Opinion
No. 09/11536.
05-19-2015
Brian LIPPENS, Plaintiff, v. WINKLER INTERNATIONAL CORP., et al., Defendants.
William Kerrigan, Esq., Jeff DiPalma, Esq., Attorney for Plaintiff. Bakery/Winkler and Kemper Leslie Ruff, Esq., Winkler Backereitechnik and Werner Pfleiderer, Attorney for Defendants.
William Kerrigan, Esq., Jeff DiPalma, Esq., Attorney for Plaintiff.
Bakery/Winkler and Kemper Leslie Ruff, Esq., Winkler Backereitechnik and Werner Pfleiderer, Attorney for Defendants.
Opinion
J. SCOTT ODORISI, J.
This lawsuit arises out of a 2006 workplace incident. Still pending before the Court are the following: (1) a portion of Defendant Bakery Engineering/Winkler, Inc.'s summary judgment motion; and, (2) a part of Defendants Winkler Backereitechnik GmbH's and Werner Pfleifderer Industrialle Backtechnik GmbH's summary judgment motion.
This Court already granted Defendant Kemper Bakery Systems, Ltd .'s unopposed motion dismissing the case against it, and also granted Defendant Bakery Engineering/Winkler, Inc.'s unopposed application dismissing the untimely breach of warranty claims. This Court denied Defendant Bakery Engineering/Winkler, Inc.'s request to dismiss the failure to warn and launching an instrument of harm claims, but granted that relief to Defendants Winkler Backereitechnik GmbH and Werner Pfleifderer Industrialle Backtechnik GmbH. Plaintiff's cross-motion to amend his complaint was granted. As a result of the preceding rulings, the Note of Issue and Statement of Readiness was stricken and Defendants were directed to submit new proposed Scheduling Order dates. The Court is still awaiting that submission.
Based upon a review of: Defendants Bakery Engineering/Winkler, Inc.'s and Kemper Bakery Systems, Ltd.'s Notice of Motion for Summary Judgment, dated January 27, 2014, the Attorney Affidavit of Jeffrey DiPalma, Esq., dated January 27, 2014, with exhibits, the Affidavit of John Borowski, III, dated January 27, 2014, with exhibits, the Affidavit of Patricia Kennedy, dated August 11, 2011, the Affidavit of Dr. Volker Grubb, dated January 17, 2014, with attachments, and the Affidavit of Tobias Rentschler, dated January 2014, with attachment—all submitted in support of the motion; Defendants Winkler Backereitechnik GmbH's and Werner Pfleifderer Industrialle Backtechnik GmbH's Notice of Summary Judgment Motion, dated January 27, 2014, and the Attorney Affirmation of Leslie Ruff, Esq., dated January 27, 2014, with exhibits—submitted in support of the motion; the Attorney Affirmation of William Kerrigan, Esq., dated February 26, 2014, with exhibits, the Affidavit of Brian Lippens, dated January 27, 2014, the Affidavit of Joseph Lippens, dated January 22, 2014, Affidavit of Igor Paul, dated January 15, 2014—all submitted in opposition to the motions; the Reply Attorney Affirmation of Jeffrey DiPalma, Esq., dated March 7, 2014, with an exhibit-submitted in further support of the motion; as well as upon oral argument heard at Special Term, this Court hereby decides that: (1) Defendant Bakery Engineering/Winkler, Inc.'s remaining summary judgment motion is DENIED WITHOUT PREJUDICE; and, (2) the remainder of Defendants Winkler Backereitechnik GmbH's and Werner Pfleifderer Industrialle Backtechnik GmbH's summary judgment motion is also DENIED WITHOUT PREJUDICE.
LAWSUIT FACTS
Background Information
On the early morning of September 13, 2006, Plaintiff Brian Lippens (“Plaintiff”) was working as an apprentice baker at Wegmans Food Market, Inc.'s (“Wegmans”) industrial baking facility in Gates on the “roll line”/” bread line.” Part of the line included a “proofer machine” wherein dough is placed to rise by a conveyor belt. As Plaintiff was talking to another employee, he opened the sliding Plexiglass doors, reached back into the operating “proofer machine” to clear out a double dough ball, and got his left arm caught within the moving chain sprocket therein. After the co-worker triggered an emergency stop button [which was located 8–10' away and thus unreachable by Plaintiff], Plaintiff was extracted and taken to a hospital emergency room. Plaintiff suffered a crushed left arm including multiple fractures and nerve damage.
After the incident, the door was equipped with a safety interlock.
The entire line, including the “proofer machine,” was manufactured by the German company Defendant Winkler GmbH & Co. KG (“Winkler GmbH”). Wegmans bought the line equipment, called the Admiral Roll Line, through Defendant Winkler USA, LP (“Winkler USA”)—a Delaware limited partnership. The partnership was comprised of Winkler GmbH with a 95% interest, and a wholly owned subsidiary Defendant Winkler International Corp. (“Winkler International”) with the remaining 5% interest. Winkler GmbH and/or Winkler USA installed the “proofer machine” at the Wegmans' baking facility in February of 1994.
Before the subject incident, and in February of 2000, Winkler GmbH filed for bankruptcy in Germany and an insolvency trustee, Dr. Volker Grub (“Grub”), was appointed to manage its assets. By the time of the trustee appointment, it is alleged that Winkler USA was already dissolved and that its assets reverted back to Winkler GmbH.
Plaintiff denies this dissolution allegation and cites to Delaware's Division of Corporation's records that indicate that Winkler USA existed until 2005 when it was suspended for failing to pay taxes.
As part of the bankruptcy, and in July of 2000, Grub coordinated the sale of some of Winkler GmbH's assets to non-party Winkler/Wachtel Backerei Technik GmbH & Co. KG (“Wachtel”), a company which has no relation to the defendants in this action.
The sales contract with Wachtel is not a part of the motion record.
Thereafter, and on February 9, 2001, Grub entered into an agreement with a New Jersey company—Defendant Bakery Engineering/Winkler, Inc. (“Bakery Engineering”)—to which he sold many of Winkler USA's assets. The Asset Sale Agreement (“ASA”) included a sale of inventory [including customer lists], customer contracts, accounts receivable, the Winkler USA name, and balance sheet assets. Also, the ASA provides that:2.Assumption and Exclusion of Liabilities and Obligations
Bakery Engineering [which is listed as “Bakery Engineering/Winkler, Inc. d/b/a Winkler USA” in the ASA] is owned by European Bakery Equipment, Inc., which in turn is owned by Werner & Pfleiderer Food Technology, Inc., which is owned by Defendant Werner who also owns Defendant Winkler Backereitechnik [DiPalma Atty. Aff., Ex. F, p. 7, ¶ 10; Ruff Atty. Aff., ¶ 14; Ex. H, p. 11, ¶ 15].
The ASA indicated that any contractual dispute arising therefrom was governed by New Jersey law [DiPalma Atty. Aff., Ex. F, p. 40, ¶ 8, F].
A.Assumption
a) Buyer [Bakery Engineering] shall, at Closing, assume and agree to pay, perform and discharge the following liabilities and/or obligations:
(i) All liabilities and/or obligations under or arising in the ordinary course of business prior to and after the Closing Date known to the Buyer ... Schedule “F” contains all liabilities and obligations of Seller known by Buyer.
Schedule F is limited to a rental lease, an IBM Interjet, a BMW, and a cell-phone [DiPalma Atty. Aff., Ex. F, p. 51].
Buyer specifically does not assume and shall have no obligation to discharge any other such liabilities and/or obligations of Seller ...
(v) Buyer will assume all employees of Winkler ...
B.Exclusion
a) Except as specifically provided in (A) above, Buyers does not assume, and shall not be obligated to pay, perform or discharge any debts, liabilities or obligations of Seller of any kind or nature, whether actual, contingent or accrued, known or unknown.
[DiPalma Atty. Aff., Ex. F, pp. 34–36 { emphasis added }].
Plaintiff's rendition of the ASA's terms is incomplete [Kerrigan Atty. Aff., p. 12].
Bakery Engineering was further responsible for dissolving Winkler USA, and it took over the liability insurance policy as well as the lease for Winkler USA's facility.Defendant Kemper Bakery Systems, Ltd. d/b/a Werner & Pfleiderer Kemper Winkler Group (“Kemper”) and Bakery Engineering are owned by the same company—Defendant Werner & Pfleiderer Industrialle Backtechnik GmbH (“Werner”).
On May 15, 2001, some portion of the remaining Winkler GmbH assets were later sold to another German company, Defendant Winkler Backereitechnik GmbH (“Winkler Backereitechnik”) via a Sales Agreement. Under the Sales Agreement, Winkler Backereitechnik bought the “entire program of Winkler,” which included the purchase of: manuals and product texts; bakery equipment; customer master data and files; price lists; design documents; patents; warehouse and office space; and, office equipment [Ruff Atty. Aff., Ex. L, Ex. B, pp. 4–6, § 3]. Specifically listed in the purchase of bakery equipment was the Admiral Line, the exact same equipment at issue in this case [Ruff Atty. Aff., Ex. L, Ex. B, p. 4, § 3]. The Sales Agreement further noted the possibility of Winkler Backereitechnik supplying Bakery Engineering. Winkler Backereitechnik is wholly-owned by Werner [Ruff Atty. Aff., ¶ 14; Ex. H, p. 9, ¶ 10]. Werner and Winkler Backereitechnik deny any affiliation with Winkler GmbH, Winkler, Inc., or Winkler USA.
The provided Sales Agreement is missing the referenced Appendices.
Compare this clear documentary proof with Werner's and Winkler Backereitechnik's allegation that Bakery Engineering was a competitor [Werner & Winkler Backereitechnik Reply Memo., p. 3, ¶ 9].
Winkler Backereitechnik was also formed in May of 2001 [Ruff Atty. Aff., ¶ 14].
After the third sale, it is unknown what, if any, assets remained of Winkler GmbH [DiPalma Atty. Aff., ¶ 43]. Winkler GmbH was not formally dissolved until May 7, 2008 [Rentschler Aff., ¶ 32].
Procedural History
This action was commenced against a multitude of defendants on August 13, 2009, and alleged the following causes of action:
*1st —Negligence in design, manufacturing, and installation
*2nd —Breach of duty to warn
*3rd —Strict products liability for a design and/or manufacturing defect
*4th —Breach of implied warranty
*5th —Breach of express warranty
Bakery Engineering and Kemper answered denying liability, and cross-claimed against their co-defendants for common law indemnification and contribution, as well as contractual indemnification. Werner and Winkler Backereitechnik also answered denying liability, and cross-claimed on the same grounds as to the co-defendants.
On March 24, 2011, a default judgment was entered against Winkler International and Winkler USA. The damages inquest against those defaulting defendants is set to occur at the same time as the trial for the remaining defendants. Defendant Gemini Bakery Equipment Co. was dismissed from the case by stipulation on or about May 30, 2013.
In his Verified Bill of Particulars, Plaintiff alleged that Bakery Engineering had successor liability for the negligence and products liability torts of Winkler GmbH and Winkler USA via the ASA which resulted in Bakery Engineering being a mere continuation of those entities. Plaintiff alleged that the ASA's choice of New Jersey law provision disallowed Bakery Engineering from disclaiming liability under German law.
In its interrogatory responses, Bakery Engineering denied it assumed any liability per the ASA or that it was a successor in interest. In its interrogatory responses, Winkler Backereitechnik denied designing, manufacturing, selling, installing, repairing, or maintaining the “proofer machine.”
Plaintiff conceded that Werner and Winkler Backereitechnik have no direct liability.
Further discovery in the form of depositions revealed the following additional information:
Bakery Engineering's former President, Daniel Wilczynski (“Wilczynski”) testified that he had no association with Winkler USA. Wilczynski stated that Bakery Engineering was formed to purchase Winkler USA's assets from Grub. However, Wilczynski was not sure if this purchase was the only reason Bakery Engineering was created, and whether Winkler USA still existed. Wilczynski agreed that Bakery Engineering used the Winkler trademark and logo. Even though Wegmans was not specifically listed in the ASA, it was a regular and ongoing service and parts client of both Winkler USA and Bakery Engineering. Wilczynski stated that Bakery Engineering retained some Winkler USA employees, and used its leased office/warehouse space for a time. As with Winkler GmbH and Winkler USA, Bakery Engineering's business was also the design and construction of bakery equipment, along with providing parts and service for the same. The service component included machines with the Winkler name.
A Bakery Engineering service technician, and former Winkler USA employee—John Borowski (“Borowski”)—testified that Winkler USA sold, installed, and serviced bakery equipment in the USA, and Bakery Engineering continued that work and used the Winkler USA name. In fact, Borowski stated that a Phil Domenicucci (“Domenicucci”) was the President of Winkler USA prior to the ASA and implied that he also owned Bakery Engineering. Borowski believed that Winkler USA folded. After the 2001 sale, some Winkler USA technicians were retained by Bakery Engineering, but only for a short time. Borowski's direct supervisor, a Service Department Manager, was also retained by and still worked for Bakery Engineering. However, Domenicucci hired many of his own managers. Borowski worked on the line equipment at Wegmans-a customer of both Winkler USA and Bakery Engineering.
However, and according to a Stock Certificate provided by Bakery Engineering, Domenicucci was the President of Bakery Engineering [DiPalma Atty. Aff., Ex. F, p. 30]. Bakery Engineering's interrogatory responses further indicate that European Bakery Equipment, Inc. directly owned Bakery Engineering [DiPalma Atty. Aff., Ex. F, p. 7, ¶ 10].
A Wegmans employee, Miguel Gutierrez (“Gutierrez”) testified that Wegmans used to order parts from Winkler USA which was the same company as Bakery Engineering. Gutierrez did not recall being advised of the purported change in companies as he continued to deal with the same people.
A representative of Werner and Winkler Backereitechnik, Michael Katterman, Esq. (“Katterman”), testified that Werner owned 100% of the shares of Winkler Backereitechnik, and Werner's lone shareholder was a Mr. Jurgen Horstmann. Katterman agreed that the Sales Agreement indicated that it constituted the “entire program” of Winkler GmbH, with the exception of the sale to Wachtel [a competitor] which covered just the baking oven program [Ruff Atty. Aff., Ex. J, pp. 21–23 citing Ex. L, Ex. B, p. 6, § 3]. After the purchase, and for about 2 years, Winkler Backereitechnik initially manufactured bakery equipment, but then it converted to selling pre-manufactured spare bakery equipment parts. About 20 out of the remaining 150 employees of Winkler GmbH were retained by Winkler Backereitechnik, including engineers, service people, and some spare parts administrators, but no managers. Winkler Backereitechnik also used some of Winkler GmbH's consignment stores and office spaces. Katterman opined that, under German law, a purchaser of assets was not liable for subsequent personal injury claims. In fact, the ASA between Grub and Winkler Backereitechnik indicated that it disclaimed any previous warranties.
The Note of Issue was filed on September 13, 2013, and this case is set for the first stand-by trial position for October 3, 2014.
Motion Contentions
Bakery Engineering's Summary Judgment Motion
Bakery Engineering moves for summary judgment contending that it has no successor liability from Winkler USA because that company was dissolved and no longer existed at the time of the ASA. Also, Bakery Engineering disclaims that it is a successor in interest to either Winkler GmbH or Winkler USA because the ASA specifically excluded an assumption of future liability, and so does German bankruptcy law which it argues governs this case. In the alternative, and even disregarding German law, Bakery Engineering asserts that Plaintiff cannot prove New York's standard for successor liability. In addition, and as to the cross-claims against them for indemnification and contribution by co-defendant Werner, Defendants contend that they are not liable under either legal theory.
In support of its motion, Bakery Engineering submits an affidavit from Borowski in which he states that Bakery Engineering did not assume a standing service contract between Winkler USA and Wegmans.
Bakery Engineering also submits an affidavit from Grub in which he states that the ASA with Bakery Engineering did not encompass all of Winkler GmbH's assets. Grub, who is an attorney, indicated that, under German insolvency law, a purchaser of a bankrupt entity's assets buys them free and clear of any liability, unless the buyer expressly assumes that obligation. Grub denied that Bakery Engineering expressly assumed that risk.
Grub's affidavit is silent as to whether the ASA encompassed all of Winkler USA's assets.
Bakery Engineering further filed an affidavit from Tobias Rentschler (“Rentschler”), a German lawyer, who stated that he was a recognized expert in the field of German insolvency law. Rentschler said that an asset purchase from an insolvency trustee, as was the ASA between Grub and Bakery Engineering for the sale of Winkler USA, does not confer liability upon the buyer, unless the buyer expressly assumes that obligation. The purpose of this rule of law is to ensure that the insolvency trustee can sell the assets at the highest possible price to obtain funds to pay off the debtor's creditors. Rentschler claimed that, under the ASA, Bakery Engineering was not responsible in regard to any liabilities associated with assets of Winkler GmbH or Winkler USA.
Werner and Winkler Backereitechnik's Summary Judgment
Motion
As with their co-defendants, Werner and Winkler Backereitechnik disclaim any successor liability due to Winkler Backereitechnik's purported limited assets purchase through Grub, either under German law or New York law, and they further seek dismissal of the cross-claims.
Plaintiff's Opposition
Plaintiff submitted a joint response to both sets of motions. As to Bakery Engineering, Plaintiff argues that it has successor liability, and relies heavily upon the language of the ASA to show that Bakery Engineering stepped into Winkler USA's shoes by either expressly or impliedly assuming liability. In fact, Plaintiff characterizes the ASA's wording as a “blanket assumption of liability” [Kerrigan Atty. Aff., p. 39]. Plaintiff objects to the application of German law, and instead asks for the Court to employ New Jersey law given the ASA's express choice of law provision. Using New Jersey law, Plaintiff claims that the ASA's liability exclusion language is unenforceable and thus Bakery Engineering is liable. Further, and again applying New Jersey law [or even New York law in the alternative], Plaintiff contends that a de facto consolidation or merger occurred between Winkler USA and Bakery Engineering allowing the later to be liable for Plaintiff's accident. Plaintiff additionally invokes the “mere continuation” exception, and very curtly the fraud exception, to the successor liability rule. Lastly, Plaintiff denies Grub's allegations concerning the purported limited scope of the sale of assets to Bakery Engineering, and asserts that it can proceed with his case, even in light of the bankruptcy, to collect under insurance policies of the moving defendants.
Plaintiff further objects to the use of affidavits from German lawyers to prove German law. However, this Court found precedent suggesting that such affidavits would be an appropriate option in a choice of law analysis. See e.g. Schoeps v. Andrew Lloyd Webber Art Found., 66 AD3d 137, 142 (1st Dept 2009) (finding that the court could not resolve choice of law question without an affidavit from an expert in German law or citations to German law).
In regard to Werner and Winkler Backereitechnik, Plaintiff argues that they are successor corporations to Winkler GmbH as Werner is a 100% shareholder of Winkler Backereitechnik, who bought many other assets of Winkler GmbH, and who also owns 100% of Bakery Engineering.
LEGAL DISCUSSION
Summary Judgment Standard
The starting place for analyzing the summary judgment motions is the CPLR itself, which provides in pertinent part that:
A motion for summary judgment shall be supported by affidavit, by a copy of the pleadings and by other available proof, such as depositions and written admissions. The affidavit shall be by a person having knowledge of the facts; it shall recite all the material facts; and it shall show that there is no defense to the cause of action or that the cause of action or defense has no merit. The motion shall be granted if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party. Except as provided in subdivision (c) of this rule the motion shall be denied if any party shall show facts sufficient to require a trial of any issue of fact ...
CPLR 3212(b) (emphasis added).
CPLR 3212(b)'s summary judgment provision means that “the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact” necessitating a trial. Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 (1986). Proof offered by a moving party must be in admissible form. See Zuckerman v. City of New York, 49 N.Y.2d 557, 562 (1980) ; Dix v. Pines Hotel, Inc., 188 A.D.2d 1007 (4th Dept 1992). Failure of the moving party to make the statutorily required prima facie case mandates denial of the motion, regardless of the sufficiency of the opposing papers. See Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 (1985).
Once a prima facie showing has been made, then “the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action.” Alvarez, 68 N.Y.2d at 324. “Bald conclusory assertions, even if believable, are not enough [to defeat summary judgment].” S.J. Capelin Assoc., Inc. v. Globe Mfg. Corp., 34 N.Y.2d 338, 342 (1974). See also State Farm Fire & Cas. Co. v. Ricci, 96 AD3d 1571, 1574 (4th Dept 2012) (reversing denial of summary judgment motion as the opposing party's speculation was insufficient to overcome the same).
In assessing a summary judgment motion, “the focus of the court's concern is issue finding, not issue determination, and the affidavits should be scrutinized carefully in the light most favorable to the party opposing the motion.” Robinson v. Strong Mem. Hosp., 98 A.D.2d 976 (4th Dept 1983). See also Branham v. Loews Orpheum Cinemas, Inc., 8 NY3d 931, 932 (2007). Moreover, summary judgment is a drastic measure as it deprives a party of his or her day in court and will normally have res judicata effects. See Ugarriza v. Schmieder, 46 N.Y.2d 471, 474 (1979) ; Harrigan v. Super Products Corp., 237 A.D.2d 882, 883 (4th Dept 1997).
The remaining portion of each Defendant's motion will next be analyzed under the above standard.
Bakery Engineering's Summary Judgment Motion
Bakery Engineering is not currently entitled to summary judgment on Plaintiff's claims sounding in successor liability. See e.g. Refermat v. A.C. & S., Inc., 15 AD3d 928 (4th Dept 2005) (affirming the denial of summary judgment to the defendant, a purchasing company, on the issue of successor liability). As in Refermat, the present case reveals issues of fact as to whether Bakery Engineering is liable for the torts of its predecessor Winkler USA. See also Nationwide Mut. Fire Ins. Co. v. Long Is. A.C., Inc., 78 AD3d 801, 802 (2d Dept 2010).
Plaintiff's approved Amended Complaint designates Bakery Engineering's successor liability as flowing from Winkler USA, not Winkler GmbH [Kerrigan Atty. Aff., Ex. # 9, p. 33, ¶¶ 75–76].
A.Choice of Law.
As a threshold legal matter, and to properly apply the summary judgment standard, this Court must first determine the proper law against which to assess the facts. This Court disagrees with Bakery Engineering that German insolvency law governs this matter thereby relieving it of any successor liability.
Bakery Engineering is correct that the first step in a choice of law analysis is “to determine whether there is an actual conflict between the laws of the jurisdictions involved.” Matter of Allstate Ins. Co. (Stolarz), 81 N.Y.2d 219, 223 (1993). See also Bodea v. Trans Nat Express, Inc., 286 A.D.2d 5, 8 (4th Dept 2001). Here, this Court concludes that the relevant jurisdictions are the country of Germany and New York State, rather than Germany and New Jersey.
Before comparing German and New York law on successor liability, this Court pauses to address Plaintiff's invocation of New Jersey law based upon the ASA's choice of law provision. This Court declines to adopt Plaintiff's invocation of New Jersey law as the controlling legal rule as to whether Bakery Engineering owed Plaintiff a duty of care. The ASA provides that:
This Agreement and all questions relating to its interpretation, performance, enforcement and the rights and remedies of the parties hereto shall be construed and determined in accordance with the laws of and in the courts of the State of New Jersey. Each of the parties agrees that the exclusive jurisdiction and venue of any legal action or proceeding arising from any dispute between the parties regarding this Agreement shall be Morris County, New Jersey, and each of the parties hereby submits itself to the exclusive jurisdiction and venue of such courts for the purpose of any such action, without regard to where this Agreement if performed by either party.
[DiPalma Atty. Aff., Ex. F, p. 40, ¶ 8(F) { emphasis added }].
The above language is appropriate for a contract dispute situation, as contended by Defendants, but not a tort liability scenario. See generally Hodom v. Stearns, 32 A.D.2d 234, 236 (4th Dept 1969) ; J.A.O. Acquisition Corp. v. Stavitsky, 192 Misc.2d 7, 11 (N.Y. Co Sup Ct 2001), aff'd, 293 A.D.2d 323 (1st Dept 2002). It is not reasonable to allow a contract to define the legal principles and standard of care owed to a non-party such as the present Plaintiff. Plaintiff seems to even acknowledge this, and abandon New Jersey law, by invoking New York's successor liability standards in his proposed Amended Complaint. Nevertheless, and even though it does not define Bakery Engineering's standard of care, the ASA remains relevant to the later successor liability factual question.
Going back to the first step of comparing German law and New York law, this Court concludes that there is a conflict between German insolvency law and New York's law governing the responsibilities, or lack thereof, of an asset purchaser. As explained by Bakery Engineering's multiple expert sources, German insolvency law insulates an asset purchaser from any liability, unless the buyer expressly assumes that obligation. At first blush, New York's law is consistent with this principle of German law because the general rule in New York is “that a corporation which acquires the assets of another is not liable for the torts of its predecessor.” Schumacher v. Richards Shear Co., Inc., 59 N.Y.2d 239, 244 (1983). However, and unlike German law which contains only one narrow exception to this general principle, New York law contains a wider range of exceptions, each of which will be discussed in more detail hereinafter. See Grant–Howard Assoc. v. Gen. Housewares Corp., 63 N.Y.2d 291, 296–297 (1984) ; Meadows v. Amsted Indus., Inc., 305 A.D.2d 1053, 1054 (4th Dept 2003). Accordingly, New York law provides a greater level of protection for victims of corporate malfeasance and thus has a cognizable interest in affording recourse for that class of people. See generally Doe v. Roe, 190 A.D.2d 463, 469 (4th Dept 1993) (strong public policy concerns weighed heavily in favor of applying New York's substantive law). This extra protection should not be negated, especially for a New York plaintiff regarding an incident that occurred in New York. See e.g. In re Qimonda AG, 462 BR 165, 185 (Bankr ED Va 2011) (refusing to apply German insolvency law because it would be manifestly contrary to U.S. public policy), aff'd sub nom., Jaffe v. Samsung Electronics Co., Ltd., 737 F3d 14 (4th Cir2013) [Bakery Engineering Memo., pp. 5–6].
Furthermore, Bakery Engineering's advocacy for German insolvency law based upon United States federal bankruptcy law is unavailing. Contrary to Bakery Engineering's contention [Bakery Engineering Memo., pp. 8–10], applying New York substantive law will not conflict with federal bankruptcy law. The Fourth Department expressly rejected the “assertion that state successor liability was preempted by the proceedings in bankruptcy.” Sweatland v. Park Corp., 181 A.D.2d 243, 247 (4th Dept 1992) (citing Wensing by Wensing v. Paris Indus.—New York, 158 A.D.2d 164, 167 (3d Dept 1990) (acknowledging that, even approved bankruptcy court asset purchase agreement, “cannot affect the rights of a stranger to their contract” in a products liability case)). Consequently, Sweatland and Wensing allow a successor liability analysis even after a federal bankruptcy case was initiated, and therefore those cases provide additional legal authority to disregard Germany's insolvency law.
Plaintiff's contention that federal bankruptcy law allows a claim against a discharged debtor to continue in order to reach the debtor's insurance coverage is misplaced. Although this premise is legally correct (see Rollo v. Servico New York, Inc., 79 AD3d 1799, 1800 (4th Dept 2010) ), and as Defendants correctly pointed out in their replies and at oral argument, this rule has no application to the moving Defendants as successor companies as opposed to Winkler GmbH itself as the discharged debtor.
The next step in the choice of law process for a tort case like this is to apply the “interest analysis” test which defers to the laws of the “jurisdiction having the greatest interest in resolving the particular issue.” Cooney v. Osgood Mach., Inc., 81 N.Y.2d 66, 72 (1993). See also Mashreqbank PSC v. Ahmed Hamad A1 Gosaibi & Bros. Co., ––– NY3d ––––, 2014 N.Y. Slip Op 02381 (04–08–14) ; Dorsey v. Yantambwe, 276 A.D.2d 108, 110 (4th Dept 2000). When assessing what jurisdiction's standard of care to impose, “the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders.” Cooney, 81 N.Y.2d at 72 (emphasis added). See also Padula v. Lilarn Properties Corp., 84 N.Y.2d 519, 522 (1994) ; Burnett v. Columbus McKinnon Corp., 69 AD3d 58, 61 (4th Dept 2009). Also significant are the parties' domiciles. See Bodea, 286 A.D.2d at 9.
In the case at bar, the “interest analysis” test favors applying New York law, as opposed to German insolvency law, to define the scope of Bakery Engineering's standard of care, i.e., liability. Due to the fact that the subject incident took place here in New York, New York has “the greatest interest.” Cooney, 81 N.Y.2d at 72 ; Burnett, 69 AD3d at 61. Even Bakery Engineering's own case-law recognizes the long-standing importance the locale of an incident is in deciding a choice of law question in a tort case. See Elmaliach v. Bank of China Ltd., 110 AD3d 192, 202 (1st Dept 2013) [Bakery Engineering's Memo., p. 6]. See also Poplar v. Bourjois, Inc., 298 N.Y. 62, 66 (1948) ; Babcock v. Jackson, 12 N.Y.2d 473, 477 (1963). Also, Plaintiff is a New York resident, even though Defendants are not. Together, these two significant factors warrant the application of New York law on successor liability over German insolvency law. See e.g. Thomas v. Hanmer, 109 A.D.2d 80, 85 (4th Dept 1985) (ruling that New York law should govern the action instead of the foreign law of the Canadian Province of Quebec).
Lastly, Bakery Engineering's main case of Schultz v. Boy Scouts of Am., Inc., 65 N.Y.2d 189 (1985), which applied another state's law to a New York lawsuit, does not compel a different result [Bakery Engineering's Memo., p. 6]. For starters, Schultz is legally distinguishable as it involved a choice of law analysis for a loss-distribution rule, i.e., damages, rather than one regulating conduct, i.e., standard of care. Id. at 195. As a result of this critical distinction, the Court of Appeals rightfully de-emphasized the place of the wrong as well as the parties' domiciles, and instead applied the three-prong test of Neumeier v. Kuehner, 31 N.Y.2d 121 (1972). Unlike Schultz, the legal question in the instant case is whether Defendants owed Plaintiff a standard of care; therefore, the location of the incident remains of utmost importance. See Cooney, 81 N.Y.2d at 72 ; Bodea, 286 A.D.2d at 9. Besides the foregoing, Bakery Engineering's further citation to Schultz to shift the burden to Plaintiff to negate the application of German insolvency law is misguided. Schultz 's “heavy burden” language was limited to the public policy doctrine exception to the choice of law rule. See Schultz, 65 N.Y.2d at 202. Plaintiff has not invoked that exception, and it is further inapplicable as it comes into play only when the foreign jurisdiction's law is deemed to be the controlling authority. Id. That is not the case here as this Court has declined to apply German law; thus, Plaintiff carries no burden.
In all, this Court elects to apply New York law to decipher Defendants' standard of care. See Thomas, 109 A.D.2d at 80.
B.New York's Successor Liability Rule Exceptions.
Under New York law, Bakery Engineering must at this stage continue to litigate its potential successor liability under some of the asset purchaser exceptions. See e.g. Kaur v. Am. Tr. Ins. Co., 19 NY3d 827, 828 (2012) (decreeing that triable issues of fact existed concerning the defendant's successor liability); Meadows, 305 A.D.2d at 1054 (affirming the denial of summary judgment on the successor liability issue).
As briefly referenced above, there are four exceptions allowing a purchasing corporation to be liable for the torts of its predecessor. See Grant–Howard Assoc., 63 N.Y.2d at 296–297 ; Meadows, 305 A.D.2d at 1054. As the Court of Appeals ruled:
A corporation may be held liable for the torts of its predecessor if (1) it expressly or impliedly assumed the predecessor's tort liability, (2) there was a consolidation or merger of seller and purchaser, (3) the purchasing corporation was a mere continuation of the selling corporation, or (4) the transaction is entered into fraudulently to escape such obligations.
Schumacher, 59 N.Y.2d at 245 (emphasis added). See also Semenetz v. Sherling & Walden, Inc., 7 NY3d 194, 198 (2006) ; Hartford Acc. & Indem. Co., Inc. v. Canron, 43 N.Y.2d 823, 825 (1977) ; Radziul v. Hooper, Inc., 125 Misc.2d 362, 365 (Monroe Co Sup Ct 1984).
For “a successor corporation to establish that it is entitled to summary judgment on the ground that it is not liable, it must demonstrate that none of the four ... exceptions” apply. Nationwide Mut. Fire Ins. Co., 78 AD3d at 802 (citing Meadows, 305 A.D.2d at 1054 ). The Fourth Department classifies the successor liability issue as one that “should be determined at trial rather than by summary disposition.” Atkisson v. Manitoba Corp., 192 A.D.2d 1077 (4th Dept 1993) (modifying order by denying the defendant's summary judgment motion). With the foregoing in mind, the successor liability exceptions as to Bakery Engineering will be hereinafter discussed.
1. Assumption of Liability.
Bakery Engineering proved as a matter of law that it did not in any fashion assume Winkler USA's future product liability obligations. See generally Zuckerman, 49 N.Y.2d at 562 ; Dix, 188 A.D.2d at 1007. See e.g. Sweatland, 181 A.D.2d at 245 (concluding that the purchase agreement did not confer successor liability as there was no implicit or express assumption of liability).
Under the plain wording of the ASA (see W.W.W. Assoc., Inc. v. Giancontieri, 77 N.Y.2d 157, 162 (1990) ; Kula v. State Farm Fire and Cas. Co., 212 A.D.2d 16, 19 (4th Dept 1995) ), Bakery Engineering unequivocally denounced any assumption of liability for obligations of “any kind or nature, whether actual, contingent or accrued, known or unknown” [DiPalma Atty. Aff., Ex. F, p. 36]. See generally Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002). See e.g. Goldman v. Packaging Indus., Inc., 144 A.D.2d 533, 535 (2d Dept 1988) (ruling that the corporate defendant expressly disclaimed the assumption of any liability of its predecessor). This clear documentary proof constitutes prima facie showing of entitlement to judgment. See e.g. Morales v. City of New York, 18 Misc.3d 686, 689 (Kings Co Sup Ct 2007) (declining to apply the first exception based upon the subject Asset Purchase Agreement's exclusionary language).
In his motion opposition, Plaintiff failed to raise a material issue of fact as to this exception. See generally Alvarez, 68 N.Y.2d at 324. Plaintiff's classification of the ASA's wording as a “blanket assumption of liability” is inaccurate [Kerrigan Atty. Aff., p. 39]. Plaintiff focuses on the language in Section 2, A, (a)(I) that Bakery Engineering was assuming “[a]ll liabilities and/or obligations under or arising in the ordinary course of business prior to and after the Closing Date ” [DiPalma Atty. Aff., Ex. F, p. 34 { emphasis for language highlighted by Plaintiff }]. However, Plaintiff omits and ignores the remaining wording that the post-closing liabilities were limited to those “known to the Buyer” as listed in Schedule F [Id. ]. Plaintiff's 2006 accident was neither known to Bakery Engineering or indicated in Schedule F, nor could it have been given the timing of the same. This narrowly tailored assumption does not have the “blanket” implication Plaintiff concocts.
Based upon the foregoing irrefutable record evidence, the first exception has no application to this case. See e.g. City of New York v. Charles Pfizer & Co., Inc., 260 A.D.2d 174, 175 (1st Dept 1999) (finding that the subject contract did not manifest either an express or implied assumption of liability).
2. Consolidation or Merger.
The second exception, often referred to as a de facto merger, may ultimately provide Plaintiff with an avenue of relief to hold Bakery Engineering liable. See e.g. Sweatland, 181 A.D.2d at 245–246 (affirming the denial of the defendant's summary judgment motion because there was an issue of fact as to a de facto merger for a pre-accident asset purchase agreement).
The objective of the de facto merger exception is to provide tort claimants with “protection against attempts by ongoing businesses to avoid liability through transfer of their operations to another legal entity.” Id. at 246. Additionally, this second exception implements the conception that a company who essentially purchases the goodwill of another company “should carry the predecessor's liabilities as a concomitant to the benefits it derives from the good will purchased” thereby ensuring that “a source remains to pay for the victim's injuries.” Grant–Howard Assoc., 63 N.Y.2d at 296–297. See also Holmberg v. Attractions Land, Inc., 230 A.D.2d 362, 365 (3d Dept 1997).
Given the preceding objectives, “courts have flexibility in determining whether a transaction constitutes a de facto merger.” Sweatland, 181 A.D.2d at 246 (emphasis added). See also AT & S Transp., LLC v. Odyssey Logistics & Tech. Corp., 22 AD3d 750, 752 (2d Dept 2005). Thus, and in assessing the de facto merger exception, courts consider the following factors:
(1) continuity of ownership; (2) a cessation of ordinary business and dissolution of the predecessor as soon as practically and legally possible; (3) assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the predecessor; and, (4) a continuity of management, personnel, physical location, assets, and general business operation.
Sweatland, 181 A.D.2d at 245–246.
“However, [n]ot all of these factors are needed to demonstrate a merger; rather, these factors are only indicators that tend to show a de facto merger.' “ Id. at 246 (the de facto merger analysis must be made on a case-by-case basis) (internal citation omitted).
When the de facto merger factors are applied to the present matter against Bakery Engineering, material issues of fact exist which prevent a summary judgment resolution. See e.g. Hoover v. New Holland N. Am., Inc., 71 AD3d 1593 (4th Dept 2010) (affirming the denial of summary judgment motion as it was disputed whether the subject transaction constituted a de facto merger).
For starters, the parties hotly contest Winkler USA's status at the time the ASA was executed. On the one hand, Bakery Engineering alleges that Winkler USA was already dissolved and it assets reverted back to Winkler GmbH; therefore, Bakery Engineering cannot possibly be a successor thereto. On the other hand, Plaintiff raised an issue of fact by proof that Winkler USA continued to exist and did not formally dissolve until 2005. See Fitzgerald v. Fahnestock & Co., Inc., 286 A.D.2d 573, 575 (1st Dept 2001) (“[s]o long as the acquired corporation is shorn of its assets and has become, in essence, a shell, legal dissolution is not necessary before a finding of a de facto merger will be made”). These juxtaposed factual allegations should be reserved for a jury's consideration. See generally S.J. Capelin Assoc., Inc., 34 N.Y.2d at 341 ; Craft v. Maier, 167 A.D.2d 933 (4th Dept 1990). Moreover, and consistent with Plaintiff's position, the ASA designates Winkler USA as the “Seller,” not Winkler GmbH [DiPalma Atty. Aff., Ex. F, p. 32]. Also per the ASA, Bakery Engineering was tasked with formally dissolving Winkler USA. Therefore, and upon the motion papers, Winkler USA's exact status at the time of the ASA is unsettled and must be further litigated.
In addition, the intermixing of various facets of Winkler GmbH and Winkler USA with Bakery Engineering trigger the de facto merger exception. See e.g. City of New York v. Aaer Sprayed Insulations, Inc., 281 A.D.2d 228, 229 (1st Dept 2001) (affirming the denial of summary judgment to the defendant on the de facto merger exception due to the cessation of the predecessor's operations which the defendant continued “at the same physical location, and with the same assets, general business operation, and many of the same personnel”).
Even though Winkler USA's owner may not be the same as Bakery Engineering's, Bakery Engineering was formed mainly to purchase what appears to be the entirety of Winkler USA from Grub. See Societe Anonyme Dauphitex v. Schoenfelder Corp., 2007 WL 3253592, at *5 (SDNY 2007) (the de facto merger exception can apply when “it was the intent of [the successor] to absorb and continue the operation of [the predecessor]”). Of further particular significance is Winkler USA's President's continued leadership role as Bakery Engineering's President. Contrary to Bakery Engineering's contention, this one potential missing ownership factor is not fatal as all of the other factors are present. See Sweatland, 181 A.D.2d at 246. Cf. In re New York City Asbestos Litig., 15 AD3d 254, 256 (1st Dept 2005) (rejecting de facto merger exception because, besides uncommon ownership, another factor was also missing); Buja v. KCI Konecranes Intern. Plc., 12 Misc.3d 859, 865 (Monroe Co Sup Ct 2006) (same) [Bakery Engineering Memo., p. 13].
Bakery Engineering's contention for the first time at oral argument (see Free In Christ Pentecostal Church v. Julian, 64 AD3d 1153, 1154 (4th Dept 2009) ), that Borowski was unqualified to testify about Domenicucci's ownership role with Bakery Engineering, just goes to the weight of that testimony, not its admissibility to create an issue of fact, and it is further a credibility determination a jury should entertain. See S.J. Capelin Assoc., Inc., 34 N.Y.2d at 341 ; Craft, 167 A.D.2d at 933.
Bakery Engineering does not affirmatively disprove the other factors [Bakery Engineering Memo., pp. 13–14].See Nationwide Mut. Fire Ins. Co., 78 AD3d at 802. As already discussed, Winkler USA's exact status is debatable; however, no party disagrees that Winkler USA was no longer engaged in active business operations. Under the ASA, Bakery Engineering took control over all of the necessary items to continue Winkler USA's work, namely inventory, including essential customer lists, customer contracts, accounts receivable, and balance sheet assets. Of importance is Bakery Engineering's purchase of the Winkler USA name, logos, and trademarks and thus the accompanying goodwill. See Grant–Howard Assoc., 63 N.Y.2d at 296–97 ; Holmberg, 230 A.D.2d at 365. After the ASA, Bakery Engineering engaged in the exact same work as Winkler USA; to wit, producing and service bakery equipment. In fact, Wegmans remained on as a customer. So effortless was the transformation that the companies' customers did not even notice any change. In fact, and according to Gutierrez, the customer's perception was that Winkler USA and Bakery Engineering were the same company because the same people remained on as the point of contact.
Also, Bakery Engineering assumed the lease for Winkler USA's office space and warehouse and, for a period of time, operated out of the exact same location. Further, there was continuity of management and personnel between Winkler USA and Bakery Engineering. The ASA required Bakery Engineering to “assume all employees of Winkler [USA]” [DiPalma Atty. Aff., Ex. F, p. 34]. Bakery Engineering implemented this requirement retaining at least one supervisor who still worked with the company and several technicians, albeit not permanently. Most importantly, Bakery Engineering ensured continuity of management by retaining Domenicucci in the key role of President.
In total, this Court finds that there is sufficient overlap between the companies to allow a jury to decide whether there was a de facto merger resulting in Bakery Engineering's successor liability. See Hoover, 71 AD3d at 1593 ; Sweatland, 181 A.D.2d at 245–246.
3. “Mere Continuation. ”
The third exception may also apply to Bakery Engineering. See e.g. Meadows, 305 A.D.2d at 1054 (ruling that one corporate defendant was not a “mere continuation, but finding issues of fact as to whether another corporate defendant qualified as the same).
The “mere continuation” exception “refers to corporate reorganization, however, where only one corporation survives the transaction; the predecessor corporation must be extinguished.” Schumacher, 59 N.Y.2d at 245.
As previously indicated, Plaintiff raised issues of fact as to Winkler USA's pre and post ASA corporate existence which militate against adjudicating as a matter of law the “mere continuation” exception. See e.g. Burgos v. Pulse Combustion, Inc., 227 A.D.2d 295 (1st Dept 1996) (the trial-level court correctly found issues of fact bearing upon the defendant's possible “mere continuation” successor liability).
A final determination of the “mere continuation” exception as to Winkler USA must await a trial. Id.
4. Fraud.
The last exception is wholly without merit on the present record. See e.g. State Farm Fire & Cas. Co. v. Main Bros. Oil Co., 101 AD3d 1575, 1577 (3d Dept 2012) (because no evidence of fraud existed, the fourth exception did not apply).
Bakery Engineering set forth a prima facie case that the ASA was not entered into fraudulently to escape any obligations of either Winkler GmbH or Winkler USA. See generally Zuckerman, 49 N.Y.2d at 562 ; Dix, 188 A.D.2d at 1007. The most compelling proof negating a fraudulent conveyance is the undisputed fact that the ASA was negotiated and overseen by a neutral bankruptcy trustee.
In his response, Plaintiff was unable to rebut Bakery Engineering's motion proof. See generally Alvarez, 68 N.Y.2d at 324. Plaintiff provides no admissible proof besides mere speculation that the ASA was fraudulent. Such conjecture is insufficient to raise a triable issue of material fact deserving of trial consideration. See generally S.J. Capelin Assoc., Inc., 34 N.Y.2d at 342 ; State Farm Fire & Cas. Co., 96 AD3d at 1574. In fact, and contrary to his motion position, Plaintiff's proposed Amended Complaint does not invoke the fraud exception [Kerrigan Atty. Aff., Ex. # 9, p. 33, ¶ 76].
Accordingly, Bakery Engineering cannot face successor liability under the fraud exception.
In conclusion of Bakery Engineering's motion, New York law applies and, under the same, there are genuine issues of fact as to its successor liability as a de facto merger, as well as a “mere continuation” of Winkler USA. See e.g. Drexler v. Highlift, Inc., 277 A.D.2d 196, 197 (2d Dept 2000) (reversing grant of summary judgment because one or more of the successor liability exceptions might apply).
Werner and Winkler Backereitechnik's Summary Judgment Motion
Werner and Winkler Backereitechnik are not yet entitled to summary judgment relief. See Hoover, 71 AD3d at 1593 ; Sweatland, 181 A.D.2d at 245–246.
Having already resolved the choice of law issue, and outlined in great detail the legal principles of successor liability, each exception is analyzed hereinafter as to Werner and Winkler Backereitechnik in regard to Winkler GmbH.
Given how Plaintiff has framed his successor liability allegations, there is no reason to consider Werner's and Winkler Backereitechnik's successor liability as to Winkler USA.
1. Assumption of Liability.
As a preliminary matter, the record is unassailable that the May 2001 sale of some Winkler GmbH assets was to Winkler Backereitechnik only, not Werner [Ruff Atty. Aff., Ex. L, Ex. B, p. 2]. Consequently, Werner has no successor liability exposure as to Winkler GmbH under this exception.
Nevertheless, and even imputing contractual participation to Werner (see generally Computersearch Corp. v. ECL Indus., Inc., 142 A.D.2d 961 (4th Dept 1988) (parent corporation can be held liable for the contractual obligation of a subsidiary if it exercised complete domination and control over the same)), Werner and Winkler Backereitechnik proved that they did not in any manner assume Winkler GmbH's future liabilities. See generally Zuckerman, 49 N.Y.2d at 562 ; Dix, 188 A.D.2d at 1007. See also Sweatland, 181 A.D.2d at 245. The Sales Agreement contains two separate provisions which disclaim any liability of Winkler GmbH [Ruff Atty. Aff., Ex. L, Ex. B, p. 10, § 7; p. 11, § 8]. See Goldman, 144 A.D.2d at 535 ; Morales, 18 Misc.3d at 689. Plaintiff failed to contest this clear contractual defense. See generally Alvarez, 68 N.Y.2d at 324.
In light of the above, the first exception cannot be utilized against either Werner or Winkler Backereitechnik. See City of New York, 260 A.D.2d at 175.
2. Consolidation or Merger.
Again applying the Fourth Department's directive that a de facto merger exception analysis involves a question of fact (see Atkisson, 192 A.D.2d at 1077 ), this second exception has potential implications against both Werner and Winkler Backereitechnik. See e.g. Hoover, 71 AD3d at 1593 ; Sweatland, 181 A.D.2d at 245–246.
Werner and Winkler Backereitechnik did not make out a prima facie case of their entitlement to judgment as a matter of law. See generally Winegrad, 64 N.Y.2d at 853. See Nationwide Mut. Fire Ins. Co., 78 AD3d at 802. Their moving papers themselves raised issues of fact over the de facto merger factors. For example, the Sales Agreement provided by Werner and Winkler Backereitechnik specifically states that the conveyance was Winkler GmbH's “entire program,” which included the subject Admiral Line, and a large quantity of other important assets [Ruff Atty. Aff., Ex. L, Ex. B, pp. 4–6, § 3]. Also, the Sales Agreement references the scope of the sale as ensuring a “smooth takeover” [Ruff Atty. Aff., Ex, L, Ex. B, p. 6, § 3, ¶ 3; see also p. 9, § 6]. In all, the Sales Agreement reflects a sale of a substantial portion of Winkler GmbH's assets, or at the very least, suggests a question of fact concerning the same.
Werner and Winkler Backereitechnik try to preemptively counter the above by referring to the prior sale to Wachtel, which was limited to a baking oven program. However, the Wachtel contract is not provided, and without the same, the Court cannot make a determinative quantitative analysis of the relative apportionments of the sales. This uncertainty is further compounded by the lack of the cited Appendices to the Winkler Backereitechnik Sales Agreement. In fact, it appears that the parties are unsure of what, if anything, of Winkler GmbH remained after the third sale to Winkler Backereitechnik. Werner and Winkler Backereitechnik have not presented sufficient proof that the May 2001 Sales Agreement did not encompass substantially all of Winkler's GmbH's assets. See Nationwide Mut. Fire Ins. Co., 78 AD3d at 802.
Moreover, Werner's and Winkler Backereitechnik's own papers reflect further de facto merger factors. Like Bakery Engineering, Winkler Backereitechnik was created about the same time as the Sales Agreement thereby calling into question the purpose of its formation. See Societe Anonyme Dauphitex, 2007 WL 3253592 at *5. Katterman's testified that Winkler GmbH employees were retained, and consistent with the Sales Agreement, various Winkler GmbH locations were utilized. Additionally, and very importantly, Katterman admitted that Winkler Backereitechnik followed in Winkler GmbH's footsteps and initially manufactured bakery equipment before a few years later transitioning to the sale of pre-fabricated spare parts. This is consistent with the Sale Agreement's objective of ensuring a “smooth takeover” of Winkler GmbH's operations [Ruff Atty. Aff., Ex, L, Ex. B, p. 6, § 3, ¶ 3].
Taking all of the preceding as a whole, and on the record presented by Werner and Winkler Backereitechnik, this Court is unable to adjudicate as a matter of law that the de facto merger exception cannot be applied to them. See City of New York, 281 A.D.2d at 229.
Besides not dispelling the de facto merger exception, the motion papers also failed to affirmatively disprove Werner's liability for its wholly owned subsidiary Winkler Backereitechnik. See generally Billy v. Consol. Mach. Tool Corp., 51 N.Y.2d 152, 162 (1980) (if a parent company's involvement in its subsidiary's management is so extensive as to render the subsidiary a mere “alter ego,” then the parent may face liability). Werner and Winkler Backereitechnik presented no proof that they each retained their separate corporate identities, and that Werner did not dominate Winkler Backereitechnik's operations. See e.g. Shelley v.. Flow Intern. Corp., 283 A.D.2d 958, 960 (4th Dept 2001) (finding that there was an issue of fact whether the corporate defendants were acting as one corporation).
In the alternative, Plaintiff raised a triable issue of material fact. See generally Alvarez, 68 N.Y.2d at 324. In particular, Plaintiff's opposition highlighted the incestuous nature of the relationships between Werner and Winkler Backereitechnik and Bakery Engineering, namely that both Winkler Backereitechnik and Bakery Engineering are either directly or indirectly owned by Werner [DiPalma Atty. Aff., Ex. F, p. 7, ¶ 10; Ruff Atty. Aff., ¶ 14; Ex. H, p. 11, ¶ 15]. As explained by Katterman, Werner—a holding company—is owned by a single shareholder, Mr. Horstmann. Given the seemingly closely held nature of Werner, and its ownership of the co-defendants, Plaintiff seeks to impose liability directly on Werner, in addition to Winkler Backereitechnik. In other words, Plaintiff is attempting to pierce the corporate veil. See generally Youngs v. Kissing Bridge Ski Corp., 216 A.D.2d 967 (4th Dept 1995). Further discovery, which this Court is permitting, may clarify the exact dynamics between Werner and Winkler Backereitechnik. See CPLR 3212(f) ; Gmerek v. Scrivner, Inc., 221 A.D.2d 991 (4th Dept 1995) (reversing the grant of summary judgment to the corporate defendants on issue of parent/subsidiary liability and directing further discovery on the same).
3. “Mere Continuation. ”
This third exception is not a viable option for Plaintiff. See e.g. Sweatland, 181 A.D.2d at 245 (finding that the “mere continuation” exception was not applicable).
As previously indicated, the “mere continuation” exception mandates that the predecessor corporation be extinguished. See Schumacher, 59 N.Y.2d at 245. Continuation of the predecessor in bankruptcy protection negates the “mere continuation” exception because the predecessor is not considered extinguished. See Sweatland, 181 A.D.2d at 245.
In the case at hand, it is yet unsettled what remained of Winkler GmbH after the third sale to Winkler Backereitechnik, especially because Winkler GmbH survived the 2001 Sales Agreement and remained in bankruptcy protection likely winding up its affairs until May of 2008. Consequently, neither Werner and Winkler Backereitechnik are a “mere continuation” of Winkler GmbH. See Hoover, 71 AD3d at 1594 ; Sweatland, 181 A.D.2d at 245.
4. Fraud.
As with the earlier ASA, the Sales Agreement with Winkler Backereitechnik bears no fraudulent hallmarks. See State Farm Fire & Cas. Co., 101 AD3d at 1577. Plaintiff does not even include this last exception in his proposed Amended Complaint [Kerrigan Atty. Aff., Ex. # 9, p. 34, ¶ 78]. Because this final exception is neither alleged, nor supported by any proof, it cannot be a basis for successor liability against Werner and Winkler Backereitechnik.
In sum, and as with Bakery Engineering, Werner and Winkler Backereitechnik must for now defend against Plaintiff's claims, and the cross-claims, at a trial. See Drexler, 277 A.D.2d at 197.
CONCLUSION
Based upon all of the foregoing, it is the Decision of this Court that the remaining portions of both sets of summary judgment motions are DENIED WITHOUT PREJUDICE. The denial is without prejudice due to the fact that the Note of Issue is going to be stricken and the parties will be engaging in further discovery given the impending submission of an Amended Complaint.
Plaintiff is directed to submit to the Court, on notice to all opposing counsels, a proposed Order encompassing the entirety of this Court's summary judgment rulings, along with new proposed Scheduling Order dates.