484 B.R. 475
Bankr. N.D. Ga.2012Background
- Georgia bankruptcy court addresses whether successor liability applies when a secured-creditor buys the debtor's assets under the UCC; Acme Security, owned by Hassebrock, buys ALK's assets for full satisfaction of the bank's secured debt; ALK leased to CLN and CLN asserts CLN’s lease debt is CLN's claim against Acme as successor; ALK's chapter 11 was dismissed; Acme continued operating in ALK's location with largely same assets and customers; Acme's post-acquisition conduct largely benefited Acme, not ALK, and Acme maintained distinct operations and accounts; court must decide if Acme is a mere continuation or liable for ALK's debts under Georgia law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Acme liable as a successor under fraudulent-avoidance theory? | CLN contends Acme’s asset purchase was a fraudulent attempt to avoid liabilities. | Acme argues the transaction was a legitimate use of UCC remedies and not a fraudulent avoidance. | No; not a fraudulent attempt to avoid liabilities. |
| Is Acme a mere continuation of ALK? | CLN argues substantial ownership and asset/object identity with insider control shows mere continuation. | Acme contends substantial equity/identity not sufficient if equity requires protecting creditors and no prejudice to CLN. | Not a mere continuation; Acme not liable. |
Key Cases Cited
- Bullington v. Union Tool Corp., 254 Ga. 283 (Ga. 1985) (establishes four exceptions to no-liability rule for asset purchasers)
- Bud Antle, Inc. v. Eastern Foods, Inc., 758 F.2d 1451 (11th Cir. 1985) (recognizes equity in successor liability analysis)
- Johnson-Battle Lumber Co. v. Emanuel Lumber Co., 33 Ga.App. 517 (Ga. App. 1925) (illustrates mere continuation with continuation of debts under common business ownership)
- Pet Care Professional Center, Inc. v. BellSouth Advertising Publishing Corp., 219 Ga.App. 117 (Ga. App. 1995) (mere continuation in a partnership-to-corporation context among same operations)
- Ed Peters Jewelry Co., Inc. v. C & J Jewelry Co., Inc., 124 F.3d 252 (1st Cir. 1997) (court discusses whether mere continuation applies when creditor would be prejudiced without considering form)