After the sale of a manufacturer’s assets in bankruptcy, the new owners continued the manufacturer’s business, even retaining the same CEO. Plaintiff was injured while using a machine built by the bankrupt manufacturer and sought to hold the new company liable. However, since the CEO merely ran the manufacturer’s day-to-day business and had no involvement in the asset sale, and since ownership of the manufacturer changed (from public to private ownership), the asset sale does not fall within the “mere continuation” exception to the general rule that a corporation that purchases another company’s assets does not assume its liabilities.
We affirm summary judgment for defendants.
Generally, when one purchases a corporation’s assets, one does not assume its liabilities. One exception to this rule is when the new company is a “mere continuation” of the seller corporation. To prove a mere continuation, a plaintiff must generally prove that the new company has the same officers, directors and shareholders as the seller corporation.
In Nationwide Mut. Ins. Co. v. Eagle Window & Door, Inc., 818 S.E.2d 447, 451 (S.C. 2018), the South Carolina Supreme Court noted an exception-to-an-exception in the rare situation where parties structure a “shuffling of corporate forms” to avoid not just successor liability but also the application of the mere continuation exception. But this exception-to-an-exception does not create successor liability whenever shared employees continue to perform similar functions. As Nationwide emphasized, where shared officers and directors are “merely along for the ride, rather than the drivers” of the asset sale, their continued presence cannot establish successor liability.
Here, it is undisputed that Alan Roehrig – CEO of both the original manufacturer and the new company – “was merely along for the ride, rather than the driver” of the decision to sell the manufacturer’s assets to private investors. The new holding company’s CEO testified that Roehrig played no role in the asset sale, and Roehrig himself admitted he was only dimly aware that the sale occurred.
The South Carolina Supreme Court has unequivocally rejected continuing enterprise liability. Because defendant is not a mere continuation of the original manufacturer – as defined by “commonality of officers, directors and shareholders” – it cannot be held liable as the original manufacturer’s corporate successor.
Lane v. New Gencoat Inc. (Lawyers Weekly No. 003-013-23, 17 pp.) (Pamela Harris, J.) No. 22-1121. Appealed from USDC at Columbia, S.C. (Michelle Childs, J.) Hannah Rogers Metcalfe, John Newton and Allison Sullivan for appellant; Scottie Forbes Lee, Jon Berkelhammer and John Lay for appellee. 4th Cir. Unpub.