Your company is looking to acquire another entity’s assets. In-house counsel has examined the purchase agreement to ensure it incorporates the general rule of successor liability: where one company sells or transfers all its assets to another company, the latter is not liable for the debts and liabilities of the transferor, including those arising out of the latter’s tortious conduct. In other words, if Company A sells or transfers all of its assets to Company B, then Company B is not liable for Company A’s debts or liabilities. But are you really clear of all successor liability? The answer, in New Jersey, is no.
Our courts have recognized four exceptions that warrant the imposition of successor liability: (1) where the purchasing corporation expressly or impliedly agreed to assume such debts and liabilities; (2) the transaction amounts to a consolidation or merger of the seller and purchaser; (3) the purchasing corporation is merely a continuation of the selling corporation; or (4) the transaction is entered into fraudulently in order to escape responsibility for such debts and liabilities. Ramirez v. Amsted Indus., 86 N.J. 332, 340-341 (1981). New Jersey has added to this list with the adoption of the “product-line exception.”
Origination of the Product-Line Exception
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