Is ‘Successor Jurisdiction’ About To Become a Thing? How About Successor Liability?

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Is ‘Successor Jurisdiction’ About To Become a Thing? How About Successor Liability?

As every litigator knows, where a defendant can be sued depends on a combination of long-arm statutes and due process considerations: The defendant has to have minimum contacts with the forum court before the defendant can be sued there. So typically, after a seller transfers a business to a buyer, a later plaintiff can establish personal jurisdiction over the buyer based only on the buyer’s own contacts with the forum. The seller’s contacts don’t count.

Or maybe they do. Recent case law in New York imputes the seller’s forum contacts to the buyer if the buyer purchased all the seller’s assets and liabilities. That means the buyer can be sued in New York if the seller could have been sued here, so long as the claims could have been asserted against the seller. This has implications. Read on.

Terror Attacks and Subsequent Litigation

First, the facts. Members of the Lelchook family and others were killed or injured by Hezbollah rocket attacks while in Israel in 2006. These attacks led to a number of lawsuits, including one against Lebanese Canadian Bank in the Southern District of New York under the Anti-Terrorism Act and the Justice Against Sponsors of Terrorism Act. The plaintiffs alleged that the Lebanese Canadian Bank facilitated the terror attacks by financing Hezbollah. The lawsuit eventually featured over 90 victim plaintiffs.

The First Certified Question

Years of litigation ensued. By 2010, the Second Circuit perceived an unsettled issue of New York state law. Specifically, under CPLR 302(a)(1), could courts in New York exercise specific jurisdiction over the Lebanese Canadian Bank? The bank’s contacts with New York consisted entirely of repeatedly using a correspondent bank account in New York. Was that enough contact to support personal jurisdiction? The Second Circuit certified the question to the New York Court of Appeals. The Court of Appeals ruled that there was an “articulable nexus or substantial relationship between the transaction” and the claims in the case, which was sufficient to permit New York courts to assert personal jurisdiction over the Lebanese Canadian Bank.[1]

Based on that ruling, the Second Circuit held that the bank could be sued in New York consistently with due process.[2] The Second Circuit later ruled in related litigation that claims against the bank for aiding and abetting the Hezbollah attacks could survive a motion to dismiss.[3] So the bank was definitely exposed.

The Lebanese Canadian Bank Sells to Société Générale de Banque au Liban SAL

While this was going on, the U.S. Treasury Department in 2011 designated the Lebanese Canadian Bank an institution of “primary money laundering concern,” citing its connection with Hezbollah. A few months later, Société Générale de Banque au Liban SAL entered into an agreement with the bank under which the bank sold all its assets and all its liabilities to it. The liabilities sold included “liabilities and/or obligations and/or debts of any kind, character or description, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, determined, determinable or otherwise” – in other words, the parties’ agreement made sure that every liability of every imaginable type was transferred. The deal closed on June 22, 2011.

This transfer of all liabilities meant that Société Générale de Banque au Liban SAL definitely was on the hook to the plaintiffs: If the Lebanese Canadian Bank was legally responsible for the effects of the Hezbollah attacks, Société Générale would be liable. But unlike the Lebanese Canadian Bank, to all appearances, it had not engaged in any conduct in New York that could subject it to personal jurisdiction in New York. So, could the plaintiffs sue Société Générale in New York? Were the Lebanese Canadian Bank’s jurisdictional contacts with New York imputed to Société Générale?

The Second Certified Question

This issue came up in the Second Circuit in the Lelchook case in 2023. The Lelchooks had sued Société Générale based on the Lebanese Canadian Bank’s actions. When the case reached the Second Circuit, the court was faced with the issue whether Société Générale was subject to personal jurisdiction in New York – did it acquire the bank’s amenability to suit in New York or only its exposure to liability? The Second Circuit certified the question to the New York Court of Appeals.[4]

In April 2024, the Court of Appeals ruled that Société Générale succeeded to the Lebanese Canadian Bank’s “jurisdictional status” when it acquired all its assets and liabilities.[5] Its analysis began with an acknowledgement that prior case law did not provide an answer. The court turned, therefore, to the “separate but related question of successor liability” to “inform” the inquiry.[6] New York has accepted successor liability only in four limited circumstances: express or implied assumption of the predecessor’s liability; consolidation or merger with the predecessor; the buyer was a “mere continuation” of the seller; or the sale transaction was a fraud designed to escape liabilities.

New York does not accept the “product line” exception that several states recognize. If a buyer acquires a manufacturing business and continues to provide product, but did not assume the seller’s liabilities, certain states nevertheless permit tort plaintiffs to sue the buyer even for injuries that occurred before the purchase, even though the buyer did not assume those liabilities. The Court of Appeals held that the decision whether to accept successor jurisdiction should turn on the same factors that the court looked at when it was considering the product line exception. Specifically, “the impact of our rule on parties to a potential acquisition, whether imputing jurisdiction fairly reflects the reasonable assumptions and expectations of the parties to such transactions, whether doing so induces responsible parties to internalize responsibility for risks they create, and the impact of imputing jurisdiction on those injured by a predecessor’s acts.”[7]

Though these factors had led the court to reject the product line exception, in this case the “factors tip in favor of allowing successor jurisdiction where a successor purchases all assets and liabilities.”[8] The Court of Appeals explained its conclusion with several observations. If the buyer purchased all liabilities, that suggests the agreed purchase price (arrived at after due diligence) took account of the risks of litigation and an ultimate adverse judgment. Any reasonable pre-purchase investigation would also account for the locations where such litigation might be. In this particular case, litigation arising from the Hezbollah bombing was already underway in New York when Société Générale bought Lebanese Canadian Bank’s assets and liabilities. Case law in other jurisdictions authorized successor jurisdiction in any case where there was successor liability – here, of course, there was successor liability as a contractual matter, because Société Générale assumed the bank’s liabilities – so it could hardly have ignored this risk. Thus, in the Court of Appeals’ view, it was eminently reasonable to impute to Société Générale the contacts the Lebanese Canadian Bank had that subjected it to personal jurisdiction in connection with the plaintiffs’ claims. In essence, when Société Générale purchased all the bank’s liabilities, those liabilities were accompanied by liability-related contacts with New York.

That left only one real issue for the Second Circuit to decide: is imputing the Lebanese Canadian Bank’s New York contacts to its buyer consistent with due process? To establish personal jurisdiction over a defendant, a plaintiff has to show both that state law authorizes it and that doing so does not offend due process. The Court of Appeals’ ruling established that state law authorized personal jurisdiction over Société Générale. How about due process? Société Générale didn’t have its own contacts with New York. Was it fair for a New York court to assert jurisdiction simply because another company whose assets Société Générale bought had contacts with New York?

The Second Circuit’s Due Process Ruling

In August, the Second Circuit answered “yes.”[9] The Second Circuit started its discussion by enumerating four factors to be considered in the due process analysis:

(1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiff’s interest in obtaining convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest … in furthering substantive social policies.[10]

Based on an evaluation of these factors, the Second Circuit determined that it was fair to subject Société Générale to jurisdiction in New York. First, technology mitigates any burden on it. Second, New York has an interest in its position as a financial center; because the Lebanese Canadian Bank’s contacts were based on its corresponding bank in New York, New York has interests in regulating these relationships. Third, the plaintiffs have an interest in recovering from a solvent company (Société Générale) rather than one that has dissipated its assets (Lebanese Canadian Bank). In that connection, the Second Circuit observed that ruling for Société Générale “would both enable and incentivize companies to pass their assets on to successors in other jurisdictions and shield them from direct claims for liabilities in that forum.”[11] Such a result is to be avoided. Fourth, the court rejected the idea that asserting jurisdiction would be an affront to international comity, because New York was asserting specific jurisdiction rather than general. Also, there was nothing unfair about the long statute of limitations for the claims, because the United States’ policy is to facilitate recovery for terror victims.

Finally, Société Générale urged that it was not the same entity as the Lebanese Canadian Bank, so there is no basis to impute the bank’s contacts to Société Générale – in effect, the Second Circuit observed, Société Générale advocated for a rule that would deny “specific personal jurisdiction over a successor entity if the successor and predecessor are not effectively one another’s alter egos.”[12] The court was having none of it: “Although LCB [Lebanese Canadian Bank] still formally exists as a separate entity, SGBL’s [Société Générale’s] acquisition resembles a merger in key respects.…” including – crucially – the fact that “SGBL expressly acquired all of LCB’s liabilities.”

The bottom line after the Second Circuit’s decision is that Société Générale will have to defend against the plaintiffs’ lawsuit in New York.

Open Questions After Lelchook

To some extent this holding is limited, because Société Générale acquired all the Lebanese Canadian Bank’s assets and liabilities. Most acquiring companies in a normal business context do not agree to take on all the liabilities of the seller. Most typically, there are excluded liabilities. And even more typically, the seller doesn’t sell all its own assets, but only one of its business lines or a group of related assets. How does this decision affect such sales? Does it affect them at all?

At first glance it appears that it won’t affect them. The Court of Appeals’ analysis looked specifically at successor liability to “inform” the decision about successor jurisdiction. So, the fact that Société Générale had acquired the Lebanese Canadian Bank’s liabilities in addition to its assets appears to loom large in the analysis.

But on closer examination things aren’t so clear. Consider that the Court of Appeals identified the factors that drove its decision: “the impact of our rule on parties to a potential acquisition, whether imputing jurisdiction fairly reflects the reasonable assumptions and expectations of the parties to such transactions, whether doing so induces responsible parties to internalize responsibility for risks they create, and the impact of imputing jurisdiction on those injured by a predecessor’s acts.”[13] These factors do not turn on whether the buyer acquires all of the seller’s assets and liabilities; they simply tilt in favor of successor jurisdiction when the buyer does so.

Because these factors do not require that all the assets and liabilities be transferred to the buyers, it is entirely conceivable that a less than 100% conveyance can lead to successor jurisdiction. Let’s consider some possible scenarios.

First, imagine that the seller is a subsidiary of a larger company. Only the subsidiary sells all its assets and liabilities – in other words, the entity that is the seller disposed of all its assets and liabilities, but the overall enterprise did not. Is there successor jurisdiction? How do the factors apply? Should the court look only at the specific entity that disposed of all its assets and liabilities, or should the court consider the overall business of the seller? To what extent does the formal structure of what gets sold determine whether the buyer acquires the seller’s jurisdictional status?

Or suppose the seller sold all the assets and liabilities of one of its divisions – an entire line of business, but not a separate entity. How do the factors apply? How about if a seller sold almost all its assets and liabilities but retained some of its liabilities? Does (or should) the inquiry depend on how significant was the amount of liabilities retained? Or does (or should) it turn on the nature of the retained liabilities? Or does it make a difference at all if less than 100% was transferred?

These are all issues of state law, of course. So, on top of these questions, there is still the overarching issue of whether any ruling that imputes a seller’s contacts to the buyer can pass muster under the due process clause in a transaction that does anything other than transfer 100% of assets and liabilities of the seller.

Now that the Court of Appeals has opened the door to permitting successor jurisdiction, it is a fair bet that plaintiffs will start to test the limits of the new rule. Because real life consistently produces fact patterns beyond anyone’s wildest imagination, it is anyone’s guess what kinds of cases will make their way through the courts.

It might not be restricted to jurisdiction, either. Remember: When the Court of Appeals listed the factors that supported asserting jurisdiction over Société Générale, it looked to the reasons for rejecting successor liability for the purchase of a product line. But if successor liability turns on a list of factors, why is there any reason to think that the potential set of scenarios in which successor liability can be imposed is limited? So long as a plaintiff can argue that the listed factors militate in favor of successor liability, the possibility exists that there can be such liability even in a case where liability was not assumed, where there was no merger or consolidation, where the buyer was not merely a “continuation” of the seller and where there was no fraud. Expect plaintiffs to make this argument in the future.

In other words, Lelchook might well be the start of a rethinking both of jurisdictional issues under the CPLR for mergers and acquisitions transactions and of the scope of successor liability. Or maybe not – maybe Lelchook is the paradigmatic one-off whose result was driven heavily by distaste for a terror-abetting entity and its efforts to avoid accountability. Only time will tell how this will shake out.

Stuart M. Riback is a partner at Wilk Auslander in New York, where he handles complex and commercial litigation in state and federal courts across the U.S. He is also an arbitrator and mediator and an active member of the Dispute Resolution and Commercial and Federal Litigation sections.

This article appears in a recent issue of NY Business Law Journal, the publication of NYSBA’s Business Law Section. For more information, please visit nysba.org/bus.

Endnotes:

[1] Licci v. Lebanese Canadian Bank, SAL, 20 N.Y.3d 327, 338-40 (2012).

[2] Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 165 (2d Cir. 2013).

[3] Kaplan v. Lebanese Canadian Bank, SAL, 999 F.3d 842 (2d Cir. 2021).

[4] Lelchook v. Société Générale de Banque au Liban SAL, 67 F.4th 69, 88 (2d Cir. 2023).

[5] Lelchook v. Société Générale de Banque au Liban SAL, 41 N.Y.3d 629 (2024).

[6] Id. at 635.

[7] Id. at 636-37.

[8] Id. at 637.

[9] Lelchook v. Société Générale de Banque au Liban SAL, 147 F.4th 226 (2d Cir. Aug. 11, 2025).

[10] Id. at 245.

[11] Id. at 246 (quote cleaned up).

[12] Id. at 247.

[13] 41 N.Y.3d at 636-37.