Insights - Spring 2013: Developing Federal Common Law of Successor Liability


When a purchaser acquires substantially all the assets of a seller, the purchase agreement typically provides that the purchaser does not assume seller’s liabilities except to the limited extent specifically set forth therein. Nevertheless, a disclaimer of liability is not effective in all situations. State statutes typically impose liability on successors for sales taxes and certain similar obligations, and for that reason purchasers usually protect themselves, such as by escrowing a portion of the sale proceeds until full payment of such taxes and obligations is verified. Additionally, federal courts have judicially imposed successor liability based on violations of the Labor Management Relations Act (John Wiley & Sons, Inc. v. Livingston, 376 543 (1964)), the National Labor Relations Act (Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973)), Title VII of the Civil Rights Act of 1964 (Wheeler v. Snyder Buick, Inc., 794 F.2d 1228 (7th Cir. 1985)), the Employee Retirement Income Security Act of 1974 (Upholsterers’ International Union Pension Fund v. Artistic Furniture, 920 F.2d (7th Cir. 1990), the Age Discrimination in Employment Act (EEOC v. G-K-G, Inc., 39 F.3d 740 (7th Cir. 1986)), and the Family and Medical Leave Act (Sullivan v. Dollar Tree Stores, Inc., 623 F.3d 7707 (9th Cir. 2010)).

In a recent decision, the Seventh Circuit Court of Appeals expanded what it characterized as the “federal common law” imposing successor liability to the Fair Labor Standards Act (“FLSA”), which governs minimum wage and overtime paid to workers....

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