1

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

MOROCCANOIL, INC, 

Plaintiff,

v.

TONY CONFORTI, et al.

Defendants.

Civ. No. 11-136 (KM)(MAH)

OPINION

KEVIN MCNULTY, U.S.D.J.:

On December 30, 2020, the Hon. Michael A. Hammer, Magistrate Judge, 

granted the motion (DE 251)1 of defendants Tony Conforti (“Conforti”) and 

Salon Distribution, Inc. (“SDI”) (collectively “defendants”) to substitute Conforti 

Holdings, Ltd. (“CHL II”) for SDI. (DE 280; MJ Oral Opinion at 20.) Plaintiff 

Moroccanoil, Inc. (“Moroccanoil”) now appeals (DE 306) that determination. 

For the reasons provided herein, I will deny the appeal and affirm Judge 

Hammer’s Order (DE 280). 

1 Citations to the record will be abbreviated as follows. Citations to page numbers 

refer to the page numbers assigned through the Electronic Court Filing system, unless 

otherwise indicated:

“DE” = Docket entry number in this case.

“MJ Oral Opinion” = Transcript of the December 30, 2020 Opinion by the Hon. 

Michael A. Hammer, United States Magistrate Judge (DE 282)

“App. Br.” = Brief in Support of Plaintiff’s Appeal of Judge Hammer’s Order (DE 

306-2)

“Opp. Br.” = Brief in Opposition to Plaintiff’s Appeal of Judge Hammer’s Order 

(DE 311)

“Reply” = Reply in Further Support of Plaintiff’s Appeal of Judge Hammer’s 

Order (DE 312). 
2

I. Summary

a. Statement of Facts and Procedural History 

This litigation has been ongoing for over a decade. As the Court writes 

primarily for the benefit of the parties, I recite only the facts pertinent to 

resolution of this appeal. 

On January 7, 2011, Moroccanoil initiated a trademark infringement 

action against defendants. (DE 1.) In July 2013, Moroccanoil, Conforti, and SDI 

entered into a Settlement Agreement and, on September 12, 2013, I so-ordered 

the parties’ stipulation and order of dismissal with prejudice. (DE 104.) Under 

the terms of the Settlement Agreement, SDI was required to obtain a bond (the 

“Settlement Bond”) in its own name to secure the settlement and any breach of 

the Agreement. (DE 252-1, Certification of Mark C. Riedel, Esq. (“Riedel Cert.”) 

¶5.) In November 2014, the Settlement Bond was issued in the names of SDI

and Tony Conforti. (DE 252-1, Exhibit 1 to Riedel Cert.) The Court retained 

jurisdiction to enforce the terms of the Settlement Agreement. (DE 104.) 

On March 31, 2013, prior to the Settlement Agreement but unbeknownst 

to Moroccanoil, SDI amalgamated with Conforti Holdings Ltd. (“CHL I”) to form 

CHL II under Canadian law. (DE 251-3, Exhibit A.)

On April 28, 2015, Moroccanoil filed a motion (DE 107) to enforce the 

Settlement Agreement, which defendants opposed and to which they filed a 

cross-motion (DE 118). On March 30, 2016, I denied both motions and ordered 

the parties to confer with Judge Hammer and establish a discovery schedule. 

(DE 124.) Thereafter the parties engaged in discovery. 

In September 2019, defendants served an expert report prepared by RSM 

Canada Consulting, LP (the “RSM Report”) which disclosed the amalgamation 

of CHL I and SDI for the first time. Indeed, Judge Hammer found that “it was 

really not until September 2019 that Defendants disclosed to [Moroccanoil] the 

amalgamation and existence of CHL II.” (MJ Oral Opinion at 3-4.) 

On July 24, 2020, defendants filed a motion (DE 251) to substitute CHL 

II for SDI, which Moroccanoil opposed (DE 252.) As explained in more detail, 

infra, on December 30, 2020, Judge Hammer granted the substitution motion 
3

and resolved other discovery disputes not presently before the Court. (See 

generally MJ Oral Opinion.) Moroccanoil filed a motion (DE 283) to reconsider 

the December 30 Order with respect to the substitution decision, which Judge 

Hammer denied on March 23, 2021. (DE 301.) Moroccanoil now appeals (DE 

306) Judge Hammer’s Order (DE 280) granting defendants’ substitution 

motion. 

b. Judge Hammer’s December 30, 2020 Decision and Order 

Judge Hammer granted defendants’ motion to substitute CHL II for SDI 

pursuant to Federal Rule of Civil Procedure 25(c) for the following reasons. (DE 

280; MJ Oral Opinion at 20.) 

First, Judge Hammer rejected Moroccanoil’s proposal to add CHL II as an 

additional defendant and its proposal to stay defendants’ claims until its claims 

have been resolved. (MJ Oral Opinion at 11-12.) Judge Hammer noted that (1) 

Moroccanoil improperly sought affirmative relief without filing a motion or 

cross-motion and (2) it offered no caselaw to supports its contention that,

despite the amalgamation, CHL II lacks standing. (Id. at 12.) Further, Judge 

Hammer found no benefit in staying a case that is over nine years old and is 

well into discovery. (Id.) Additionally, “Moroccanoil’s claims and Defendants’ 

counterclaims are inextricable intertwined such that resolution of one 

invariably will impact the resolution of the other.” (Id.) 

Next, Judge Hammer found that, under Canadian law, CHL II stepped 

into the shoes of SDI after the amalgamation. (Id. at 15-17.) Thus, as 

defendants acknowledged, CHL II remains liable to prosecution and is subject 

to any orders or judgments for or against SDI. (Id. at 17.) In other words, Judge 

Hammer accepted defendants’ contention that “CHL [II] is SDI, and the entities 

are one and the same.” (Id. (internal quotation marks omitted) (quoting 

defendants’ reply brief in further support of their motion to substitute (DE 254 

at 3).) 

Finally, Judge Hammer found that, although defendants belatedly

informed Moroccanoil of the amalgamation, Moroccanoil “fail[ed] to identify any 
4

material prejudice resulting from allowing substitution at this stage.” (Id. at 

18.) Judge Hammer reasoned that: (1) “substitution does not affect 

Moroccanoil’s right of recovery against Defendants” because “CHL II has 

assumed all of the assets and liabilities of SDI, and is subject to any rules, 

orders, or judgments entered against SDI”; and (2) Moroccanoil “has been 

afforded ample discovery specific to the amalgamation since its disclosure.” (Id.

at 18.) Thus, although Judge Hammer agreed with Moroccanoil “that the 

disclosure was long overdue,” he identified “no litigation advantage that 

Defendants gained from the belated disclosure, nor any prejudice that Plaintiff 

has suffered.” (Id. at 20.) Therefore, Judge Hammer granted defendants’ motion 

to substitute under Rule 25 (c). (Id.)

II. Discussion

a. Legal Standard 

The District Court will reverse a Magistrate Judge’s decision on a nondispositive motion only if it is “clearly erroneous or contrary to law.” Fed. R. 

Civ. P. 72(a); L. Civ. R. 72.1(c)(1)(A). This Court has frequently spoken of the 

discretion granted to the Magistrate Judge in non-dispositive matters. Where 

the appeal seeks review of a matter within the core competence of the 

Magistrate Judge, such as a discovery dispute, an abuse of discretion standard 

is appropriate. See Cooper Hospital/Univ. Med. Ctr. v. Sullivan, 183 F.R.D. 119, 

127 (D.N.J. 1998); Deluccia v. City of Paterson, No. 09-703, 2012 WL 909548, 

at *1 (D.N.J. March 15, 2012). “This deferential standard is especially 

appropriate where the Magistrate Judge has managed this case from the outset 

and developed a thorough knowledge of the proceedings.” Lithuanian Commerce 

Corp., Ltd. v. Sara Lee Hosiery, 177 F.R.D. 205, 214 (D.N.J. 1997) (internal 

quotations omitted); see Deluccia, 2012 WL 909548, at *1 (same). Abuse of 

discretion review, of course, may get us to much the same place: as a practical 

matter it incorporates plenary review of legal questions. See Koon v. United 

States, 518 U.S. 81, 100 (1996); Doe v. Hartford Life & Acc. Ins. Co., 237 F.R.D. 
5

545, 548 (D.N.J. 2006) (“[A] magistrate judge's legal conclusions on a nondispositive motion will be reviewed de novo.”).2

b. Substitution Under Rule 25 (c)

Rule 25(c) provides that “[i]f an interest is transferred, the action may be

continued by or against the original party unless the court, on motion, orders 

the transferee to be substituted in the action or joined with the original party.”

Fed. R. Civ. P. 25(c). The United States Court of Appeals for the Third Circuit 

has explained a transfer of interest in the corporate setting:

A “transfer of interest” in a corporate context occurs when 

one corporation becomes the successor to another by merger or 

other acquisition of the interest the original corporate party had in 

the lawsuit. See Froning's, Inc. v. Johnston Feed Service, Inc., 568 

F.2d 108, 110 (8th Cir.1978) (assignment of claims); DeVilliers v. 

Atlas Corp., 360 F.2d 292, 297 (10th Cir.1966) (merger); Hazeltine 

Corp. v. Kirkpatrick, 165 F.2d 683, 685–86 (3d Cir.1948) (transfer 

of patents).

Rule 25(c) “does not require that anything be done after an 

interest has been transferred.” See 7C Wright, Miller & Kane, 

Federal Civil Procedure (hereinafter “Wright & Miller”) § 1958 at 

555 (2d ed. 1986). When a defendant corporation has merged with 

another corporation, for example, the case may be continued 

against the original defendant and the judgment will be binding on 

the successor even if the successor is not named in the lawsuit. 

See id.; see also Froning’s, 568 F.2d at 110. Although substitution 

is usually effected during the course of litigation, substitution has 

been upheld even after litigation has ended as long as the transfer 

of interest occurred during the pendency of the case. See, e.g.,

Bamerilease Capital Corp. v. Nearburg, 958 F.2d 150, 153–54 (6th 

Cir.1992) (affirming substitution in the context of proceeding to 

enforce a settlement agreement); Arnold Graphics Industries, Inc. v. 

Independent Agent Center, Inc., 775 F.2d 38, 40 (2d Cir.1985) 

(affirming district court’s substitution of successor corporation for 

original defendant after entry of judgment).

2 Defendants submit that, because the decision to allow substitution of a party 

under Rule 25(c) is discretionary, the appropriate standard of review is abuse of 

discretion. (Opp. Brief at 13-14.) However, as explained, the abuse of discretion 

standard incorporates plenary review of legal conclusions. Thus, where, as here, a 

party seeks review of a Magistrate Judge’s legal conclusion (i.e. review of Judge 

Hammer’s application of Rule 25(c)), the district court engages in de novo review.
6

Luxliner P.L. Exp., Co. v. RDI/Luxliner, Inc., 13 F.3d 69, 71 (3d Cir. 1993).3

The decision to join or substitute a party under Rule 25(c) is generally 

left to the district court’s discretion because such joinder or substitutional 

“does not ordinarily alter the substantive rights of parties but is merely a 

procedural device designed to facilitate the conduct of a case.” Id. at 71-71; see 

also Abraxis BioScience, Inc. v. Navinta LLC, No. 07-1251, 2009 WL 904043, at 

*5 (D.N.J. Mar. 30, 2009) (“A joinder or substitution under Rule 25 is 

appropriate when a district court, in the exercise of its discretion, finds that 

such joinder or substitution would facilitate the conduct of a case.”). 

In sum, in the context of a transfer of interest, a court must make a 

choice: 

[It] may direct the transferee to be either substituted in the action 

or joined with the original party. Thus, the court must make a 

determination, based on the respective rights and liabilities among 

the parties and the transferee under the substantive law governing 

the case, whether it would best facilitate the conduct of the case to 

have the transferor remain in the case, substitute the transferee, 

or join the transferee and continue with both as parties.

6 Moore’s Federal Practice - Civil § 25.34 (2021). 

c. Judge Hammer’s Application of Rule 25(c)

Moroccanoil argues that Judge Hammer misapplied Rule 25(c) in 

substituting CHL II for SDI, rather than joining the former as an additional 

party, for three reasons. (App. Br. at 13-20.) I will address each in turn. 

i. Alleged uncertainty regarding the relationship among SDI, CHL II, 

the Settlement Agreement, and the Settlement Bond. 

First, Moroccanoil contends that “where there is uncertainty about the 

nature of the interest transferred, the court should join the new party, and 

leave the old party in the litigation.” (Id. at 13.) Moroccanoil submits that, here,

substitution creates uncertainties about: (1) the relationship between SDI and 

3 As Judge Hammer noted, at issue in Luxliner was the due process rights of the 

successor corporation. (MJ Oral Opinion at 3); Luxliner, 13 F.3d at 72-73. Thus, the 

facts in Luxliner are not analogous to the situation presented here. 
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CHL II; (2) the amalgamation’s effect on the Settlement Agreement (of which 

SDI was a party, not CHL II) and the Settlement Bond; and (3) the impact 

substitution would have on this litigation and the substantive legal rights of 

the parties. (Id.) Plaintiff relies primarily on two cases: Mars, Inc. v. JCM Am. 

Corp., No. 05-3165, 2007 WL 776786 (D.N.J. Mar. 9, 2007) and Eastman 

Chemical Company v. Alphabet Inc., No. 9-971, 2011 WL 13054223 (D. Del. 

Dec. 9, 2011).

In Mars, the plaintiff, Mars, Inc. (“Mars”), initiated a patent infringement 

action against the two defendants. 2007 WL 776786 at *1. During the 

pendency of the litigation, Mars filed a motion to substitute the entity MEI, Inc.

(“MEI”) for itself, alleging that it had “transferred ‘the entire, right, title, and 

interest in and to the patents-in-suit’ to MEI.” Id. The court, however, denied 

Mars’ motion because the “record provided by the parties d[id] not clearly 

indicate . . . whether Mars, MEI, or a third party presently own[ed] the rights 

and interests in the patents-in-suit.” Id. at 2. Thus, the court found it would be 

inappropriate to substitute MEI for Mars given “the uncertainty over the rights 

and interests in the patents-in-suit.” However, “[i]n an effort to assure that the 

proper parties [were] named,” the Court “exercis[ed] its discretion to join MEI 

as a party plaintiff with Mars pursuant to Rule 25(c).” Id. 

In Eastman, the plaintiff Eastman Chemical Company (“Eastman”) filed a 

complaint against defendants asserting patent infringement and other related 

claims. 2011 WL 13054223 at *1. During the pendency of the action, Eastman 

allegedly assigned the patents-in-suit to Grupo Petrotemex, S.A. de C.V. 

(“Petrotemex”) and DAK Americas LLC (“DAK”) and moved to substitute them as 

plaintiffs. Id. The court, however, found that Eastman failed to provide 

sufficient evidence “that all of its interests relating to th[e] litigation ha[d] been 

transferred.” Id. at *3. While it appeared that the interests related to the 

patents-in-suit were transferred, there was uncertainty about the interests 

involved in Eastman’s breach of contract and trade secret misappropriation 

claims, which were premised on a Technology License Agreement (“TLA”)
8

executed by Eastman and certain defendants. Id. at *1-3 (“It appears from the 

record that Eastman has assigned its entire right, title, and interest in the 

patents-in-suit to Petrotemex. However, although both the breach of contract 

and trade secret misappropriation claims are intimately related to the TLA, 

Eastman does not appear to have assigned its interest in the TLA to either 

Petrotemex or DAK.”) (internal citations omitted). Thus, the court found that 

Eastman may have “continue[d] to bear the burdens and reap the benefits of 

the TLA” which made it clear that Eastman may still have an interest in the 

litigation. Id. at *3. Because there was “uncertainty regarding the nature and 

extent of the alleged transfers of interest from a named party to a third party,” 

the court found that joiner was more appropriate than substitution. Id. at *4.

Moroccanoil submits that, as in Mars and Eastman, the uncertainty 

about the nature of the rights transferred between SDI and CHL II renders 

substitution improper. (App. Br. at 15.) Further, Moroccanoil disputes that SDI 

and CHL II are essentially the same entity. Instead, it contends that “SDI and 

CHL [II] were, and possibly still are, different entities, and their transfer of

interest is completely uncertain.” (Id. at 17.) 

Defendants respond that Mars and Eastman are inapposite because 

those cases did not concern a complete statutory amalgamation of entities, like 

that which occurred here, but instead involved a limited assignment of patent 

rights. (Opp. Br. at 19.) Here, defendants contend, the rights of SDI, CHL II, 

and Moroccan after the amalgamation are clear as a matter of Canadian law: 

[I]n light of the Ontario Ministry of Government Service’s 

certification of the Articles of Amalgamation consolidating the 

entities, and the plain terms of the Settlement Agreement, CHL II 

holds all causes of action, claims, and liabilities, and is liable to 

prosecution and subject to convictions, rules, orders, or judgments 

entered for or against SDI and/or old CHL. 

(Id.) Regarding the Settlement Agreement, defendants point to the following 

comprehensive language transferring all liabilities: 

each Party, each Party’s affiliates, and each Party’s affiliates’ 

present and future subsidiaries, divisions, parents, successors, 
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assignees, licensees, transferees, executors, trustees, receivers, 

conservators or administrators ... , including any entity surviving 

out of any merger (in any form), acquisition or reorganizations, and 

including all persons or entities receiving any benefits, rights, 

obligations or liabilities of this Agreement by its terms or by 

operation of law . . . .

(Opp. Br. at 9 (citing DE 107-5 at 112).)

Defendants have the better argument. As explained, Judge Hammer 

found that CHL II “stepped into the shoes” of SDI after the amalgamation. (MJ 

Oral Opinion at 14.) Judge Hammer relied on the Ontario Business 

Corporations Act, R.S.O. 1990, c. B. 16, § 179, which provides in pertinent 

part: 

Upon the articles of amalgamation becoming effective,

. . . 

(b) the amalgamated corporation possesses all the property, rights, 

privileges and franchises and is subject to all liabilities, including 

civil, criminal and quasi-criminal, and all contracts, disabilities 

and debts of each of the amalgamating corporations;

(c) a conviction against, or ruling, order or judgment in favour or 

against an amalgamating corporation may be enforced by or 

against the amalgamated corporation;

. . . 

(e) the amalgamated corporation shall be deemed to be the party 

plaintiff or the party defendant, as the case may be, in any civil 

action commenced by or against an amalgamating corporation 

before the amalgamation has become effective. 

Judge Hammer found that “the Articles of Amalgamation submitted to, and 

certified by, the Ontario Ministry of Government on March 31, 2013 clearly 

establish that the amalgamation that resulted in the formation of CHL II was 

completed pursuant to the Ontario Provincial Business Corporations Act.” (MJ 

Oral Opinion at 17); (see also DE 251-3, Exhibit A.) Because “§ 179 mandates 

that the amalgamated corporation steps into the shoes of the amalgamating 

corporations, and assumes all of their assets, liabilities, and obligations,” 

Judge Hammer concluded that, “under Ontario law, an action commenced 
10

against the amalgamating corporation [i.e., SDI] continues against the 

amalgamated corporation [i.e., CHL II]”. (MJ Oral Opinion at 17.) 

In finding that SDI and CHL II were essentially the same entity, Judge 

Hammer relied, in part, on the reasoning in Brinkley v. Monterey Financial 

Services, Inc., No. 16-1103, 2018 WL 3618054 (S.D. Cal. 2018). (MJ Oral 

Opinion at 15-17.) In Brinkley, the plaintiff initiated a state court action 

against Monterey Financial Services Inc. (“Old Monterey”). 2018 WL 3618054 

at*1. During the pendency of the litigation, “Old Monterey underwent a 

voluntary statutory conversion from a California corporation to a limited 

liability company.” That conversion resulted in the company’s name being 

changed from Monterey Financial Services Inc. to Monterey Financial Services 

LLC (“New Monterey”). Id. The district court found that, as a result of that 

conversion, “Old Monterey dissolved by operation of California law, ceased to 

exist as a legal entity, all of its assets and liabilities transferred to New 

Monterey, and New Monterey stepped into its shoes for all purposes.” Id.

Although Old Monterey “no longer exist[ed] by operation of California law” 

plaintiff continued to insist that it provide its own discovery responses, 

separate from those responses of New Monterey. Id. Plaintiff refused to accept 

New Monterey’s discovery responses on behalf of Old Monterey even though 

New Monterey explained that the responses would be identical. Id. Because 

“Old Monterey no longer exist[ed] and [wa]s ‘essentially’ a non-entity that 

lack[ed] assets, employees, or officers who could respond to discovery on its 

behalf,” the court granted the motion to substitute Old Monterey for New 

Monterey.4 Id.

4 The Brinkley Court explained the legal consequences when a corporation 

converts to an LLC under California law: 

[A] corporation seeking to become a limited liability company must 

complete a statement of conversion on the new entity’s article of 

organization. § 1155(a)(3). The California Secretary of State has created 

and designated Form LLC-1A as the form corporations must file to do 

this. http://www.sos.ca.gov/business-programs/businessentities/conversion-information/ (listing different conversion certificates 

based on type of entity being converted) (last visited July 10, 2018). The 
11

Moroccanoil submits that Brinkley is not analogous to the present matter 

because SDI and CHL II were two separate entities and, thus, this is not a

situation where a single entity converted to a different form. (App. Br at 16-18).

According to Moroccanoil, substitution in this situation affects the substantive 

rights of the parties for three reasons. First, per the RSM Report, defendants 

claim damages on behalf of the “Conforti Group,” which comprises different 

salons from those that would have been owned by SDI at the time of the 

Settlement Agreement. (Id. at 17.) Therefore, substitution would allow CHL II 

“to assert damages on behalf of those salons which were not part of SDI’s July 

2013 Agreement but which arise solely from CHL [II] or the ‘Conforti Group.’” 

(Id.) In other words, substitution “potentially open[s] the door to new damages 

not contemplated by the Agreement.” (Id.)

filing of Form LLC-1A has several immediate and automatic 

consequences.

First, the corporation is immediately dissolved and the LLC 

springs forth in its place. § 1155(d) (“The filing with the Secretary of State 

of a statement of conversion on an organizational document or a 

certificate of conversion ... shall have the effect of the filing of a certificate 

of dissolution by the converting corporation and no converting 

corporation that has made the filing is required to file” the certificates of 

dissolution otherwise required.). As a result of this automatic dissolution, 

“the corporate powers, rights, and privileges of the [converting] 

corporation shall cease.” § 1905(b).

This statutory conversion also automatically causes the immediate 

transfer of all legal rights, assets, and liabilities to the newly-formed LLC. 

Specifically, the following vest or transfer to the LLC: all real and 

personal rights and property, § 1158(b)(1); all debts, liabilities, and 

obligations, § 1158(b)(2); and all rights and liens of creditors and 

lienholders, § 1158(b)(3).

Finally, “[a]n entity that converts into another entity ... is for all 

purposes ... the same entity that existed before the conversion.” § 

1158(a). That being said, although the corporation ceases to exist as a 

legal entity, “[a]ny action or proceeding pending ... against the ... 

converting corporation may be continued against the ... converted 

corporation as if the conversion had not occurred.” § 1158(c).

2018 WL 3618054 at *2–3.
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Moroccanoil’s argument is unavailing for two reasons. First, as Judge 

Hammer noted, Moroccanoil was afforded ample discovery after learning about 

the amalgamation:

Moroccanoil has been afforded ample discovery specific to the 

amalgamation since its disclosure in the RSM Report. In the wake 

of Defendant’s belated disclosure of the amalgamation, the Court 

has permitted Plaintiff to take extensive discovery focused 

specifically on the amalgamation. Order, November 1, 2019, D.E. 

216. According to the Defendants, Plaintiff sought, and 

Defendants produced, more than 80,000 pages of financial 

information and corporate records and Plaintiff was afforded the 

opportunity to depose or redepose relevant witnesses.

(MJ Oral Opinion at 18.) Therefore, Moroccanoil was on notice of all salons 

owned by Conforti and CHL II at least as early as September 2019. Second, 

whether CHL II can assert damages on behalf of salons not contemplated by 

the Settlement Agreement is an issue of contract interpretation to be addressed 

upon resolution of parties’ competing motions in connection with the

settlement. Thus, I find that the issue of potential new damages, however it 

may ultimately be resolved, does not affect the question of substitution. 

Moroccanoil also submits that, in granting substitution, Judge Hammer 

“essentially amended the Agreement and imposed additional and conflicting 

settlement obligations on Moroccanoil that were never bargained-for by the 

parties.” (Id. at 18.) Again, that issue, if it is one, is something to be explored 

on the motions to enforce the Settlement Agreement. Moreover, under 

Canadian law, CHL II assumed all duties and responsibilities of SDI. Therefore, 

CHL II is subject to the Settlement Agreement to the same extent as SDI.5

5 Moroccanoil points out that SDI, a supposedly non-existent entity, entered into 

the Settlement Agreement before amalgamation. It also notes that Judge Hammer, in 

his recitation of the facts, indicated the amalgamation occurred after settlement. (App. 

Br. at 9 n.3.) However, in his Oral Opinion, Judge Hammer stated the correct dates: 

that settlement occurred in July 2013 and the amalgamation occurred in March 2013. 

(MJ Oral Opinion at 3.) Thus, contrary to Moroccanoil’s assertion, Judge Hammer did 

not determine the issues “based on an incorrect understanding that SDI was still a 

valid legal entity when the Agreement was signed, or that CHL succeeded to the 

interests of SDI subsequent to the Agreement under the terms of the Agreement.” 

(App. Br at 9 n.3.) As Judge Hammer noted, the belated disclosure of the 
13

Finally, Moroccanoil submits that substitution raises uncertainties 

regarding the Settlement Bond. (Id.) However, Judge Hammer directly 

addressed this issue and found that it did not constitute a valid reason to deny 

substitution, for two reasons:

First, as noted above, it appears that the bond was amended in 

December 2014, whereby CHL II secured an irrevocable standby 

letter of credit. Second, nothing in the record suggests any 

cognizable risk that were an amendment to the bond still 

necessary, CHL II would be unable to procure it particularly given 

that CHL II also holds all of the assets and claims of SDI.

(MJ Oral Opinion at 19.) For those reasons, there is no uncertainty regarding 

the status of the bond. 

In its reply, Moroccanoil further argues that there is uncertainty because 

“SDI was a non-existent legal entity with no power to contract at the time the 

Agreement was signed in its name, despite warranting that it had the full 

power and authority to enter the Agreement.” (Reply at 8.) Further, it contends 

that the assignment clause in the Settlement Agreement is unhelpful because it 

contemplates present and future affiliates, rather than past affiliates. (Id.) These 

concerns, however, do not warrant denial of substitution because defendants 

acknowledge CHL II’s obligations under the agreement, and will be held to that 

acknowledgement. (See Opp. at 25.)

For the reasons articulated above, I find that there is no “uncertainty” 

regarding the relationship between the parties and the effect of substitution on 

the Settlement Agreement or the Settlement Bond. By operation of Ontario law, 

CHL II stepped into the shoes and assumed all obligations of SDI. Thus, CHL II 

is bound by the Agreement to the same extent as SDI. And, as explained, the 

Settlement Bond was amended to incorporate CHL II’s irrevocable standby 

letter of credit. Therefore, Moroccanoil’s uncertainty arguments are unavailing. 

amalgamation is not unproblematic. However, defendants acknowledge CHL II’s 

responsibilities under the Settlement Agreement. (Opp. Br at 23-24.) And, as 

explained, under Canadian law, the amalgamated corporation (CHL II) assumes all 

obligations of the amalgamating corporation (SDI). 
14

ii. Substitution and the ends of justice

Next, Moroccanoil submits that substituting CHL II in place of SDI does 

not serve the ends of justice. (App. Br. at 18-19.) In particular, Moroccanoil 

submits that substitution should not be permitted under principles of equity 

given defendants’ failure to disclose the amalgamation. (App. Br. at 19.) Again, 

however, Judge Hammer acknowledged that defendants “could have done 

considerably more to clarify the amalgamation and formation of CHL II.” (MH 

Oral Opinion at 17-18.) However, as Judge Hammer noted, “substitution does 

not affect Moroccanoil’s right of recovery” because “CHL II has assumed all of 

the assets and liability of SDI.” (Id. at 18.) Further, extensive discovery was 

permitted after Moroccanoil learned of the amalgamation in 2019. (Id.) At this 

point, nearly two years later, the delay alone does not warrant denial of 

defendants’ substitution motion. 

iii. The Court’s ability to order joinder 

Finally, regarding Judge Hammer’s application of Rule 25(c), Moroccanoil 

submits that a court can order joinder without an affirmative application. (App. 

Br at 19-20.) Moroccanoil is correct, as a technical matter, that a district court, 

in exercising its discretion, is permitted to order joinder rather than 

substitution under Rule 25(c). See, e.g., Mars, 2007 WL 776786 at *2 (“In an 

effort to assure that the proper parties are named in this case, this Court is 

exercising its discretion to join MEI as a party plaintiff with Mars pursuant to 

Rule 25(c).”); Eastman, 2011 WL 13054223 at *6 (“Because Eastman's interest 

in the patents-in-suit appears to have been transferred and because joinder 

will result in more efficient facilitation of this litigation than would 

substitution, the Court finds that Petrotemex and DAK should be joined, not 

substituted, as plaintiffs in this matter.”). 

Nevertheless, for the reasons explained supra, Judge Hammer did not 

commit any error in exercising his discretion to order substitution. Because 

CHL II stepped into the shoes of SDI, and assumed all assets and liabilities, 

and is subject to any rules, orders, or judgments entered against SDI, 
15

substitution does not create uncertainty and does not affect Moroccanoil’s 

substantive rights. 

d. Alleged Prejudice to Moroccanoil 

Moroccanoil also contends that Judge Hammer erred in determining that 

it would not be prejudiced by substitution. (App. Br. at 20-21.) In this regard, 

Moroccanoil relies on its brief in support of its motion for reconsideration of 

Judge Hammer’s December 30 Order. In particular, though, Moroccanoil notes 

that Judger Hammer indicated that the amalgamation occurred after the 

Settlement Agreement. That point has been addressed. See n.5, supra. 

Moroccanoil also contends that Brinkley was misapplied because this matter 

involves amalgamation of two separate entities and not the conversion of one 

entity into a different form. That point, too, has been addressed. See, supra

Section II.c.i. 

In any event, Judge Hammer thoroughly and accurately addressed the 

issue of prejudice in his December 30 decision and on reconsideration:

Moroccanoil has failed to identify any material prejudice resulting 

from allowing substitution at this stage. First, as noted above, 

substitution does not affect Moroccanoil’s right of recovery against 

Defendants. CHL II has assumed all of the assets and liabilities of 

SDI, and is subject to any rules, orders, or judgments entered 

against SDI. Second, Moroccanoil has been afforded ample 

discovery specific to the amalgamation since its disclosure in the 

RSM Report. In the wake of Defendant’s belated disclosure of the 

amalgamation, the Court has permitted Plaintiff to take extensive 

discovery focused specifically on the amalgamation.

(MJ Oral Opinion at 18)

Plaintiff rehashes the same or substantially similar arguments 

concerning prejudice that the Court considered in granting 

Defendants’ substitution motion. However, the Court carefully 

considered the issue of prejudice, and articulated several reasons 

why Plaintiff would not suffer undue prejudice if the Court granted 

substitution. The Court examined relevant caselaw and the 
16

extensive additional discovery afforded to Plaintiff in concluding 

that any delay was not sufficient to warrant denial of the motion. 

(DE 301 at 3 n.2 (internal citations omitted).)

At base, Moroccanoil fears that substitution will inhibit its ability to 

recover against SDI’s assets. It argues in its Reply as follows:

Defendants glaringly fail to provide any facts to rebut 

Moroccanoil’s citations showing that SDI has continued to operate 

independently long after the amalgamation purportedly caused SDI 

to cease to exist. Besides conducting this litigation in its own 

name, undisputed evidence shows that SDI continued transacting 

business throughout the relevant period as SDI. In fact, all of the 

transactions, invoices, orders, product shipments, and party 

communications in performance of the Agreement occurred in the 

name of SDI. This all makes perfect sense, as SDI was operating 

as a separate business. SDI had its own bank account, its own 

employees, and probably still has assets in its name to this day. 

These assets should be available to Moroccanoil for any recovery 

against Defendants. Substitution allows SDI to be free of any 

judgment against it for its breach of the Agreement it signed.6

(Reply at 9.) However, as Judge Hammer found, CHL II assumes all assets of 

SDI by operation of Canadian law. (MJ Oral Opinion at 18); Ontario Business 

Corporations Act, R.S.O. 1990, c. B. 16, § 179(b) (“the amalgamated 

corporation possesses all the property, rights, privileges and franchises and is 

subject to all liabilities, including civil, criminal and quasi-criminal, and all 

contracts, disabilities and debts of each of the amalgamating corporations.”). 

Like Judge Hammer, I find that Moroccanoil will not be prejudiced by 

substitution because, under Canadian law, CHL II assumes all liabilities of 

SDI.

III. Conclusion

For the reasons set forth above, I will deny Moroccanoil’s’ appeal (DE 

306) and affirm Judge Hammer’s Order (DE 280) substituting CHL II for SDI. 

6 Moroccanoil also submits that it can produce 250 pages of CHL II’s financial 

statements demonstrating the separate and continuing business operations of SDI. 

However, because the statements are marked “attorneys’ eyes only,” Moroccanoil 

would be forced to file another motion to seal. (Reply at 9 n.2.)
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An appropriate order follows.

Dated: June 4, 2021

/s/ Kevin McNulty

____________________________________

Kevin McNulty

United States District Judge