Meadows v. Krayem
2:19-cv-00525
S.D.W. VaMay 13, 2021Background:
- Plaintiffs are former employees of AM & GH LLC (d/b/a Grano) who previously obtained a default judgment against AM & GH in an earlier FLSA action.
- Owner Ammar Krayem sold Grano’s assets in August 2018 to Sana Suliman; consideration recorded was two residential properties (valued > $140,000); purchasers formed KAL PRO LLC shortly thereafter.
- Plaintiffs allege the transfers (and later deeds to Krayem family members and others) were fraudulent transfers made to evade the earlier judgment and that KAL PRO is a successor liable for AM & GH’s obligations.
- Plaintiffs moved for summary judgment on Count II (fraudulent transfer) against several individuals and on Count III (successor liability) against KAL PRO and Suliman.
- The district court denied Plaintiffs’ motion for summary judgment, finding Plaintiffs produced no evidentiary support for intent, lack of reasonably equivalent value, or successor-status; the court also gave Plaintiffs notice under Rule 56(f) that it intended to enter summary judgment for Defendants on those claims unless Plaintiffs responded.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraudulent transfer under W. Va. Fraudulent Transfers Act | Sale timed to evade the prior judgment; transfers to insiders show actual intent to hinder creditors | Plaintiffs produced no evidence of fraudulent intent; bill of sale records consideration (two houses); many transferees were not debtors | Denied summary judgment for Plaintiffs for lack of evidence; court gave Plaintiffs notice it would enter judgment for Defendants absent response |
| Successor liability (KAL PRO, Suliman) | KAL PRO purchased Grano assets and continued the business, so it is successor/mere continuation or the transaction was fraudulent | Bill of Sale disclaims assumption of debts absent an unproduced exhibit; no proof of common identity of owners/directors or intent to defraud | Denied summary judgment for Plaintiffs; claim was pleaded only against KAL PRO (not Suliman); Plaintiffs failed to show facts supporting successor exceptions |
| Sua sponte Rule 56(f) procedure | N/A (Plaintiffs sought summary judgment) | Court may grant summary judgment sua sponte but must give notice and reasonable time to respond | Court provided notice and set a deadline to allow Plaintiffs to oppose the court’s intended entry of judgment for Defendants on Counts II and III |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (movant and nonmovant burdens at summary judgment)
- Adickes v. S. H. Kress & Co., 398 U.S. 144 (view evidence in light most favorable to nonmovant)
- Barwick v. Celotex Corp., 736 F.2d 946 (4th Cir.) (using discovery materials to meet summary judgment burden)
- Davis v. Celotex Corp., 420 S.E.2d 557 (W. Va. 1992) (successor liability exceptions and mere-continuation doctrine)
- Amzura Enterprises, Inc. v. Ratcher, [citation="18 F. App'x 95"] (4th Cir. 2001) (notice requirement before sua sponte summary judgment)
- Jordan v. Ravenswood Aluminum Corp., 455 S.E.2d 561 (W. Va. 1995) (test for mere continuation)