2010 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 3-11-2010 

# Gree n wa y C tr Inc v . Es sex Ins C o P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 08-3724

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2010

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2010 D e c i sion s b y an author i z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion
" Gr e e n wa y C tr Inc v . Es s ex In s C o " (2010). 2010 D e cisio n s . P ape r 1744. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2010/1744NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

_____________ N o. 08- 3724

_____________ GREE NW AY CENTE R, I NC.

v. E S S E X IN S U R A N C E C O M P A N Y ; A N N E T T E M A IO N E , I ndi vi dual l yand as A dm i ni s t r at orof the Est at e of

M ark W i l l et E S S E X I NS UR ANC E CO M P ANY, A ppel l ant

_______________ O n A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e M id d le D istric t o f P e n n sy lv a n ia ( D . C . N o. 04- cv- 1143) D i s t r i ctJ udge: H onor abl e J ames M . M unl ey

_______________ Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

J anuary26, 2010 B e f o re : R E N D E L L a n d J O R D A N , C i r cui tJudges , and P A D O V A * , Seni orD is tr i ct Judge. ( Fi l ed: M ar ch 11, 2010)

_______________ * H o n o rab le Jo h n R . P ad o v a, U n it ed S tat es D istri ct C o u rtS en ior Ju d g e f o r th e E astern D i s tr i ctof Penns y l vani a, s i t t i ng bydes i gnat i on.T h e p o lic yw a s is s u e d o n F e b ru a ry 3 , 1 9 9 7 a n d h a d a te rm o f o n e y e a r. 1 2 _______________ OPI NI ON O F THE COURT

_______________ J O R D A N , C i r cui tJudge . E s s ex I ns ur ance C om pany( “Ess ex”) appea l s fr om a dec l ar at oryj udgm entent er ed agai ns ti tbyt he U ni t ed St at es D i s t r i ctC our tforthe M i ddl e D i s t r i ctof Penns y l vani a af t er a benc h tr i al , obl i gat i ng i tt o defe nd and i ndemni fyG r eenw ayC ent er , I nc. ( “G C I ”) i n a w r ongful death act i on br oughtagai ns tG C I i n t he M onr oe C ount yC our tof C om m on Pl eas byA nnet t e M ai one. T he bas i s forthe D i s t r i ctC our t ’ s j udgm entw as i t s concl us i on thata de f

act o m e rg e r o c c u rre d b e tw e e n G C I a n d W in c o A c q u isitio n s, In c . d /b /a G r eenw ayC ent er( “W i nco”) . W i nco i s the form eroper at orof the G r eenw ayC ent er( the “C ent er ”) , a drug and al cohol t r eatm entfac i l i t yi n H enryvi l l e, Penns y l vani a, and the in su re d o n a 1 9 9 7 p o licyiss u e d b yE ss e x . B e c a u se w e c o n c lu d e th a t G C I is n o t a 1
s ucce s s ort o W i nco underPenns y l vani a l aw , w e w i l l vaca t e the D i s t r i ctC our t ’ s j udgm ent and r emand forfur t herpr ocee di ngs cons i s t entw i t h t hi s opi ni on. I . Backg r ound O n J une 24, 1997, M ark W i l l etpas s ed aw aythe dayaft erhavi ng chec ked i nt o the C ent erfort r eatm entof hi s drug and al cohol addi ct i ons . A tthe t i m e of W i l l et ’ s death, W i nco oper at ed the C ent er . H ow ever , as di s cus s ed i n m or e det ai l bel ow , G C I , w hi ch w as3

i ncorpor at ed i n 1998, eventual l yt ook overthe C ent er ’ s oper at i ons . I n 1999, M ai one b ro u g h t a w ro n g f

u l d e a th a c tio n a g a in s t G C I i n c o n n e c tio n w ith h e r h u s b a n d ’s d e a th . G C I fi l ed the i ns t antl aw s ui tagai ns tE s s ex and M ai one, i ndi vi dual l yand i n her capa ci tyas t he admi ni s t r at orof herhus band’ s es t at e, i n t he M onr oe C ount yC our tof C o m m o n P lea s in D e c e m b e r o f 2 0 0 3 , se e k in g a d e c lar a to ryju d g m e n t th a t E ss e x is obl i gat ed t o i ndemni fyand def end G C I i n M ai one’ s w r ongful death act i on. T he mat t er w as r emoved t o t he D i s t r i ctC our ti n 2004. A ft era benc h t r i al on A pr i l 19, 2005, the C our tfound i n favorof G C I , hol di ng thatthe s t at e courti n t he under l y i ng negl i gence act i on had al r eadyfound G C I t o be a s ucce s s orof W i nco and thati s s ue pr ecl us i on pr event ed Ess ex fr om chal l engi ng t hatfi ndi ng. W e r ever s ed on appe al , hol di ng thati s s ue precl usi on w as i nap pli cable, and rem and ed fo r a det erm i nati on as t o w hetherG C I w as a s u c c e s s o r i n in te re s t to W in c o . G r eenway C tr . I nc. v. Es s ex I

ns . C o. , 475 F. 3d 139 ( 3d C ir . 2 0 0 7 ). O n r emand, t he D i s t r i ctC our thel d a s uppl ement al bench tr i al and, i n an A ugus t6, 2008 m emora ndum opi ni on, t he fol l ow i ng fac t s emer ged. W i nco oper at ed the C ent eras a n a lco h o l an d d ru g re h a b ili tatio n c e n ter p u rsu a n t to a lice n se iss u e d b yth e P e n n sy lv a n ia D epart m entof H eal t h ( “D O H ”) . A ft erW i l l et ’ s death, the D O H r evoked W i nco’ s l i cens e, and the C ent erw as s hutdow n i n N ovember1997. W i nco had pr evi ous l yfi l ed for b a n k ru p tcy i n Ju n e o f

1 9 9 7 a n d h a d d e v e lo p e d a re o rg a n iza tio n p lan p u rsu a n t to w h ich a ll of i t s s t ock w as t o be ves t ed i n orr ei s s ued t o G C I . U l t i m at el y , how ever , no s t ock w asH M A , G C I, a n d W in c o d id , h o w e v e r, h a v e th e s a m e a tto rn e y . 2 A l though t he D i s t r i ctC our tdi d notexpr es s l yacknow l edge thi s fac t , i ti s appar ent 3 fro m the re co rd a n d o u r prior o p inion in this m att er. 4 ev er trans fe rred fro m W inco to G C I. F u rth erm o re, G C I did n o t pu rch ase an yo f W inco ’s
a s s e ts . H eath M anage m entA s s oci at es ( “H M A ”) , a managementcompany , w as author i zed byt he B ankrupt cyC our tt o oper at e the C ent erdur i ng the tr ans i t i on per i od. H M A began
runni ng t he C ent eri n February1998 pur s uantt o a managementagr eementw i t h W i nco, and reopen ed the C enteri n M arch 19 98 “w i t h the ai m of ev entual l yturni ng the b usi ness o v e r t o G C I.” (A p p . a t 1 6 .) Fi nanci ng forthe C ent er ’ s oper at i on w as pr ovi ded by V i aca r e. H M A , V i aca r e, and G C I al l had the s ame i ndi vi dual s s ervi ng on t hei rboar ds of d ir ec tors. H o w ev er, no n e o f th e sh are h o lders, of fice rs, o r directo rs of

W inco w ere sh are h o lders, of

fice rs, o r directo rs of

G C I. 2 H M A b e c a m e th e h o ld e r o f W in c o ’s lic e n se , tho u g h th e lice n se re m a in e d in Wi n c o ’ s n a me . S i n c e mo s to f Wi n c o ’ s e mp l o y e e s l e f tth e Ce n t e ra f

t e ri tc l o s e d , HM A hi r ed new empl oy ees upon r eopeni ng w i t h t he exc ept i on of tw o i ndi vi dual s fr om the pr evi ous admi ni s t r at i on. W hi l e runni ng the C ent er , H M A di d nott ake a nydi r ect i on fr om anyof W i nco’ s s t ockhol der s orow ner s . I n fac t , i tw as pr ohi bi t ed fr om doi ng s o bythe D O H , w h ich o n lyp erm itted th e C en ter t o reo p en o n the c o n d it ion that W inco ’s
m anag em ent be prohibi t ed from part i ci pati ng i n the C enter ’s op erat i on s. G reenw ay C tr. 35

I nc. , 4 7 5 F .3 d a t 1 4 3 n .3 . In o th e r w o rd s, W in c o ’s m a n a g e m e n t w a s f o rb id d e n to , an d in f a c t n e v e r a g a in d id , p la ya n yro le in ru n n in g th e C e n te r a f te r i t w a s s h u t d o w n . T he boar ds of H M A , V i aca r e, and G C I m etbetw een 1998 a nd 2000 t o di s cus s t he C en ter’s op era ti o n s. N o o n e f rom W inco w as p rese n t attho se m ee ti n g s, an d thu s G C I’s exec ut i ve di r ect orm ade de ci s i ons forW i nco. W i nco w as the l i cens ee a nd the named i ns ur ed on r el evanti ns ur ance pol i ci es dur i ng thi s t i m e per i od, and i tm ai nt ai ned bank
a c c o u n ts to p a ye m p lo y e e s , e v e n th o u g h it p la y e d n o ro le in ru n n in g th e C e n te r. A ddi t i onal l y , W i nco r emai ned a pa r t yt o contr act s w i t h var i ous count i es thatr efe r r ed pati ents t o the C enterfor cou rt -s up ervi sed t reatm ent s o thatreferral s pursuant t o those contr act s coul d cont i nue uni nt errupt ed. I n s hor t , aft erH M A t ook overoper at i ons , W i nco es s ent i al l yexi s t ed onl yas a s hel l , i t s s har ehol der s had aba ndoned the corpor at i on and otherent i t i es r an the bus i nes s , butW i nco w as notdi s s ol ved bec aus e of the pende ncyof W ill e t’s s tate c o u rt su it an d “ b e c a u se it w a s c o n v e n ien t to a llo w W in c o to re m a in a p a rty t o thi r d par t ycontr act s t hatw er e s ervi ced byG r eenw ayC ent er . ” ( A pp. at17. ) B ythe t i m e M ai one s ued W i nco – af t ers ui ng G C I and pr es um abl yr eal i zi ng thats he had
m ista k e n lysu e d th e w ro n g d e f e n d a n t – th e sta tu te o f

lim itatio n s h a d ru n a n d h e r la w su it agai ns tW i nco w as di s m i s s ed as t i m e- barr ed. E s s ex def ended W i nco i n t hatact i on. T he p ersist en t eff

o rt s to f ind G C I t o b e W inco ’s su cc esso r ap p ea r t o stem fro m M aion e’s in itia l m is ta k e in s u in g th e im p ro p e r d e f e n d a n t.6

O n J u n e 2 8 , 2 0 0 0 , G C I b e c a m e th e h o ld e r o f th e lic e n s e to ru n th e C e n te r. R egar dl es s of w ho w as oper at i ng t he fa ci l i t y , the C ent erw as al w ay s know n as the Gr e e n wa yCe n t e r ; i t s b u s i n e s s d i d n o tc h a n g e ; i twa s a l wa y s l o c a t e d o n th e s a me p re m is e s , a n d its le tte rh e a d a n d p h o n e n u m b e r d id n o t c h a n g e . T he D i s t r i ctC our t , appl y i ng Penns y l vani a l aw , hel d t hata de f acto m er gerhad o cc u rred b etw ee n W inco an d G C I, su ch that G C I co u ld tak e a d v an tage o f E ssex ’s i ns ur ance pol i cy . I n m aki ng t hatdet erm i nat i on, the C our tcons i der ed fourfac t or s s et for th underPenns y l vani a l aw foras s es s i ng a cl ai m of d e fa c to m er ger : “( 1) cont i nui tyof ow ner s hi p; ( 2) ces s at i on of the or di narybus i nes s by , and di s s ol ut i on of, the pr edec es s or as so o n as p rac ti ca b le; (3) a ssu m p ti o n b ythe s u cc esso r of li ab il it ies o rdin aril yn ec essa ry f o r u n in ter ru p ted c o n tin u a tio n o f th e b u sin e ss ; an d (4 ) c o n tin u ityo f th e m a n a g e m e n t, per s onnel , phy s i cal l ocat i on, and the gene r al bus i nes s oper at i on. ” ( A pp. at15 ( quot i ng C ont i nentalI

ns . C o. v. Schnei der, I

nc. , 8 1 0 A .2 d 1 2 7 , 1 3 5 (P a . S u p e r. C t. 2 0 0 2 ).) T he C ou rtheld that the fir stfact or, con t i nu i t yof o w nershi p, w as m etbecau se H M A “had i n eff

ectbeen runni ng W i nco t o t he ext entthati tneede d runni ng” and the s har ehol der s of H M A ar e i dent i cal t o t hos e of G C I . ( A pp. at19. ) T he C our tfound that the s econd f

act or , ear l i es tpr act i cabl e di s s ol ut i on, w ei ghed i n favorof d e fa c to m er ger beca us e, even though W i nco w as neveroffi ci al l ydi s s ol ved, “i thas no s har ehol der s , no b u sine ss an d d o es n o thing . ” (A p p . at 19 . ) T h e C o u rtfo u n d that the th ir d fa ctor, as s um pt i on of l i abi l i t i es nece s s aryforcont i nuat i on of bus i nes s , w ei ghed i n favorof deT he D i s t r i ctC our tr ej ect ed G C I ’ s ot hertheor i es of r ecove r y . T hos e i s s ues ar e not 4 b e f o re u s o n a p p e a l. T hi s cas e w as r emoved t o D i s t r i ctC our tpur s uantt o 28 U . S. C . § 1441. T he D i s t r i ct 5 C our t ’ s j ur i s di ct i on w as bas ed upon di ver s i t ybeca us e the part i es ar e ci t i zens of di ffe r ent s t at es – G C I i s a ci t i zen of Penns y l vani a w hi l e Ess ex i s a ci t i zen of D el aw ar e and V irg in ia a n d M a io n e a n d W ill e t ar e b o th c iti z e n s o f N e w Je rse y– a n d th e a m o u n t in c o n tr o v e rs ye x c e e d s $ 7 5 ,0 0 0 . See 2 8 U .S .C . § 1 3 3 2 . W e h a v e ju risd ictio n o v e r th is appea l bas ed on 28 U . S. C . § 1291. 7 fa c to m er gerbeca us e the C ent er ’ s contr act s r emai ned i n W i nco’ s name butw er e ca r r i ed outbyH M A and G C I . Fi nal l y , t he C our tfound thatthe fourt h fac t or , cont i nui t yof
m an ag em en t and g en era l bu sine ss o p era ti o n , w eigh ed in f av o r of m erg er b ec au se th ere w as a cont i nui t y“i n t he phy s i cal l ocat i on and gene r al bus i nes s oper at i ons of the G r eenw ayC ent er ” and a cont i nuat i on of per s onnel t o a ce r t ai n ext ent . ( A pp. at20. ) T he C o u rt a c c o rd in g lye n ter e d d e c lar a to ryju d g m e n t in f a v o r o f G C I, o b lig a tin g E ss e x to d e f e n d a n d in d e m n if

yG C I in M a io n e ’s w ro n g f u l d e a th a c tio n b a se d o n its f in d in g th a t a de f acto m e rg e r h a d o c c u rr e d . E s s e x tim e ly ap p e a le d . 4 I I . D i s cus s i on 5 “W e r evi ew a di s t r i ctcourt ’ s fi ndi ngs of fa ctfol l ow i ng a benc h t r i al underthe cl ear l yerr oneous s t andar d. ” A m . So c’y f or T est i ng& M

ater i als v. C orrpro C os. , I nc. , 478 F. 3d 557, 566 ( 3d C i r . 2007) . I n contr as t , w e exe r ci s e pl enaryr evi ew overa di s t r i ct c o u rt ’s le g a l c o n c lu s io n s . I d. S i nce thi s act i on i s gov erned b yP enn sy l van i a l aw , w e m ust “appl yexi s t i ng s t at e l aw as i nt erpr et ed bythe s t at e’ s hi ghes tcour ti n an ef for tt o pr edi ct how t hatcourtw oul d deci de the pr eci s e l egal i s s ues befor e us . ” See Koppers C o. v.8

A etna C as . and Sur
. C o. , 98 F. 3d 1440, 1445 ( 3d C i r . 1996) . I f the hi ghes ts t at e courthas no tspok en o n the pert i nen ti ssue, w e m ayl oo k fo r gui dan ce t o, am on g o t her things, deci s i ons of s t at e i nt erm edi at e appe l l at e court s and dec i s i ons of fe der al cour t s i nt erpr et i ng th a t s ta te ’s la w . I

d. T he gene r al rul e i n Penns y l vani a i s that , w hen one c om panys el l s al l or s ubs t ant i al l yal l of i t s as s et s t o anothercompany , the pur chas i ng companyi s notl i abl e as a s u c c e s s o r. C ont i nentalI ns . C o. v. Schnei der, I

nc. , 8 7 3 A .2 d 1 2 8 6 , 1 2 9 1 (P a . 2 0 0 5 ). O ne exc ept i on t o t hatrul e occ ur s w hen the pur chas i ng companyi s “mer el ya cont i nuat i on of the s el l i ng corpor at i on, ” i d. at1291, al s o know n as a d e fa c to m erg er, B er g C hi l l i ng Sys
. , I nc. v. H ul lC or p. , 4 3 5 F .3 d 4 5 5 , 4 6 8 (3 d C ir. 2 0 0 6 ) (n o tin g th a t co u rts tre a t d e fa c to me r g e ra n d c o n t i n u a t i o n i d e n t i c a l l y ) . A d e fa c to m erg er o r m ere co n ti n u ati o n o cc u rs w hen a ne w corpor at i on i s form ed t o acqui r e the as s et s of ort ake ove ra s econd c o rp o ra tio n , w h ic h th e n c e a s e s to e x is t. See Sc hnei der , 810 A . 2d at134- 35. A g a in , as th e D istric t C o u rt re c o g n ize d , P e n n sy lv a n ia la w re q u ire s c o u rts to cons i derthe fol l ow i ng fourfac t or s i n det erm i ni ng w hethera d e fa c to m er gerhas occurr ed betw een tw o en t i t i es, “(1) con t i nu i t yof o w nershi p; ( 2) cess at i on of the ordi narybu si ness by , and di s s ol ut i on of, t he pr edec es s oras s oon as pr act i cabl e; ( 3) as s um pt i on bythe successor of l i abil i t i es ordi nari l ynecessaryfor un i nterrupt ed co nti nu at i on of the bu si ness; and ( 4) cont i nui t yof the management , per s onnel , phy s i cal l ocat i on, and the gene r al bus i nes s oper at i on. ” Id
. a t 1 3 5 ; s ee al s o B er g C hi l l i ng , 435 F. 3d at468- 69. I n B erg , weIn its su p p lem e n tal b rie f , G C I c laim s th a t F iz

z ano i s s om ehow i r r el evantt o our 6 anal y s i s , beca us e F iz

z ano conce r ned an a s s etpur chas e w hi l e no as s etpur chas e occ ur r ed in th is c a s e . F iz

z ano i s t he Penns y l vani a Super i orC our t ’ s l at es tpr onouncementon t he de fa c to m er gerdoctr i ne, and i t s l egal pr i nci pl es ar e appl i cabl e her e eve n i f ther e ar e fa ctual d if f e re n c e s in th e c a se s. In d e e d , G C I itse lf c ites c a se s in its a n sw e rin g b rie f a s a p p lica b le l aw on the is sue w hich them sel ves con cern assetpu rchases. N or does F iz z ano confl i ct w i th the Penns y l vani a Super i orC our t ’ s ear l i erdeci s i on i n Schnei der , 810 A . 2d 127 ( Pa. S u p e r. C t. 2 0 0 2 ). I n s te a d , F iz z ano cl ar i fi ed Schnei der , ex p lain in g th a t Schnei der emphasi zed “ t he i m por t ance of cont i nui t yof ow ner s hi p i n t he de f acto m er geranal y s i s . ” F iz z ano , 9 7 3 A .2 d a t 1 0 2 1 . 9 expl ai ned thatt he fi r s tfac t or , cont i nui t yof ow ner s hi p, i s the mosti m por t antfac t ori n t he anal y s i s , and thatt he abs ence of anycont i nui t yof ow ner s hi p t her efor e cr eat es a “s t r ong pr es um pt i on agai ns ti m pos i ng s ucce s s orl i abi l i t y . ” 435 F. 3d at469. R ece nt l y , the Penns y l vani a Super i orC our tconfi r m ed thatcont i nui t yof ow ner s hi p i s “a ke yel ement thatm us texi s ti n or dert o appl yt he de f acto m er gerdoctr i ne, s i nce i n t he abs ence of a tr ans ferof s t ock foras s et s t he cons equenc e of the tr ans act i on i s notthe func t i onal equi val entof a mer ger . ” F iz z ano B r os . C oncr et e Prods
. , I nc. v. X LN , I nc. , 973 A . 2d 1 0 1 6 , 1 0 2 0 (P a. S u p er. C t. 2 0 0 9 ). “The obj ect i ve of [ t he cont i nui t yof ow ner s hi p] 6
r equi r ementi s us ual l yt o i dent i fys i tuat i ons i n w hi ch s har ehol der s of a s el l ercorpor at i on unfai r l yat t empt t o i m pos e thei rcos t s orm i s deeds on t hi r d par t i es byr et ai ni ng as s et s t hat have be en art i fi ci al l ycl eans ed of l i abi l i t y . ” B erg , 4 3 5 F .3 d a t 4 6 9 . T he D i s t r i ctC our terr ed i n concl udi ng thata de f acto m er geroccurr ed betw een G C I and W i nco bec aus e ther e i s no evi dence of cont i nui t yof ow ner s hi p. G C I never p u rch ase d an yo f W inco ’s asse ts an d n o stoc k w as e v er trans fe rred fro m W inco ’sG C I’s rel ianc e o n the b an k rup tcyp lan, w h ich s o u g h t t o tr an sfe r W inco ’s st o ck to G C I, 7 is m is p la c e d , n o t le a s t b e c a u s e th e re w a s n o s u c h tr a n s f e r. 10 sh a re h o ld e rs to G C I’s sh a re h o ld e rs. F u rth e rm o re , W in c o ’s o w n e rs n e v e r p a rticip a ted in run n ing the C en ter after itw as c lose d in N o v em b er 1 9 9 7 an d , im p o rt an tl y , w ere p roh ibit ed fro m d o ing so as a co n d it ion o f th e re o p en ing o f th e C en ter un d er H M A ’s
m a n a g e m e n t. T h e re c o rd d o e s n o t sh o w th a t th e o w n e rsh ip o f W in c o p a ss e d to H M A in anyfas hi on. T h e D istric t C o u rt f

o u n d a c o n tin u ityo f

o w n e rsh ip b e tw e e n H M A a n d W in c o “ to a ce r t ai n ext ent ” bec aus e H M A r an “W i nco t o t he ext entthati tneede d runni ng. ” ( A pp. at19. ) Pr es um abl y , t he D i s t r i ctC our tw as r efe r r i ng t o t he fa ctthatH M A r an the C ent er aft eri tr eopene d and ca rr i ed outcontr act s t o w hi ch W i nco w as s t i l l a part y . T hatdoes not m ean, how ever , t hatt he off i cer s and di r ect or s of H M A s om ehow beca m e ow ner s of W inco . A n d , to the ex tent that o v erlap p ing m an ag em en t i s m ea n ing fu l, n o n e o f W inco ’s
m a n a g e m e n t p la y e d a n yro le a t a ll in th e C e n te r’ s o p e ra tio n o n c e it r e o p e n e d . A ccor di ngl y , t her e w as no cont i nui t yof ow ner s hi p betw een W i nco and H M A , and the f a c t th a t G C I a n d H M A sh a re th e sa m e m a n a g e m e n t is irre lev a n t. 7 G C I as s ert s t hatt he “gr adual m et amorphos es [w her e] the oper at i ons of [the C ent er ] w entfr om W i nco t o H M A t o G C I overa cour s e of t i m e” e s t abl i s hes cont i nui tyof o wn e r s h i p . ( Ap p e l l e e ’ s An s . Br . a t2 1 . ) Al t h o u g h i ti s tru e th a tHM A, a n d GCI th e re a f ter , as su m e d o p e ra tio n o f th e C e n ter , the re w a s n o c o n tin u ityo f o w n e rsh ip11

betw een W i nco and H M A ( and thus , G C I ) – an i m por t antdi s t i nct i on. I n t he abs ence of a s t ock tr ans fer , as s etpur chas e, oranyot herevi dence es t abl i s hi ng thatthe ow ner s of W i nco bec ame t he ow ner s of G C I , ther e i s no bas i s forfi ndi ng a cont i nui t yof ow ner s hi p. A l though ourconcl us i on i s s uffi ci entt o pr ecl ude appl i cat i on of the d e fa c to m e rg e r d o c tr in e , s ee Fiz z ano , 973 A . 2d at1020 ( concl udi ng that“s i nce ther e w as no cont i nui tyof ow ner s hi p, t he de f act o m er gerdoctr i ne does notappl y ”) , w e al s o not e that the r emai ni ng fac t or s – ear l i es tpr act i cabl e di s s ol ut i on of the pr edec es s or , as s um pt i on by the s ucce s s orof the nec es s aryl i abi l i t i es , and the cont i nui t yof the managementand gener al oper at i ons – do nots uppor ta fi ndi ng of d e fa c to m er ger . Fi r s t , r egar dl es s of
w hetherW i nco conduc t ed anybus i nes s , i tw as neverdi s s ol ved and w as capa bl e of
r es pondi ng t o t he ac t i on M ai one fi l ed aga i ns ti t . Second, al t hough G C I s ervi ced s ever al o f W i n c o ’ s c o n t r a c t s , GCI d i d n o tp u r c h a s e W i n c o ’ s s e r v i c e a g r e e me n t s o ra s s u me W i nco’ s l i abi l i t i es . Fi nal l y , al t hough the gene r al bus i nes s oper at i ons and phy s i cal l ocat i on of the C ent erdi d notchange underG C I ’ s ow ner s hi p, the managementw as new an d the p erso n n el w as, fo r th e m o st pa rt , d iffe ren t from p erso n n el un d er W inco ’s
m anag em ent. T aking t he fo ur fact ors t og et her, w e cann ot concl ud e t hat G C I i s a cont i nuat i on of W i nco and, t hus , t he D i s t r i ctC our t ’ s concl us i on t o t he contr aryw asA tt he end of i t s anal y s i s , t he D i s t r i ctC our tfocus ed on the fa ctthat“G C I m ai nt ai ned 8 the i ns ur ance i n W i nco’ s name even w hen W i nco w as cl ear l ydoi ng not hi ng t o oper at e the b u sin e ss .” A lth o u g h it m a yh a v e a p p e a re d e q u itab le to th e C o u rt to p e rm it G C I to re c o v e r in su ra n c e p ro c e e d s f ro m E ss e x w h e n G C I w a s ru n n in g th e C e n ter , W ill e t’s d e a th t ook pl ace i n J une of 1997, w hen W i nco w as runni ng the C ent er . Fur t herm or e, the i ns ur ance pol i cyi n ques t i on w as i s s ued t o W i nco fora t erm of one y ear , begi nni ng on F e b ru a ry3 , 1 9 9 7 . Ac c o r d i n g l y , t h a tp a r t i c u l a rp o l i c ywo u l d h a v e e x p i r e d b e f o r e HM A – an d ce rt ainlyb ef

o re G C I – b eg an run n ing the C en ter. 12 erro n eo u s. S ince G C I i s n o t W inco ’s su cc esso r, G C I ca n n o t t ak e a d v an tage o f E ssex ’s

8 i nsurance p oli cyon t hat basi s. I I I . C oncl usi on N o d e fa c to m e rg e r o r c o n tin u a tio n o c c u rre d b e tw e e n G C I a n d W in c o th a t w o u ld p e r m i tG C I t o t a k e a d v a n t a g e o f E s s e x ’ s i n s u r a n c e p o l i c ya s Wi n c o ’ s s u c c e s s o r . We
m us tt her efor e vac at e the D i s t r i ctC our t ’ s decl ar at oryj udgm entand r emand forfur t her pr ocee di ngs cons i s t entw i t h t hi s opi ni on.