Document Type

Case Summary

Publication Date

1-1-2005

Case Synopsis

In September 1995, Ray Brannen formed Buena Nevada. In December 1996, Brannen sold 100% of Buena Nevada’s shares to Geofon, Inc, which formed a new company named Buena Engineers, Inc., a Division of Geofon, Inc. (Buena Geofon). In the sales agreement, Brannen reserved the right to repurchase the shares of Buena Geofon. In 1997, Buena Geofon submitted a proposal to Village Builders, LP (Village) to perform an environmental site assessment, which Village accepted. Acting on Buena Geofon’s assessment, Village purchased the property only to discover in December 1998 that Buena Geofon’s assessment failed to identify contaminated soil and ground water on the property. In May 1999, Brannen bought all of Buena Geofon’s stock, thereby resuming ownership of the company known as Buena Nevada. Brannen then sold all of Buena Nevada’s assets and good will to U.S. Labs, excepting any stock and limiting specific liabilities, and Buena Engineers, Inc., a Delaware Corporation (Buena Delaware) was formed to hold Buena Nevada’s assets. After the sale, Buena Nevada continued to operate as a separate corporate entity. For Buena Nevada’s assets and good will, Brannen received $14,000 as the cash value of 3,333 shares of U.S. Labs stock, which Brannen later used to purchase U.S. Labs stock. Additionally, U.S. Labs hired many Buena Geofon employees, including Brannen, to work for Buena Delaware; Buena Delaware continued to use the same facilities and logo and to offer the same services; further Buena Delaware did not alter the contracts it obtained as part of the asset purchase transaction. In August 1999, Village filed an action against Buena Nevada to recover its cleanup costs. When Village discovered that U.S. Labs had purchased all of Buena Nevada’s assets and good will, Village amended its complaint and brought breach of contract, negligence, and negligence per se claims against U.S. Labs. Village contended that U.S. Labs and Buena Delaware were proper parties to the suit based upon the doctrine of successor liability. The district court granted U.S. Labs’ motion for summary judgment, determining as a matter of law that U.S. Labs was not liable under a successor liability theory. The district court also awarded $3,108 in costs to U.S. Labs and Buena Delaware. Village appealed both orders. The Nevada Supreme Court held that Village failed to make out a prima facie case establishing an exception to the general rule precluding successor liability. However, the Nevada Supreme Court reversed and remanded with regard to costs, holding that U.S. Labs failed to submit a verified memorandum of costs and that U.S. Labs’ motion for attorney fees and costs did not sufficiently satisfy the trial court’s award.

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