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At The 2014 TMA Senate
At The 2014 TMA Annual
Successor liabilities usually arise in 363
sales when the purchasing entity does
one or more of the following: assumes
all or most of a seller’s workforce,
assumes the seller’s executory
contracts or work in progress, buys
the goodwill of the seller, retains a
seller’s brand names or trade dress,
or fails to clearly distinguish that
it is not a successor to the seller. A
careful purchaser must understand
exposure to successor liabilities that
it may involuntarily assume when
it purchases assets in a 363 sale.
Product liability and other tort risks
may be insured against by preserving
the seller’s existing policies or by
purchasing new policies in connection
with the sale. Detailed environmental
studies and remediation plans should
be prepared for any purchase involving
real property. In addition, actuarial
estimates of pension obligations should
be developed and accounted for in
formulation of the purchase price for
sellers with pension obligations.
An assessment of the real costs of
acquiring the assets may lead a
prospective purchaser to conclude
Leon Komkov is a director and general counsel of Longroad
Asset Management, LLC, a private equity firm focused on special
situation investing and business improvement in lower middle
market manufacturing and distribution companies. He holds
a law degree from the University of Texas School of Law.
that a purchase of the assets is
not economically beneficial. J
1 See Fletcher, Fletcher Cyclopedia of the Law
of Private Corporations § 7122, at 249 (Victoria
A. Braucher et al. eds., 1999 & Supp. 2004).
2 In re Trans World Airlines, Inc.
322 F.3d 283 (3d Cir. 2003).
3 In re Leckie Smokeless Coal Co., 99 F.3d 573,
582 (4th Cir. 1996) (lack of express statutory
limitation of “interests” supported expansive
reading as to the types of liabilities discharged).
4 445 B.R. 243 (S.D.N. Y 2011).
5 Grumman, 445 B.R. at 250
6 195 B.R. 716 (N.D. Ind. 1996).
7 Allis-Chalmers, 195 B.R. at 732.
8 In re General Motors Corp., 407 B.R. 463, 508
(S.D. N. Y 2009).
9 920 F.2d 1323 (7th Cir. 1990)
10 Artistic, 920 F.2d at 1329. See also Central
States, Southeast and Southwest Areas
Pension Fund v. Hayes, 789 F. Supp. 1430
(N.D. Ill.to permit pension funds to recover
delinquent contributions from asset
purchasers who also take on a material
portion of debtor’s workforce, and continue.
11 Einhorn v. M.L. Ruberton Construction Co., 632
F.3d 89, at 98-99 (3d Cir. 2011)(summarizing
holdings in other circuit court cases).
12 29 U. S.C. §1381 et seq.
13 “Crawling out of the Shadows—Shining a
Light on Multiemployer Pension Plans,” doc.
26, 2012 (access to website is restricted).
14 Id. at p. 5.
15 Einhorn, 632 F.3d at 97.
16 Golden State Bottling Co. v. NLRB, 414 U.S. 168,
94 S. Ct. 414 (1973
17 181 F.3d 396 (3d Cir. 1999).
18 322 F3d 283, 293 (3d Cir 2003).