Court Opinion

ID: 9686695
Source: CourtListenerOpinion
Date Created: 2023-08-24 16:01:10.967892+00
Date Added: 2024-06-11T18:15:18.361994
License: Public Domain

GILBERT, Justice
(dissenting).
I respectfully dissent from the majority’s opinion and would affirm the court of appeals. The majority’s conclusion that Jillian’s is a successor employer represents a major departure in our jurisprudence and produces an unfair result. Moreover, this decision creates a dramatic new risk for those who are either acquiring ongoing business entities or hiring employees of a separate management company in Minnesota. Likewise, it creates an entirely new avenue of responsibility for the disclosure and estimation of liabilities and contingent liabilities of the selling entity and affiliates and an unwieldy , due diligence responsibility for the purchaser and those professionals representing purchasers of ongoing business entities.
The majority correctly points out that Jillian’s did not have successor corporate liability under Minnesota corporate law. All of the companies here were properly registered to do business and they carefully defined the liabilities and debts they wanted to assume and appellant’s debts were not among those. However, the majority goes on and applies a “separate and broader” successor-employer liability doctrine that has emerged in Labor Act cases. The application of this federal doctrine of successor-employer liability here is contrary to the law of this case, as found by the district court, and is contrary to the federal law controlling successor-employer liability for purposes of the Labor Act.
FPM was a Texas limited partnership that was a lessee of the restaurant, was the holder of the restaurant’s liquor license and owned all of the furniture, fixtures and equipment, and inventory. Harborage I, Ltd. managed the restaurant. In deciding the appellant’s underlying sexual harassment claim, the district court found that Harborage I could be treated as an employer under Title VII. The court then entered judgment in favor of appellant against Harborage I in the amount of $33,886.99. At the same time, the court entered the following factual findings: “Defendant FPM, Ltd., while sharing some common ownership, was only the lessee and holder of the liquor license at Gators, but not involved in management or labor relations to a degree sufficient to be considered plaintiffs employer.” Accordingly, the court ordered and adjudged “that [appellant] is entitled to recover nothing from the defendant FPM, Ltd.” Thus, the court absolved FPM of any wrongdoing in appellant’s sexual harassment case, and FPM had absolutely no employment responsibility or liability whatsoever in favor of the appellant in this case. Subsequently, Jillian’s and FPM entered into a purchase agreement for the restaurant’s assets. As part of the agreement, Jillian’s, as purchaser, did not assume or have any responsibility with respect to any retained liabilities.
*301Notwithstanding the fact that FPM was absolved of any responsibility for this wrongful employment conduct and money judgment, now, through the back door, appellant is obtaining a money judgment against Jillian’s. The majority now deems Jillian’s “a successor employer” despite the fact that Jillian’s purchased the operating assets of the restaurant from FPM, and merely hired employees of Harborage I, a separate management company. The appellant is basically accomplishing indirectly what she could not accomplish or prove directly. Now, we have an innocent bona fide third-party purchaser of FPM’s assets obligated for the judgment against Har-borage I. The district court buttressed this result by stating, “If Jillian’s is an innocent party here, its remedy lies against the sellers.” The irony in this is that even if Jillian’s, as the successor in interest, had performed its preacquisition due diligence investigation and had reviewed the underlying judgments and decrees and decisions from the court of appeals, it would not have had any possible means of ascertaining that by purchasing assets from FPM, Ltd. it was in any way responsible for the liability of Harborage I. The foundation for the majority opinion made at the district court is full of fault lines that should not be expanded upon by this court.
The district court embarked upon some creative reasoning to reattach liability to a purchaser of assets (Jillian’s) 3 years after it had absolved the seller of the assets (FPM) of any responsibility in regard to appellant’s claim. First of all, the court acknowledged that Harborage I was not a party to the asset purchase agreement. However, in essence, it brought FPM back into the picture, in part, because the asset purchase agreement “sets out the allocation of the seller’s purchase price, indicates that nearly $3.7 million of the total purchase price was allocated to management fees. These fees were, until shortly before the sale transaction, payable to Harborage I pursuant to its agreement with the selling entities.” This conclusion is misleading because only a small portion of the management fees was allocated to FPM. Of the total amount allocated to management fees, only $352,491 was allocated to FPM. The balance was allocated to four other separate entities that had nothing to do with the appellant or FPM, the actual seller of the assets.
The district court then went on to link this new liability to the asset purchasers (Jillian’s) because of “other ties between Harborage I, Ltd. and the selling entities.” This linkage related to insurance and certain identified benefit plans. The district court then reinforced its reason in that “the Harborage I, Ltd. principals benefited substantially from this sale, while avoiding a valid judgment debt to [the] plaintiff.” This reasoning is problematic for a number of reasons. It ignores the separate, valid and legal existence of the various entities. Moreover, this rationale is used to pierce the separate independent veil of each entity because “the principals benefited” from the sale. A new legal theory has been created in Minnesota, which appears to abolish the distinction between separate legal entities as long as the principals of the various entities benefited from the transaction. Again, the majority fails to cite to authority for this major new proposition.
Furthermore, this new legal theory ignores the fact that these separate companies were long in existence and were not set up to defraud the appellant or anyone else. Appellant was only hired by, worked for, and harmed in the employment context by Harborage I. Now, long after the appellant has left the employment and lost in the first go-around in court against FPM, the district court has successfully bundled up all of these separate business *302entities to make each one liable for the debts of the others. By concluding that Jillian’s is hable to the appellant as a successor-employer, the district court ignored the fact that FPM was only the seller of these assets and had been previously absolved of any responsibility by this same district court and now 3 years after the initial decision, attributes liability to “the Jillian defendants.”
Moreover, in using the admittedly separate and broader concepts of successor-employer liability under the Labor Act, the majority belies what actually occurred in the federal cases cited for this proposition. The federal cases establishing successor-employer liability either involved a merger, a purchase or a consolidation of businesses. See John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 548, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) (holding “that the disappearance by merger of a corporate employer which has entered into a collective bargaining agreement with a union does not automatically terminate all rights of the employees covered by the agreement, and that, in appropriate circumstances, present here, the successor employer may be required to arbitrate with the union under the agreement.”); Golden State Bottling Co. v. NLRB, 414 U.S. 168, 180, 94 S.Ct. 414, 38 L.Ed.2d 388 (1973) (holding that a bona fide purchaser may be considered in privity with its predecessor).
In contrast, Harborage I, the wrongdoer in the employment case, was not a party to the asset purchase agreement between FPM and Jillian’s. Harborage I was a party to a separate “Transition Service Agreement.” As part of that agreement, Jillian’s agreed to hire the employees of Harborage I on an at-will basis and agreed that other employees of Harborage I would supply support services during the transition period. And while I agree with the majority that the federal courts have refused “to distinguish among mergers, consolidations, and purchases of assets,” they have never bundled together an exonerated seller of assets with a separate management company found to have violated employment laws. Under the “Transition Service Agreement,” Harborage I did not sell, merge or consolidate its business with Jillian’s, nor did Jillian’s purchase any of Harborage I’s assets. Har-borage I merely allowed its employees to be hired by Jillian’s. Accordingly, these federal cases do not support the majority’s conclusion that Jillian’s is a successor-employer.
Our fact situation differs from the federal cases cited in another material respect. One federal case cited had a collective bargaining agreement, which the United States Supreme Court held the purchaser was obligated to consider. John Wiley & Sons, Inc., 376 U.S. at 551, 84 S.Ct. 909. In addition, in Golden State, there was an NLRB order to rectify unfair labor practices. 414 U.S. at 170, 94 S.Ct. 414. This involved the nature of injunctive, equitable relief to remedy the continuing unfair labor practices.
I acknowledge that the appellant’s underlying claim is a very serious claim. However, there is nothing in law or in equity that would foist this liability of Har-borage I onto Jillian’s. Neither entering the Transition Services Agreement with Harborage I nor purchasing separately the assets of FPM under these facts, makes Jillian’s a culpable, successor employer. The successor-employer doctrine in the federal common law is an equitable doctrine and has only been in force when there are equitable principles supporting that. In this case, there are no equitable or legal principles whatsoever supporting holding Jillian’s liable for Harborage I’s judgment as a successor-employer. There in effect has been an effort to accomplish a *303preordained result notwithstanding the existence of separate entities while ignoring the fact that FPM was absolved of any employment responsibility initially and that Jillian’s is not a successor in interest of the wrongdoer because it did not purchase any assets of the wrongdoer.
I also dissent from the majority’s conclusion that under these facts, the post-judgment amendment of appellant’s complaint is permissible under Minn. R. Civ. P. 15.01. This conclusion allows the post-judgment, post-appeal amendment of appellant’s complaint, which has the effect of adding a judgment debtor to a final judgment that has been in place for almost 3 years. The only citation to Minnesota authority in the majority opinion relating to an amendment of a complaint under these facts is to Crum v. Anchor Casualty Co., 264 Minn. 378, 119 N.W.2d 703 (1963). While we have stated that under our modern pleading system and practice amendments of pleading is liberally allowed even after a judgment has been entered, this proposition is supported only by a citation to Rules of Civil Procedure 15.01 and 15.02. Id. at 389, 119 N.W.2d at 710. However, I find no authority in Rules 15.01 and 15.02 to support an amendment to the complaint under these facts. Rule 15.02 allows such amendments for issues not raised in pleadings if they were tried with consent and then the amendment can conform to the evidence, even after the entry of judgment. Minn. R. Civ. P. 15.02. That is not what has happened in this case and, in fact, the exact opposite has happened. This legal patchwork is being done without consent and long after the final judgment has been entered and is contrary to the law of the case as found by the district court judge.