A recent decision from the Tenth Circuit Court of Appeals highlights some of the pitfalls of entering into commercial transactions without conducting thorough employment diligence – even in the asset purchase context.
In 2009, buyer (Roark-Whitten) purchased a hotel. Following the transaction, several employees of the hotel alleged management had discriminated against them. The Equal Employment Opportunity Commission (“EEOC”) filed a complaint against Roark-Whitten, alleging Title VII violations. During the pendency of the EEOC’s complaint, Roark-Whitten sold the hotel to another entity, Jai Hanuman, LLC, which subsequently sold the hotel to another entity, SGI, LLC. For each transaction, the EEOC amended its complaint to name the new owner. Jai Hanuman and SGI moved to dismiss the complaint, arguing they were not liable for any discriminatory conduct as successors. The district court agreed and dismissed the complaint as against them.
On appeal, the Tenth Circuit Court of Appeals reversed, holding SGI could be liable as a successor for liability stemming from the discrimination claims. The EEOC argued the Jai Hanuman-SGI purchase agreement contained language providing that SGI had thirty (30) days to investigate the hotel’s liabilities. The Tenth Circuit agreed, reasoning because the purchase agreement afforded a due diligence period, SGI should have conducted “reasonable and adequate” investigation during its diligence. The Tenth Circuit reasoned that such diligence...
WASHINGTON: President Donald Trump encouraged supporters on Saturday and again on Monday to vote by mail if they wanted, a change of tone for the US president, who has for years described mail-in ...