Buyer Beware: Seventh Circuit Upholds Application of the Federal Common Law Standard of Successor Liability in an Asset Sale

Buyer Beware: Seventh Circuit Upholds Application of the Federal Common Law Standard of Successor Liability in an Asset Sale

Apr 11, 2013

Article

Brownstein Client Alert, April 11, 2013

One of the benefits to structuring an acquisition as an asset deal is that the buyer has the ability to choose the liabilities that it will assume and the liabilities that will remain with the seller, including contingent liabilities. A recent Seventh Circuit ruling, however, has raised doubt about a buyer’s ability to leave certain liabilities behind with the seller. The case is a reminder that, in certain situations, a buyer may be liable under federal common law for a successor liability claim even though it would not be liable for such claim under applicable state law. The case is particularly concerning because the buyer had expressly excluded the seller liabilities in question in the purchase agreement.

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