Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-02147/USCOURTS-azd-2_09-cv-02147-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Idearc Media, LLC, 

Plaintiff, 

v. 

Palmisano & Associates, P.C., an Arizona 

professional corporation and Palmisano 

Law, PLLC, an Arizona professional 

limited liability company, 

Defendants. 

No. CV-09-02147-PHX-JAT

ORDER 

 Pending before the Court is Plaintiff’s Motion for Summary Judgment (Doc. 48). 

The Court now rules on the Motion. 

I. BACKGROUND 

Plaintiff Idearc Media, LLC, now known as SuperMedia, LLC (hereinafter 

“Plaintiff” or “SuperMedia, LLC”) publishes the Verizon Yellow Pages and White Pages 

telephone directories and Superpages.com. (Plaintiff’s Statement of Facts (“Doc. 49”) at 

¶ 1 and Defendants’ Responses to Plaintiff’s Separate Statement of Facts (“Doc. 52”) at ¶ 

1). Defendant Palmisano & Associates, P.C. is an Arizona professional corporation and 

is solely owned by Joseph Palmisano. (Doc. 32 at ¶ 2; Doc. 34 at ¶ 2; Doc. 49 at ¶ 17; 

Doc. 52 at ¶ 17). Defendant Palmisano Law is a single member Arizona professional 

limited liability company wholly owned by Joseph P. Palmisano. (Doc. 32 at ¶ 3; Doc. 

34 at ¶ 3 Doc. 49 at ¶ 18; Doc. 52 at ¶ 18). 

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 A. The Contracts 

 On April 20, 2007, Joseph P. Palmisano executed an Application for Directory 

Advertising on behalf of Palmisano & Associates, P.C. to purchase advertising in the 

Greater Tucson directory to be published in November 2007. (Doc. 49 at ¶ 2; Doc. 49-1 

at Exhibit A; Doc. 52 at ¶ 2). On September 28, 2007, Palmisano & Associates executed 

an Application for Directory Advertising to purchase advertising in the Phoenix South 

Valley directory to be published in February 2008. (Doc. 49 at ¶ 3; Doc. 49-1 at Exhibit 

B; Doc. 52 at ¶ 3). On December 14, 2007, Palmisano & Associates executed an 

Application for Directory Advertising to purchase advertising, including back cover, in 

the Greater Phoenix directory to be published in June 2008. (Doc. 49 at ¶ 4; Doc. 49-1 at 

Exhibit C; Doc. 52 at ¶ 4). On July 22, 2008, Palmisano & Associates executed an 

Application for Directory Advertising to purchase advertising in the Greater Tucson 

directory to be published in November 2008. (Doc. 49 at ¶ 5; Doc. 49-1 at Exhibit D; 

Doc. 52 at ¶ 5). On December 3, 2008, Palmisano & Associates executed an Advertising 

Agreement to purchase advertising in the Phoenix-North Valley and Phoenix-South 

Valley directories to be published in February 2009. (Doc. 49 at ¶ 6; Doc. 49-1 at 

Exhibit E; Doc. 52 at ¶ 6). 

 It is undisputed that, in each contract, Palmisano & Associates agreed to pay the 

monthly rate listed in each Application for Directory Advertising. (Doc. 49 at ¶ 10; Doc. 

52 at ¶ 10). It is further undisputed that SuperMedia published all of the contracted-for 

advertisements for Palmisano & Associates and Palmisano Law. (Doc. 49 at ¶¶ 12-13; 

Doc. 52 at ¶¶ 12-13). 

 It is likewise undisputed that: (1) Plaintiff invoiced Palmisano & Associates, (2) 

Plaintiff received payment, in whole or in part, on some of the invoices; (3) Plaintiff did 

not receive payments after November 2008; (4) Plaintiff accelerated the remaining 

balance due under the Agreements upon Defendants’ failure to pay the invoices; (5) 

Palmisano & Associates failed to pay $187,068.00 in advertising charges; (6) on 

September 16, 2009, interest in the amount of $12,501.54 had accrued on the past due 

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amount and interest continues to accrue at a rate of 18% per annum until judgment is 

entered; and (7) the Agreements’ Terms and Conditions require Palmisano & Associates 

to pay all collection costs and attorneys’ fees. (Doc. 49 at ¶¶ 19-26; Doc. 52 at ¶¶ 19-26). 

 Plaintiff argues that each contract incorporated a set of standard Term and 

Conditions which governed the relationship between the Parties. (Doc. 49 at ¶ 7). 

Indeed, each contract from April 2007 to July 2008 contained the following language: 

“This application is subject to the Application for Directory Advertising Terms and 

Conditions” and “Advertiser has received a duplicate copy of the cover section of this 

Application and the attached Terms and Conditions, which are hereby incorporated in the 

cover section of this Application, and has read and understands same.” (Doc. 49-1 at 

Exhibits A–D). The December 2008 contract contained the following language: “By 

signing this Agreement I acknowledge that I have received, read and agree to the Terms 

and Conditions that are part of this Agreement.” (Doc. 49-1 at Exhibit E). Defendants 

deny that the Application included a Standard Set of Terms and Conditions and deny ever 

reading such Terms and Conditions. (Doc. 52 at ¶¶ 8-9). 

 B. Procedural History 

On October 1, 2009, Plaintiff filed a Complaint against Defendants alleging four 

counts, specifically, breach of contract, breach of the implied covenant of good faith and 

fair dealing, unjust enrichment, and open account. (Doc. 1). On November 17, 2009, 

Defendant Palmisano & Associates filed for bankruptcy. Thereafter, the Parties 

stipulated to dismiss Defendant Palmisano Law without prejudice based on the 

Declaration of Joseph Palmisano that Palmisano Law was not an operating entity and had 

no assets or revenue. (Doc. 14; Doc. 14-1). The case was then stayed pending the 

outcome of the bankruptcy. On November 14, 2011, when the bankruptcy case was 

dismissed, the stay was lifted. 

 Thereafter, Plaintiff moved to vacate the Order dismissing Palmisano Law or, 

alternatively, to amend the Complaint, because Palmisano Law was an operating entity 

with assets and revenue. (Doc. 22). The Court granted the Motion to Amend the 

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Complaint and Plaintiff filed an amended Complaint re-alleging its claims of breach of 

contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, 

and open account against Palmisano Law and Palmisano & Associates. (Doc. 30 and 

Doc. 32). 

 Plaintiff now moves for summary judgment on its claims against Defendants 

Palmisano & Associates, P.C. and Palmisano Law PLLC. (Doc. 48 at 1). Plaintiff 

specifically requests that the Court enter judgment in its favor on its breach of contract 

claim or, in the alternative, on its unjust enrichment claim. (Doc. 48 at 12). Defendants 

claim that there are disputed issues of material fact preventing summary judgment in 

Plaintiff’s favor. 

 II. LEGAL STANDARD 

Summary judgment is appropriate when “the movant shows 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 party asserting that a fact cannot be or is genuinely 

disputed must support that assertion by . . . citing to particular parts of materials in the 

record, including depositions, documents, electronically stored information, affidavits, or 

declarations, stipulations . . . admissions, interrogatory answers, or other materials,” or by 

“showing that materials cited do not establish the absence or presence of a genuine 

dispute, or that an adverse party cannot produce admissible evidence to support the fact.” 

Id. at 56(c)(1)(A)&(B). Thus, summary judgment is mandated “against a party who fails 

to make a showing sufficient to establish the existence of an element essential to that 

party’s case, and on which that party will bear the burden of proof at trial.” Celotex 

Corp. v. Catrett, 477 U.S. 317, 322 (1986). 

 Initially, the movant bears the burden of pointing out to the Court the basis for the 

motion and the elements of the causes of action upon which the non-movant will be 

unable to establish a genuine issue of material fact. Id. at 323. The burden then shifts to 

the non-movant to establish the existence of material fact. Id. The non-movant “must do 

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more than simply show that there is some metaphysical doubt as to the material facts” by 

“com[ing] forward with ‘specific facts showing that there is a genuine issue for trial.’” 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586B87 (1986) (quoting 

Fed. R. Civ. P. 56(e) (1963) (amended 2010)). A dispute about a fact is “genuine” 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). In the summary judgment 

context, the Court construes all disputed facts in the light most favorable to the nonmoving party. Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir. 2004). 

III. ANALYSIS 

A. The Existence of a Contract 

 Plaintiff first argues that it is entitled to summary judgment on its breach of 

contract claim. To succeed on its breach of contract claim, Plaintiff must prove “the 

existence of a contract, breach of contract, and resulting damages.” Chartone, Inc. v. 

Bernini, 83 P.3d 1103, 1111 (Ariz. Ct. App. 2004) (internal citation omitted). 

 Plaintiff argues that it is entitled to summary judgment on its breach of contract 

claim because there were contracts (the April 20, 2007, September 28, 2007, December 

14, 2007, and July 22, 2008 Applications for Directory Advertising and the December 3, 

2008 Advertising Agreement); Plaintiff performed all its obligations under the contracts, 

including publishing the advertisements; Defendants breached their obligations under the 

contracts by failing to pay the amount due for the advertising; and Plaintiff has been 

damaged in the amount of $187,068.00 plus interest. 

 Defendants argue that Palmisano & Associates did not breach any contract 

because no contract was ever formed and, if a contract was formed, Plaintiff breached the 

contract. Defendants further argue that, if there was a breach of contract, only Palmisano 

& Associates is liable for such breach. The Court will first consider whether valid 

contracts were formed between Plaintiff and Palmisano & Associates and whether 

Defendants have raised any viable defenses to a breach of contract claim. 

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 1. Whether the Terms and Conditions were 

 Incorporated into the Contract 

 Defendants claim they are not bound by the terms and conditions of the contract 

because: 

 Palmisano & Associates never received a Standard Set 

of Terms and Conditions from Idearc (or anyone else) and 

never read any Terms and Conditions to any Idearc 

Application. It was unaware of any liability provisions. 

 . . . 

 Palmisano Law, PLLC never received a Standard Set 

of Terms and Conditions and never received any Terms and 

Conditions to any Idearc Application. It was unaware of any 

successor liability provisions. 

Doc. 50 at ¶¶ 28-29. 

 Between April 20, 2007 and December 3, 2008, Defendant Palmisano & 

Associates executed Applications for Directory Advertising to purchase advertising from 

Plaintiff and Plaintiff provided the advertising. (Doc. 49 ¶¶ 2-6 and Doc. 52 ¶¶ 2-6). 

Each contract from April 2007 to July 2008 contained the following language: “This 

application is subject to the Application for Directory Advertising Terms and Conditions” 

and “Advertiser has received a duplicate copy of the cover section of this Application and 

the attached Terms and Conditions, which are hereby incorporated in the cover section of 

this Application, and has read and understands same.” (Doc. 49-1 at Exhibits A–D). The 

December 2008 contract contained the following language: “By signing this Agreement I 

acknowledge that I have received, read and agree to the Terms and Conditions that are 

part of this Agreement.” (Doc. 49-1 at Exhibit E). 

In Response to Defendants’ argument that they are not bound by the Terms and 

Conditions because they did not read and/or receive them, Plaintiff argues that the Terms 

and Conditions were clearly incorporated by reference into all of the contracts and, thus, 

whether Defendants read the Terms and Conditions is irrelevant. 

 It is a basic rule of contract construction that to 

incorporate by reference: “[T]he reference must be clear and 

unequivocal and must be called to the attention of the other 

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party, he must consent thereto, and the terms of the 

incorporated document must be known or easily available to 

the contracting parties . . . . 

Weatherguard Roofing Co., Inc. v. D.R. Ward Const. Co., Inc., 152 P.3d 1227, 

1229 (Ariz. Ct. App. 2007) (quoting United California Bank v. Prudential Ins. Co. of 

America, 681 P.2d 390, 420 (Ariz. Ct. App. 1983) (emphasis and alterations in original)). 

Further, “the context in which the reference is made must make clear that the writing is 

part of the contract.” Id. (quoting Prudential, 681 P.2d at 420). Whether the terms and 

conditions are attached to the contract itself is irrelevant, and “physical attachment is not 

necessary if the document . . . is clearly and unambiguously incorporated by reference.” 

Id. at 1230 (quoting Prudential, 681 P.2d at 420). 

 Here, Defendants do not argue that the language in the contracts incorporating the 

terms and conditions by reference was not clear and unequivocal or that it was not 

brought to their attention. Indeed, the signed contracts are each one page. Aside from 

detailing the advertisements, the contracts executed between April 2007 and July 2008 

only contain two short paragraphs, including the “incorporation by reference” provisions: 

“This application is subject to the Application for Directory Advertising Terms and 

Conditions” and “Advertiser has received a duplicate copy of the cover section of this 

Application and the attached Terms and Conditions, which are hereby incorporated in the 

cover section of this Application, and has read and understands same.” (Doc. 49-1 at 

Exhibits A–D). 

 Likewise, with regard to the December 2008 contract, aside from detailing the 

advertisements, the contract only has one line: “By signing this Agreement I 

acknowledge that I have received, read and agree to the Terms and Conditions that are 

part of this Agreement.” (Doc. 49-1 at Exhibit E). 

 Accordingly, in this case, the incorporation by reference was clear and 

unequivocal, and, by signing the contracts containing this language, Defendant Palmisano 

& Associates consented to the terms. Although Joseph Palmisano claims that he never 

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received and/or read the terms and conditions, he makes no argument that the terms and 

conditions were not easily available to him and his assertion that he never received the 

terms and conditions is contradicted by the language in the contracts that Palmisano & 

Associates signed, which states that the terms and conditions were received by Palmisano 

& Associates. 

 Accordingly, the terms and conditions of each contract were incorporated by 

reference into the contracts themselves and Defendant Palmisano & Associates is bound 

by all of the terms of the contracts, including those incorporated by reference. 

 2. Whether there were Material Misrepresentations that Precluded Formation of a Contract and Whether 

 Plaintiff Breached the Contract

Defendants next argue that “[a]s a material inducement to entering into larger 

contracts to be published in mid [sic] 2008 and 2009, Plaintiff’s employees made material 

misrepresentations to Palmisano & Associates. These representations were not only 

false, but in a dramatic fashion.” (Doc. 53 at 2). Defendants argue that the 

“misrepresentations and breaches of contract by Plaintiff excused Defendants’ 

performance of the contract and prevented the formation of the contract.” (Doc. 53 at 8). 

 The only evidence in the Record that Defendants argue support these assertions is 

a Declaration of Joseph P. Palmisano that states: 

 35. Idearc made substantial and material 

representations to Palmisano & Associates concerning the 

volume of leads and revenue to be anticipated for the cost per 

month of the delivered advertising at 5-7 times the cost of 

advertising; the representations were false and based on 

misleading statistics. Idearc had substantial evidence as to 

the falsity of the representation. Idearc did not provide 

Defendant with a complete copy of the Contract. The 

misrepresentations were made by the account executive and 

three managers for Idearc at meetings at Palmisano & 

Associates’ office. As an inducement to enter into the 

advertising Idearc misrepresented that Defendant would 

receive significantly greater contacts and revenue than was 

actually receive. Idearc also promised, as a material 

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inducement to entering into the contracts with Defendant, to 

perform certain services to implement 123EZLegal. Idearc 

failed to take any action to implement it was promised. 

Palmisano & Associates made numerous complaints 

regarding the performance of the contract and 123EZLegal 

but Idearc failed to take any corrective action. 

 36. Palmisano & Associates reasonably relied on 

representations, deceptive advertising and promises made. 

Defendant relied on the false representations regarding the 

quantity of contacts and level of business Defendant could 

expect. Idearc promised, as a material inducement to entering 

into the contracts with Defendant to perform certain services 

to implement 123EZLegal. Idearc failed to take any action to 

implement it as promised. 

 37. Idearc provided false statistics, data on ROI, 

given the materials presented to Defendant at the time which 

induced Defendant into entering into contracts with Idearc. 

The failing of the advertisements as promised is selfevidence. Idearc provided false statistics regarding the 

contacts and business Defendant would receive as a 

consequence of the services performed by Idearc. Idearc’s 

conduct consisted of willful and knowing misrepresentations 

of the level of business Defendant would realize. 

(Doc. 50 at ¶¶ 35-37). 

 Defendants argue that this declaration raises disputed facts and, as such, a jury 

must resolve questions of materiality and reliance. 

 In Reply, Plaintiff objects to these paragraphs of the Declaration of Joseph 

Palmisano as containing conclusory legal arguments. Plaintiff further argues that Mr. 

Palmisano has created a “sham affidavit,” which directly contradicts Mr. Palmisano’s 

deposition testimony and was created solely to raise a disputed issue of fact where there 

is none. As such, Plaintiff argues that the Court should disregard the paragraphs of Mr. 

Palmisano’s declaration that directly contradict his deposition testimony. Indeed, when a 

party attempts to introduce “sham” testimony that flatly contradicts earlier testimony in 

an attempt to “create” an issue of fact and avoid summary judgment, the Court must not 

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consider such “sham” testimony in ruling on the motion for summary judgment. 

Kennedy v. Allied Mutual Ins. Co., 952 F.2d 262, 266 (9th Cir. 1991). 

 Here, Plaintiff argues that Mr. Palmisano’s deposition testimony that an agent of 

Plaintiff was going to attempt to get approval from Plaintiff regarding 123EZLegal, but 

that no such approval was ever given contradicts the parts of his affidavit wherein Mr. 

Palmisano claims that Plaintiff promised to perform certain services relating to 123 

EZLegal. The Court is unable to conclude that this portion of Mr. Palmisano’s deposition 

testimony actually contradicts Mr. Palmisano’s declaration. Plaintiff has only provided 

portions of Mr. Palmisano’s deposition testimony to the Court and nowhere in the pages 

and line numbers of the deposition cited to by Plaintiff in support of this argument does 

any party reference 123EZLegal. Accordingly, the Court is unable to ascertain if Mr. 

Palmisano’s declaration is contradicted by his deposition testimony. 

 Plaintiff next argues that Defendants failed to identify any specific 

misrepresentations made by Plaintiff in response to discovery requests and, thus, cannot 

rely on their lack of disclosure to avoid summary judgment. Plaintiff cites to an 

interrogatory requesting identification of misrepresentations by Plaintiff and a response 

thereto provided by Palmisano Law, which states that “Palmisano Law PLLC was not a 

party to, was not involved in, and did not benefit from the Contract.” (Doc. 49 at Exhibit 

7). Plaintiff does not cite to any interrogatory responses by Palmisano & Associates and 

the Court will not impute Palmisano Law’s responses to interrogatories to Palmisano & 

Associates. Accordingly, the Court is unable to ascertain if both Defendants refused to 

identify alleged misrepresentations during discovery. 

 Plaintiff further argues that Defendants have failed to point to a single document 

containing any statistics or promise of performance made by Plaintiff. Plaintiff argues 

that Defendants’ assertions that Plaintiff promised that Defendant Palmisano & 

Associates would receive significantly greater contacts and revenue than was actually 

received, and that Plaintiff would perform certain services to implement 123EZLegal are 

completely unsupported by the Record and are contradicted by the contracts entered into 

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between April 20, 2007 and December 3, 2008, by Defendant Palmisano & Associates 

and Plaintiff. 

 The Court agrees. Defendants have not provided any factual support for Mr. 

Palmisano’s conclusory assertions that Plaintiff made certain promises to materially 

induce Palmisano & Associates to enter into the contracts. Further, these conclusory 

assertions are directly contradicted by the language in the contracts themselves that 

provide: 

Publisher disclaims any obligations and warranties, whether 

express or implied, that are not expressly set forth in this 

Application, including without limitation: 

 Publisher does not warrant that the advertising will be 

published without error or omission; 

 Publisher disclaims any warranty of merchantability or 

fitness for a particular purpose; and 

 Publisher does not warrant the number of responses to 

any advertising, any other business benefit or the suitability 

of any advertising for any business purpose 

. . . 

Application for Director Advertising Terms and Conditions, Doc. 49-1, Exhibit F at § 20. 

This paragraph is in the Terms and Conditions that were incorporated by reference into 

the Contracts executed on April 20, 2007, September 28, 2007, December 14, 2007, and 

July 22, 2008. See Declaration of Scott Roes, Doc. 49-1 at ¶ 10; Doc. 49-1 at Exhibit D 

(“This Application is subject to the Application for Directory Advertising Terms and 

Conditions.”). 

We disclaim any obligations, representations, or warranties, 

whether express or implied, that are not expressly set forth in 

this Agreement including any warranty of merchantability or 

fitness for a particular purpose. Without limiting the 

generality of the foregoing, we do not warrant the number of 

responses to your Ads, the number of persons who will view 

your Ads, or any other business benefit . . . . 

Advertising Agreement, Terms and Conditions, Doc. 49-1, Exhibit G at ¶ 9. This 

paragraph is in the Terms and Conditions that were incorporated by reference into the 

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Contract executed on December 3, 2008. See Declaration of Scott Roes, Doc. 49-1 at ¶ 

11; Doc. 49-1 at Exhibit E (“By signing this Agreement, I acknowledge that I have 

received, read and agree to the Terms and Conditions that are part of this Agreement.”). 

 Because Mr. Palmisano’s declaration directly contradicts the terms of the written 

agreement, it is parol evidence that the Court cannot consider. See Sun Lodge, Inc. v. 

Ramada Development Co., 606 P.2d 30, 32 (Ariz. Ct. App. 1979) (“Evidence of 

statements which are squarely against the terms of the written agreement are inadmissible 

under the parol evidence rule.”) (internal citation omitted); Arnold v. Cesare, 668 P.2d 

891, 895 (Ariz. Ct. App. 1983) (same). 

 Further, “the parol evidence rule prevents the use of evidence of prior or 

contemporaneous oral agreement to vary, contradict or enlarge a fully integrated, written 

agreement.” Thomas v. Goudreault, 786 P.2d 1010, 1018 (Ariz. Ct. App. 1989) (internal 

citations omitted). Here, the Contracts were fully integrated. See Application for 

Director Advertising Terms and Conditions, Doc. 49-1, Exhibit F at § 22 (“This 

Application (including all Publisher-provided, pre-printed addenda) describes the entire 

agreement between Publisher and Advertiser and supersedes any other oral or written 

agreement regarding the Print, Electronic, and/or Non-Directory Product Advertising 

listed on the cover section of this Application, except for any increase in the limitation of 

liability agreed to in writing by both parties in accordance with Section 6 . . . . Except as 

provided in this Section, no oral or written representation made by the Representative or 

other person that purports to modify this Application is binding on Publisher. Advertiser 

confirms that Advertiser has not relied upon any such representation in entering into this 

Application.”); Advertising Agreement, Terms and Conditions, Doc. 49-1, Exhibit G at ¶ 

20 (“This Agreement constitutes the entire agreement between you and us and supersedes 

all prior agreements and representations, whether express or implied, written or oral, with 

respect to the Ads and Services. . . . Neither you nor any Idearc employee or agent is 

authorized to change or add to this Agreement or any other agent is authorized to change 

or add to this Agreement or any other documents that are part of this Agreement in any 

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way, and any purported change or addition, whether oral or written, is void.”). 

 Accordingly, Defendants have failed to demonstrate that there is genuine issue of 

material fact as to whether material misrepresentation precluded contract formation or to 

provide any evidence that Plaintiff breached any contract. 

 Based on the foregoing, there are no genuine disputed issues of fact that Plaintiff 

and Defendant Palmisano and Associates entered into contracts (the April 20, 2007, 

September 28, 2007, December 14, 2007, and July 22, 2008 Applications for Directory 

Advertising and the December 3, 2008 Advertising Agreement), Plaintiff performed all 

of its obligations under the contracts, including publishing the advertisements, and 

Defendants breached their obligations under the contracts by failing to pay the amount 

due for the advertising, and Plaintiff has been damaged in the amount of $187,068.00 

plus interest. Defendants have raised no genuine disputed issues of fact regarding valid 

defenses to these breaches of contracts. Accordingly, Plaintiff is entitled to summary 

judgment on its breach of contract claims against Defendant Palmisano & Associates. 

 B. Whether Palmisano Law is Liable to Plaintiff 

Plaintiff next argues that Palmisano Law is liable for the contractual obligations of 

Palmisano & Associates based on three separate theories: (1) Palmisano Law is the 

successor of Palmisano & Associates; (2) Palmisano Law is the alter ego of Palmisano & 

Associates; and (3) Palmisano Law was unjustly enriched by Plaintiff’s advertisements. 

 1. Successor Liability 

Plaintiff first argues that Palmisano Law is the successor corporation of Palmisano 

& Associates. 

 In Arizona, the general rule for successor liability is 

when a corporation sells or transfers its principal assets to a 

successor corporation, the successor corporation is not liable 

for the former corporation’s debts and liabilities. A.R. Teeters 

& Assocs., Inc. v. Eastman Kodak Co., 172 Ariz. 324, 329, 

836 P.2d 1034, 1039 (App. 1992). Legal responsibility exists 

only if (1) the successor corporation expressly or impliedly 

agreed to assume the liabilities of the predecessor 

corporation; (2) the alleged transactions between the two 

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companies amounted to a consolidation or merger of the 

corporations; (3) the successor corporation is a mere 

continuation or reincarnation of the predecessor corporation; 

or (4) clear and convincing evidence shows that the transfer 

of assets from the predecessor corporation to the successor 

corporation was for the fraudulent purpose of escaping debt 

liability. Id.

Warne Investments, Ltd. v. Higgins, 195 P.3d 645, 650 (Ariz. Ct. App. 2008). 

 Plaintiff argues that three theories of successor liability apply to the facts of this 

case. Plaintiff argues that Palmisano Law is a mere continuation or reincarnation of 

Palmisano & Associates. Plaintiff further argues that that Palmisano Law impliedly 

agreed to assume the liabilities of Palmisano & Associates when Palmisano & Associates 

signed the contracts, which included clauses stating that Palmisano & Associates’ 

successors would be held liable for its debt to Plaintiff. Plaintiff finally argues that 

Palmisano Law is the successor corporation of Palmisano & Associates because the 

transfer of certain assets from Palmisano & Associates to Palmisano Law was for a 

fraudulent purpose. 

 a. Successor Liability under the Mere Continuation 

 Theory 

The mere continuation grounds for finding successor 

liability “reinforces the policy of protecting rights of a 

creditor by allowing a creditor to recover from the successor 

corporation whenever the successor is substantially the same 

as the predecessor.” Gladstone v. Stuart Cinemas, Inc., 178 

Vt. 104, 878 A.2d 214, 222, ¶ 19 (2005) (citing William M. 

Fletcher, 15 Fletcher Cyclopedia Corp. § 7124. 10, at 298–

301 (1999)). The premise of this approach “is that, if [a] 

corporation goes through a mere change in form without a 

significant change in substance, it should not be allowed to 

escape liability.” Id. 

Warne, 195 P.3d at 650-51. 

 Defendants argue that Palmisano Law cannot be a successor of Palmisano & 

Associates because Palmisano & Associates is still in existence. Defendants further 

argue that Palmisano Law is not a mere continuation of Palmisano & Associates. The 

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Court will address each argument in turn. 

 1. Whether there is Evidence that Palmisano and 

 Associates Remains a Viable Source of 

 Relief. 

 Defendants argue that Palmisano Law cannot be a “successor” to Palmisano & 

Associates because Palmisano & Associates still exists “for the sole purpose of winding 

up” and has approximately “$150,000 in accounts receivable.” (Doc. 53 at 5). Plaintiff 

argues that Defendants have failed to present any evidence that the receivables are 

actually collectible, how Palmisano & Associates, which is in the process of winding up, 

could retain clients after ceasing active operations, or how those clients could have value. 

(Doc. 57 at 8-9). 

 To impose successor liability under the continuation of business theory, Plaintiff 

must show that the “predecessor no longer represents a viable source of relief.” William 

M. Fletcher, 15 Fletcher Cyclopedia Corp. § 7124.10 (West, database updated September 

2012) (internal citation omitted). In this case, Plaintiff has presented evidence that 

Palmisano & Associates no longer represents a viable source of relief, as it declared 

bankruptcy and exists solely for the process of winding up. Defendants have failed to 

present any evidence that Palmisano & Associates could pay any judgment entered in 

favor of Plaintiff or that the remaining accounts receivable are actually collectible. 

Further, even if the accounts receivable were collectible and were to be used solely to pay 

any potential judgment to Plaintiff, the $150,000 of accounts receivable would be 

insufficient to satisfy Plaintiff’s undisputed damages in this case. Accordingly, 

Palmisano & Associates no longer represents a viable source of relief and successor 

liability under the mere continuation theory is plausible.

 2. Whether Palmisano Law is the Successor of 

 Palmisano & Associates under the Mere 

 Continuation Theory 

 “To find a corporation is a mere continuation of a predecessor corporation there 

must be ‘a 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 

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passing to the new company.” Warne, 195 P.3d at 651 (quoting Teeters, 836 P.2d at 

1040). 

 a. Substantial Similarity in Ownership and Control 

Palmisano & Associates and Palmisano Law are both owned and controlled by 

Joseph Palmisano. Both companies provided the same services under substantially 

similar names and used the same office, phone number, and internet address. (Doc. 49 at 

¶ 16). 

 b. Sufficient Consideration 

Palmisano & Associates sold office furnishings, equipment, including old 

computers and its phone numbers to Palmisano Law for $2,500. (Doc. 49 at ¶ 28; Doc. 

50 at ¶ 28). Plaintiff argues that the $2,500 paid for the tangible assets of Palmisano & 

Associates by Palmisano Law was insufficient consideration because (1) no money was 

paid for the intangible assets of Palmisano & Associates, namely the knowledge and skill 

of Joseph Palmisano, no money was paid for the use of the internet URL, which was 

already in the public eye, and nothing was paid for the right to take over Palmisano & 

Associates’ lease, all of which avoided any disruption in the transition from Palmisano & 

Associates to Palmisano Law and (2) the consideration paid for the phone number was 

insufficient because Palmisano & Associates owed a significant amount of debt for 

advertisement of that phone number. 

 In showing that consideration was insufficient, there is no requirement that 

Plaintiff prove the value of the intangible assets transferred, rather, Plaintiff must simply 

show that the successor corporation obtained intangible assets of some value to support 

mere continuation successor liability. Warne, 195 P.3d at 652. “To hold otherwise 

would mean that a service business that repeatedly reorganizes itself into a new corporate 

form could escape liability simply by arguing that the tangible assets of the business were 

de minimis and the income stream was not touchable. . . .[I]mposing liability as a mere 

continuation is intended to avoid this very scenario.” Id. at 652. This is the very 

argument that Defendants are making in this case. Defendants argue that Palmisano & 

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Associates can simply change form into Palmisano Law, running the same business, with 

the same owner and key employee, and with the same phone numbers, address, and 

internet URL to avoid Palmisano & Associates’ debts to its creditors. As aptly stated by 

the Warne court, “imposing liability as a mere continuation is intended to avoid this very 

scenario.” No reasonable juror could conclude that Palmisano Law owed no 

consideration for the intangible assets of Palmisano & Associates. 

 Further, no reasonable juror could find that $2,500 was sufficient consideration for 

Palmisano & Associates’ tangible assets, including its phone number. Palmisano & 

Associates promised to pay Plaintiff for the advertisements of a company called both 

“Palmisano & Associates” and “Palmisano Law” in the advertisements. Plaintiff fulfilled 

its bargain and published those advertisements with the phone number and address 

retained by Palmisano Law. Those advertisements, as contracted for and agreed by 

Plaintiff and Palmisano & Associates, whose owner was Joseph Palmisano, were jointly 

valued at $187,068.00. Palmisano Law claims that its payment of $2,500 for some office 

furniture and the phone number of Palmisano & Associates is evidence of sufficient 

consideration. Because the purchase of the assets from Palmisano Associates to 

Palmisano Law was not an arms-length transaction, it is not evidence of fair market value 

consideration sufficient to create a disputed issue of fact from which a jury could find a 

value less than the value offered by Plaintiff (the value of the advertising of the phone 

number, address, and name of the law firm, which the owner of Palmisano 

Associates/Palmisano Law and Plaintiff agreed were valued at $187,068.00). Defendants 

have offered no evidence that $2,500 was sufficient consideration for the assets obtained 

from Palmisano & Associates. 

 Because Defendants have failed to present any evidence that there is a disputed 

issue of material fact as to the ownership or control of Palmisano & Associates and 

Palmisano Law and because Defendants have failed to present any evidence that there is 

a disputed issue of material fact regarding the sufficiency of the consideration from 

Palmisano Law to Palmisano & Associates, summary judgment in favor of Plaintiff on 

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the mere continuation theory of liability against Defendant Palmisano Law is appropriate. 

Because the Court finds that successor liability under a mere continuation theory 

applies, the Court need not address Plaintiff’s arguments that two other theories of 

successor liability apply, that Palmisano Law is the alter ego of Palmisano & Associates, 

or that Palmisano Law was unjustly enriched.1

 

 C. The Amount of Damages 

 Defendants do not dispute that they did not make payments pursuant to the 

agreements between the Parties. Likewise, Defendants do not dispute the alleged 

amounts due and owing to Plaintiff. Rather, Defendants assert that a valid contract was 

never formed and, if a contract was formed, Plaintiff breached the contract. Accordingly, 

there is no disputed issue of fact as to the amount of damages owed by Defendants and 

summary judgment on the issue of damages in favor of Plaintiff is appropriate. 

IV. CONCLUSION 

Based on the foregoing, IT IS ORDERED that Plaintiff’s Motion for Summary 

Judgment (Doc. 48) is granted. 

 The Clerk of the Court shall enter judgment in favor of Plaintiff and against 

Defendants Palmisano & Associates and Palmisano Law in the amount of $187,068.00, 

plus interest to September 16, 2009 in the amount of $12,501.54, plus interest from 

September 16, 2009 to the date of this Order at a rate of 18% per annum, jointly and 

severally. 

IT IS FURTHER ORDERED that any Motion for Attorneys’ Fees and/or 

Request for Costs shall be filed as set forth in LRCiv 54.1 and LRCiv 54.2. 

 

1

 Although Plaintiff does not reference its claims for breach of the implied 

covenant of good faith and fair dealing or open account in its Motion for Summary 

Judgment, during oral argument on its Motion for Summary Judgment, Plaintiff conceded 

that those claims would be rendered moot if the Court granted the Motion for Summary 

Judgment. Accordingly, to the extent those claims are not subsumed in the Court’s 

judgment on the Breach of Contract and Successor Liability Claims, they are dismissed 

with prejudice. 

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