanently.
These types of workplace injuries are devastating:
- Loss of hand function affects nearly every aspect of daily life
- Workers may be unable to return to their previous occupation
- Medical treatment often requires multiple surgeries and extensive rehabilitation
- Pain and disability can be permanent
- Earning capacity is significantly diminished
Under California law, when a defective product causes injury, the manufacturer can be held strictly liable. Meaning the injured person doesn’t have to prove negligence, only that the product was defective and caused the injury.
The Legal Nightmare: A Defunct Manufacturer
Just as Mr. Setareh began investigating the case, he discovered a critical problem: the original manufacturer of the defective machine had gone out of business.
This is every products liability attorney’s worst nightmare. According to California law, it is extraordinarily difficult and virtually impossible, under most circumstances, to sue and recover damages from a company that has ceased to exist.
When a company dissolves:
- It no longer has assets to satisfy a judgment
- Corporate officers and shareholders are generally protected from personal liability
- There is no insurance policy to pursue
- The legal entity simply disappears
For most attorneys, this would be the end of the case. The client’s injuries might be severe, the defect might be clear, but without a solvent defendant to sue, there is no path to recovery.
The Breakthrough: Successor Liability
However, Mr. Setareh’s investigation uncovered a crucial fact: before dissolving, the original manufacturer had sold all of its assets to a second company. This opened the door to a complex legal doctrine known as successor liability.
Mr. Setareh filed suit against:
- The original company that manufactured the defective machine (though defunct)
- The company that purchased all of the original company’s assets
Understanding Successor Liability in California
Under California law, when one company purchases another company’s assets, the purchasing company (the “successor”) generally does not assume the selling company’s liabilities. This is known as the “general rule of successor non-liability.”
The General Rule (Protecting Successors):
When Company B buys assets from Company A, Company B is NOT responsible for Company A’s debts, obligations, or legal liabilities. Including products liability claims for defective products manufactured by Company A.
This rule exists to:
- Encourage legitimate business transactions
- Allow companies to buy assets without inheriting unknown liabilities
- Provide certainty in commercial transactions
- Protect good-faith purchasers
The Exceptions (When Successors ARE Liable):
However, California recognizes several narrow exceptions where a successor company CAN be held liable for the predecessor’s obligations:
- Express or Implied Agreement: The successor expressly or impliedly agreed to assume the liabilities
- De Facto Merger: The transaction amounts to a consolidation or merger of the two companies (looking at factors like continuity of management, shareholders, business operations, and corporate identity)
- Mere Continuation: The successor corporation is merely a continuation of the predecessor (similar ownership, management, and operations)
- Fraudulent Transfer: The transaction was entered into fraudulently to escape liability for the predecessor’s obligations
- Product Line Exception: In some California cases, when a successor continues manufacturing the same product line and holds itself out as a continuation of the original manufacturer’s business
The Ray v. Alad Exception:
California’s landmark case Ray v. Alad Corp. (1977) established the “product line exception” to successor non-liability. Under this doctrine, a successor company that acquires a manufacturing business and continues the same product line may be held liable for defects in products manufactured by the predecessor when:
- There is continuity of the product line
- The successor benefits from the goodwill of the predecessor
- The predecessor has dissolved, making it impossible to sue them
- The successor has the ability to assume the predecessor’s risk-spreading role (through insurance and pricing)
Why This Case Was "Virtually Impossible"
Despite these exceptions, successor liability cases are notoriously difficult to prove because:
1. High Burden of Proof The plaintiff must demonstrate that one of the narrow exceptions applies, requiring extensive discovery into:
- Corporate documents and transaction agreements
- Ownership and management structures
- Business operations and continuity
- The specific terms of the asset purchase
2. Defendants Fight Aggressively Successor companies vigorously defend these cases because:
- A finding of successor liability can expose them to massive liabilities they never anticipated
- It affects their ability to limit risk in future acquisitions
- The financial consequences can be devastating
3. Complex Corporate Law These cases require sophisticated understanding of:
- Corporate structure and transactions
- Contract law and asset purchase agreements
- California’s evolving successor liability jurisprudence
- Piercing the corporate veil doctrines
4. Evidentiary Challenges Proving the exceptions often requires:
- Internal corporate documents the defendant won’t voluntarily produce
- Testimony from corporate officers who have incentive to deny continuity
- Financial records showing the true nature of the transaction
- Evidence that the predecessor is truly judgment-proof
Mr. Setareh's Strategy and Success
Through exhaustive investigation and aggressive litigation, Mr. Setareh was able to:
- Conduct Thorough Discovery: Obtaining corporate records, asset purchase agreements, and internal documents showing the relationship between the two companies
- Establish Legal Grounds for Successor Liability: Proving that one or more of the exceptions to the general rule of successor non-liability applied to this transaction
- Demonstrate Continuity: Showing that the successor company continued the predecessor’s business operations, product lines, or held itself out as a continuation of the original manufacturer
- Navigate Complex Corporate Law: Successfully arguing that holding the successor liable was both legally appropriate and necessary to provide compensation to the injured worker
- Overcome Defendant’s Defenses: Defeating the successor company’s arguments that it bore no responsibility for products manufactured before it acquired the assets
The result was a successful recovery for the client. Achieving what California law describes as “virtually impossible” and securing compensation for injuries that might otherwise have gone uncompensated.
Understanding Products Liability Law
Products liability law holds manufacturers, distributors, and sellers responsible when defective products cause injuries. There are three main types of product defects:
1. Design Defects
- The product’s design is inherently dangerous or flawed
- Even when manufactured perfectly, the design creates unreasonable risks
- Example: Industrial machinery without proper safety guards
2. Manufacturing Defects
- The product’s design is safe, but something went wrong during manufacturing
- The specific unit that caused injury differs from the intended design
- Example: A machine with improperly installed safety mechanisms
3. Warning Defects (Failure to Warn)
- The product is dangerous, but lacks adequate warnings or instructions
- Users aren’t properly informed of risks or safe usage procedures
- Example: Industrial equipment without clear safety warnings
Strict Liability in California
California applies “strict liability” to products liability cases, meaning:
- The injured person doesn’t need to prove the manufacturer was negligent
- They only need to prove the product was defective and caused their injury
- The focus is on the product’s condition, not the manufacturer’s conduct
- This makes it easier for injured consumers and workers to recover
Workers' Compensation vs. Products Liability:
When injured by defective equipment at work, employees may have two separate claims:
- Workers’ Compensation: Provides medical benefits and wage replacement regardless of fault, but limits recovery and prohibits suing the employer
- Products Liability (Third-Party Claim): Allows the injured worker to sue the equipment manufacturer for full damages, including pain and suffering, lost future earnings, and punitive damages
These claims can proceed simultaneously, providing more complete compensation for seriously injured workers.
The Importance of This Victory
This case demonstrates several critical principles:
For Injured Workers:
Even when recovery seems impossible due to corporate dissolution, creative legal strategies may still provide a path to justice and compensation. Never assume a case is hopeless without consulting an experienced attorney.
For Corporate Accountability:
Companies cannot escape responsibility for defective products simply by dissolving and transferring assets. California law recognizes successor liability to ensure injured victims have recourse.
For Legal Innovation:
Complex legal obstacles require innovative thinking and aggressive advocacy. Mr. Setareh’s success in this case required deep knowledge of both products liability and corporate law, as well as the determination to pursue justice despite long odds.
For Workplace Safety:
Holding manufacturers accountable for defective equipment creates incentives for safer design and manufacturing, ultimately protecting all workers who use industrial machinery.
Relevant Resources
Product Safety Information:
- U.S. Consumer Product Safety Commission (CPSC) – Product recalls and safety information
- OSHA – Occupational Safety and Health Administration – Workplace safety standards and regulations
- OSHA Machine Guarding – Safety requirements for industrial equipment
- National Safety Council – Workplace safety resources
Legal Information
- California Department of Industrial Relations – Workers’ compensation and workplace safety
- Product Liability Law – California Courts – Legal resources and information
Workers' Rights:
- California Division of Workers’ Compensation – Information about workers’ comp claims
- Legal Aid at Work – Resources for California workers
- California Civil Rights Department – File complaints and learn about protections
Thank you for reading our Zavala vs Avibank Manufacturing Case Settlement Review by Setareh Law Group.
*Disclaimer: This information is provided for educational purposes and does not constitute legal advice. Each case is unique, and outcomes depend on specific facts and circumstances. Consult with a qualified California employment attorney to discuss your individual situation. The settlements and case results summary-overview described on this page represent outcomes in specific cases and should not be interpreted as a guarantee, warranty, or prediction of the outcome of any other case. Case valuations depend on numerous factors including the severity of injuries, the strength of evidence, the jurisdiction, and many other variables unique to each matter.
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