Stutman Law attorneys Daniel Hogan and Jonathan Acklen recently secured a significant appellate victory on the issue of successor liability in New York’s Appellate Division for the Fourth Department. The case arose from a fire at a brewery in Lewiston, New York, caused by improperly installed ventilation equipment.
The HVAC work had been performed three years earlier by KJ Mechanical. After completing the project, KJ Mechanical ceased operations. Its owner and former employees immediately joined another local HVAC company, Direct Heating and Air Conditioning (now known as Direct HVAC). These employees launched a new service department for Direct HVAC, used the same tools and equipment, and served the same customers. Customers were told that the two companies had merged. The voicemail for KJ Mechanical’s phone number was changed to reference only Direct HVAC.
Stutman Law’s client paid substantial damages related to the fire. The firm then filed a subrogation action against both KJ Mechanical and Direct HVAC, alleging that KJ Mechanical’s faulty work caused the fire and that Direct HVAC was liable as KJ Mechanical’s successor under New York’s de facto merger doctrine.
That doctrine holds that when one company effectively takes over another, it may also inherit its liabilities. Direct HVAC moved for summary judgment, arguing that no de facto merger occurred because the two companies didn’t share ownership and KJ Mechanical still existed on paper. The trial court denied the motion, citing the flexible nature of the de facto merger test.
Direct HVAC appealed. Hogan argued the case before the Fourth Department, which upheld the trial court’s decision and agreed that the successor liability claim could proceed. Following that ruling, Direct HVAC paid $1.6 million to settle the case.
This result reflects Stutman Law’s commitment to acting quickly and litigating effectively. Our New Loss team preserved critical evidence, retained top experts, and built a strong theory of liability against KJ Mechanical. Then our litigation team pushed the case through trial and appeal to achieve a substantial recovery for our client.
To read the Fourth Department’s decision, click here: https://www.nycourts.gov/courts/ad4/Clerk/Decisions/2024/1115T1500/pdf/0749.pdf