Narrative Opinion Summary
The Supreme Court of Vermont adjudicated on the liability of E.B.M. Inc. for the debts of Acousti-Phase, Inc. in the case CAB-TEK, INC. v. E.B.M. INC. E.B.M., owned by the same individuals as Acousti-Phase, began operations to assemble and sell Acousti-Phase products without a formal merger or acquisition. The trial court found E.B.M. liable for Acousti-Phase's debts under the principles of corporate successor liability, as E.B.M. had utilized Acousti-Phase's assets without compensation following a fire that led to Acousti-Phase's cessation. The court applied the Ostrowski precedent, which allows for successor liability without a statutory merger, rejecting E.B.M.'s argument that these exceptions were limited to products liability and required an asset sale. The court identified a de facto merger, noting that E.B.M. absorbed Acousti-Phase's assets and operations, thereby invoking the Ostrowski exceptions for bad-faith avoidance of debts. The court affirmed the trial court's conclusion that liability was properly imposed on E.B.M. for the debts of Acousti-Phase, stressing the factual findings and the legal application of corporate successor liability principles.
Legal Issues Addressed
Application of Ostrowski Exceptionssubscribe to see similar legal issues
Application: The court affirmed the applicability of the Ostrowski exceptions to impose successor liability on E.B.M., emphasizing that a transfer of assets without consideration occurred under common ownership.
Reasoning: The trial court determined that a sale of assets occurred without consideration, which imposed liability on E.B.M. for Acousti-Phase's outstanding obligations.
Corporate Successor Liability without Statutory Mergersubscribe to see similar legal issues
Application: The court applied corporate successor liability principles to hold E.B.M. liable for Acousti-Phase's debts, due to the de facto merger that occurred when E.B.M. took over Acousti-Phase's operations and assets without compensation.
Reasoning: The trial court concluded E.B.M. was liable under corporate successor liability principles, specifically citing that E.B.M. had utilized Acousti-Phase's assets without compensation.
De Facto Merger Doctrinesubscribe to see similar legal issues
Application: The court found a de facto merger occurred as E.B.M. absorbed Acousti-Phase's assets and operations, leading to liability for Acousti-Phase's debts under successor liability principles.
Reasoning: A de facto merger had occurred, leading to E.B.M.'s liability for Acousti-Phase's debts to Cab-Tek.
Ostrowski Precedent on Successor Liabilitysubscribe to see similar legal issues
Application: The court applied the Ostrowski precedent beyond products liability to encompass corporate debts, rejecting E.B.M.'s argument that the precedent was inapplicable without a formal asset sale.
Reasoning: The court disagreed, noting that the Ostrowski test has been applied beyond products liability to impose successor liability for corporate debts in various contexts.