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Successor Liability
In
California, when one corporation purchases the assets of another
corporation, the purchaser generally does not assume the seller's
liabilities unless (1) there is an express or implied agreement
of assumption, (2) the transaction amounts to a consolidation
or merger of the two corporations, (3) the purchasing corporation
is a mere continuation of the seller, or (4) the transfer of
assets to the purchaser is for the fraudulent purpose of escaping
liability for the seller's debts. Ray v. Alad Corporation (1977)
19 Cal.3d 22, 136 Cal.Rptr. 574.
In Rosales v. Thermex - Thermatron. Inc. (1998) Cal.App.4th,
78 Cal.Rptr.2d 81, the Second District Court of Appeal held
the purchaser corporation liable for a product manufactured
by the seller corporation 24 years earlier. The Appellate Court
predicated its decision on exceptions to the general rule stated
above, finding that (1) the defendant's purchase of the original
manufacturer virtually destroyed plaintiffs remedies against
the manufacturer, (2) defendant was capable of spreading the
risk of such loss, and (3) such liability exposure is merely
a cost of doing business. |
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