IN THE UNITED STATES DISTRICT COURT 

FOR THE SOUTHERN DISTRICT OF OHIO 

EASTERN DIVISION 

THE OPPORTUNITY FUND, LLC : 

 : 

 Plaintiff, : Case No. 2:11-CV-528 

 : 

 v. : JUDGE ALGENON L. MARBLEY 

 : 

EPITOME SYSTEMS, INC., et al., : Magistrate Judge Elizabeth 

 : Preston Deavers 

 Defendants. : 

OPINION & ORDER 

I. INTRODUCTION 

 This matter is before the Court on Defendant Savana, Inc.’s (“Savana”) Motion to 

Dismiss the Amended Complaint Pursuant to Rules 12(B)(2), 12(B)(3), and 12(B)(6) of the 

Federal Rules of Civil Procedure (“Motion”). (Doc. 34.) For the reasons stated below, 

Defendant’s Motion is GRANTED in part and DENIED in part. 

II. BACKGROUND 

 In May 2008, Plaintiff, The Opportunity Fund, LLC (“Opportunity Fund”), an Ohio 

company, became an “investing entity” in Epitome Systems, Inc. (“Epitome”), a Delaware 

corporation based in Pennsylvania that provided client companies with business information 

processing services. This transaction was memorialized with a Loan and Security Agreement 

that granted some number of investing entities,1

 including Opportunity Fund, a security interest 

in Epitome’s assets as collateral for funds lent. (Doc. 26, Ex. A.) According to the terms of the 

Agreement, collateral assets consisted of a comprehensive list of Epitome’s current and future 

                                                            

1 The text of the document suggests the presence of at least one other investing entity: Vision Opportunity Master 

Fund, Ltd.

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personal property, including intangibles like stock, intellectual property, computer software 

rights, and customer lists. 

 In July 2008, in connection with the Loan and Security Agreement, Epitome executed a 

Secured Promissory Note (the “Note”) (Doc. 26, Ex. B) in which it promised to repay 

Opportunity Fund the lent sum of $100,000 plus interest on or before August 31, 2008. The 

Note contains a successor clause, which states: “This Note shall be binding upon Maker 

[Epitome] and its successors and shall inure to the benefit of the Payee [Opportunity Fund] and 

its successors and permitted assigns.” (Doc. 26, Ex. B at 6.) The Note also contains a choice of 

law and forum selection clause which directs that the laws of New York State govern “[a]ll 

questions concerning the construction, validity, enforcement and interpretation” of the Note, and 

that “all legal proceedings concerning the interpretations, enforcement and defense” of the Note 

are to be “commenced in the state and federal courts sitting in the City of New York, Borough of 

Manhattan.” (Doc. 26, Ex. B at 6-7.) Opportunity Fund alleges that Epitome failed to comply 

with the terms of the Note and that the $100,000 loan was never repaid. 

 In March 2009, a Bill of Sale and Transfer Statement (“Bill of Sale”) (Doc. 26, Ex. C) 

was executed which sold Epitome, or some part of its assets, to Savana, a Delaware corporation 

with its primary place of business in Pennsylvania. The Bill of Sale lists Sovereign Bank as the 

seller. The Bill of Sale indicates that the buyer, Savana, paid Sovereign $400,000 for their 

purchase, less a $60,000 expense reimbursed by the seller. 

 Plaintiff alleges that “the March 16, 2009 Bill of Sale [of Epitome to Savana] was in fact 

a de facto consolidation or merger and/or Savana is merely a continuation of the business of 

Epitome and/or the March 16, 2009 transaction was entered into fraudulently for the purpose of 

escaping liability.” (Doc. 26 at ¶ 12.) In Plaintiff’s conception of transaction, Savana was a 

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newly formed company whose first act was the acquisition of Epitome in its entirety. Epitome as 

previously organized ceased operations in the wake of the transactions. Savana continues to 

conduct the business of Epitome under the Epitome name. The business continues to serve the 

same customers. (See Doc. 39 at 3-4, Ex. C.) Savana has retained top officers of Epitome to run 

the business. In particular, Epitome’s founder is President of the new company, and Epitome’s 

Chief Financial Officer is the new entity’s Chief Administrative Officer. (Doc. 39, Exs. C, D.) 

Plaintiff has included as Exhibits electronically available public records for Epitome’s business 

entity registration in Pennsylvania (Doc. 39, Ex. A) and Delaware (Doc. 39, Ex. B). Neither 

evinces any information identifying ownership interests in Epitome. 

 In contrast, Defendant Savana contends that it purchased only some of Epitome assets, 

and in doing so did not assume any of Epitome’s liabilities or obligations. Defendant 

characterizes the transaction at issue as a mere asset purchase at a public sale orchestrated by 

Sovereign Bank, which had seized the assets as collateral when Epitome defaulted on a secured 

loan. Defendant argues Sovereign’s exercise of this post-default remedy was proper under the 

Uniform Commercial Code and denies that there is any continuity or commonality of ownership 

between itself and Epitome. (See Docs. 35, 40.) Savana has submitted no sworn affidavits in 

support of these contentions. 

 In June 2011, Opportunity Fund filed a Complaint asserting breach of contract, 

conversion, promissory estoppel and unjust enrichment claims against named defendants 

Epitome and Savana. (Doc. 1.) After multiple futile attempts to serve process on Epitome 

through the agents so designated in Epitome’s Pennsylvania and Delaware business entity 

records, Plaintiff concluded that Epitome no longer existed due to its purchase by Savana. 

Plaintiff therefore amended its Complaint to name Savana as the sole defendant. (Doc. 26.) 

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Defendant Savana now moves to dismiss Plaintiff’s Amended Complaint pursuant to Fed. R. 

Civ. P. 12(b)(2) for lack of personal jurisdiction, pursuant to Rule 12(b)(3) due to the presence of 

a forum selection clause in the Note, and pursuant to Rule 12(b)(6) for failure to state a claim on 

which relief can be granted. The Court discusses each asserted ground for dismissal in turn. 

III. MOTIONS 

A. Personal Jurisdiction 

Defendant Savana seeks dismissal of the claims against it for lack of personal jurisdiction 

pursuant to Federal Rule of Civil Procedure 12(b)(2). “Because personal jurisdiction is a 

threshold determination linked to any subsequent order issued by the court,” The Kroger Co. v. 

Malease Foods Corp., 437 F.3d 506, 510 (6th Cir. 2006), the Court turns to Defendant’s Rule 

12(b)(2) argument first. For the reasons set forth below, Defendant’s Rule 12(b)(2) motion to 

dismiss for lack of personal jurisdiction is DENIED. 

1. Standard of Review 

Plaintiff bears the burden of establishing that personal jurisdiction over a defendant 

exists. Air Prods. & Controls, Inc. v. Safetech Int'l, Inc., 503 F.3d 544, 549 (6th Cir. 2007) 

(citing Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989)). Where, as 

here, “the district court relies solely on written submissions and affidavits to resolve a Rule 

12(b)(2) motion, rather than resolving the motion after either an evidentiary hearing or limited 

discovery, the burden on the plaintiff is ‘relatively slight,’ and ‘the plaintiff must make only a 

prima facie showing that personal jurisdiction exists in order to defeat dismissal.’” Id. (quoting 

Am. Greetings Corp. v. Cohn, 839 F.2d 1164, 1169 (6th Cir. 1988); Theunissen v. Matthews, 935 

F.2d 1454, 1458 (6th Cir. 1991)). Plaintiff can make this showing by “‘establishing with 

reasonable particularity sufficient contacts between [the Defendants] and the forum state to 

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support jurisdiction.’” Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 

2002) (quoting Provident Nat'l Bank v. California Savings Loan Ass'n, 819 F.2d 434, 437 (3d 

Cir. 1987)). In deciding a Rule 12(b)(2) motion, the Court “construe[s] the facts in the light most 

favorable to the non-moving party,” and “does not weigh the controverting assertions of the 

party seeking dismissal.” CompuServe Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996) 

(emphasis in original) (citing Theunissen, 935 F.2d at 1459). 

2. Law and Analysis 

a. Introduction

“Personal jurisdiction over an out-of-state defendant arises from certain minimum 

contacts with [the forum] such that maintenance of the suit does not offend traditional notions of 

fair play and substantial justice.” Air Prods., 503 F.3d at 549 (quoting Int'l Shoe Co. v. 

Washington, 326 U.S. 310, 316 (1945)) (internal quotations omitted). When a federal court sits 

in diversity, “[t]he exercise of personal jurisdiction is valid only if it meets both the state longarm statute and constitutional due process requirements.” Calphalon Corp. v. Rowlette, 228 F.3d 

718, 721 (6th Cir. 2000) (citing Nationwide Mut. Ins. Co. v. Tryg Int’l Ins. Co., Ltd., 91 F.3d 

790, 793 (6th Cir. 1993)). 

Here, Plaintiff argues that this Court has jurisdiction over Defendant Savana not because 

of its own contacts with Ohio, but because it is successor to Epitome. As the Sixth Circuit has 

explained: 

federal courts have consistently acknowledged that it is compatible with due 

process for a court to exercise personal jurisdiction over an individual or a 

corporation that would not ordinarily be subject to personal jurisdiction in that 

court when the individual or corporation is an alter ego or successor of a 

corporation that would be subject to personal jurisdiction in that court. 

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Estate of Thompson v. Toyota Motor Corp. Worldwide, 545 F.3d 357, 362 (6th Cir. 2008) 

(quoting Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir. 2002)). 

Accordingly, in evaluating Defendant’s 12(b)(2) motion, the Court assesses first whether 

Plaintiff has made the requisite prima facie statutory and constitutional showing with respect 

Epitome, and then determines whether personal jurisdiction can be imputed to Savana as 

Epitome’s successor. 

b. Ohio's Long Arm Statute

Ohio's long-arm statute grants Ohio courts personal jurisdiction over a non-resident 

defendant “as to a cause of action arising from the person's ... [t]ransacting any business in 

[Ohio].” Ohio Rev. Code § 2307.382(A)(1); Slate Rock Construction Co., Ltd. v. Admiral Ins. 

Co., No. 2:10-cv-1031, 2011 WL 3841691 at *2 (S.D. Ohio Aug. 30, 2011). The Supreme Court 

of Ohio has broadly construed the meaning of “transacting any business in Ohio,” which does 

not require physical presence in Ohio. Ky. Oaks Mall Co. v. Mitchell's Formal Wear, 559 N.E.2d 

477, 470-80 (Ohio 1990); Goldstein v. Christiansen, 638 N.E.2d 541, 544 (Ohio 1994). 

The facts pled regarding Epitome’s interactions with Plaintiff constitute “transacting 

business in Ohio” within the broad meaning of the statute. Epitome and Opportunity Fund – an 

Ohio corporation with its primary place of business in Ohio – together executed the May 2008 

Loan and Security Agreement. That agreement lists Opportunity Fund as an “investing entity” in 

Epitome and grants Opportunity Fund a security interest in all of Epitome’s assets, including its 

stock, intellectual property, customer lists, etc., as collateral for Opportunity Fund’s investments. 

(See Doc. 26, Ex. A at 1-5.) Epitome and Opportunity Fund also together executed the June 2008 

Secured Promissory Note, which memorializes Plaintiff’s six-figure investment in Epitome and 

created an ongoing obligation for Epitome to repay that loan with interest. Plaintiff’s assertion 

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of these transactions is sufficient to make a prima facie showing that personal jurisdiction over 

Epitome is authorized under Ohio’s long arm statute. 

c. Due Process

In evaluating whether personal jurisdiction comports with due process, the Court must 

determine whether there are sufficient minimum contacts between the nonresident defendant and 

the forum state so as not to offend “‘traditional notions of fair play and substantial justice.’” Bird 

v. Parsons, 289 F.3d 865, 871-72 (6th Cir. 2002) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 

310, 316 (1945)). Jurisdiction may be found to exist “either generally, in cases in which a 

defendant's ‘continuous and systematic’ conduct within the forum state renders that defendant 

amenable to suit in any lawsuit brought against it in the forum state, or specifically, in cases in 

which the subject matter of the lawsuit arises out of or is related to the defendant's contacts with 

the forum.’” Thompson, 545 F.3d at 361 (6th Cir. 2008) (quoting Nationwide, 91 F.3d at 793). 

Here, as there is no indication that Epitome had ‘continuous and systematic’ contact with Ohio, 

the relevant inquiry is whether the constitutional requirements for specific jurisdiction are met in 

this case. 

Specific jurisdiction “often may be premised on a single act of the defendant.” 

Nationwide, 91 F.3d at 794 (citing McGee v. Int’l Life Ins. Co., 355 U.S. 220, 222 (1957)). “The 

nature and quality of the act, as well as the circumstances surrounding its commission, must be 

examined to determine whether personal jurisdiction exists in each case.” Id. (citing Int’l Shoe,

326 U.S. at 318). The Sixth Circuit has devised a three-part test for determining the “outer limits 

of in personam jurisdiction based on a single act:” 

First, the defendant must purposefully avail himself of the privilege of acting in 

the forum state or causing a consequence in the forum state. Second, the cause of 

action must arise from the defendant's activities there. Finally, the acts of the 

defendant or consequences caused by the defendant must have a substantial 

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enough connection with the forum state to make the exercise of jurisdiction over 

the defendant reasonable. 

Payne v. Motorists' Mut. Ins. Cos., 4 F.3d 452, 455 (6th Cir. 1993) (quoting Southern Mach. Co. 

v. Mohasco Indus., 401 F.2d 374, 381 (6th Cir. 1968)). As discussed below, the Court finds all 

three requirements satisfied. 

i. Purposeful Availment 

With respect to interstate contractual obligations, “parties who reach out beyond one state 

and create continuing relationships and obligations with citizens of another state are subject to 

regulation and sanctions in the other State for the consequences of their activities.” Nationwide, 

91 F.3d at 795 (quoting LAK, Inc. v. Deer Creek Enterprises, 885 F.2d 1293, 1300 (6th Cir. 

1989)) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 (1985)) (internal quotations 

omitted). The purposeful availment requirement “ensures that a defendant will not be haled into 

a jurisdiction solely as a result of random, fortuitous, or attenuated contacts.” Id. (quoting LAK,

885 F.2d at 1300) (quoting, Burger King, 471 U.S. at 475) (internal quotations omitted). Thus, 

“the existence of a contract with a citizen of the forum state, standing alone, will not suffice to 

confer personal jurisdiction over a foreign defendant.” Id. (citing Burger King, 471 U.S. at 475). 

Rather, “prior negotiations and contemplated future consequences, along with the terms of the 

contract and the parties' actual course of dealing ... must be evaluated in determining whether the 

defendant purposefully established minimum contacts within the forum.’” Id. (quoting Burger 

King, 471 U.S. at 479). 

Epitome’s alleged contacts with Ohio satisfy this standard. In executing the Loan and 

Security Agreement and Secured Promissory Note, Epitome purposely entered an ongoing 

relationship with the Plaintiff Ohio corporation in order to gain the benefit of Opportunity Fund’s 

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substantial investment capital. Moreover, that relationship contemplated future consequences. 

These contracts not only created an ongoing obligation for Epitome to repay its debt to 

Opportunity Fund, but also granted the Ohio company a conditional right to $100,000 worth of 

Epitome’s assets should it default on its obligations. Epitome’s contacts are therefore hardly 

random or fortuitous in nature, but rather a purposeful availment of the privilege of transacting 

business on Ohio. See Burnshire Dev., LLC v. Cliffs Reduced Iron Corp., 198 F. App'x 425, 432 

(6th Cir. 2006) (holding that the Ohio “transacting any business” standard is coextensive with the 

purposeful availment prong of constitutional analysis). 

ii. Arising from Activities in Forum State 

To establish specific jurisdiction, the cause of action at issue must arise from the 

defendant's activities in the forum state. Air Prods., 503 F.3d at 552. To meet this requirement, a 

plaintiff must establish at least a “causal connection” between a defendant's activities in the 

forum state and the harm to the plaintiff. Neogen, 282 F.3d at 892. “If a defendant's contacts with 

the forum state are related to the operative facts of the controversy, then an action will be 

deemed to have arisen from those contacts.” CompuServe, 89 F.3d at 1267 (citing Reynolds v. 

Int'l Amateur Athletic Fed'n, 23 F.3d 1110, 1119 (6th Cir. 1994)). Here, all of Opportunity 

Fund’s claims arise out of Epitome’s alleged failure to repay the Secured Promissory Note 

executed with the Plaintiff Ohio corporation. This satisfies the second due process requirement. 

iii. Reasonableness 

Finally, a defendant’s acts or the consequences thereof must have a substantial enough 

connection with the forum state to make the exercise of jurisdiction reasonable. Southern 

Machine Co., 401 F.2d at 381. When the first two prongs of the due process inquiry have been 

satisfied, Ohio courts will “presume the specific assertion of personal jurisdiction was proper.” 

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Cole v. Mileti, 133 F.3d 433, 436 (6th Cir. 1998). When making the “reasonableness” inquiry, 

courts consider several factors, “including ‘the burden on the defendant, the interest of the forum 

state, the plaintiff's interest in obtaining relief, and the interest of other states in securing the 

most efficient resolution of controversies.’” CompuServe, 89 F.3d at 1268 (quoting Am. 

Greetings, 839 F.2d at 1169–70). 

As a Pennsylvania-based Delaware corporation, Epitome would certainly be burdened by 

defending a lawsuit in Ohio. Nevertheless, when it accepted the capital investment from 

Opportunity Fund and entered into the Loan and Security Agreement and Note, it assumed that 

obligation. While it may be burdensome to defend a suit in Ohio, Epitome “knew when [it] 

entered into [business] with [Plaintiff] that [it] was making a connection with Ohio, and 

presumably ... hoped that connection would work to [its] benefit.” Id. 

Moreover, “Ohio has a legitimate interest in protecting the business interests of its 

citizens,” Bird, 289 F.3d at 875, and “a strong interest in resolving a dispute involving an Ohio 

company.” CompuServe, 89 F.3d at 1268. That another state – here, Pennsylvania or Delaware – 

would also have an interest in adjudicating these claims “does not override the other factors 

suggesting that personal jurisdiction in Ohio is reasonable.” Bird, 289 F.3d at 876. 

Given the presumption of reasonableness that arises from the Court's finding of 

purposeful availment and harm arising out of Epitome’s contacts with Ohio, as well as the 

Court’s obligation “construe the facts in the light most favorable to the non-moving party,” 

CompuServe, 89 F.3d at 1262, the Court finds Epitome’s connections with Ohio substantial 

enough to make personal jurisdiction reasonable. Plaintiff’s allegations therefore meet all three 

elements necessary to establish specific jurisdiction over Epitome consistent with due process. 

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d. Successor Jurisdiction 

Having found the exercise of personal jurisdiction proper with respect to Epitome, the 

Court now examines whether Savana may be subject to personal jurisdiction as Epitome’s 

successor. As discussed above, the Sixth Circuit has explained that “it is compatible with due 

process for a court to exercise personal jurisdiction over ... an alter ego or successor of a 

corporation that would be subject to personal jurisdiction in that court.” Thompson, 545 F.3d at 

362. See Hitachi Medical Sys. Am., Inc. v. Branch, No. 5:09-cv-01575, 2010 WL 816344 at *5 

(N.D. Ohio Mar. 4, 2010) (“The exercise of jurisdiction over an alter ego is compatible with due 

process because a corporation and its alter ego are the same entity-thus, the jurisdictional 

contacts of one are the jurisdictional contacts of the other for the purposes of the International 

Shoe due process analysis.”) (emphasis in original) (quoting Sys. Div., Inc. v. Teknek Elecs., Ltd., 

253 Fed. Appx. 31, 27 (Fed.Cir. 2007). To apply the successor theory of personal jurisdiction in 

a diversity action, courts look to the forum state’s rules of successor liability. See Thompson, 

545 F.3d at 362 (applying Ohio law governing piercing the corporate veil in an alter-ego 

personal jurisdiction analysis). 

In Ohio, “[t]he well-recognized general rule of successor liability provides that the 

purchaser of a corporation’s assets is not liable for the debts and obligations of the seller 

corporation.” Welco Indus., Inc. v. Applied Cos., 617 N.E.2d 1129, 1132 (Ohio 1993) (citing 

Flaugher v. Cone Automatic Mach. Co., 507 N.E.2d 331 (Ohio 1987)). The Ohio Supreme Court 

has identified discrete exceptions to the general rule when: “(1) the buyer expressly or impliedly 

agrees to assume such liability; (2) the transaction amounts to a de facto consolidation or merger; 

(3) the buyer corporation is merely a continuation of the seller corporation; or (4) the transaction 

is entered into fraudulently for the purpose of escaping liability.” Id. at 1133 (citing Flaugher, 

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507 N.E.2d at 334). Plaintiff argues that the de facto merger, mere continuation, and fraudulent 

transaction exceptions apply in this case. 

i. De Facto Merger 

A de facto merger is “a transaction that results in the dissolution of the predecessor 

corporation and is in the nature of a total absorption of the previous business into the successor.” 

Welco, 617 N.E.2d at 1134 (citing Flaugher, 507 N.E.2d at 340 (A.W. Sweeney, J., dissenting)). 

The hallmarks of de facto merger include: “(1) the continuation of the previous business activity 

and corporate personnel, (2) a continuity of shareholders resulting from a sale of assets in 

exchange for stock, (3) the immediate or rapid dissolution of the predecessor corporation, and (4) 

the assumption by the purchasing corporation of all liabilities and obligations ordinarily 

necessary to continue the predecessor’s business operations.” Id. (citing Turner v. Bituminous 

Cas. Co., 244 N.W.2d 873, 887 (Mich. 1976)). 

Here Plaintiff has alleged that “the March 16, 2009 Bill of Sale [of Epitome to Savana] 

was in fact a de facto consolidation or merger.” To this end, Plaintiff contends that Savana 

purchased Epitome’s business operation in its entirety, continues to conduct Epitome’s business 

and serve its customers under the Epitome name, and has retained much of Epitome’s senior 

management. Plaintiff also alleges that Epitome ceased operations and was essentially dissolved 

upon its acquisition by Savana. Although Plaintiff makes no allegations regarding the payment 

details of the transaction nor the specific identities of the respective stockholders and directors of 

Savana and Epitome, it is unclear how Opportunity Fund would have access to such information 

for two privately held corporations without the benefit of discovery. Indeed, the publicly 

available business entity registration documents for Epitome, both in Pennsylvania and 

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Delaware, reveal no information whatsoever about the identity of the ownership interests in the 

corporation. (See Doc. 39, Exs. A, B.) 

Defendant’s contrary contention that there is no continuity of ownership and no 

assumption of ordinary business liabilities or obligations is of no moment: the Court “does not 

weigh the controverting assertions of the party seeking dismissal” in evaluating a Rule 12(b)(2) 

motion. CompuServe, 89 F.3d at 1262. Nor is the Court persuaded by Defendant’s argument that, 

under the Ohio Court of Appeals’ decision in Rondy & Co. v. Plastic Lumber Co., 2011 WL 

5377741, C.A. No. 25548, 2011 -Ohio- 5775 (Ohio Ct. App. Nov. 9, 2011), Sovereign Bank’s 

involvement bars this transaction from being a de facto merger as a matter of law. 

Plastic Lumber considers a situation in which a manufacturer and seller of plastic lumber 

products, Plastic Lumber, defaulted on a bank loan secured by the company’s assets. Plastic 

Lumber and the bank, Huntington, entered into a formal agreement by which Plastic Lumber 

surrendered all its assets to be liquidated in an orderly fashion by a third-party liquidating officer. 

The majority – though not all – of those assets were sold to Bright Idea, a newly formed 

company fully owned by Plastic Lumber’s primary shareholder. Unlike Plastic Lumber, Bright 

Idea’s business was the sale and assembly of plastic lumber products, not their manufacture. 

Significantly, the prices of Plastic Lumber’s various assets were all either set by the independent 

liquidating officer and the bank, or determined via legitimate public auction. Fully one quarter 

of Plastic Lumber’s assets were sold to third parties, rather than to Bright Idea. Plastic Lumber, 

2011 WL 5377741 at *1. Under these facts, the Plastic Lumber Court found that “the 

transaction at issue was not ‘in the nature of a total absorption of the previous business into the 

successor[,]’ and thus d[id] not even seem to fit within the general definition of a de facto merger 

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as defined by the Welco Court.” Id. at *3 (first alteration in original) (quoting Welco, 617 N.E.2d 

at 1134). 

Savana argues that this case is analogous to Plastic Lumber in every respect because it 

bought only some of Epitome’s assets – for cash, not stock – at a public sale of collateral seized 

by an independent senior creditor exercising a proper remedy and acting in good faith. This 

characterization of the transaction, however, has yet to be proven. Indeed, at this stage in the 

proceedings, this Court cannot even weigh Defendant’s assertions against Plaintiff’s allegations 

that Savana purchased and absorbed Epitome’s business in its entirety. CompuServe, 89 F.3d at 

1262. Accordingly, given that the nature of the sale and Savana’s current business operation 

have not yet been established, the Court cannot find that undefined involvement of Sovereign in 

the transaction precludes de facto merger as a matter of law. 

ii. Mere Continuation and Transaction to Escape Liability 

The “mere continuation” exception permits successor liability when the “the acquiring 

corporation is just a new hat for, or a reincarnation of, the acquired corporation.” Plastic Lumber, 

2011 WL 5377741 at *4 (quoting Welco, 617 N.E.2d at 1134). The mere continuation exception 

is based on “the continuation of the corporate entity, not the business operation.” Id. (quoting 

Welco, 617 N.E.2d at 1134). This would be the case, for example, “when one corporation sells its 

assets to another corporation with the same people owning both corporations.” Id. (quoting 

Welco, 617 N.E.2d at 1134). Because “[t]his type of transaction is executed to escape liabilities 

of the predecessor corporation, ... the inadequacy of consideration is one of the indicia of mere 

continuation.” Id. (quoting Welco, 617 N.E.2d at 1134). 

The fourth exception, entering into a transaction with fraudulent intent to escape liability, 

has similar hallmarks: “[i]ndicia of fraud include inadequate consideration and lack of good 

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faith.” Welco, 617 N.E.2d at 1134 (citing Turner, 244 N.W.2d at 887 (Coleman, J., dissenting)). 

 Plaintiff has alleged that “Savana is merely a continuation of the business of Epitome 

and/or the March 16, 2009 transaction was entered into fraudulently for the purpose of escaping 

liability.” (Doc. 26 at ¶ 12.) As evidence of this, Plaintiff points to the dissolution of Epitome, as 

well as Savana’s retention of Epitome’s senior staff, including the installation of Epitome’s 

founder as President of the new company and Epitome’s Chief Financial Officer as Chief 

Administrative officer. (Doc. 39 at 3-4, Exs. C, D.) Although continuation of the business 

operation is itself insufficient to establish successor liability via mere continuation, it makes 

Plaintiff’s allegations of corporate continuation more plausible. Again, given that Savana and 

Epitome are both privately held corporations, it is unclear how Plaintiff could have made more 

specific factual allegations as to the identities of their respective stockholders without the aid of 

discovery. (See Epitome’s Pennsylvania and Delaware business entity registrations, Doc. 39, Ex. 

A, Ex. B (containing no information regarding corporate ownership).) 

 In addition, Plaintiff has presented facts which, when construed in the light most 

favorable to the plaintiff, CompuServe, 89 F.3d at 1262, raise the specter of inadequate 

consideration – the tell-tale sign that implicates both mere continuation and an impermissible 

transaction to escape liability. Specifically, the Bill of Sale indicates that Savana paid the seller 

$400,000, less $60,000 in expenses reimbursed by the seller. If indeed Savana only paid 

$340,000 to purchase Epitome in its entirety, including all of its assets, that amount would seem 

remarkably little consideration in light of the logical inference that Epitome’s assets were 

sufficient to secure at least $440,000 in loans not nine months earlier.2

 

                                                            

2 The inference is that, if indeed this was a post-default sale of collateral, the value of the collateral sold would not 

exceed the amount of the total debt to Sovereign plus expenses. If expenses account for $60,000, the debt to 

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 Defendant asserts that there was no continuation of ownership, and argues that, because it 

purchased Epitome’s assets from Sovereign, Plastic Lumber precludes recourse to the mere 

continuation theory as a matter of law. As in the de facto merger context, this argument is 

likewise unavailing. To begin with, as discussed above, Defendant’s characterization of its 

relationship to Epitome and of the transaction as a purchase of collateral seized by a senior 

creditor are not weighed at this stage of the litigation. CompuServe, 89 F.3d at 1262. 

 But even if the Court were to infer from the Bill of Sale that the Epitome was sold in 

order to pay off the company’s outstanding debt to Sovereign, those facts would not ipso facto

foreclose a finding of successor liability. The Ohio Court of Appeals’ decision in Plastic Lumber

is premised on a number of very particular findings of fact which have not yet been established 

in this case.3

 Specifically, the Plastic Lumber court held that that the mere continuation 

exception did not apply where it was undisputed that: 

(1) Huntington was a secured party that held a valid blanket lien on Plastic 

Lumber's assets; (2) Huntington instructed Plastic Lumber to hire a restructuring 

agent, who ultimately became a liquidating agent, so that Huntington might 

realize the most money possible from the sale of Plastic Lumber's assets; (3) 

Huntington was entitled, as the secured creditor, to proceed in the manner it did; 

(4) the assets of Plastic Lumber that Bright Idea acquired were acquired through 

the third party agent and from Huntington; and (5) the assets were sold for fair 

and reasonable price given the nature of the assets and the circumstances under 

which they were sold. 

Plastic Lumber, 2011 WL 5377741 at *4. On that record, the court found “no evidence ... which 

suggested that Bright Idea purchased the assets of Plastic Lumber for inadequate consideration, 

                                                                                                                                                                                               

Sovereign would total at least $340,000. Furthermore it appears that at least two other loans were secured by 

Epitome’s assets: Opportunity Fund’s $100,000 capital investment and an unknown amount from Vision 

Opportunity Master Fund, Ltd., the other investing entity named in the loan and security agreement. (See Doc. 26, 

Ex. A at 29.) Together, that would mean at least $440,000 worth of loans were secured in Epitome’s assets. 3 The facts of the case are set forth in greater detail in Part III.A.2.d.i, supra. See also Plastic Lumber, 2011 WL 

5377741 at *1. 

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or that the transaction was conducted to escape the liabilities of Plastic Lumber.” Id. at *5. 

Here, in contrast, the legitimacy of Epitome’s sale and the adequacy of consideration are

in dispute. Without the hallmarks of formality, legitimacy, and adequacy that characterize the 

asset seizure, liquidation and public auction in Plastic Lumber, Sovereign’s apparent listing in 

the chain of ownership does not foreclose a mere continuation theory of successor liability. 

Indeed, it would be incredibly problematic if a company could shirk all secured debt obligations 

save one by nominally surrendering all its assets to a chosen creditor and then, clothed in a new 

corporate form, buying those assets back for the low price of a single outstanding debt. Thus, at 

this pre-evidentiary stage, the Court does not find recourse to mere continuation barred as a 

matter of law. If this case is indeed analogous to Plastic Lumber, Savana will have the 

opportunity to so prove as the record develops.   

In light of the above, Plaintiff’s allegations are sufficient to make a prima facie showing 

of successor status for the purposes of establishing personal jurisdiction over Savana. See Dow 

Corning Corp. v. Jie Xiao, et al., No. 11-10008-BC, 2011 WL 2015517 at *15 (E.D. Mich. May 

20, 2011) (finding allegations that defendant is a successor created to shield assets from liability 

to be sufficient for prima facie showing of personal jurisdiction); Gorge v. Rapid Advance, LLC, 

No. 10-11474, 2011 WL 679842 at *4-5 (E.D. Mich. Feb. 16, 2011) (finding allegations that 

defendant is a successor by virtue of “mere continuation” theory sufficient for prima facie 

showing of personal jurisdiction); Weather Underground, Inc. v. Navigation Catalyst Sys. Inc., 

No. 09-10756, 2011 WL 2414415 at *5 (E.D. Mich. June 10, 2011) (finding allegations of 

defendant’s alter-ego status sufficient for prima facie showing of personal jurisdiction). 

The Court notes, however, that Plaintiff’s prima facie showing is merely that. A threshold 

determination that personal jurisdiction exists “does not relieve [the plaintiff] [...] at the trial of 

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the case in chief from proving the facts upon which jurisdiction is based by a preponderance of 

the evidence.’” Hitachi, 2010 WL 816344 at *8 (quoting Serras, F.2d at 1215) (changes in 

original) (internal quotations omitted). 

e. Conclusion 

Plaintiff has met its burden and made the requisite prima facie showing that this Court’s 

personal jurisdiction over Savana is proper. Defendant’s Rule 12(b)(2) motion to dismiss for 

lack of personal jurisdiction is therefore DENIED. 

B. Forum Selection Clause 

Defendant moves pursuant to Federal Rule of Civil Procedure 12(b)(3) to dismiss this 

action in light of the forum selection clause contained in the Note. The Sixth Circuit, however, 

has stated unequivocally that “a forum selection clause should not be enforced through dismissal 

for improper venue under FRCP 12(b)(3) because these clauses do not deprive the court of 

proper venue.” Wong v. PartyGaming Ltd., 589 F.3d 821, 829 (6th Cir. 2009). Accordingly, the 

Court declines to use Rule 12(b)(3) to that effect here. Defendant’s motion to dismiss pursuant 

to Rule 12(b)(3) is DENIED. 

Because Defendant has made no other motions regarding the Note’s forum selection 

clause, the Court’s ability to consider this matter is severely constrained.4

 When presented with a 

procedurally improper 12(b)(3) motion asserting a forum selection clause defense, the Court 

may, sua sponte, analyze the question under the common law doctrine of forum non conveniens. 

                                                            

4 Forum non conveniens or a 28 U.S.C. § 1404(a) motion to transfer venue would both have been appropriate 

mechanisms through which to enforce the forum selection clause at issue in this case. In addition, there is debate 

among district courts in this Circuit as to whether a forum selection clause may be enforced via a Rule 12(b)(6) 

Motion. See Carillo v. ITFCO Industries, Inc., 2011 WL 4538079 (M.D. Tenn. Sept. 29, 2011) (collecting cases and 

deciding that 12(b)(6) is not a proper mechanism for forum selection clause enforcement). As Defendant has made 

no such argument, however, this Court does not consider the question here.

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Wong v. Partygaming Ltd., 589 F.3d 821, 830 (6th Cir. 2009). A court balances three factors in 

the forum non conveniens analysis: (1) the existence of an adequate alternate forum; (2) any 

relevant public factors that favor another venue; and (3) any relevant private factors that favor 

another venue. See Stewart v. Dow Chemical Co., 865 F.2d 103, 106 (6th Cir. 1989). Sua sponte

invocation of the doctrine is appropriate if the court already possesses “facts relevant to the issue 

of forum non conveniens.” Estate of Thomson, 545 F.3d 357, 364-65 (6th Cir. 2008) (citing 

Chamber v. NASCO, 501 U.S. 32, 44 (1991)). 

Here, the Court does not possess sufficient information to weigh the doctrine's factors 

and make a determination. To assess whether dismissal under forum non conveniens is 

warranted, the Court must assess public and private factors, of which the validity of a forum 

selection clause in a contract is only one. See Kerobo v. Southwestern Clean Fuels, Corp., 285 

F.3d 531, 537-38 (6th Cir. 2002) (explaining, in the context of a motion to transfer, that when a 

district court weighs public and private factors related to venue, “[a] forum-selection clause in a 

contract is one of the factors to consider in this calculus [and] ‘should receive neither dispositive

consideration... nor no consideration’”) (quoting Steward Org. Inc. v. Ricon Corp., 487 U.S. 22, 

31 (1988)). Accordingly, “[i]t would be unfair to both parties to make this determination based 

on the arguments presented in their briefs that only address facts relevant to the standards for 

12(b) motions, not forum non conveniens.” Arcelormittal Tubular Prods. Shelby, Inc. v. Uranie 

Int’l, S.A., No. 1:09-cv-1821, 2011 WL 1230271 at *4 (N.D. Ohio Mar. 30, 2011) (denying 

enforcement of forum selection clause via Rule 12(b)(3) and declining to analyze forum non 

conveniens sua sponte). As such, the court declines at this time to analyze the forum selection 

clause defense, sua sponte, under the doctrine of forum non conveniens. 

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C. Failure to State a Claim 

 Finally, Defendant Savana moves to dismiss Plaintiff’s action for “failure to state a claim 

on which relief can be granted” pursuant to Federal Rule of Civil Procedure 12(b)(6). 

Specifically, Defendant argues that Plaintiff’s successor liability claims are inadequately pled 

and fail as a matter of law. Defendant also argues that each of the underlying claims to which 

successor liability is pendant – Breach of Contract (Count I), Conversion (Count II), Promissory 

Estoppel (Count III) and Unjust Enrichment (Count IV) – also fail as a matter of law under the 

facts alleged. Defendant’s motion to dismiss is GRANTED as to Count II and DENIED as to 

Counts I, III and IV. 

1. Standard of Review 

 Federal Rule of Civil Procedure 12(b)(6) permits dismissal of a complaint for “failure to 

state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). A complaint must 

contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” 

Fed. R. Civ. P. 8(a). Although a plaintiff need not plead specific facts, the complaint must “give 

the defendant fair notice of what the claim is, and the grounds upon which it rests.” Nader v. 

Blackwell, 545 F.3d 459, 470 (6th Cir. 2008) (quoting Erickson v. Pardus, 551 U.S. 89, 93 

(2007)). The plaintiff’s ground for relief must entail more than “labels and conclusions, and a 

formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. 

Twombly, 550 U.S. 544, 555 (2007). The plaintiff has satisfied Rule 12(b)(6) if he or she pled 

enough facts “to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 

662, 663 (2009). 

 In evaluating a Rule 12(b)(6) motion, the Court accepts Plaintiff’s factual allegations as 

true, and “the complaint is construed liberally in favor of the party opposing the motion.” Davis 

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H. Elliot Co. v. Caribbean Util. Co., Ltd., 513 F.2d 1176, 1182 (6th Cir. 1975) (citing L'Orange 

v. Medical Protective Co., 394 F.2d 57, 59 (6th Cir. 1968)). “Furthermore, such a motion should 

not be granted ‘unless it appears beyond doubt that the plaintiff can prove no set of facts in 

support of his claim which would entitle him to relief.’” Id. (quoting Conley v. Gibson, 355 U.S. 

41, 45-46 (1957)). 

2. Law and Analysis 

a. Choice of Law

In briefing this Motion to Dismiss, the parties have argued the sufficiency of Plaintiff’s 

claims under Ohio law. Yet the contract at issue – the Note – contains a choice of law clause 

which is unequivocal in its selection of New York law to govern “[a]ll questions concerning the 

construction, validity, enforcement and interpretation of th[e] Note.” (Doc. 26, Ex. B, pp.6-7.)5

 

Thus, this Court cannot not take as given that Ohio law should be applied this case. 

“In a diversity case, a federal district court ‘is obligated to apply the choice of law rules 

of the state in which it sits.’” Slate Rock Constr., 2011 WL 3841691 at *2 (quoting Security Ins. 

Co. v. Kevin Tucker & Assoc., 64 F.3d 1001, 1005 (6th Cir. 1995)). Ohio has adopted § 187 of 

the Restatement (Second) of Conflict of Laws, under which “parties’ choice-of-law provisions 

are enforceable unless [1] ‘the chosen state has no substantial relationship to the parties or the 

transaction and there is no other reasonable basis for the parties’ choice, or [2] application of the 

law of the chosen state will be contrary to the fundamental policy of a state having a greater 

                                                            

5 The Note’s choice of law clause states: 

All questions concerning the construction, validity, enforcement and interpretation of this Note 

shall be governed by and construed and enforced in accordance with the internal laws of the State 

of New York, without regard to the principles of conflicts of law thereof. 

(Doc. 26, Ex. B at 6.)

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material interest in the issue than the chosen state and such state would be the state of the 

applicable law in the absence of a choice by the parties.’” Century Bus. Servs., Inc. v. Barton, 

967 N.E.2d 782, 793 (Ohio App. 2011) (quoting Schulke Radio Prods., Ltd. v. Midwestern 

Broad. Co., 453 N.E.2d 683, syllabus (Ohio 1983)).6

 Neither exception applies here. 

Given New York State’s apparent lack of connection to either the parties or the 

transaction, the first exception would initially seem germane. As the Sixth Circuit has made 

clear, however, this exception “rarely, if ever, appl[ies] as a practical matter because contracting 

parties rarely make a choice of law without a good reason.” DaimlerChysler Corp. Healthcare 

Benefits Plan v. Durden, 448 F.3d 918, 924 n.2 (6th Cir. 2006). Rather, “[t]his exception is 

merely intended to preclude, for example the application of ‘foreign law which has been chosen 

by the parties in the spirit of adventure or to provide mental exercise for the judge.’ ” Id. (quoting 

Rest.2d Conflict of Laws § 187 cmt. f). The selection of New York law to govern a financial 

instrument is hardly so “adventurous” a choice. Thus, as it is not the function of the judiciary to 

speculate as to the mindset of the parties, this Court will presume they acted on a rational basis. 

See Rest.2d Conflict of Laws § 187 cmt. f (“The parties to a multistate contract may have a 

reasonable basis for choosing a state with which the contract has no substantial relationship. For 

example, .... parties to a contract for the transportation of goods by sea between two countries 

with relatively undeveloped legal systems should be permitted to submit their contract to some 

well-known and highly elaborated commercial law.”).  

                                                            

6 This analysis is applied “even when the parties have set forth a choice of law and indicated that it is to be applied 

‘without regard to principles of conflicts [sic] of law[s].’” Century Bus. Servs., 967 N.E.2d at 793 n.6 (alterations in 

original) (quoting Greif Packaging, LLC v. Ryder Integrated Logistics, Inc., No. L-09-1259, 2010 WL 3610588 at 

*3 (Ohio App. Sept. 17, 2010)).

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Nor does the second exception apply. Given the involvement of an Ohio corporation, 

Ohio may indeed have a materially greater interest in the outcome of this dispute than does New 

York, which has no connection to either party. There is, however, no indication that New York 

law with respect to successor liability or common law contract and quasi-contract claims would 

be fundamentally contrary to Ohio public policy. 

Having determined that the Note’s choice of law clause falls within neither enumerated 

exception, the Court finds the clause enforceable. Accordingly, the proper substantive law to 

apply is that of New York, and Plaintiff’s assertion of successor liability against Savana, as well 

is its underlying claims for breach of contract (Count I), conversion (Count II), promissory 

estoppel (Count III), and unjust enrichment (Count IV), must be analyzed for adequacy under 

New York law. The Court will consider each seriatim. 

b. New York Successor Liability 

New York applies the same general rules for successor liability as does Ohio. Thus, “a 

corporation that purchases the assets of another corporation is generally not liable for the seller's 

liabilities,” New York v. Nat’l Serv. Indus., Inc., 460 F.3d 201, 209 (2d Cir. 2006), unless: “‘(1) 

[the buyer] expressly or impliedly assumed the predecessor's tort liability, (2) there was a 

consolidation or merger of seller and purchaser, (3) the purchasing corporation was a mere 

continuation of the selling corporation, or (4) the transaction is entered into fraudulently to 

escape such obligations.’” Id. (quoting Schumacher v. Richards Shear Co., 451 N.E.2d 195, 198 

(N.Y. 1983)). 

i. De Facto Merger 

The de facto merger exception “originated in cases where the seller's shareholders 

retained their interest in the transferred assets through an ownership interest in the purchasing 

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corporation, while freeing the assets from the claims of the seller's creditors by disguising the 

transaction as an asset sale. Cargo Partner AG v. Albatrans Inc., 207 F.Supp.2d 86, 94-95 

(S.D.N.Y. 2002), aff'd 352 F.3d 41 (2d Cir. 2003). In such cases, “courts determined that the 

form of the transaction did not accurately portray its substance, and they imposed successor 

liability upon the purchaser.” Id. Although “[t]he New York Court of Appeals has not directly 

addressed whether a de facto merger creates liability for a successor corporation, ... [the Second 

Circuit] and lower New York courts have held that it does.” Nat’l Serv. Industries, 460 F.3d at 

209 (quoting Cargo Partner AG v. Albatrans, Inc., 352 F.3d 41, 45 (2d Cir. 2003)). 

A de facto merger occurs “when a transaction, although not in form a merger, is in 

substance ‘a consolidation or merger of seller and purchaser.’” Nat’l Serv. Industries, 460 F.3d at 

209 (internal quotations omitted) (quoting Cargo Partner AG, 352 F.3d at 45). Under New York 

law, “hallmarks of a de facto merger include: (1) continuity of ownership; (2) cessation of 

ordinary business and dissolution of the acquired corporation as soon as possible; (3) assumption 

by the purchaser of the liabilities ordinarily necessary for the uninterrupted continuation of the 

business of the acquired corporation; and (4) continuity of management, personnel, physical 

location, assets, and general business operation.” Nat’l Serv. Industries, 460 F.3d at 209. “In 

New York, courts have found the continuity of ownership requirement satisfied where the 

shareholders of the selling corporation retain only an indirect interest in the assets that were 

sold.” Hayden Capital USA, LLC v. Northstar Agri Indus., LLC, No. 11 Civ. 594(DAB), 2012 

WL 1449257, *5 (S.D.N.Y. Apr. 23, 2012) (citing In re New York City Asbestos Litig., 15 

A.D.3d 254, 256 (N.Y. 2005) (“The first criterion, continuity of ownership, exists where the 

shareholders of the predecessor corporation become direct or indirect shareholders of the 

successor corporation as the result of the successor's purchase of the predecessor's assets, as 

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occurs in a stock-for-assets transaction.”); Cargo Partner, 207 F.Supp.2d at 104–105 (S.D.N.Y. 

2002) (“The fact that the seller's owners retain their interest in the supposedly sold assets 

(through their ownership interest in the purchaser) is the ‘substance’ which makes the transaction 

inequitable.”) (emphasis in original)). 

 As the Court has discussed at length, see Part III.A.2.d.i., supra, Plaintiff’s allegations 

related to the post-transaction cessation of Epitome, the uninterrupted continuation of Epitome’s 

business operations, the transfer of Epitome’s assets in full, and the continuity of management in 

the form of several of Epitome’s senior officers, are sufficient to make Rule 12(b)(2)’s required 

prima facie showing that the de facto merger exception applies. The Court likewise concludes 

that these allegations, when accepted as true and construed in the light most favorable to the 

Plaintiff, Davis H. Elliot, 513 F.2d at 1182, are sufficient to make Plaintiff’s assertion of de facto 

merger “plausible on its face.” Iqbal, 556 U.S. at 663, and “give the defendant fair notice of what 

the claim is, and the grounds upon which it rests.” Nader, 545 F.3d at 470. 

 Given that the retention of an indirect interest in sold assets can establish continuity of 

ownership under New York law, Hayden Capital USA, 2012 WL 1449257 at *5, the undefined 

involvement of Sovereign in the sale of Epitome does not as a matter of law preclude a finding of 

de facto merger. Although Plaintiff will ultimately have to prove that Epitome’s stockholders did 

retain such an interest, it is unclear how Opportunity Fund, as a third party, could access 

information regarding the details of Savana’s purchase of Epitome or the respective identities of 

those private corporations’ stockholders without the benefit of discovery. Cf. Michaels Bldg. Co. 

v. Ameritrust Co., N.A., 848 F.2d 674, 680 (6th Cir. 1988) (“Especially in a case in which there 

has been no discovery, courts have been reluctant to dismiss the action where the facts 

underlying the claims are within the defendant's control.”) (discussing the exception to Fed. R. 

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Civ. P. 9(b)’s heightened pleading standard for fraud in cases “where the information is only 

within the opposing party’s knowledge”). Accordingly, reading all inferences in favor of the nonmoving party, the Court cannot say that Plaintiff can prove no set of facts which would entitle it 

to relief from Savana on the basis of de facto merger. Davis H. Elliot Co., 513 F.2d at 1182 (6th 

Cir. 1975) (quoting Conley, 355 U.S. at 45-46). 

ii. Mere Continuation and Transaction to Escape Liability 

 The mere continuation exception “is designed to prevent a situation whereby the specific 

purpose of acquiring assets is to place those assets out of reach of the predecessor's creditors.... 

Thus, the underlying theory of the exception 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.” Hayden Capital USA, 2012 WL 1449257 at *5 (alterations in original) (internal 

quotations omitted) (quoting Societe Anonyme Dauphitex v. Schoenfelder Corp., No. 07 Civ. 

489, 2007 WL 3253592 at *6 (S.D.N.Y Nov. 2, 2007)). 

The mere continuation rule applies in New York when “the purchasing corporation ... 

represent[s] merely a ‘new hat’ for the seller. That is, it is not simply the business of the original 

corporation which continues, but the corporate entity itself. ” Cargo Partner, 207 F.Supp.2d at 

95 (internal citations omitted) (quoting Ladjevardian v. Laidlaw-Coggeshall, Inc., 431 F.Supp. 

834, 839 (S.D.N.Y. 1977)). Mere continuation “requires actual dissolution of the seller,” Cargo 

Partner, 207 F.Supp.2d at 95 (citing Shumacher, 59 N.Y.2d at 244): “[t]he successor-buyer is 

not in existence prior to the purchase of the predecessor's assets, and the predecessor-seller does 

not survive the sale of the assets.” Alvarado v. Dreis & Krump Mfg. Co, 1 Misc.3d 912(A), 2004 

WL 258117 at *2 (N.Y. Super. Ct. Jan. 23, 2004)) (citing Greenlee v. Sherman, 142 A.D.2d 472, 

476 (N.Y.A.D. 1989)). Other factors “considered by New York courts to be indicative of the 

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‘mere continuation’ exception are that the business of the successor is the same as the business of 

the predecessor, the business employs the same work force, and the predecessor's officers and 

directors become the officers and directors of the successor.” Id. (citing Mitchell v. Suburban 

Propane Gas Corp., 182 A.D.2d 934 (N.Y.A.D. 1992)). 

In New York, the de facto and mere continuation exceptions have largely subsumed the 

exception for transactions undertaken to escape liability has been largely subsumed by. See

Cargo Partner, 207 F.Supp.2d 86, 94-95 (discussing the mere continuation and de facto merger 

exceptions). New York courts have noted, however, that “‘a purchase of assets may ordinarily 

be arranged so as to insulate the purchaser from the seller’s liabilities’ so long as the purchase is 

‘for fair consideration and undertaken in good faith as a bone fide transaction.” Connecticut 

Indem. Co. v. 21st Century Transp. Co., Inc., No. 99-cv-7735(ILG), 2001 WL 868340 at *7 

(E.D.N.Y Jul. 27, 2001) (quoting Gardner v. Fyr-Fyter Co., 47 A.D.2d 591, 591 (N.Y.A.D. 

1975)). Thus, the absence of fair consideration and good faith can weigh in favor of finding that 

the transaction was, in substance, one “with a concomitant assumption of liabilities.” Gardener, 

47 A.D.2d at 591 (holding that questions as to whether an asset sale was ‘for fair consideration 

and undertaken in good faith as a bona fide transaction” created “factual issues which preclude 

the granting of summary judgment” regarding de facto merger). 

Here, as discussed in Part III.A.2.d, supra, Plaintiff has alleged that Savana was a new 

corporation whose first act was the purchase of Epitome in whole, and that Epitome was 

dissolved following the transaction. Plaintiff has also alleged that Savana continued Epitome’s 

business to the same customers under the management of Epitome senior officers. In addition, 

Plaintiff argues the transaction was merely an attempt to remove assets from the reach of 

Epitome creditors like itself, an allegation supported by the seemingly low purchase price paid 

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by Savana.7 While not conclusive evidence of the continuation of the corporate entity, these are 

“factors considered by New York courts to be indicative of the ‘mere continuation’ exception.” 

Id. That plaintiff did not plead specific detail as to stockholders in common is not fatal where, as 

here, the identity of such stockholders identity is not publicly accessible for privately held 

corporations absent discovery. Cf. Michaels Bldg. Co., 848 F.2d at 680 (“Especially in a case in 

which there has been no discovery, courts have been reluctant to dismiss the action where the 

facts underlying the claims are within the defendant's control.”) (discussing exceptions to Fed. R. 

Civ. P. 9(b)’s heightened pleading standard for “information ... only within the opposing party’s 

knowledge”). Reading all inferences in the light most favorable to the non-moving party, 

Plaintiff’s assertion of mere continuation is plausible and the Court cannot say that Plaintiff can 

prove no set of facts that would establish successor liability via mere continuation. Davis H. 

Elliot Co., 513 F.2d at 1182 (quoting Conley, 355 U.S. at 45-46). 

iii. Conclusion 

Plaintiff’s allegations are therefore sufficient at this stage of the litigation to sustain 

claims against Savana predicated on Defendant’s successor liability. Thus, to the extent 

Plaintiff’s allegations state claims against Eptiome, they likewise state claims against Savana. 

c. Breach of Contract 

Count I of Plaintiff’s Amended Complaint asserts claims against Savana, as successor to 

Eptiome, for breach of contract. To establish a claim for breach of contract under New York 

law, a party must prove: “(1) a contract; (2) performance of the contract by one party; (3) breach 

by the other party; and (4) damages.” Command Cinema Corp. v. VCA Labs, Inc., 464 F.Supp.2d 

191, 198 (quoting Terwilliger v. Terwilliger, 206 F.3d 240, 245-46 (2d Cir. 2000)). Plaintiff has 

                                                            

7 See text accompanying note 2, supra. 

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alleged that: (1) the Note constitutes a valid and enforceable contract; (2) Opportunity Fund 

substantially performed on that contract in making the $100,000 loan to Epitome; (3) Epitome 

breached the contract by failing to repay the loan; and (4) Opportunity Fund has been damaged 

by the breach in the amount of $100,000 plus interest. Thus, Plaintiff has stated a claim against 

Epitome, and, by extension, a claim against Savana as successor to Epitome, on which relief can 

be granted. Savana’s argument that Savana was not party to the Note simply begs again the 

question of claims predicated on successor liability, which this Court has addressed and 

dispatched at length, above. Defendant’s motion to dismiss Count I pursuant to Rule 12(b)(6) is 

therefore DENIED. 

d. Conversion 

Count II of Plaintiff’s Amended Complaint asserts claims against Savana, as successor to 

Eptiome, for conversion. Conversion is “any unauthorized exercise of dominion or control over 

property by one who is not the owner of the property that interferes with and is in defiance of a 

superior possessory right of another in the property.” Command Cinema, 464 F.Supp.2d at 199 

(quoting Schwartz v. Capital Liquidators, Inc., 984 F.2d 53, 53 (2d Cir. 1993)). Under New 

York Law, “[a] conversion claim may only succeed if the party alleges a wrong that is distinct 

from any contractual obligations.” Id. (citing Briarpatch Ltd. L.P. v. Geisler Roberdeau, Inc.,

148 F.Supp.2d 321, 328 (S.D.N.Y. 2001)). Thus, “[t]here is no conversion action where damages 

are sought for breach of contract.” Id. (citing Peters Griffin Woodward, Inc. v. WCSC, Inc., 88 

A.D.2d 883 (N.Y.A.D. 1982). Here, Plaintiff has alleged no wrong distinct from Epitome’s 

breach in failing to repay the $100,000 Note. Plaintiff’s claim for conversion therefore fails as a 

matter of law. Defendant’s motion to dismiss Count II pursuant to Rule 12(b)(6) is GRANTED.

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e. Promissory Estoppel 

Count III of Plaintiff’s Amended Complaint asserts claims against Savana, as successor 

to Eptiome, for promissory estoppel. A cause of action for promissory estoppel under New York 

law “requires the plaintiff to prove three elements: 1) a clear and unambiguous promise; 2) 

reasonable and foreseeable reliance on that promise; and 3) injury to the relying party as a result 

of the reliance.” Ashland Inc. v. Morgan Stanley & Co., Inc. ., 700 F.Supp.2d 453, 472 (S.D.N.Y. 

2010) (quoting Kaye v. Grossman, 202 F.3d 611, 615 (2d Cir.2000)). A claim for promissory 

estoppel “may proceed jointly with a breach of contract claim only where it is not clear that a 

valid contract exists.” Brenner v. Brenner, No. CV 10-4857, 2012 WL 3597247 at *7 (E.D.N.Y. 

Aug. 20, 2012) (quoting BLD Prods., LLC v. Viacom, Inc., No. 10 Civ. 2625, 2011 WL 1327340 

at *15 (S.D.N.Y. Mar. 31, 2011)). Where a contract’s enforceability is at issue, however, 

“plaintiffs are ‘entitled to plead the alternative theory of promissory estoppel in the event it is 

later determined there is no enforceable contract.’” Id. (quoting Polargrid LLC v. Videsh 

Sanchar Nigam Ltd., No. 04-cv-9578, 2006 WL 903184 at *3 (S.D.N.Y. Apr. 7, 2006)). 

Here, Defendant Savana has yet to answer to Plaintiff’s Complaint. Accordingly, it is not 

yet clear whether Defendant will contest the validity and enforceability of the Note. To the 

extent that Defendant chooses to contest this issue, Plaintiff is “entitled to plead the alternative 

theory of promissory estoppel.” Id. In the event it is later determined there is no enforceable 

contract, Plaintiff has stated a claim for promissory estoppel against Epitome – and by extension 

Savana – in alleging that: (1) the Note contains a clear promise to repay the $100,000 loan with 

interest by August 31, 2008; (2) Plaintiff’s reliance was reasonable and foreseeable in light of 

Plaintiff’s business relationship with Epitome; and (3) Plaintiff was injured by loss of those 

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funds as a result of its reliance. Defendant’s motion to dismiss Count III pursuant to Rule 

12(b)(6) is DENIED. 

f. Unjust Enrichment 

Count IV of Plaintiff’s Amended Complaint asserts claims against Savana, as successor 

to Eptiome, for unjust enrichment. Pursuant to New York law, “where a plaintiff has paid the 

defendant money pursuant to an unenforceable agreement, he may obtain restitution damages 

under an implied-in-law contract theory where there is found to be no enforceable contract, but 

in equity and good conscience the defendant should not retain the amounts paid to him.” 

Kermaneshah v. Kermanshah, No. 08-cv-409, 2010 WL 1904135 at *6 (S.D.N.Y. May 11, 2010) 

(citing Hamlin Beach Camping, Catering, & Concessions Corp. v. State, 303 A.D.2d 849, 358 

(N.Y.A.D. 2003); RTC Props., Inc. v. Bio Res., Ltd., 295 A.D.2d 285, 744 N.Y.S.2d 173 

(N.Y.A.D. 2002)). While a plaintiff “initially may raise both breach of contract and unjust 

enrichment claims, a plaintiff cannot prevail on both because the determination that an 

enforceable contract existed necessarily precludes an unjust enrichment claim based on the same 

underlying agreement.” Id. 

Here, Plaintiff alleges that it paid $100,000 to Epitome on the expectation that it would 

repay those moneys, with interest, pursuant to the Note – an act which Epitome allegedly failed 

to perform. At this early stage in the litigation, there has yet been no finding as to whether the 

Note constitutes a valid, enforceable contract. Accordingly, Plaintiff may maintain its claim for 

unjust enrichment against Epitome – and by extension, Savana – unless and until the Note is 

found to be an enforceable contract. Defendant’s motion to dismiss Count IV pursuant to Rule 

12(b)(6) is therefore DENIED.

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IV. CONCLUSION 

 For the foregoing reasons, Defendant’s Motion to Dismiss is GRANTED as to Count II 

of the Plaintiff’s Amended Complaint and DENIED as to Counts I, III and IV.

 IT IS SO ORDERED. 

s/ Algenon L. Marbley 

 Algenon L. Marbley 

 United States District Judge 

Dated: November 27, 2012 

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