Baustista v. Srisuk, Inc. et al

Filing 42

OPINION AND ORDER re: 26 MOTION for Partial Summary Judgment filed by Gregorio Baustista. For the foregoing reasons, Plaintiff's motion is GRANTED as to BTK and DENIED as to Veerapornphimon. Defendants' motion is GR ANTED as to Veerapornphimon and DENIED as to BTK. The Clerk of Court is respectfully directed to close the motion at Docket No. 26, terminate Veerapornphimon as a party in this action and amend the caption in this matter as it appears in this Opinion. (As further set forth in this Opinion.) (Signed by Judge Lorna G. Schofield on 9/17/2015) (mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
:
GREGORIO BAUTISTA,
:
Plaintiff,
:
:
-against:
:
BEYOND THAI KITCHEN, INC.,
Defendant. :
:
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USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #:
DATE FILED: 09/17/2015
14 Civ. 4335 (LGS)
OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:
This action arises from alleged wage and hour violations, in contravention of the Fair
Labor Standards Act (“FLSA”), that took place while Plaintiff Gregorio Bautista was employed
at a restaurant owned and operated by Srisuk, Inc. (“Srisuk”) and Darun Lamnaotrakoon, who
were defendants until Plaintiff voluntarily dismissed this action against them. The two remaining
Defendants, Beyond Thai Kitchen, Inc. (“BTK”) and its sole shareholder Pantipa
Veerapornphimon, purchased all of Srisuk’s assets after Plaintiff stopped working at the
restaurant. Plaintiff moves for partial summary judgment, seeking an order imposing successor
liability on BTK and Veerapornphimon for unpaid wages allegedly owed to Plaintiff by Srisuk
and Lamnaotrakoon. Defendants cross-move for summary judgment, seeking dismissal of the
action in its entirety. For the following reasons, Plaintiff’s motion is granted in part and denied in
part, and Defendants’ motion is granted in part and denied in part.
BACKGROUND
The following facts are taken from Plaintiff’s Rule 56.1 Statement, which Defendants
admitted in its entirety; undisputed facts from Defendant’s Rule 56.1 Statement and other
submissions filed in connection with this motion.
Veerapornphimon is the sole shareholder of BTK. BTK was formed as an entity on April

17, 2014. BTK operates a restaurant called “Beyond Thai Kitchen” (the “Restaurant”), located at
133 West 3rd Street in New York, New York. On May 2, 2014, BTK purchased -- for $10,000 -the assets of Srisuk, Inc., which previously conducted business at the same location as a
restaurant also called “Beyond Thai Kitchen.” The assets BTK purchased included all furniture,
fixtures and equipment at the Restaurant.
The Agreement and Bill of Sale between BTK and Srisuk (the “Purchase Agreement”)
provides, in relevant part:
1. Srisuk “guarantee[s] that the Restaurant and all other rights that are
included are free of any debts, mortgages, security interests or
other liens or encumbrances except as expressly stated in this
Agreement”;
2. Srisuk “indemnifies [BTK] with respect to any current debts and
obligations connected in any way to the transfer of Restaurant that
are not paid in full or are not otherwise expressly enumerated in
this Agreement”;
3. Srisuk “represent[s] that there is no known pending violation
affecting the premises” and “[i]n the event that the representation
is incorrect, [Srisuk] could choose to cure the violation within a
reasonable period, or to cancel the contract and refund all deposit
to [BTK]”; and
4. “[T]here are no actions pending against [Srisuk] in any court” or
“any replevins, judgments or execution outstanding, now in force.”
At her deposition, Veerapornphimon testified that she has never communicated with the
owner of Srisuk or the owner’s accountant. On the buyer’s side, the transaction apparently was
conducted by Veerapornphimon’s husband, who is not a shareholder of BTK. According to
Veerapornphimon, she and her husband learned of the opportunity to purchase Srisuk’s assets in
April 2014, and the closing occurred approximately a month later. Defendants do not have access
to any of Srisuk’s tax returns.
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Since purchasing Srisuk’s assets, Defendants operate the Restaurant at the same location
with the same name and phone number used by Srisuk. Furthermore, the Restaurant has retained
substantially the same appearance, hours of operation and menu that Srisuk previously used.
BTK currently pays a monthly rent of $10,506, and it deposited $21,102 with its landlord as
security. BTK represents that it employs eight employees, and documentary and testimonial
evidence suggests that BTK’s chef, Ladda Metintanarangsan, previously worked for Srisuk when
it operated the restaurant.
Plaintiff Gregorio Bautista worked for Srisuk as a kitchen helper from September 2010
through March 2014. While employed by Srisuk, Plaintiff received his wages in cash and did not
receive any wage statements from Srisuk. Defendants do not have access to any records of the
hours worked by Plaintiff or the compensation that Plaintiff received from Srisuk. Defendants
represent that they have “no knowledge about the [business] practices of [Srisuk] with respect to
the Plaintiff.” According to the New York State Department of State, Srisuk is still registered as
an active corporation.
Prior to Defendants’ purchase of Srisuk’s assets -- from March 25, 2014, through June 16,
2014 -- Plaintiff negotiated with an attorney representing Srisuk concerning unpaid wages and
overtime compensation that Srisuk allegedly owed Plaintiff. Plaintiff and Srisuk reached a
settlement in principle, agreeing that Srisuk would make payments to Plaintiff for unpaid wages.
On April 29, 2014, by e-mail, Srisuk’s counsel informed counsel for Plaintiff that his client “will
speak with [his] accountant” the following Monday, May 5, 2014, and that the first payment to
Plaintiff could be made on May 15, 2014, and then “on the 15th of each successive month.” On
May 7, 2014 -- five days after Defendants purchased Srisuk’s assets -- Srisuk’s attorney sent a
3

draft settlement agreement to Plaintiff. It appears that the agreement was never signed. On June
16, 2014, Srisuk’s counsel communicated to Plaintiff by e-mail that he had “withdrawn from [his]
representation of [Srisuk]” and that he was “not in a position to discuss the reasons for [his]
withdrawal.”
STANDARD
The standard for summary judgment is well established. Summary judgment is
appropriate where the record before the court establishes that there is no “genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). A genuine dispute as to a material fact exists “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986).
The moving party bears the initial burden of informing the court of the basis for the
summary judgment motion and identifying those portions of the record that demonstrate the
absence of a genuine dispute as to any material fact. Fed. R. Civ. P. 56(c)(1); see, e.g., Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986); Koch v. Town of Brattleboro, 287 F.3d 162, 165 (2d
Cir. 2002). Courts must construe the evidence in the light most favorable to the non-moving
party and draw all reasonable inferences in the non-moving party’s favor. See Young v. United
Parcel Serv., Inc., 135 S. Ct. 1338, 1347 (2015); In re Agent Orange Prod. Liab. Litig., 517 F.3d
76, 87 (2d Cir. 2008). “Only disputes over facts that might affect the outcome of the suit under
the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986).

4

DISCUSSION
I.

APPLICABILITY OF SUBSTANTIAL CONTINUITY TEST
Before analyzing whether Defendants here may be held liable as successors to Srisuk, it is

necessary to determine whether “substantial continuity” -- a test for successor liability -- is
applicable to FLSA claims. For the following reasons, the substantial continuity test applies in
the FLSA context.
Plaintiff does not argue -- and presumably cannot -- that Defendants may be held liable as
successors under the traditional New York common law test for successor liability, which
generally requires continuity of ownership. See New York v. Nat’l Serv. Indus., Inc., 460 F.3d
201, 209 (2d Cir. 2006) (“Under both New York law and traditional common law, a corporation
that purchases the assets of another corporation is generally not liable for the seller’s liabilities.”);
Battino v. Cornelia Fifth Ave., LLC, 861 F. Supp. 2d 393, 401 (S.D.N.Y. 2012) (holding that no
exceptions to traditional successor liability tests apply where “there is no dispute that ownership
of the business changed hands”). In this case, the record shows no legal continuity of ownership.
Instead, Plaintiff argues that “substantial continuity,” a broader test that does not require
continuity of ownership, should apply. See id. (citing Fall River Dyeing & Finishing Corp. v.
NLRB, 482 U.S. 27, 43 (1987)).
The Second Circuit has yet to address whether the substantial continuity test applies in the
FLSA context. See id. at 402. However, three circuits and several courts in this District have
held that successor liability applies to FLSA claims; these courts reason that applying “substantial
continuity” to FLSA claims was the “logical extension of existing case law,” Thompson v. Real
Estate Mortg. Network, 748 F.3d 142, 151 (3d Cir. 2014), which already applies “substantial
5

continuity” to other labor and employment claims, Steinbach v. Hubbard, 51 F.3d 843, 845 (9th
Cir. 1995) (concluding that “successorship liability exists under the FLSA, as FLSA’s
“fundamental purpose is as fully deserving of protection as the . . . policies underlying the NLRA,
Title VII, 42 U.S.C. § 1981, ERISA, and MPPAA,” where successor liability had already been
found to exist). Accord Teed v. Thomas & Betts Power Solutions, L.L.C., 711 F.3d 763, 766 (7th
Cir. 2013) (“[S]uccessor liability is appropriate in suits to enforce federal labor or employment
laws -- even when the successor disclaimed liability when it acquired the assets in question -unless there are good reasons to withhold such liability.”); Jai Fu Chen v. New 9th Ave Pearl on
Sushi Inc., No. 14 Civ. 580, 2015 WL 3947560, at *1 (S.D.N.Y. June 29, 2015) (applying
successor liability to FLSA claim where predecessors sold defendants-successors assets for
$40,000 and discarded “most of [its] accounting records and documents”); Alvarez v. 40
Mulberry Restaurant, Inc., No. 11 Civ. 9107, 2012 WL 4639154, at *6 (S.D.N.Y. Oct. 3, 2012)
(concluding that “a reasonable jury could find that [defendant] is a successor in interest . . . under
the ‘substantial continuity’ test”); Battino, 861 F. Supp. 2d at 402-04; Wong v. Hunda Glass
Corp., No. 09 Civ. 4402, 2010 WL 2541698, at *1 (S.D.N.Y. June 23, 2010) (finding that
successor liability applied because “there was substantial continuity between the businesses, and
there was the same workforce, same job titles, same supervisors, same machinery, and same
products”).
The reasoning in these decisions is persuasive. For example, in Battino, a court in this
District stated that, because (1) “[c]ourts in this Circuit have applied this test in, inter alia, the
Title VII context” and (2) the Second Circuit has instructed courts to “use a ‘flexible’ approach in
applying FLSA,” “application of the broader ‘substantial continuity’ standard used in other labor
6

and employment law contexts is appropriate in cases brought under FLSA.” 861 F. Supp. 2d at
402-04 (citing Barfield v. N.Y. City Health & Hospitals Corp., 537 F.3d 132, 142 (2d Cir. 2008)
(noting that Congress intended FLSA’s “‘remedial’ purpose . . . to ‘have the widest possible
impact in the national economy’”)). The Seventh Circuit remarked, “In the absence of successor
liability, a violator of [FLSA] could escape liability, or at least make relief much more difficult to
obtain, by selling its assets without an assumption of liabilities by the buyer (for such an
assumption would reduce the purchase price by imposing a cost on the buyer) and then
dissolving.” Teed, 711 F.3d at 766.
Defendants’ reliance on New York v. National Service Industries, Inc., 460 F.3d 201, 215
(2d Cir. 2006) (Sotomayor, J.), is misplaced. The ruling there addressed substantial continuity
only in the context of the Comprehensive Environmental Response, Compensation and Liability
Act (“CERCLA”) and made no pronouncements concerning substantial continuity in FLSA
cases. See id. at 204 (discussing “substantial continuity test” as “a CERCLA-specific rule”).
Defendants are correct that several courts in the Eastern District of New York have applied the
traditional common law and New York successor liability standards, but these decisions (1)
mistakenly rely on National Service and (2) do not conclusively rule that substantial continuity is
inapplicable to FLSA claims. See, e.g., Vasquez v. Ranieri Cheese Corp., No. 07 Civ. 464, 2010
WL 1223606, at *10 n.14 (E.D.N.Y. Mar. 26, 2010) (noting that “the case for successor liability
may be more or less compelling than the case presented under the New York rule” but
“regardless which test is applied, the result remains the same”); Kaur v. Royal Arcadia Palace,
Inc., 643 F. Supp. 2d 276, 290 n.10 (E.D.N.Y. 2007) (finding National Service test “appropriately
applied in the FLSA context” but noting that outcome would be same even if substantial
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continuity applied); see also, e.g., Said v. SBS Electronics, Inc., No. 08 Civ. 3067, 2010 WL
1287080, at *3 (E.D.N.Y. Mar. 31, 2010) (limiting analysis to “de facto merger exception” to
New York rule, as it was only exception plaintiff argued).
Accordingly, the substantial continuity test is applicable here.
II.

APPLICATION OF SUBSTANTIAL CONTINUITY TEST
The law is unclear whether the substantial continuity test is to be decided ultimately by

the Court or by the finder of fact. Several district court decisions treat it as a question for the
jury. See, e.g., Alvarez, 2012 WL 4639154, at *6; E.E.O.C. v. Barney Skanska Const. Co., No.
99 Civ. 2001, 2000 WL 1617008, at *1 (S.D.N.Y. Oct. 27, 2000) (“On the record before the
Court, no reasonable jury could conclude that defendants are successors in liability”); see also
E.E.O.C. v. Nichols Gas & Oil, Inc., 688 F. Supp. 2d 193, 201 n.6 (W.D.N.Y. 2010) (noting that,
at oral argument, parties were asked if -- “assuming that the jury would decide any disputed
issues of fact relating to the MacMillan factors” -- “the jury would then also balance the factors,
or whether the Court would balance the factors, based on the jury’s factual determinations,” but
remarking that parties ultimately agreed that, for purposes of cross-motions for summary
judgment, “the Court may make all of the findings necessary to resolve the issue of successor
liability”); cf. Carter Enterprises, Inc. v. Ashland Specialty Co., 257 B.R. 797, 800 (S.D. W. Va.
2001) (in bankruptcy appeal, stating that successor liability presents “mixed question of fact and
law”). For purposes of resolving these summary judgment motions, this Opinion assumes
without deciding that the question is one for the jury and applies the usual summary judgment
standard.

8

A.

Veerapornphimon

A threshold matter is whether Veerapornphimon, merely by virtue of her status as BTK’s
sole shareholder, may be subject to successor liability. For the following reasons, she may not.
For purposes of successor liability, the successor “is the party that actually purchases the
assets of the predecessor and continues the predecessor’s business.” Musikiwamba v. ESSI, Inc.,
760 F.2d 740, 753 (7th Cir. 1985). Successor liability may not be imposed on an individual
where there is merely evidence that the individual incorporated the successor entity, is an officer
or major shareholder of that entity and had notice of a plaintiff’s claims. Id.
Moreover, “[c]ourts that have found majority or sole shareholders liable [under FLSA]
have not relied solely on shareholder status, but have looked also to the degree of operational
control a shareholder exerts over the corporation’s functions.” Copantitla v. Fiskardo Estiatorio,
Inc., 788 F. Supp. 2d 253, 311 (S.D.N.Y. 2011) (collecting cases). Veerapornphimon’s
deposition testimony shows that -- despite her shareholder status -- she exerts little, if any, control
over the corporation’s functions, and that instead, her husband does.
Accordingly, on the record submitted with this motion, no reasonable jury could find that
Veerapornphimon controls the corporation’s operations. Plaintiff’s motion for summary
judgment against her is denied, and Veerapornphimon’s motion for summary judgment is
granted.
B.

Beyond Thai Kitchen, Inc.

By contrast, BTK is liable as Srisuk’s successor.
The party advocating for successor liability bears the burden of proof. Call Ctr.
Technologies, Inc. v. Grand Adventures Tour & Travel Pub. Corp., 635 F.3d 48, 52 (2d Cir.
9

2011) (“Because the ‘general rule’ is that a purchaser of assets does not assume the predecessor’s
liability, it follows that the proponent of successor liability must offer proof that one of the []
exceptions to the general rule applies.”). The substantial continuity test “focus[es] on whether the
new company has ‘acquired substantial assets of its predecessor and continued, without
interruption or substantial change, the predecessor’s business operations.’” Fall River, 482 U.S.
at 43 (quoting Golden State Bottling Co. v. N.L.R.B., 414 U.S. 168, 173 (1973)). Courts applying
substantial continuity generally look to nine factors articulated by the Sixth Circuit, specifically:
(1) whether the successor company had notice of the charge or
pending lawsuit prior to acquiring the business or assets of the
predecessor; (2) the ability of the predecessor to provide relief; (3)
whether there has been a substantial continuity of business
operations; (4) whether the new employer uses the same plant; (5)
whether he uses the same or substantially the same work force; (6)
whether he uses the same or substantially the same supervisory
personnel; (7) whether the same jobs exist under substantially the
same working conditions; (8) whether he uses the same machinery,
equipment, and methods of production; and (9) whether he
produces the same product.
Musikiwamba, 760 F.2d at 750 (citing E.E.O.C. v. MacMillan Bloedel Containers, Inc., 503 F.2d
1086, 1094 (6th Cir. 1974)); accord Battino, 861 F. Supp. 2d at 404 (applying MacMillan
factors). “No one factor is controlling, and it is not necessary that each factor be met to find
successor liability.” Barney Skanska, 2000 WL 1617008, at *2. Under this test, successor
liability may be imposed on “a purchaser of select assets” -- “as distinct from the stock” -- of the
predecessor company. Id. at *3. The MacMillan factors are addressed below.
1.

Third, Fourth, Eighth and Ninth Factors

It is undisputed that the fourth and eighth factors -- use of the same plant and use of the
same machinery, equipment and methods of production -- are satisfied here.
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Also, the record contains ample evidence that the third and ninth factors -- “substantial
continuity of business operations” and “same product” -- also are satisfied here. In opposition,
Defendants argue that, because “[t]he product, menu and even hours of operation are substantially
the same in all Thai restaurant business,” Plaintiff has failed to meet these factors with a
meaningful level of particularity. However, the record establishes that BTK’s business shares
similarities with Srisuk that are not common to all Thai restaurants; in particular, BTK kept the
“Beyond Thai Kitchen” name that Srisuk previously used, did not change the Restaurant’s phone
number and utilizes a menu that is identical in substance to the menu used by Srisuk. Indeed,
BTK does not appear to have changed the Restaurant’s logo on the menu, and BTK maintains the
same, somewhat distinctive hours of operation that Srisuk did, closing on quarter hours.
Although new restaurant owners certainly do not have an “affirmative duty” to change their
restaurant’s menu or name, the absence of such a duty does not alter the substantial continuity
analysis. Cf. Alvarez, 2012 WL 4639154, at *6 (reasoning that reasonable jury could find
successor liability on FLSA claim where successor “(1) uses the same location as [predecessor];
(2) employs many of the same personnel; (3) uses the same kitchen equipment . . . ; (4) offers the
same menu as [predecessor], with food prepared by the same cook; (5) uses a Facebook page
holding itself out as [same name as predecessor] . . . ; and (6) may employ . . . [same] floor
manager”).
These four factors therefore weigh heavily in favor of imposing successor liability on
BTK.

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2.

Fifth Through Seventh Factors

The fifth through seventh factors address the successor company’s workforce.
The evidence suggests that the seventh factor -- “whether the same jobs exist under
substantially the same working conditions” -- is met here. A list of BTK’s current employees
show that BTK employs eight people in total: one chef, three line cooks, two deliverymen and
two wait staff. Plaintiff testified that the chef and two deliverymen worked for Srisuk in the same
capacities. Although the record is inconclusive as to the number of line cooks and wait staff
Srisuk employed, Defendants do not present any serious arguments that the jobs or working
conditions at the Restaurant have substantially changed.
On the other hand, a reasonable jury could find for either party on the fifth and sixth
factors. The record is clear that BTK retained at least three of Srisuk’s eight employees, but
insufficient to conclude that BTK uses “the same or substantially the same work force.”
Likewise, it is clear that Defendants retained the chef previously employed by Srisuk, but the
record is inadequate to determine whether Defendants use “the same or substantially the same
supervisory personnel.”
Thus, the workforce factors together weigh moderately in favor of successor liability.
3.

Second Factor

The record contains insufficient evidence concerning MacMillan’s second factor -- “the
ability of the predecessor to provide relief.” Although New York State records reflect that Srisuk
remains an active entity registered with the Secretary of State, it is unclear whether Srisuk
continues to conduct business and whether Srisuk retained any assets after selling the Restaurant
to BTK. Thus, the evidence does not show that, after the sale, Srisuk is able to provide Plaintiff
12

the relief he seeks. As Plaintiff bears the burden of proof and is the moving party, the absence of
evidence concerning the second factor militates against granting Plaintiff’s motion. See Battino,
861 F. Supp. 2d at 407-08 (concluding that “there are genuine issues of fact” as to this fact where
corporate successors “technically still exist” but “the record is not at all clear what, if any, assets
are held by these entities, and whether they actually have the ability to provide relief for
Plaintiffs’ claims”).
4.

First Factor

Although the evidence shows that BTK did not have actual notice of Plaintiff’s claims,
ample evidence suggests that it had constructive notice. As constructive notice is sufficient for
purposes of substantial continuity in the FLSA context, the first factor weighs in favor of
imposing successor liability.
Courts have held that lack of notice of potential liability presents “a good reason[] . . . to
withhold [successor] liability.” Teed, 711 F.3d at 766. Several courts outside this Circuit have
suggested that constructive notice is sufficient to establish notice for substantial continuity
purposes. See Musikiwamba, 760 F.2d 740 at 755 (“The successor must have had actual or
constructive notice of the claim or charge of employment discrimination against the predecessor
sufficiently in advance of the closing of the transaction to enable the successor to negotiate
compensation for its exposure to the liability the plaintiff seeks to impose.”); Dominguez v. Hotel,
Motel, Rest. & Miscellaneous Bartenders Union, Local No. 64, 674 F.2d 732, 733 (8th Cir. 1982)
(holding that, at time of acquisition, successor “had no direct or indirect knowledge of appellant’s
allegations of discrimination”); Goodpaster v. ECP Am. Steel, LLC, No. 09 Civ. 59, 2012 WL

13

5267971, at *1 (N.D. Ind. Oct. 24, 2012) (noting that notice factor was satisfied where defendant
had “constructive notice” of plaintiff’s claim).1
These decisions provide compelling policy reasons to impute constructive notice on
successors who have failed to exercise due diligence. In Goodpaster, for example, the court
reasoned that “[a]n asset purchaser should not avoid successor liability . . . by playing an
unspoken but mutually understood game of ‘don’t ask, don’t tell.’” 2012 WL 5267971, at *4 n.3.
Rather, “[t]he proper rule is one that encourages shoppers for substantial assets simply to get the
whole story and adjust their offers accordingly.” Id.
The record establishes that, here, Defendants exercised little, if any, diligence concerning
Srisuk’s liabilities prior to acquiring the Restaurant. Based on the undisputed evidence, a
reasonable jury could conclude only that BTK had constructive notice of Plaintiff’s claims. See
Goodpaster, 2012 WL 5267971, at *4 (applying successor liability to FLSA claim where
defendant “failed to show its ignorance of [plaintiff]’s suit was reasonable” and where
defendant’s “complete failure to ask about prospective liabilities . . . can hardly constitute due
diligence with regard to ‘all outstanding potential’ obligations” (quoting Musikiwamba, 760 F.2d
1

Accord Reed v. EnviroTech Remediation Servs., Inc., 834 F. Supp. 2d 902, 911 (D. Minn.
2011) (holding, in context of pension contribution liability, that “[t]he notice prong is satisfied by
either actual or constructive knowledge . . . where an employee of the predecessor company who
had knowledge of . . . liability begins employment with the successor company”) (citing Golden
State, 414 U.S. at 173); Lipscomb v. Technologies, Servs., & Info., Inc., No. Civ. 09-3344, 2011
WL 691605, at *8 (D. Md. Feb. 18, 2011) (noting that, where plaintiff filed EEOC charge during
negotiations between defendant-successor and predecessor, defendant would have been able to
discover ongoing EEOC investigation “[w]ith some due diligence”); E.E.O.C. v. 786 South LLC,
693 F. Supp. 2d 792, 795 (W.D. Tenn. 2010) (“It is well-accepted that constructive notice may
suffice under the successor liability doctrine, at least where the relevant charges have been filed
with the EEOC.”) (citing, inter alia, Wiggins v. Spector Freight Sys., Inc., 583 F.2d 882, 886 (6th
Cir. 1978), and EEOC v. Vucitech, 842 F.2d 936, 945 (7th Cir. 1988)); Scott v. Sopris Imports
Ltd., 962 F. Supp. 1356, 1359 (D. Colo. 1997) (finding no evidence that successor had
“constructive notice of an imminent, or even possible claim” under Title VII by plaintiff).
14

at 752)). At a minimum, Defendants could have spoken to Srisuk’s accountant concerning
potential liabilities or spoken to the chef whom they retained concerning problems at the
Restaurant. Cf. EEOC v. Sage Realty Corp., 507 F. Supp. 599, 612 (S.D.N.Y. 1981) (reasoning
that successor could have learned of plaintiff’s employment claims from predecessor’s president,
who served as consultant to successor). Veerapornphimon’s deposition, however, confirms that
Defendants took no such steps.
Defendants’ argument that the facts are insufficient to “justify charging [a] completely
innocent new owner [who was] never involved with the Plaintiff . . . with [the] responsibility” for
Srisuk’s actions is unpersuasive. Indeed, although the Complaint does not allege any claims of
fraud, case law from this Circuit addressing such claims is instructive. Defendants here paid
suspiciously little for the assets that they purchased from Srisuk. The purchase price is less than
what Defendants currently pay in rent and is less than half the security deposit that they placed
for the lease. Moreover, Veerapornphimon testified that she and her husband learned of the
opportunity to purchase Srisuk’s assets in early April and that the closing took place in short
order -- approximately a month afterward. These circumstances -- known to Defendants -- were
at least suspicious, and appear nefarious when factoring in Srisuk’s ongoing settlement
discussions with Plaintiff at the time. The Second Circuit has held, in the fraud context, that
“[c]onstructive knowledge of fraudulent schemes will be attributed to transferees who were aware
of circumstances that should have led them to inquire further into the circumstances of the
transaction, but who failed to make such inquiry.” HBE Leasing Corp. v. Frank, 48 F.3d 623,
636 (2d Cir. 1995).

15

5.

Consideration of All Factors

Considering all of the MacMillan factors as applied to this action, a reasonable jury could
only conclude that BTK is liable as a successor to Srisuk.
The reasoning in Medina v. Unlimited Systems, LLC, issued by another court in this
Circuit, addressed analogous facts. 760 F. Supp. 2d 263 (D. Conn. 2010). In Medina, default
judgment was entered against defendant-employer Unlimited Systems, LLC (“Unlimited”) and its
president for unpaid wages owed to plaintiffs-employees under FLSA. Id. at 264. Several
months before the action was commenced, Unlimited’s president created another company, U.S.
Stucco LLC (“U.S. Stucco”), and transferred his interest in U.S. Stucco to his wife for $1.00
without any appraisal. Id. at 265. U.S. Stucco continued to operate in the same business in
which Unlimited previously operated, albeit at a reduced scale. Id. The court held that, under
both the traditional and “substantial continuity” tests for successor liability, U.S. Stucco was
liable for the default judgment entered against Unlimited in its entirety. Id. at 273. The court
reasoned, “It would be contrary to the remedial purposes of the FLSA to allow Unlimited
Systems to shed its liability to its employees through the subterfuge of ‘U.S. Stucco, LLC.’ . . .
[i]t would elevate form over substance to allow U.S. Stucco to escape liability for the amounts
Unlimited Systems incurred in back wages and attorney fees and costs.” Id. at 274 (citing Golden
State, 414 U.S. at 184); accord New 9th Ave Pearl on Sushi Inc., 2015 WL 3947560, at *5
(noting that, where “the restaurants were essentially the same, the new owner did not know basic
facts about the operation of the business, and the new owner could not locate the bill of sale,” a
reasonable jury could conclude that “Defendants executed the transaction for no reason other than
to avoid liability”).
16

Similarly here, a reasonable jury could only conclude on the undisputed facts that BTK is
subject to successor liability for any FLSA violations its predecessor may have committed.
Plaintiff’s motion for summary judgment is therefore granted as to BTK, and BTK’s motion is
denied.
CONCLUSION
For the foregoing reasons, Plaintiff’s motion is GRANTED as to BTK and DENIED as to
Veerapornphimon. Defendants’ motion is GRANTED as to Veerapornphimon and DENIED as
to BTK.
The Clerk of Court is respectfully directed to close the motion at Docket No. 26, terminate
Veerapornphimon as a party in this action and amend the caption in this matter as it appears in
this Opinion.
SO ORDERED.
Dated: September 17, 2015
New York, New York

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