On the heels of the decision of the New York Court of Appeals in American Standard v. OakFabco, 14 N.Y.3d 399 (2010), which held that, pursuant to the terms of an asset purchase and sale agreement, the buyer of a boiler business assumed certain of the seller’s tort liabilities, we wrote an article that appeared in the Nov. 15, 2010 edition of the New York Law Journal entitled “Determining Successor Liability.” Since that time, New York courts have continued to grapple with the various theories that exist for extending liability to an otherwise “innocent” defendant. The precise contours of successor liability continue to evade simple definition. While successor liability may not quite be the legendary nine-headed Hydra of Greek mythology, practitioners would be well-advised to understand the various branches of liability that are recognized under New York law, and how best to position their case for a favorable resolution of this key legal issue.
General Rule and Its Exceptions
We previously noted, as a general rule, a corporation that purchases the assets of another is not liable for the predecessor’s tort or contract obligations. See Aguas Lenders Recovery Group v. Suez, 585 F.3d 696, 702 (2d Cir. 2009); In re New York City Asbestos Litig., 15 A.D.3d 254, 255 (1st Dept. 2005). For this reason, parties often seek to structure corporate transactions as asset deals, making clear that certain known, pre-existing, or likely liabilities are not being assumed by the buyer. However, as discussed below, even with an asset deal there can be no assurance that a claim for successor liability will fail in all circumstances.
