After all, what you say and do at a real estate closing may come back to bite you and your client. Prosky (MA SJC 5/30/14) Apparently for the first time, a Massachusetts trial judge has used a newly decided corporate successor liability theory to hold a newly formed company responsible for the debts of its predecessor, yielding a million judgment for back rent and interest.The plaintiff in the case, Renaissance Worldwide, had leased space to Sitara Networks, a voice-over-Internet (VOIP) company, in a Waltham building.
“We hand the keys to Lighthouse and then purchase the assets back from them,” he wrote.
“We have spent time working this last option out with Argus, who have much more experience at this than we do. Financially, this is a better deal for all of us but more complicated.” In a later e-mail to an investor, Khan spelled out the plan in greater detail: Lighthouse would take over the assets and a new company would buy them, getting “Sitara’s current business, assets, IP, brand names, trade marks and copyrights, with no debt on its balance sheet.” And he noted that, if done “expeditiously,” there would be “a seamless transition from employees, customers and the market, with minimal disruption to business.” Not So Fast Says The Judge After several years of litigation, the Judge ruled in a jury waived trial that the plan “engineered by Khan with assistance from Argus and the cooperation of Lighthouse was designed to permit Sitara to continue its business, albeit with a new name, and to shed its unsecured debt.” He ordered the defendants to pay $1.2 million in rent plus roughly $800,000 in interest, as well as attorneys’ fees, which have not yet been calculated.
With few exceptions, outside of the commercial law context, Massachusetts has not generally recognized the doctrine of anticipatory repudiation, which permits a party to a contract to bring an action for damages prior to the time performance is due if the other party repudiates.
One such exception occurs where a seller of land informs the “holder of an enforceable option” to purchase that he plans to sell the land to a third party.
KGM’s attorney demanded that the Prosky’s attorney produce the closing documents he was supposed to have drafted.