On September 1, 2023, Justice Borrok of the New York County Commercial Division issued a decision in Metropolitan Partners Fund IIIA, LP v. GemCap Lending I, LLC, 2023 NY Slip Op. 33042(U), finding personal jurisdiction under the de facto merger doctrine, explaining:
A successor company may be found to have inherited its predecessor’s jurisdictional status when there is a de facto merger between the two entities or where one entity is a mere continuation of its predecessor. Jurisdictional contacts however are not imputed to a successor where the successor merely acquired the assets of the predecessor. The hallmarks of a de facto merger are (i) continuity of ownership, (ii) cessation of ordinary business and dissolution of the acquired corporation as soon as possible, (iii) assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the acquired corporation, and (iv) continuity of management, personnel, physical location, assets, and general business operation. Not all of these elements are necessary to find a de facto merger.
The well pled SAC alleges that both GemCap I and GemCap 2 are/were owned by the Ellis Brothers, Gem Cap I filed for bankruptcy shortly after transferring its assets to the Ellis Brothers so that they could run GemCap 2 without business interruption, and GemCap 2 continues to operate Gem Cap I’s business, including by using the same name, trademarks, logos, URL, phone numbers, and email addresses and that GemCap2 held itself out as a continuation of Gem Cap I’s business. These allegations are sufficient at this stage of the proceedings to demonstrate that Gem Cap 2 has inherited Gem Cap I’s jurisdictional status.
(Internal quotations and citations omitted).