Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_19-cv-08231/USCOURTS-azd-3_19-cv-08231-0/pdf.json

Nature of Suit Code: 350
Nature of Suit: Motor Vehicle Personal Injury
Cause of Action: 28:1441 Petition for Removal- Tort/Motor Vehicle (P.I.)

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Carlos Earnesto Tillman,

Plaintiff,

v. 

Baxter E. Everett, et al.,

Defendants.

No. CV-19-08231-PCT-JJT

ORDER 

At issue is Defendants Universal Logistics Holdings (“ULH”), Universal 

Intermodal Services (“UIS”), and Westport Axle Co.’s (“Westport”) Motion for Summary 

Judgment Regarding Successor Liability (Doc. 33, “Mot.”) and Plaintiff’s Amended Rule 

56(d) Motion and Affidavit (Doc. 58, “Aff.”), to which Defendants filed a Response in 

opposition (Doc. 61, “Resp.”). 

This action stems from a motor accident between Plaintiff and Defendant Baxter

Everett, who was employed by Defendant Specialized Rail Services, Inc. (“SRS”) at the 

time of the accident in July 2017. SRS later executed a Stock Purchase Agreement (“SPA”)

in October 2018 in which Westport1 purchased all SRS shares with cash. Westport and UIS 

are subsidiaries of ULH. Under a theory of successor liability, Plaintiff alleges that ULH, 

UIS, and or Westport are liable to Plaintiff by virtue of the SRS stock purchase. On 

February 4, 2020, ULH, UIS, and Westport filed a Motion for Summary Judgment on the 

1 The Court acknowledges, as Plaintiff points out, that the press release contained 

in ULH’s SEC Form 8-K filing, exhibit 99.1, states that (1) ULH acquired SRS, and (2) 

SRS would operate as part of UIS. However, the SPA lists Westport as the buyer. Thus, 

for purposes of this Motion, the Court refers to Westport as the purchasing corporation. 

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grounds that Plaintiff cannot and will not be able to establish successor liability for any 

liability of SRS’s resulting from the accident between Plaintiff and Defendant Baxter.

Plaintiff has filed a motion and affidavit under Federal Rule of Civil Procedure 56(d) 

(formerly Rule 56(f)), asking the Court to defer ruling on Defendants’ Motion to allow 

time to take discovery on the issue of successor liability. Under Rule 56(d), a party may 

request a continuance on the court’s ruling on the opposing party’s motion for summary 

judgment if the party shows (1) the specific facts it hopes to elicit from further discovery;

(2) the facts sought exist; and (3) the sought-after facts are essential to oppose summary 

judgment. Family Home & Fin. Ctr., Inc. v. Fed. Home Loan Mortg. Corp., 525 F.3d 822, 

827 (9th Cir. 2008). The decision to grant or deny a Rule 56(d) motion is within the court’s 

discretion. Burlington N. Santa Fe R. Co. v. Assiniboine & Sioux Tribes of Fort Peck 

Reservation, 323 F.3d 767, 773 (9th Cir. 2003). “Where, however, a summary judgment 

motion is filed so early in the litigation, before a party has had any realistic opportunity to 

pursue discovery relating to its theory of the case, district courts should grant any Rule 

[56(d)] motion fairly freely.” Id.

Plaintiff submits several bases for delaying ruling on Defendants’ Motion. As a 

procedural matter, Plaintiff notes that discovery had not even begun in this case before 

Defendants filed their Motion for Summary Judgment. Further, it could not have begun

with respect to Westport, because Westport did not serve its first MIDP response until

February 2—after the Motion was filed. Though not dispositive, this fact weighs in favor 

of granting Plaintiff’s Rule 56(d) motion and affidavit. 

Turning to the substance, the general rule is that when a corporation sells or transfers 

its principal assets to a successor corporation, the latter will not be liable for the debts and 

liabilities of the former. A.R. Teeters & Assocs., Inc. v. Eastman Kodak Co., 836 P.2d 1034, 

1039 (Ariz. Ct. App. 1992). However, four exceptions to this rule exist, such that successor 

liability may be found if: (1) there is an express or implied agreement of assumption; (2) 

the transaction amounts to a consolidation or merger of the two corporations; (3) the 

purchasing corporation is a mere continuation or reincarnation of the seller; or (4) the 

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transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the 

seller’s debts. Id. Plaintiff presents no argument or material with respect to the first 

exception. However, he contends that due to the early timing of Defendants’ Motion, he is 

currently unable to present facts that would defeat summary judgment regarding the 

second, third, and fourth exceptions.

2

Defendants point out that no Arizona case directly addresses the de facto merger 

exception to the general rule of non-liability for a successor corporation. However, courts 

nationwide are in accord as to the factors for finding a de facto merger: (1) continuity of 

management, personnel, physical location, assets, and general business operations between 

the buyer and seller corporations; (2) continuity of shareholders; (3) the seller corporation 

ceases its ordinary business operations, liquidates, and dissolves as soon as legally and 

practically possible; (4) the purchasing corporation assumes those obligations of the seller 

ordinarily necessary for the uninterrupted continuation of normal business operations of 

the seller corporation. E.g., Louisiana-Pac. Corp. v. Asarco, Inc., 909 F.2d 1260, 1264 (9th 

Cir. 1990), overruled on other grounds in Atchison, Topeka & Santa Fe Ry. Co. v. Brown 

& Bryant, Inc., 159 F.3d 358, 361 (9th Cir. 1997); see also Cargo Partner AG v. Albatrans, 

Inc., 352 F.3d 41, 46 (2d Cir. 2003); Philadelphia Elec. Co. v. Hercules, Inc., 762 F.2d 

303, 310 (3d Cir. 1985). 

While some courts hold that not all factors must be met, they “consistently require[]

continuity of shareholders, accomplished by paying for the acquired corporation with 

shares of stock.” Louisiana-Pac. Corp., 909 F.2d at 1264; see also Arnold Graphics Indus. 

v. Independent Agent Center, Inc., 775 F.2d 38, 42 (2d Cir. 1985) (“To find that a de facto

merger has occurred there must be . . . a continuity of stockholders, accomplished by paying 

for the acquired corporation with shares of stock.”); Bud Antle, Inc. v. Eastern Foods, Inc., 

758 F.2d 1451, 1458 (11th Cir. 1985) (“Where the assets are sold for cash [rather than 

stock], no basic fundamental change occurs in the relationship of the stockholders to their 

2 The Court acknowledges that much of Defendants’ Response focuses on the

interpretation of the SPA and the Defendants’ intent not to transfer to Westport SRS’s 

potential liability for Plaintiff’s claim. However, the second, third, and fourth exceptions 

are equitable doctrines that look beyond the plain language of the contract. 

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respective corporations, . . . and absent continuity of shareholder interest, the two 

corporations are strangers, both before and after the sale.”)3

Here, the SPA was accomplished through a purchase of SRS’s shares with cash, not

the purchasing corporation’s shares. (Doc. 34-3 at 7.) Prior to the sale, SRS was owned by 

a combination of individuals and trusts. (See Doc. 34-3 at 7.) Westport is a wholly owned 

subsidiary of a publicly traded company. Thus, discovery will not yield information that

creates a genuine dispute of material fact as to the continuity of shareholders, as Westport

paid for the SRS shares with cash. Accordingly, the Court denies Plaintiff’s Rule 56(d) 

motion and affidavit on these grounds. 

As to the mere continuation exception, a corporation is a mere continuation of a 

predecessor corporation if there is “substantial similarity in the ownership and control of 

the two corporations,” and “insufficient consideration running from the new company to 

the old for the assets passing to the new company.” Warne Investments, Ltd. v. Higgins, 

195 P.3d 645, 651 (Ariz. Ct. App. 2008). Here, Plaintiff avers that Westport and SRS have 

common ownership, executives, employees, or directors, and that Westport pays salaries 

and other expenses of SRS. (Aff. ¶¶ 23, 30.) This sufficiently demonstrates commonality 

in the operation and control of the corporations such that Plaintiff should have the 

opportunity to discover more information related to the same. Plaintiff also submits that 

Westport purchased the shares of SRS for an amount equaling approximately half of SRS’s 

revenue the previous year, which may demonstrate insufficient consideration for the 

purchase of SRS shares. (Aff. ¶¶ 27c.) In light of the early stages of this litigation, Plaintiff

is entitled to limited discovery to develop the mere continuation theory. 

3 The Court located a few cases in which the absence of a stock transfer was not 

conclusive. In Turner v. Bituminous Cas. Co., 244 N.W.2d 873, 883 (Mich. 1976), the 

court held that continuity of the seller corporation’s policy, operations, personnel, and 

properties may sufficiently satisfy the continuity element. However, that case dealt with a 

fifth exception to the rule of non-liability for successor corporations—the product line 

exception—which the Arizona Court of Appeals expressly declined to adopt, finding the 

task of expanding the exceptions was appropriate for the legislature. See Winsor v. 

Glasswerks PHX, L.L.C., 63 P.3d 1040, 1047 (Ariz. Ct. App. 2003) (discussing Turner and 

declining to follow it). In Atlas Tool Co., Inc. v. Comm’r, 614 F.2d 860, 863 (3d Cir. 1980),

one man owned all the stock in both the selling and purchasing corporations such that

shareholder continuity was met automatically.

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As to the fourth exception, Plaintiff states that Arizona imposes successor liability 

if the asset transfers were fraudulent under state law and cites to the Uniform Fraudulent 

Transfer Act, A.R.S. § 44-1001 et seq. See also Moore v. Browning, 50 P.3d 852, 858 

(Ariz. Ct. App. 2002) (holding the “UFTA has displaced any common law cause of action 

for fraudulent conveyance”). Constructive fraudulent transfer occurs when the transferor 

does not receive “reasonably equivalent value” in exchange for the transaction and the 

transferor is insolvent at the time of the transaction or becomes insolvent shortly after.

4

A.R.S. § 44-1005. Plaintiff again avers that SRS transferred all its stock for approximately 

half its total revenue earned in the year preceding the transfer. While Defendants contend 

SRS is a “going concern,” (Resp. at 7), Plaintiff’s counsel submits that SRS’s counsel told 

him SRS was likely going to be dissolved or terminated. (Aff. ¶ 20.) Because it is possible 

that facts exist on the issues of inadequate consideration and insolvency that would 

preclude summary judgment, Plaintiff is entitled to limited discovery of the same.

Finally, Plaintiff asserts a theory of alter ego liability in his Rule 56(d) motion and 

affidavit. The Court fails to see how this is relevant to resolution of Defendant’s pending 

Motion regarding successor liability, and therefore declines to address it. The Court has 

established a general discovery timeline (Doc. 60) which governs discovery of all other 

claims, defenses and issues not the subject of Defendant’s pending Motion for Summary 

Judgment.

Again, in generous consideration of the early timing of Defendants’ Motion, 

Plaintiff has demonstrated he is entitled to a deferred ruling on the Motion in order to 

conduct discovery on the issues of mere continuation and constructive fraudulent transfer.

Accordingly, the Court grants Plaintiff’s Rule 56(d) request for additional discovery “as a 

matter of course.” See Burlington N. Santa Fe R. Co., 323 F.3d at 773–74.

However, the Court declines to grant the scope of discovery that Plaintiff requests. 

Plaintiff seeks to depose approximately 11 people on the issue of successor liability alone. 

4 A constructive fraudulent transfer claim is not subject to the heightened pleading 

standards of Rule 9(b). See, e.g., Airbus DS Optronics GmbH v. Nivisys LLC, No. CV-14-

02399-PHX-JAT, 2015 WL 3439143, at *10 (D. Ariz. May 28, 2015).

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Discovery on a claim or defense is limited to what is nonprivileged, relevant, and 

proportional to the needs of the case. Fed. R. Civ. P. 26(b). The Court therefore limits 

Plaintiff to three depositions on the issue of successor liability. While the Court will not 

impose a numerical limitation on the pages or documents that Plaintiff may request, it

reiterates again that he is entitled only to that which fits the needs of the case. 

IT IS THEREFORE ORDERED granting in part and denying in part Plaintiff’s 

Amended Rule 56(d) Motion and Affidavit (Doc. 58) to the extent consistent with this 

Order. 

IT IS FURTHER ORDERED that Plaintiff will have until July 24, 2020, to 

conduct its limited discovery as set forth above in support of its successor liability 

exception arguments. Plaintiff’s Amended Response to Defendant’s Motion for Summary 

Judgment shall be due no later than August 21, 2020. Defendant’s reply will be due 

thereafter according to the Local Rules. 

Dated this 17th day of April, 2020.

Honorable John J. Tuchi

United States District Judge

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