Court Finds Plaintiff Properly Alleges Successor Liability to Survive Motion to Dismiss

Supreme Court of New York, New York County, April 24, 2022

The defendant, PB Heat LLC, filed a motion to dismiss the plaintiff’s complaint and a motion to impose sanctions. The plaintiff filed suit against PB Heat claiming exposure to asbestos, arguing that the doctrine of successor liability is applicable to PB Heat. PB Heat moved to dismiss for failure to state a claim, and moved for sanctions for alleged frivolous conduct. PB Heat argued the complaint lacked any factual allegations that could possibly warrant the imposition of successor liability against PB Heat.

Peerless Industries was established in 1981. From its inception to 2019, Peerless Industries’ insurers defended and indemnified the company against all asbestos-related lawsuits. PB Heat was formed on April 16, 2003. Shortly thereafter, Atlantic Shores Corporation acquired both assets and liabilities to a company named Peerless Heater Company on April 30, 2003. Atlantic Shores was the sole member of PB Heat at the time of this transaction. As a part of this transaction, any asbestos-related liability prior to September 1997 was not assumed by Atlantic Shores, as the liability pre-1997 remained with Peerless Heater Company. Following such transaction, Atlantic Shores transferred the assets and liabilities acquired from Peerless Heater Company to PB Heat. Subsequently, Peerless Heater Company merged with Boiler Products Co., which is a subsidiary wholly owned by Peerless Industries, thus dissolving Peerless Heater Company. As a result, the pre-1997 asbestos-related liability transferred to Boiler Products Co.

In analyzing the complaint, the court found the plaintiff alleged (1) the successor entity or corporation expressly or impliedly assumed the predecessor’s tort liability or liabilities described herein; (2) there was a consolidation or a de jure or de facto merger of the seller and purchaser; (3) the purchasing entity or corporation was a mere continuation of the selling entity or corporation; or (4) the transaction was entered into fraudulently to escape such liabilities or obligations.  The court determined these factual allegations set forth clear and unambiguous allegations related to successor liability.

PB Heat also moved to dismiss, claiming that the documentary evidence proffered demonstrated that PB Heat is not a successor in interest to Peerless Industries. Specifically, PB Heat contended that “dispelling any suggestion that Atlantic Shores assumed any product/asbestos related liabilities from the asbestos era, the Peerless Heater Company/Atlantic Shores APA expressly states that Atlantic Shores assumes any and all liabilities, whether known or unknown, now existing or as might arise hereafter, with respect to events, conditions, acts and omissions existing or occurring with respect to Peerless [Heater Company] products sold and installed after September 1997.” However, the court found such documents failed to refute the plaintiff’s allegations regarding successor liability.

Based on the above, the court denied PB Heat’s motion to dismiss. Since the complaint was not without merit and contained factual allegations that substantiated a cause of action, the complaint was not frivolous. As such, the court denied the motion for sanctions.

Read the full decision here