Hadassa Investment Security Nigeria Ltd v. Swiftships Shipbuilders L L C et al
ORDER: Plaintiff Hadassa Investment Security Nigeria Ltd may file an amended complaint in accordance with the Court's analysis within 21 days from the date of the entry of this order. IT IS FURTHER ORDERED the 73 Motion To Dismiss Pursuant To FRCP 12(b)(6) filed by Swiftships L L C is DENIED as Moot and Dismissed Without Prejudice to re-file if it deems appropriate. Signed by Magistrate Judge Carol B Whitehurst on 3/12/2018. (crt,Putch, A)
UNITED STATES DISTRICT COURT
WESTERN DIVISION OF LOUISIANA
Hadassa Investment Security Nigeria Ltd
Civil Action No. 6:16-cv-01502
Judge Robert G. James
Swiftships Shipbuilders LLC et al
Magistrate Judge Carol B. Whitehurst
Before the Court on referral from the district judge is a Motion To Dismiss
Pursuant To Fed. R. Civ. P. 12(b)(6) filed by the Defendant Swiftships LLC
(“Swiftships”) [Rec. Doc. 73] and Plaintiff, Hadassa Investment Security Nigeria
Ltd.’s (“Hadassa”), Opposition [Rec. Doc. 27]. For the reasons that follow, the Court
will allow Plaintiff to amend his Complaint and the Motion To Dismiss will be denied
I. Factual and Procedural Background
On October 2, 2013, Hadassa filed a lawsuit against Swiftships Shipbuilders
LLC (“Shipbuilders”) in the Western District of Louisiana, 6:13:cv-02795, claiming
breach of contract, failure to return deposit and unjust enrichment (“Hadassa I
lawsuit”). R. 1-2. Hadassa alleged in the complaint that in 2008 it was attempting to
broker an agreement between the Nigerian Navy and Shipbuilders for the
manufacture of a number of vessels to serve the Nigerian Navy. Hadassa further
alleged that on April 30, 2009, Hadassa wired $500,000 to Shipbuilders as a deposit
on a 25M Patrol Boat Shipbuilders had built and to hasten delivery for future vessels
in the event the Nigerian Navy awarded a contract to Hadassa. Hadassa alleged that
it subsequently learned that Shipbuilders sold the 25 M Patrol Boat to the U.S.
Government. After Shipbuilders failed to refund its deposit despite numerous
demands, Hadassa filed the Hadassa I lawsuit. On January 12, 2016, after a trial on
the merits, the court awarded Judgment in favor of Hadassa and against “Swiftships
Shipbuilders LLC” in the amount of $1,499,910.00.1 R. 1-3. Based on Shipbuilders
failure to pay the Judgment, Hadassa filed a motion for contempt on March 21, 2017.
At the hearing on the motion,2 counsel for Shipbuilders contended that, “our basis for
nonpayment is not for disrespect or [sic] willingness. It's a flat inability to pay.” R.
1, ¶XIV. The court denied Hadassa’s motion concluding that the Judgment was “a
final judgment that cannot be altered or amended by this Court under the procedure
utilized by the parties.” R.1-8.
Thereafter, Hadassa filed the instant lawsuit against Shipbuilders, Swiftships
and the United States for “Revocatory Action.” Hadassa alleged that after it filed the
Hadassa I lawsuit, it learned that Shipbuilders and Swiftships entered into an “Asset
Purchase Agreement” (the “Purchase Agreement”) on January 1, 2014, by which
The bench trial was conducted and Judgment was entered by retired Judge Richard T. Haik.
The contempt hearing was conducted by Judge Rebecca F. Doherty.
Swiftships, as purchaser, received the assets of Shipbuilders for the stated monies
paid and received. R. 1. Hadassa further alleged that Shipbuilders was insolvent at the
time of the transaction and that the transaction resulted in damages to Plaintiff..
Hadassa filed a second Amended Complaint on October 31, 2017, alleging that
Swiftships LLC is liable for the January 12, 2016 judgment under the Successor
Liability Doctrine.” R. 62.3 Shipbuilders filed the instant Motion to Dismiss under
Rule 12(b)(6) for failure to state a claim for successor liability. R. 73.
II. Contentions of the Parties
Swiftships contends the allegations in Hadassa’s Complaint are insufficient to
allege a cause of action for successor liability. Swiftships provides nothing in support
of its position, merely stating, “the ‘Successor Liability Doctrine’ takes many
different forms and/or theories.” R. 73.
Hadassa argues that its allegations in the Complaint are sufficient to state a
claim for successor-in-interest liability of Swiftships, LLC for the January 12, 2016
Judgment. Paragraph VIII and Paragraph XVII of the Complaint state:
On January 12, 2016, Judgment [Rec. Doc. 97] was entered in this
matter. The January 12, 2016 Judgment is now a final Judgment. The
Defendant named in the Judgment is Swiftships Shipbuilders, LLC. A
After filing its original complaint, R. 1, Hadassa filed two amended
complaints, R. 33 and 62. The Court will refer to the original and amended complaint
as “the Complaint.”
copy of the Judgment is attached hereto.
In Paragraph XVIII Plaintiff alleged:
Since the January 12, 2016 Judgment became final, Counsel for Plaintiff
Hadassa has learned that actually, prior to the January 12, 2016 entry
of the Judgment [Hadassa I, Rec. Doc. 97], all of the interest of
Swiftships Shipbuilders, LLC were transferred to another entity, to wit:
Swiftships, LLC.” (Emphasis in original)
III. Legal Standards & Analysis
Federal Rule of Civil Procedure 8(a) requires that a complaint set forth “a short
and plain statement of the claim showing that the pleader is entitled to relief[,]” and
Rule 12(b)(6) provides that a complaint may be dismissed if it “fails to state a claim
upon which relief can be granted[.]” Courts apply these rules through the
two-pronged process outlined by the Supreme Court in Bell Atlantic Corp. v.
Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009). First, the
Court must identify the complaint's factual allegations, which are assumed to be true,
and distinguish them from any statements of legal conclusion, which are not entitled
to the assumption of truth. Iqbal, 556 U.S. at 678, 680–81. Second, the Court must
assess whether the assumed-as-true factual allegations set forth a plausible claim to
relief. This is “a context-specific task that requires the reviewing court to draw on its
judicial experience and common sense” to determine whether “the well-pleaded facts
... permit the court to infer more than the mere possibility of misconduct[.]” Iqbal,
556 U.S. at 679. Ultimately, the claim is subject to dismissal if it lacks “factual
content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.
The record indicates that this Court has jurisdiction under 28 U.S.C. § 1332,
diversity jurisdiction. R. 26. As far as the Court can ascertain, neither party has
addressed Louisiana’s choice of law in order to determine what law would apply to
any successor liability claim in this case. The record provides that Swiftships
Shipbuilders, LLC is a Limited Liability Company whose members are: Calvin
Leleux, a Louisiana resident, and Swift Group LLC. Swift Group LLC’s members
are: Calvin Leleux and ICS Marine, Inc, a Virginia corporation. Swiftships, LLC is
a Limited Liability Company whose members are Shehraze Shah, a Virginia resident
and Jeff Leleux a Louisiana resident.4
In the context of corporate liability, the general rule is that where one
corporation sells or otherwise transfers all of its assets to another corporation, the
latter is not liable for the debts and liabilities of the transferor. La Bella Dona Skin
The Court notes that generally successor liability is analyzed under the law
of the transferee corporation’s, in this case Swiftships, state of incorporation.
Restatement (Second) of Conflict of Laws § 302. See Patin v. Thoroughbred Power
Boats Inc., 294 F.3d 640, 649 (5th Cir. 2002)(concluding that the law of
incorporation “governs ... substantive determination whether [an entity] is subject to
successor liability” ....).
Care, Inc. v. Belle Femme Enterprises, LLC, 805 S.E.2d 399, 407, 294 Va. 243, 258
(Va., 2017); Blizzard v. National R.R. Passenger Corp., 831 F.Supp. 544, 547
(E.D.Va.1993); In re Louisiana Crawfish Producers, 772 F.3d 1026, 1030 (5th Cir.
2014). Under the “traditional view” there are four exceptions to this rule: (1) the
purchasing corporation expressly or impliedly agreed to assume such liabilities, (2)
the circumstances surrounding the transaction warrant a finding that there was a de
facto merger of the two corporations, (3) the purchasing corporation is merely a
continuation of the selling corporation, or (4) the transaction is fraudulent in fact. Id.
Hadassa’s Complaint does not state which exception or exceptions to the
traditional view of successor liability he is alleging. Based on Hadassa’s Complaint
and the record of this action, it appears that 2, 3 and/or 4 could be relevant—de facto
merger, mere continuation and /or fraudulent transaction.5
Both Virginia and Louisiana adopt the traditional view of the de facto merger
exception. “The elements of a de facto merger under the traditional view are: (1) a
continuity of the selling corporation's enterprise, including continuity of management,
personnel, physical location, assets, and general business operations; (2) a continuity
of ownership because the purchasing corporation acquires the assets with shares of
De facto merger requires that the seller corporation ceases to exist, while mere
continuation requires that only one corporation remains. United States v. Vista
Hospice Care, Inc., 2014 WL 12580020, at *1 (N.D.Tex., 2014)
its own stock, which ultimately are held by the selling corporation's shareholders; (3)
prompt liquidation and dissolution of the selling corporation's business operations;
and (4) an assumption by the purchasing corporation of the selling corporation's
obligations necessary for normal operation of the seller's business. The key element
of a de facto merger is, however, a continuity of ownership corporations.” Blizzard
v. National R.R. Passenger Corp., 831 F.Supp. 544, 547 (E.D.Va.,1993); Tex Tin
Corp. v. U.S., 2006 WL 1118587, at *5 (S.D.Tex.,2006).
Virginia and Louisiana also apply the traditional view of the “mere
continuation” exception and have identified numerous factors which can help in the
determination. Kaiser Found Health Plan of the Mid–Atlantic States v. Clary &
Moore, P.C., 123 F.3d 201, 207 (4th Cir.1997) (applying the “mere continuation”
exception under Virginia law); Hollowell v. Orleans Reg'l Hosp. LLC, 217 F.3d 379
(5th Cir. 2000) (applying Louisiana’s “mere continuation” exception). A threshold
requirement to trigger a determination of whether successor liability is applicable
under the “continuation” exception is that one corporation must have purchased all
or substantially all of the assets of another.
Under Louisiana law, the following eight factors have been applied in
determining whether a new company is a “mere continuation” of an older company:
1) retention of the same employees; 2) retention of the same supervisory personnel;
3) retention of the same production facility in the same physical location; 4)
production of the same product; 5) retention of the same name; 6) continuity of
assets; 7) continuity of general business operations; and 8) whether the successor
holds itself out as the continuation of the previous enterprise. Bank of Am., N.A. v.
Garden Dist. Pet Hosp., Inc., 2016 WL 952250, p. *8 (E.D. La. 3/14/16) (citing J.D.
Fields & Co. v. Nottingham Const. Co., LLC, 2015 WL 6875153, at *7 (La. App. 1
Cir. 2015); Pichon v. Asbestos Defendants, 52 So. 3d 240, 244 (La. App. 4 Cir.
Virginia law finds several factors relevant to determining whether one
company is a mere continuation of another, including the following. First, the “key
element” of the inquiry is whether there is a common identity of the officers,
directors, and stockholders in the selling and purchasing corporations. Also relevant
is the two companies' extensive sharing of office space and resources. Another factor
of the “mere continuation” analysis is whether there exists one corporation following
the transaction. Waterford Inv. Services, Inc. v. Bosco, 2011 WL 3820723, at *17
(E.D.Va.,2011) (citing Blizzard, 831 F.Supp. at 548).
Under the fraudulent transaction exception to the general rule of nonliability
there is usually some fraudulent intent exposing the purchaser to liability. In the
Fourth and Fifth Circuits, the heightened pleading standards of Rule 9(b) may be
relaxed, and fraud may be pled on information and belief. Willard v. Humana Health
Plan of Texas Inc., 336 F.3d 375, 385 (5th Cir. 2003) (“This is not, however, ‘license
to base claims of fraud on speculation and conclusory allegations,’ and ‘the complaint
must set forth a factual basis for such [information and] belief.’ ”); U.S. ex rel.
United States ex rel. Bunk v. Government Logistics N.V., 842 F.3d 261, 275 (4th Cir.
2016)(“a court should hesitate to dismiss a complaint under Rule 9(b) if the court is
satisfied (1) that the defendant has been made aware of the particular circumstances
for which she will have to prepare a defense at trial, and (2) that plaintiff has
substantial prediscovery evidence of those facts.’”).
In Virginia, the fraudulent transaction exception “turns on whether [the
transaction] was made with an actual intention to hinder, delay, or defraud creditors.”
“Because direct evidence of such an intention is usually absent, courts generally look
to indirect and circumstantial evidence for ‘badges of fraud.’ These ‘badges of fraud’
include: (1) a conveyance to a spouse or near relative; (2) inadequacy of
consideration (3)“transactions that are different from the usual method of transacting
business; (4) transfers in anticipation of suit or execution; (5) retention of possession
by the debtor (6) the transfer of all or nearly all of the debtor's property (7) insolvency
caused by the transfer (8) failure to produce rebutting evidence when circumstances
surrounding the transfer are suspicious and (9) transactions whereby the debtor
retains benefits. But the ultimate legal issue of fraudulent intent is a fact-laden
inquiry.” United States ex rel. Bunk v. Government Logistics, N.V., 2017 WL
4476845, at *11 (E.D.Va., 2017).
As to the claim of Successor Liability, Hadassa alleges in his Complaint that
his initial suit against Shipbuilders, Hadassa I, was filed on October 2, 2013, prior
to the January 1, 2014 Asset Purchase Agreement. R. 1, ¶ VII. The Judgment in
Hadassa I was issued on January 12, 2016 against Shipbuilders. Id. at XVII. Hadassa
also alleges that “as of August 9-10, 2016, [after the January 11, 2016 Judgment]
multimillions of dollars were owed and/or forthcoming to be paid to Shipbuilders.”
Id. at ¶ XI. Hadassa also alleges that during that period of time, existing contracts for
the building of ships held by Shipbuilders were changed by “Novations” to contracts
under which Swiftships had the obligation to build the same ships. Id. at ¶¶ X - XII.
He further alleges that after the January 12, 2016 Judgment all of the interests of
Swiftships, including the payments owed to Shipbuilders for the aforesaid ships, were
changed to Swiftships which left Shipbuilders insolvent, as evidenced on June 1,
2016, when Shipbuilders declared its “flat inability to pay” the Judgment. Id. at ¶¶
XII-XIV, XVII. Ultimately, Hadassa alleges in its “Cause of Action For Revocatory
Action” that the Asset Purchase Agreement entered into by Shipbuilders and
Swiftships caused or increased the insolvency of Shipbuilders and caused Plaintiff
to be deprived of being able to satisfy the amount it owed pursuant to the January 12,
2016 Judgment. Id. at ¶ XV. Hadassa alleges that Swiftships is liable for the January
12, 2016 Judgment under the “Successor Liability Doctrine.” Id. at ¶ XIX.
As previously noted, Plaintiff’s Complaint fails to identity any successor
liability theory against Swiftships. Similarly, the Complaint provides no facts bearing
on the factors of the successor liability analysis identified in the foregoing. The Court
finds that Hadassa has failed to plead facts sufficient to make a plausible showing of
successor liability. The Court is aware that some of the factual matter that is absent
from Hadassa’s pleadings is uniquely within the sphere of knowledge of Defendant,
not Plaintiff who is not privy to the details of the business dealings between
Shipbuilders and Swiftships, the predecessor company. However, many of the facts
that weigh on the factors of the successor liability analyses should be accessible to
Therefore, the Court will allow Hadassa to Amend its Complaint within 21
days from the date of the entry of this order if he wishes to pursue his claim of
successor liability against Defendant.
For the reasons set forth above,
IT IS ORDERED that Plaintiff Hadassa Investment Security Nigeria Ltd may
file an amended complaint in accordance with the Court’s analysis within 21 days
from the date of the entry of this order.
IT IS FURTHER ORDERED that the Motion To Dismiss Pursuant To Fed.
R. Civ. P. 12(b)(6) filed by Swiftships LLC, [Rec. Doc. 73] is DENIED as Moot and
Dismissed Without Prejudice to re-file if it deems appropriate.
THUS DONE AND SIGNED at Lafayette, Louisiana, this 12th day of March,
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