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`2
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`A
`&
`i.
`Court
`San Francisco County Superior
`
`
`:
`
`MAY 14 2019
`
`CLERK OF
`BY.
`
`AHE COURT
`_
`Deputy Clerk
`
`SUPERIOR COURT OF CALIFORNIA
`
`‘COUNTY OF SAN FRANCISCO
`
`DEPARTMENT318
`
`LAURA S. LEHMAN,
`
`Case No. CGC-16-553758
`
`ORDER DENYING LANGAN
`ENGINEERING AND ENVIRONMENTAL
`SERVICES, INC.’*S MOTION FOR
`SUMMARY JUDGMENT
`
`Plaintiff,
`
`vs.
`
`JOINT POWERS AUTHORITY,
`
`TRANSBAY
`et al,
`_
`Defendant
`
`to:
`This document
`applies
`Lehman, et al. v.
`Transbay Joint Powers
`et al. (CGC-16-553758)
`Authority,
`Millennium Tower Association v. Mission Street
`LLC,et al.
`Development
`(CGC-17-557830)
`
`
`
`Development
`
`LLC,et
`
`v.
`
`Buttery
`
`Jeffries
`
`Montana v. Mission Street
`al.(CGC-17-558649)
`et al. (CGC-17-556292)
`et
`
`v.
`
`Transbay Joint Powers Authority
`Ying
`(CGC-17-559210)
`
`al.
`
`v. Mission Street
`Maui Peaks Corporation
`et al. (CGC-17-560322)
`Development
`
`Lehmanv.
`
`Transbay
`
`Joint Powers
`
`Authority,
`
`-1-
`et al. CGC-16-553758 Order re:
`
`Langan’s Motion for Summary Judgment
`
`

`

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`Langan’s liability
`
`alleged
`
`INTRODUCTION
`Defendant Langan Engineering & Environmental
`Inc. (“Langan”) brings this motion for
`Services,
`summary judgment in six actions againstplaintiff Millennium Tower Association (“MTA”) and/or cross-
`complainant Transbay Joint Powers Authority (“TJPA”). (Notice, 1-2.) MTA asserts causes
`of action
`against Langan forviolation of Civil Code § 895, et seq. and negligence. (See
`Polin Decl., Ex. 20
`43 and preamble to first and second causesofaction; see
`[Fourth Amended Complaint”] 4740, Alai,
`also Langan Separate Statement of Undisputed Facts (“Langan SSF”) No. 30.). TJPA’s cross-complaints
`assert causes of action against Langan for
`indemnification. (See Polin Decl., Ex. 21 [“Second
`equitable
`see also Langan SSF No. 30.) The
`Amended Complaint”], § 1, 32-33a.-g., 61;
`basis for
`alleged
`rests in its successor
`torts of Treadwell & Rollo, Inc. (“T&R”).
`liability for the
`(See Polin Decl., Exs. 20-21; see also Langan SSF Nos. 1-3, 8-12, 30.) T&R wasthe geotechnical
`engineer for the Millennium Tower. (See Langan SSF Nos.1-3, 5, 11.) Langan purchased the assets of
`see also Langan SSF Nos.8-
`T&R in 2010.
`(See Polin Decl., Ex. 1, Asset Purchase Agreement (“APA”);
`|
`12.) The motion is opposed by TJPA; MTA joins in TJPA’s opposition.
`The motion came on for hearing on April 12, 2019 in
`318 of the Superior Court of
`Department
`California, County of San Francisco, the Honorable Charlene Padovani Kiesselbach
`Counsel
`presiding.
`were
`was
`for the parties
`represented by Jacob Polin and Steve Madison of Quinn
`present. Langan
`& Sullivan, LLP, and David A. Ericksen of Severson & Werson, APC. TJPA was
`Urquhart
`represented by Michael S.
`of Jones Day and Matthew A. Dekovich of Norton Rose Fulbright
`McCauley
`Kaneda & Litt LLP. A court
`US LLP. MTAwasrepresented by John Stander of Fenton Grant
`|
`was presentat the
`reporter
`for summary judgmentpursuantto the provisions of C.C.P. § 437c(f).
`Langan bringsthis
`motion
`(See Notice, 1.) To succeed on this motion, Langan has the burden of showing that there is no triable
`v. Atl. Richfield Co. (2001)
`25 Cal.4th 826.) Langan’s motion for
`issue of material fact. (See Aguilar
`summary judgement is DENIED.
`
`Emanuel
`
`hearing.
`
`Mayfield
`
`“A party may movefor
`
`LEGAL STANDARD
`
`action has no merit or that there is no defense to the action or
`
`Lehmanv.
`
`Transbay Joint Powers Authority,
`
`-2-
`et al. CGC-16-553758 Order re:
`
`summary judgment in an action or proceedingifit is contended that the
`proceeding. The motion may be madeat any
`
`Langan’s Motion for Summary Judgment
`
`

`

`Ww&wobo—
`oOOoNSNDD
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`|
`
`one
`
`ofeach party
`
`that the court, with
`
`action,
`
`that
`
`timeafter 60 days have elapsed since the general appearance in the action or
`proceeding
`against whom the motionis directed or at any
`earlier time after the general appearance
`or without notice and upon good
`cause
`may
`shown,
`direct.” (C.C.P. § 437c(a)(1).)
`“A party may move for summary adjudication
`as to one or more causesofaction within an
`or more affirmative defenses, one or more claims for damages, or one or moreissuesof duty,if the
`party contends that the cause of action has no
`merit, that there is no affirmative defense to the cause of
`action, that there is no merit to an
`affirmative defense as to
`cause of action, that there is no merit to a
`any
`as
`one or more defendantseither
`or
`claim for damages,
`specified in Section 3294 of the Civil Code,
`owedor did not owe a dutyto the
`or
`
`plaintiffs. A motion for summary adjudication shall be
`plaintiff
`|
`a causeof
`an affirmative defense,
`a claim for damages,
`granted only if it completely disposes of
`an issue of duty.” (C.C.P. § 437c(\(1).)
`“The purpose of the law of summary judgmentis to provide courts with a mechanism to cut
`the parties’ pleadings in order to determine whether, despite their allegations,trial is in fact
`to resolvetheir dispute.” (Aguilar, supra, 25 Cal.4th at
`and generally, from commencementto conclusion, the partymoving for summary judgment
`“First,
`burden ofpersuasion that there is no triable issue ofmaterial fact and that he is entitled to
`the
`a matter of law.” (/d. at 850.) “Thereis a triable issue of
`fact if, and onlyif, the
`judgment as
`material
`evidence would allow a
`reasonabletrier of fact to find the underlying fact in favor of the party opposing
`applicable standard of
`proof.” (/d.) “A defendant bears the burden of
`|
`or that
`persuasion that ‘one or more elements of the causeof action’ in question ‘cannotbe established,’
`‘there is a
`defense’ thereto.” (d.)
`“Second, and generally, the party moving for summary judgmentbears
`
`action,
`
`or
`
`843.)
`
`aninitial burden of
`
`through
`
`necessary
`
`bears
`
`the motion in accordance with the
`
`complete
`
`production
`
`to make a
`
`prima facie showing of the nonexistence of any triable issue of material fact; if he
`he causes a
`to a burden of
`
`shift, and the
`
`production,
`
`carries his burden of
`
`(Id.)
`
`opposing party is then subjected
`of his own to make a
`ofthe existence of a triable issue of material fact.”
`prima facie showing
`production
`“A burden of production entails only the presentation of ‘evidence.’” (d.)
`“Third, and generally, how the parties moving for, and opposing, summary judgment may each
`on which would bear what burden of
`carry their burden of persuasion and/or production depends
`proofat
`
`;
`
`Lehmanv.
`
`Transbay
`
`Joint Powers Authority,
`
`3-
`et al. CGC-16-553758 Order re:
`
`.
`
`Langan’s Motion for Summary Judgment
`
`

`

`more
`
`trial.” (dd. at 851.) “[I]f a defendant moves for summary judgment against such
`a plaintiff, he must
`a reasonable trier of fact not to find any underlying material
`present evidence that would require
`fact
`|
`|
`as a matter oflaw, but would have to
`he would notbe entitled to judgment
`likely than
`not-otherwise,
`present his evidence toa trier of fact.” (/d.)
`“delimit the scope of the issues” and” frame ‘the outer measure of materiality in a
`The
`pleadings
`v.
`Fidelity Nat’l Title Co. (2013) 213 Cal.App.4th 486, 493.)
`summary judgment proceeding.’” (Hutton
`“[T]he burden of a defendant moving for summary judgmentonly requires that he or she negateplaintiff's
`theories of
`as
`a
`moving party need notrefute liability
`on some
`in the complaint; that is,
`liability
`alleged
`theoretical possibility not included in the pleadings.” (Ibid.)
`In a case such as
`this, where TJPA and MTA alleged that Langanis liable for T&R’s torts under a
`successor liability theory, TJPA and MTAbearthe burden of establishing inadequate cash consideration
`v. American Pharmaceutical Co.
`paid for T&R’s assets
`discussed further below).
`(See Maloney
`(as
`(1988) 207 Cal.App.3d 282, 288 fn. 3 [on appeal from a grant of summary judgment, the court quoted
`a want of consideration
`Civil Code section 1615 for the proposition that “[t]he burden of showing
`sufficient to support an instrumentlies with the party seeking to invalidate or
`avoid it.”]; see also Katzir's
`Inc. v. M-MLS.com
`Floor and Home
`Cir. 2004) 394 F.3d 1143, 1151 [citing Maloney ina
`Design,
`(9th
`non-summary judgment context, and noting thatthe “party asserting the theory of successor liability bears
`the burden of establishing inadequate consideration.”]; KNT, Inc.,.v. USA (N.D. Cal., Feb. 15, 2019) 2019
`at *11 [“the Governmenthas the burden of establishing that KNT acquired assets from
`WL
`1473458,
`MKM Inc.for inadequate consideration” at summary judgment].)
`
`EVIDENTIARY OBJECTIONS
`
`I.
`
`proffers
`
`to TJPA’s Experts.
`Langan’s Objections
`the Declaration of Mr. Marcinkowski, as an expert on the valuation of businesses
`TJPA
`and assets in connection with mergers and acquisitions. (See
`Marcinkowski Dec., Ex. 1 at TIPA-DP-
`000002- TJPA-DP-000003 & Appendix A.) Mr. Marcinkowski’s opinionis
`that the stated purchase price
`of $8,569,231 in the APA doesnotreflect the Fair Market Value of T&R’s assets as of November1,
`2010, the Valuation Date. (See id. at TIPA-DP-000003
`of Opinions”], TJPA-DP-000015
`
`[discussion of
`
`adequacy
`
`of purchase price].)
`
`Mr. Marcinkowskiutilizes the Discounted Cash Flow
`
`Lehman v.
`
`Transbay Joint Powers Authority,
`
`-4-
`et al. C@C-16-553758 Order re:
`
`Langan’s Motion for Summary Judgment
`
`(“Summary
`
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`

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`Market Comparable Method to arrive at the opinion that the Fair Market Value of T&R’s
`Method and the
`assets were $9.75 million on the Valuation Date. (See id. at TJPA-DP-000003 [Summary ofOpinions],
`TJPA-DP-000006-13 [Income Approach] & Exs. 2.0 and 3.0; TJPA-DP-000013-15 & Ex. 4.0 [Market
`.
`
`Approach].):
`TJPA proffers the Declaration of Dr. Mordecai,
`expert in forensic financial and economic
`Ex. ] at pp. 10-11 & Appendix B.) Dr. Mordecai’s opinion is that the
`analysis. (See Mordecai
`Dec.,
`actual amountof the consideration given by Langan
`to the APA on the Valuation Date of
`pursuant
`was between $5,045,951 and $5,306,059, and that only $4,071,106
`November 1, 2010,
`availablefor creditors of T&R. (See id. at pp. 16-26 & Exs.I, I-A.)
`
`was
`
`actually
`
`as an
`
`Langan objects
`
`to the
`
`opinions of Mr. Marcinkowski and Dr. Mordecaias (i) improper expert
`and lacking in foundation, and (411) insufficiently relevant. (See generally,
`opinion, (ii) speculative
`Langan’s Objections to TIPA’s Declarations and Evidence Submitted in support ofits
`to
`Opposition
`see also TJPA’s Responses
`to
`Langan’s Motion for Summary Judgment(“Langan’s Objections”);
`in support of Langan’s Motion for Summary Judgment (“TJPA’s Responsesto
`Langan’s Obj
`ections
`are overruled. As outlined above, both Mr.
`Langan’s Objections”), at pp.
`These objections
`4-16.)
`Marcinkowski and Dr. Mordecai are
`
`methodology
`
`support
`
`qualified economists with relevant experience. Both use factors and
`economists employto arrive at their conclusions. (See, e.g., Mordecai Dec., Ex. 1 at pp. 18,
`20-23 & fns. 37, 41-43, 46-48 [discussing industry-accepted methodologies] and Marcinkowski Dec., Ex.
`1 at TJPA-DP-000003 [Summary of Opinions], TJPA-DP-000006-13
`[Income Approach] & Exs. 2.0 and
`3.0; TIPA-DP-000013-15 & Ex. 4.0 [Market Approach].) Langan cites to the holding of the California
`v.
`Supreme Court in Sargon Enterprises
`University ofSouthern California (2012) 55 Cal.4th 747, in
`of its objection to exclude theseopinions. (See generally, Langan’s Objections.)
`In Sargon, the
`speculative and not
`supported by the material
`
`forensic accountant’s
`
`was excluded because it was
`
`opinion
`on which the expert relied. Ud.
`776-782.) However,in ruling, the Supreme Court cautioned that the
`between competing expert opinions.” (/d. at 772.)
`court’s “gatekeeping role does not involve
`not on the conclusions
`and methodology,
`to be given to the opinions of Mr.
`
`at
`
`choosing
`on
`focus “must be solely
`The court’s
`gatekeeper’s
`principles
`that they generate.” (/d.) Langan’s objections go to the
`
`weight
`Marcinkowski and Dr. Mordecai, not to their admissibility.
`;
`
`Lehman v.
`
`Transbay
`
`Joint Powers Authority,
`
`-5-
`et al. CGC-16-553758 Order re:
`
`Langan’s Motion for Summary Judgment
`
`

`

`II.
`
`Langan’s objections
`
`Langan’s Other Objections.!
`non-expert evidence are discussed immediately below.
`to
`Zweig White Draft (TJPA Appendix
`of Exhibits, Ex. 18): Langan objects to Zweig White’s
`“draft” valuation of T&R’s assets as
`(1) inadmissible hearsay; and (2) insufficiently relevant. (See
`see also TJPA’s
`to
`Langan’s Objections, pp. 76-77.) The
`Responses
`establish that Zweig White’s valuation is an admission of a
`objections are overruled,
`party
`opponent (as Langan’s agent) and/or that Langan
`it, and (2) the relevance/materiality objection
`adopted
`again goesto
`weight, not
`admissibility (and the Court will not consider irrelevant facts at summary
`
`Langan’s Objections, p. 6;
`as TJPA can
`
`judgment).
`to Mr. Frizzi’s
`Frizzi “Valuation” (TJPA Appendix
`of Exhibits, Ex. 12): Langan objects
`valuation as
`(1) improperexpert opinion, (2) speculative/lacks foundation, and (3) insufficiently relevant.
`(See Langan’s Objections, p. 6; see
`alsoTJPA’s Responses to Langan’s Objections, pp. 77-79.) Asfor
`the third point, the Court overrules the objection for the same reasons
`noted above for the Zweig White
`to be an
`draft. As to the first point, the Court will not consider Mr. Frizzi’s
`expert valuation, but
`valuation
`rather a valuation based on the his personal knowledge
`as a lay witnessattributable to Langanas a party
`opponent. (See Evid. Code § 800 [a non-expert witness may
`testify in the form of an
`opinion if
`opinionis (a) rationally based on his perception and (b) helpful to a clear
`ofhis
`understanding
`to the second
`his valuation opinion is supported by financial documentation
`testimony].)
`As
`point,
`provided directly to Frizzi, which he
`and assessed at the request of Langan’s CEO. Thus, the
`reviewed
`are overruled on all three grounds.
`
`objections
`
`that
`
`Tringale Testimony about Terracon
`
`Agreement (TJPA Appendix
`at 136:10-22; 137:8-13; 137:15-138:2) The Court need not consider this objection,as it
`
`of Exhibits, Ex. 47, P.
`
`Tringale Depp.
`
`'
`
`To the extent the Court mustrule on the objections within the parties’ respective separate statement of
`facts, the Court overrules those objections. (See, e.g., TJPA’s Separate Statement of facts in
`Opposition
`someiteration of the
`to
`Nos. 1-31
`Langan’s Motion for Summary Judgment (“TJPA SSF’)
`[containing
`statement of fact is immaterial and irrelevant to
`“TJPA
`objects that this purported
`Langan’s
`following:
`as a successor-in-interest to Treadwell & Rollo
`(Cal. Evid. Code § 210).”]; Langan’s Responses
`liability
`to TJPA’s SSF Nos. 32-87, 90-91, 97, 107
`fact is not
`©
`sufficiently relevant, material, or
`[““This purported
`to the disposition of the motion. CRC 3.1350
`(d)(2) and (f)(3); Cal. Evid. Code § 210 and
`pertinent
`.
`352.”].) First, the Court will only consider relevant evidence at summary judgment. Second, the
`not
`objections also go to
`weight,
`admissibility.
`i
`
`_6-
`Lehman v.
`et al. CGC-16-553758 Order re:
`Transbay Joint Powers Authority,
`Langan’s Motion for Summary Judgment
`
`OOFeWwWNOee
`oOonsDN
`
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`7 2
`
`8
`
`

`

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`is immaterial to the Court’s analysis below. (See Codeof Civ. Proc. § 437c(q).)
`Tringale Testimony about use of the term
`“merger” (TJPA Appendix of Exhibits, Ex. 47,
`Tringale Depo. at 193:4-17; TJPA
`Ex.48, Tringale Depo. at 429:18-431:17.): Langan objects to Mr.
`as
`(1) speculative/lacks foundation; (2) insufficiently relevant, (2) inadmissible
`Tringale’s testimony
`hearsay, and (4) outside the scope of the personal most
`knowledgeable deposition topics. (See Langan’s
`Objections, p. 26; TIPA’s Responses to Langan’s Objections, pp. 80-82.) For the reasons outlined in
`onall four grounds.
`|
`TJPA’s responses, the Court overrules the
`(Seeid.)
`objections
`DISCUSSION AND ANALYSIS
`
`In sum, and as outlined below,there
`an
`
`are
`
`multiple triable issues of material fact as to whether the
`most
`APAwastruly
`“asset-only” purchase because: (1)
`importantly, the admissible declarations of Dr.
`a triable issue of
`fact as to whether the
`Mordecai and Mr. Marcinkowski, read together, create
`material
`cash consideration Langan paid
`to the fair
`adequate (Dr. Mordecai), when viewed in comparison
`market value of T&R’sassets at the time ofsale (Mr. Marcinkowski); (2) TJPA presents evidence
`to
`support the remaining factors on the defacto merger/mere continuation exceptions to the general rule that
`a
`purchasing corporation cannotbeliable for a selling corporation’s torts in an
`asset-only purchase; and
`to be absolvedofall liability here, where (a) T&R was
`to allow Langan
`(3) it wouldalso be
`a triable issue of material fact as
`the geotechnical engineer for the Millennium Tower, (b) thereis at
`least
`to the de facto merger and mere continuation
`exceptions, (c) the T&R entity in existence after the APA,
`namedin the at-issue complaints, immediately ceased business operations
`T&R Consolidated, though
`after the APA was executed, and only maintains a $ 2 million insurance policy
`for known claimsprior to
`the sale of T&R’s assets; and (d) yet, the estimated sales price ofthe Toweraloneis
`approximately $ 472
`
`was
`
`inequitable
`
`|
`
`million.
`
`23
`
`III.
`
`Adequacy
`
`of Consideration.
`
`a.
`
`Law
`
`Background
`v. Alad Corporation (1977) 19 Cal.3d
`The Supreme Court in Ray
`22,
`whether a
`assumesthe other’s
`assets of another corporation
`corporation purchasing the
`liabilities. Generally, “the purchaser does not assumetheseller’s liabilities unless: [i] there is an express
`or
`to a consolidation or merger of the two
`implied agreement of assumption,[ii] the transaction
`
`28, stated the rule as to
`
`|
`
`principal
`
`amounts
`
`Lehman v.
`
`Transbay Joint Powers Authority,
`
`-7-
`et al. CGC-16-553758 Order re:
`
`Langan’s Motion for Summary Judgment
`
`

`

`NnneyWoDO—
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`most
`
`a
`
`or
`
`paid.” (Franklin
`
`v.
`
`purchasing corporation is a mere continuation oftheseller,
`corporations,[iii] the
`[iv] the transfer of
`the purchaseris for the fraudulent purpose of
`assets to
`escapingliability for the seller’s debts.”
`The
`(Jd.)*
`important factor in determining whetheror not there was a de facto merger or mere continuation
`|
`successor
`liability) is “whether adequate cash consideration was
`(which would impose
`USX Corporation (2001) 87 Cal.App.4th 615, 625 [emphasis supplied].)
`|
`b. Analysis
`It is undisputed that Langan paid cash and non-cash consideration in exchange for T&R’s assets in
`a Langan note
`the total amount of $8,569,231, consisting of:
`cash in the amount of $2,637,079; (2)
`(1)
`with a face amount of $2,753,750; (3)
`to fund T&R shareholders
`$1,244,375 transfer of cash proceeds
`purchase of Langan stock at a below marketrate; (4)
`a
`$1,434,027 advance of cashagainst T&R’s
`|
`a
`(5) hold-back reserve of $500,000. (See Mordecai Dec., Ex. 1 at pp. 14-15;
`accounts receivables,plus
`see Polin
`Ex. 1, APA §2.1.)
`Decl.,
`
`)
`
`*
`
`on whether T&R must haveofficially.“‘dissolved”at the time of sale in order for
`The parties disagree
`to
`any of the four Ray exceptions
`(Compare Oppo. 24:2-25:15 & fn. 14 with Mot., 11-14 &
`apply.
`Reply
`7:4-8:11.) Given the specific facts of this case, and with respect to the “continued”existence of TRR
`through “T&R Consolidated,” the weight of the provided authority supports TJPA’s assertion that the
`selling entity need not be technically dissolved for the Ray exceptions
`to
`apply,if the selling entity is
`a
`(See Ray, 19 Cal.3d at 26-27; Ameripride Services, Inc.v.
`non-operating, shell corporation.
`essentially
`Valley Industrial Services, Inc. (E.D. Cal., July 13, 2016) 2016 WL 3753267, at *8 [“Here, AmeriPride
`argues that a de facto merger could not have taken place because VIS did not dissolve as soon as
`‘legally
`practically possible[,]’ and remained a
`and
`subsidiary of Petrolane until 1990... This argument, which
`_
`only goesto the third factor of the [Centrecorp] test, cannot overcomethefact that three of the other
`important one, favor” a de facto merger”]; In re PW Commercial Constr. Co.
`factors, including the most
`(Bankr. N.D. Cal. Oct. 4, 2012) 2012 WL 4755165, at *15 [“[i]t makes no senseto allow [an entity]
`to
`formally dissolved, but having orchestrated a transfer of
`not
`assets that
`hide behind the fiction that, having
`left the transferor a shell without any ability
`to
`satisfy the just claims againstit, it is ‘still in existence’ and
`see
`cannot be invoked as a matter of law.”];
`that the ‘mere continuation’ ground for successor liability
`also United States v.
`the same de
`General Battery Corp. (3rd Cir. 2005) 423 F.3d 294, 308 [applying
`emphasizes Price Investment's failure to
`facto merger factors under
`Centrecorp, and noting that “Exide
`immediately, contending that for over a year ‘the two
`dissolve
`companies remained completely
`But the moresalient fact is that Price Battery
`of each other in management and operations.’
`independent
`immediately ceased ordinary business operations. Within one week ofthe closing date, Price
`Battery
`recastitself as Price Investment
`Company—acorporate shell that only held cash reserves
`pendingfinal
`settlement with General Battery. Price Investment had no
`operations.”] [emphasis supplied].) The Court
`finds Beatrice Co. v. State Bd. ofEqualization (1993) 6 Cal.4th 767, 778-779 and
`v.
`Cooper Labs
`Phillips
`(1989) 215
`Cal.App.3d 1648, 1652-1653, 1660-1661
`inapplicable.
`
`Lehmanv.
`
`Transbay Joint.Powers Authority,
`
`-8-
`et al. CGC-16-553758 Order re:
`
`Langan’s Motion for Summary Judgment
`
`

`

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`The Declaration of TJPA’s expert, Mr. Marcinkowski,raises a triable issue of fact as to whether or
`not $8,569,231 was a
`fair market purchaseprice; his opinion is that the fair market value was $9.75
`million. (See Marcinkowski Dec., Ex. 1 at
`TJPA-DP-000003 [Summary of Opinions], TIPA-DP-000006-
`13 [Income Approach]
`& Exs. 2.0 and 3.0; TJPA-DP-000013-15 & Ex. 4.0 [Market Approach].)
`To
`this, Langan offers the Declaration of Dr. Bergin for the
`opinion that the overall fair market value
`of T&R’s assets at the time of sale was $5.9 million. (See R. Bergin Decl., J] 19-24.) However, TJPA’s
`available for creditorsat the time of
`expert, Dr. Mordecai opines that cash portion of the $8.57 million
`—
`was
`which represents just 42% ofthe fair market value of T&R (using Mr.
`just $4,071,106
`Marcinkowski’s $9.75 valuation), and just 48% ofthe purchase price.* (See id. at pp. 16-26 & Exs.I, I-
`
`closing?
`
`counter
`
`A.)
`
`3
`
`The Court is not persuaded by Langan’s argument- stated for thefirsttime in its reply brief and contrary
`to its moving papers-that the proper temporalinquiry for the consideration analysis is the time
`of
`dissolution, rather than the time of sale. (See Reply,
`5:16-6:3
`[citing Ray and Franklin in arguing the
`at the
`Mordecai declaration is unreliable because Mordecai measured the adequacy of consideration paid
`as
`time
`Langan admits in its moving papers, Franklin
`and Ray support the theory that
`ofsale|.) However,
`at the time
`Mot. 10:23-24
`the relevant temporal inquiry is the consideration
`ofsale. (See
`paid
`[“Adequacy
`of consideration is measured at the closing date.”| [citing Franklin, supra, 87
`at
`625]
`Cal.App.4th
`Co. v.
`Other cases are in accord. (See Sunnyside Development
`Ltd. (N.D.
`[emphasis supplied].)
`Opsys
`inadequate consideration at the
`must
`to
`Cal. 2007) 2007 WL 2462142,at *1 [“plaintiff
`specifically point
`see also Ortiz v. South Bend Lathe (1975) 46 Cal.App.3d 842
`asset
`time
`ofthe
`transfer.”|;
`purported
`was sufficient
`at
`and held until the predecessor liquidated,
`[holding that $1 million
`paid
`closing,
`v.
`Lundgren (1966) 245 Cal. App.2d 582, 589 “[[iJn determining whether
`consideration]; Lundgren
`consideration was fair and adequate,all circumstances surrounding the transfer of the property
`as
`they
`or
`adequacy ofthe consideration cannotbe judged
`existedat that time, must be considered. The fairness
`or estimatedin relation to events which transpired subsequent
`to the time
`ofthe conveyance....”|
`v. Best Buy Co. (S.D.N.Y. 2010) 2010 WL 4860780,
`[emphasis added]; Software Freedom Conservancy
`at *5 fn. 88 [applying California law and quoting Franklin as
`providing the standard for when adequacy
`consideration ensures that at the time
`ofsale there
`of consideration is determined: “[A] sale for
`adequate
`.
`meansto
`are
`satisfy any claims madeagainst the
`predecessor corporation.” [emphasis
`adequate
`supplied].)
`
`Further, Langan’s
`—
`date of the APA
`to
`
`own
`
`expert concludesthat “[t]he appropriate determination of value here is as of the
`Dec. J 7
`the date ofthe sale ofthe APA Assets.”
`[emphasis supplied].) Thus,
`(Bergin
`own
`own
`would be inadmissible. (See Reply,
`argument, Langan’s
`Langan’s
`expert’s opinion
`
`according
`5:16-6:3.)
`*
`Even assuming arguendo that the contingent promissory note had any economic value, Dr. Mordecai
`to
`opinesthat the cash consideration T&Rreceived at
`closing was, at most, $5,045,951
`$5,306,059,
`of the fair market value of T&R’s assets
`52% and 54%, respectively,
`Mr.
`(using
`representing
`Marcinkowski’s $9.75 million estimate fair market value). (See id.)
`
`-9-
`Lehman vy.
`et al. CGC-16-553758 Order re:
`
`Transbay Joint Powers Authority,
`
`Langan’s Motion for Summary Judgment
`
`

`

`TJPA has met its burden to showthat there is a triable issue of fact as to
`
`(1) the properfair market
`_
`value of T&R’s assets at the time of sale and (2) whether or not adequate consideration was givenand
`available to meet the claims of T&R’s creditors, (See Hernandez v. KWPHEnters. (2004) 116 Cal. App.
`4th 170, 176 [“dueling expert opinions created a factual dispute not
`appropriately resolved by way of
`summary judgment.”].)
`IV.
`De Facto Merger.
`
`|
`
`a.
`
`Law
`
`Background
`Successorliability is found in the situation of a de facto merger. (See Marks v. Minnesota Mining
`Cal.App.3d 1429, 1435.) De facto merger is an
`& Manufacturing Co. (1986) 187
`equitable doctrine
`which recognized that “a transaction cast in the form ofan asset
`but which] actually achieves the
`sale|,
`same
`practical result as a merger,”will be treated as a merger. (See id. at 1436; see also U.S. v. Sterling
`Centrecorp Inc. (2013) 960 F.Supp.2d 1025, 1042-1043
`California law and citing Marks].) In
`[applying
`whetherthere is a defacto merger, the courts consider
`addition to the cash consideration,in determining
`whether:(i) “There is a continuation of the enterprise of the seller corporation,
`so that there is continuity
`of
`and general business operations”; (ii) “There isa
`management, personnel, physical location, assets,
`from the purchasing corporation paying for the acquired assets
`continuity of shareholders which
`with shares ofits own stock”; (iii) “The seller corporation ceasesits
`business
`operations,
`ordinary
`liquidates, and dissolves as soon as
`legally and practically possible”; and (iv) “The purchasing corporation
`ofthe seller ordinarily necessary for the
`assumesthose obligations
`uninterrupted continuation of normal
`at 1042
`business operations of the seller corporation.” (See Sterling Centrecorp, supra, 960 F.Supp.2d
`see also Marks, supra, 187 Cal.App.3d at 1437 [outlining thefive relevant de
`[outlining the four
`factors];
`In addition to the cash consideration, among these Sterling Centrecorp factors,
`factors] .)
`a de facto merger. (See Sterling
`important is the continuity of shareholders in supporting
`supra, 960 F.Supp.2d at 1042.)
`|
`Centrecorp,
`b. Analysis
`
`results
`
`facto merger
`
`the most
`
`TJPA has produced several pieces
`the Langan—T&Rtransaction is a de facto merger:
`
`of evidence that raise a triable issue of fact as to whether or not
`
`Lehman v.
`
`Transbay Joint Powers Authority,
`
`-
`
`
`10-
`et al. CGC-16-553758 Order re:
`
`Langan’s Motion for Summary Judgment
`
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`all of the T&R assets andliabilities necessary to continue running the
`First, Langan acquired
`business of T&R as of the closing date, such as office leases. (See TJPA SSF Nos. 52-54[citing Polin
`Decl., Ex. 1, APA at
`LANGAN00004491, LANGANO00004504; TJPA
`of Exhibits, Ex. No. 46,
`|
`Gockel Depo., 396:18-397:16]°,)
`as
`were an essential element
`Second, Langanretainedthe vast
`majority of T&R’s employees,
`they
`the success of the APA transaction. (See TJPA SSF Nos. 70-73, 87[citing Polin Decl., Ex. 1, APA at
`to
`LANGAN00002517, LANGAN00004516- LANGAN00004517, LANGAN00004555,
`
`Appendix
`
`LANGAN00004572- LANGAN00004578; TJPA Appendix of Exhibits, Ex. 25 at
`id. at Ex. 46, Gockel Depo., at 378:2-379:4, 379:17-381:2; id. at Ex. 47, Tringale Depo., 55:22-56:4,
`see alsoid.
`106:15-107:6, 110:15-23; id. at Ex. 48, Tringale Depo., 279:13-24];
`
`LANGANO00050895;
`
`97:18-98:3,105:19-106:2,
`‘at Ex. 57, Langan’s Responses
`
`to Plaintiff Millennium Tower Association’s Interrogatories, Set Two,
`
`Appendix B.)
`Third, Langan provided services to the same T&R clients, under the same T&R contracts, from the
`same T&R offices, and conducted business from the same T&R email addresses.
`TJPA SSF Nos.
`
`(See
`
`74, 77, 81, 89-90 [citing
`
`TJPA
`
`Appendix
`
`of Exhibits, Ex. 57
`
`[Appendices
`
`A-B to
`
`Langan’s Responses
`
`to
`
`Set Two
`
`164 former T&R clients who
`
`Langan
`
`68 former T&R
`
`[evidencing
`
`Plaintiff Millennium Tower Association’s Interrogatories,
`listing
`asclients within the next two yearsafter the APA
`paid fees to
`[Appendix A], and approximately
`employees who became Langan employees [Appendix B]}; id. at Ex. 45, Gockel Depo.,
`166:2-6; id. at Ex. 27, Letter from T&R CEO (Tringale) to clients; id. at Ex. 47
`Tringale Depo. at 103:8-
`use of the T&R e-mail addresses through May 2011); id. at Ex. 48,
`105:12; id. at Exs. 40, 42
`Depo., at 418:25-419:15; id. at Ex. 35 [“Execution document, ManagementServices
`
`Tringale
`at 309:22-311:1; id. at Ex. 47, P.
`Agreement”]; id. at Ex. 48, Tringale Depo.,
`id. at Ex. 49, Tringale Depo., at 97:19-98:20;
`id. at Ex.
`at p. 2,016].)
`57,
`Fourth, former T&R personnel, including Mr. Golesorkhi,the principal engineer for the
`project, continued to service Millennium Partners
`
`Tringale Depo.,
`
`at
`
`41:12-16;
`
`Millennium Tower
`
`as a
`
`Langan employee concerning
`
` >
`
`The APAincluded contracts with ongoingclients, the office space, leases associated with the office
`space, accounts receivable, and “all goodwill” associated with T&R
`T&R’s
`and
`including
`reputation
`and fax numbers, websites, URL addresses, and all other
`brand credibility, client lists, logos, telephone
`assets related to the T&R business.‘
`
`-ll-
`et al. CGC-16-553758 Order re:
`Transbay Joint Powers Authority,
`
`Lehman v.
`
`Langan’s Motion for Summary Judgment
`
`SaHNWNFf
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`the settlement andtilt ofthe Tower
`as evidenced bya letter from Mr. Golesorkhi on “Langan Treadwell
`Rollo”letterhead. (See TJPA SSF No.96 [citing TJPA
`of Exhibits, Ex. 62 [July 15, 2014 letter
`Appendix
`from Mr. Golesorkhi to Millennium Partners on
`id. at Ex. 64].)
`“Langan Treadwell Rollo”
`letterhead];
`to use the T&R name for approximately five
`Fifth, after the APA’s execution, Langancontinued
`years, and emphasized to the market that T&R was“still in business.” (See TIPA SSF Nos. 76, 83 [citing
`Polin Decl., Ex. 1, APA at
`LANGAN0000453 8; TJPA Appendix ofExhibits, Ex. 46, Gockel Depo.,
`390:19-391:9, 394:12-396:6, 400:16-401:24; id. at Ex. 43 [Memorandumto
`Principals from Mark
`.
`Devaney]; id. at Ex. 51, M. Devaney Depo.,
`at 176:4-177:4, 178:4-13, 180:12-17].)
`—
`wasin the same essential business as T&R
`geotechnical engineering. (See TJPA
`Sixth, Langan
`SSF Nos.1, 5, 11, 23°, 36, 52, 70, 96, 97.)
`Seventh, 10 of the 12 (or 13) T&R shareholders became Langan shareholders.’ (See TJPA SSF
`No.69 [citing Polin Decl., Ex. 1, APA at LANGAN000045 18-20;
`TJPA Appendix
`LANGAN00004555:
`ofExhibits, Ex. 22 at LANGAN00034651; id. at Ex. 31 at
`LANGAN00004653-4897; id. at Ex. 39,
`Langan’s stock certificates; id. at Ex. 47, Tringale Depo.,
`Eighth, Langan continuously referred to the APA as a
`“merger.” (See TJPA SSF Nos. 78-81, 84-
`86, 98 [citing TJPA Appendix of Exhibits, Ex. 28 [Langan/T&R Talking Points}; id. at Ex. 29 [FAQ’
`About Langan and T&R Joining Forces]; id. at Ex. 30
`1, 2010 Press Release]; id. at Ex. 40
`[November
`[January 2011 e-mail]; id. at Ex. 42 [May 2011 e-mail]; id. at Ex. 47, Tringale Depo., at 193:4-17; id. at
`|
`|
`id. at Ex. 51, Devaney Depo., 110:12-23, 115:11-19; id. at Ex. 62
`
`at
`
`60:17-62:10].)
`
`Ex. 48, Tringale Depo., 418:25-419:15;
`[April 2010 email]].)
`_
`Ninth, TJPA presents evidence t