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Vivint, Inc. v. Northstar Alarm Services, LLC

United States District Court, D. Utah

August 14, 2017

VIVINT, INC., a Utah corporation, Plaintiff,
v.
NORTHSTAR ALARM SERVICES, LLC, a Utah limited liability company, Defendant.

          MEMORANDUM DECISION AND ORDER DENYING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT

          JILL N. PARRISH UNITED STATES DISTRICT COURT JUDGE.

         Before the court is Plaintiff Vivint, Inc.'s (“Vivint”) Motion for Partial Summary Judgment on its First Cause of Action for Declaratory Judgment (the “Motion”). [Dkt. No. 70]. Specifically, Vivint seeks a declaration that Defendant NorthStar Alarm Services, LLC (“NorthStar”) is the successor in interest to third-party Vision Security, LLC (“Vision”) and is therefore bound by the terms of a settlement agreement between Vivint and Vision. The court held oral argument on the Motion on February 23, 3017. Because genuine disputes of material fact exist, the court denies the Motion.

         FACTUAL BACKGROUND

         Vivint and NorthStar are both in the business of marketing, selling, and installing electronic home automation and security systems. Companies in the home alarm and automation industry market their products and services in a variety of ways, including door-to-door direct sales. As two of the more established companies in the industry, Vivint and NorthStar have been competing against each other since 2001.

         In 2010, Vivint sued Vision, another competitor in the home security industry, alleging, inter alia, deceptive sales practices towards Vivint's customers. In December 2014, Vivint and Vision entered into a settlement agreement (the “Settlement Agreement”) to resolve that litigation. The Settlement Agreement includes a provision that requires Vivint and Vision to follow an arbitration procedure to settle future disputes relating to allegations of deceptive sales practices. The Settlement Agreement also states that its terms are binding on Vivint and Vision's successors and assigns.

         Beginning in early 2014, Vision and NorthStar discussed a possible transaction between the two. Those discussions were consummated by the execution of an Asset Purchase Agreement, dated January 16, 2015 (the “APA”), whereby Vision sold approximately 8, 000 customer accounts and related assets to NorthStar, and NorthStar hired certain Vision employees and representatives.

         Vivint now seeks a declaratory ruling that NorthStar is bound to the terms of the Settlement Agreement as the successor in interest to Vision. Vivint argues that the APA transaction constitutes a “de facto merger” of Vision and NorthStar and that NorthStar is therefore bound to the Settlement Agreement under Utah's successor liability doctrine. NorthStar responds by arguing that it never agreed to be bound by the Settlement Agreement, that the APA transaction was an asset purchase and not a “de facto merger, ” and that the successor liability doctrine does not apply.

         LEGAL STANDARD

         “The court shall grant summary judgment 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). When considering a motion for summary judgment, the court must examine all of the evidence in the light most favorable to the nonmoving party. Jones v. Unisys Corp., 54 F.3d 624, 628 (10th Cir.1995) (citation omitted). This requires that all reasonable inferences be drawn in favor of the nonmoving party. Sports Unltd., Inc. v. Lankford Enters., Inc., 275 F.3d 996, 999 (10th Cir. 2002) (citation omitted). A dispute of fact is genuine only if “a reasonable [trier of fact] could find in favor of the nonmoving party on the issue.” Macon v. United Parcel Serv., Inc., 743 F.3d 708, 712 (10th Cir. 2014). “At the summary judgment stage, the judge's function is not to weigh the evidence and determine the truth of the matter.” Concrete Works of Colo., Inc. v. City & Cty. of Denver, 36 F.3d 1513, 1518 (10th Cir. 1994) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)). “Nonetheless, ‘[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, ' summary judgment in favor of the moving party is proper.” Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

         ANALYSIS

         I. Successor Liability

         Utah case law regarding successor liability in this context is sparse. The few cases that discuss and analyze claims of successor liability do so in the context of products liability cases. See, e.g., Tabor v. Metal Ware Corp., 168 P.3d 814, 816-17 (Utah 2007). These cases indicate that Utah adheres to the traditional corporate law view of successor nonliability, subject to four exceptions, as outlined in section 12 of the Restatement (Third) of Torts. Id. (stating the general rule of successor nonliability and its four exceptions and citing Restatement (Third) of Torts: Products Liability). Utah courts have described that traditional view as follows:

[W]here one company sells or otherwise transfers all its assets to another company the latter is not liable for the debts and liabilities of the transferor, except where: (1) the purchaser expressly or impliedly agrees to assume such debts; (2) the transaction amounts to a consolidation or merger of the seller and purchaser; (3) the purchasing corporation is merely a continuation of the selling corporation; or (4) the transaction is entered into fraudulently in order to escape liability for such debts.

Macris & Assocs., Inc. v. Neways, Inc., 986 P.2d 748, 752 (Utah Ct. App. 1999) (quoting Florom v. Elliott, 867 F.2d 570, 575 n.2 (10th Cir. 1989) (quotation marks omitted)), aff'd, 16 P.3d 1214 (Utah 2000). Vivint argues that the second of the four enumerated exceptions applies in this case.

         The second of the four exceptions described in Macris is commonly referred to as the de facto merger exception. Courts applying the de facto merger exception look beyond the form of an asset sale to determine whether there has been, in substance, a merger or consolidation. See, e.g., MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 965 N.Y.S.2d 284, 297 (Sup. Ct. 2013) (citations omitted). Whether a de facto merger has occurred generally depends on the presence of the following factors:

(1) there is a continuation of the enterprise of the seller in terms of continuity of management, personnel, physical ...

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