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Legal Updates

No Successor Liability in the Absence of a Transfer of Assets

3/13/2021

 
In a reported opinion from the Appellate Division, the Court overturned a trial court verdict in the amount of $457,870.86 (inclusive of counsel fees), finding that there was no violation of the Uniform Fraudulent Transfer Act (“UFTA”).  The suit was brought by a landlord who had been leasing 16,000 square feet of a strip mall to a Amma Corp. for the operation of a supermarket.  Prior to the end of the lease, the owners of Amma Corp., Mr. and Mrs. Perez, created a new company named NRVP LLC and opened another supermarket under that company’s name in a different location less than a half-mile away.  The Perezes operated both supermarkets simultaneously for approximately nine months, but proceeded to have Amma break its lease with its landlord about nineteen months early.  After breaking the lease, the Perezes shut down Amma Corp.
 
Unable to find a replacement tenant for Amma Corp., the landlord sued NRVP LLC for the balance due under the remainder of Amma’s lease on a successor liability theory.  The trial court testimony indicated that other than a trademark, no assets of Amma were transferred to NRVP.  However, given the common ownership, the close proximity in location, and the transfer of Amma’s trademark of the term “Super Supermarket” to the new company, the trial court found that NRVP was liable for the debts of Amma as a “continuation of the selling corporation,” and entered judgment in favor of the landlord.
 
However, the Appellate Division disagreed and reversed the trail court’s decision, finding that transfer of all, or substantially all, of the assets of the prior company is a prerequisite to the imposition of liability upon another company.  Here, while there was the transfer of a trademark, the expert testimony was that is value was only $740 and there were no other assets transferred.  Accordingly, there could be no successor liability.  160 West Broadway Associates LP v. 1 Memorial Drive LLC, et. al

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    Authors

    Peter J. Vazquez, Jr.
    Jeffrey Heldman

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  • Home
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