No. 02 C 708 Page 4

Options continue to exist as separate corporate entities, separate from FOLLC, Deciding these

questions, however, requires us to take a close look at the combination agreement, the

relationship between the parties, and make factual determinations which are not proper for

a motion to dismiss. Plaintiff has sufficiently alleged successor liability in the complaint.
CONCLUSION

For the foregoing reasons, defendant’s motion to dismiss is denied.

6. Mave

JAMES B. MORAN
‘ior Judge, U.S. District Court

Negl. QO, 2002.



No. 62 C708 Page3

defendants breached the duty of good faith and fair dealing by entering into a contract which
they knew they could not perform according to its terms.

Defendants first argue that there is no recognizable claim for breach of duty of good
faith and fair dealing, As discussed in the order denying RTA’s motion to dismiss, we will
treat this claim as essentially a breach of contract claim. Reading plaintiff's claim fairly, it
alleges that it signed a contract and cannot now receive the benefits of the bargain,

Defendants next argue that plaintiff failed to state a claim based on successor liability.
Generally, a corporation that merely purchases the assets of another corporation does not
assume the seller’s liabilities arising from tort claims or other kinds of claims. Ruizy. Blentech
Corp., 89 F.3d 320, 324 (7" Cir, 1996). Minois, however, recognizes four exceptions to this
general rule: (1) when there is an express agreement; (2) the asset sale amounts to a de facto
merger’; (3) the purchaser is a mere continuation of the seller; and (4) the sale is for a
fraudulent purpose. Id.”

Reading the complaint liberally, plaintiff alleges that FOLLC assumed the obligations
of RTA when RTA combined with Flight Options under the agreement ( 22). Moreover,
plaintiff also alleges that RTA and Flight Options effectively merged, creating the new

corporation FOLLC (4 21). Defendant denies these allegations, arguing that RTA and Flight

‘ade facto merger exists when the following four criteria are present: (1) there is a continuation of
the seller corporation; (2) there is a continuity of shareholders; (3) the seller corporation ceases its ordinary
business operations; and (4) the purchasing corporation assumes those liabilities and obligations necessary for
normal business. Hemstrect v. Compuscan, Inc,, 1990 WL 103280 (N.D. Il. 1990). Determining whether
there was a de facto merger would require an analysis of the surrounding facts.

The combination agrecment that created FOLLC is governed by New York law, which recognizes
the same exceptions to the general rule against successor liability. See Schumacher y. Richards Shear €v..,
Anc., 59 N.Y.2d 239, 244-45, 451 N.E.2d 195, 198 (N.Y. 1983) (discussing tort liabilittes); International Private
Satellite Partners, L.P. v. Lucky Cat Limited, 975 F.Supp. 483, 486 (W.D.N.Y. 1997) (discussing contract

liabilities).



Minuit Order Form (06°97) 4)
United States District Court, Northern District of Illinois L

viii Magra dude James B. Moran “Than Aastgned Judge

CASE NUMBER 02 C 708 DATE 9/20/2002
CASE Lakeside Building Maintenance etc. Vs. Raytheon Travel Air Co. et al.
TITLE

[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented.)

Memorandum Opinion and Order

DOCKET ENTRY:

(1) oO Filed motion of | use listing in “Motion” box above.]

(2) Oo Brief in support of motion due

Q) Oo Answer brief to motion due__. Reply to answer briefdue___.

(4) oO Ruling/Hearingon____sset for atl

(5) a Status hearing[held/continued to] [set for/re-set for] on at.

(6) o Pretrial confcrence[held/continued to] [set for/re-set for]on_— set for at

(7) o Trial[set for/re-set for] on at

(8) Oo [Bench/Jury trial] [Hearing] held/continued to at

(9) oOo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

DFRCP4(m) Local Rule 41.1 O FRCP41(a)(1) [1 FRCP41(a)(2).

(ao =f [Other docket entry} Enter Memorandum Opinion and Order. Defendant’s motion to dismiss is
denied. Status hearing set for October 10, 2002 at 9:15am.

(il) [For further detail see order attached to the original minute order.]

No notices required, advised in open court.  Bocumel
‘Number:
Agia ig

No notices required.

we)

Notices mailed by judge's staff.

Notified counsel by telephone.

oY | Docketing to mail notices.

Mail AO 440 fonn.

Copy to judge/magisteate judge.

courtroom
WAH deputy’s
initials

Date/time received in
central Clerk’s Office ‘mailing deputy initials



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

LAKESIDE BUILDING MAINTENANCE,
INC., an Illinois corporation,

Plaintiff,

RAYTHEON TRAVEL AIR COMPANY, a
Kansas corporation, and FLIGHT OPTIONS,

)
)
)
)
)
Ys. ) No. 02 C 708
)
)
)
LLC, a Delaware limited liability company, )

)

)

Defendants,

MEMORANDUM OPINION AND ORDER

Plaintiff Lakeside Building Maintenance, Inc. (Lakeside) brought this action against
defendants Raytheon Travel Air Company (RTA) and Flight Options, LLC (FOLLC),
alleging fraudulent inducement to contract and breach of duty of good faith and fair dealing.
FOLLC filed a motion to dismiss for faiJure to state a claim, arguing that it is not a proper
party to the suit and that breach of duty of good faith and fair dealing is not a recognizable
cause of action. For the following reasons, the motion is denied.

BACKGROUND

The facts are taken from plaintiffs complaint. In November 2000, Lakeside decided
to take part in RTA’s fractional aircraft ownership program. Rather than purchasing an
entire aircraft, this program allows a company to purchase a fractional interest in aircraft
along with a limited number of other owners, each of whom is allowed to use the aircraft for
a set number of hours per year. On December 1, 2000, Lakeside and RTA entered into a

purchase agreement whereby Lakeside purchased a one-eighth share of a new RTA aircraft,

3D.



No. 02 C 708 Page 2

RTA made a series of representations to Lakeside as to the quality of service and type of
aircraft Lakeside would be given.

On March 20, 2002, RTA entered into a combination agreement with Flight Options,
under which RTA and Flight Options would sell all of their assets in exchange for shares in
a newly-formed limited liability company called Flight Options, LLC. Allof RTA’s previously
existing contracts, including that with Lakeside, were transferred to the new corporation, and
Lakeside was notified that if RTA aircraft was unavailable, they could be switched to a Flight
Options aircraft, which aircrafts are older and not equipped with the same avionics,

Lakeside alleges that FOLLC demanded that Lakeside amend various parts of the
initial contract in ways that would be to Lakeside’s disadvantage. And, further, that FOLLC
has threatened to prevent Lakeside access to its aircraft if it does not agree.

DISCUSSION

In deciding a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss, the court must

assume the truth of all well-pleaded allegations, making all inferences in the plaintiff's favor.

Sidney S. Arst Co. v. Pipefitters Welfare Educ. Fund, 25 F.3d 417, 420 (7" Cir. 1994). The

court should dismiss a claim only if it appears “beyond doubt that the plaintiff can prove no
set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355
U.S. 41, 45-46 (1957).

The complaint here consists of two counts, First, Lakeside alleges that it was
fraudulently induced to enter into the contract. At the time Lakeside signed the contract, RTA

and Flight Options knew that they would be entering into the combination agreement, thereby

negatively affecting the quality of service Lakeside would receive, Second, plaintiff alleges that