Opinion
AANCV156017933S
11-01-2017
Crown Milford, LLC v. Jackson Law Group, LLC
UNPUBLISHED OPINION
Filed November 2, 2017
RULING ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
Peter L. Brown, J.
The issue in the present case is whether the plaintiff is entitled to summary judgment on the ground that there is no genuine issue of material fact as to whether the defendant, Jackson Law Group CT, LLC (Jackson CT), is a mere continuation of The Jackson Law Group, LLC (Jackson Law), and can thus be held liable under a theory of successor liability for a breach of contract. More specifically, the issue is whether the defendant is liable for its breach of a lease agreement with the plaintiff, Crown Milford, LLC. The plaintiff filed a motion for summary judgment, as to liability only, along with a memorandum of law and exhibits. Thereafter, the defendant filed an objection to the motion, and did not include any exhibits. The court heard the matter at short calendar on September 18, 2017.
The plaintiff proffered the following exhibits in support of its motion for summary judgment: (1) Affidavit of Alex Rad, manager of the plaintiff company, regarding the plaintiff's damages; (2) affirmation of Brian Cohen, attorney for the plaintiff, attesting to the validity of the attached exhibits; (3) the amended complaint; (4) the defendant's answer; (5) a copy of the lease between Bishop, Jackson, and Kelley, LLC and the plaintiff, dated July 14, 2008; (6) amendment to the lease, dated August 1, 2013, in which the lease was changed to be between Jackson Law and the plaintiff; (7) the transcript of the deposition of Attorney Bruce Jackson; (8) the defendant's LexisNexis subscription plan; (9) the plaintiff's first set of interrogatories and request for production; and (10) a copy of the lease between a third party and Jackson Law Group, LLC, dated September 15, 2014.
" In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law. The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent . . . When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue . . . Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue . . . It is not enough, however, for the opposing party merely to assert the existence of such a disputed issue. Mere assertions of fact . . . are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book [§ 17-45]." (Internal quotation marks omitted.) State Farm Fire & Casualty Co. v. Tully, 322 Conn. 566, 573, 142 A.3d 1079 (2016).
Moreover, when a plaintiff moves for summary judgment against a defendant, the court must consider the validity of the defendant's special defenses. See Congress Street Condominium Ass'n, Inc. v. Anderson, 132 Conn.App. 536, 541, 33 A.3d 274 (2011) (" [s]ince a single valid defense may defeat recovery, [a] motion for summary judgment should be denied when any defense presents significant fact issues that should be tried" [internal quotation marks omitted]). The following is the defendant's special defense.
In its memorandum of law in support of summary judgment, the plaintiff argues that there is no genuine issue of material fact that the first corporation, Jackson Law, breached the lease agreement under its claims of both breach of contract and anticipatory breach of contract, and thus, under a theory of successor liability, Jackson CT should be held liable for such breach. Specifically, the plaintiff argues that successor liability applies to the present case because Jackson CT holds itself out to the public as " the effective continuation" of Jackson Law; Attorney Bruce Jackson was the corporate agent and sole partner in Jackson Law, and continues in those positions in Jackson CT; Jackson CT performs the same legal services as Jackson Law; Jackson CT was formed three days after the " effective date" of Jackson Law's dissolution; and most of Jackson CT's employees were also employees of Jackson Law.
At oral argument, the defendant does not dispute that Jackson Law breached the lease agreement between itself and the plaintiff. The defendant argues, however, that Jackson CT should not be held liable because the plaintiff has not sufficiently established its cause of action for successor liability to warrant the granting of its motion for summary judgment. Specifically, there were no transfers of assets between the two entities; no funds were transferred from Jackson Law to Jackson CT; the overlap of employees for both entities is minimal; and the fact that. Attorney Jackson was the sole principal and operated both entities is not by itself enough to satisfy the burden for granting the plaintiff's motion.
The following facts are found in the plaintiff's submission of evidence. Jackson Law Group, LLC was formed on July 19, 2013. (Jackson Dep., pp. 9, 31.) Attorney Jackson testified that sometime in 2014 or 2015, he changed the name of his firm from Jackson Law Group, LLC to Jackson Law Group CT, LLC because when potential clients searched for the firm online, they were directed to firms in other states. (Jackson Dep., pp. 10-11.) When asked what areas of law Jackson CT specializes in, Jackson responded " mostly transactional . . . So I do represent some lenders on mortgages where we help them close them. I represent buyers who are purchasing property. I represent sellers who are selling property. I represent corporate entities, setting up, mostly representing individual on their buy or their sell of their house or their setting up a business . . . [I am] primarily a real estate lawyer." (Jackson Dep., pp. 11-12.) The lease between the plaintiff and defendant expires on July 31, 2018 (Jackson Dep., p. 16), and Jackson Law vacated the premises on October 31, 2014 (Jackson Dep., p. 18). Attorney Jackson admitted that he did not pay remainder of the rent to the plaintiff (Jackson Dep., p. 18), and moved to Two Enterprise Drive, Suite 406, in Shelton (Jackson Dep., p. 19). The lease with the new Shelton office is between Jackson Law, not Jackson CT, and the third party. (Jackson Dep., p. 20.)
Jackson Law's practice areas included real estate and litigation. (Jackson Dep., pp. 23-26.) Attorney Jackson testified that he " had a very healthy foreclosure practice up to a point. So we did a lot of foreclosures for a number of banks." (Jackson Dep., p. 26.) Now, Jackson CT does some foreclosure litigation, specifically tax foreclosures. (Jackson Dep., p. 27.) " We do a lot of tax appeals, and we do some litigation for municipal dealing with slip and falls on the town property or litigation dealing with . . . zoning violations and stuff for the town." (Jackson Dep., pp. 27-28.) Jackson Law ceased business operations on January 29, 2017 and Jackson CT commenced business operations on the same date. (Defs. Answers to Interrogatories, ¶ ¶ 1, 2; Jackson Dep., p. 28.) Jackson is the principal of both companies. (Jackson Dep., p. 28.) In transitioning from Jackson Law to Jackson CT, Attorney Jackson took active case files with him to the new office. (Jackson Dep., p. 30.) He took some of the computers, some of the furniture and cubicle dividers, but did not take any kitchen items. (Jackson Dep., pp. 30-31.) Jackson Law and Jackson CT share the same phone number: (203) 647-3300. (Jackson Dep., p. 31.) When Jackson CT was formed, about half of the employees moved over from Jackson Law, with one additional attorney hired. (Def's. Answers to Interrogatories, ¶ ¶ 5, 6.)
Jackson filed for dissolution of Jackson Law on March 23, 2016. (Jackson Dep., p. 32.) Regarding bank accounts, there was an operating account and a trust account. (Jackson Dep., p. 37.) Those accounts were maintained until after the dissolution of Jackson Law " because we had to close them out and sort of empty them and start again." (Jackson Dep., p. 38.) This was done in 2016. (Jackson Dep., p. 38.) " I believe the [Jackson] CT accounts were opened first, because once [Jackson Law] terminated I have to close out the accounts under the bar rules to show that they balance down to zero. So I think I . . . opened [Jackson] CT first, and then . . . Jackson [Law] closed after I was able to balance them down to zero." (Jackson Dep., p. 38.)
" The legal principles governing a claim for successor liability in Connecticut were first set forth by [the Appellate Court] in Chamlink Corp. v. Merritt Extruder Corp., 96 Conn.App. 183, 899 A.2d 90 (2006)." Robbins v. Physicians for Women's Health, LLC, 133 Conn.App. 577, 584, 38 A.3d 142 (2012), cert. granted on other grounds, 311 Conn. 707, 90 A.3d 925 (2014).
" There are two theories used to determine whether the purchaser is merely a continuation of the selling corporation. Under the common-law mere continuation theory, successor liability attaches when the plaintiff demonstrates the existence of a single corporation after the transfer of assets, with an identity of stock, stockholders, and directors between the successor and predecessor corporations. Under the continuity of enterprise theory, a mere continuation exists if the successor maintains the same business, with the same employees doing the same jobs, under the same supervisors, working conditions, and production processes, and produces the same products for the same customers." (Citation omitted; internal quotation marks omitted.) Chamlink Corp. v. Merritt Extruder Corp., supra, 96 Conn.App. 187-88. " The issues of whether a purchaser is a mere continuation of the selling corporation is a question of fact." Id., 187. " [T]he general rule is that where a corporation sells or otherwise transfers all of its assets, its transferee is not liable for the debts and liabilities of the transferor, and that [the] liability of a new corporation for the debts of another corporation does not result from the mere fact that the former is organized to succeed the latter . . . This general rule of corporate nonliability serves, in effect, as a security blanket that protects corporate successors from unknown or contingent liabilities of their predecessors." (Internal quotation marks omitted.) Robbins v. Physicians for Women's Health, LLC, supra, 311 Conn. at 714. Furthermore, " [a] successor corporation may be held liable for the debts and liabilities of its predecessor when there is an express or implied assumption of liability, the transaction amounts to a consolidation or merger, the transaction is fraudulent, or the transferee corporation is a mere continuation or reincarnation of the old corporation." (Internal quotation marks omitted.) Id., 715. " The term successor corporation means [a] corporation that, through amalgamation, consolidation, or other assumption of interests, is vested with the rights and duties of an earlier corporation . . . Thus, the liability of a successor corporation is derivative in nature and the successor may be held liable for the conduct of its predecessor only to the same extent as the predecessor." (Citation omitted; internal quotation marks omitted.) Id.
In Southern Connecticut Gas Co. v. Waterview of Bridgeport Assn., Inc., Superior Court, judicial district of Fairfield, Docket No. CV-05-4005335-S (June 1, 2006, Owens, J.T.R.) (41 Conn. L. Rptr. 450, ), the court outlined the following factors in determining whether successor liability should be imposed. " In determining whether or not successor liability should be imposed, it is the duty of the court to examine the substance of the transaction to ascertain its purpose and true intent. Factors relevant to the mere continuation exception include continuity of management; continuity of personnel; continuity of physical location, assets and general business operations; and cessation of the prior business shortly after the new entity is formed. Also relevant is the extent to which the successor intended to incorporate the predecessor into its system with as much the same structure and operation as possible. Thus, the court should determine whether the purchaser holds itself out to the world as the effective continuation of the seller. However, the proponent of successor liability need not necessarily establish all of these factors." (Citation omitted.) Id., 450-51,, citing Bowen Engineering v. Estate of Reeve, 799 F.Supp. 467, 487-88 (D.N.J. 1992), aff'd, 993 F.2d 223 (3d Cir. 1993).
The issue in that case was whether the defendant corporation, Waterview of Bridgeport Association, Inc., should be held liable as a successor for debts incurred by Seabreeze Condominium Association, Inc. In analyzing the factors, the court in Southern Connecticut Gas Co. found the following. First, there was no continuity of management between the corporations because none of the officers were the same for both corporations. Id., 451, . Second, there was continuity of physical location because both corporations operated at the same address. Id. Third, no assets transferred from one corporation to the other, but the general business operations of the two corporations were the same. Id. For example, the by-laws of the new corporation set forth the same requirements as the first corporation. Id. In addition, there was also cessation of the prior company shortly after the new company was formed. On May 16, 2003, the defendant was incorporated and one month later, the first corporation ended. " Lastly, the defendant [corporation] had the intent to incorporate Seabreeze Condominium Association into its system with as much the same structure and operation as possible. This intent is evidence through the defendant's adoption of bylaws that are almost identical to the bylaws of Seabreeze . . ." Id. The court thus held that " [i]n balancing all of these relevant factors . . . Waterview of Bridgeport Association, Inc. is the mere continuation of Seabreeze . . ." Id.
In Chamlink Corp. v. Merritt Extruder Corp., supra, 96 Conn.App. 188, the predecessor corporation had nine shareholders, including one shareholder who owned seventeen percent of the company. This one shareholder was the only shareholder in the successor corporation. Id. Additionally, the predecessor corporation had ten board members, including this shareholder, while the successor corporation had this shareholder as its only board member. Id. Relating to the continuity of enterprise theory, the trial court found that the successor corporation used the same telephone number and one-half of the same office space as that of the predecessor corporation. Id. The successor corporation had fourteen employees compared to the 35 workers at the predecessor corporation. Id. The successor corporation had a narrower product line than the predecessor corporation. Id. Finally, the successor corporation purchased only physical assets from the predecessor corporation and did not purchase any contract rights or accounts receivable. Id., 188-89. Applying either theory, common law, mere continuation or continuity of enterprise, to these facts, our Appellate Court held that " it is clear that the [trial] court's determination that [the successor corporation] is not a mere continuation of [the predecessor corporation] was not clearly erroneous." Id., 189.
Based upon the evidence presented, the court finds that the plaintiff has met its burden in establishing that there are no issues of fact that Jackson CT was a continuation of Jackson Law and should be held liable under the theory of successor liability. The facts of this case are more analogous to the facts in Southern Connecticut Gas Co. and are distinguishable from those in Chamlink Corp. The above deposition testimony and document production establishes that Jackson CT holds itself out to the public as the effective continuation of Jackson Law. The court finds that there is a continuity of personnel between the two firms, continuity of assets and general business operation, and a cessation of Jackson Law on the same date it commenced business operations with Jackson CT.
Accordingly, the motion for summary judgment is granted as to liability only. The court will hold a hearing in damages pursuant to Practice Book § 17-50.
" Pursuant to the letter attached hereto as Exhibit A, the plaintiff notified the defendant of its formal cancellation of the lease between the two via a letter dated February 5, 2015. As such, in the event the defendant is found to be liable for damages, any damages should be limited to what was owed to the plaintiff up until the instance in which the plaintiff terminated the lease on February 5, 2015." Here, this special defense relates to the issues of damages only, and is not relevant to the disposition of the present matter.