H. Daya International Co., Ltd. v. DO Denim, LLC

Background

H. Daya International Co., Ltd. sought payment of a $1,157,012.23 judgment against Do Denim LLC and Reward Jean LLC. It also sued R. Siskind & Company, Inc., Vintage Apparel Group LLC, Salomon Murciano, Richard Siskind, and Only Brands, Inc. H. Daya alleged, among other things, that the corporate defendants were jointly and severally liable under a de facto merger theory. A de facto merger is a legal theory that can impose a predecessor company’s liabilities on a successor when the companies function as though a merger occurred.

In its summary-judgment briefing, H. Daya argued that two smaller de facto mergers combined into one larger merger among the corporate defendants. The court’s March 31, 2022 order denied H. Daya’s motion for summary judgment. That order found that H. Daya’s allegations about R. Siskind & Company and Vintage operating as one company advanced an alter ego theory. An alter ego theory seeks to treat two nominally separate companies as the same for liability purposes and may support piercing the corporate veil, meaning disregarding the companies’ separate legal identities.

The court had deferred deciding whether H. Daya could establish that theory because the parties had not briefed which state’s law governed veil piercing.

Motion for Reconsideration

H. Daya moved for reconsideration, arguing that the court had overlooked a decision it cited in its summary-judgment papers: Recurrent Capital Bridge Fund I LLC v. ISR Systems & Sensors Corp. H. Daya argued that this decision supported its alternative theory of a smaller de facto merger involving Vintage and the judgment debtors, as well as R. Siskind & Company and Vintage.

The court explained that reconsideration is an extraordinary remedy generally reserved for an overlooked controlling decision or data, an intervening change in controlling law, new evidence, clear error, or the need to prevent manifest injustice. It is not available merely to relitigate an issue the court already decided.

Court’s Analysis

The court stated that continuity of ownership is essential to a de facto merger. It distinguished Recurrent because that case involved allegations that a chain of four companies shared common owners and management. Although Recurrent accepted a theory involving several companies at the motion-to-dismiss stage, the court concluded that the decision did not eliminate the two requirements already identified in H. Daya’s case.

The court held that H. Daya’s theory remained viable only if H. Daya could establish both that Vintage and the judgment debtors had undergone a de facto merger and that R. Siskind & Company and Vintage were alter egos warranting veil piercing. Because the cited decision did not alter that analysis, the court found reconsideration unwarranted.

Disposition

Judge Victor Marrero ordered that H. Daya’s motion for reconsideration of the March 31, 2022 order be DENIED. The opinion does not decide the ultimate liability of the defendants under H. Daya’s de facto merger theory; it only denies reconsideration of the earlier summary-judgment ruling.