Facts

After he was laid off from his position as the Chief Operating Officer of ReSourcePhoenix.com (ReSource) in 2000, W. Corey West and several other ReSource employees claimed they were entitled to receive severance pay equaling their one-year's salary. Thereafter, Phoenix American Inc. purchased the assets of ReSource Phoenix Inc., a subsidiary of ReSource. Phoenix American took the position that in purchasing the assets, it did not also assume ReSource's debts. West claimed that Phoenix American became ReSource's successor-in-interest after the purchase. West sought to arbitrate his claims before the American Arbitration Association (AAA). Consequently, Phoenix American sought a declaratory judgment against West and the other employees who sought severance pay.

Phoenix American named AAA as a defendant after AAA went forward with the arbitration request against its wishes. West then filed a cross complaint against ReSource, its former CEO, Phoenix American and an affiliate of Phoenix American, claiming, in part, breach of contract, breach of the implied covenant of good faith and fair dealing and fraudulent transfer. Only the claims for successor liability and fraudulent transfer reached trial.

PLAINTIFF'S CONTENTIONS:
The plaintiff took the position that a fraudulent transfer did not occur and it did not become a successor-in-interest for purposes of assuming ReSource's debts following the acquisition.

DEFENDANT'S CONTENTIONS:
The defendants contended that their employment contracts contained provisions entitling them to severance pay equal to one-year's salary. The provisions would take effect in the event that the defendants were terminated without cause. The defendants contended that the plaintiff became the successor-in-interest of ReSource after the acquisition. They further claimed that Phoenix American's affiliates, as well as ReSource Phoenix Inc. and ReSource's former CEO were responsible for paying them because these parties were all operating as alter egos of ReSource. In addition, the defendants claimed that the transfer of assets to the plaintiff was the result of fraud.

Damages

The defendants claimed they were entitled to unpaid severance in an amount over $750,000, as well as punitive damages.

Result

Plaintiff's verdict.