United States District Court, D. Massachusetts
REPORT AND RECOMMENDATION ON HAYSTACKID, LLC'S
MOTION FOR SUMMARY JUDGMENT [Docket No. 190]
JENNIFER C. BOAL, Magistrate Judge.
action, plaintiff Anna Cruz alleges, inter alia, that her
former employer, Boston Litigation Solutions, LLC
("BLS") failed to pay her overtime and minimum
wages, discriminated against her on the basis of a perceived
disability, and invaded her privacy in violation of
Massachusetts law. Cruz also brings claims against
HaystackID, LLC ("Haystack") on the theory that
Haystack is BLS's successor. Haystack has filed a motion
for summary judgment. Docket No. 190. For the following
reasons, the Court recommends that the District Judge
assigned to this case deny the motion.
filed this action on May 8, 2013. Docket No. 1. On February
25, 2014, Cruz filed an amended complaint. Docket No. 26.
1, 2015, this Court granted in part and denied in part
Cruz's motion to file a further amended complaint. Docket
No. 114. Cruz filed her Second Amended Complaint on July 6,
2015. Docket No. 116. Among other things, the Second Amended
Complaint added Haystack as a defendant as to all claims
based on a successor liability theory.
February 24, 2016, Haystack filed the instant motion for
summary judgment. Docket No. 190. Cruz filed her opposition
on March 24, 2016. Docket No. 197. Haystack filed a reply on
April 7, 2016. Docket No. 201. The Court heard oral argument
on May 18, 2016.
2007, Jefferey Stevens founded BLS. BLS was organized under
the laws of Massachusetts with Stevens as
manager. BLS's 2008 Annual Report added
Kevin Glass and Nicole (Goddard) Glass as co-managers along
with Stevens. BLS's 2009 Annual Report lists
Stevens, Nicole Glass and Kevin Glass as
managers. BLS's 2010, 2011, and 2012 Annual
Reports list only Stevens and Kevin Glass as
provided electronic discovery, data processing, and imaging
services for law firms. BLS also performed paper production
services for its customers. BLS maintains that it
only did work local to the Boston market and did no business
outside of the state. However, BLS provided services to
law firms with offices in other states and DaVita, one of its
customers, had no offices in Massachusetts.
Glass was a part owner of BLS. BLS maintains that
Kevin Glass's ownership ended in 2013 because his vesting
period had concluded. During discovery, BLS, Stevens
and Kevin Glass characterized the transaction differently,
stating that Kevin Glass's ownership had been
"earned out" or "whittled
out." On February 1, 2013, Kevin Glass
executed a resignation as managing member of
BLS. Cruz alleges, however, that Kevin
Glass continued to have an active role in the management of
BLS until it ceased operations in June 2013.
and Glass assert that in late 2012, BLS was failing because
the eDiscovery market was evolving. The market was
moving from paper to forensics and BLS was not equipped for
complex eDiscovery work. Stevens decided to shut down BLS
and "downsize all employees."
maintains that it was organized in Delaware as a limited
liability company in March 2011. Cruz disputes the date
of organization as the Foreign Limited Liability Company
Application for Registration which was filed with the
Massachusetts Secretary of State listed Haystack's date
of organization as June 29, 2007. Haystack asserts that
the date listed in the Foreign Limited Liability Company
Application was a typographical error by the company's
accountant who filed the application.
and Jason Glass created Haystack to provide international
end-to-end eDiscovery, digital forensics services, and
litigation-preparedness solutions. Its focus is to offer
sophisticated litigation response consulting, managed
services, and forensic experts that can testify for
clients. Haystack developed proprietary
software to manage data more effectively and to manage
potential evidence for litigation.
Glass is Haystack's Chief Executive Officer
("CEO"). Jason Glass is the Executive Vice
President. The Operating Agreement also lists
Nicole Glass as a party. Haystack's Foreign Limited
Liability Company Application for Registration in
Massachusetts, dated June 26, 2013, lists Kevin Glass, Nicole
Goddard, and Jefferey Stevens as managers.
Haystack's 2014 Annual Report lists Kevin Glass, Nicole
Goddard, and Jefferey Stevens as managers. Again,
Haystack asserts, without more, that these dates are
rented office space at 21 Congress Street in Salem,
Massachusetts and 1 International Place in Boston,
Massachusetts. Haystack also occupied space at 100
Franklin Street, the same space occupied by
2013, Kevin Glass came into the BLS's offices at 100
Franklin Street and met with employees regarding the
termination of their employment at BLS. At least one
employee (Carline Duroska) testified that Kevin Glass told
employees that the company name was going to change to
HaystackID. When Duroska asked Kevin Glass
whether they were "going to be doing the same thing,
" Kevin Glass responded "oh, yes, we're going
to be doing [sic] - just the name is going to
change." Kevin Glass personally met with
BLS' employees and laid them off from BLS and then hired
them as Haystack employees, sometimes in the same
meeting. Duroska testified that she was not
given a final paycheck from BLS and that her next biweekly
paycheck contained one week of pay from BLS and one from
terminated its contract with HRO, an outside human resources
consulting company, in June or July of 2013. In June
or July 2013, Haystack entered into a contract with
HRO. Haystack denies that it hired all of
BLS's employees, but HRO believed that Haystack hired all
of the employees laid off by BLS. HRO did not believe
that there was any interval of time between the end of BLS
and the beginning of Haystack.
approximately two years after June of 2013, Haystack
continued the same operations in paper production which had
been performed by BLS at the Franklin Street
location. Haystack paid rent to BLS and BLS
paid the rent to the landlord. Haystack vacated the
Franklin Street location when BLS's lease was
over. Paper production services continued
on the same equipment which BLS used, although some equipment
was replaced in the ordinary course of business and other
equipment was returned when the lease expired. BLS
effectively stopped doing business after June of 2013, when
it laid off its employees, who were then hired by Haystack to
perform the same job functions. BLS, however, has not
Haystack's clients had been clients of BLS.
Immediately after BLS ceased operations, Haystack received
business from McDermott, Will & Emery ("MWE"), one
of BLS's largest clients. Haystack's
business from MWE slowed down around 2015.
lawsuit was filed on May 8, 2013. Docket No. 1. Starting on
May 9, 2013, the Essex County Sheriff's Office made six
attempts to serve Kevin Glass, BLS's registered agent, at
the address listed in the Secretary of State's website,
which was also his home address.
4, 2013, BLS filed a Restated Certificate of Organization,
KEVIN GLASS HAS BEEN REMOVED AS THE REGISTERED AGENT AND IT
HAS BEEN CHANGED TO JEFFEREY STEVENS. KEVIN GLASS HAS ALSO
BEEN REMOVED AS A MANAGER. KEVIN GLASS HAS ALSO BEEN REMOVED
FROM AUTHORITY TO EXECUTE DOCUMENTS TO BE FILED WITH THE
CORPORATIONS DIVISION. KEVIN GLASS HAS ALSO BEEN REMOVED FROM
AUTHORITY TO EXECUTE ANY RECORDABLE INSTRUMENT PURPORTED TO
AFFECT AN INTEREST IN REAL ESTATE.
filing also updated the Registered Agent to Stevens and the
Registered Agent's address to 100 Franklin Street in
20, 21, and 24, the Essex County Sheriff's Office
attempted service at 100 Franklin Street. A Suffolk
County Sheriff's Department Civil Process Division
Diligent Search form states, in relevant part: "Unable
to obtain definite answers on person in charge. Other than
they were a new co. Did get to speak to Mr. Scott Parker,
informing me of new co. called Haystack ID. Told me Solutions
moved out 2 weeks ago." The form also stated
that the "Bldg. super stated they were still
December 3, 2014, Attorney Trevor Findlen filed a notice of
appearance on behalf of BLS. The notice listed Mr.
Findlen's address as "HaystackID, LLC, 6 Beacon
Street, Suite 815, Boston, MA 02108." His email
address was listed as firstname.lastname@example.org. On
September 16, 2015, Mr. Findlen filed a notice of appearance
on behalf of Haystack. Attorney Jeremy Bombard entered
an appearance for both BLS and Haystack after Attorney
Findlen withdrew from representing them. Mr. Bombard is
in-house counsel for Haystack.
Standard Of Review
judgment is appropriate "if 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). "A dispute is genuine' if the
evidence about the fact is such that a reasonable jury could
resolve the point in the favor of the non-moving party."
Sanchez v. Alvarado, 101 F.3d 223, 227 (1st Cir.
1996) (quotations and citations omitted). A material fact is
one which has "the potential to affect the outcome of
the suit under the applicable law." Id .
(quotations and citations omitted).
moving party bears the initial burden of establishing that
there is no genuine issue of material fact. See Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). If that
burden is met, the opposing party can avoid summary judgment
only by providing properly supported evidence of disputed
material facts that would require trial. See id. at 324.
"[T]he non-moving party may not rest upon mere
allegation or denials of his pleading, '" but must
set forth specific facts showing that there is a genuine
issue for trial. LeBlanc v. Great Am. Ins. Co., 6
F.3d 836, 841 (1st Cir. 1993) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 256 (1986)).
court must view the record in the light most favorable to the
non-moving party and indulge all reasonable inferences in
that party's favor. See O'Connor v. Steeves,
994 F.2d 905, 907 (1st Cir. 1993). However, "[a]s to any
essential factual element of its claim on which the nonmovant
would bear the burden of proof at trial, its failure to come
forward with sufficient evidence to generate a trialworthy
issue warrants summary judgment to the moving party."
In re Spigel, 260 F.3d 27, 31 (1st Cir. 2001)
(citation omitted). "If, after viewing the record in the
non-moving party's favor, the Court determines that no
genuine issue of material fact exists and the moving party is
entitled to judgment as a matter of law, summary judgment is
appropriate." Walsh v. Town of Lakeville, 431
F.Supp.2d 134, 143 (D. Mass. 2006).
Issues Of Fact Preclude Summary Judgment
argues that Cruz has not presented sufficient evidence to
hold it liable for BLS's actions on a theory of successor
liability. Docket No. 191 at 7-12. The Court finds that
issues of fact preclude summary judgment.
Massachusetts, as in most jurisdictions, the general rule is
that one corporation may ordinarily purchase all of the
assets of another without taking on any of its
liabilities." Nat'l Gypsum Co. v. Continental
Brands Corp., 895 F.Supp. 328, 333 (D. Mass. 1995)
(citations omitted). There are four exceptions to this
general rule; liability may be imposed if "(1) the
successor expressly or impliedly assumes liability of the
predecessor, (2) the transaction is a de facto merger or
consolidation, (3) the successor is a mere continuation of
the predecessor, or (4) the transaction is a fraudulent
effort to avoid liabilities of the predecessor."
Milliken v. Duro Textiles, LLC, 451 Mass. 547, 556
(2008). "[A] determination of whether a predecessor
corporation continues to exist for purposes of successor
liability is wholly fact specific." Id. at 559.
"No single indicator of succession is controlling."
Id. at 558.
argues that successor liability attaches to Haystack under
the de facto merger, mere continuation, and fraud theories of
successor liability. Docket No. 197 at 7-13.
the labels "de facto merger" and "mere
continuation" "have been enshrined separately in
the canonical list of exceptions to the general rule of no
successor liability, they appear, in practice to refer to the
same concept, and courts have often used the two terms
interchangeably." Nat'l Gypsum Co., 895
F.Supp. at 336. The concept of de facto merger has usually
been applied to situations in which the ownership, assets and
management of one corporation are combined with those of
another, preexisting entity while a mere continuation has
been most often found where the owners of the selling entity
set up the buyer with the specific purpose of continuing
their business under a new form. Id.
consider the following factors in determining whether a
transfer of assets should be considered a de facto merger ...