The rule from case law is not an exercise in statistics or probability; you don't say "well, the rule in most states is X so it must therefore be X in this state too." 49 of the 50 states could have one rule and the 50th another. In that 50th state, what the law is in the other 49 does not matter. What matters is what the law is in that 50th state. So even if the rule in all the other states does not require the buyer to use its stock to buy the assets for a de facto merger, Utah is free to have a different rule. Looking at what rule the other states use does no good when Utah has its own case law already on the matter. And like it or not, the Utah Court of Appeals stated: "The second exception, the 'de facto merger,' considers whether the business operations and management continued and requires that the buyer paid for the asset purchase with its own stock." Decius v. Action Collection Serv., Inc., 2004 UT App 484, ¶ 8, 105 P.3d 956, 959 (bolding added). That statement in the case is pretty clear and speaks for itself, I think. And if you sue claiming de facto merger, you will have to overcome that particular statement of Utah law. As I said before, the Utah Supreme Court has not ruled on the matter, so there is the chance for you to try to convince that court that a different rule should apply if you lose at the lower courts due to the Decius decision.
The Shannon case is not a Utah case, it is a federal district court decision that applies New Jersey law to determine the outcome. While the Utah court looked to the Shannon case to help it determine the rule it made, the Shannon case itself is not binding authority in Utah; in fact it is not binding case law in any jurisdiction. You can argue that the Utah Court of Appeals drew the wrong conclusion when it stated the rule that it did, but you may have to reach the Utah Supreme Court to get a shot at a favorable result, unless the Utah Court of Appeals itself wishes to revise its own case law, which is possible but not all that common. It is not me that you have to convince, it is the Utah appellate courts.
Again, the Utah Court of Appeals made the express statement that the buyer is required to use its stock to pay for the assets. Until the Utah appellate courts change that, that is the rule in Utah. Every other state may have a different rule, but that doesn't matter. Utah trial courts will apply the rules from their own case law on a subject when there is one, even when every other state does it differently.
You are right about the 1974
Shannon case court decision that applies New Jersey law not being binding authority in Utah. Although that is the case its quoted from.
Think of it like this. Some people use words of the most common product to describe something other than what it means.
For example, many people will say " Google it" they really mean " reseach it online". There are many search engines such as Yahoo, Bing, Duck Duck go, etc..
They may say " XERO this document" to mean " copy the document" There are many copier machines such as Cannon, Brother, Lexmark ,etc.
Since probably 99.9% of successor liability cases deal with payment of one company with stock from the seller. This may have been casual throw in to the statement of the law when it does not say that.
There have been subsequent cases of successor liability in quote standard in Utah as follows.
"
Whether a de facto merger has occurred generally depends on the presence of the following factors:
(1) there is a continuation of the enterprise of the seller in terms of continuity of management, personnel, physical location, assets, and operations;
(2) there is a continuity of shareholders;
(3) the seller ceases operations, liquidates, and dissolves as soon as legally and practically possible; and
(4) the purchasing corporation assumes the obligations of the seller necessary for uninterrupted continuation of business operations."
Notice how it said " continuity of shareholders" not requiring a particular method of payment. This case was from 2017 not 1974.
If what you were saying is true, then every case in Utah would say how in Utah the law is different than the other states and say how stock being used is required.
If you don't think that courts make mistakes. In Washington state supreme court had the lead opinion issued and it was only after the fact that they realized they made a counting error and the lead opinion had actually lost. They miscounted the votes or made some mistake.
The case deals with if refusing to let a cop enter your house without a warrant was obstruction of justice.
If you want to get into the weeds and semantics and take every word 100% literal and not look at the spirit of the law, then , a "driver" as define by law is "
Driver means any person who operates a
Commercial Motor Vehicle (CMV) " meaning that as long as you are not a Uber driver, you don't need a Driver license.
What about the Tax 861 argument? Does that hold up? Did it hold up for Wesley Snipers?
Look at what the law is intended to do here? You are stopping someone who is intentionally trying to escape the debt of a company by forming a new company that does the same thing.
The "pay with your own stock" argument can be accidental. The case I'm talking about was done on purpose. It was premeditated and for the sole purpose of escaping the debt of the first company. It also may even have some illegal and criminal elements in here too.
If anything, it should be stronger argument not weaker.
Sometimes judges have law clerks who may research some of this stuff for them. I do not believe the judge in that case was attempting to go outside the standard of the street, but rather a clerk of his misread an out of state non binding old arguments from the early 70. They mistakenly believe they were simple quoting the status quo not intending to break it. The fact that subsequent cases in Utah even as recent as 2017 don't define de facto in the same way is testament to that.
I believe the judge would have made a bigger deal about if he was altering the standing law and other courts would be quoting that same statement which they are not. I think what they are trying to say is that an element of De Facto merger is when there is common ownership even if that ownership is as a result of stock payment. This is because someone may not consider someone getting a stock payment as being a co-owner in the buyer's company.
I have asked this question on yahoo legal section and been told that payment in stock is not required. I believe if there was a situation in which the owners of the 2 companies combined the company for the sole purpose of escaping all their debt, the courts would focus on what the law is trying to accomplish rather then one court misquoting the law from another court in 1974 who was summarizing the case in front of them.
Also, the case I have falls well outside the norm but its an egregious case of successor liability.