stating that “[u]nless extraordinary circumstances exist, an injured [party] should not be made worse off by a change in the business. But neither should an injured employee be made better off ...,” and cautioning against “imposing liability on a successor when a predecessor could have provided no relief whatsoever”
How later courts described this case
- stating that “[u]nless extraordinary circumstances exist, an injured [party] should not be made worse off by a change in the business. But neither should an injured employee be made better off ...,” and cautioning against “imposing liability on a successor when a predecessor could have provided no relief whatsoever”
- explaining that “it would be grossly unfair, except in the most exceptional circumstances, to impose successor liability on an innocent purchaser ... when the successor did not have the opportunity to protect itself’
- holding that an individual corporate official cannot be held liable under Section 1981 when that official is not alleged to have participated in the discrimination against the plaintiff
- declining to find that successor had notice of a lawsuit filed the same day as the sale of the 20 predecessor’s assets where the successor conducted due diligence and nonetheless failed to 21 discover the suit, but stating that “[n]ormally, the burden would be on the successor to find out 22 from the predecessor all outstanding potential and actual liabilities.”
Written by the judges who cited it.
The opinion
ESCHBACH, Circuit Judge,
concurring.
In this groundbreaking case we today become the first court of appeals to recognize that the doctrine of successor liability can apply in a proper case in which the plaintiff seeks relief under 42 U.S.C. § 1981 for employment discrimination. While I agree with the result and with much of the Court’s reasoning, I write separately to emphasize my understanding of the narrowness of our holding, the conditions we attach to the imposition of successor liability under § 1981, and the limitations on the relief that may be obtained.
As I understand it, our principal holding is narrow indeed, amounting only to the following: Under certain conditions it is possible for an employee (or former employee) to state a claim for which relief may be granted under 42 U.S.C. § 1981 for employment discrimination against a company that succeeds to the business of his (former) employer, when the employee alleges that the predecessor and not the successor did the acts charged as discriminatory-
I understand the Court to supplement this holding by attaching at least the following conditions to successor liability and to impose on the plaintiff the burden of pleading and proving them:
(a) The predecessor must be liable to the plaintiff for employment discrimination under § 1981. The requirement of an intentional act of discrimination is not relaxed, even though the successor need not have committed such an act.
(b) The successor must have had actual or constructive notice of the claim or charge of employment discrimination against the predecessor sufficiently in advance of the closing of the transaction to enable the successor to negotiate compensation for its exposure to the liability the plaintiff seeks to impose.
(c) It must appear from the complaint that the predecessor is unable to provide the plaintiff with the relief he seeks from the successor.
(d) But for the succession, the predecessor would have been able to provide the plaintiff with the relief he seeks from the successor.
(e) There must be sufficient continuity between the business of the predecessor and the business of the successor to support the type of relief sought.
While this list does not purport to be an exhaustive statement of the elements of a claim for successor liability under § 1981 in employment discrimination cases, I agree with the Court that these five conditions are properly imposed as necessary ingredients of such a claim.
Finally, I understand the Court to hold that the relief obtainable from the successor is confined to the “make-whole” remedies available under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e; the successor may not be assessed additional compensatory or punitive damages. I agree that this is a proper restriction of the remedies, for the reasons the Court gives.