Dive into the intricacies of M&A transactions with our latest blog post, ‘Navigating Union Liabilities in M&A: Lessons from the Surecut Lawncare Case.’ Uncover the complexities businesses face when merging, especially in dealings with unionized labor. Explore a recent legal battle that highlights the challenges and key takeaways for buyers acquiring businesses with union employees. Learn from the Eastern Missouri Laborers District Council v. Surecut Lawncare case as we dissect the defense, court’s decision, and crucial considerations for a successful M&A journey
M&A Stories
July 2, 2018
In a recent legal battle, the Eastern Missouri Laborers District Council took on the task of collecting supplemental union dues from a buyer who acquired the assets of a landscaping business with union employees. The case sheds light on the complexities businesses face in mergers and acquisitions, especially when unionized labor is involved.
Background:
The seller, a well-established landscaping business operating in the St. Louis area since 1988, decided to sell in 2015. The buyer, a larger player in the same industry with operations in the Lake of the Ozarks area, saw an opportunity to expand into St. Louis.
The deal, sealed in January 2016, involved the acquisition of all seller assets, including real estate, customer lists, trademarks, and goodwill. Six of the seller’s eight employees were hired by the buyer, who continued servicing the former customers in the St. Louis area.
The Allegation:
The union argued that the buyer was the “alter ego” of the seller, holding it responsible for the supplemental union dues of the former employees. The union claimed that the transaction was a mere disguise to sidestep collective bargaining agreement obligations.
The Defense:
While the buyer admitted to operating the seller’s business in St. Louis with its assets and employees, it contested the union’s allegations. The buyer emphasized that the post-closing operation should not automatically impose the seller’s union liabilities.
Court’s Decision:
The court carefully considered the facts presented. Crucially, the seller’s owner had no ownership stake in the buyer, and the buyer and seller owners did not have any prior connection. Additionally, the buyer paid a fair price for the business. Based on these factors, the court ruled against the union, stating that the buyer was not the alter ego of the seller.
Key Takeaways:
This case serves as a reminder for buyers acquiring businesses with union employees. The court emphasized the importance of avoiding transactions that appear as a disguised continuance of the seller’s operations or an attempt to evade collective bargaining agreement obligations.
Conclusion:
In the realm of M&A, particularly when dealing with businesses with unionized labor, caution is paramount. Seeking guidance from experienced labor lawyers during asset acquisitions can help businesses navigate potential union liabilities successfully.
Case Reference:
This case is referred to as Eastern Missouri Laborers District Council v. Surecut Lawncare, LLC, No. 4:17-CV-1234 CAS, United States District Court, E.D. Missouri, Eastern Division (June 25, 2018).
By John McCauley: I help people start, grow, buy and sell their businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
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