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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 112774
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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About a year ago,18 drivers from our expedite company filed

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About a year ago,18 drivers from our expedite company filed a lawsuit against them because of payment discrepancies for the same job to different drivers.Two of the drivers are still employed by the company yet named as plaintiffs.We found that since we have contracts with the company as independent owner operators we are entitled to 67% of gross revenue charged as invoices to the shipping companies,however we cant verify these amounts since the company stopped showing invoices to the drivers in dec 07.T here have been a lot of difference in the amounts paid to the drivers for the same jobs over this time that cant be explained;if a driver complains the company just says someone made a mistake and compensates the driver.The less experience the driver has the more this happens to,and most drivers dont last more than a year.Many drivers have been fired for asking to look at the invoices and this initiated the lawsuit.Since the company has been served papers in Jan 09,they have gone thru many changes,management shuffles,attempts at transparency on the pay sheets,a change from corporation status to limited,and a process to sell the company.This leads to my question,they have sold to a very large transportation comp that we are assuming would have to know about the ongoing litigation.They bought the smaller company at a 63% premium on it`s stock price for 248 million and their stock price doubled,adding 600 million to their capitalization.The transfer of ownership should be completed by the end of the first calender quarter of 2011.We are concerned that there may be some way to transfer this lawsuit to the bigger company and they would wait us out with their battery of lawyers and unlimited resources.Is there some precedent that would indicate that companies would have to deal with established lawsuits before transfer of sold company or can the new company just agree to take it on.One more piece of info;the company delayed us for months by asking for irrefuteable evidence of payment discrepancies and we gathered up about 5000 incidences and presented their lawyer with spreadsheets that showed unexplained and random charges for similar jobs.As far as i know they have 20 days to mount a defence or show the invoices.Also in sept 09 their lawyer wanted to know if we wanted to mediate when they thought they had the company sold the first time but our lawyer said sure,as soon as we see the invoices and we haven`t heard from them since.Their shareholders balked at the first sale because they did not put the company up for public bidding.Your thoughts on whether they can sell and transfer this lawsuit over to the new owners would be apprieciated.
Submitted: 5 years ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 5 years ago.
Unfortunately, no there is no precedent that would halt the sale. When a new company comes in and purchases an existing company they purchase their assets and liabilities and the new company becomes liable for the suit and defending it or settling it. At this point your attorneys will be monitoring the sale (or should be) to ensure that the old company does not try to simply sell off only assets and then seek to file bankruptcy (which actually would be illegal and not approved, but you would be amazed that there are a handful of companies that still try that silly stuff). If the new company has bought the old company out, they will become liable for managing the litigation and paying on it if they lose.


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Customer: replied 5 years ago.
Thanks for your answer,i was away from internet access for a few days.Our company has been sold to the larger company who seems to be a lot more careful in how they conduct their business,ie,not allowing their drivers to drive excessive hours and paying more honestly.The small sold company is having a majority shareholders meeting on Feb 18 to vote on the sale which should be easy since they made so much money on it.The drivers involved in the lawsuit have a hard time believeing that the new company would want to take on the lawsuit and chance that problems would leak out and damage their share price.Have u seen any examples where the companies involved would settle before the sale?
Expert:  Law Educator, Esq. replied 5 years ago.
This may be a bit different question since you are correct the new company may not want to take on the debt of the pending litigation, presuming the new company has done their due diligence and have discovered the suit. Presuming the new company has found out about the suit, the next thing is that they need to have evaluated the grounds for the suit to determine the change of success of the suit on the merits. There have been many of these cases, but they have gone either way, it just depends. Now is certainly the time for the attorneys in the litigation to begin cranking up the heat on the company for settlement and usually they will notify the new company coming in about the suit as well. The interference with the sale could be a big motivator for the old company to settle to get the sale made. However, if they have evaluated the suit and determined that there are no merits to the suit, then they will simply let the new company come in and continue to fight. So there is no way to give you the definitive answer on what they will do.
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