United States District Court, M.D. Tennessee, Nashville Division
MEMORANDUM OPINION AND ORDER
Marvin E. Aspen District Judge
before us is Plaintiff RXAR Company, LLC's
(“RXAR”) motion for summary judgment. (Dkt. No.
72.) For the reasons stated below, we deny RXAR's motion.
2010, Metro Medical Supply, Inc. (“Metro”), a
Tennessee corporation with its principal place of business in
Nashville, Tennessee, “began selling and supplying
pharmaceutical products and medical supplies . . . to
AROC.” (Dkt. No. 78 ¶¶ 1, 9.) AROC was an
arthritis clinic incorporated by Dr. Suzanne Zorn in Raleigh,
North Carolina in February 2000. (Id. ¶¶
5-6, 21.) Dr. Zorn was “president of AROC's board
of directors, an officer of the company, its sole
stockholder, and was its only practicing physician.”
(Id. ¶ 7.) Mark Weiner, Dr. Zorn's husband,
“was the practice manager and corporate secretary of
AROC.” (Id. ¶ 8.)
signed a credit agreement to pay for the medical supplies
from Metro and to pay certain costs of collection incurred by
Metro Medical to collect past due amounts owed. (Id.
¶ 10.) After AROC defaulted on its obligation to pay
Metro Medical for the Medical Goods supplied under the Credit
Agreement, Metro filed suit in the Chancery Court of Davidson
County, Tennessee. (Id. ¶¶ 11-12.) On
October 25, 2012, the Chancery Court granted summary judgment
in favor of Metro, awarding it $302, 123.84, with
post-judgment interest accruing at 5.25%.”
(Id. ¶ 14.) On December 27, 2012 Metro sought
to enforce its Tennessee judgment against AROC in North
Carolina by filing a “notice of foreign judgment in
Wake County, North Carolina Superior Court, and the judgment
was domesticated on or around February 7, 2013.”
(Id. ¶ 15.)
“ceased operating on January 11, 2013.”
(Id. ¶ 18.) At the time, AROC had four
employees besides Dr. Zorn and Mr. Weiner. (Id.
¶ 22.) Sometime in December 2012, Dr. Zorn incorporated
Defendant Rheumatology Associates, P.A.
(“Rheumatology”) in Raleigh, North Carolina.
(Id. ¶¶ 16-17.) Dr. Zorn is the only
practicing physician at Rheumatology, where she
“treat[s] patients with rheumatic and arthritic related
medical conditions, ” and is the sole stockholder, the
president of its board of directors, and is an officer of the
company. (Id. ¶¶ 25, 28.) “On
January 14, 2013, Rheumatology Associates employed 3 out of
the 4 AROC employees other than Dr. Zorn and Mr.
Weiner.” (Id. ¶ 23.) At its inception,
Rheumatology also had the same telephone number, fax number,
and address as AROC. (Id. ¶ 24.) Furthermore,
“Dr. Zorn has continued to treat patients at
Rheumatology Associates that she treated at AROC.”
(Id. ¶ 30.) AROC declared bankruptcy on July
23, 2013, and is “incapable of paying its debts,
including the judgment debt owed to Metro Medical.”
(Id. ¶¶ 31, 33.)
March 20, 2014, Metro filed a two-count complaint against
Rheumatology, alleging state-law successor liability and
fraudulent transfer claims. Metro, meanwhile, changed its
name to Ashley Medical Supply, Inc. on April 17, 2015, and
“assigned certain of its assets, including the claims
in this litigation, to RXAR” on December 31, 2015.
(Id. ¶¶ 2-3.) Like Metro Medical, RXAR is
a Tennessee corporation with its principal place of business
in Nashville, Tennessee. (Id. ¶ 4.) On April
27, 2016, RXAR was substituted for Metro as the party
plaintiff in this action. (Dkt. No. 44.)
judgment is appropriate where “the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). The movant bears the initial burden of
“informing the district court of the basis for its
motion, and identifying those portions of the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, which it believes
demonstrate the absence of a genuine issue of material
fact.” Celotex Corp. v. Catrett, 477 U.S. 317,
323, 106 S.Ct. 2548, 2553 (1986) (internal quotations
omitted). A genuine issue for trial exists when “the
evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505,
2510 (1986). Once the moving party meets that burden, the
nonmoving party must “go beyond the pleadings”
and identify those portions of the record showing that there
is a genuine dispute of material fact. Celotex, 477
U.S. at 324, 106 S.Ct. at 2553. “[T]he party opposing
the summary judgment motion must ‘do more than simply
show that there is some metaphysical doubt as to the material
facts.'” Amini v. Oberlin College, 440
F.3d 350, 357 (6th Cir. 2006) (quoting Pierce v.
Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir.
1994)). At the summary judgment stage, “inferences to
be drawn from the underlying facts must be viewed in the
light most favorable” to the nonmoving party.
Clayton v. Meijer, Inc., 281 F.3d 605, 609 (6th Cir.
argues that Rheumatology is a “mere continuation”
of AROC and therefore liable to RXAR for the October 25, 2012
Chancery Court judgment against AROC. (Pl.'s Mem. ISO
Mot. for Summ. J. (Dkt. No. 73) at 7.) Specifically, RXAR
argues that Rheumatology is a “mere continuation”
of AROC because AROC transferred its assets to Rheumatology
without payment, Rheumatology is continuing AROC's
business, Rheumatology and RXAR share an officer who was
“instrumental in the transfer” of AROC's
assets, and AROC is incapable of paying its debts.
(Id. at 8-10.) Rheumatology contends that there is a
genuine issue as to whether certain items- such as AROC's
employees, clients, and telephone numbers-are properly
considered assets capable of being transferred, and as to
whether AROC ever transferred any assets to Rheumatology.
(Def.'s Resp. Br. (Dkt. No. 76) at 2-5.)
Tennessee law, a successor company generally cannot be held
liable for the debts of its predecessor. Hopewell
Baptist Church v. Se. Window Mfg. Co., LLC, No.
E2000-02699, 2001 WL 708850, at *4 (Tenn. Ct. App. June 25,
2001). However, if a successor is “merely a
continuation” of its predecessor company, then it may
be held liable for the predecessor's debts. Id.
A successor company is a “mere continuation” of
its predecessor if: (1) the predecessor “transfers its
assets” to the successor; (2) the successor company
“pays less than adequate consideration for the
assets”; (3) the successor company continues the
predecessor's business; (4) both companies “share
at least one common officer who was instrumental in the
transfer”; and (5) the predecessor company “is
left incapable of paying its creditors.” IBC Mfg.
Co. v. Velsicol Chem. Corp., No. 97-5340, 1999 WL
486615, at *3 (6th Cir. July 1, 1999) (applying Tennessee
law); Mapco Exp., Inc. v. Interstate Entertainment,
Inc., No. 3:08 C 1235, 2011 WL 12556959, at *17 (M.D.
Tenn. Aug. 11, 2011) (same).
was incorporated in December 2012. (Dkt. No. 78 ¶¶
16-17.) AROC closed on Friday, January 11, 2013, and
Rheumatology opened on Monday, January 14, 2017 in the same
leased space. (Id. ¶¶ 18-19, 24.)
Rheumatology has the same telephone and fax number as AROC
did prior to closing. (Id. ¶ 24.) Rheumatology
also has the same president and sole practicing physician as
AROC, the same practice manager, and is otherwise staffed
entirely by former AROC employees. (Id. ¶¶
7-8, 22-23, 25, 29.) All of these facts tend to show that
Rheumatology is a mere continuation of AROC. There remain,
however, genuine disputes of material facts concerning
whether AROC transferred its assets to Rheumatology,
precluding summary judgment.
argues the first and second elements of the “mere
continuation” test are met because AROC transferred its
“employees, fixtures, equipment, location, telephone
number, fax number, . . . a significant number of patients,
the good will of the company, and . . . going-concern
value” to Rheumatology without compensation. (Pl.'s
Mem. at 8.) As to Dr. Zorn's patients, RXAR states that
client lists are a form of intangible asset that are
routinely considered transferrable. (Pl.'s Reply (Dkt.
No. 80) at 3.) In response, Rheumatology contends that
AROC's employees, telephone number, fax number, and
customers are not properly considered “assets.”
(Def.'s Resp. at 2-4.) Client lists, it argues,
“may have some value to a creditor when applied to a
non-medical business (such as a seller of tangible goods) or
a business where clients are contractually obligated to that
business to continue as a client thereof, ” but do not
have such value in a medical practice setting. (Id.
at 2.) Indeed, Dr. Zorn stated explicitly that, in the
medical profession, “[p]eople don't pay for
[patient lists].” (Zorn Dep. (Dkt. No. 14-1 at Pg. ID#:
95.) Because “patients are not automatically
transferred, but rather have the option to continue seeing
the same physician at any practice they may be an employee or
owner in, or the patient may elect to collect their records
and seek treatment elsewhere, ” patients are not