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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF MICHIGAN

THE WEATHER UNDERGROUND, INC.,

a Michigan corporation,

Plaintiff, 

Case No. 2:09-CV-10756

vs. Hon. Marianne O. Battani

NAVIGATION CATALYST SYSTEMS, INC.,

 a Delaware corporation; CONNEXUS CORP., 

 a Delaware corporation; FIRSTLOOK, INC.,

 a Delaware corporation; and EPIC MEDIA

GROUP, INC., a Delaware corporation,

Defendants.

______________________________________________________________________

Enrico Schaefer (P43506)

Brian A. Hall (P70865)

TRAVERSE LEGAL, PLC

810 Cottageview Drive, Unit G-20

Traverse City, MI 49686

231-932-0411

enrico.schaefer@traverselegal.com 

brianhall@traverselegal.com 

Lead Attorneys for Plaintiff

Anthony P. Patti (P43729)

HOOPER HATHAWAY, PC

126 South Main Street

Ann Arbor, MI 48104

734-662-4426

apatti@hooperhathaway.com

Attorneys for Plaintiff 

William A. Delgado 

WILLENKEN WILSON LOH & LIEB LLP

707 Wilshire Boulevard, Suite 3850

Los Angeles, CA 90017

(213) 955-9240

williamdelgado@willenken.com

Lead Counsel for Defendants

Nicholas J. Stasevich (P41896)

Benjamin K. Steffans (P69712)

BUTZEL LONG, P.C.

150 West Jefferson, Suite 100

Detroit, MI 48226

(313) 225-7000

stasevich@butzel.com

steffans@butzel.com

Local Counsel for Defendants

______________________________________________________________________

DEFENDANTS THE EPIC MEDIA GROUP, INC.’S REPLY MEMORANDUM IN 

SUPPORT OF MOTION FOR SUMMARY JUDGMENT

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REPLY MEMORANDUM OF POINTS AND AUTHORITIES

I. ARGUMENT

A. Plaintiff Misunderstands and Misapplies the Law With Respect to the ParentSubsidiary Relationship.

As a general matter, Plaintiff‟s opposition to Epic Media‟s Motion for Summary 

Judgment (“MSJ”) (and its basis for imposing liability on Epic Media) rests on the fact that Epic 

Media “controls” Connexus, a refrain that is repeated throughout its brief. Notably, however, it 

does not support this conclusory assumption with any admissible evidence. Moreover, it is an 

irrelevant point. Every parent corporation “controls” its wholly-owned subsidiaries by virtue of 

owning 100% of the shares in the subsidiary. But, mere control is not sufficient to impose 

liability on a parent for the acts of its subsidiaries. Cf. Ruiz v. Sysco Corp. 2011 WL 3300098 * 

4 (S.D. Cal. July 29, 2011) (to show “interrelation of operations” in a similar context, “plaintiff 

must show...that the parent has exercised control to a degree that exceeds the control normally 

exercised by a parent corporation.”). Plaintiff presents no evidence of beyond-normal control.

Similarly, Plaintiff attempts to make hay about the existence of intercompany cash 

transfers between Epic Media and Connexus. But, cash transfers between parents and 

subsidiaries are entirely appropriate and entirely common. After all, parent corporations do not 

establish subsidiaries just so that transactional lawyers have something to do during the 

weekdays. Wholly-owned subsidiaries exist to benefit the parent in some way. Trenswick Am. 

Lit. Trust v. Ernst & Young, LLP, 906 A.2d 168 (2006) (“A wholly-owned subsidiary is to be 

operated for the benefit of its parent.”). The real question is whether the formalities of the intercompany cash transfers were disregarded, resulting in a “comingling of funds,” or whether the 

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transfers were recorded in a legitimate way. Here, contrary to Plaintiff‟s rhetoric that Epic 

Media “raided” Connexus of its cash, the uncontroverted evidence establishes that inter-company 

cash transfers are duly recorded as a “receivable” or “payable” and dealt with as a legitimate 

obligation.1 Deposition Transcript of David Graff, taken June 24, 2011, at 84:20-88:4 (“Graff 

Dep.”); see also Second Declaration of David Graff, dated August 30, 2011, at ¶¶ 4-6; Sonora 

Diamond Corp. v. Sup. Ct., 83 Cal. App. 4

th 523, 547 (2000) (“There is no evidence [parent] 

„stripped‟ [subsidiary] of its assets. In this case, all financial transactions between [parent] and 

[subsidiary] were separately recorded, maintained in the records of each, documented as 

intercompany loans and similar arrangements, and dealt with as legitimate obligations. The fact 

that no interest was charged was immaterial...”) (internal citations omitted).2

B. Reverse Triangular Mergers Do Not Result in Liability.

In its opposition, Plaintiff implicitly concedes that the reverse triangular merger protects 

Epic Media from liability. Realizing this, Plaintiff cites to the securities case of In re McKesson

for the principle that the reverse triangular merger can be treated as a “de facto” merger if has 

been structured to disadvantage creditors or shareholders. Opp. at 7. Nevertheless, this case 

does not involve a securities claim, and Plaintiff is neither a creditor nor a shareholder of any of 

the defendants. Thus, as in McKesson, Plaintiff cannot show any facts to support the proposition 

that a creditor or shareholder has been disadvantaged.

 

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In its opposition, Plaintiff concedes the existence of a recorded receivable but simply argues it 

should be disregarded which would be contrary to law. See Opp. at 5.

2

Plaintiff also erroneously argues that Epic Media intends to claim past net operating losses 

(“NOL”) of Connexus to reduce Epic Media‟s own income. Opp. at p. 5. That is simply untrue 

as David Graff explained at deposition. Graff Depo. at 73:14-74:15.

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C. The “De Facto Merger” Doctrine Does Not Apply.

As Epic Media noted in its opening brief, the “de facto” merger doctrine does not apply 

because the transaction between Epic Media and Connexus Corporation was not a sale of assets.3 

Even if the doctrine applied, Plaintiff cannot show all four elements. Epic Media submitted 

uncontroverted evidence that Connexus and Firstlook are still in business and still operational 

which means that Plaintiff cannot meet, at least, the third element which requires the seller to 

cease operations. Realizing that, Plaintiff provides a tortured and altogether unclear 

interpretation of the doctrine as to why that third element should not apply. Nevertheless, the 

only citation in support of this tortured interpretation (U.S. v. Gen. Battery Corp.) actually 

supports Epic Media because in General Battery, the agreement between the seller and purchaser 

explicitly provided for the complete liquidation and dissolution of the seller corporation. U.S. v. 

Gen. Battery Corp., 423 F.3d 294, 307-08 (3d Cir. 2005). That is the exact opposite of this case 

given that Connexus and Firstlook are still corporations in good standing, conduct business, pay 

debts, and have employees.

D. Agency Theory Does Not Result in Liability Either.

Plaintiff‟s agency theory is also altogether flawed. The title of Section C of the 

Argument argues that “Epic has used the domains under the ACPA as agent or alter ego of 

Connexus.” But, Plaintiff does not cite, and Defendants are not aware of, any case which stands 

for the proposition that an agent can be liable for the actions of its principal. To the extent that 

Plaintiff meant to argue that Connexus is an agent of Epic, it must show that Epic‟s control of 

Connexus is so pervasive that it has reduced Connexus to a mere instrumentality:

 

3 As the Court can readily ascertain, the doctrine clearly anticipates a “sale” since each of the 

four factors refer to either a “purchaser” corporation or a “seller” corporation.

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The nature of the control exercised by the parent over the subsidiary necessary to 

put the subsidiary in an agency relationship with the parent must be over and 

above that to be expected as an incident of the parent‟s ownership of the 

subsidiary and must reflect the parent‟s purposeful disregard of the subsidiary‟s 

independent corporate existence. The parent’s general executive control over 

the subsidiary is not enough; rather there must be a strong showing beyond 

simply facts evidencing “the broad oversight typically indicated by [the] common 

ownership and common directorship” present in a normal parent-subsidiary 

relationship. As a practical matter, the parent must be shown to have moved 

beyond the establishment of general policy and direction for the subsidiary and in 

effect taken over performance of the subsidiary‟s day-to-day operations in 

carrying out that policy.

Sonora Diamond, 83 Cal. App. 4th at 542 (citations omitted) (bold added). Plaintiff has not and 

cannot make that significant showing.4

E. Plaintiff Has Not Pleaded Any Facts to Support a Conspiracy Cause of Action.

Plaintiff boldly claims that its conspiracy claims are sufficiently pleaded. This begs the 

question: where? It certainly is not in the FAC even though a conspiracy claim, like a fraud 

claim, requires pleading with specificity. See Phoenix Life Ins. Co. v. LaSalle Bank N.A., 2009 

WL 877684 *12 (E.D. Mich. Mar. 30, 2009). Moreover, there is not a single citation to 

admissible evidence in Plaintiff‟s opposition that would support a conspiracy cause of action.

F. Epic Media Merits Summary Judgment Not More Cost and Expense.

Realizing that it has no facts which can rebut Epic Media‟s MSJ, Plaintiff essentially asks 

this Court to “punt” on the Motion until after trial and further discovery. First, that would violate 

Local Rule 16.1(f) which requires a decision on all pending dispositive motions before the 

pretrial order is lodged with the Court. More importantly, Plaintiff has not met the requisite 

showing for additional discovery. To be sure, Plaintiff attacks certain witnesses for lacking 

 

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The failure to show that Epic Media has reduced Connexus Corporation to a “mere 

instrumentality” also precludes a finding that Epic Media is an alter ego of Connexus as Epic 

Media explained in its opening brief.

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knowledge on some isolated questions, but Plaintiff fails to acknowledge the responses to its 

written discovery it received (where such questions were answered) or Epic Media‟s document 

production. See Second Declaration of William A. Delgado, dated August 30, 2011, at ¶¶ 2-6.

Indeed, Plaintiff makes absolutely no showing of what additional discovery it could 

conduct that would change the outcome of this motion. Certain facts (e.g., that Epic Media 

acquired Connexus through a reverse triangular merger) are immutable and dispositive. “Bare 

allegations of the need for discovery are not enough under Rule 56(f). To fulfill the 

requirements of Rule 56(f), [plaintiff] (through counsel) had to describe with some precision the 

materials he hopes to obtain with further discovery, and exactly how he expects those materials 

would help him in opposing summary judgment.” Everson v. Leis, 556 F.3d 484, 493 (6th Cir. 

2009)5; Jocham v. Tuscola County, 239 F. Supp. 2d 714, 734 (E.D. Mich. 2003) (“Rule 56(f) 

may be invoked only when the plaintiff has been unable to acquire needed discovery through due 

diligence, not to permit further discovery when the plaintiff had failed to thoroughly examine her 

opportunities in the time available to her.”).

RESPECTFULLY SUBMITTED this 30th day of August, 2011.

/s/William A. Delgado

William A. Delgado

WILLENKEN WILSON LOH & LIEB LLP

707 Wilshire Boulevard, Suite 3850

Los Angeles, CA 90017

(213) 955-9240

williamdelgado@willenken.com

Lead Counsel for Defendants

 

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Effective December 1, 2010, Rule 56(f) is now Rule 56(d) but the requirements remain the 

same. Here, Plaintiff did not even meet the procedural requirement of filing the requisite 

affidavit that would be required to request additional discovery. Fed. R. Civ. P. 56(d); Cacevic v. 

City of Hazel Park, 226 F.3d 483, 488 (6th Cir. 2000).

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CERTIFICATE OF SERVICE

I hereby certify that on August 30, 2011, I electronically filed the foregoing paper 

with the Court using the ECF system which will send notification of such filing to the 

following:

Enrico Schaefer (P43506)

Brian A. Hall (P70865)

TRAVERSE LEGAL, PLC

810 Cottageview Drive, Unit G-20

Traverse City, MI 49686

231-932-0411

enrico.schaefer@traverselegal.com 

brianhall@traverselegal.com 

Lead Attorneys for Plaintiff

Anthony P. Patti (P43729)

HOOPER HATHAWAY, PC

126 South Main Street

Ann Arbor, MI 48104

734-662-4426

apatti@hooperhathaway.com

Attorneys for Plaintiff 

Nicholas J. Stasevich (P41896)

Benjamin K. Steffans (P69712)

BUTZEL LONG, P.C.

150 West Jefferson, Suite 100

Detroit, MI 48226

(313) 225-7000

stasevich@butzel.com

steffans@butzel.com

Local Counsel for Defendants

William A. Delgado 

WILLENKEN WILSON LOH & LIEB LLP

707 Wilshire Boulevard, Suite 3850

Los Angeles, CA 90017

(213) 955-9240

williamdelgado@willenken.com

Lead Counsel for Defendants

/s/William A. Delgado

William A. Delgado 

WILLENKEN WILSON LOH & LIEB LLP

707 Wilshire Boulevard, Suite 3850

Los Angeles, CA 90017

(213) 955-9240

williamdelgado@willenken.com

Lead Counsel for Defendants

2:09-cv-10756-MOB-VMM Doc # 211 Filed 08/30/11 Pg 7 of 7 Pg ID 5742