The Loan Source Inc. and The 1993 Steven D. Kravitz Family Trust v. Newity LLC and ACAP SME, LLC; ACAP SME, LLC v. The Loan Source Inc. and The 1993 Steven D. Kravitz Family Trust

Summary

The United States District Court for the District of Delaware granted NEWITY LLC’s motion for partial judgment under Federal Rule of Civil Procedure 52(c). The court held that Plaintiffs could not impose liability on NEWITY under theories of horizontal veil piercing, mere continuation, or assignee liability. The court concluded that NEWITY and ACAP were distinct sister entities, that mere continuation was not adequately pleaded, and that the agreement’s non-recourse provision barred claims against NEWITY as an affiliate.

Holdings

1. Under Delaware law, Plaintiffs could not hold Newity liable under a horizontal veil-piercing theory because Delaware had not adopted that theory, and Newity and ACAP were sister entities rather than a parent and subsidiary.
2. Plaintiffs' mere-continuation claim failed because the theory was raised for the first time in a trial-response filing, was not pleaded clearly in the amended complaint, and the stipulated facts showed that ACAP and Newity remained separate entities.
3. The agreement's non-recourse provision barred Plaintiffs' assignee-liability claim against Newity because Newity was an affiliate of ACAP and the provision extended protection to affiliates and permitted assigns.
4. Newity was entitled to partial judgment under Federal Rule of Civil Procedure 52(c) on Plaintiffs' claims against it.

Questions Presented

1. Whether Plaintiffs could impose liability on Newity under a horizontal veil-piercing or alter ego theory when Newity and ACAP were sister entities under common ownership and control.
2. Whether Plaintiffs could pursue a mere-continuation or successor-liability theory that was not pleaded in the amended complaint and where both entities remained separate and existing.
3. Whether the agreement's non-recourse provision barred Plaintiffs' assignee-liability claim against Newity because Newity was an affiliate of ACAP.
4. Whether Newity was entitled to partial judgment under Federal Rule of Civil Procedure 52(c).

Disposition

other