HEALTH, LLC, et al., SC 18961

Judicial District of New London


     Corporations; Successor Liability; Whether Covenant Not to Sue Executed by Plaintiff in Favor of Corporate Tortfeasor Bars Successor Liability Claim Against the Purchaser of the Company's Assets.  The plaintiff's infant son died while under the medical care of Shoreline Obstetrics and Gynecology, P.C. (Shoreline).  Subsequently, Shoreline's assets were sold to the defendant corporations.  The plaintiff then brought this medical malpractice action against the defendants, as well as against Shoreline and two of its employees (Shoreline defendants).  The plaintiff’s claim against the defendants was premised on the doctrine of successor liability.  Under that doctrine, a corporation that purchases all the assets of another company becomes liable for the debts and liabilities of its predecessor only under limited circumstances, including when the purchaser is "merely a continuation" of the selling corporation.  The plaintiff, after reaching a monetary settlement with the Shoreline defendants and executing an agreement not to sue (the agreement), withdrew her claims as to them.  The defendants moved for summary judgment, arguing that, because successor liability derives exclusively from and is coterminous with the predecessor corporation’s liability, the plaintiff was barred from pursuing her successor liability claim because the agreement completely discharged Shoreline from liability.  The trial court granted the defendants’ summary judgment motion on that ground, and the plaintiff appealed.  The Appellate Court (133 Conn. App. 577) determined that, when a claim is premised on the continuation of enterprise theory of successor liability, a threshold determination is required that the predecessor corporation no longer represents a viable source of recovery.  The court explained that, although the plaintiff had reached a monetary settlement with Shoreline, it could not conclude, as a matter of law, that Shoreline represented a viable source of recovery to the plaintiff in the absence of undisputed evidence establishing the amount of her damages.  Next, addressing the trial court's rationale for granting summary judgment, the court determined that the dispositive issue was whether the agreement should be construed as a covenant not to sue or as a release of liability.  The court noted that, while the language of the agreement purported to discharge Shoreline of all liability, it also contained an explicit reservation of the plaintiff’s right to continue pursuing a cause of action against the defendants.  Under the principles of contract interpretation, the court opined, such an agreement is properly construed as a covenant not to sue rather than a release.  The Appellate Court reversed the trial court's judgment, ruling that, because the covenant did not discharge Shoreline’s liability for the underlying causes of action, it did not foreclose the imposition of successor liability against the defendants as a matter of law.  The Supreme Court will review the Appellate Court's judgment in this certified appeal.