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IN RE: ASBESTOS LITIGATION
DOCKET # FBT-CV-21-6109520-S : SUPERIOR COURT
:
EVAN PLOTKIN AND MARTHA : J.D. OF FAIRFIELD
PLOTKIN, :
Plaintiffs, : AT BRIDGEPORT
:
v. :
:
JOHNSON & JOHNSON, et al., :
Defendants. : MAY 17, 2024
DEFENDANTS HOLDCO, JANSSEN, AND KENVUE’S REPLY BRIEF IN SUPPORT
OF THEIR MOTION TO STRIKE PLAINTIFFS’ SEVENTH AMENDED COMPLAINT
Defendants Johnson & Johnson Holdco (NA) Inc. (“Holdco”), Janssen Pharmaceuticals,
Inc. (“Janssen”), and Kenvue, Inc. (“Kenvue”) respectfully submit this reply brief in further
support of their motion to strike the Plaintiffs’ Seventh Amended Complaint. Plaintiffs’ response
fails to rebut the simple fact that Holdco inherited no talc-related liabilities from Old JJCI. The
Defendants have properly raised a narrow choice of law issue – what state’s law governs Holdco’s
successor liability. Holdco received its assets as a result of a divisional merger under Texas law,
and the entities created from the divisional merger were Texas entities.1 Thus, this Court should
apply Texas law to determine whether Holdco inherited any talc-related liabilities. Under Texas
1
As the Third Circuit described, the divisional merger caused Old JJCI to cease to exist and
created two new Texas limited liability companies, Chenango One LLC (“Chenango One”) and
Chenango Two LLC (“Chenango Two”). In re LTL Mgmt., LLC, 64 F.4th 84, 95-96 n.3 (3rd Cir.
2023). Old JJCI’s assets and liabilities were divided between the two new entities, with
Chenango One acquiring all of Old JJCI’s talc liabilities as well as certain assets. Id. at 96.
Chenango Two received all other assets and liabilities. Id. at 96-97. After the divisional merger,
Chenango One converted into a North Carolina limited liability company and changed its name
to “LTL Management LLC.” Id. at 96 n.3. Chenango Two merged into another entity, which
then changed its name to “Johnson & Johnson Consumer Inc.” Id. That entity later changed its
name to Johnson & Johnson Holdco (NA) Inc. For simplicity, Defendants’ opening brief used
the term “Holdco” to refer more broadly to Chenango Two and the entity it merged into.
law, Holdco inherited no talc-related liabilities and thus could not pass any liabilities onto Kenvue
or Janssen. For this reason, the Court should strike Holdco, Kenvue, and Janssen from the
Complaint.
ARGUMENT
As a matter of law, Holdco came into existence with no talc-related liabilities. All
liabilities were allocated to LTL Management, LLC (“LTL”) (now LLT Management LLC). As
a result, Holdco had no liabilities to pass on to Kenvue or Janssen. The Defendants adequately
presented a narrow choice of law issue that is appropriately addressed on a motion to strike –
Texas law governs the successor liability of Holdco. A choice of law analysis for this narrow issue
is appropriate at this juncture because only one choice of law question needs to be addressed –
what state’s law determines Holdco’s successor liability after the divisional merger. And that
determination relies on a single fact that is present in the complaint – that during the divisional
merger the talc-related liabilities were allocated to LTL under Texas law. Holdco was created as
a result of a divisional merger under Texas law and its successor liability is thus governed by Texas
law. Under Texas law, Holdco inherited no talc-related liabilities and therefore had no talc-related
liabilities to pass to Kenvue or Janssen.
The first step of a choice of law analysis, whether there is a conflict between the states, is
easily resolved. Texas does not recognize the “mere continuation” exception, which Plaintiffs
argue applies to Holdco, Asfahl Agency v. Tensor, Inc., 135 S.W.3d 768, 791-92 (Tex. App. 2004),
but Connecticut does. Chamlink Corp. v. Merritt Extruder Corp., 96 Conn. App. 183, 188, 899
A.2d 90, 93 (2006).
The next step to identify the specific legal issue that requires a choice of law analysis.
Here, the Plaintiffs mention depecage but ignore its impact on this case. Although the underlying
2
cause of action sounds in tort, “the rule of ‘depecage’ requires a separate choice of law analysis
for each issue presented.” JobPro Temp. Servs., Inc. v. Giftcorp, Inc., No. HHD-CV-126030121S,
2014 WL 341895, at *4 (Conn. Super. Ct. Jan. 7, 2014).2 “The principle of depecage has been
described as the framework under which different issues in a single case . . . may be decided
according to the substantive law of different states.” Reichhold Chemicals, Inc. v. Hartford
Accident & Indem. Co., 252 Conn. 774, 784 n.5 (2000) (internal quotation marks omitted). Thus,
Texas law can apply to the narrow issue of Holdco’s successor liability and Connecticut tort law
can apply to the other substantive issues in the case. Indeed, the court in JobPro Temporary
Services expressly acknowledged that “the fact that this case is primarily about a breach of contract
does not mandate that contract choice of law rules apply to the question of successor liability[.]”
2014 WL 341895, at *4. The court in that case did ultimately apply Connecticut law to the issue
of successor liability, but as Defendants pointed out in their memorandum of law in support of
their motion to strike (see dkt no. 446, footnote 3), that case is not binding on this court as there is
no authority from a higher court on point. See JobPro Temporary Services, 2014 WL 341895, at
*1 (“The primary question presented is whether contracts choice of law rules or, alternatively,
corporations choice of law rules govern in determining whether to apply the ‘continuity of
enterprise’ doctrine and the successor liability principle. There is no binding Connecticut authority
on point.”) (emphasis added).
That is why Weber v. U.S. Sterling Sec., Inc., wherein the Connecticut Supreme Court used
the law of a defendant LLC’s state of incorporation to determine an issue of successor liability, is
instructive. 282 Conn. 722, 730 (2007). Plaintiffs correctly point out that Weber concerned
foreign LLCs and Holdco is not an LLC, but Defendants merely cited to Weber as an example of
2
All unreported cases are attached as Exhibit A.
3
how this court should determine successor liability and explained in a footnote that there is no
binding authority on this point. As a further example, the court in Haina Inv. Co. Ltd. v.
InterEnergy Grp. Ltd., a breach of contract action, considered whether to apply Connecticut law
or Delaware law – the state of the defendant’s incorporation – to the issue of veil-piercing, a
doctrine that concerns successor liability. No. FST-CV-206045183, 2021 WL 4481204, at *5
(Conn. Super. Ct. Sept. 8, 2021). Citing to Weber, the court explained that “[a]lthough Weber
involved a limited liability company, the Supreme Court relied on authorities from other states that
concerned corporations in its determination that a court should look to the state of incorporation
to determine the extent of an entity's liability.” Id. at *5 (emphasis added). Following those
authorities, the court ultimately concluded that “for the purposes of corporate veil-piercing,
Delaware law applies as it is the law of the jurisdiction in which [the defendant] was incorporated.”
Id. Thus, the court declined to apply Connecticut contracts choice of law principles to all issues
in the case and, relying on Weber, applied Delaware law to the issue of successor liability of a
corporation. This is precisely what the court should do here.
Because the divisional merger is the only fact needed to determine whether Holdco
inherited talc-related liabilities, no fact-intensive inquiry is necessary. The Plaintiffs argue that a
motion to strike is not the appropriate juncture to conduct a choice of law analysis, but this case
presents the rare scenario where it is appropriate. “[T]his is the unusual case where the court has
all of the information it needs from the complaint to conduct the choice of law analysis.” Bos.
Prop. Exch. Transfer Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. X04-HHD-CV-
116026660S, 2013 WL 2383606, at *4 (Conn. Super. Ct. May 13, 2013); see also Sessa v. Amica
Mut. Ins. Co., No. CV156030881, 2016 WL 2955830, at *2 (Conn. Super. Ct. May 2, 2016)
(“[S]uperior courts have conducted choice of law analyses to determine a motion to strike when
4
there are sufficient underlying facts.”). The Plaintiffs’ complaint sets forth that New JJCI, which
was eventually renamed Holdco, was created as part of a “Texas Two Step” divisional merger.
(See 7th Am. Compl. ¶¶ 18-19.) As part of this merger, all talc-related liabilities were allocated
to LTL. Holdco thus came into existence with no such liabilities.
The Plaintiffs argue that Defendants ignore the series of transactions that occurred after the
divisive merger and the fact that the J&J entities continued to operate in New Jersey at Old JJCI’s
properties (dkt no. 462, at 3-4), but the corporate details of Kenvue and Janssen are irrelevant.
Holdco never inherited any talc-related liabilities that it could have passed on to them. All talc-
related liabilities were transferred exclusively to LTL. As the Third Circuit explained, the
corporate restructuring under Texas law “allocated LTL responsibility for essentially all liabilities
of Old Consumer tied to talc-related claims. This meant, among other things, it would take the
place of Old Consumer in current and future talc lawsuits and be responsible for their defense.”
In re LTL Mgmt., LLC, 64 F.4th 84, 96 (3d Cir. 2023) (footnote omitted). Holdco, by contrast,
inherited “none of [old JJCI’s] talc-related liabilities.” Id. at 97. Since Holdco had no talc-based
liabilities to begin with, it could not pass talc-based liabilities to Janssen or Kenvue though any
theory of “successor” liability.
This court should conduct a narrow choice of law analysis and apply Texas law to
determine Holdco’s successor liability. Under Texas law, Holdco inherited no talc-related
liabilities. That limited issue is thus determinative of Holdco, Kenvue, and Janssen’s liability in
this case. LLT is the proper defendant in this case. There is no reason for Plaintiffs to maintain
claims against other entities that have no liability as a matter of law. Holdco, Janssen, and Kenvue
should therefore all be stricken from the complaint.
5
Accordingly, Holdco, Janssen, and Kenvue respectfully request that the Court grant their
motion to strike.
DEFENDANTS,
JOHNSON & JOHNSON HOLDCO (NA) INC.,
JANSSEN PHARMACEUTICALS, INC., AND
KENVUE, INC.
By: /s/James D. Geisler (441958)
Robert R. Simpson, Esq.
Sheldon R. Poole, Esq.
James D. Geisler, Esq.
SHOOK, HARDY & BACON L.L.P.
185 Asylum Street
City Place I, Suite 3701
Hartford, CT 06104
Juris No. 443536
Tel. No.: (860) 515-8901
Fax: (860) 515-8911
RSimpson@shb.com
SPoole@shb.com
JGeisler@shb.com
Gregory Boulos (pro hac vice)
SHOOK, HARDY & BACON L.L.P.
201 South Biscayne Boulevard
Citigroup Center, Suite 3200
Miami, FL 33131
Tel. No.: (305) 358-5171
Fax: (305) 358-7470
GBoulos@shb.com
Colin K. Kelly, Esq. (pro hac vice)
Anna S. Pieschel, Esq. (pro hac vice)
SHOOK, HARDY & BACON L.L.P.
1230 Peachtree Street, Suite 1200
Atlanta, GA 30309
Tel. No.: (470) 867-6000
Fax: (470) 867-6001
CKelly@shb.com
APieschel@shb.com
Their Attorneys
6
CERTIFICATION OF SERVICE
The undersigned hereby certifies that on May 17, 2024, a copy of the foregoing
DEFENDANTS HOLDCO, JANSSEN, AND KENVUE’S REPLY BRIEF IN SUPPORT OF
THEIR MOTION TO STRIKE PLAINTIFFS’ SEVENTH AMENDED COMPLAINT was
sent via email to the following counsel of record.
Brian P. Kenney, Esq. Benjamin H. Adams, Esq.
Early, Lucarelli, Sweeney Benjamin D. Braly, Esq.
& Meisenkothen, LLC Ethan A. Horn, Esq.
265 Church Street Dean Omar Branham Shirley, LLP
P.O. Box 1866 302 N. Market Street, Suite 300
New Haven, CT 06508-1866 Dallas, TX 75202
Attorney for the Plaintiffs Pro Hac Attorneys for the Plaintiffs
And sent via e-mail to all defense counsel of record via CT Listserve
/s/James D. Geisler (441958)
James D. Geisler
7
EXHIBIT A
JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014)
2014 WL 341895, 57 Conn. L. Rptr. 449
done by Giftcorp, which was to supply gift packages to
2014 WL 341895 corporations for their employees and customers.
UNPUBLISHED OPINION. CHECK COURT RULES The plaintiff thereafter amended its complaint to add
BEFORE CITING. Longmeadow and the defendant as named defendants. It
Superior Court of Connecticut, also added as a defendant Richard Shechtman (Shechtman),
Judicial District of Hartford. who was president of Giftcorp and became executive vice
president of the defendant. The plaintiff sued the defendant on
JOBPRO TEMPORARY SERVICES, INC. the theories of piercing the corporate veil, successor liability,
v. fraudulent transfer, and conspiracy. It sued Longmeadow
GIFTCORP, INC. et al. and Shechtman on some of these theories, and also sued
Shechtman for breach of a personal guarantee of the debt.
No. HHDCV126030121S.
| During the week of October 29, 2013, the court heard the
Jan. 7, 2014. plaintiff's application for a prejudgment remedy against all
defendants. On November 1, 2013, the court granted the
Attorneys and Law Firms
application against the defendant in the amount of the debt,
Beck & Eldergill, Manchester, CT, for Jobpro Temporary plus interest and attorneys fees, on the theory of successor
Services, Inc. liability and, specifically, that the defendant represented a
“continuity of enterprise” of Giftcorp. 2 The court denied the
Rogin Nassau LLC, Hartford, CT, Weinstein & Wisser PC, prejudgment remedy against all the other defendants.
West Hartford, CT, for Giftcorp, Inc. et al.
The plaintiff thereafter filed a supplemental memorandum in
Opinion
which it sought to add attorneys fees incurred in the hearing
CARL J. SCHUMAN, Judge. to the total amount of the prejudgment remedy. The defendant
filed an “Objection Regarding the Amount of Prejudgment
*1 The primary question presented is whether contracts Remedy” in which it sought, among other things, to vacate
choice of law rules or, alternatively, corporations choice the court's prejudgment remedy by arguing that Delaware law
of law rules govern in determining whether to apply the applies to the issue of the defendant's liability as successor
“continuity of enterprise” doctrine and the successor liability to Giftcorp's debt and that the continuity of enterprise theory
principle. There is no binding Connecticut authority on point. of successor liability is not cognizable under Delaware law.
For the reasons discussed below, the court applies contracts The plaintiff filed a response asserting primarily that contract
choice of law rules and confirms a prejudgment remedy in choice of law rules apply, that under those rules Connecticut
favor of the plaintiff. law would apply, and that Connecticut accepts the continuity
of enterprise theory of successor liability.
On November 12, 2013, the court issued the following
I
order: “In its objection regarding the amount of prejudgment
Plaintiff JobPro Temporary Services, Inc. (the plaintiff), remedy, defendant American Gourmet Group, LLC
a Connecticut corporation, originally filed suit to collect (American Gourmet) argues, among other things, that the
$145,776.78 and other charges for supplying temporary prejudgment remedy order of the court should be vacated
workers between November 2011 and February 2012 because Delaware law applies and Delaware law does not
to defendant Giftcorp, Inc. (Giftcorp), a Delaware recognize the continuity of enterprise theory. American
Gourmet raised this substantive point at oral argument but
corporation. 1 In April 2012, Giftcorp sold its assets, but
the court did not address it in its oral decision. Although
not its liabilities, to defendant Longmeadow Capital, LLC
American Gourmet does not label its current objection and
(Longmeadow), a Connecticut limited liability investment
request to vacate the court's ruling as a motion to reargue,
firm. Shortly thereafter, Longmeadow created defendant
the court recognizes that the issue meets the criteria for
American Gourmet Group, LLC (the defendant), a Delaware
reargument because it may involve a ‘principle of law
limited liability company, to perform work similar to that
© 2023 Thomson Reuters. No claim to original U.S. Government Works. 1
JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014)
2014 WL 341895, 57 Conn. L. Rptr. 449
which would have a controlling effect, and which has been are two theories used to determine whether the purchaser is
overlooked ...” ’ (Internal quotation marks omitted.) Opoku merely a continuation of the selling corporation. Under the
v.. Grant, 63 Conn.App. 686, 692–93, 778 A.2d 981 (2001). common law mere continuation theory, successor liability
To avoid elevating form over substance, the court will treat attaches when the plaintiff demonstrates the existence of
American Gourmet's request as a motion to reargue and grant a single corporation after the transfer of assets, with an
the procedural component of the motion. identity of stock, stockholders, and directors between the
successor and predecessor corporations.’ (Internal quotation
*2 “The court accordingly orders the parties to submit marks omitted.) Graham v. James, 144 F.3d 229, 240 (2d
simultaneous memoranda by November 26, 2013, or such Cir.1998). Under the ‘continuity of enterprise’ theory, a
other date as counsel may agree upon, on the issue of mere continuation exists ‘if the successor maintains the same
which state's law applies to the question of the validity of business, with the same employees doing the same jobs, under
the continuity of enterprise theory upon which the court the same supervisors, working conditions, and production
relied and, applying that state's law, whether the outcome processes, and produces the same products for the same
of the present case would be the same. Compare Reichold customers.’ B.F. Goodrich v. Betkoski, 99 F.3d 505, 519 (2d
Chemicals, Inc. v. Hartford Accident & Indemnity Co., 243 Cir.1996).” Chamlink Corp. v. Merritt Extruder Corp., supra,
Conn. 401, 414, 703 A.2d 1132 (1997) (under the law 96 Conn.App. at 188. 4
of contracts, it is presumed that “the law of the state in
which the bulk of the contracting transactions took place The defendant first questions whether the continuity of
should be applied”), with Weber v. U.S. Sterling Securities, enterprise theory is part of Connecticut law. It is true, as
Inc., 282 Conn. 722, 730, 924 A.2d 816 (2007) (law of the defendant points out, that the language in Chamlink was
state of incorporation applies to organization, internal affairs, dictum because the Court approved the trial court's factual
and liability of managers and members of limited liability finding that the purchaser was not a mere continuation of
companies).” the seller. Id., at 188 n. 3, 189. However, in Kendall v.
Amster, 108 Conn.App. 319, 330–32, 948 A.2d 1041 (2008),
The parties have now submitted briefs on this issue and the the Appellate Court soon thereafter quoted the language in
court considers the matter ready for decision. 3 Chamlink pertaining to the continuity of enterprise theory
in upholding a prejudgment remedy. Then in Robbins v.
Physicians for Women's Health, LLC, 133 Conn .App. 577,
584–88, 38 A.3d 142, cert. granted, 304 Conn. 926, 41
II
A.3d 1052 (2012), the Appellate Court again quoted the
The continuity of enterprise theory first gained recognition Chamlink language and essentially assumed the applicability
by our appellate courts in Chamlink Corp. v. Merritt Extruder of the entire continuation theory in holding that “the
Corp., 96 Conn.App. 183, 187–89, 899 A.2d 90 (2006). imposition of successor liability under the mere continuation
There the court began its analysis by recognizing the and continuity of enterprise theories requires a threshold
following general principle: “The mere transfer of the assets determination that the predecessor no longer represents a
of one corporation to another corporation or individual viable source of relief.” (Footnote omitted.) Id., at 587. 5
generally does not make the latter liable for the debts or Both the Second Circuit and the District Court for the
liabilities of the first corporation except where the purchaser District of Connecticut have interpreted these decisions as
expressly or impliedly agrees to assume the obligations, the having adopted the continuity of enterprise theory under
purchaser is merely a continuation of the selling corporation, Connecticut law. See Call Center Technologies v. Grand
[the companies merged] or the transaction is entered into Adventures TR, 635 F.3d 48, 53 (2d Cir.2011) (quoting
fraudulently to escape liability.” (Internal quotation marks Altman v. Motion Water Sports, Inc., 722 F.Sup.2d 234,
omitted.) Id., at 187 (quoting 19 C.J.S. 314, Corporations § 242–43 (D.Conn.2010) (“In Kendall the Appellate Court
657 (1990)). makes it plain that “continuity of enterprise” is not just
a theory of successor liability, it is a recognized principle
In the present case, although the plaintiff alleged fraudulent of Connecticut law.”) and Medina v. Unlimited Systems,
transfer, the only theory argued by the plaintiff and found by LLC, 760 F.Sup.2d 263, 270 (D.Conn.2010) (“Connecticut
the court was one of continuation of the selling corporation. courts treat ‘continuity of enterprise’ as their preferred
As to that theory, the Appellate Court observed: “ ‘There version of the ‘mere continuation’ exception, essentially
© 2023 Thomson Reuters. No claim to original U.S. Government Works. 2
JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014)
2014 WL 341895, 57 Conn. L. Rptr. 449
defining ‘mere continuation’ as ‘continuity of enterprise.’ 915, 33 A.3d 739 (2011). Thus, the court must first determine
Connecticut courts do not view continuity of ownership as whether there is a conflict between Delaware and Connecticut
an essential requirement for a business to be deemed a mere law. If there is, the court must then proceed through a conflict
continuation”)) 6 Thus, the continuity of enterprise theory has of law analysis to determine the applicable law.
become part of Connecticut law.
In this case, there is a conflict. Although the Delaware
*3 The defendant also argues that the continuity of Supreme Court has apparently not addressed the issue, it
enterprise theory in Connecticut applies only to tort cases appears to be settled law that Delaware does not accept the
and that it would constitute improper judicial legislation continuity of enterprise theory of successor liability. Instead,
to extend the theory to commercial cases such as the Delaware has narrowly construed the mere continuation
present one. While the court is sensitive to these concerns, theory of successor corporate liability and required the
they do not apply here. Kendall itself was a commercial continuation of officers, directors, or stockholders of the
case arising from a failed business relationship. Kendall v. predecessor and successor corporations. See Magnolia's at
Amster, supra, 108 Conn.App. at 321–24. While Robbins Bethany, LLC v. Artesian Consulting Engineers, Inc., 2011
involved medical malpractice, the Appellate Court explained WL 48261606 at *3 (Del.Super. Sept. 19, 2011). In contrast,
the purpose of the continuity of enterprise theory as seeking as discussed, in Connecticut our Appellate Court has adopted
“to prevent corporations from externalizing the costs of the continuation of enterprise theory and applied it to
contract or tort liability by transferring assets into the name commercial cases.
of a second corporation.” (Emphasis added.) Robbins v.
Physicians for Women's Health, LLC, supra, 133 Conn.App. *4 To determine which state's law applies, it is first
at 585. Several of the federal cases applying Connecticut necessary to characterize the issue properly. Although the
law have involved commercial disputes. See Call Center underlying cause of action involves a contractual dispute,
Technologies v. Grand Adventures TR, supra, 635 F.3d at the rule of “depecage” requires a separate choice of law
49–50 (sales agreement); Medina v. Unlimited Systems, LLC, analysis for each issue presented. See Reichold Chemical, Inc
supra, 760 F.Sup.2d at 264 (failure to pay wages). Thus, while v. Hartford Accident & Indemnity Co., supra, 252 Conn. at
there are valid arguments for limiting the mere continuation 783. That is, the “principle of depecage has been described as
theory of successor liability to tort cases; see C.T. Charlton & the framework under which different issues in a single case ...
Associates, Inc. v. Thule, Inc., 2013 W.L. 5433434 at *4 (6th may be decided according to the substantive law of different
Cir.2013) (“the public-safety concerns that underlie tort law states.” (Internal quotation marks omitted.) Id., at 783 n. 5.
are absent in the commercial context”); there is little question Thus, the fact that this case is primarily about a breach of
that Connecticut law currently recognizes the continuity of contract does not mandate that contract choice of law rules
enterprise theory in commercial cases. It would also constitute apply to the question of successor liability and the continuity
improper judicial legislation for the court not to follow this of enterprise theory. Rather, the depecage rule dictates that the
case law. court characterize the issue of successor liability in terms of a
contract law issue, as the plaintiff contends, or a corporations
law issue, as the defendant maintains.
III There is a nationwide split of authority on this very matter.
See Savage Arms v. Western Auto Supply Co., 18 P.3d 49,
The next question is whether to apply Connecticut law in this
case. “In determining the governing law, a forum applies its 52–54 (Alaska 2001). 7 Compare In re Asbestos Litigation
own conflict-of-law rules ...” Gibson v. Fullin, 172 Conn. 407, (Bell), 517 A.2d 697, 699 (Del.Super.1986) (tort choice of
411, 374 A.2d 1061 (1977). “The threshold choice of law law rules should not apply because the key question concerns
issue in Connecticut, as it is elsewhere, is whether there is the legal effect of contracts between corporations) with Reed
an outcome determinative conflict between applicable laws v. Armstrong Cork Co., 577 F.Sup. 246, 248 (E.D.Ark.1983)
of the states with a potential interest in the case. If not, (in product liability case, “the question of liability is created
there is no need to perform a choice of law analysis, and the under strict liability theory which is tort rather than contract or
law common to the jurisdiction should be applied.” (Internal corporate law”). There is no Connecticut appellate authority
quotation marks omitted.) Cohen v.. Roll–A–Cover, LLC, 131 directly on point. Cf. Call Center Technologies v. Grand
Conn.App. 443, 465–66, 27 A.3d 1, cert. denied, 303 Conn. Adventures TR, supra, 635 F.3d at 49–52 (Second Circuit
© 2023 Thomson Reuters. No claim to original U.S. Government Works. 3
JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014)
2014 WL 341895, 57 Conn. L. Rptr. 449
applied Connecticut law without a conflict of law analysis *5 Because the primary purpose of the successor liability
even though defendants were Texas entities and plaintiff, doctrine in Connecticut is thus to provide contract or tort
a Delaware corporation, produced items in Connecticut creditors a remedy, it makes sense to characterize it as a
and shipped them to Texas); Peglar & Associates, Inc. v. contract or torts issue, as the case may be, and apply the choice
Professional Indemnity Underwriters Corp., Superior Court, of law rule for contracts or torts. Thus, the Alaska Supreme
judicial district of Stamford–Norwalk, Docket No. CV97– Court reasoned as follows in deciding that torts rather than
0160824S (June 19, 2002, Rogers, J .) [32 Conn. L. Rptr. 359] corporation choice of law rules apply: “Successor liability
(in commercial case, court assumes that contract choice of is essentially an expansion of products liability law, which
law rules apply). derives from tort principles of negligence and strict liability,
and rejects contract-derived requirements such as privity. The
In resolving this conflict, the better approach is to focus on purpose of the modern strict liability regime is to insure that
the purpose of the successor liability doctrine and attempt to the cost of injuries resulting from defective products [is]
characterize the doctrine in a way that furthers its purposes. borne by the manufacturers that put such products on the
See Zimnoch v. Planning and Zoning Commission, 302 Conn. market rather than by the injured persons who are powerless
535, 558–59, 29 A.3d 898 (2011) (construing a rule in light to protect themselves.” (Internal quotation marks omitted.)
of its purpose). In Robbins v. Physicians for Women's Health, Savage Arms v. Western Auto Supply Co., supra, 18 P.3d at 53.
LLC, supra, 133 Conn.App. at 585–86, our Appellate Court
addressed the purpose of the successor liability doctrine in While a corporate creditor is not as sympathetic as an injured
the following terms: “The imposition of successor liability is tort victim, the same reasoning applies in contract cases.
generally intended to prevent corporations from externalizing A contract creditor is normally entitled to a remedy. Our
the costs of contract or tort liability by transferring assets law should prevent debtor corporations from escaping their
into the name of a second corporation. See United States v. contractual obligations by the expedient of changing their
General Battery Corp., Inc., 423 F.3d 294, 306 (3d Cir.2005) name without changing their business.
(‘[t]he overriding goal of successor liability ... is to balance
the interest in preventing tortfeasors from externalizing the The defendant contends that successor liability is a question
costs of their misconduct with the interest in a fluid market of corporate law. It cites Weber v. U.S. Sterling Securities,
in corporate assets' [internal quotation marks omitted] ), cert. Inc., supra, 282 Conn. at 72, in which our Supreme Court
denied sub nom. Exide Technologies v. United States, 549 held that the question of whether to pierce the corporate
U.S. 941, 127 S.Ct. 41, 166 L.Ed.2d 250 (2006); United States veil of a limited liability corporation is one of corporate
v. Mexico Feed & Seed Co., 980 F.2d 478, 487 (8th Cir.1992) law. The Court relied on General Statutes § 34–222, which
(‘[t]he purpose of corporate successor liability ... is to prevent mandates that the law of the state of incorporation governs
corporations from evading their liabilities through changes issue involving the “organization and internal affairs and the
in ownership’); G. Kuney, ‘A Taxonomy and Evaluation of liability of its managers and members ...” 9 The Court also
Successor Liability,’ 6 Fla. St. U. Bus. L.Rev. 9, 60 (2007) cited the Restatement (Second) Conflicts of Laws § 307,
(‘the purpose of [successor liability is] to provide contract which provides that “the local law of the state of incorporation
and tort creditors with an avenue for recovery in appropriate will be applied to determine the existence of a shareholder's
cases against successor entities, when the predecessor that liability ... to its creditors for corporate debts.” (Internal
contracted with them or committed the tort, or the action that quotation marks omitted.) Id.
later gave rise to the tort, had sold substantially all of its assets
and [is] no longer a viable source of recovery’).” See also The defendant, with commendable diction, asserts that the
Robbins v. Physicians for Women's Health, LLC, supra, at 585 doctrines of piercing the corporate veil and mere continuity
n. 7 (citing M. Reilly, “Making Sense of Successor Liability,” are “kissing cousins.” But the court is not convinced that
31 Hofstra L.Rev. 745, 785–87 (2003), for the proposition the relationship is that close. Piercing the corporate veil
that courts employ “ ‘fraud-free successor liability’ doctrines, involves a determination of when the court should disregard
including continuity of enterprise, ‘ostensibly to provide a the corporate structure and hold members, shareholders, or
source of compensation for claimants who cannot establish owners of a corporate business entity personally liable for the
fraud’ ”). 8 debts of the corporation. See Commissioner of Environmental
Protection v. State Five Industrial Park Inc., 304 Conn. 128,
138–39, 37 A.3d 724 (2012). Successor liability seeks to
© 2023 Thomson Reuters. No claim to original U.S. Government Works. 4
JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014)
2014 WL 341895, 57 Conn. L. Rptr. 449
The defendant's written objection also challenged the amount
hold the corporation liable, not its members or owners. It is
of attorneys fees to which the plaintiff is entitled on the
not an issue directly involving the “organization and internal
ground that the plaintiff's request includes amounts expended
affairs and the liability of its managers and members ...”
on claims against other parties that proved unsuccessful at
General Statutes § 34–222. It is not a matter of disregarding
the prejudgment remedy stage. The court agrees that the
the corporate form or the intracorporate structure. Rather, it is
plaintiff achieved only partial success at this stage. In cases
a question of corporate liability for an injury or a debt. That
of partial success, there is no precise formula for allocating
question is primarily one of torts or, in this case, contracts.
Accordingly, the court applies the Connecticut choice of law attorneys fees to prevailing counts. See Hensley v. Eckhardt,
rule for contracts. 461 U.S. 424, 436–37 (1983). Because of the substantial
overlap between the various counts and defendants, the court
*6 Connecticut follows the Restatement (Second) approach will allocate 2/3 of the attorneys fees to litigation against
to contracts choice of law questions. This approach provides the defendant. Two-thirds of the total attorneys fees claim of
that “unless another state has an overriding policy-based $49,433.55 amounts to $32,955.70. The court will include
interest in the application of its law, the law of the state that amount in the prejudgment order.
in which the bulk of the contracting transactions took place
To that amount, the court adds the underlying debt of
should be applied.” Reichold Chemicals, Inc. v. Hartford
$145,776.78 and the interest owed through October 29, 2013
Accident & Indemnity Co, supra, 243 Conn. at 413–14. Here,
of $58,302.40. The total is $237,034.88.
all of the contracting transactions-negotiations, execution,
and partial performance-took place in Connecticut. There are
no overriding policy interests of other states. The defendant
does not argue that the law of Delaware or any other state VII
should apply under the contracts choice of law standard.
Therefore, the court applies Connecticut law which, as The court enters a prejudgment remedy against the defendant
discussed above, has accepted the continuity of enterprise in the amount of $237,034.88.
theory of successor liability in commercial cases. Thus, after
reconsidering its original decision granting a prejudgment It is so ordered.
remedy against the defendant, the court declines to change its
decision.
All Citations
Not Reported in A.3d, 2014 WL 341895, 57 Conn. L. Rptr.
IV 449
Footnotes
1 The plaintiff also named as a defendant Gifted Expressions, LLC. The latter admits that it was an alter ego,
and essentially a trade name, for Giftcorp.
2 Obviously, because the proceeding was a prejudgment remedy, the court found only that there was
probable cause to believe that the plaintiff would prevail on this theory and not necessarily that there was
a preponderance of the evidence. See TES Franchising, LLC v. Feldman, 286 Conn. 132, 137, 943 A.2d
406 (2008).
3 The defendant also argued in its objection regarding the amount of the prejudgment remedy that there was
no contractual agreement between the plaintiff and Giftcorp. As far as the court can determine, the defendant
did not make this objection at oral argument on the merits. It is therefore inappropriate to raise it now. In
any event, Shechtman, as president of Giftcorp, clearly agreed to be bound by the provisions in Exhibit A.
© 2023 Thomson Reuters. No claim to original U.S. Government Works. 5
JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014)
2014 WL 341895, 57 Conn. L. Rptr. 449
While Exhibit A deletes a sentence calling for a personal guarantee by Shechtman, it unquestionably includes
language making all charges of JobPro due and payable upon receipt, and authorizing JobPro to collect
interest and attorneys fees in the event of default by Giftcorp. Thus, the defendant cannot now deny liability
for the debt, interest, and attorneys fees on the ground that Giftcorp did not agree to pay them.
4 In B.F Goodrich v. Betkoski, supra, 99 F.3d at 519, the court also referred to the continuity of enterprise
theory as the “substantial continuity rule.” The Second Circuit, however, overruled B.F. Goodrich in Marsh
v. Rosenblum, 499 F.3d 165, 181 (2d Cir.2007), on the basis of the United States Supreme Court's holding
in United States v. Bestfoods, 524 U.S. 51 (1998), that federal common law did not require the successor
liability rule in environmental cases.
5 Our Supreme Court then granted certification on the following issue: “Did the Appellate Court properly
determine that a covenant not to sue, executed by the plaintiff in favor of a corporate tortfeasor, does
not foreclose the imposition of successor liability, as a matter of law, on the subsequent purchaser of that
company's assets?” Robbins v. Physicians for Women's Health, LLC, 304 Conn. 926, 41 A.3d 1052 (2012).
The Supreme Court heard argument on this case on December 10, 2013, and decision is pending.
6 The Medina Court recognized, however, that: “[t]here is no Connecticut Supreme Court decision that defines
the requirements for successor liability. The Connecticut Appellate Court has quoted treatises and Second
Circuit cases to articulate Connecticut's successor liability standard.” Medina v. Unlimited Systems, LLC,
supra, 760 F.Sup.2d at 269.
7 Savage Arms was a product liability case in which respondent Western Auto Supply Co. stood in the shoes
of an injured plaintiff seeking indemnity against petitioner Savage Arms, Inc., which was the successor to the
product manufacturer. Although the court initially characterized the issue as “whether successor liability is
better characterized in terms of contract or tort”; id., at 53; the court thereafter used the term contract law as
synonymous with corporation law. See id., at 53 (“In one sense, successor liability derives from corporate and
contract law, because it may require the interpretation of the contracts that governed the transfer of assets
between corporations. But successor liability is also a creature of tort law when it is claimed that the successor
is liable because a product defect has caused injury or death”). Thus, in reality, Savage Arms involved a
dispute over whether tort law or corporations law choice of law rules applied. The present case is similar
because it pits an allegedly injured party-plaintiff JobPro-against a successor corporation. The only difference
between the two cases is that here the allegedly injured party claims injury due to breach of contract rather
than tort. Therefore, although the present case raises the question of whether to characterize successor
liability as an adjunct of corporation law or one of contract law, it is similar to the product liability cases in
which the alternative to treating the issue as one of corporation law is to treat it as one of tort law.
8 The Robbins Court concluded that the imposition of successor liability under the mere continuation and
continuity of enterprise theories requires a threshold determination that the predecessor no longer represents
a viable source of relief. Id., at 587.
9 Section 34–222 provides: “Subject to the Constitution of this state, the laws of the state or other jurisdiction
under which a foreign limited liability company is organized shall govern its organization and internal affairs
and the liability of its managers and members. A foreign limited liability company may not be denied
registration by reason of any difference between those laws and the laws of this state.”
End of Document © 2023 Thomson Reuters. No claim to original U.S. Government Works.
© 2023 Thomson Reuters. No claim to original U.S. Government Works
Preview
IN RE: ASBESTOS LITIGATION DOCKET # FBT-CV-21-6109520-S : SUPERIOR COURT : EVAN PLOTKIN AND MARTHA : J.D. OF FAIRFIELD PLOTKIN, : Plaintiffs, : AT BRIDGEPORT : v. : : JOHNSON & JOHNSON, et al., : Defendants. : MAY 17, 2024 DEFENDANTS HOLDCO, JANSSEN, AND KENVUE’S REPLY BRIEF IN SUPPORT OF THEIR MOTION TO STRIKE PLAINTIFFS’ SEVENTH AMENDED COMPLAINT Defendants Johnson & Johnson Holdco (NA) Inc. (“Holdco”), Janssen Pharmaceuticals, Inc. (“Janssen”), and Kenvue, Inc. (“Kenvue”) respectfully submit this reply brief in further support of their motion to strike the Plaintiffs’ Seventh Amended Complaint. Plaintiffs’ response fails to rebut the simple fact that Holdco inherited no talc-related liabilities from Old JJCI. The Defendants have properly raised a narrow choice of law issue – what state’s law governs Holdco’s successor liability. Holdco received its assets as a result of a divisional merger under Texas law, and the entities created from the divisional merger were Texas entities.1 Thus, this Court should apply Texas law to determine whether Holdco inherited any talc-related liabilities. Under Texas 1 As the Third Circuit described, the divisional merger caused Old JJCI to cease to exist and created two new Texas limited liability companies, Chenango One LLC (“Chenango One”) and Chenango Two LLC (“Chenango Two”). In re LTL Mgmt., LLC, 64 F.4th 84, 95-96 n.3 (3rd Cir. 2023). Old JJCI’s assets and liabilities were divided between the two new entities, with Chenango One acquiring all of Old JJCI’s talc liabilities as well as certain assets. Id. at 96. Chenango Two received all other assets and liabilities. Id. at 96-97. After the divisional merger, Chenango One converted into a North Carolina limited liability company and changed its name to “LTL Management LLC.” Id. at 96 n.3. Chenango Two merged into another entity, which then changed its name to “Johnson & Johnson Consumer Inc.” Id. That entity later changed its name to Johnson & Johnson Holdco (NA) Inc. For simplicity, Defendants’ opening brief used the term “Holdco” to refer more broadly to Chenango Two and the entity it merged into. law, Holdco inherited no talc-related liabilities and thus could not pass any liabilities onto Kenvue or Janssen. For this reason, the Court should strike Holdco, Kenvue, and Janssen from the Complaint. ARGUMENT As a matter of law, Holdco came into existence with no talc-related liabilities. All liabilities were allocated to LTL Management, LLC (“LTL”) (now LLT Management LLC). As a result, Holdco had no liabilities to pass on to Kenvue or Janssen. The Defendants adequately presented a narrow choice of law issue that is appropriately addressed on a motion to strike – Texas law governs the successor liability of Holdco. A choice of law analysis for this narrow issue is appropriate at this juncture because only one choice of law question needs to be addressed – what state’s law determines Holdco’s successor liability after the divisional merger. And that determination relies on a single fact that is present in the complaint – that during the divisional merger the talc-related liabilities were allocated to LTL under Texas law. Holdco was created as a result of a divisional merger under Texas law and its successor liability is thus governed by Texas law. Under Texas law, Holdco inherited no talc-related liabilities and therefore had no talc-related liabilities to pass to Kenvue or Janssen. The first step of a choice of law analysis, whether there is a conflict between the states, is easily resolved. Texas does not recognize the “mere continuation” exception, which Plaintiffs argue applies to Holdco, Asfahl Agency v. Tensor, Inc., 135 S.W.3d 768, 791-92 (Tex. App. 2004), but Connecticut does. Chamlink Corp. v. Merritt Extruder Corp., 96 Conn. App. 183, 188, 899 A.2d 90, 93 (2006). The next step to identify the specific legal issue that requires a choice of law analysis. Here, the Plaintiffs mention depecage but ignore its impact on this case. Although the underlying 2 cause of action sounds in tort, “the rule of ‘depecage’ requires a separate choice of law analysis for each issue presented.” JobPro Temp. Servs., Inc. v. Giftcorp, Inc., No. HHD-CV-126030121S, 2014 WL 341895, at *4 (Conn. Super. Ct. Jan. 7, 2014).2 “The principle of depecage has been described as the framework under which different issues in a single case . . . may be decided according to the substantive law of different states.” Reichhold Chemicals, Inc. v. Hartford Accident & Indem. Co., 252 Conn. 774, 784 n.5 (2000) (internal quotation marks omitted). Thus, Texas law can apply to the narrow issue of Holdco’s successor liability and Connecticut tort law can apply to the other substantive issues in the case. Indeed, the court in JobPro Temporary Services expressly acknowledged that “the fact that this case is primarily about a breach of contract does not mandate that contract choice of law rules apply to the question of successor liability[.]” 2014 WL 341895, at *4. The court in that case did ultimately apply Connecticut law to the issue of successor liability, but as Defendants pointed out in their memorandum of law in support of their motion to strike (see dkt no. 446, footnote 3), that case is not binding on this court as there is no authority from a higher court on point. See JobPro Temporary Services, 2014 WL 341895, at *1 (“The primary question presented is whether contracts choice of law rules or, alternatively, corporations choice of law rules govern in determining whether to apply the ‘continuity of enterprise’ doctrine and the successor liability principle. There is no binding Connecticut authority on point.”) (emphasis added). That is why Weber v. U.S. Sterling Sec., Inc., wherein the Connecticut Supreme Court used the law of a defendant LLC’s state of incorporation to determine an issue of successor liability, is instructive. 282 Conn. 722, 730 (2007). Plaintiffs correctly point out that Weber concerned foreign LLCs and Holdco is not an LLC, but Defendants merely cited to Weber as an example of 2 All unreported cases are attached as Exhibit A. 3 how this court should determine successor liability and explained in a footnote that there is no binding authority on this point. As a further example, the court in Haina Inv. Co. Ltd. v. InterEnergy Grp. Ltd., a breach of contract action, considered whether to apply Connecticut law or Delaware law – the state of the defendant’s incorporation – to the issue of veil-piercing, a doctrine that concerns successor liability. No. FST-CV-206045183, 2021 WL 4481204, at *5 (Conn. Super. Ct. Sept. 8, 2021). Citing to Weber, the court explained that “[a]lthough Weber involved a limited liability company, the Supreme Court relied on authorities from other states that concerned corporations in its determination that a court should look to the state of incorporation to determine the extent of an entity's liability.” Id. at *5 (emphasis added). Following those authorities, the court ultimately concluded that “for the purposes of corporate veil-piercing, Delaware law applies as it is the law of the jurisdiction in which [the defendant] was incorporated.” Id. Thus, the court declined to apply Connecticut contracts choice of law principles to all issues in the case and, relying on Weber, applied Delaware law to the issue of successor liability of a corporation. This is precisely what the court should do here. Because the divisional merger is the only fact needed to determine whether Holdco inherited talc-related liabilities, no fact-intensive inquiry is necessary. The Plaintiffs argue that a motion to strike is not the appropriate juncture to conduct a choice of law analysis, but this case presents the rare scenario where it is appropriate. “[T]his is the unusual case where the court has all of the information it needs from the complaint to conduct the choice of law analysis.” Bos. Prop. Exch. Transfer Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. X04-HHD-CV- 116026660S, 2013 WL 2383606, at *4 (Conn. Super. Ct. May 13, 2013); see also Sessa v. Amica Mut. Ins. Co., No. CV156030881, 2016 WL 2955830, at *2 (Conn. Super. Ct. May 2, 2016) (“[S]uperior courts have conducted choice of law analyses to determine a motion to strike when 4 there are sufficient underlying facts.”). The Plaintiffs’ complaint sets forth that New JJCI, which was eventually renamed Holdco, was created as part of a “Texas Two Step” divisional merger. (See 7th Am. Compl. ¶¶ 18-19.) As part of this merger, all talc-related liabilities were allocated to LTL. Holdco thus came into existence with no such liabilities. The Plaintiffs argue that Defendants ignore the series of transactions that occurred after the divisive merger and the fact that the J&J entities continued to operate in New Jersey at Old JJCI’s properties (dkt no. 462, at 3-4), but the corporate details of Kenvue and Janssen are irrelevant. Holdco never inherited any talc-related liabilities that it could have passed on to them. All talc- related liabilities were transferred exclusively to LTL. As the Third Circuit explained, the corporate restructuring under Texas law “allocated LTL responsibility for essentially all liabilities of Old Consumer tied to talc-related claims. This meant, among other things, it would take the place of Old Consumer in current and future talc lawsuits and be responsible for their defense.” In re LTL Mgmt., LLC, 64 F.4th 84, 96 (3d Cir. 2023) (footnote omitted). Holdco, by contrast, inherited “none of [old JJCI’s] talc-related liabilities.” Id. at 97. Since Holdco had no talc-based liabilities to begin with, it could not pass talc-based liabilities to Janssen or Kenvue though any theory of “successor” liability. This court should conduct a narrow choice of law analysis and apply Texas law to determine Holdco’s successor liability. Under Texas law, Holdco inherited no talc-related liabilities. That limited issue is thus determinative of Holdco, Kenvue, and Janssen’s liability in this case. LLT is the proper defendant in this case. There is no reason for Plaintiffs to maintain claims against other entities that have no liability as a matter of law. Holdco, Janssen, and Kenvue should therefore all be stricken from the complaint. 5 Accordingly, Holdco, Janssen, and Kenvue respectfully request that the Court grant their motion to strike. DEFENDANTS, JOHNSON & JOHNSON HOLDCO (NA) INC., JANSSEN PHARMACEUTICALS, INC., AND KENVUE, INC. By: /s/James D. Geisler (441958) Robert R. Simpson, Esq. Sheldon R. Poole, Esq. James D. Geisler, Esq. SHOOK, HARDY & BACON L.L.P. 185 Asylum Street City Place I, Suite 3701 Hartford, CT 06104 Juris No. 443536 Tel. No.: (860) 515-8901 Fax: (860) 515-8911 RSimpson@shb.com SPoole@shb.com JGeisler@shb.com Gregory Boulos (pro hac vice) SHOOK, HARDY & BACON L.L.P. 201 South Biscayne Boulevard Citigroup Center, Suite 3200 Miami, FL 33131 Tel. No.: (305) 358-5171 Fax: (305) 358-7470 GBoulos@shb.com Colin K. Kelly, Esq. (pro hac vice) Anna S. Pieschel, Esq. (pro hac vice) SHOOK, HARDY & BACON L.L.P. 1230 Peachtree Street, Suite 1200 Atlanta, GA 30309 Tel. No.: (470) 867-6000 Fax: (470) 867-6001 CKelly@shb.com APieschel@shb.com Their Attorneys 6 CERTIFICATION OF SERVICE The undersigned hereby certifies that on May 17, 2024, a copy of the foregoing DEFENDANTS HOLDCO, JANSSEN, AND KENVUE’S REPLY BRIEF IN SUPPORT OF THEIR MOTION TO STRIKE PLAINTIFFS’ SEVENTH AMENDED COMPLAINT was sent via email to the following counsel of record. Brian P. Kenney, Esq. Benjamin H. Adams, Esq. Early, Lucarelli, Sweeney Benjamin D. Braly, Esq. & Meisenkothen, LLC Ethan A. Horn, Esq. 265 Church Street Dean Omar Branham Shirley, LLP P.O. Box 1866 302 N. Market Street, Suite 300 New Haven, CT 06508-1866 Dallas, TX 75202 Attorney for the Plaintiffs Pro Hac Attorneys for the Plaintiffs And sent via e-mail to all defense counsel of record via CT Listserve /s/James D. Geisler (441958) James D. Geisler 7 EXHIBIT A JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014) 2014 WL 341895, 57 Conn. L. Rptr. 449 done by Giftcorp, which was to supply gift packages to 2014 WL 341895 corporations for their employees and customers. UNPUBLISHED OPINION. CHECK COURT RULES The plaintiff thereafter amended its complaint to add BEFORE CITING. Longmeadow and the defendant as named defendants. It Superior Court of Connecticut, also added as a defendant Richard Shechtman (Shechtman), Judicial District of Hartford. who was president of Giftcorp and became executive vice president of the defendant. The plaintiff sued the defendant on JOBPRO TEMPORARY SERVICES, INC. the theories of piercing the corporate veil, successor liability, v. fraudulent transfer, and conspiracy. It sued Longmeadow GIFTCORP, INC. et al. and Shechtman on some of these theories, and also sued Shechtman for breach of a personal guarantee of the debt. No. HHDCV126030121S. | During the week of October 29, 2013, the court heard the Jan. 7, 2014. plaintiff's application for a prejudgment remedy against all defendants. On November 1, 2013, the court granted the Attorneys and Law Firms application against the defendant in the amount of the debt, Beck & Eldergill, Manchester, CT, for Jobpro Temporary plus interest and attorneys fees, on the theory of successor Services, Inc. liability and, specifically, that the defendant represented a “continuity of enterprise” of Giftcorp. 2 The court denied the Rogin Nassau LLC, Hartford, CT, Weinstein & Wisser PC, prejudgment remedy against all the other defendants. West Hartford, CT, for Giftcorp, Inc. et al. The plaintiff thereafter filed a supplemental memorandum in Opinion which it sought to add attorneys fees incurred in the hearing CARL J. SCHUMAN, Judge. to the total amount of the prejudgment remedy. The defendant filed an “Objection Regarding the Amount of Prejudgment *1 The primary question presented is whether contracts Remedy” in which it sought, among other things, to vacate choice of law rules or, alternatively, corporations choice the court's prejudgment remedy by arguing that Delaware law of law rules govern in determining whether to apply the applies to the issue of the defendant's liability as successor “continuity of enterprise” doctrine and the successor liability to Giftcorp's debt and that the continuity of enterprise theory principle. There is no binding Connecticut authority on point. of successor liability is not cognizable under Delaware law. For the reasons discussed below, the court applies contracts The plaintiff filed a response asserting primarily that contract choice of law rules and confirms a prejudgment remedy in choice of law rules apply, that under those rules Connecticut favor of the plaintiff. law would apply, and that Connecticut accepts the continuity of enterprise theory of successor liability. On November 12, 2013, the court issued the following I order: “In its objection regarding the amount of prejudgment Plaintiff JobPro Temporary Services, Inc. (the plaintiff), remedy, defendant American Gourmet Group, LLC a Connecticut corporation, originally filed suit to collect (American Gourmet) argues, among other things, that the $145,776.78 and other charges for supplying temporary prejudgment remedy order of the court should be vacated workers between November 2011 and February 2012 because Delaware law applies and Delaware law does not to defendant Giftcorp, Inc. (Giftcorp), a Delaware recognize the continuity of enterprise theory. American Gourmet raised this substantive point at oral argument but corporation. 1 In April 2012, Giftcorp sold its assets, but the court did not address it in its oral decision. Although not its liabilities, to defendant Longmeadow Capital, LLC American Gourmet does not label its current objection and (Longmeadow), a Connecticut limited liability investment request to vacate the court's ruling as a motion to reargue, firm. Shortly thereafter, Longmeadow created defendant the court recognizes that the issue meets the criteria for American Gourmet Group, LLC (the defendant), a Delaware reargument because it may involve a ‘principle of law limited liability company, to perform work similar to that © 2023 Thomson Reuters. No claim to original U.S. Government Works. 1 JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014) 2014 WL 341895, 57 Conn. L. Rptr. 449 which would have a controlling effect, and which has been are two theories used to determine whether the purchaser is overlooked ...” ’ (Internal quotation marks omitted.) Opoku merely a continuation of the selling corporation. Under the v.. Grant, 63 Conn.App. 686, 692–93, 778 A.2d 981 (2001). common law mere continuation theory, successor liability To avoid elevating form over substance, the court will treat attaches when the plaintiff demonstrates the existence of American Gourmet's request as a motion to reargue and grant a single corporation after the transfer of assets, with an the procedural component of the motion. identity of stock, stockholders, and directors between the successor and predecessor corporations.’ (Internal quotation *2 “The court accordingly orders the parties to submit marks omitted.) Graham v. James, 144 F.3d 229, 240 (2d simultaneous memoranda by November 26, 2013, or such Cir.1998). Under the ‘continuity of enterprise’ theory, a other date as counsel may agree upon, on the issue of mere continuation exists ‘if the successor maintains the same which state's law applies to the question of the validity of business, with the same employees doing the same jobs, under the continuity of enterprise theory upon which the court the same supervisors, working conditions, and production relied and, applying that state's law, whether the outcome processes, and produces the same products for the same of the present case would be the same. Compare Reichold customers.’ B.F. Goodrich v. Betkoski, 99 F.3d 505, 519 (2d Chemicals, Inc. v. Hartford Accident & Indemnity Co., 243 Cir.1996).” Chamlink Corp. v. Merritt Extruder Corp., supra, Conn. 401, 414, 703 A.2d 1132 (1997) (under the law 96 Conn.App. at 188. 4 of contracts, it is presumed that “the law of the state in which the bulk of the contracting transactions took place The defendant first questions whether the continuity of should be applied”), with Weber v. U.S. Sterling Securities, enterprise theory is part of Connecticut law. It is true, as Inc., 282 Conn. 722, 730, 924 A.2d 816 (2007) (law of the defendant points out, that the language in Chamlink was state of incorporation applies to organization, internal affairs, dictum because the Court approved the trial court's factual and liability of managers and members of limited liability finding that the purchaser was not a mere continuation of companies).” the seller. Id., at 188 n. 3, 189. However, in Kendall v. Amster, 108 Conn.App. 319, 330–32, 948 A.2d 1041 (2008), The parties have now submitted briefs on this issue and the the Appellate Court soon thereafter quoted the language in court considers the matter ready for decision. 3 Chamlink pertaining to the continuity of enterprise theory in upholding a prejudgment remedy. Then in Robbins v. Physicians for Women's Health, LLC, 133 Conn .App. 577, 584–88, 38 A.3d 142, cert. granted, 304 Conn. 926, 41 II A.3d 1052 (2012), the Appellate Court again quoted the The continuity of enterprise theory first gained recognition Chamlink language and essentially assumed the applicability by our appellate courts in Chamlink Corp. v. Merritt Extruder of the entire continuation theory in holding that “the Corp., 96 Conn.App. 183, 187–89, 899 A.2d 90 (2006). imposition of successor liability under the mere continuation There the court began its analysis by recognizing the and continuity of enterprise theories requires a threshold following general principle: “The mere transfer of the assets determination that the predecessor no longer represents a of one corporation to another corporation or individual viable source of relief.” (Footnote omitted.) Id., at 587. 5 generally does not make the latter liable for the debts or Both the Second Circuit and the District Court for the liabilities of the first corporation except where the purchaser District of Connecticut have interpreted these decisions as expressly or impliedly agrees to assume the obligations, the having adopted the continuity of enterprise theory under purchaser is merely a continuation of the selling corporation, Connecticut law. See Call Center Technologies v. Grand [the companies merged] or the transaction is entered into Adventures TR, 635 F.3d 48, 53 (2d Cir.2011) (quoting fraudulently to escape liability.” (Internal quotation marks Altman v. Motion Water Sports, Inc., 722 F.Sup.2d 234, omitted.) Id., at 187 (quoting 19 C.J.S. 314, Corporations § 242–43 (D.Conn.2010) (“In Kendall the Appellate Court 657 (1990)). makes it plain that “continuity of enterprise” is not just a theory of successor liability, it is a recognized principle In the present case, although the plaintiff alleged fraudulent of Connecticut law.”) and Medina v. Unlimited Systems, transfer, the only theory argued by the plaintiff and found by LLC, 760 F.Sup.2d 263, 270 (D.Conn.2010) (“Connecticut the court was one of continuation of the selling corporation. courts treat ‘continuity of enterprise’ as their preferred As to that theory, the Appellate Court observed: “ ‘There version of the ‘mere continuation’ exception, essentially © 2023 Thomson Reuters. No claim to original U.S. Government Works. 2 JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014) 2014 WL 341895, 57 Conn. L. Rptr. 449 defining ‘mere continuation’ as ‘continuity of enterprise.’ 915, 33 A.3d 739 (2011). Thus, the court must first determine Connecticut courts do not view continuity of ownership as whether there is a conflict between Delaware and Connecticut an essential requirement for a business to be deemed a mere law. If there is, the court must then proceed through a conflict continuation”)) 6 Thus, the continuity of enterprise theory has of law analysis to determine the applicable law. become part of Connecticut law. In this case, there is a conflict. Although the Delaware *3 The defendant also argues that the continuity of Supreme Court has apparently not addressed the issue, it enterprise theory in Connecticut applies only to tort cases appears to be settled law that Delaware does not accept the and that it would constitute improper judicial legislation continuity of enterprise theory of successor liability. Instead, to extend the theory to commercial cases such as the Delaware has narrowly construed the mere continuation present one. While the court is sensitive to these concerns, theory of successor corporate liability and required the they do not apply here. Kendall itself was a commercial continuation of officers, directors, or stockholders of the case arising from a failed business relationship. Kendall v. predecessor and successor corporations. See Magnolia's at Amster, supra, 108 Conn.App. at 321–24. While Robbins Bethany, LLC v. Artesian Consulting Engineers, Inc., 2011 involved medical malpractice, the Appellate Court explained WL 48261606 at *3 (Del.Super. Sept. 19, 2011). In contrast, the purpose of the continuity of enterprise theory as seeking as discussed, in Connecticut our Appellate Court has adopted “to prevent corporations from externalizing the costs of the continuation of enterprise theory and applied it to contract or tort liability by transferring assets into the name commercial cases. of a second corporation.” (Emphasis added.) Robbins v. Physicians for Women's Health, LLC, supra, 133 Conn.App. *4 To determine which state's law applies, it is first at 585. Several of the federal cases applying Connecticut necessary to characterize the issue properly. Although the law have involved commercial disputes. See Call Center underlying cause of action involves a contractual dispute, Technologies v. Grand Adventures TR, supra, 635 F.3d at the rule of “depecage” requires a separate choice of law 49–50 (sales agreement); Medina v. Unlimited Systems, LLC, analysis for each issue presented. See Reichold Chemical, Inc supra, 760 F.Sup.2d at 264 (failure to pay wages). Thus, while v. Hartford Accident & Indemnity Co., supra, 252 Conn. at there are valid arguments for limiting the mere continuation 783. That is, the “principle of depecage has been described as theory of successor liability to tort cases; see C.T. Charlton & the framework under which different issues in a single case ... Associates, Inc. v. Thule, Inc., 2013 W.L. 5433434 at *4 (6th may be decided according to the substantive law of different Cir.2013) (“the public-safety concerns that underlie tort law states.” (Internal quotation marks omitted.) Id., at 783 n. 5. are absent in the commercial context”); there is little question Thus, the fact that this case is primarily about a breach of that Connecticut law currently recognizes the continuity of contract does not mandate that contract choice of law rules enterprise theory in commercial cases. It would also constitute apply to the question of successor liability and the continuity improper judicial legislation for the court not to follow this of enterprise theory. Rather, the depecage rule dictates that the case law. court characterize the issue of successor liability in terms of a contract law issue, as the plaintiff contends, or a corporations law issue, as the defendant maintains. III There is a nationwide split of authority on this very matter. See Savage Arms v. Western Auto Supply Co., 18 P.3d 49, The next question is whether to apply Connecticut law in this case. “In determining the governing law, a forum applies its 52–54 (Alaska 2001). 7 Compare In re Asbestos Litigation own conflict-of-law rules ...” Gibson v. Fullin, 172 Conn. 407, (Bell), 517 A.2d 697, 699 (Del.Super.1986) (tort choice of 411, 374 A.2d 1061 (1977). “The threshold choice of law law rules should not apply because the key question concerns issue in Connecticut, as it is elsewhere, is whether there is the legal effect of contracts between corporations) with Reed an outcome determinative conflict between applicable laws v. Armstrong Cork Co., 577 F.Sup. 246, 248 (E.D.Ark.1983) of the states with a potential interest in the case. If not, (in product liability case, “the question of liability is created there is no need to perform a choice of law analysis, and the under strict liability theory which is tort rather than contract or law common to the jurisdiction should be applied.” (Internal corporate law”). There is no Connecticut appellate authority quotation marks omitted.) Cohen v.. Roll–A–Cover, LLC, 131 directly on point. Cf. Call Center Technologies v. Grand Conn.App. 443, 465–66, 27 A.3d 1, cert. denied, 303 Conn. Adventures TR, supra, 635 F.3d at 49–52 (Second Circuit © 2023 Thomson Reuters. No claim to original U.S. Government Works. 3 JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014) 2014 WL 341895, 57 Conn. L. Rptr. 449 applied Connecticut law without a conflict of law analysis *5 Because the primary purpose of the successor liability even though defendants were Texas entities and plaintiff, doctrine in Connecticut is thus to provide contract or tort a Delaware corporation, produced items in Connecticut creditors a remedy, it makes sense to characterize it as a and shipped them to Texas); Peglar & Associates, Inc. v. contract or torts issue, as the case may be, and apply the choice Professional Indemnity Underwriters Corp., Superior Court, of law rule for contracts or torts. Thus, the Alaska Supreme judicial district of Stamford–Norwalk, Docket No. CV97– Court reasoned as follows in deciding that torts rather than 0160824S (June 19, 2002, Rogers, J .) [32 Conn. L. Rptr. 359] corporation choice of law rules apply: “Successor liability (in commercial case, court assumes that contract choice of is essentially an expansion of products liability law, which law rules apply). derives from tort principles of negligence and strict liability, and rejects contract-derived requirements such as privity. The In resolving this conflict, the better approach is to focus on purpose of the modern strict liability regime is to insure that the purpose of the successor liability doctrine and attempt to the cost of injuries resulting from defective products [is] characterize the doctrine in a way that furthers its purposes. borne by the manufacturers that put such products on the See Zimnoch v. Planning and Zoning Commission, 302 Conn. market rather than by the injured persons who are powerless 535, 558–59, 29 A.3d 898 (2011) (construing a rule in light to protect themselves.” (Internal quotation marks omitted.) of its purpose). In Robbins v. Physicians for Women's Health, Savage Arms v. Western Auto Supply Co., supra, 18 P.3d at 53. LLC, supra, 133 Conn.App. at 585–86, our Appellate Court addressed the purpose of the successor liability doctrine in While a corporate creditor is not as sympathetic as an injured the following terms: “The imposition of successor liability is tort victim, the same reasoning applies in contract cases. generally intended to prevent corporations from externalizing A contract creditor is normally entitled to a remedy. Our the costs of contract or tort liability by transferring assets law should prevent debtor corporations from escaping their into the name of a second corporation. See United States v. contractual obligations by the expedient of changing their General Battery Corp., Inc., 423 F.3d 294, 306 (3d Cir.2005) name without changing their business. (‘[t]he overriding goal of successor liability ... is to balance the interest in preventing tortfeasors from externalizing the The defendant contends that successor liability is a question costs of their misconduct with the interest in a fluid market of corporate law. It cites Weber v. U.S. Sterling Securities, in corporate assets' [internal quotation marks omitted] ), cert. Inc., supra, 282 Conn. at 72, in which our Supreme Court denied sub nom. Exide Technologies v. United States, 549 held that the question of whether to pierce the corporate U.S. 941, 127 S.Ct. 41, 166 L.Ed.2d 250 (2006); United States veil of a limited liability corporation is one of corporate v. Mexico Feed & Seed Co., 980 F.2d 478, 487 (8th Cir.1992) law. The Court relied on General Statutes § 34–222, which (‘[t]he purpose of corporate successor liability ... is to prevent mandates that the law of the state of incorporation governs corporations from evading their liabilities through changes issue involving the “organization and internal affairs and the in ownership’); G. Kuney, ‘A Taxonomy and Evaluation of liability of its managers and members ...” 9 The Court also Successor Liability,’ 6 Fla. St. U. Bus. L.Rev. 9, 60 (2007) cited the Restatement (Second) Conflicts of Laws § 307, (‘the purpose of [successor liability is] to provide contract which provides that “the local law of the state of incorporation and tort creditors with an avenue for recovery in appropriate will be applied to determine the existence of a shareholder's cases against successor entities, when the predecessor that liability ... to its creditors for corporate debts.” (Internal contracted with them or committed the tort, or the action that quotation marks omitted.) Id. later gave rise to the tort, had sold substantially all of its assets and [is] no longer a viable source of recovery’).” See also The defendant, with commendable diction, asserts that the Robbins v. Physicians for Women's Health, LLC, supra, at 585 doctrines of piercing the corporate veil and mere continuity n. 7 (citing M. Reilly, “Making Sense of Successor Liability,” are “kissing cousins.” But the court is not convinced that 31 Hofstra L.Rev. 745, 785–87 (2003), for the proposition the relationship is that close. Piercing the corporate veil that courts employ “ ‘fraud-free successor liability’ doctrines, involves a determination of when the court should disregard including continuity of enterprise, ‘ostensibly to provide a the corporate structure and hold members, shareholders, or source of compensation for claimants who cannot establish owners of a corporate business entity personally liable for the fraud’ ”). 8 debts of the corporation. See Commissioner of Environmental Protection v. State Five Industrial Park Inc., 304 Conn. 128, 138–39, 37 A.3d 724 (2012). Successor liability seeks to © 2023 Thomson Reuters. No claim to original U.S. Government Works. 4 JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014) 2014 WL 341895, 57 Conn. L. Rptr. 449 The defendant's written objection also challenged the amount hold the corporation liable, not its members or owners. It is of attorneys fees to which the plaintiff is entitled on the not an issue directly involving the “organization and internal ground that the plaintiff's request includes amounts expended affairs and the liability of its managers and members ...” on claims against other parties that proved unsuccessful at General Statutes § 34–222. It is not a matter of disregarding the prejudgment remedy stage. The court agrees that the the corporate form or the intracorporate structure. Rather, it is plaintiff achieved only partial success at this stage. In cases a question of corporate liability for an injury or a debt. That of partial success, there is no precise formula for allocating question is primarily one of torts or, in this case, contracts. Accordingly, the court applies the Connecticut choice of law attorneys fees to prevailing counts. See Hensley v. Eckhardt, rule for contracts. 461 U.S. 424, 436–37 (1983). Because of the substantial overlap between the various counts and defendants, the court *6 Connecticut follows the Restatement (Second) approach will allocate 2/3 of the attorneys fees to litigation against to contracts choice of law questions. This approach provides the defendant. Two-thirds of the total attorneys fees claim of that “unless another state has an overriding policy-based $49,433.55 amounts to $32,955.70. The court will include interest in the application of its law, the law of the state that amount in the prejudgment order. in which the bulk of the contracting transactions took place To that amount, the court adds the underlying debt of should be applied.” Reichold Chemicals, Inc. v. Hartford $145,776.78 and the interest owed through October 29, 2013 Accident & Indemnity Co, supra, 243 Conn. at 413–14. Here, of $58,302.40. The total is $237,034.88. all of the contracting transactions-negotiations, execution, and partial performance-took place in Connecticut. There are no overriding policy interests of other states. The defendant does not argue that the law of Delaware or any other state VII should apply under the contracts choice of law standard. Therefore, the court applies Connecticut law which, as The court enters a prejudgment remedy against the defendant discussed above, has accepted the continuity of enterprise in the amount of $237,034.88. theory of successor liability in commercial cases. Thus, after reconsidering its original decision granting a prejudgment It is so ordered. remedy against the defendant, the court declines to change its decision. All Citations Not Reported in A.3d, 2014 WL 341895, 57 Conn. L. Rptr. IV 449 Footnotes 1 The plaintiff also named as a defendant Gifted Expressions, LLC. The latter admits that it was an alter ego, and essentially a trade name, for Giftcorp. 2 Obviously, because the proceeding was a prejudgment remedy, the court found only that there was probable cause to believe that the plaintiff would prevail on this theory and not necessarily that there was a preponderance of the evidence. See TES Franchising, LLC v. Feldman, 286 Conn. 132, 137, 943 A.2d 406 (2008). 3 The defendant also argued in its objection regarding the amount of the prejudgment remedy that there was no contractual agreement between the plaintiff and Giftcorp. As far as the court can determine, the defendant did not make this objection at oral argument on the merits. It is therefore inappropriate to raise it now. In any event, Shechtman, as president of Giftcorp, clearly agreed to be bound by the provisions in Exhibit A. © 2023 Thomson Reuters. No claim to original U.S. Government Works. 5 JobPro Temporary Services, Inc. v. Giftcorp, Inc., Not Reported in A.3d (2014) 2014 WL 341895, 57 Conn. L. Rptr. 449 While Exhibit A deletes a sentence calling for a personal guarantee by Shechtman, it unquestionably includes language making all charges of JobPro due and payable upon receipt, and authorizing JobPro to collect interest and attorneys fees in the event of default by Giftcorp. Thus, the defendant cannot now deny liability for the debt, interest, and attorneys fees on the ground that Giftcorp did not agree to pay them. 4 In B.F Goodrich v. Betkoski, supra, 99 F.3d at 519, the court also referred to the continuity of enterprise theory as the “substantial continuity rule.” The Second Circuit, however, overruled B.F. Goodrich in Marsh v. Rosenblum, 499 F.3d 165, 181 (2d Cir.2007), on the basis of the United States Supreme Court's holding in United States v. Bestfoods, 524 U.S. 51 (1998), that federal common law did not require the successor liability rule in environmental cases. 5 Our Supreme Court then granted certification on the following issue: “Did the Appellate Court properly determine that a covenant not to sue, executed by the plaintiff in favor of a corporate tortfeasor, does not foreclose the imposition of successor liability, as a matter of law, on the subsequent purchaser of that company's assets?” Robbins v. Physicians for Women's Health, LLC, 304 Conn. 926, 41 A.3d 1052 (2012). The Supreme Court heard argument on this case on December 10, 2013, and decision is pending. 6 The Medina Court recognized, however, that: “[t]here is no Connecticut Supreme Court decision that defines the requirements for successor liability. The Connecticut Appellate Court has quoted treatises and Second Circuit cases to articulate Connecticut's successor liability standard.” Medina v. Unlimited Systems, LLC, supra, 760 F.Sup.2d at 269. 7 Savage Arms was a product liability case in which respondent Western Auto Supply Co. stood in the shoes of an injured plaintiff seeking indemnity against petitioner Savage Arms, Inc., which was the successor to the product manufacturer. Although the court initially characterized the issue as “whether successor liability is better characterized in terms of contract or tort”; id., at 53; the court thereafter used the term contract law as synonymous with corporation law. See id., at 53 (“In one sense, successor liability derives from corporate and contract law, because it may require the interpretation of the contracts that governed the transfer of assets between corporations. But successor liability is also a creature of tort law when it is claimed that the successor is liable because a product defect has caused injury or death”). Thus, in reality, Savage Arms involved a dispute over whether tort law or corporations law choice of law rules applied. The present case is similar because it pits an allegedly injured party-plaintiff JobPro-against a successor corporation. The only difference between the two cases is that here the allegedly injured party claims injury due to breach of contract rather than tort. Therefore, although the present case raises the question of whether to characterize successor liability as an adjunct of corporation law or one of contract law, it is similar to the product liability cases in which the alternative to treating the issue as one of corporation law is to treat it as one of tort law. 8 The Robbins Court concluded that the imposition of successor liability under the mere continuation and continuity of enterprise theories requires a threshold determination that the predecessor no longer represents a viable source of relief. Id., at 587. 9 Section 34–222 provides: “Subject to the Constitution of this state, the laws of the state or other jurisdiction under which a foreign limited liability company is organized shall govern its organization and internal affairs and the liability of its managers and members. A foreign limited liability company may not be denied registration by reason of any difference between those laws and the laws of this state.” End of Document © 2023 Thomson Reuters. No claim to original U.S. Government Works. © 2023 Thomson Reuters. No claim to original U.S. Government Works