Opinion ID: 2518474
Heading Depth: 1
Heading Rank: 12

Heading: Application of the mere continuation exception

Text: One federal district court has opined that [t]he gravamen of the `mere continuation' exception is the continuation of corporate control and ownership, rather than continuation of business operations. [32] Many courts have likewise concluded that the key inquiry in resolving this issue is whether there exists a continuation of the corporate entity. [33] We agree. For that reason, it is impossible in the instant case to conclude that Village has asserted a prima facie case for the mere continuation exception. Importantly, Village cannot establish that only one corporation existed after the sale. As discussed above, both Buena Nevada and Buena Geofon continued to exist after the sale of assets to U.S. Labs. In addition, Village has failed to demonstrate that there exists an identity of stock, stockholders or directors between Buena Nevada on the one hand and U.S. Labs and Buena Delaware on the other. Brannen purchased only a negligible amount of U.S. Labs stock, which we have already concluded is insufficient to demonstrate prima facie evidence of continuity of stock. Additionally, Brannen was made president of Buena Delaware, but did not serve as an officer or director of U.S. Labs, the purchasing corporation. Therefore, we conclude that the facts in this case are insufficient to establish a common or substantially similar ownership between the selling and purchasing corporation. As a result, Village has failed to show that either requirement for establishing the mere continuation exception has been met. Accordingly, we conclude that the district court properly granted U.S. Labs' motion for summary judgment because no exception to the general rule of successor nonliability will lie under this particular set of facts.