(4) Where the transaction is for the fraudulent purpose of escaping liability for the seller's obligations.
Fenderson, 220 Ill. App. 3d at 834, 581 N.E.2d at 290; Kramer, 204 Ill. App. 3d at 475, 562 N.E.2d at 274.
In the instant case, the County contends that the September 1991 transfer of Mellon Stuart assets to MBC constitutes a de facto merger. Further, the County argues that Baker Engineering, operating as part of a common enterprise to deliver combined services, can be held liable for the obligations of Mellon Stuart. Under Illinois law, a de facto merger occurs in the following circumstances:
(1) The seller corporation ceases its ordinary business operations, liquidates, and dissolves as soon as legally and practically possible;
(2) The purchasing corporation assumes those liabilities and obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations of the seller;
(3) There is a continuation of shareholders which results from the purchasing corporation paying for the acquired assets with shares of its own stock, this stock ultimately coming to be held by shareholders of the seller corporation so that they become a constituent part of the purchasing corporation; and
(4) There is a continuation of the enterprise of the seller corporation, so that there is a continuity of management, personnel, physical location, assets, and general business operation.
Fenderson, 220 Ill. App. 3d at 835, 581 N.E.2d at 290; Kramer, 204 Ill. App. 3d at 475-76, 562 N.E.2d at 275. To support its position, the County, in its verified complaint and exhibits appended to its current motion, assert the following: MBC acquired substantially all of Mellon Stuart's valuable assets and on-going projects in consideration for a promise to make payments totaling $ 4 million, the first payment being due on March 1, 1993. Defendant MBC created MSCI to receive the Mellon Stuart assets and to conduct its ongoing projects, absorbing Mellon Stuart's employees. With the addition of MSCI, MBC embodies three functional work groups (i.e., engineering, operation and maintenance, and construction), organized to provide one integrated product. Baker Engineering is a division of MBC's engineering group, and is closely related to MSCI. Baker Engineering shares directors, officers and common management with both MBC and MSCI. Defendant Federal Street was created by MBC in order to liquidate Mellon Stuart's losing projects. Indeed, Federal Street, purportedly a shell company for the affiliated Baker defendants, was burdened with such enormous liabilities that it was forced to seek protection under Chapter 11 of the Bankruptcy Code. MSCI, through its President, who is also the Executive Vice President of MBC, and other officers and employees, directed and continued the operations of Federal Street throughout the time when serious damage was caused to the County's new jail. Baker Engineering worked out of the same address, 118 South Clinton Street in Chicago, Illinois, as did Federal Street and MSCI. Further, Baker Engineering pursued design business with Mellon Stuart, a/k/a Federal Street, on public sector projects in Chicago during the time when Federal Street was controlled and directed by MBC.
In order to rebut the County's allegations regarding Baker Engineering's role in the alleged common enterprise, defendants rely on the affidavit of Harry R. Hanley, President of Baker Engineering. In this affidavit, Hanley states "Baker Engineering, Inc. does not now, nor has it ever controlled or directed the operations of Mellon Stuart Company/Federal Street Construction Company. Hanley also denied that it ever shared or maintained common offices with Mellon Stuart or Federal Street. The assertions of the Hanley affidavit, however, at best create a factual dispute regarding the interrelationship of the Baker defendants.
Resolving all questions of law and fact in favor of the County, we find a reasonable possibility that an Illinois court would conclude that the transfer of assets from Mellon Stuart to MBC constitutes a de facto merger and, as such, Baker Engineering, acting as an integral part of a common enterprise with MBC and MSCI, would be liable for Mellon Stuart's purportedly deficient work on the new jail. Moreover, these same allegations support the County's assertion that the creation of Federal Street by MBC, acting in a common enterprise with Baker Engineering, was for the fraudulent purpose of escaping liability for Mellon Stuart's obligations. Accordingly, we cannot conclude that Baker Engineering was fraudulently joined as a defendant in this cause, and the County's supplemental motion for remand is granted.
For the reasons set forth above, this cause, having been removed improvidently and without jurisdiction, is remanded to the Circuit Court of Cook County. It is so ordered.
MARVIN E. ASPEN, United States District Judge