Douglas v. StamcoDouglas v. Stamco
We next address GMAC‘s motion as it relates to Adkins‘s attorneys. Our review of the district court‘s decision reveals that the court did not address this aspect of GMAC‘s motion. We thus remand to allow the court to address this issue, and make specific findings on GMAC‘s several arguments that Adkins‘s suit against GMAC was not brought in good faith. See Jones v. UNUM Life Ins. Co. of Am., 223 F.3d 130, 138-39 (2d Cir. 2000); Eisemann, 204 F.3d at 396-97;.
Finally, having considered the pertinent factors, we deny GMAC‘s request that this case be remanded to a different district judge. See Mackler Prods., Inc. v. Cohen, 225 F.3d 136, 146-47 (2d Cir.2000). However, in remanding, we instruct the district court to decide the request for costs and fees from Adkins‘s attorneys based on the records and briefs on this appeal, except to the extent that the judge deems it necessary to order additional briefing. As to GMAC‘s motion for costs and fees from Adkins, the court may do the same, but allow GMAC to file opposition to Adkins‘s asserted indigency and responses as it sees fit.
In remanding, we express no view as to the disposition of GMAC‘s motion and merely remand to the district court, which is most familiar with the facts and proceedings of this case, for further findings. The district court should make specific findings on GMAC‘s various contentions that Adkins and his attorneys acted vexatiously and in bad faith in prosecuting this suit.
Accordingly, the decision of the district court is VACATED AND REMANDED.
David G. Klaber, Mark D. Feczko, Jared S. Hawk, K & L Gates LLP, Pittsburgh, PA; Kenneth M. Alweis, Lisa M. Robinson, Goldberg Segalla LLP, Syracuse, NY, for Appellee.
Present: WILFRED FEINBERG, WALKER, ROBERT A. KATZMANN, Circuit Judges.
SUMMARY ORDER
On October 10, 2008, the district court granted defendant‘s motion to dismiss for failure to plead successor liability and because public policy favored the extinguishing of plaintiff‘s claim after an asset sale pursuant to
We review de novo the district court‘s grant of a motion to dismiss pursuant to
“Under both New York law and traditional common law, a corporation that purchases the assets of another corporation is generally not liable for the seller‘s liabilities.” N.Y. v. Nat‘l Serv. Indus., Inc., 460 F.3d 201, 209 (2d Cir.2006). Therefore, successor liability attaches only where:
The parties appear to agree that neither the first nor the fourth exception applies. The two remaining exceptions—namely the de facto merger and mere continuation exceptions—though routinely listed separately, are often regarded as so similar as to be considered a single exception. See Cargo Partner AG v. Albatrans, Inc., 352 F.3d 41, 45 n. 3 (2d Cir.2003). The inquiry is whether “a transaction, although not in form a merger, is in substance a consolidation or merger of seller and purchaser.” Nat‘l Serv. Indus., 460 F.3d at 209. Thus, to determine whether there has been a de facto merger, the Court considers whether there was: “(1) continuity of ownership; (2) cessation of ordinary business and dissolution of the acquired corporation as soon as possible; (3) assumption by the purchaser of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the acquired corporation; and (4) continuity of management, personnel, physical location, assets, and general business operation.” Id. Though the Court examines all of the foregoing factors, “continuity of ownership is the essence of a merger,” id. at 211 (quoting Albatrans, 352 F.3d at 47), and therefore the exception cannot apply in its absence. Id. (extending the reasoning in Albatrans to tort claims). Indeed, in authorizing the asset sale in this case, the bankruptcy court explicitly stated that “[t]here is no common identity among the Purchaser and the Debtors’ incorporators, officers, directors or material stockholders.”1 Moreover, to the extent that the mere continuation exception is considered distinct from the de facto merger exception, it also appears that the predecessor entity, Genesis Worldwide, Inc. (“Genesis I“), survived the asset sale as a bankrupt entity, which renders the mere continuation exception unavailable to breathe life into plaintiff‘s successor liability claim. See Wensing v. Paris Indus.-N.Y., 158 A.D.2d 164, 167, 558 N.Y.S.2d 692 (N.Y.App.Div.1990) (“The record reveals that Paris Industries Corporation survived the asset transfer as a distinct corporation, albeit in bankruptcy. Under such circumstances, Leander cannot be cast as its mere continuation.“).
The underlying public policy concerns implicated by this case also weigh in appellee‘s favor. Allowing the plaintiff to proceed with his tort claim directly against Genesis II would be inconsistent with the Bankruptcy Code‘s priority scheme because plaintiff‘s claim is otherwise a low-priority, unsecured claim. See
Moreover, because plaintiff is unable to substantiate a claim for successor liability under New York law, we also do not find that the district court abused its discretion in denying leave to amend the complaint for futility,3 see Holmes, 568 F.3d at 334 (“Generally, [a] district court has discretion to deny leave [to amend] for good reason, including futility.“) (internal quotation marks omitted) (alterations in original), particularly where the plaintiff initially failed to plead the cause of action and subsequently failed to seek leave to amend at any point in the underlying proceedings despite several obvious opportunities to do so.