Noreen A. Brzozowski v. Correctional Physician Services, Inc.

1
PRECEDENTIAL
UNITED STATES COURT OF
APPEALS FOR THE
THIRD CIRCUIT
No. 02-3659
NOREEN A. BRZOZOWSKI,
Appellant
v.
CORRECTIONAL PHYSICIAN
SERVICES, INC.; PRISON HEALTH
SERVICES, INC.
____________
APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF
PENNSYLVANIA
(D.C. Civ. No. 00-cv-02590)
District Judge:
Honorable Mary A. McLaughlin
____________
Argued October 2, 2003
Before: RENDELL, WEIS, and
GARTH Circuit Judges.
(Filed: February 23, 2004)
____________
Harold I. Goodman, Esquire (ARGUED)
Raynes, McCarty, Binder, Ross &
Mundy
1845 Walnut Street, 20th Floor
Philadelphia, PA 19103
Attorney for Appellant
Andrew J. Rolfes, Esquire (ARGUED)
Klett Rooney Lieber & Schorling
Two Logan Square, 12th floor
Philadelphia, PA 19103-2756
Attorneys for Appellee Prison Health
Services, Inc.
OPINION
WEIS, Circuit Judge.
In this Title VII
employment discrimination case, we
conclude that when an insolvent
employer sells a substantial portion of its
assets to another corporation, that
company may be subject to successor
liability. We also decide that because
substantial portions of Title VII are
governed by laches, rather than a statute
of limitations, the relation back provision
of Federal Rule of Civil Procedure
15(c)(3) does not apply to the joinder of
the successor corporation as an
additional defendant.
Plaintiff was employed by

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defendant Correctional Services, Inc.
(“Correctional”), from 1991 until she
was discharged in 1996. Correctional
was a subchapter S corporation engaged
in the business of supplying medical
services to incarcerated inmates in
several states. Dr. Kenan Umar and his
son Emre Umar each held 50% of the
stock.
Alleging gender
discrimination, plaintiff exhausted EEOC
administrative requirements and then
filed a complaint in the District Court in
May 2000, asserting claims under Title
VII of the Civil Rights Act of 1964, 42
U.S.C. § 2000e, et. seq., and the
Pennsylvania Human Rights Act,
(“PHRA”), 32 Pa. Cons. Stat. Ann. §
951, et. seq. Unknown to plaintiff at the
time, Correctional had agreed in March
2000 to sell a substantial amount of its
assets to Prison Health Services
(“Prison”), an organization in a similar
business. These assets consisted
primarily of contracts with various states
to provide medical services to prisoners.
The sales agreement
disclaimed Prison’s potential liability for
certain law suits and EEOC claims
pending against Correctional.
Specifically mentioned were
discrimination claims brought by the
plaintiff and two other individuals. The
agreement also provided for the creation
of an “oversight committee,” which was
to be responsible for disbursing the $14
million proceeds from the sale to
creditors of Correctional. The committee
was specifically directed to pay $500,000
each to Dr. Umar and his son.
According to the
deposition of Dr. Kenan Umar, the fund
was exhausted in August 2000. After
that time, however, it appears that Prison
paid some debts of Correctional in order
to maintain credibility with the
Commonwealth of Pennsylvania. The
contract between the Commonwealth and
Correctional was one of the assets that
had been sold to Prison. Other efforts at
collection of receivables and payment of
creditors were still underway at the time
of Dr. Umar’s deposition in February
2001. Nonetheless, he stated that
Correctional was “financially defeated”
by that point, and that it owed more than
it could collect.
In December 2000, counsel
who had been retained to defend
Correctional in this litigation filed a
petition to withdraw his appearance,
citing the inability of his client to pay its
legal fees. Plaintiff asserts that this event
was the first notice she received of the
sale of assets and Correctional’s
insolvency. After a hearing, the District
Court granted counsel’s withdrawal
motion.
Soon thereafter, on March
14, 2001, plaintiff moved to join Prison
as an additional defendant, alleging that
it was a successor to Correctional. The
District Court sustained Prison’s
objections and denied the motion on the
ground that Prison should not be held
responsible on a successor liability
theory.

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After the District Court
denied reconsideration or certification of
a controlling issue of law, Correctional
stipulated that judgment be entered
against it and in favor of plaintiff for
$150,000. In addition, it was agreed that
plaintiff would not sue or seek to collect
the judgment from Dr. Umar or any other
individual associated with Correctional.
In accordance with the stipulation, the
District Court entered judgment on
August 28, 2002.
Plaintiff has appealed,
arguing that a Title VII claimant in
appropriate circumstances may be
entitled to the benefit of successor
liability. Prison maintains that
Correctional was in a precarious
financial position before March 2000 and
the sale of assets had no real effect on the
plaintiff’s ability to recover money
damages. Thus, Prison asserts that
successor liability should be inapplicable
in this instance. Prison also contends
that this Court lacks jurisdiction because
the plaintiff consented to the judgment
against Correctional and, in the
alternative, that plaintiff’s claim is time-
barred because the relation-back
provision of Federal Rule of Civil
Procedure 15(c)(3) is not applicable.
I.
We will first address the
contention that we lack appellate
jurisdiction because the order of the
District Court refusing joinder of an
additional party is interlocutory.
Ordinarily, such an order does not
support appellate jurisdiction under 28
U.S.C. § 1291. Lockett v. General Loan
Finance Co. of Downtown, 623 F.2d
1128 (5th Cir. 1980); 15B Charles Alan
Wright, Arthur R. Miller & Edward H.
Cooper, Federal Practice and Procedure §
3914.18 (2d ed. 1991 ed.). Here,
however, the judgment against
Correctional gives us jurisdiction.
Although entered by consent, it is
unconditional, and will remain
undisturbed no matter what our ruling on
the interlocutory order denying the
joinder of Prison. See Bethel v.
McAllister Bros., 81 F.3d 376 (3d Cir.
1996). See also Kahn v. Chase
Manhattan Bank, 91 F.3d 385, 388 (2d
Cir. 1996).
Prison cites Federal Home
Loan Mortgage Corp. (“Freddie Mac”) v.
Scottsdale Ins. Co., 316 F.3d 431 (3d Cir.
2003), and Verzilli v. Flexon, Inc., 295
F.3d 421 (3d Cir. 2002), where we
concluded that a consent judgment was
conditional and therefore not final. As
we observed in Verzilli, a party’s
standing to appeal a consent judgment
requires a reservation of that right.
Verzilli, 295 F.3d at 423. The intention
to appeal was not included in the
stipulation here, but it was made clear in
the letter by plaintiff’s counsel to the
District Court forwarding the stipulation
for approval and filing.
In the letter, counsel
explained that the consent judgment
would “permit Ms. Brzozowski to take
an appeal of the final judgment to pursue
her successor liability claim against

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Prison Health Services, Inc.” Although it
would have been the better practice to
add a statement to that effect in the
stipulation itself, we are satisfied that the
letter was adequate to establish the
plaintiff’s intent to appeal. We conclude,
therefore, that the objections to our
jurisdiction must be denied.
II.
The substantive aspects of
the plaintiff’s appeal challenge the
District Court’s refusal to apply the
successor liability doctrine. At common
law, where one corporation sells or
transfers all or a substantial part of its
assets to another, the transferee does not
become liable for the debts and
liabilities, including torts, of the
transferor. Poulis v. Clark Equipment
Co., 802 F.2d 75 (3d Cir. 1986). There
are certain exceptions to that general
rule. A purchaser may be liable where it
expressly assumes liability, the
transaction amounts to a consolidation or
merger, the transaction is fraudulent and
intended to escape liability, or the
purchaser is a mere continuation of the
seller. 15 Fletcher, Cyclopedia of the
Law of Private Corporations, § 7122
(rev. perm. ed. 1983).
The Supreme Court has
expanded the common law rule in the
field of labor relations. In Golden State
Bottling Co. v. NLRB, 414 U.S. 168
(1973), the Court recited the general
sucessorship principle but found that
federal labor relations policy required
consideration of additional factors. For
example, when a successor continues to
operate the business without substantial
change, the employees will assume that
their job situations will also remain the
same and that past unfair labor practices
will be remedied. Failure to meet these
expectations may well result in the labor
unrest which federal labor policies are
designed to avoid. Id. at 425.
Moreover, the avoidance of
labor strife, prevention of a deterrent
effect on rights granted employees under
the National Labor Relations Act, and
protection for victimized employees are
important goals which can be achieved at
minimal cost to a successor. The
expense resulting from successor liability
can be considered in setting the price
paid for the business, or through the
inclusion of an indemnity clause in the
purchase agreement. Id. at 425.
Similarly, in John Wiley &
Sons, Inc. v. Livingston, 376 U.S. 543,
549 (1964), the Court recognized that
employees and their union generally do
not take part in the negotiations resulting
in a change of corporate ownership and,
thus, are placed at a disadvantage. As a
result, the objectives of national labor
policy must balance an employer’s
option to rearrange its business with
“some protection for employees from a
sudden change in the employment
relationship.” Id. at 549
In EEOC v. MacMillan
Bloedel Containers, Inc., 503 F.2d 1086
(6th Cir. 1974), the Court of Appeals
noted that Title VII was molded to a

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large degree on the National Labor
Relations Act, including its relief
provisions. The Court specifically noted
“the emphasis that both Acts place on
extending protection to and providing
relief for the victims of prohibited
practices,” and concluded that this
federal policy is “sufficient, in our view,
to warrant imposing liability on a
corporate successor for Title VII
violations of the predecessor company.”
Id. at 1091. However, liability in this
context “must be determined on a case-
by-case basis.” Id.
In Rego v. ARC Water
Treatment Co. of Pennsylvania, 181 F.3d
396 (3d Cir. 1999), we recognized that,
in employment discrimination cases, “the
doctrine of successor liability applies
where the assets of the defendant-
employer are transferred to another
entity.” Rego, 181 F.3d at 401. An
aggrieved employee may enforce a claim
or judgment against a successor that
would have been valid against the
predecessor. The doctrine is “derived
from equitable principles, and fairness is
the prime consideration in its application
. . .” Id. at 401.
Citing Criswell v. Delta
Airlines, Inc., 868 F.2d 1093, 1094 (9th
Cir. 1989), Rego listed three principal
factors applicable to successor liability in
the employment discrimination field:
“(1) continuity in operations and work
force of the successor and predecessor
employers; (2) notice to the successor-
employer of its predecessor’s legal
obligation; and (3) ability of the
predecessor to provide adequate relief
directly.” Id. at 401. This Court has
committed itself to recognizing
successorship liability in the appropriate
Title VII context.1 Although the
underpinnings of successor liability have
been derived from equitable principles,
they are nonetheless legal considerations
which, when satisfied as they are here,
warrant the application of the doctrine.
The plaintiff’s motion for
permission to file an amended complaint
alleges that each of the Rego tests is met.
Notice is not an issue; the agreement of
sale between Prison and Correctional
specifically refers to the plaintiff’s claim.
Prison assertedly has continued
Correctional’s operations and work
force. Correctional’s financial debacle
makes it unable to satisfy the plaintiff’s
monetary claims and it cannot reinstate
her.
We cannot discern any
undue prejudice to the imposition of
successor liability should plaintiff be
1 Other Courts of Appeals
have articulated a similar view. See, e.g.,
Rojas v. TK Communications, Inc., 87
F.3d 745 (5th Cir. 1996) (discussing
successor liability in the Title VII
context); EEOC v. G-K-G, Inc., 39 F.3d
740 (7th Cir. 1994) (same); Slack v.
Havens, 522 F.2d 1091 (9th Cir. 1975)
(same); Trujillo v. Longhorn Mfg. Co.,
Inc., 694 F.2d 221 (10th Cir. 1982)
(same); In re Nat’l Airlines, Inc., 700
F.2d 695 (11th Cir. 1983) (same).

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able to establish the validity of her claim.
And, because the potential for this
obligation has been well-established in
the law for some time, there is nothing
unfair about its application at this
juncture. We note that Prison included
an indemnity clause in the agreement of
sale. Realistically, it is probably of no
value now, but the existence of such a
provision was cited in Golden State
Bottling Co. as a factor supporting
successor liability. Prison might have
made provisions for meeting
Correctional’s obligation to plaintiff
through a lower price or an escrow
arrangement. On the other hand, the
plaintiff had no knowledge of the asset
sale and no opportunity to protect her
claim. The fact that Prison did not take
appropriate steps to insulate itself does
not serve to make application of
successor liability unfair in the
circumstances. Prison had means at its
disposal to anticipate such a situation and
offset expected costs associated with a
potential claim like that of the Plaintiff.
We are struck by the
agreement’s provision for establishment
of an interim committee to oversee the
distribution of the $14 million sale
proceeds. This arrangement provided an
opportunity for Prison to guard itself to
some extent from claims like that of
plaintiff. In this connection, too, a
reasonable person might question the
payment of $1 million to Dr. Umar and
his son, the two stockholders of
Correctional, without any consideration
of the plaintiff’s claim.
Relying on the opinion of
the Court of Appeals for the Seventh
Circuit in Musikiwamba v. Essi, Inc.,
760 F.2d 740 (7th Cir. 1985), the District
Court concluded that enforcing successor
liability in the case before us would be
unfair. In Musikiwamba the Court of
Appeals stated that, “[u]nless
extraordinary circumstances exist, an
injured employee should not be made
worse off by a change in the business.
But neither should an injured employee
be made better off.” Id. at 750. The
District Court reasoned that here
“successor liability should not be
imposed if the predecessor was in
financial ruin prior to, and not as a result
of, a sudden sale of assets.” The Court
believed that giving an employee the
right to pursue a claim against the
successor in this situation does not
protect preexisting rights, “but instead
creates new rights.”
Preliminarily, we note that
the Court of Appeals for the Seventh
Circuit in a later opinion substantially
weakened the comment it made in
Musikiwamba. In EEOC v. Vucitech,
842 F.2d 936, 946 (7th Cir. 1988), the
Court wrote, “[w]e do not understand
these decisions to have imposed an
ironclad requirement in all cases of
successor liability.” Rather, emphasis
should be on balancing the interest in
“sanctioning unlawful conduct and the
interest in facilitating the market in
corporate and other productive assets.”
Id. Moreover, no other court has adopted
an expanded view of successor liability

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similar to the one espoused by
Musikiwamba.
Concededly, the language
in Musikiwamba is somewhat confusing,
at least when read as an assertion that it
is somehow unfair to provide a plaintiff
with a better chance of recovering
damages in a Title VII case from a
successor rather than a penniless
predecessor. To the extent that the
plaintiff gains another source for
satisfaction of her claim, of course, she is
better off than the claimant whose only
recourse is against a defunct or insolvent
defendant. However, the mere
substitution of a responsible defendant
for an insolvent one is not a basis for
denying successor liability.
The notion that successor
liability cannot be invoked where it
would leave the creditor “better off”is a
curious one. The doctrine of successor
liability is premised on the idea that the
creditor cannot obtain satisfaction from
the predecessor. To read this factor, or
to impose a new one to require a court to
look at whether the creditor is better off,
seems to undermine the basic rationale
underlying the doctrine. Moreover, we
note that, as a factual matter, there was
money available here for creditors that
was disbursed without regard to the
possibility that the plaintiff might
succeed in her claim.
Although we do not agree
with the District Court’s application of
Musikiwamba, there is an area where it
might have some relevance: the
establishment of liability for the alleged
wrongful act. In that setting, a plaintiff’s
claim should not be weakened or
improved by presenting it against the
successor rather than the guilty
predecessor whose wrongdoing underlies
the claim.
We conclude that the
District Court erred in refusing to allow
joinder of Prison as an additional
defendant. The plaintiff should be given
the opportunity to establish her claim of
successor liability. We caution,
however, that should the cause continue
to the merits, the plaintiff may not simply
rely on the consent judgment arranged
with Correctional. Prison was not a party
to the stipulation for a judgment and
must be afforded the opportunity to
defend itself against the claim de novo.
III.
Prison contends that as a
separate and independent ground the
District Court should be affirmed
because the plaintiff’s effort to add
Prison as a defendant was untimely and
the claim would not relate back to the
date of the original complaint under
Federal Rule of Civil Procedure 15(c)(3).
Conceding that the original complaint
was filed against Correctional within the
90-day “limitations period” set out in 42
U.S.C. § 2000(e)-5(f)(1),2 Prison argues,
2 The relevant portion of
that statute states that “if a charge filed
with the Commission ... is dismissed by
the Commission, or if within one

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however, that the time had expired as to
derivative claims that could be brought
against it as a successor.
Federal Rule of Civil
Procedure 15(c)(3) provides that an
amendment to a complaint relates back to
the date of the original pleading when (1)
permitted by the statue of limitations
applicable to the action; (2) the claim or
defense arose out of the occurrence set
forth in the original pleading; or (3) the
amendment changes a party and the
foregoing (2) is satisfied. When
“relation-back” is based on (3), the new
party must also have received notice of
the suit within the period set under Rule
4(m), must not be prejudiced in
maintaining a defense, and should have
known that, but for a mistake in identity,
the suit would have been brought against
it.
Prison asserts that it had no
notice of the lawsuit within the 120-day
period under Rule 4(m). In essence,
Prison is contending that the 90-day
period is a statute of limitations for Title
VII claims, and plaintiff’s failure to
comply with Rule 15(c)(3) bars relation
back.
The basic flaw in Prison’s
argument is that Title VII does not
contain a statute of limitations applicable
to joinder in the situation here.
Title VII sets a 300-day
time limit after the discriminatory action
occurred to present a claim to the EEOC,
and a 90-day period for filing suit in the
District Court after receipt of a notice of
right-to-sue letter from the agency. The
Act does not address the question
presented here – whether an additional
defendant may be joined after the 90-day
period has expired.
Generally, in federal
litigation, if Congress does not provide a
limitations period , courts look to
analogous state statutes for the
appropriate time within which a suit must
be brought.3 Title VII is an exception to
that policy. In Occidental Life Ins. Co.
v. EEOC, 432 U.S. 355 (1977), the Court
held that absorption of state limitations
hundred and eighty days from the filing
of such charge ... the Commission has
not filed a civil action under this
section,... [or] has not entered into a
conciliation agreement to which the
person aggrieved is a party, the
Commission ... shall so notify the person
aggrieved and within ninety days after
the giving of such notice a civil action
may be brought against the respondent
named in the charge ... by the person
claiming to be aggrieved...” 42 U.S.C.
2000(e)-5(f)(1).
3 In 1990, Congress
enacted 28 U.S.C. § 1658 providing that
except as otherwise provided by law, a
four-year statute of limitations would
apply to the civil actions commenced
thereafter. It was amended in 2002 with
respect to securities litigation. The
statute has no application to Title VII,
which was enacted before 1990.

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would be inconsistent with the
congressional intent underlying Title VII.
That case was not a suit by an individual,
but by the EEOC which is not bound by
the 90-day limitation of Title VII.
Nevertheless, the refusal to look to state
statutes of limitations has been cited in
individual suits as well. See, e.g., Burgh
v. Borough Council of the Borough of
Montrose, 251 F.3d 465 (3d Cir. 2001);
Cleveland Newspaper Guild, Local 1 v.
Plain Dealer Publishing Co., 839 F.2d
1147 (6th Cir. 1988) (en banc).
Just as MacMillan Bloedel
held that a plaintiff need not repeat the
administrative process for the benefit of
a successor corporation, we see no
reason why the 90-day restriction must
be applicable to a defendant joined after
the plaintiff has timely filed suit against
the original employer. See MacMillan
Bloedel, 503 F.2d at 1093. The plaintiff
here “name[d] those who were known to
[her] and could have been charged
during the period of limitations,” and
requiring more could encourage evasion
through corporate transfers and would
frustrate the equitable power of the Court
to make plaintiff whole. Id.
Courts have strictly
construed the 90-day limitations period
against plaintiffs who either misnamed
the appropriate party in their complaint,
see e.g., Williams v. Army & Air Force
Exchange Serv., 830 F.2d 27 (3d Cir.
1987), or have otherwise entirely failed
to meet the filing requirements in the
statute. See Baldwin Co. Welcome
Center v. Brown, 466 U.S. 147 (1984).
Those cases involved situations in which
the plaintiff did not file a proper
complaint within the 90-day period and
are thus distinguishable from the
litigation here where the original
complaint was timely filed.
Generally, when no
specified or analogous statute of
limitations applies to a cause of action,
laches must be considered. A Title VII
defendant who has been prejudiced
because of a delay in the administrative
process does have the right to invoke the
equitable defense of laches. “In addition
to other equitable defenses . . . an
employer may raise a laches defense,
which bars a plaintiff from maintaining a
suit if he unreasonably delays in filing a
suit and as a result harms the defendant.”
National Railroad Passenger Corp. v.
Morgan, 536 U.S. 101, 121 (2002). This
Court, along with a number of other
Courts of Appeals, has cited that
principle in cases where the EEOC has
unduly delayed an individual claimant’s
law suit before issuing a right-to-sue
letter. Waddell v. Small Tube Produce
Products, Inc., 799 F.2d 69 (3d Cir.
1986).4
4 Other cases of
administrative delay invoking laches
with differing results are Bernard v. Gulf
Oil Co., 596 F.2d 1249 (5th Cir. 1979);
Cleveland Newspaper Guild, Local 1 v.
The Plain Dealer Pub. Co., 839 F.2d
1147 (6th Cir. 1988); Jeffries v. Chicago
Transit Authority, 770 F.2d 676 (7th Cir.
1985); Brown v. Continental Can Co.,

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The application of laches is
in accord with Title VII, which “vests
District Courts with broad discretion to
award ‘appropriate equitable relief to
remedy unlawful discrimination.’” Local
28 of the Sheet Metal Workers’ Int’l v.
EEOC, 478 U.S. 421, 446 (1986). The
Courts are empowered to order “such
affirmative action as may be appropriate,
which may include, but is not limited to,
reinstatement or hiring of employees . . .
or any other relief as the court deems
appropriate. 42 U.S.C. § 2002(e)-
(5)(g).” Id. at 466.
Prison is not left without a
defense. When laches applies, a plaintiff
may not be entitled to relief if her
conduct of the case has improperly and
substantially prejudiced the other party.
See Albermarle Paper Co. v. Moody, 422
U.S. 405, 424 (1975). In Jeffries v.
Chicago Transit Authority, 770 F.2d 676
(7th Cir. 1985), the Court held that the
plaintiff had inexcusably failed to prod
the excessively slow administrative
proceedings and the delay materially
prejudiced the defendant. Accordingly,
the plaintiff was found guilty of laches.
In National Assn. of Gov’t Employees v.
City Public Serv. Board, 40 F.3d 698 (5th
Cir. 1994), on the other hand, the Court
emphasized that there must be more than
inexcusable delay. Plaintiff must also
show that the delay caused a
disadvantage in establishing and
asserting a defense.
The relation back
provisions of Rule 15 are primarily
concerned with alleviating unfair
prejudice in circumstances involving
statutes of limitations. It has no
controlling force where, as here, a
defendant’s remedy is provided by the
equitable doctrine of laches.
In this case, the timeliness
issue in terms of the 90-day period in the
context of a statute of limitations was
raised in the District Court, but it was not
ruled upon. On remand, the parties may
bring the issue to the court’s attention.
As we observed in Waddell, the decision
to consider a laches defense is within the
sound discretion of the trial court which,
of course, must make the requisite
findings. The District Court must
consider whether the plaintiff’s conduct
was unreasonable and whether the
defendant was materially prejudiced.
Accordingly, the order
denying plaintiff the right to join Prison
as an additional defendant is reversed,
and the case is remanded to the District
Court for further proceedings consistent
with this Opinion. 765 F.2d 810 (9th Cir. 1985); Brown-
Mitchell v. Kansas City Power & Light
Co., 267 F.3d 825 (8th Cir. 2001);
Howard v. Roadway Express, Inc., 726
F.2d 1529 (11th Cir. 1984); Rozen v.
District of Columbia, 702 F.2d 1202
(D.C. Cir. 1983).

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Garth, Circuit Judge, dissenting:
The majority of this panel
has remanded M s. Brzozowski’s case to
the District Court for further inquiry into
the timeliness of her attempt to amend
her Complaint to add Prison as a
defendant.5 I am pleased that the
majority has seen fit to remand, but
distressed that it has not affirmed in toto
the District Court’s judgment which
denied M s. Brzozowski relief. I
therefore respectfully dissent.
Considering (1) the
equitable nature of the “successor
doctrine,” (2) the prejudice that Prison
would suffer if Ms. Brzozowski were
allowed to amend her Complaint, and (3)
the inescapable conclusion that Ms.
Brzozowski’s desire to add Prison as a
defendant represents the paradigm search
for the deepest available pocket, it is
evident to me that the District Court
correctly denied Ms. Brzozowski’s
motion to join Prison as an additional
defendant and that Prison should prevail.
The polestar of the “successor doctrine”
is equity, and I suggest strongly that
equity has not triumphed in the opinion
of the majority.6
I.
“Equity” has been said to
be “the body of principles constituting
what is fair and right . . . the recourse to
principles of justice to correct or
supplement the law as applied to
particular circumstances.” Black’s Law
Dictionary 560 (7th ed. 1999). As this
Court has stated, successor liability is a
doctrine derived from equitable
principles, and the principle of fairness is
the prime consideration in its
application. Rego v. ARC Water
Treatment Co. of Pa., 181 F.3d 396, 401
(3d Cir. 1999). That doctrine, however,
has necessarily been qualified. In Ed
5 The majority’s opinion has
referred to CPS, Ms. Brzozowski’s original
employer and the seller of assets, as
“Correctional.” It has also referred to the
defendant-successor as “Prison.” For ease
of reference, I have adopted the same
nomenclature.
6 The policy underlying the
successor doctrine is designed to protect an
employee when the ownership of his
employer suddenly changes. See, e.g., Rojas
v. TK Communications, Inc., 87 F.3d 745,
750 (5th Cir. 1996) (“Although developed in
the context of labor relations, the doctrine of
successor liability has been extended to
claims asserted under Title VII and related
statutes. . . . [T]he successor doctrine arises
in the context of discrimination cases in
situations where the assets of a defendant
employer are transferred to another entity.
Thus, the purpose of the doctrine is to ensure
that an employee’s statutory rights are not
“vitiated by the mere fact of a sudden
change in the employer’s business.””). But
by the same token, while an employee’s
right should not be diminished, neither
should it be enhanced. Musikiwamba v.
ESSI, Inc., 760 F.2d 740, 750 (7th Cir. 1985)

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12
Peters Jewelry Co., Inc. v. C&J Jewelry
Co., Inc., et al, 124 F.3d 252, 274 (1st
Cir. 1997), the First Circuit said that “the
successor doctrine is derived from equity
principles and it would be grossly unfair,
except in the most exceptional
circumstances, to impose successor
liability on an innocent purchaser when
the predecessor is fully capable of
providing relief.”
The Seventh Circuit added
to the equitable gloss of the successor
liability doctrine when, using some of
the same language, it stated:
the successor doctrine is
derived from equity
principles, and it would be
grossly unfair, except in the
m o s t e x c e p t i o n a l
circumstances, to impose
successor liability on an
innocent purchaser when
the predecessor is fully
capable of providing relief
or when the successor
would not have the
opportunity to protect itself.
Musikiwamba v. ESSI, Inc., 760 F.2d
740, 750 (7th Cir. 1985). Other courts
have chimed in to the same effect. See,
e.g., Criswell v. Delta Air Lines, 868
F.2d 1093, 1094 (9th Cir. 1989) (citing
to Musikiwamba, 760 F.2d at 750).7
In Rego, where we adopted
the doctrine of successor liability, we
specified that the District Court should
analyze a successor claim by considering
three principal factors before making a
successor liability determination: (1)
continuity in operations and work force
of the successor and predecessor
employers; (2) notice to the successor
employer of its predecessor’s legal
obligation; and (3) ability of the
predecessor to provide adequate relief
directly. Rego, 181 F.3d at 402
(emphasis added).
To this extent and to this
point, the majority opinion and I are in
complete agreement. However, where
we part company is in our analysis of the
third prong of Rego. That is, could
financially insolvent Correctional (the
predecessor and Ms. Brzozowski’s
original employer) provide adequate
relief directly to Ms. Brzozowski? Is it
fair and equitable to burden Prison with
the obligation to provide relief to Ms.
Brzozowski when that relief was the
7 The majority acknowledges
that the successor doctrine has equitable
“underpinnings,” but asserts that the factors
employed in making a successor liability
determination are not equitable but “legal
determinations.” Maj. Op. at 11. These
legal considerations are not defined, and it is
unclear from whence they are derived or
why they overrule, or allow the majority to
overlook, the inherent inequity of the result
reached here.
Moreover, as the majority
opinion points out, because of the equitable
nature of the successor doctrine, it is laches,
and not the statute of limitations, which
must be applied in cases such as this one,
which seek equitable relief.

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13
primary responsibility and charge of her
original employer, Correctional? I
answer these questions by concluding
that the principles of justice – those
principles which embrace fairness and
rightful conduct – as applied to the
particular circumstances of this case,
require that the successor doctrine
should not place Ms. Brzozowski in a
better position than she was in before
Prison entered the arena.
The majority dismisses this
crucial principle, imbedded in the third
prong of Rego’s formula (i.e., the ability
of the predecessor to provide relief
directly), as undermining the rationale
upon which the successor doctrine is
based. See Maj. Op. at 15. I cannot
agree. The majority fails to recognize
the importance of Correctional’s initial
responsibility to discharge Ms.
Brzozowski’s claim if she were
successful in her discrimination action,
particularly in light of Correctional’s
receipt of $14 million and the Umars’
receipt of $1 million. Moreover,
Correctional had agreed with Prison that
any liability that might arise out of Ms.
Brzozowski’s claim was to be
Correctional’s responsibility. The
majority opinion’s position completely
eliminates the third prong of this Court’s
Rego doctrine, which looks first to the
predecessor – here, Correctional – for
relief.
For successor liability to
attach, we have provided in Rego, supra,
and I have emphasized, that the Court
must look to the “ability of the
predecessor to provide adequate relief
directly.” This is a mandate of our
jurisprudence. Yet the majority opinion,
without recognition of this standard,
provides “. . . the mere substitution of a
responsible defendant [Prison] for an
insolvent one [Correctional] is not a
basis for denying successor liability.”
Maj. Op. at 15. I suggest that a re-
writing of an established formula
adopted by this Court can be
accomplished only by an en banc Court.
See 3d Cir. Internal Operating
Procedures § 9.1 (“. . . [N]o subsequent
panel overrules the holding in a
precedential opinion of a previous panel.
Court en banc consideration is required
to do so.”).
II.
Judge Swygert, writing in
Musikiwamba,8 held that while an
employee injured by her original
employer (here Correctional) should not
be made worse off after the employer’s
successor (here Prison) took over,
neither should she profit and be better
8 The majority opines that
EEOC v. Vucitech, 842 F.2d 936, 946 (7th
Cir. 1988), weakened the doctrine of
Musikiwamba when it emphasized that a
balancing test should gloss the
Musikiwamba successor doctrine. See Maj.
Op. at 14. While I do not read Vucitech in
the same illiberal manner as the majority
does, I suggest that under any balancing
standard, the balance ends up in favor of
Prison under the circumstances which I
outline here.

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14
off with a successor who was “better
heeled.”
[A]n injured employee
should not be made worse
off by a change in the
business. But neither
should an injured employee
be made better off...
Imposing liability on a
s u c c e s s o r w h e n a
predecessor could have
p r o v i d e d n o r e l i e f
whatsoever is likely to
severely inhibit th e
reorganization or transfer of
assets of a failing business.
A company on the verge of
bankruptcy may find itself
deluged with meretricious
claims for employment
discrimination as employees
see the prospect of a deep-
pocket to provide relief.
Musikiwamba v. ESSI, Inc., 760 F.2d
740, 750-51 (7th Cir. 1985) (emphasis
added).
Accord EEOC v. Vucitech, 842 F.2d
936, 945 (7th Cir. 1988) (J. Posner).
Because the successor
inquiry is fact-specific, and because its
prime consideration is fairness to the
parties, see Rego, 181 F.3d at 401, 403,
it is clear to me that the equities here
counsel against holding Prison liable as a
successor. I believe that consideration of
the following uncontroverted evidence
renders a liability determination against
Prison thoroughly inequitable – indeed,
utterly unconscionable:
1. Correctional, Ms.
Brzozowski’s original
employer, was a failing
company and had no assets
with which to respond to
her claim of
discrimination.
2. The District Court found
that the financial troubles
experienced by the
predecessor, Correctional,
existed before Correctional
sold its assets to the
successor, Prison. Because
Correctional could not
provide any recovery to
Ms. Brzozowski before the
sale transaction took place,
she was not adversely
impacted by the sale of
assets.
3. The sale of assets did not
cause Correctional’s
inability to provide relief to
Ms. Brzozowski, and
Correctional’s poor
financial status remained
unchanged after the sale of
its assets to Prison.
4. Although Prison paid $14
million as part of the asset

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15
purchase, Correctional
made no provision to
respond to Ms.
Brzozowski’s claim of
discrimination out of those
funds.
5. The principals of
Correctional, Dr. Kenan
Umar and Emre Umar,
each received $500,000
from the purchase price of
Correctional’s assets, but
neither of them made any
provision out of these
monies to respond to Ms.
Brzozowski’s claim,
although the discrimination
which Ms. Brzozowski
charges occurred during
their tenure at
Correctional.
6. Astonishingly, Ms.
Brzozowski never sought
to obtain relief from either
of the principals (who were
charged with corporate
misconduct in state court)
by piercing the
Correctional corporate veil
in order to recover under
her claim.
7. Compounding her desire to
forego relief from her
original employer out of
the monies which
Correctional received from
Prison, was Ms.
Brzozowski’s agreement
not to pursue either
Correctional or its
principals. Rather, after
consenting to a judgment
in the sum of $150,000
against Correctional – a
judgment which she knew
was uncollectible – she
agreed to limit collection of
this judgment against
Correctional alone and to
forego seeking collection
of the judgment against
Dr. Kenan Umar or any
other individual associated
with Correctional. She did
so, knowing at the time
that Correctional was
judgment-proof.
8. These actions were taken
by Ms. Brzozowski,
Correctional and the
Umars, despite the fact that
the asset purchase
agreement specified that
Prison would not be
responsible for Ms.
Brzozowski’s
discrimination claim.
Indeed, Prison, through the
agreement, expressly
excluded itself from
liability for her claim at the
time that it paid

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16
Correctional $14 million
for its assets.9
III.
The recitation of these
uncontroverted facts inexorably leads to
the conclusion that it would be
inequitable and unfair to hold Prison
liable as a successor to Correctional
simply in order to enhance Ms.
Brzozowski’s ability to collect a money
judgment. It is obvious that Ms.
Brzozowski, realizing this, decided to
amend her complaint to add a deep
pocket defendant – in this case, Prison.
It is clear to me, as it should be to
everyone, that the sale of Correctional’s
assets to Prison did not and would not
have harmed Ms. Brzozowski, and it
certainly did not offend Rego because it
would not make Ms. Brzozowski worse
off. And, there is no doubt that Ms.
Brzozowski, under her interpretation of
successor liability which has been
acceded to by the majority of the Court
here, will be far better off if Prison’s
resources are made available to her.
It is also clear that before
Correctional (and the Umars) received
$14 million from Prison, Correctional
had no ability to provide an adequate
legal remedy for Ms. Brzozowski
because, as the District Court held,
Correctional was completely unable to
satisfy any judgment that Ms.
Brzozowski obtained against it.
Accordingly, as the District Court stated
and as I agree, the equitable principle –
the third prong of Rego – which
underlies the successor liability doctrine,
i.e. protecting employees when the
ownership of their employer changes, is
not implicated in this case. It should be
remembered that Correctional retained
liability for Ms. Brzozowski’s claim in
the asset purchase agreement, but it
simply could not and did not provide for
any recovery made by Ms. Brzozowski
before the sale transaction took place,
9 It is beyond per adventure
that Prison would have paid substantially
less than the $14 million purchase price for
Correctional’s assets, had Prison been
obliged to respond to Ms. Brzozwski’s
discrimination claim. The $14 million
purchase price was agreed to only after Ms.
Brzozowski’s suit was specifically excluded
in the sales agreement, thereby leaving any
judgment obtained by Ms. Brzozowski to be
satisfied by Correctional. The majority’s
assertion that Prison should have anticipated
it would be held liable as a successor
therefore makes no sense, and leaves no
successor entity – a purchaser – with any
customary means to exclude claims in a
contract of sale with the seller. The majority
cites Golden State Bottling Co., Inc. v.
N.L.R.B., 414 U.S. 168, 187 (1973), as
stating, “the expense resulting from
successor liability can be considered in
setting the price for the business, or through
the inclusion of an indemnity clause in the
purchase agreement.” Maj. Op. at 9.
However, an indemnity agreement with
Correctional would have been senseless in
light of the financial condition of that
company.

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17
although it could well have done so after
its sale of assets. This fact alone is the
critical factor in determining whether
successor liability may be imposed.
Dr. Umar testified that
Correctional’s poor financial status was
one of the motivating factors behind the
sale of assets to Prison. When the
subsequent actions of Ms. Brzozowski,
the Umars and Correctional are
considered in light of the financially
insolvent condition of Correctional (and
I have listed those actions above), it is
apparent that Ms. Brzozowski now seeks
a right which the successor liability
doctrine has not afforded her, and to
which she is not entitled. She has no
right to assess Prison for monetary
damages when she could not under any
circumstances have received them from
her employer, which was the responsible
party for any discriminatory acts she
suffered.10
IV.
I note that Ms.
Brzozowski, in her motion to join Prison
as an additional defendant, relied upon
Fed. R. Civ. P. 20, “Permissive Joinder
of Parties.” Instead, Fed. R. Civ. P. 15,
“Amended and Supplemental
Pleadings,” would have been the
appropriate Rule under which to proceed
in this instance. That Rule, however,
requires that the newly added defendant
has received notice and will not be
prejudiced. In this case, there is no
question that Prison had received notice
of Ms. Brzozowski’s claim because
Prison had expressly disclaimed
responsibility for it in the sales
agreement. By doing so, Prison did not
have to reserve monies for that claim,
10 I have difficulty
understanding the emphasis that the majority
places on “corporate tools at its disposal to
effectively anticipate such a situation and
offset expected costs associated with a
potential claim like that of Ms.
Brzozowski.” In this case, the parties did
utilize their “corporate tools” – did
anticipate the Brzozowski situation – did
adjust the purchase price because they
anticipated that situation, and Prison took
every step that it could to ensure that Ms.
Brzozowski’s claim against the employer
which allegedly discriminated against her
would be discharged by the discriminating
entity. Moreover, it was Correctional that
improperly appropriated and distributed the
monies that were paid, and it was because
both Correctional and its principals
“improperly appropriated” the $14 million
purchase price (including the $500,000 paid
to each of the Umars) that resulted in an
inability to satisfy Ms. Brzozowski’s claim.
The third prong of Rego
provides, as I have stated, that before a
successor can be liable, it must be shown
that there was an “ability of the predecessor
[in this case, Correctional] to provide
adequate relief directly.” The majority
opinion appears to abandon this third factor
when it inappropriately analyzes the facts of
this case where there is no speculation
whatsoever that Brzozowski would be better
off by ignoring the predatory conduct of
Correctional and its principals and pursuing
Prison.

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and consequently did not reduce its $14
million purchase price. See note 5,
supra.
I make mention of this here
not because I make an issue of the
manner in which, or the Rule by which,
Ms. Brzozowski has sought to join
Prison as a defendant in this action.
Rather, I do so because Rule 15(c)(3)
and the “successor doctrine”’s
application here to Prison, which was
rejected by the District Court and by me,
emphasize that there should be no
prejudice to the defendant who is joined.
Here, as I have pointed out, Prison had
no part in any discriminatory actions
claimed by Ms. Brzozowski. In addition,
Prison recognized that she had brought a
claim against Correctional, and therefore
sought to relieve itself of any obligation
to her. In such a situation, it is quite
understandable why the District Court
Judge, acknowledging the prejudice
which Prison would suffer, refused to
add Prison as a defendant. How can one
say she abused her discretion? I, for one,
cannot.
In light of the uncontested
facts which I have related, it is apparent
that by failing to consider these
circumstances, the majority has
inequitably ordered Prison to respond, to
its detriment and prejudice, to Ms.
Brzozowski despite the third prong of
the Rego successor liability analysis. If
the successor liability doctrine is rooted
in equitable principles, as it is, then it is
evident to me that the equities all lie in
Prison’s favor, and none lie in favor of
Ms. Brzozowski or her original
employer, Correctional.
I therefore respectfully
dissent from the majority’s judgment,
which would hold Prison liable, subject
only to a further analysis concerning the
relevance of laches or the statute of
limitations – an analysis in which I do
not engage, as I see no need for it.

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