That's What She Said

Mergers & Aggravations

Litigation Value: Whatever it is, David Wallace should pray that he’s not on the hook for it.

My colleagues and I have written on this blog about all of the costly potential lawsuits the Scranton branch has spawned since Sabre acquired Dunder Mifflin. Let’s assume some of these incidents have become actual lawsuits alleging discrimination or harassment. David Wallace, former DM executive and inventor of the Suck-It, is going to purchase Dunder Mifflin from Sabre. Question: Does Wallace inherit these lawsuits?

The answer depends (we’re lawyers, after all). It depends first on the structure of the transaction. If Wallace purchases the controlling shares of Dunder Mifflin in a stock transaction, then he steps into DM’s shoes and assumes all of its liabilities, end of story. On the other hand, if Wallace purchases Dunder Mifflin’s assets, then the general rule is that the purchaser of corporate assets does not acquire the seller’s liabilities.

But, where federal rights are involved, such as the right to be free of discrimination and harassment in the workplace, many courts hold that the purchaser may inherit the seller’s liabilities if (a) the purchaser is put on notice of the claims and (b) there is substantial continuity in the business operations before and after the sale. These courts have weighed the need for unfettered business transactions against rights created by federal law and come out generally in favor of the latter.

Will Wallace navigate his way through the sale successfully? Maybe. Hopefully, we find out next season. If we’re lucky, we’ll also find out how Robert California made out with his Eastern European college-age ex-gymnast mentoring program.