Updated July 26, 2018

Sometimes there is an injured person – perhaps severely and permanently hurt – who was clearly injured by a business that is now out of business.  As New Jersey personal injury attorneys, we sometimes must deal with situations like these. This is a very difficult situation in some cases, especially when the company did not have any insurance, or the insurance that they did have does not cover the type of injury suffered by the plaintiff (like an assault or certain types of premises liability like inadequate security ).  If there is a new company that is continuing the business of the old company, then you may be able to collect from the new company under the theory of “successor liability.”

Successor liability means that a new company is held accountable for the actions of an old company that was purchased, merged, etc.  The law in New Jersey has long been as follows:

It is the general rule that where one company sells or otherwise transfers all its assets to another company the latter is not liable for the debts and liabilities of the transferor, including those arising out of the latter’s tortious conduct, except where: (1) the purchaser expressly or impliedly agrees to assume such debts; (2) the transaction amounts to a consolidation or merger of the seller and purchaser; (3) the purchasing corporation is merely a continuation of the selling corporation, or (4) the transaction is entered into fraudulently in order to escape liability for such debt.

See Menacho v. Adamson United Co., 420 F.Supp. 128 (D. NJ. 1976).

These 4 scenarios are generally rare.  Usually, when one company buys the assets of the company that is going out of business, they do not agree to be responsible for the actions of the old company, they aren’t doing a full merger, and they aren’t committing fraud.

But sometimes the new company is simply “a new hat” for the old company.  In other words, the old company was in the business of selling a certain product, goes out of business, and then a new company sells those same products, using the old name.  The New Jersey Supreme Court has held  that the new company should be responsible if the defective or dangerous products sold by the old company injure someone.

In a more recent case ,  the courts have held that a successor company can also be liable for damages other than those caused by defective products.  Like, for example, a case where the old company provided real estate service and someone suffered a trip and fall accident , and then a successor company takes over the business of the old company.  This successor company may be liable if the new company is a “mere continuation” of the old company.  The analysis in this regard is heavily fact sensitive, but courts generally look common management, employees, type of business, advertising, business location, etc.

If you would like to know whether you have a case against a company that is now out of business, what kind of value your case may have, and what you can expect, you should contact us for a FREE CONSULTATION with one of our attorneys.  We have been protecting the rights of people injured in accidents since 1922, and we are very experienced with these types of cases, especially in Passaic County, Bergen County, and Essex County, where out attorneys regularly appear in court and regularly interact with the lawyers for the insurance companies.

Remember, the insurance companies and corporations have teams of skilled attorneys who are aggressively representing their interests, and you should too.

Raff & Raff, LLP
Attorneys at Law
30 Church Street
Paterson, NJ 07505

Tel: (973) 742-1917


Fax: (973) 742-2454