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Heavenly Hana, LLC v. Hotel Union & Hotel Industry of Hawaii Pension Plan, p. 760.
In Heavenly Hana LLC v. Hotel Union & Hotel Industry of Hawaii Pension Plan, the Ninth Circuit
addressed whether a company purchasing assets from another is responsible for the seller's
unpaid withdrawal liability to a multiemployer pension plan. The court held that the purchasing
company must assume this liability if it had constructive notice—meaning that a reasonable
purchaser would have discovered the potential withdrawal liability during due diligence. This
decision emphasizes the importance for asset purchasers to thoroughly investigate any
potential pension liabilities of the seller to avoid unexpected financial obligations.
Mergers and Takeovers
1. Corporate Growth Strategies
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Reinvesting earnings (equipment, employees, R&D)
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Merging or consolidating with another corporation
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Purchasing assets or controlling interest in another corporation2. Merger, Consolidation, and Share Exchange
2.1 Merger
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One corporation acquires another’s assets and liabilities.
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The surviving corporation retains its identity and absorbs the acquired company.
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The acquired company ceases to exist as a separate entity.
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Surviving corporation inherits all rights, assets, and liabilities.
2.2 Consolidation
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Two or more corporations combine to form a new corporation.
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Both original corporations terminate.
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The new corporation assumes all rights, assets, and liabilities.
2.3 Share Exchange
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One corporation acquires shares of another corporation.
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Both corporations continue to exist.
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Often used to form holding companies.
3. Procedures for Mergers, Consolidations, and Share Exchanges
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Board of directors of each corporation must approve the plan.
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Plan must outline terms, share value conversion, and other conditions.
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Majority shareholder approval is required.
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Plan must be filed with the state; a certificate of merger/consolidation is issued.
3.1 Short-Form Mergers
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Simplified process when a parent corporation owns 90% or more of a subsidiary.
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No shareholder approval required.
3.2 Shareholder Approval & Appraisal Rights
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Most mergers require shareholder approval.
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Dissenting shareholders have the right to receive fair value for their shares.
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Appraisal rights procedures vary by state.
4. Purchase of Assets
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A corporation buys another company’s assets without acquiring its liabilities.
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Selling corporation must obtain shareholder and board approval.
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Buyer assumes liabilities only under specific conditions (e.g., fraud, merger, continuation
of business).5. Purchase of Stock
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Acquiring corporation buys significant shares of a target company.
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Tender Offer: Direct offer to target company’s shareholders, usually above market price.
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Federal and state laws regulate takeovers.
5.1 Responses to Takeovers
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If favorable, the board recommends shareholders accept.
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If opposed, target company may use defenses against a hostile takeover.
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Business Judgment Rule: Directors must show a reasonable basis for resisting a
takeover.
6. Corporate Termination
6.1 Dissolution
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Voluntary: Shareholder vote or board proposal.
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Must file articles of dissolution and notify creditors.
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Involuntary: State or court action due to fraud, failure to pay taxes, or deadlock.
6.2 Winding Up
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Liquidation and distribution of assets.
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In voluntary dissolution, directors act as trustees.
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In involuntary dissolution, courts may appoint a receiver.
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Creditors are paid first; remaining assets go to shareholders