Source: https://www.themundyfirm.com/blog/2013/04/04/successor-liability-for-employee-claim-124166
Timestamp: 2019-04-23 09:07:22+00:00

Document:
Thus, applicability of the doctrine hinges on the need to protect a plaintiff where the offending entity is substituted by another company.
(4) whether the new employer uses the same plant; (5) whether he uses the same or substantially the same work force; (6) whether he uses the same or substantially the same supervisory personnel; (7) whether the same jobs exist under substantially the same working conditions; (8) whether he uses the same machinery, equipment, and methods of production; and (9) whether he produces the same product.
Id. (quoting Musikiwamba v. ESSI, Inc., 760 F.2d 740, 750 (7th Cir. 1985)). Of these nine factors, the first two are critical, while the remaining seven simply "provide a foundation for analyzing the larger question of whether there is a continuity in operations and the work force of the successor and predecessor employers." Id. (quoting Musikiwamba, 760 F.2d at 751).
B. A disposition of any, all, or substantially all, of the property and assets of a corporation, whether or not it requires the special authorization of the shareholders of the corporation . . .
(2) except as otherwise expressly provided by another statute, does not make the acquiring corporation, foreign corporation, or other entity responsible or liable for any liability or obligation of the selling corporation that the acquiring corporation, foreign corporation, or other entity did not expressly assume.
regardless of whether the disposition requires the approval of the entity's owners or members, is not a merger or conversion for any purpose.
(b) Except as otherwise expressly provided by statute, a person acquiring property described by this section may not be held responsible or liable for a liability or obligation of the transferring domestic entity that is not expressly assumed by the person.
TEX. BUS. ORGS. CODE ANN. § 10.254 (Vernon Supp. 2012) (emphasis added).
As reflected in the above statutes, Texas "strongly embraces" a "non- liability" rule for corporate successors. See Lockheed Martin Corp. v. Gordon, 16 S.W.3d 127, 139 (Tex. App.--Houston [1st Dist.] 2000, pet. denied). Texas law authorizes a successor to acquire the assets of a corporation without incurring any of the grantor corporation's liabilities unless the successor expressly assumes those liabilities. C.M. Asfahl Agency v. Tensor, Inc., 135 S.W.3d 768, 780-81 (Tex. App.--Houston [1st Dist.] 2004, no pet.); Lockheed Martin, 16 S.W.3d at 139; see also McKee v. Am. Transfer and Storage, 946 F. Supp. 485, 487 (N.D. Tex. 1996) ("The Texas Business & Corporations Act eliminates the doctrine of implied successor liability."). Thus, in Texas, there is no successor in interest when an acquiring corporation does not expressly agree to assume the liabilities of the other party to an agreement because "successor" has a specialized meaning "beyond simple acquisition." Sitaram v. Aetna U.S. Healthcare of N. Tex., Inc., 152 S.W.3d 817, 828 (Tex. App.--Texarkana 2004, no pet.).
Shaw cites to no Texas authority applying successor liability as discussed by federal courts in the context of Title VII or otherwise imposing liability on a successor company in spite of the Texas rule in support of non-liability. However, the reasoning supporting the federal application of successor liability is similar to the reasoning supporting the "mere continuation" exception to limited liability, an exception "even more liberal" than the de facto merger doctrine. See, e.g., Mudgett v. Paxson Mach. Co., 709 S.W.2d 755, 758 & n.4 (Tex. App.--Corpus Christi 1986, writ ref'd n.r.e.) (listing elements of "mere continuation" doctrine as whether "the buyer purchased the 'good will' and name of the seller, operated the business in the same place, with the same employees and continued to produce the same product") (citing Cyr v. B. Offen & Co., 501 F.2d 1145, 1153 (1st Cir. 1974)); see also Hollowell v. Orleans Reg'l Hosp. LLC, 217 F.3d 379, 390-91 (5th Cir. 2000) (applying "mere continuation" doctrine under Louisiana law and listing elements as: "(1) retention of the same employees; (2) retention of the same supervisory personnel; (3) retention of the same production facility in the same physical location; (4) production of the same product; (5) retention of the same name; (6) continuity of assets; (7) continuity of general business operations; and (8) whether the successor holds itself out as a continuation of the previous enterprise").
However, Texas courts have interpreted article 5.10 as expressly abrogating the mere continuation doctrine as a means of imposing successor liability. See Motor Components, LLC v. Devon Energy Corp., 338 S.W.3d 198, 205 (Tex. App.--Houston [14th Dist.] 2011, no pet.) ("The Texas legislature rejected long ago the 'continuation' doctrine of implied successor liability . . . .") (citing TEX.
BUS. ORGS. CODE ANN. § 10.254); Shapolsky v. Brewton, 56 S.W.3d 120, 137-38 (Tex. App.--Houston [14th Dist.] 2001, pet. denied) (holding that just as liability cannot be transferred under "mere continuation" doctrine, company's contacts cannot be imputed to successor for purposes of establishing personal jurisdiction), abrogated on other grounds by Michiana Easy Livin' Country v. Holten, 168 S.W.3d 777 (Tex. 2005); Mudgett, 709 S.W.2d at 758 ("Certainly if the de facto merger doctrine is contrary to the public policy of our state, so must be the mere continuation doctrine.").
S.W.3d 473, 476 (Tex. 2001) (citing TEX. LABOR CODE ANN. § 21.001(1)). "Therefore, analogous federal statutes and cases interpreting them guide our reading of the TCHRA." Id. (citing NME Hosps., Inc. v. Rennels, 994 S.W.2d 142, 144 (Tex. 1999)).
However, as Shaw concedes in her brief, successor liability, as discussed by the federal courts, is a "common law" doctrine, like the "mere continuation" doctrine. It is not based on a statutory interpretation of Title VII, but rather "derived from equitable principles." See, e.g., Brzozowski v. Correctional Physician Servs., Inc., 360 F.3d 173, 178 (3rd Cir. 2004); Ed Peters Jewelry Co. v. C & J Jewelry Co., 124 F.3d 252, 265 (1st Cir. 1997) ("[S]uccessor liability is an equitable doctrine, both in origin and nature."). And, unlike in Rojas, where the plaintiff brought suit under Title VII and directly joined the defendants in that suit, Shaw brings her claim under neither Title VII or the TCHRA. Rather, Shaw seeks to recover on a judgment entered long ago, presumably for violations of the TCHRA. And, again, Shaw cites us to no Texas authority imposing successor liability under such circumstances.
Shaw does note that a federal district court has applied successor liability to claims brought under the TCHRA. See Mendez v. Ameri-Forge Corp., No. Civ.A. H-01-0523, 2005 WL 2241009, at *4 (S.D. Tex. Sept. 15, 2005). Although the federal district court in Mendez did provide a brief analysis of the applicability of successor liability to the plaintiff's claims brought under both Title VII and the TCHRA, it ultimately resolved the case by concluding that the plaintiff had failed to timely prosecute the action. Id. at *4-5; but see McKee, 946 F. Supp. at 487 (declining to apply successor liability to Texas wrongful-termination claim, brought along with claim under Americans with Disabilities Act, because of Texas statute limiting successor liability to those expressly assumed); Schutze v. Fin. Computer Software, No. 04-CV-0276-H, 2006 WL 2842008, at *9-10 & n.2 (N.D. Tex. Sept. 29, 2006) (concluding it "clearly true" that successor liability could not apply to plaintiff's Texas discrimination claims and assuming, without deciding, that doctrine could not apply to plaintiff's statutory discrimination claims brought under TCHRA). As a result, Mendez is inapplicable here.
Accordingly, we hold that the trial court erred in concluding otherwise.
Having held that the trial court erred in concluding that Shaw's successorliability claim is not barred by Texas law, we need not address the remaining issues of E-Quest and Odyssey. We reverse the judgment of the trial court and render a take-nothing judgment in favor of E-Quest and Odyssey.
Panel consists of Justices Jennings, Higley, and Sharp.
*fn1 In her first amended petition, filed on April 23, 2008, Shaw brought claims only against E-Quest. Shaw did not bring suit against Odyssey until December 9, 2009.

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