Teed v. Thomas & Betts Power Solutions, L.L.C.
- Citation:
- Nos. 12-2440, 12-3029 (7th Cir. March 26, 2013)
- Tag(s):
-
- Ruling:
- Successor liability is appropriate in suits to enforce federal labor or employment laws-even when the successor disclaimed liability when it acquired the assets, unless there is a good reason to withhold such liability (i.e. lack of notice of potential liability, maintaining priorities of competing creditors). Increasing the cost to the buyer is not a good reason to withhold successor liability suits in federal labor or employment law cases. The Court used a multifactor test to determine whether federal standards or state standards for successor liability applied.
- Procedural context:
- Two collective action cases seeking overtime pay under the Fair Labor Standards Act were ruled on together. Employer and Employer's parent entity were the defendants. Employer's assets were purchased and placed in a wholly owned subsidiary. Plaintiffs substituted the wholly owned subsidiary as a defendant, in place of the Employer. The wholly owned subsidiary objected to the substitution. The District Court overruled the objection, and the wholly owned subsidiary appealed.
- Facts:
- Employer couldn't pay debts. It had one valuable asset worth approximately one-third of the debt it owed. That asset was assigned for the benefit of creditors and sold to a wholly owned subsidiary. Plaintiff employees brought collective action cases against the Employer, and later substituted the wholly owned subsidiary purchaser, claiming overtime pay violations under the Fair Labor Standards Act. The case is not a bankruptcy case but describes (see ruling) important 7th Circuit notions regarding successor liability and the effectiveness of disclaiming liabilities in an asset purchase.
- Judge(s):
- Posner, Flaum, Williams
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