as a factor counting against successor liability, as imposition of such liability would result in a "windfall" for the plaintiff. Third, the predecessor could not have provided relief after the sale as all of the proceeds of sale (along with its remaining assets) went to the bank whose loan it had defaulted on payment. Fourth, the purchaser could provide the relief sought in the suit (the court calls this the "goes without saying" condition). And fifth, there was continuity between the operations and work force of the predecessor and the successor, as the court stated that nothing had really changed in the operations of the business. Even though not all of the factors pointed towards imposition of successor liability, the Seventh Circuit found that successor liability in the Teed case should be imposed given the facts and circumstances of the case. The Seventh Circuit noted that the idea behind having a distinct federal standard applicable to federal labor and employment statutes is that the statutes "foster labor peace" or "protect workers' rights" and that the imposition of achieving the statute's goals. The court cites an example that without the threat of successor liability, there would be nothing workers could do to head off a corporate sale by the employer aimed at extinguishing that employer's liability to them for violations of the federal statutes. Given this articulation of the federal standard by the Seventh Circuit, what should counsel look for during the due diligence period? First, the party responsible for diligence in any potential deal needs to closely examine these areas of federal labor relations and employment laws for potential claims and what relevant statutes may be applicable. While not exhaustive, the Seventh Circuit cited the Labor Management Relations Act, the National Labor Relations Act, ERISA, Age Discrimination in Employment Act, Family and Medical Leave Act and 42 U.S.C. §1981 (racial discrimination in contracting) as areas where the more favorable federal common law standard is applied in determining whether to impose successor liability. Many of the above cited acts have different thresholds of employee before they are to be familiar, or work with another attorney or person familiar with, the applications of these laws in analyzing potential risks. Second, if a potential issue exists, it is wise to require a holdback of a portion of the purchase price which should satisfy any claim made and/or include indemnification language in the purchase contract. If a potential buyer finds itself in a position similar to the purchaser in Teed, where it is bidding on assets in bankruptcy or a receivership auction, all known outstanding claims exposure should be considered when determining the purchase price of the assets. In conclusion, the Teed case should be in the back of every attorney's mind when analyzing potential liabilities that a client may face when acquiring a business, and when issues arise in diligence involving federal labor and employment statutes, the attorney and client should not simply rely upon disclaiming liabilities of the seller in a purchase agreement to protect them from successor liability. |