The Pennsylvania Supreme Court has declined to rule continuity of ownership is an essential element in determining whether a de facto merger has taken place that would confer corporate successor liability.
The ruling overturns a Superior Court decision in Fizzano Brothers Concrete Products Inc. v. XLN Inc. that found one of the four prongs of the de facto merger test — continuity of ownership — must be shown in order to prove a de facto merger occurred. The Delaware County Common Pleas Court had found the asset purchase of XLN by XLNT was enough to constitute a de facto merger that would import successor liability on XLNT given three of the four prongs were met. In reversing, the Superior Court had said the absence of the continuity-of-ownership prong specifically negated successor liability.
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