The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge*fn1
Silverman Partners LP ("Plaintiff" or "Silverman") is an investment company that invested in and issued a loan to defendant, The Verox Group ("Verox Group") between April 2006 and March 2007. Verox Group was to begin repaying its loan to Silverman in September 2007. Instead, according to Plaintiff, Verox Group transferred its assets and business to Verox Technology, LLC*fn2 ("Verox Technologies") -a company located at the same address, owned by the same shareholders, and doing the same essential business- which left Silverman without any return on his investment or any repayment on his loan. Silverman now brings suit against both Verox Group and Verox Technologies for fraud, breach of their loan agreement, fraudulent conveyance, and in the case of Verox Technologies, successor liability. Further, Plaintiff seeks judicial dissolution of Verox Group, an accounting, and damages. Verox Technologies brings a motion to dismiss for failure to state a claim, specifically that Plaintiff cannot demonstrate successor liability. For the reasons set forth below, Verox Technologies' motion is DENIED.
Silverman is a New York limited partnership that invests in small to medium size businesses, with its principal place of business in New York,. Am. Compl. ¶¶ 4, 7. Defendants Verox Group and Verox Technologies are corporations, incorporated in Delaware and Nevada respectively, with their principal places of business in New Hampshire. Id. ¶¶ 5-6. Until December 2007, Verox Group manufactured chemicals and installed equipment to disinfect water for the poultry industry, and Verox Technologies began doing the same work after it was created in June 2007. Id. ¶¶ 8-9, 22, 39.
This case arises out of Plaintiff's investment in Verox Group and Verox Group's failure to repay a loan made to it by Plaintiff. In March 2006, Plaintiff met with the two managing members of Verox Group, Kenneth Howlett and William Edwards (the "Managing Members"). Id. ¶ 10. The Managing Members, who owned seventy-five percent of Verox Group, sought an investment from Plaintiff and made statements to Plaintiff about Verox Group's financial health. Id. ¶¶ 10, 25; Pl.'s Mem. in Opp'n to Verox Technologies' Mot. to Dismiss Ex. B ("Pl.'s Mem. in Opp'n").*fn3 Specifically, Plaintiff was told that Verox Group's monthly revenue was $80,000, and was provided with charts and graphs detailing Verox Group's cash flow. Am. Compl. ¶ 25. In April 2006, Plaintiff invested $300,000 in Verox Group and was supposed to have received fifteen percent ownership of Verox Group in return. Id. ¶ 11. Subsequently, the Managing Members claimed that Verox Group had increased its sales over the course of several months, and Plaintiff thereupon invested an additional $450,000 in Verox Group in September 2006. This was supposed to have increased Plaintiff's ownership to twenty-five percent. Id. ¶ 12. Following this investment, Plaintiff was informed that the value of Verox Group had increased by almost three hundred percent. Id. ¶ 13.
The following year, in March 2007, Plaintiff allegedly loaned $275,000 to Verox Group. Id. ¶ 32. Verox Group was to begin repaying the loan in September 2007 by making monthly payments of $11,000 over the course of twenty-five months, with five percent interest accruing if the payments were not on time. Id. ¶ 33. However, despite written and verbal demands from Plaintiff, Verox Group failed to make any payments on the loan. Id. ¶ 34. In December 2007, Verox Group notified Plaintiff that it would be closing up shop at the end of the year. Id. ¶ 39.
Verox Group never provided an accounting of Verox Group, updates on the company's financial health, or any explanation as to why it stopped conducting business. Id.
In June 2007, three months before Verox Group was to begin making payments on its loan to Plaintiff, the Managing Members of Verox Group formed a new corporation called Verox Technologies. Id. at ¶ 22. Howlett and Edwards each held fifty percent ownership interest in the newly created Verox Technologies. Pl.'s Mem. in Opp'n Ex. B. Verox Group transferred both its tangible and intangible assets to Verox Technologies, leaving the company Plaintiff invested in with nothing. Am. Compl. ¶ 52. In November 2007, Howlett submitted a letter to the Environmental Protection Agency requesting that several Verox Group pesticide registrations be transferred to Verox Technologies. Pl.'s Mem. in Opp'n Ex. E.
After Verox Group ceased doing business, Plaintiff alleges that Verox Technologies continued to operate under the direction of Verox Group's Managing Members, with Verox Group's EPA registrations, and all of Verox Group's assets. Pl.'s Mem. in Opp'n Exs. B, C, E. Verox Technologies also hired two of Verox Group's independent sales representatives and conducted business with some of Verox Group's former customers. Id. Exs. D, F. While Verox Technologies was registered in Nevada and Verox Group in Delaware, Plaintiff asserts that both have their principal places of business in New Hampshire and that they occupy the same physical location. Id. Exs. B, C; Am. Compl. ¶¶ 5- 6, 61. Plaintiff further alleges that Verox Group is now a shell company with no cash or other assets and that there was, essentially, a de facto merger between Verox Group and Verox Technologies. Id. ¶¶ 50, 63.
Silverman claims that Verox Group made various misrepresentations about its financial state in order to mislead Plaintiff into believing it was a viable company and to induce Plaintiff to invest in the business. Id. ¶ 28. Silverman alleges that Verox Group never had monthly revenue higher than $30,000 despite statements from the Managing Members that the monthly revenue was $80,000, and that the Managing Members and other unknown investors misrepresented their stock interest in Verox Group. Plaintiff also claims Verox Group misrepresented the price of certain pumps prior to its acquisition of the $275,000 Silverman loan; the Managing Members told Silverman the pumps cost $215,000 when they only cost $25,000. Id. ¶¶ 25-27. Plaintiff names Verox Technologies as a defendant in this action as a successor to Verox Group. Plaintiff alleges that Verox Technologies is continuing Verox Group's business and was created to avoid Verox Group's obligations to Plaintiff. Id. ¶ 51. Silverman further claims the Verox Group assets were fraudulently conveyed to Verox Technologies and transferred without fair compensation, which allegedly defrauded Silverman of his investment and loan. Id. ¶¶ 52-53
Only Verox Technologies moves to dismiss the action, and argues that the successor liability claim is premature because Plaintiff has not yet secured a judgment against Verox Group,*fn4 and also that Plaintiff failed to present sufficient facts to support a finding of successor liability pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
To survive a motion to dismiss, a plaintiff must "plead enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A facially plausible claim is one where "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Where the court finds well-pleaded factual allegations, it should assume their veracity and determine whether they "plausibly give rise to an entitlement to relief." Id. at 1950. To decide the motion to dismiss, a court may consider "any written instrument attached to [the complaint] as an exhibit, materials incorporated in it by reference, and documents that, although not incorporated by reference, are 'integral' to the complaint," Sira v. Morton, 380 F.3d 57, 67 (2d Cir. ...