## Facts

- American Paper Recycling Corporation (APR) contracted in 1990 with Ivy Hill Corporation (Ivy) for APR to buy Ivy’s entire accumulation of waste paper from two plants.
- The parties amended the agreement multiple times; the final amendment extended the term through December 31, 2020, and APR provided equipment and other consideration tied to extensions.
- In 2009, MPS/IH, LLC (MPS) acquired substantially all of Ivy’s operating assets, including the two plants, under an asset purchase agreement.
- The asset purchase consideration was primarily cash (about $23 million) plus a small, non-voting, redeemable equity interest in the purchaser’s parent.
- The asset purchase agreement expressly excluded certain assets and liabilities, including the APR waste paper contract.
- After the sale, Ivy did not dissolve; it renamed itself IHC Corporation (IHC) and continued as a corporate entity, including leasing retained property to MPS.
- Shortly after closing, MPS notified APR it would terminate APR’s recycling services at the plants and instead use another waste paper service provider.
- APR sued for contract-related relief and sought to hold MPS liable as Ivy/IHC’s successor.

## Issues

1. Whether MPS’s purchase of substantially all of Ivy’s operating assets constituted a de facto merger making MPS liable for Ivy/IHC’s obligations under the waste paper contract.
2. Whether MPS was a mere continuation of Ivy/IHC such that successor liability attached for the contract.
3. Whether APR’s contract-based claims against MPS could survive summary judgment on a successor-liability theory.

## Decision

- The court granted summary judgment for MPS on APR’s contract-based claims premised on successor liability.
- The transaction did not qualify as a de facto merger because shareholder continuity was lacking, the seller continued to exist and conduct business after the sale, and the contract at issue was expressly excluded from the asset transfer.
- The transaction did not qualify as a mere continuation because there was no common identity of ownership or control, and Ivy/IHC remained an active, separate corporate entity.

## Legal Principles

- Under Massachusetts law, an asset purchaser generally is not liable for the seller’s debts and contractual obligations.
- Recognized exceptions include: (1) express or implied assumption of liabilities, (2) de facto merger, (3) mere continuation, and (4) fraudulent transaction to escape liabilities.
- De facto merger analysis commonly considers continuity of enterprise, continuity of shareholders, prompt cessation/dissolution of the seller, and assumption of obligations necessary to continue the business.
- Mere continuation typically requires that the purchaser is essentially the same entity as the seller, often shown through common identity of officers, directors, or stockholders; continuation of operations alone is insufficient.

## Conclusion

The court refused to impose successor liability on an asset purchaser where the deal was structured as an asset sale for primarily cash consideration, the seller remained a viable corporation after closing, and the disputed contract was explicitly excluded, defeating de facto merger and mere continuation theories under Massachusetts law.


American Paper Recycling Corp. v. IHC Corp., 707 F. Supp. 2d 114 (D. Mass. 2010)