## Facts

- S & W Edger Works, Inc. manufactured and sold a 10,000-pound band sawmill to Semenetz Lumber Mill, Inc. in New York in 1998.
- In 1999, Sean Semenetz (an infant) was injured when his hand was caught in the sawmill’s sprocket-and-chain mechanism, causing partial finger amputations.
- In 2000, Edger Works sold most of its assets (including goodwill and trade names) to Sawmills & Edgers, Inc. under an agreement stating the buyer assumed no seller liabilities except limited inventory-related obligations.
- The day after the asset sale, Edger Works changed its name to Sherling & Walden, Inc. and used the sale proceeds to pay remaining corporate debts.
- Sawmills continued manufacturing sawmills at the same plant, with some of the same employees, and advertised itself as “formerly S & W Edger Works.”
- The plaintiff sued for strict products liability and related theories, naming Sawmills, Edger Works, and Sherling & Walden as defendants.
- The trial court denied Sawmills’ summary judgment motion, but the Appellate Division reversed; the Court of Appeals affirmed the Appellate Division.

## Issues

1. Whether New York should impose strict products-liability successor liability on an asset purchaser under a “product line” theory when the purchaser did not assume the seller’s liabilities.
2. Whether any of New York’s recognized exceptions to the general rule of nonliability for asset purchasers applied to the transaction.

## Decision

- The Court of Appeals affirmed dismissal of successor-liability claims against Sawmills.
- The court declined to adopt the “product line” exception to the rule that asset purchasers are not liable for the seller’s torts.
- The court held Sawmills did not fall within any of the four recognized exceptions to nonliability for asset purchasers.
- The court treated any expansion of successor liability as a policy choice better left to the Legislature.

## Legal Principles

- In New York, a corporation that purchases another corporation’s assets is not liable for the seller’s torts unless one of four exceptions applies: (1) express or implied assumption of liabilities, (2) de facto merger, (3) mere continuation, or (4) fraud to escape obligations.
- A contractual disclaimer of liability is effective absent facts supporting an exception; limited assumed obligations do not imply assumption of tort liability.
- De facto merger and “mere continuation” analysis centers on continuity of ownership and related merger-like characteristics, not simply continuation of operations, employees, location, or product output.
- New York does not recognize a product-line successor-liability theory in strict products-liability cases.

## Conclusion

New York refused to extend strict products-liability successor liability to an asset purchaser under a product-line theory and held the purchaser not liable because none of the established exceptions to asset-purchaser nonliability applied.


Semenetz v. Sherling & Walden, Inc., 7 N.Y.3d 194, 851 N.E.2d 1170 (N.Y. 2006)