NOTICE: This opinion is subject to motions for rehearing under Rule 22 as 

well as formal revision before publication in the New Hampshire Reports. 

Readers are requested to notify the Reporter, Supreme Court of New 

Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any 

editorial errors in order that corrections may be made before the opinion goes 

to press. Errors may be reported by E-mail at the following address: 

reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 

a.m. on the morning of their release. The direct address of the court's home 

page is: http://www.courts.state.nh.us/supreme.

THE SUPREME COURT OF NEW HAMPSHIRE

___________________________

Rockingham

No. 2014-0465

CELESTICA, LLC

v.

COMMUNICATIONS ACQUISITIONS CORPORATION

Argued: April 9, 2015

Opinion Issued: October 14, 2015

Pierce Atwood LLP, of Portsmouth (Michele E. Kenney on the brief and 

orally), for the plaintiff.

Bernstein, Shur, Sawyer & Nelson, P.A., of Manchester (Andru H. 

Volinsky and Talesha L. Caynon on the brief, and Ms. Caynon orally), for the 

defendant.

BASSETT, J. Following a bench trial in Superior Court (Delker, J.), the 

court denied the petition of the plaintiff, Celestica, LLC (Celestica), requesting a

declaration that the defendant, Communications Acquisitions Corporation 

d/b/a Whaleback Managed Services (CAC), is obligated to pay the balance of a 

judgment that Celestica had obtained against another business, the assets of

which CAC had purchased at public auction. Specifically, the trial court ruled 

that, when CAC purchased the assets of Whaleback Systems Corporation 

(Whaleback), the transaction did not amount to a de facto merger between the 
2

two companies. On appeal, Celestica argues that the trial court erred by not 

imposing successor liability upon CAC under the de facto merger doctrine. We 

affirm.

I. Factual Background

The trial court found the following facts, which are not in dispute on 

appeal. Whaleback was founded to provide telecommunications services 

through Voice Over Internet Protocol (VOIP) to small and mid-sized businesses. 

Whaleback, which operated primarily from Portsmouth, was funded by a group 

of venture capital firms. The primary investors in Whaleback were: (1) Ascent 

Venture Partners IV, LP (Ascent), which owned 53.1% of the stock; (2) Egan 

Managed Capital III, LP (Egan), which owned 22.7%; and (3) Castile Ventures 

III, LP (Castile), which owned 17.8%. Fifteen other individuals owned the 

remaining 6.4% of the Whaleback stock.

Whaleback was also funded through a series of secured loans. Horizon 

Technology Funding Company, LLC (Horizon) lent Whaleback $3 million

(Horizon Loan), and was the primary secured lender. Horizon held a security 

interest in all of Whaleback’s assets, “including equipment, inventory, accounts 

receivable, and intellectual property rights.” Subordinate to Horizon’s secured 

interest, the three primary shareholders of Whaleback — Ascent, Egan, and 

Castile — also provided secured loans to Whaleback in the amounts of $4.8 

million, $2 million, and $1.2 million respectively. 

In 2011, after Whaleback defaulted on the Horizon Loan, the investors 

began looking for new sources of funding. Hercules Technology Growth Capital

offered to lend Whaleback $2 million, provided that the equity investors 

invested an additional $700,000 in the company. Ascent, however, responded 

that it would provide only $50,000 of additional capital. Castile and Egan 

declined to invest more capital as long as Whaleback continued to operate 

under its existing business model. Hercules eventually withdrew its offer.

Soon thereafter, Whaleback board members Roger Walton, of Castile, 

and Michael Shanahan, of Egan, discussed forming a new company to acquire 

Whaleback’s assets. Walton had a background in information technology, and 

believed that Whaleback had valuable technology but had a flawed business 

model. Walton and Shanahan met with Karil Reibold, the CEO of Whaleback, 

to discuss the future of the company. The three men then approached Horizon 

with a proposal whereby Castile and Egan would create a new company and 

purchase Whaleback’s assets from Horizon. Under the proposal, Castile and 

Egan would pay Horizon $500,000, plus $50,000 in legal fees and costs. The 

plan also contemplated that Horizon would pay $125,000 to keep Whaleback 

operating until the sale closed, at which time Castile and Egan would 

reimburse Horizon for this expense.
3

The parties ultimately agreed to the following terms, which were

memorialized by a Letter of Intent (LOI) dated November 15, 2011. Castile and 

Egan would fund Whaleback’s operations between the signing of the LOI and 

the closing. Horizon would conduct a public auction of Whaleback’s assets. 

The minimum bid at the auction was set at $600,000, and any interested 

bidder would be required to submit a $60,000 deposit on the day before the 

auction. Castile and Egan also had a right of first refusal, allowing them to 

match any higher bid. If they chose not to match a higher bid, Castile and 

Egan would receive a refund of any money invested in Whaleback to keep it 

operational between the LOI and closing.

On November 15, the same day that the LOI was signed, Horizon sent a 

notice to Whaleback stating that Whaleback was in default on the Horizon

Loan, thus triggering Horizon’s right to sell all of Whaleback’s assets at 

auction. Notice of the public auction was sent to all secured lenders and to 

Celestica. Notice was also published in the Manchester Union Leader and the 

Boston Globe, and posted on the auctioneer’s website.

At the November 29 auction, CAC, the new company formed by Castile 

and Egan, was the only bidder for Whaleback’s assets.

*

 It bid $600,000. Prior 

to the December 7 closing, George Vaughn, who was hired to serve as CEO of 

CAC, worked with Reibold to keep Whaleback running, because “if there was 

an interruption in the business for any length of time then all of [Whaleback’s] 

customers would be lost.” Thus, to ensure that it could provide uninterrupted 

service to its customers prior to the closing, CAC honored some of the debts 

owed by Whaleback to existing vendors. Vaughn was ultimately responsible for 

deciding which of Whaleback’s contracts that CAC would honor during the 

interim period.

The asset sale closed as planned. CAC “acquired all of . . . Whaleback’s 

assets, including the good will, existing customers, equipment, and intellectual 

property,” free from any of Whaleback’s liabilities, including the judgment that 

Celestica had obtained against Whaleback. After the closing, Whaleback had 

no assets. Whaleback was not formally dissolved because it did not have 

sufficient funds to pay for its dissolution.

In 2012, Celestica filed a petition for declaratory judgment in superior

court, seeking a declaration that the asset sale between Whaleback and CAC

constituted a de facto merger of the two companies. Celestica asked the trial 

court to rule that, under the theory of successor liability, CAC was “fully and 

 

* The actual bidder at auction was a predecessor of CAC named Communications Acquisitions, 

LLC. However, because the distinction between the two companies does not matter for purposes 

of this opinion, we refer to both entities as “CAC.”
4

completely” liable for the judgment that Celestica had obtained against 

Whaleback. Following a three-day bench trial, the trial court declined to 

impose successor liability on CAC. This appeal followed.

II. Standard of Review

Celestica first argues that we should review the trial court’s decision de

novo because it “does not challenge the facts found by the trial court, but 

rather, the significance attributed to the facts and legal conclusions drawn 

from them.” CAC counters that the imposition of successor liability is an 

equitable remedy within the sound discretion of the trial court, and, therefore,

the trial court’s ruling is owed deference on appeal. We agree with CAC.

Claims of successor liability, including the application of the de facto

merger doctrine, are equitable in nature. See Bielagus v. EMRE of N.H., 149 

N.H. 635, 639 (2003). “The propriety of affording equitable relief in a particular 

case rests in the sound discretion of the trial court.” Axenics, Inc. v. Turner 

Constr. Co., 164 N.H. 659, 669 (2013) (quotation omitted). “We review the trial 

court’s factual findings under the clearly erroneous standard to determine if 

they are supported by evidence presented at trial.” Bielagus, 149 N.H. at 639. 

We will not overturn the trial court’s decision regarding equitable relief absent 

an unsustainable exercise of discretion. See Conant v. O’Meara, 167 N.H. __, 

__ (decided May 15, 2015).

“To show an unsustainable exercise of discretion, [Celestica] must 

demonstrate that the court’s ruling was clearly unreasonable or untenable to 

the prejudice of [its] case.” Axenics, 164 N.H. at 669. “Although the award of 

equitable relief is within the sound discretion of the trial court, that discretion 

must be exercised, not in opposition to, but in accordance with, established 

principles of law.” Id. (quotation omitted). “Our inquiry is to determine 

whether the evidence presented to the trial court reasonably supports the 

court’s findings, and then whether the court’s decision is consonant with

applicable law.” Bielagus, 149 N.H. at 639 (quotation omitted).

III. The De Facto Merger Doctrine

A general precept of commercial law is that “a corporation purchasing 

assets of another corporation is not liable for the seller’s debts.” Id. at 640. 

“This rule . . . allows, in the regular course of business, free alienability of 

corporate assets to maximize their productive use.” Id. “There are judicially 

recognized exceptions to this rule, however, intended to prevent corporations 

from evading their business obligations to creditors by selling their assets.” Id. 

“Under the de facto merger exception, successor liability will be imposed if the 

parties have achieved virtually all of the results of a merger without following 

the statutory requirements for merger of the corporations.” Id. at 640-41
5

(quotation omitted); see RSA 293-A:11.07(a) (Supp. 2014) (describing the 

circumstances in which a merger between two entities becomes effective). In 

Bielagus, we enumerated four non-exclusive factors to be considered when 

determining whether a purported sale of assets is, in fact, a de facto merger.

Bielagus, 149 N.H. at 640-43. Those factors are whether:

(1) There is a continuation of the enterprise of the seller 

corporation, so that there is continuity of management, personnel, 

physical location, assets, and general business operations.

(2) There is a continuity of shareholders which results from the 

purchasing corporation paying for the acquired assets with shares 

of its own stock, this stock ultimately coming to be held by the 

shareholders of the seller corporation so that they become a 

constituent part of the purchasing corporation.

(3) The seller corporation ceases its ordinary business 

operations, liquidates, and dissolves as soon as legally and 

practically possible.

(4) The purchasing corporation assumes those obligations of the 

seller ordinarily necessary for the uninterrupted continuation of 

normal business operations of the seller corporation.

Id. at 642 (quotation omitted). “The factor that usually tips the scales in favor 

of finding a merger is continuity of ownership, usually taking the form of an 

exchange of stock for assets.” Id. (quotation omitted). In addition to the four 

factors, “[t]he fact-finder may look to other factors indicative of commonality or

distinctiveness with the corporations.” Id. at 641.

A. Continuation of the Enterprise of the Seller Corporation

The trial court first considered whether “[t]here is a continuation of the 

enterprise of the seller corporation, so that there is continuity of management, 

personnel, physical location, assets, and general business operations.” Id. at 

642. The trial court observed that “[t]his factor superficially supports the 

conclusion that [CAC] was a mere continuation of [Whaleback].” However, it is 

apparent from the trial court’s order that, upon closer analysis, it found that 

this factor did not weigh in favor of imposing successor liability. Celestica

argues that the trial court erred when it “tried to explain away the facts 

showing a continuity of the enterprise,” which, it argues, “are controlling.” We 

disagree.

Although the trial court observed that Whaleback and CAC “looked like 

the same company immediately before and after the sale,” it made numerous

factual findings in support of its conclusion that the enterprise of CAC

materially differed from that of Whaleback. For instance, with regard to 

continuity of management, the trial court credited the testimony of Walton, 
6

Castile’s member on the Whaleback board of directors, that immediate 

turnover of management would have been detrimental to the value of the assets 

that CAC purchased. Walton testified that “if there was any disruption in 

service as a result of firing management or employees, the customer base 

would immediately disappear and the value of the company would be lost.”

The trial court found that “within 14 months of the foreclosure sale virtually 

the entire management team was replaced,” and that only the Chief Technology 

Officer remained employed by CAC.

Further, prior to the asset sale, Castile and Egan each held only one of 

six seats on Whaleback’s board of directors. After the closing, Castile and 

Egan held a total of three of four seats on CAC’s board of directors, giving them 

control of the CAC board. As the trial court noted, “before the sale Castile and 

Egan did not control . . . Whaleback either through equity ownership or on the 

Board of Directors,” but “[a]fter the sale Castile and Egan [controlled] the new 

company from both positions.”

As for personnel, the trial court found that Whaleback had employed 28 

staff members, and that, at the time of the trial, only half of those employees 

worked for CAC. The trial court recounted Walton’s testimony that “it took 

time to identify which employees continued to provide valuable services and to 

replace those who were not productive without disrupting service to the 

customers.” Additionally, employees’ stock options in Whaleback were 

cancelled, and each employee was granted new stock options in CAC “based on 

the employee’s value to” CAC.

In regard to continuity of CAC’s business operations, the trial court

referenced Walton’s testimony that Whaleback’s financial problems stemmed 

not from its services or technology, but rather from its “poor control over the 

cash flow.” To that end, CAC brought in a new CEO, Vaughn, and gave him 

full control over spending. CAC also reduced its payments to resellers, who 

acted as middlemen between CAC and its customers, from 20% of the 

customer’s contract to 10%, a change that “dramatically improved” CAC’s 

revenue stream. CAC also moved to a “cloud-based” system to provide

upgrades to customers remotely, as opposed to individually servicing each 

customer’s computer. Although Whaleback had developed the remote upgrade 

system, it did not invest the resources to implement it.

Additionally, in April 2013, CAC moved its operations from the facilities 

that Whaleback had used in Portsmouth and in Bedford, Massachusetts, to

new locations in Boston and Virginia. The trial court found that the new 

facilities “were an upgrade and involved a completely different generation of 

equipment and technology from that used by . . . Whaleback in the prior 

facilities.”
7

Finally, the trial court found that Castile and Egan “invested an 

additional $1.1 million in equity and $200,000 in loans into [CAC] in order to 

implement the new business model.” The trial court observed that “[t]his 

money was necessary not just to keep Whaleback from bankruptcy but also to 

transition to new co-location facilities and to migrate customers to a new 

cloud-based technology.” Moreover, these investments do not include the 

additional money that Castile and Egan spent to keep Whaleback operational 

between the auction and closing.

Given these factual findings — none of which are in dispute on appeal —

there is ample evidence in the record to support the trial court’s conclusion 

that the continuation-of-the-enterprise factor did not weigh in favor of imposing 

successor liability.

B. Continuity of Shareholders

The second Bielagus factor is whether “[t]here is a continuity of 

shareholders which results from the purchasing corporation paying for the 

acquired assets with shares of its own stock, this stock ultimately coming to be 

held by the shareholders of the seller corporation so that they become a 

constituent part of the purchasing corporation.” Bielagus, 149 N.H. at 642. 

“In traditional corporate law, the key factors to finding a de facto merger are 

the exchange of stock and continuity of ownership, because shareholders are 

the indirect beneficiaries of any increase in a corporation’s assets or any 

decrease in its liabilities.” Id. at 643. “The existence of these factors suggests

an asset sale is not actually a bona fide business transaction . . . .” Id.

Celestica first argues that the trial court’s order “suggest[s]” that a “de

facto merger requires uniformity of ownership between the old and new 

company.” We disagree with Celestica’s interpretation of the trial court order. 

See Choquette v. Roy, 167 N.H. __, __, 114 A.3d 713, 718 (2015) (“The 

interpretation of a trial court order is a question of law, which we review de

novo.”). The trial court did not rule that uniformity of ownership is required to 

demonstrate a de facto merger. Rather, after recognizing that a de facto merger 

could be found absent uniformity, the trial court declined to find that, simply

because Castile and Egan were shareholders in both companies, this factor 

favored imposing successor liability. 

The trial court, after observing “that [Celestica] is correct that a 

foreclosure sale, in and of itself, does not terminate the successor liability 

inquiry,” went on to examine the circumstances surrounding the sale,

concluding that, despite the fact that “Castile and Egan were shareholders in 

both companies, there was a bona fide change in ownership as a result of the 

foreclosure sale.” There is ample evidence to support this finding. Prior to the 
8

closing, Castile and Egan owned 17.8% and 22.7%, respectively, of the stock in 

Whaleback. Castile and Egan paid $600,000 in cash for Whaleback’s assets,

and after the closing, Castile owned 66.7% of CAC, and Egan owned 33.3%. As 

the trial court noted, Castile changed from “the smallest institutional 

shareholder in . . . Whaleback to holding an outright majority of the new 

company.” Importantly, Ascent, Whaleback’s majority shareholder, did not 

have an equity interest in CAC, nor did 15 other investors in Whaleback.

In light of these findings, Celestica has not demonstrated that the trial 

court erred in finding that the continuity-of-shareholders factor weighed

against imposing successor liability.

C. Cessation of the Business of the Seller Corporation

The trial court next considered the third Bielagus factor: whether the 

“seller corporation ceases its ordinary business operations, liquidates, and 

dissolves as soon as legally and practically possible.” Bielagus, 149 N.H. at 

642. The trial court noted that “on its face this factor tends to support 

imposing successor liability” because “[t]here is no question that . . . 

Whaleback functionally ceased operations without any capital after the 

foreclosure sale.” Nevertheless, the trial court observed that “good will and an 

existing customer base” were valuable assets and, had “Whaleback’s property 

been liquidated and its operations ceased[,] Horizon would have lost these two 

valuable assets.” Accordingly, the trial court did not give this factor much 

weight. Celestica argues that the trial court erred in doing so. We disagree.

Celestica first argues that the trial court erred when it stated that this 

case is similar to Bielagus. However, the trial court did not state that this case 

was similar to Bielagus in all respects; rather it cited Bielagus in support of the 

proposition that a debtor’s liabilities may be “cut off” in some cases in which

the buyer continues the business operations of the seller. Indeed, in that 

particular respect, this case is similar to Bielagus, a case in which the 

purchaser bought and continued operations of the seller’s residential real 

estate business, the trial court ruled that the sale did not amount to a de facto

merger, id. at 638-39, and we upheld that determination, id. at 644.

Celestica also asserts that the trial court erred by determining that it 

would have constituted waste if CAC had not carried on Whaleback’s business 

operations, a consideration that Celestica maintains is “irrelevant” to the de

facto merger doctrine. We disagree. As we observed in Bielagus, “[i]nherent in 

an asset transfer is the purchaser’s right to operate in the business to which 

the assets are suited . . . . Corporations purchase assets in order to use them; 

to do otherwise would constitute waste.” Id. at 642 (quotation omitted). We 

are not persuaded that the trial court erred in considering whether waste 

would have resulted if CAC had not carried on Whaleback’s business 
9

operations or in assigning minimal weight to this factor in its Bielagus

analysis.

D. Assumption of Seller Corporation’s Obligations

The fourth Bielagus factor is whether “[t]he purchasing corporation 

assumes those obligations of the seller ordinarily necessary for the 

uninterrupted continuation of normal business operations of the seller 

corporation.” Id. Celestica argues that the “trial court misapplied this de facto

merger factor, concluding that there [was] no successor liability because [CAC] 

assumed only critical business liabilities of . . . Whaleback.” Once again, we

disagree with Celestica’s reading of the trial court order.

The trial court found that CAC assumed only those liabilities that it

deemed necessary to ensure continued operation of the company. It 

specifically observed that CAC “did not blindly assume [Whaleback’s] 

liabilities,” but “agreed only to maintain those obligations which were crucial to 

preserve the company’s good will and continued customers.” Importantly, the 

trial court noted that, “[h]ad CAC assumed liability for some non-essential 

debts, such as those to the insiders, this factor would weigh heavily in favor of 

[a] finding of successor liability.” Here, the trial court reasonably concluded 

that, because it had found that Castile and Egan “lost millions of dollars in 

secured debt” — as had other investors — the assumption of only critical 

business liabilities was not a factor weighing in favor of finding successor 

liability. Thus, the trial court’s analysis was more detailed and nuanced than 

Celestica contends: the trial court did not rule that, simply because CAC 

assumed only the liabilities necessary to continue Whaleback’s operations, 

successor liability should not be imposed. We are not persuaded that the trial 

court erred in its analysis of this factor.

E. Other Factors

Finally, in Bielagus, we stated that, in addition to the four enumerated 

factors, the “fact-finder may look to other factors indicative of commonality or 

distinctiveness with the corporations.” Id. at 641. Here, the trial court 

considered the circumstances of the foreclosure sale itself, and concluded that 

CAC’s purchase was the product of arms-length negotiations which resulted in 

adequate consideration being paid for the assets. Celestica argues that 

considerations such as adequacy of consideration and absence of collusion 

between Horizon and CAC were improperly considered by the trial court and 

are irrelevant to the de facto merger inquiry. We disagree.

“A primary purpose of the de facto merger exception is to protect 

dissenting shareholders or creditors from a transaction that is a ploy to avoid 

the seller’s liabilities.” Devine & Devine Food v. Wampler Foods, 313 F.3d 616, 
10

619 n.3 (1st Cir. 2002). “Courts commonly appeal to this doctrine where the 

asset transfer in question was neither an arms-length bargain nor supported 

by adequate consideration.” Id. (emphasis added); see also Bielagus, 149 N.H. 

at 643 (stating that continuity of ownership is an important factor given its 

tendency to demonstrate that “an asset sale is not actually a bona fide

business transaction”).

Here, the trial court determined that the asset sale was bona fide and 

that “this circumstance weighs in favor of the finding that there is no successor 

liability.” The trial court found that “Horizon’s lawyer testified credibly that he 

negotiated at arms-length with CAC’s lawyers and Horizon’s only interest was 

in minimizing its losses.” To that end, the primary secured lender, Horizon,

which had the undisputed right to foreclose and sell Whaleback’s assets, held a 

widely advertised public auction, at which Celestica could have bid. Also, 

Horizon required a starting auction bid of $600,000, an increase of $100,000 

from the original proposal by Castile and Egan to buy Whaleback’s assets. The 

trial court noted that, given the amount of Whaleback’s secured debt, if 

Whaleback’s business had been liquidated, Celestica, as an unsecured

judgment creditor, would not have received any money. We are not persuaded 

that the trial court erred when it found that the circumstances surrounding the 

foreclosure sale supported its conclusion that there was no de facto merger.

Finally, Celestica argues that the trial court “[c]onflated” the de facto

merger doctrine with the successor liability doctrines of fraud and “mere 

continuation.” We disagree. In fact, as courts in other jurisdictions have 

observed, there is a substantial overlap between the doctrines giving rise to 

successor liability. See, e.g., National Gypsum Co. v. Continental Brands 

Corp., 895 F. Supp. 328, 336 (D. Mass. 1995) (referring to “de facto merger” 

and “mere continuation” as “[s]light variations on the theme of fraudulent 

conveyance” and stating “[w]hile these two labels have been enshrined 

separately in the canonical list of exceptions to the general rule of no successor 

liability, they appear, in practice to refer to the same concept and courts have 

often used the two terms interchangeably” (citation omitted)); Cargo Partner AG 

v. Albatrans, Inc., 352 F.3d 41, 45 n.3 (2d Cir. 2003) (“Some courts have 

observed that the mere-continuation and de-facto-merger doctrines are so 

similar that they may be considered a single exception.”). Accordingly, we 

conclude that the trial court did not err in its analysis or application of the 

doctrines that give rise to successor liability.

IV. Conclusion

Accordingly, we hold that there is ample support for the trial court’s

conclusion that CAC is not merely Whaleback “reincarnated as a different 

entity,” and that the trial court sustainably exercised its discretion when it 
11

refused to impose successor liability on CAC and denied Celestica’s request for 

declaratory relief.

Affirmed.

DALIANIS, C.J., and HICKS, CONBOY, and LYNN, JJ., concurred.