When Asset Buyers Inherit the Seller’s Problems: Avamer v. Hunter Boot

In most asset sales, the buyer wants the goods, not the debts. Generally, when you buy assets, you leave liabilities behind. But there are exceptions. One of them, the “mere continuation” doctrine, was front and center in a recent First Department case, Avamer 57 Fee LLC v. Hunter Boot USA LLC.

In a 3-2 decision, the majority applied the mere continuation doctrine allowed a claim to survive against a buyer “mere continuation” claim to survive even when the seller still existed and its assets were split between two buyers. 

The deal

Hunter Boot USA leased three floors at 57 West 57th Street in Manhattan. In June 2023, it sold non-footwear stock and intellectual property to Authentic Brands Group and sold footwear stock, fixtures in the leased premises, and equipment to Marc Fisher LLC. Two months later, Hunter told its landlord, Avamer 57 Fee LLC, that it was winding down and could not pay rent.

Avamer sued Hunter for breach of lease and also sued Authentic and Fisher, claiming they were liable under the “mere continuation” exception to the general rule against successor liability.

The majority: Facts fit a possible “mere continuation”

The trial court dismissed the claims against the buyers. The First Department reversed in part.

The court agreed there was no express assumption of the lease, no de facto merger (because there was no continuity of ownership), and no fraud. But it held that Avamer alleged enough to keep the “mere continuation” theory alive.

The majority pointed to these pleaded facts:

• Authentic and Fisher together purchased substantially all of Hunter’s assets

• Hunter told Avamer it was winding down and had no funds for rent

• Fisher’s purchase agreement anticipated using the leased premises and keeping fixtures there

• Authentic and Fisher continued Hunter’s operations, using its brand, staff, management, and the leased space

• The buyers had a long-standing relationship, and Authentic guaranteed Fisher’s purchase agreement, naming itself as the principal obligor

The majority stressed that “no one factor is dispositive” in a mere continuation analysis. It rejected the idea that multiple asset buyers automatically escape the doctrine, noting there is no precedent barring its application to more than one successor. It also found that the purchase agreements did not conclusively refute the allegations because they did not disclose the consideration paid or whether Hunter retained meaningful assets.

The dissent: Doctrine requires one successor, seller gone

Two justices dissented, arguing that Schumacher v. Richards Shear Co. and later cases require the predecessor to be extinguished and only one successor to remain. Here, Hunter continued to exist after the sales, kept its corporate registration, and paid rent for at least two months.

The dissent viewed the split between two separate buyers as fatal to the claim. It distinguished prior cases like Tap Holdings and Lippens because those involved far more comprehensive transfers of the seller’s business and obligations. In its view, the allegations here were thin — no assumption of employees or liabilities, no contractual obligation to take the leased space, and no formal dissolution.

Why this matters

The split reveals two very different readings of “mere continuation” in New York.

• Majority approach: Focuses on the substance of the transaction. Multiple coordinated buyers can be treated as a continuation if, together, they acquire substantially all assets and keep the business running.

• Dissent approach: Sticks to a stricter rule. The seller must be gone and only one successor remain. Multiple buyers and a surviving seller defeat the doctrine.

For creditors, the majority’s reading opens the door to successor claims in more scenarios, including multi-buyer distressed sales. For buyers, it is a warning that dividing assets among friendly parties may not eliminate liability risk if the court sees operational continuity.

Buyer takeaways

• Ensure the seller keeps meaningful operations and assets post-closing

• Avoid deals where coordinated buyers end up with nearly all of the seller’s business

• Maintain operational and brand separation from the seller’s business

• Document independence of transactions and consideration paid

Bottom line

The mere continuation doctrine is already the most flexible of New York’s successor liability exceptions. Avamer stretches it further by letting a claim proceed against multiple buyers in a split-asset sale. If you are buying from a distressed seller, structure the deal so it is clear the business did not simply keep running under new hands — because under the majority’s view, creditors will have more room to argue that it did.