Synergy Insurance Company v. Unique Personnel Consultants, Inc.

Filing 46

ORDER Denying 36 Motion to Dismiss for Lack of Jurisdiction; Denying 44 Motion to Strike 44 MOTION to Strike 43 Addendum, 42 Reply to Response to Motion , or in the Alternative, MOTION for Leave to File Sur-Reply in Opposition to Motion to Dismiss, 36 MOTION to Dismiss for Lack of Jurisdiction ; Granting 44 Motion for Leave for Plaintiff to File it's Sur-reply. Signed by Senior Judge Graham Mullen on 11/14/2017. (Pro se litigant served by US Mail.)(jaw)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:16CV611
SYNERGY INSURANCE COMPANY,

)
)
Plaintiff,
)
)
Vs.
)
)
UNIQUE PERSONNEL CONSULTANTS, INC., )
and TEAM COMPANY d/b/a STAFFQUICK,
)
)
Defendants.
)
__________________________________________)

ORDER

This matter is before the Court upon Defendant Team Company’s Motion to Dismiss for
Lack of Personal Jurisdiction and Plaintiff’s Motion to Strike or, in the Alternative, for Leave to
File Sur-reply. These motions are fully briefed and ripe for disposition.
I.

Factual Background
Plaintiff Synergy Insurance Company (“Synergy”) is a Charlotte, North Carolina

insurance company that provides workers compensation insurance to employers. Plaintiff filed
this lawsuit against its customer Defendant Unique Personnel Consultants, Inc. (“UPC”), an
Illinois corporation that offers staffing services in Illinois and Indiana. Plaintiff provided UPC
with workers compensation insurance coverage and administration for two years. Plaintiff
alleged that UPC stopped paying Synergy premiums and stopped reimbursing Synergy for the
deductible amounts advanced on its behalf. Plaintiff is seeking recovery of amounts due under
the policies. UPC moved to dismiss for lack of personal jurisdiction and this Court denied that
motion on December 13, 2016.

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On July 18, 2017, Plaintiff amended its Complaint to add Team Company as a
Defendant. Plaintiff’s First Amended Complaint alleges that Team Company is the successor to
UPC and thus stands in the shoes of UPC for purposes of personal jurisdiction analysis. See City
of Richmond, Va. v. Madison Mgmt. Grp., Inc., 918 F.2d 438, 454–55 (4th Cir. 1990). Team
Company has moved to dismiss for lack of personal jurisdiction, asserting that it is not the
successor corporation to UPC and is not otherwise subject to personal jurisdiction in this Court.
II.

Discussion
“The great weight of persuasive authority permits imputation of a predecessor’s actions

upon its successor whenever forum law would hold the successor liable for its predecessor's
actions.” Id. at 454 (internal quotation marks omitted) (emphasis in original). In City of
Richmond, the successor company argued that although the predecessor company had committed
sufficient acts within Virginia to support personal jurisdiction over the predecessor, the court
could not assert jurisdiction over the successor merely because it purchased the predecessor’s
assets. See id. The Fourth Circuit disagreed and concluded that the district court properly
asserted personal jurisdiction over the defendant under a theory of successor liability. The court
reasoned that “[a]ny other ruling would allow corporations to immunize themselves by
formalistically changing their titles.” Id. at 455; see also Leonard v. Bed, Bath & Beyond, Inc.,
No. 5:15-CV-00284-F, 2016 WL 158587, at *3 (E.D.N.C. Jan. 8, 2016). (“Nonetheless, the court
notes that it may exercise personal jurisdiction over a successor corporation to the extent that
such jurisdiction exists over its predecessor corporation.”) As the Court has already determined
that it has personal jurisdiction over UPC, the only issue is whether in Team Company is a
successor to UPC and thus stands in UPC’s shoes for purposes for personal jurisdiction.

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Where, as here, the court rules on a 12(b)(2) motion relying on the complaint, briefs, and
affidavits alone, without conducting an evidentiary hearing, the burden is on the plaintiff to make
a prima facie showing that personal jurisdiction exists. Mylan Laboratories, Inc. v. Akzo, N.V., 2
F.3d 56, 59-60 (4th Cir. 1993). As for the facts, “the court must construe all relevant pleading
allegations in the light most favorable to the plaintiff, assume credibility, and draw the most
favorable inferences for the existence of jurisdiction.” Combs v. Bakker, 886 F.2d 673, 676 (4th
Cir. 1989).
Courts in both North Carolina and Illinois1 have recognized numerous circumstances in
which an entity that succeeds to the assets of a company also succeeds to its liabilities. Thus,
successor liability exists “(1) where there is an express or implied agreement by the purchasing
corporation to assume the debt or liability; (2) where the transfer amounts to a de facto merger of
the two corporations; (3) where the transfer of assets was done for the purpose of defrauding the
corporation’s creditors; or (4) where the purchasing corporation is a ‘mere continuation’ of the
selling corporation in that the purchasing corporation has some of the same shareholders,
directors, and officers.” G.P. Publ'ns, Inc. v. Quebecor Printing, 481 S.E.2d 674, 679 (N.C. Ct.
App. 1997); see also Steel Co. v. Morgan Marshall Indus., Inc., 662 N.E.2d 595, 599 (Ill. App.
Ct. 1996) (describing the same four exceptions under Illinois law). Here, Synergy’s First
Amended Complaint alleges facts that establish successor liability under the second, third, and
fourth circumstances described by the courts in G.P. Publications and Steel Company.
Team Company has submitted an affidavit of Dixie Ladd, its majority shareholder and
sole director, refuting some of the allegations that Team Company is the successor to UPC and
stating that Team Company purchased the assets of UPC pursuant to an asset sale conducted by

Successor liability is recognized in both North Carolina and Illinois, the state of Team Company’s incorporation,
and the elements in both states are functionally identical.
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the IRS. Team Company also submitted a supplemental affidavit of Ms. Ladd with its Reply
brief indicating that it has an ongoing dispute with the Illinois Department of Employment
Services with regard to whether Team Company bears any successor liability for the obligations
of UPC. Plaintiff, in a separate motion, seeks to strike the supplemental affidavit along with its
39 pages of supporting documents as untimely because it was not submitted with Team
Company’s original brief, in violation of Rule 6(c)(2) of the Federal Rules of Civil Procedure. In
the alternative, Plaintiff requests leave to file a sur-reply to address issues that Team Company
raised for the first time in its Reply and supplemental affidavit. While the supplemental affidavit
was clearly untimely, the Court, in its discretion, will allow it but will also allow Plaintiff the
opportunity to file its sur-reply.2
Where, as here, “the existence of jurisdiction turns on disputed factual questions, the
court may resolve the challenge on the basis of a separate evidentiary hearing, or may defer
ruling pending receipt at trial of evidence relevant to the jurisdictional question.” Combs v.
Baker, 886 F.2d 673, 676 (4th Cir. 1989). However, when the jurisdictional facts are so
intertwined with issues going to the merits of the dispute, the preferred course is to require only a
prima facie showing of personal jurisdiction and to defer a full hearing on the facts until trial.
See Adams v. Bain, 697 F.2d 1213, 1220 (4th Cir. 1982) (reversing district court’s denial of
subject matter jurisdiction after evidentiary hearing and remanding for resolution “only after a
full trial”); see also 2 James Wm. Moore, et al. Moore’s Federal Practice ¶ 12.31[5] (3d ed.
2017).
The Court finds that Plaintiff’s First Amended Complaint makes out a prima facie
showing of personal jurisdiction over Team Company as the successor corporation to UPC. In

2

Plaintiff’s proposed Sur-reply is attached as Exhibit A to its Motion.

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its responsive brief (Doc. No. 41), Synergy cataloged the numerous, specific factual allegations
in its Amended Complaint that established successor liability between UPC and Team Company.
(Id. at 7-8.) Synergy pointed out, for example, that UPC and Team Company shared the same
headquarters, satellite branches, website content and phone numbers; that the transaction by
which UPC sold all of its assets to Team Company—headed by a UPC insider— was
accomplished within just weeks of UPC’s having been served with Synergy’s Amended
Complaint; and that Team Company paid inadequate consideration of the purchase of UPC’s
considerable assets. (Id.) Taken as a whole, these extensive factual allegations amply make out
a prima facie showing of personal jurisdiction. Of course, Team Company is free to raise this
issue again at trial.
IT IS THEREFORE ORDERED that Defendant’s Motion to Dismiss for lack of personal
jurisdiction is hereby DENIED at this time;
IT IS FURTHER ORDERED that Plaintiff’s Motion to Strike is hereby DENIED, but
Plaintiff may file its Sur-reply.

Signed: November 14, 2017

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