Thomas B. Russell, Senior Judge.
This matter is before the Court on Defendant Element Transportation, LLC's
This case arises out of Gale Carter and Forbes Hayes's previous employment as truck drivers for Paschall Truck Lines, Inc. ("PTL"). In short, Element Financial Corp. ("EFC") leased tractor trailers to Plaintiffs who then subleased the tractor trailers and their driving services to PTL. [See R. 98-4 at 6-7 (Carter's Responses to Request for Admissions); R. 98-6 at 6 (Hayes's Responses to Request for Admissions).] Plaintiffs claim that this arrangement was represented to them as a "Lease-Purchase Program." [R. 103 at 16 (Amended Complaint).] Specifically, Plaintiffs claim that as a condition of their employment for PTL, PTL required Plaintiffs to lease tractors from EFC, and, under the lease agreement with EFC, Plaintiffs could only drive for PTL. [Id. at 8.] If they did not drive for PTL, the Plaintiffs claim that they would default on their Lease Agreements, "subjecting Plaintiffs to an acceleration clause whereby Plaintiffs would be required to pay the entire balance of the lease immediately." [Id. at 9] However, this motion does not concern the substance of Carter and Hayes's claims. Rather, it involves the question of who should be held liable.
On October 20, 2015, Gale Carter entered in to an Individual Program Lease Agreement with EFC. [R. 98-3 at 2 (Carter Individual Program Lease Agreement).] That agreement terminated in December of 2015. [R. 98-4 at 7.] On March 18, 2016, Forbes Hayes entered into an Individual Program Lease Agreement with EFC. [R. 98-5 at 2 (Hays Individual Program Lease Agreement).] Hays discontinued his lease agreement in June of 2016. [R. 110-2 at 3 (Plaintiffs' Statement of Facts); R. 98-1 at 6.]
On June 30, 2016, EFC became Element Financial, LLC. [R. 110-11 at 3 (Certificate of Conversion).] Element Financial, LLC continued to operate the commercial and vendor leasing business it had previously operated as EFC. [R. 110-2 at 4; R. 98-1 at 6.] On September 19, 2016, a transaction occurred between Element Financial, LLC and Element Transportation, LLC, another subsidiary of Element Financial, LLC's parent company—Element Financial Corporation. [R. 110-19 at 67:17-21 (Bradley Rowse Deposition); R. 110-2 at 4; R. 98-1 at 7.] Plaintiffs refer to a different agreement than Element Transportation, but both parties claim the document to which they refer represents the transaction of September 19, 2016. Plaintiffs provided the Asset Purchase Agreement as evidence that Element Financial, LLC transferred the trucks and the rights to receive lease payments on those trucks to Element Transportation on that date. [R. 110-2 at 4 (citing R. 110-14).] Element Transportation provided the SUBI Sale Agreement, of the same date, as evidence that Element Financial, LLC sold Element Transportation "a special unit of beneficial interest in certain vehicles held in trust, including the vehicles previously leased by the Plaintiffs." [R. 98-1 at 7 (citing R. 98-8).]
On October 3, 2016, Element Financial Corporation split to form ECN Capital Corp. and Element Fleet Management Corporation. [R. 110-19 at 49:12-18; R. 98-1 at 7.] As a part of the split, Element Financial, LLC became ECN Financial,
On December 30, 2016, Element Transportation assigned its interests in the trucks and accompanying leases to ECN Financial, LLC as interim assignee and 19th Capital Group, LLC as assignee. [R. 98-9 at 1 (Assignment Agreement).] In exchange, Element Transportation received an approximately 49.9995 percent equity interest in 19th Capital Group and a loan receivable—with an initial balance of approximately $740 million. [R. 110-19 at 67:24-69:2.]
On December 19, 2017, Gale Carter and Forbes Hayes, on behalf of themselves and those similarly situated, filed the First Amended Complaint against PTL, ECN (as successor to EFC), and Element Transportation, LLC (as successor to ECN). [R. 19.] On October 12, 2018, Element Transportation filed the Motion for Summary Judgment that is currently before the Court. [R. 98.] It raises the question of whether Element Transportation should be considered a successor in liability to Element Financial, LLC.
Summary judgment is appropriate when the record, viewed in the light most favorable to the nonmoving party, reveals "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 of material fact exists where "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court "may not make credibility determinations nor weigh the evidence when determining whether an issue of fact remains for trial." Laster v. City of Kalamazoo, 746 F.3d 714, 726 (6th Cir. 2014) (citing Logan v. Denny's, Inc., 259 F.3d 558, 566 (6th Cir. 2001); Ahlers v. Schebil, 188 F.3d 365, 369 (6th Cir. 1999) ). "The ultimate question is `whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Back v. Nestlé USA, Inc., 694 F.3d 571, 575 (6th Cir. 2012) (quoting Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505).
As the party moving for summary judgment, the defendant must shoulder the burden of showing the absence of a genuine dispute of material fact as to at least one essential element of the plaintiff's claims. Fed. R. Civ. P. 56(c); see also Laster, 746 F.3d at 726 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). Assuming the defendant satisfies his or her burden of production, the plaintiff "must—by deposition, answers to interrogatories, affidavits, and admissions on file—show specific facts that reveal a genuine issue for trial." Laster, 746 F.3d at 726 (citing Celotex Corp., 477 U.S. at 324, 106 S.Ct. 2548). As the United States Supreme Court has stated, "there is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the [nonmoving party's] evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505 (citations omitted); see Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548. "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the
As mentioned above, this motion mainly concerns the question of whether successor liability should be applied to Element Transportation. The Seventh Circuit Court of Appeals once stated: "[T]he issue of successor liability is `dreadfully tangled, reflecting the difficulty of striking the right balance between the competing interests at stake."' Upholsterers' Int'l Union Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323, 1325 (7th Cir. 1990), quoting EEOC v. Vucitech, 842 F.2d 936, 944 (7th Cir. 1988). This proves to be true in the case at hand. The Court will address Element Transportation's Motion for Summary Judgment, [R. 98], as well as Plaintiffs' Motion for Leave to File a Sur-Reply, [R. 119.]
Element Transportation moves for summary judgement on Count III and Count IV of the Amended Complaint. The Court will analyze each in turn.
Under Count III of the Amended Complaint, Plaintiffs allege that the defendants, including Element Transportation, "obtained the continuous labor of Plaintiffs by using threats of serious harm" and "operated a scheme, plan or pattern intended to cause Plaintiffs to believe that non-performance of labor would result in serious financial and professional harm." [R. 103 at 28-29.] Plaintiffs allege that this conduct violates the federal forced labor statute, 18 U.S.C. §§ 1589 and 1595. [Id.]
"Successor liability is appropriate in the employment-law context if `the imposition of such liability would be equitable.'" Comer v. Directv, LLC, No. 2:14-CV-1986, 2016 WL 853027, at *5 (quoting Cobb v. Contract Transp., Inc., 452 F.3d 543, 554 (6th Cir. 2006) ).
Cobb, 452 F.3d at 554. The Sixth Circuit further explained that these factors are "not in themselves the test for successor liability" but "simply factors courts have considered when applying the three prong balancing approach, considering the defendant's interests, the plaintiff's interests, and federal policy." Id. "The ultimate inquiry always remains whether the imposition of the particular legal obligation at issue would be equitable and in keeping with federal policy." Id.
In its Motion for Summary Judgment, Element Transportation argues that it had no notice of Plaintiffs' claims when it purchased a beneficial interest in certain vehicles held in trust through the SUBI Sale Agreement. [R. 98-1 at 7.] Therefore, Element Transportation asserts that it would be "grossly unfair to hold Element Transportation liable as a successor" and the interests of the defendant-employer weigh against successor liability. [Id.] In support of this element, Element Transportation submitted the deposition of Bradley Rowse, Senior Vice President of Finance at Element Fleet Management Corporation, in which Rowse stated that Element Transportation did not have any notice of the claims or alleged violations of the law asserted by Plaintiffs. [R. 98-1 at 11 (citing R. 110-19 at 104:4-7).] Also, Element Transportation points to § 3.02(e) of the SUBI Sale Agreement, in which ECN agreed that it was unaware of any claims or threatened claims against it upon entering the SUBI Sale Agreement. [R. 98-8 at 17 (SUBI Sale Agreement).]
In their Response, Plaintiffs make several arguments concerning notice. First, Plaintiffs argue that lack of notice is not dispositive to a finding of successor liability. [R. 110 at 17.] As support, Plaintiffs cite to Clark v. Shop24 Global, LLC, 77 F.Supp.3d 660, in which the plaintiff brought an action against his former employer under the Fair Labor Standards Act (FLSA) and Ohio state law, alleging that the defendants failed to pay him overtime. Clark, 77 F.Supp.3d at 668. During the plaintiff's employment, his initial employer, Shop24 USA, sold its assets to Shop24 Global; however, his job responsibilities did not change and he continued to work. Id. at 667. The Southern District of Ohio denied the defendant employers' motion for summary judgment on the issue of successor liability even though the plaintiff conceded that Shop24 Global did not have notice of the plaintiff's law suit against Shop24 USA when Shop24 Global bought its assets. Id. at 693. Although the court noted that the first factor was "[i]n one sense ... irrelevant to the case at hand," the court also recognized that the record indicated that Shop24 Global "potentially had notice" of the claims against Shop24 USA because the plaintiff expressed concerns about overtime pay before the transfer from Shop24 USA to Shop24 Global occurred. Id. at 693 n.14. Similarly, Plaintiffs argue that Element Transportation "was or should have been aware of" Plaintiffs' potential claims. [R. 110 at 18.]
Secondly, Plaintiffs argue that Element Transportation had constructive notice of their claims against Element Financial, LLC. [R. 110 at 19.]
Finally, Plaintiffs reject Element Transportation's contractual argument regarding the SUBI Sale Agreement for two reasons. First, Plaintiffs state that "because the doctrine of successor liability is an equitable one, in making a determination on notice, entities may not rely upon contractual disclaimers to demonstrate an absence of notice." [Id. (citing Clark, 77 F.Supp.3d at 692).] Second, Plaintiffs argue that the SUBI contract term that the seller is "unaware of any claims" does not control whether Element Transportation is liable for claims related to the assets it purchased because Element Transportation "expressly agreed to assume all liabilities of the seller, known or unknown, as set forth in Section 2.2 of the Asset Purchase Agreement ...." [R. 110 at 21.]
In its Reply, Element Transportation mainly retorts these arguments made by Plaintiffs concerning notice. First, Element Transportation reiterates that it did not have notice of Plaintiffs' claims and argues that it would be inequitable to hold Element Transportation liable for the alleged unlawful acts of Element Financial, LLC when it did not have notice of those acts. [R. 113 at 2.] Specifically, Element Transportation quotes the following line from Golden State as support: "Since the successor must have notice before liability can be imposed, `his potential liability for remedying the unfair labor practices is a matter which can be reflected in the price he pays for the business, or he may secure an indemnity clause in the sales contract which will indemnify him for liability arising from the seller's unfair labor practices.'" [Id. (quoting Golden State Bottling Co., Inc., 414 U.S. at 185, 94 S.Ct. 414).] Secondly, Element Transportation distinguishes Clark from the matter at hand by stressing that, unlike the plaintiffs in Clark, the Plaintiffs in this matter never expressed concerns about potential violations of the federal forced labor statute. [Id.] Third, Element Transportation asserts that the only evidence provided by Plaintiffs for the proposition that the officers at Element Financial, LLC were the same as the officers at Element Transportation is the Asset Purchase Agreement, in which Michael Beland signed on behalf of both the seller and the buyer. [Id. at 4.] However, Element Transportation states that this evidence falls short of being sufficient. Furthermore, Element Transportation argues that the "interplay between the terms of Plaintiffs' Lease Agreements with EFC and the terms of their ICS Agreements with PTL" is not adequate to prove that Element Transportation continued the alleged unlawful labor scheme because Plaintiffs did not show that "PTL continued to use the same terms in its ICS Agreement and that Element Transportation continued EFC's relationship with PTL." [Id.] Finally, Element Transportation argues that it did not assume Element Financial, LLC's liabilities in Section 2.2 of the Asset Purchase Agreement because "Section 2.2 applies only to future liabilities, i.e., those that arise or accrue after the asset purchase is completed." [Id. at 5.]
Out of the tangled mass of notice arguments strewn before the Court, three main issues rise to the surface: (1) the weight of lack of notice in a successor liability analysis, (2) the evidence regarding
Under the second issue, the Court notes that the only evidence provided for the assertion that the officers of Element Financial, LLC were the same as the officers of Element Transportation is the signature of one individual, Michael Beland, on behalf of both entities. [See R. 110 at 20.]
In Golden State, All American Beverages, Inc. bought Golden State Bottling Co.'s soft drink bottling and distribution business after the National Labor Relations Board (NLRB) ordered Golden State to reinstate with backpay a driver-salesman whose discharge was found to be an unfair labor practice. 414 U.S. at 170, 94 S.Ct. 414.
In Harlan Coal, Roy Jackson, the president of South Harlan Coal Company, Inc., personally negotiated and bought a coal mine, Mine No. 12, from Croley Coal. 844 F.2d at 381-82. In between two occasions of negotiations, miners employed at Mine No. 12 publicly picketed in protest of certain alleged unfair labor practices. Id. The Sixth Circuit affirmed the NLRB's finding of notice because Jackson was "personally engaged" in both negotiations, he lived in close proximity to the situs of unfair labor practices, he had a leading role in a major association dealing with the coal mining industry in the area, the local newspaper published three headline stories on the picketing (Jackson had a newspaper receptacle in front of his house), and the unfair labor practices occurred only a matter of months before the purchase of Mine No. 12. Id. at 386-87. Unlike Harlan Coal, the Plaintiffs in this matter provided no evidence regarding Beland's role in the negotiations, nor is there any further circumstantial evidence that would allow the Court to infer that he had knowledge of any unfair labor practices.
Under the third issue, the parties disagree over whether certain provisions from the SUBI Sale Agreement or the Asset Purchase Agreement serve as proof that Element Transportation did or did not agree to assume the liability of the seller. As Plaintiffs emphasized in their Response, federal courts have generally held that a limitation of liability provision in an asset transfer agreement "does not control when the federal standard for successor liability is at issue." Clark, 77 F.Supp.3d at 692 (citing Teed v. Thomas & Betts Power Sols., L.L.C., 711 F.3d 763, 765 (7th Cir. 2013) ); Finnerty v. Wireless Retail, Inc., 624 F.Supp.2d 642, 657 (E.D. Mich. 2009) (noting that exclusion of liability by contract does not necessarily prevent successor liability from attaching). Thus, the Court finds that, on this particular issue, the federal standard for successor liability controls over a contractual provision.
Overall, the only evidence provided by Plaintiffs to show that Element Transport had notice of Element Financial, LLC's unfair labor practices is a signature from Michael Beland on the Asset Purchase
Element Transportation's second argument within its Motion for Summary Judgment is that Element Financial, LLC continued operating as ECN after the asset purchase and it has sufficient assets to pay the relief Plaintiffs seek on their federal forced labor statute claim. [R. 98-1 at 12.] Thus, Element Transportation concludes that the interests of the plaintiff weigh against successor liability. [Id.] Plaintiffs respond that the fact that Element Financial, LLC still exists and may be able to provide relief does not preclude a finding of liability against Element Transportation. [R. 110 at 22.] Furthermore, Plaintiffs assert that both Element Financial, LLC and Element Transportation may be held liable for the predecessor's bad acts under the doctrine of successor liability. [Id. at 23.]
Although Plaintiffs never acknowledge "the interests of the plaintiff-employee" and how it should weigh in the consideration of successor liability, [see generally R. 110], it seems that Plaintiffs have an interest in being able to provide their truck driving services free from "threats of serious harm" and to be compensated properly. However, as explained above, Plaintiffs have not provided sufficient evidence that Element Transportation knew of or was involved such threats. Furthermore, the parties do not dispute that ECN is solvent and may be able to compensate Plaintiffs. Thus, it would not necessarily be against Plaintiff's interests if Element Transportation was dismissed from this matter because Plaintiffs could still seek compensation from at least ECN. Considering that Plaintiffs brought this claim against Element Transportation, it would seem illogical to conclude that Plaintiffs' interests do not weigh in favor of successor liability. However, the lack of evidence and the availability of defendants to compensate Plaintiffs balances the scales. Thus, this prong weighs neutrally.
In Plaintiffs' Response, after discussing Element Transportation's first two arguments, Plaintiffs briefly argue the application of the remaining MacMillan factors. First, in reference to the third factor, Plaintiffs argue that Element Transportation utilized the same "plant" as Element Financial, LLC because the lease agreements of both companies identify the same address as the principle place of business. [R. 110 at 24.]
Secondly, under the fourth factor, Plaintiffs contend that Element Transportation continued the business operations of Element Financial, LLC because Element Transportation continued leasing trucks to individuals under the same lease terms and with the same "Element" logo on the agreement as Element Financial, LLC. [R. 110 at 25.] As evidence, Plaintiffs provide one lease agreement from after the asset purchase in which Element Transportation left every provision the same as Element Financial, LLC's lease agreements, except it changed the lessor name to Element Financial, LLC. [R. 110-8 at 14.] Element Transportation responds that there is no evidence that it provided equipment financing or vehicle fleet leasing to PTL. [R. 113 at 7.] Furthermore, under the fifth, sixth, and seventh factors, Element Transportation contends that it did not have employees or supervisory staff and it did not maintain the same jobs under the same working conditions as Plaintiffs experienced. [Id.] While Plaintiffs' broad argument under the fourth factor seems to weigh in favor of successor liability, Element Transportation's pointed observations under the fifth, sixth, and seventh factors seem to weigh against it. Ultimately, as the parties mainly dispute the issue of notice, the limited discussion and evidence regarding these factors have little to no effect on the determination of successor liability in this matter.
After arguing the first two prongs of the three-prong successor liability test, i.e., that the interests of the employer and employee both weigh against applying successor liability, Element Transportation concludes its Motion for Summary Judgment by arguing that holding it liable as a successor would not "further the goals" of federal policy. [R. 98-1 at 12.] Specifically, Element Transportation quotes a conference report concerning the Trafficking Victims Protection Act (TVPA) which states: "Section 1589 is intended to address the increasingly subtle methods of traffickers who place their victims in modern-day slavery, such as where traffickers threaten harm to third persons, restrain their victims without physical violence or injury, or threaten dire consequences by means other than overt violence." H.R. CONF. REP. 106-939, at 101 (2000). Element Transportation reasons that these goals are not furthered by holding it liable as a successor because PTL and EFC are not traffickers, PTL and EFC did not use "subtle methods" to trick Plaintiffs, and "it strains credulity" to compare Plaintiffs' contracts with PTL and EFC to "modern day slavery." [R. 98-1 at 13.]
Also, Element Transportation argues that the general goals of the successor liability doctrine under federal law are not furthered by holding Element Transportation liable. [Id.] It contends:
[Id. (quoting Teed, 711 F.3d at 766 (internal citation omitted) ).] In contrast to this policy, Element Transportation argues that it received no lease payments from Carter or Hayes. Moreover, it did not receive any benefit from the alleged forced labor of any other owner-operators because it was guaranteed those lease payments by Element Financial, LLC "regardless of whether the owner-operators made any payments on their leases or
In their Response, Plaintiffs first argue that although the federal forced labor statute is mostly commonly applied to situations involving undocumented immigrants being forced into labor or the sex trade, it should not be limited to such circumstances. [R. 110 at 26 (citing R. 80; United States v. Callahan, 801 F.3d 606, 617 (6th Cir. 2015) ).] Plaintiffs assert that the conditions under which these truck drivers operate through the lease and labor agreements cannot be so easily brushed off as noncoercive or not involving forced labor. [Id.]
Element Transportation counters Plaintiffs' arguments by stating that the "relevant question" at hand is whether it benefitted from Plaintiffs' forced labor—as opposed to whether it benefitted in general from the transaction. [R. 113 at 6.] Element Transportation agrees that it generated $28.4 million in revenue from lease payments for commercial trucks, however, "[n]one of this revenue was from Plaintiffs because Plaintiffs' leases had terminated and Plaintiffs had ceased performing work for PTL before Element Transportation purchased the SUBI assets." [Id.] Moreover, Element Transportation contends, once again, that it did not receive any increased lease payment revenue from any owner-operator because of the alleged unlawful labor scheme between EFC and PTL. [Id.] Rather, there was a "seller guarantee to pay EFC the payments due under the lease agreements regardless of whether the owner/operator drivers who signed those agreements made any payments or performed any work." [Id.] Lastly, Element Transportation rejects the notion that it receiving interest from 19th Capital is of any probative value because Element
In sum, the parties dispute whether finding Element Transportation liable as a successor to Element Financial, LLC will further the interest of federal policy, both under the federal forced labor statute and the general federal policy behind successor liability. The Court will consider their arguments concerning each policy in turn.
"The federal forced labor statute, 18 U.S.C. § 1589, was enacted as part of the Victims of Trafficking and Violence Prevention Act of 2000 (also known as the Trafficking Victims Protection Act)." Callahan, 801 F.3d at 617. Although the legislative history quoted by Element Transportation depicts the statute as being directed specifically at human traffickers who place victims in "modern day slavery," the actual text of the statute yields a broader interpretation. The first portion of the statute reads:
18 U.S.C. § 1589(a) (emphasis added). In Section (c) of the statute, the term "serious harm" is defined as:
18 U.S.C. § 1589(c) (emphasis added). As the Sixth Circuit stated in Callahan while interpreting this statute, "[d]efendants are correct that `[w]hen construing a legislative enactment, [courts] must give effect to the intent of the legislature adopting the statute in question.' But Defendants forget that `legislative intent should be divined first and foremost from the plain language of the statute,' and `reference to legislative history is inappropriate when the text of the statute is unambiguous.' Callahan, 801 F.3d at 617-18 (internal citations omitted). Thus, Plaintiffs were able to plead their claim under the plain language of the statute, but it remains ambiguous as to whether finding Element Transportation liable as a successor would align with the goals of the federal forced labor statute. As Element Transportation mentioned, the original purpose of the overall Trafficking Victims Protection Act in 2000 was to "combat trafficking in persons, a contemporary manifestation of slavery whose victims are predominantly women and children, to ensure just and effective punishment of traffickers, and to protect their victims." 75 A.L.R. Fed. 2d 467 (quoting Pub. L. No. 106-386, § 102, 114 Stat. 1488 (2000) ). Furthermore, there is no case law currently available regarding the applicability of successor liability in a case involving the forced labor statute. Thus, it remains uncertain whether a finding of successor liability
As the Sixth Circuit stated in the context of applying successor liability in a Title VII case:
MacMillan, 503 F.2d at 1091-92. Here, failing to hold Element Transportation liable as a successor would not "emasculate the relief provisions" of the federal forced labor statute because other defendants remain who may be able to compensate Plaintiffs. Furthermore, "the equities of the matter" do not favor successor liability because there is not sufficient evidence that Element Transportation knew of or benefitted from the alleged unlawful labor practices of Element Financial, LLC. Plaintiffs claim that this is a situation in which a parent company attempted to evade liability by transferring interests between subsidiaries. [See R. 110 at 26-27.] However, with no sufficient evidence that Element Transportation was aware of any unlawful labor practices and no dispute that ECN can provide monetary relief, the Court must disagree. This matter does not present a circumstance that aligns with the goals of successor liability under federal common law.
After weighing the interests of the employer and employee, as well as the goals of federal policy, the Court finds that the imposition of successor liability upon Element Transportation is inappropriate. Although the second prong seems to weigh neutral, the first and third both weigh against applying successor liability in this circumstance. Perhaps most importantly, it would not be equitable here to find Element Transportation liable when there is little to no evidence it had notice of Plaintiffs' claims and Plaintiffs may still seek relief from Element Transportation's predecessor, ECN. Thus, Element Transportation's Motion for Summary Judgment, [R. 98], as it applies to Count III of the Amended Complaint, is GRANTED.
Element Transportation also moves for summary judgment on Count IV of Plaintiffs' Amended Complaint, which alleges violations of common law unjust enrichment. In addition to federal common law, Element Transportation argues that it is also not liable as a successor under Pennsylvania law, and, therefore, Plaintiffs' claim of unjust enrichment should be dismissed. [R. 98-1 at 14.] The parties do not dispute that Pennsylvania common law applies, as the lease agreements contained a Pennsylvania choice of law provision. [See R. 98-3 at 10; R. 98-5 at 10.]
Under Pennsylvania law, "it is well-established that `when one company sells or transfers all of its assets to another company, the purchasing or receiving company is not responsible for the debts and liabilities of the selling company simply because it acquired the seller's property.'" Cont'l Ins. Co. v. Schneider, Inc., 582 Pa. 591, 599, 873 A.2d 1286 (2005) (quoting Hill v. Trailmobile, 412 Pa.Super. 320, 603 A.2d 602, 605 (1992) ). However, this rule is overcome if it is established that "(1) the purchaser expressly or implicitly agreed to assume liability, (2) the transaction amounted to a consolidation or merger, (3) the purchasing corporation was merely a continuation of the selling corporation, (4)
As the factors under Pennsylvania law are rather similar to those under federal common law, the parties essentially repeat the arguments from the federal successor liability sections of their briefs. In relation to the five exceptions, Element Transportation argues: (1) the "SUBI Sale Agreement expressly states that Element Transportation did not assume an[y] of ECN's liabilities," (2) Element Transportation split with ECN rather than consolidate or merge, (3) ECN continued its commercial and vendor leasing business after the SUBI sale, (4) Element Transportation and ECN could not have entered into the transaction to escape liability because neither party had any knowledge of Plaintiffs' claims, and (5) Element Transportation paid "book value" for the SUBI assets. [R. 98-1 at 14-15.] Plaintiffs' respond that Element Transportation "explicitly agreed to assume the liabilities of its predecessor" pursuant to Section 2.2 of the Asset Purchase Agreement. [R. 110 at 30.] Furthermore, Plaintiffs contend that "during the period it continued the individual truck leasing business, Defendant Element Transportation represented a mere continuation of the individual fleet leasing business ECN Financial ran as EFC." [Id.]
First, as the Court explained above, Plaintiffs have not provided sufficient evidence that Element Transportation continued the unfair labor practices of its predecessor. Nor do Plaintiffs provide additional evidence here that Element Transportation was a "mere continuation" of ECN. In fact, neither party disputes that ECN continued doing business independently after the asset purchase occurred. [R. 113 at 7; R. 110 at 22; 24.] Thus, the Court finds this argument from Plaintiffs unconvincing.
Secondly, upon examining the plain meaning of the unambiguous language of the Asset Purchase Agreement, the Court disagrees with Plaintiffs' interpretation of Section 2.2.
[R. 110-14 at 2 (emphasis added).] Both section 2.2(a) and section 2.2(b) state that Element Transportation is to be responsible for liabilities that occurred after the Asset Purchase Agreement, not "prior to the date hereof." [Id.] Thus, the Court finds Plaintiffs' contractual interpretation argument regarding successor liability under
Also before the Court is Plaintiffs' Motion for Leave to File a Sur-Reply. [R. 119.] In support of this motion, Plaintiffs argue that the "Reply of Defendant Element Transportation contains a substantial inaccuracy that must be addressed for the Court to have a complete understanding of the evidence in the record." [R. 119.] Specifically, Plaintiffs contend that Element Transportation incorrectly asserted that Plaintiffs failed to show that Element Transportation continued the unlawful forced-labor scheme between EFC and Paschall Truck Lines. [R. 119-1 at 2.] Plaintiffs go on to highlight evidence already in the record in an effort to refute this argument. [See R.119-1 at 2-3.]
"Although the Federal Rules of Civil Procedure do not expressly permit the filing of sur-replies, such filings may be allowed in the appropriate circumstances, especially `[w]hen new submissions and/or arguments are included in a reply brief, and a nonmovant's ability to respond to the new evidence has been vitiated.'" Key v. Shelby Cnty., 551 F. App'x 262, 265 (6th Cir. 2014) (quoting Seay v. Tenn. Valley Auth., 339 F.3d 454, 481 (6th Cir. 2003) ). It is true that "surreplies... are highly disfavored, as they usually are a strategic effort by the non-moving party to have the last word on a matter." Liberty Legal Foundation v. Nat'l Democratic Party of the USA, Inc., 875 F.Supp.2d 791, 797 (W.D. Tenn. 2012) (internal quotation marks omitted). However, the question of whether to permit such an additional filing is a matter left to the broad discretion of the trial court. See Key, 551 F. App'x at 264.
Here, Element Transportation did not make a new submission or argument in its Reply. Rather, it was responding to Plaintiffs' argument in its Response that "Defendant Element Transportation continued the unfair labor practices of its predecessors...." [R. 110 at 17.] Furthermore, the evidence Plaintiffs claim refutes Element Transportation's arguments in its Reply was already before the Court. Thus, Plaintiffs' Motion for Leave to File Sure-Reply, [R. 119], is DENIED.
For the foregoing reasons,
[R. 98-8 at 17.]
[R. 110 at 28.]
