New York Court Finds No Successor Liability and Grants Defendant’s Summary Judgment Motion Supreme Court of New York, New York County, February 8, 2017

In this NYCAL asbestos action, plaintiff Ivette Montanez alleged that she developed malignant mesothelioma as the result of washing her brother’s laundry. Montanez’s brother, Eliud Hernandez, Jr., testified to working with Beck/Arnley brakes at a friend’s automobile ship in Puerto Rico when he was 15-17 years old. Defendant Beck Arnley Worldparts, Inc. moved for summary judgment, arguing, among other things, that it was not the successor to the product alleged to have caused the exposure.

The key issue to this motion centered on successor liability and whether any of the seller’s owners required a direct or indirect interest in the buyer under an asset purchase where no stock was exchanged. The plaintiffs ultimately argued that a more flexible standard should apply to de facto mergers in the context of tort actions. The plaintiffs further asserted that summary judgment should be denied even in the absence of issues of fact regarding ownership, because the defendant received a “continuing benefit” from the asset purchase through the hiring of, and activities of, Max Dull, a former owner of the Beck/Arnley company.

Judge Peter H. Moulton found while there may be good reasons for adopting a different test for successor liability in the context of an asbestos case, the law, as it presently exists, requires that the proponent of a de facto merger demonstrate a continuity of ownership. Under New York law, continuity of ownership is “the touchstone of the de facto merger concept” and thus a necessary predicate to a finding of a de facto merger. [Citation Omitted]. While this might be unfair in instances where, as here, the plaintiffs submitted evidence that (1) Beck/Arnley Worldparts Corp. did not continue to exist in a meaningful way after the asset purchase (having been stripped of any way to generate income) and (2) the defendant knew of asbestos lawsuits and Beck/Arnley Worldparts Corp. failed to set aside sufficient monies to pay for them, any finding that other indicia could substitute for continuity of ownership must come from the appellate courts.

Accordingly, the defendant’s summary judgment motion was granted.

Read the full decision here.


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