mere continuation exception in New York

2016We conclude that, on this record, Bakery failed to establish that it was not a mere continuation of Winkler USA (see generally Martorel v Tower Gardens, Inc., 74 AD3d 651, 652 [2010]).

2016We conclude that, on this record, Bakery failed to establish that it was not a mere continuation of Winkler USA (see generally Martorel v Tower Gardens, Inc., 74 AD3d 651, 652 [2010]).

2025Accordingly, the undisputed fact that more than one corporation existed after Hunter completed the asset purchase transaction is dispositive of the mere continuation claim ( see 47 E. 34th St. [NY] L.P. v BridgeStreet Worldwide, Inc. , 219 AD3d 1196 , 1200 [1st Dept 2023]; Highland Crusader Offshore Partners, L.P. v Celtic Pharma Phinco B.V. , 205 AD3d 520 , 523 [1st Dept 2022]; Ring v Elizabeth Found. for the Arts , 136 AD3d 525, 526 [1st Dept 2016]; Ivory Dev., LLC v Roe , 135 AD3d 1216, 1222-1223 [3d Dept 2016]; State Farm Fire & Cas.

2022Thus, the mere continuation exception is inapplicable ( see Ring v Elizabeth Found. for the Arts, 136 AD3d 525, 526 [1st Dept 2016]).

2025We disagree with the dissent to the extent that it asserts that Schumacher ( 59 NY2d 239 ) stands for the proposition that the existence of more than one successor corporation necessarily bars application of the mere continuation doctrine.

2025With respect to the second factor, "the predecessor corporation must be extinguished" to properly plead or establish the mere continuation exception ( Schumacher , 59 NY2d at 245 ).

2025Corp., 109 A.D.3d 167 , 176 (1st Dept. 2013) (holding that the mere continuation doctrine can apply when the predecessor entity still exists but is “effectively extinguished”).

2025The Tap court's application of the mere continuation doctrine was based on significantly broader allegations of corporate continuation, including: (1) the successor entity's purchase of all of the predecessor's assets; (2) employ of all the predecessor's employees on substantially similar terms; (3) the successor's assumption of all of the predecessor's liabilities; (4) the successor's contractual obligation to fund the dissolution of the predecessor; (5) the predecessor executives assumed their same positions with the successor and received equity in the successor equivalent to or in excess o

2025"With respect to the mere continuation exception, the underlying theory is that, if a corporation goes through a mere change in form without a significant change in substance, it should not be allowed to escape liability" ( Wass v County of Nassau , 153 AD3d 887, 888 [2d Dept 2017] [citations and internal quotation marks omitted]).

2025"With respect to the mere continuation exception, the underlying theory is that, if a corporation goes through a mere change in form without a significant change in substance, it should not be allowed to escape liability" ( Wass v County of Nassau , 153 AD3d 887, 888 [2d Dept 2017] [citations and internal quotation marks omitted]).

2025But a line of cases since have allowed for a claim for successor liability on a de facto merger theory to stand when it is alleged that the predecessor company has been left a “mere shell.” Fitzgerald v. Fahnestock & Co., 286 A.D.2d 573, 575 (1st Dept. 2001); see also Holme v. Global Mins. & Metals Corp., 63 A.D.3d 417, 418 (1st Dept. 2009); Radium2 Capital, LLC v. Xtreme Natl.

2025Accordingly, given the continued existence of three entities after the asset purchase, the complaint does not set forth the type of "corporate reorganization . . . where only one corporation survives the transaction" to support the application of the mere continuation exception to the general rule against successor liability ( Mitchell v Suburban Propane Gas Corp. , 182 AD2d 934, 935 [3d Dept 1992], quoting Schumacher , 59 NY2d at 245 ).

2025Accordingly, the undisputed fact that more than one corporation existed after Hunter completed the asset purchase transaction is dispositive of the mere continuation claim ( see 47 E. 34th St. [NY] L.P. v BridgeStreet Worldwide, Inc. , 219 AD3d 1196 , 1200 [1st Dept 2023]; Highland Crusader Offshore Partners, L.P. v Celtic Pharma Phinco B.V. , 205 AD3d 520 , 523 [1st Dept 2022]; Ring v Elizabeth Found. for the Arts , 136 AD3d 525, 526 [1st Dept 2016]; Ivory Dev., LLC v Roe , 135 AD3d 1216, 1222-1223 [3d Dept 2016]; State Farm Fire & Cas.

2025But a line of cases since have allowed for a claim for successor liability on a de facto merger theory to stand when it is alleged that the predecessor company has been left a “mere shell.” Fitzgerald v. Fahnestock & Co., 286 A.D.2d 573, 575 (1st Dept. 2001); see also Holme v. Global Mins. & Metals Corp., 63 A.D.3d 417, 418 (1st Dept. 2009); Radium2 Capital, LLC v. Xtreme Natl.

2017Thus, this exception applies where “it is not simply the business of the original corporation which continues, but the corporate entity itself” (Ladjevardian v Laidlaw-Coggeshall, Inc., 431 F Supp 834, 839 [1977]).

2005In summary, if a “predecessor corporation continues to exist after the transaction, in however gossamer a form, the mere continuation exception is not applicable” (Diaz v South Bend Lathe Inc., 707 F Supp 97, 100 [ED NY 1989]).