Landmark California Cases on Successor liability
It is well settled that the transfer of corporate assets to another corporation results in successor liability where "the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts. " (Ray v. Alad Corp. (1977) 19 Cal.3d 22, 28.)
Successor liability may be imposed where the transaction amounts to a consolidation or merger of two corporations or where the purchasing corporation is a mere continuation of the seller. (Ibid.)
In Franklin v. USX Corp. (2001) 87 Cal.App.4th 615, 625, the court viewed the "mere continuation" theory of successor liability as "merely a subset" of the "consolidation or merger" theory stating:
"The crucial factor in determining whether a corporate acquisition constitutes either a de facto merger or a mere continuation is the same: whether adequate cash consideration was paid for the predecessor corporation's assets."