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G.P. Publications Inc. v. Quebecor Printing3/4/1997
ation of the ordinary business of Signal Research, Inc; whether G.P. . . . assumed the liabilities ordinarily necessary for the uninterrupted continuation of the business of Signal; whether G.P. employed many of the same employees and served many of the same customers as Signal had.
Not all of these factors need to be present in order for you to determine that G.P. was a mere continuation of Signal. Rather, you must determine whether, under all the facts and circumstances surrounding the transactions, given the factors just set out, G.P. is a mere continuation of Signal. (Emphasis added).
We conclude that the trial court erred in its instruction to the jury regarding the elements of the "mere continuation" exception. It appears that in its charge to the jury, the trial court applied a broadened test of successorship, called the "substantial continuity" or "continuity of enterprise" test. See Mexico Feed, 980 F.2d at 487. The "substantial continuity" test does consider identity of stockholders and corporate officers; however, this issue is not determinative. Id. at 488 n. 10. This approach considers a series of factors in determining whether one corporation is the successor of another: (1) retention of the same employees; (2) retention of the same supervisory personnel; (3) retention of the same production fa cilities in the same location; (4) production of the same product; (5) retention of the same name; (6) continuity of assets; (7) continuity of general business operation; and (8) whether the successor holds itself out as a continuation of the previous enterprise. Id. (citations omitted); Carolina Transformer Co., 978 F.2d at 838 (citations omitted).
The "substantial continuity" test has evolved from the traditional "mere continuation" test "in contexts where the public policy vindicated by recovery from the implicated assets is paramount to that supported by the traditional rules delimiting successor liability." Mexico Feed, 980 F.2d at 487. The test has been applied in cases such as labor relations, product liability and environmental regulation. Id.
This broader test originated with a line of Supreme Court labor relations cases, the seminal case being Golden State Bottling Co., Inc. v. NLRB, 414 U.S. 168, 38 L. Ed. 2d 388, 94 S. Ct. 414 (1973). In Golden State, an employer sold its business after the National Labor Relations Board had found that it was guilty of an unfair labor practice in discharging an employee. In a subsequent back-pay specification proceeding, the Board held that although the purchaser was a bona fide purchaser, it should be responsible for reinstating the employee with back pay. The Ninth Circuit enforced the order and on certiorari, the Supreme Court unanimously affirmed.
The Golden State Court extended the traditional approach to the "mere continuation" theory of successor liability in order to further the public policy behind the National Labor Relations Act. The Court noted that
"when a new employer . . . has acquired substantial assets of its predecessor and continued, without interruption or substantial change, the predecessor's business operations, those employees who have been retained will understandably view their job situations as essentially unaltered. Under these circumstances, the employees may well perceive the successor's failure to remedy the predecessor employer's unfair labor practices . . . as a continuation of the predecessor's labor policies."
Golden State, 414 U.S. at 184, 38 L. Ed. 2d at 402-03. The Court held that under these circumstances, extending liability to the successor corporation was appropriate in order to protect victimized employees, to avoid labor unrest and to p
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