PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

KAISER FOUNDATION HEALTH PLAN OF
THE MID-ATLANTIC STATES,
Plaintiff-Appellant,

v.                                                                 No. 96-1818

CLARY & MOORE, P.C.; MATTHEW A.
CLARY, III,
Defendants-Appellees.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Claude M. Hilton, District Judge.
(CA-94-1098-A)

Argued: January 30, 1997

Decided: September 10, 1997

Before HALL and ERVIN, Circuit Judges, and
BUTZNER, Senior Circuit Judge.

_________________________________________________________________

Reversed by published opinion. Judge Ervin wrote the opinion, in
which Judge Hall and Senior Judge Butzner joined.

_________________________________________________________________

COUNSEL

ARGUED: Gary Miller Zinkgraf, FOLEY & LARDNER, Washing-
ton, D.C., for Appellant. Judith Lynne Wheat, CACHERIS &
TREANOR, Washington, D.C., for Appellees. ON BRIEF: Paul R.
Monsees, Alan D. Rutenberg, FOLEY & LARDNER, Washington,
D.C., for Appellant. Gerard Treanor, CACHERIS & TREANOR,
Washington, D.C., for Appellees.

_________________________________________________________________

OPINION

ERVIN, Circuit Judge:

Kaiser Foundation sued Clary & Moore, a law firm, and Matthew
Clary, III, in an effort to obtain payment of a judgment which Kaiser
had secured against Clary, Lawrence, Lickstein & Moore ("Clary,
Lawrence"), Clary & Moore's corporate predecessor. Kaiser raised
three claims at the bench trial before the district court: (1) successor
liability, (2) piercing the corporate veil, and (3) fraudulent convey-
ance. The court ruled in Clary & Moore's favor on all counts. Kaiser
now appeals with respect to the claims of successor liability and
fraudulent conveyance. For the following reasons, we reverse.

I

Clary, Lawrence was a law firm founded in 1976 by Colonel Mat-
thew Clary, Jr. (Clary Jr.) under a different name; it was named Clary,
Lawrence in 1985. From 1976 forward, Clary Jr. was the majority
stockholder of the firm, owning 57% of the stock, and Matthew Clary,
III ("Clary III"), his son, was a minority shareholder with 42% of the
stock; other partners owned a very small amount of the firm's stock.
Until 1990, Clary Jr. was president, Clary III was vice-president, and
other partners were officers of the firm. Slight changes took place
among the lower officers over the years. In October 1990, all the
directors and officers resigned from Clary, Lawrence except Clary III,
who became the sole director and president.

Clary, Lawrence began to suffer severe financial difficulties in
1990. The firm owed $110,000 in back taxes and owed a large
amount to Sovran Bank, its primary creditor. Sovran's claim against
Clary, Lawrence exceeded $600,000 at one point in the 1990s, but in
1991 the outstanding debt was about $574,000. Sovran's debt was
personally secured by Clary Jr., his wife, and Clary III.

                     2
By this time the firm also owed around $40,000 to Kaiser. Kaiser
had prevailed against the firm in a 1990 lawsuit for unpaid rent on the
firm's former corporate office space, which it leased from Kaiser.
Although as of 1990 Kaiser had not yet been awarded attorney's fees
for the lawsuit, it would obtain a judgment for more than $230,000
for those fees on March 7, 1991. Kaiser's total judgment against
Clary, Lawrence is $271,690.57.

In response to Clary, Lawrence's dire financial straits, the partners
began to plan to close the firm and open a new one. Clary & Moore
was founded in October 1990, although it was called The Business
Law Firm for the first couple of months. It officially became Clary
& Moore, and opened its doors for business, on February 18, 1991.
From the very beginning of Clary & Moore, Clary III was the sole
shareholder, the president, and the sole director of the firm.

Five partners, three associates, and one attorney serving as of coun-
sel from Clary, Lawrence ultimately joined Clary & Moore; three
other attorneys left for other firms at some point prior to or during the
transition. However, on February 18, all of the attorneys who would
join Clary & Moore were still on the payroll of Clary, Lawrence; they
were not officially hired at Clary & Moore until March 31, 1991. Dur-
ing the intervening six weeks, Clary & Moore "leased" the services
of the Clary, Lawrence attorneys, paying Clary, Lawrence the same
amount Clary, Lawrence actually paid the attorneys through salary
and benefits. Clary & Moore in turn billed its clients at a standard
billing rate, a rate much greater than it paid Clary, Lawrence. There-
fore, Clary & Moore made a profit on the services of these attorneys
while Clary, Lawrence did not. Services of staff members were also
leased to Clary & Moore by Clary, Lawrence, and some of those
leases lasted until April 1991. In addition, Clary & Moore leased
office furniture and equipment from Clary, Lawrence for $5,000 each
month, an amount that expert testimony at trial showed to be quite
generous. Clary & Moore could not pay its various leasing obligations
to Clary, Lawrence in cash, so the old firm allowed the new firm to
pay the debts with some cash and with promissory notes and the old
firm loaned the new firm $1500 in cash at one point. Clary & Moore
also used Clary, Lawrence's law library during these months,
although it did not specifically pay for that privilege. Clary & Moore

                    3
also continued to operate in the same office space, with the same
address and telephone numbers, as Clary, Lawrence had used.

In addition, it appears that almost all of Clary & Moore's clients
when it opened its doors had been the clients of Clary, Lawrence.
Both firms communicated with the clients about the changes and
asked if they would care to be represented by Clary & Moore. A num-
ber of clients of Clary, Lawrence did not accept the services of Clary
& Moore, but instead employed the former Clary, Lawrence lawyers
who had left for other firms. It appears, however, that Clary &
Moore's client list and the nature of its practice was substantially
identical to that of Clary, Lawrence. Moreover, at firm meetings dis-
cussions would address the affairs of both the old and the new firms.

Clary, Lawrence was dying while Clary & Moore was setting up
shop. In October 1990, all of Clary, Lawrence's attorneys resigned as
shareholders and directors in Clary, Lawrence, with the single excep-
tion of Clary III. Kaiser obtained an "execution and levy" on remain-
ing Clary, Lawrence assets, which, according to Clary & Moore,
made it difficult for Clary, Lawrence to make its payments to Sovran
Bank. After several months of financial stagnation, Sovran Bank fore-
closed on Clary, Lawrence in August 1991, with the consent and
cooperation of the firm. Sovran had long held a security interest in
Clary, Lawrence's assets which explicitly covered almost everything,
although it did not specifically list the "database information" on the
firm's computers.

A public foreclosure sale was held in an attempt to raise enough
capital to cover Clary, Lawrence's debt to Sovran bank. On its face
the auction was by-the-book. It was widely advertised and attended
by the public. The furniture, fixtures, equipment and law library were
sold through the public auction for $265,200. It is not surprising that
Clary & Moore was the purchaser for these goods, nor that Sovran
Bank loaned the new firm the money for the purchase based on the
personal guarantees of Clary Jr., Clary III and Clary Jr.'s wife.

Clary, Lawrence's accounts receivable were also sold at the auction
to The Finance Company for $286,000. Included in these accounts
receivable were the newly created notes showing Clary & Moore's
leasing debts of more than $80,000 to Clary, Lawrence. Again, it is

                    4
not surprising that The Finance Company had been one of Clary,
Lawrence's loyal clients, and that Clary Jr. personally guaranteed that
The Finance Company would recoup through collections of the
accounts what it bid for them at the auction. Ultimately, Clary Jr.'s
wife, Mary, purchased Clary & Moore's promissory note from The
Finance Company, and there is no evidence in the record that that
debt was ever repaid. Soon thereafter, Clary Jr. also wrote a check to
The Finance Company for almost $160,000, fulfilling his promise to
cover any difference between what the Company was able to recoup
on the accounts receivable and what the Company had paid for them.

Almost enough was raised through the auction to satisfy Clary,
Lawrence's obligations to Sovran Bank. This was perhaps a predict-
able result because Clary Jr. and Clary III planned the bids that would
be offered for the accounts receivable and the furniture, fixtures and
equipment to approximate the outstanding debt to Sovran. It also
appears that Clary, Lawrence made arrangements for the payment of
its debts to the Internal Revenue Service. However, after the foreclo-
sure, Clary, Lawrence had no money left to satisfy Kaiser's judgment
worth more than $270,000, made no arrangements to pay that debt,
and soon entered bankruptcy.

II

Kaiser initiated this suit to obtain payment of its judgment. Kaiser
alleges that the conversion of Clary, Lawrence into Clary & Moore
was done solely to avoid paying the debt to Kaiser. Clary & Moore
asserts that it is a completely separate corporate entity from Clary,
Lawrence and that it was created to avoid many of the financial and
organizational problems of its predecessor, not to avoid a single credi-
tor. The district court agreed with Clary & Moore and, although some
of its conclusions are not explicit in the record, the court seemingly
found in Clary & Moore's favor on every question and issue before
it.

On appeal, Kaiser suggests two theories pursuant to which it claims
it is entitled to recover. Kaiser argues that Clary & Moore is a mere
continuation of Clary, Lawrence, and as such it is liable for its pre-
decessor's debts. Kaiser also argues that the transfers of assets from
Clary, Lawrence to Clary & Moore were all fraudulent in violation of

                    5
section 55-80 of the Code of Virginia. Because we find that the theory
of successor liability holds water, and entitles Kaiser to full recovery,
we decline to address whether the individual conveyances from Clary,
Lawrence to Clary & Moore were themselves fraudulent.

III

Before proceeding to the merits of this case, we must address two
preliminary legal matters: choice of law and standard of review. We
note that both parties and the district court have applied and relied
upon Virginia law in this litigation, but we are unable to discover in
the record whether there was ever any discussion of which state's law
in fact governs. Although the record on appeal does not contain many
important jurisdictional facts, it appears from the information before
us that Virginia law is in fact appropriate. See Ambrose v. Southworth
Prod. Corp., 953 F. Supp. 728, 734 (W.D. Va. 1997). However,
because neither party questions the applicability of Virginia law, we
will assume without deciding that it properly controls our decision.

With respect to the standard of review, we must review the district
court's factual findings for clear error and its legal conclusions de
novo. See Waters v. Gaston County, N.C., 57 F.3d 422, 425 (4th Cir.
1995); F. R. Civ. P. 52(a). In the instant case, the district court did
not issue a written opinion but instead ruled from the bench, and in
that ruling the court made very few specific factual findings. Instead,
the court mostly issued legal conclusions without much exploration
of the facts that gave rise to those conclusions. Therefore we will
independently decide whether the record contains sufficient facts to
support the lower court's conclusions of law.

IV

We turn now to the issue of successor liability. In Virginia, as in
most states, a company that purchases or otherwise receives the assets
of another company is generally not liable for the debts and liabilities
of the selling corporation. Blizzard v. National R.R. Passenger Corp.,
831 F. Supp. 544, 547 (E.D. Va. 1993); Crawford Harbor Assoc. v.
Blake Constr. Co., 661 F. Supp. 880, 883 (E.D. Va. 1987). There are
four traditional exceptions, each recognized in Virginia, to this rule
against successor liability.

                    6
         In order to hold a purchasing corporation liable for the obli-
         gations of the selling corporation, it must appear that (1) the
         purchasing corporation expressly or impliedly agreed to
         assume such liabilities, (2) the circumstances surrounding
         the transaction warrant a finding that there was a consolida-
         tion or de facto merger of the two corporations, (3) the pur-
         chasing corporation is merely a continuation of the selling
         corporation, or (4) the transaction is fraudulent in fact.

Harris v. T.I., Inc., 413 S.E.2d 605, 609 (Va. 1992).1 See also
Crawford Harbor, 661 F. Supp. at 883. In the instant case, Kaiser
alleges that Clary & Moore should be liable as a mere continuation
of Clary, Lawrence, pursuant to the third exception.

A

Although there is no absolute legal standard for determining
whether one corporation is in fact a mere continuation of another,
courts in Virginia adhere to the "traditional view" and have identified
numerous factors which can help in the determination. See Crawford
Harbor, 661 F. Supp. at 885; Blizzard, 831 F. Supp. at 548. The most
critical element in proving a continuation is showing the same owner-
ship of the two companies, a "common identity of the officers, direc-
tors, and stockholders in the selling and purchasing corporations."2
Harris, 413 S.E.2d at 609; see also Blizzard , 831 F. Supp. at 548. It
is also relevant whether the new corporation continues in the same
business as its predecessor, although courts point out that this is less
important than identity of ownership. Crawford Harbor, 661 F. Supp.
at 885. In addition, when transfer of the selling company's assets was
done for less than adequate consideration, a purchasing corporation is
likely to be a mere continuation. Id. The Virginia Supreme Court has
also emphasized that a new corporation is not a mere continuation
when the purchase of the seller's assets occurred in a bona fide,
_________________________________________________________________
1 There is also a fifth exception, the "product line exception," recog-
nized in some states. Virginia has explicitly declined to adopt the new
exception. Harris, 413 S.E.2d at 609.
2 We will discuss below, subsection C infra, whether the ownership of
the two companies need be identical, or whether strong similarity will
suffice in reaching a finding of successor liability.

                   7
arm's-length transaction. Harris, 413 S.E.2d at 609. Additional fac-
tors include whether two corporations or only one remain after the
transactions at issue and whether the new company continues in the
old offices with the same telephone number and address as the old
company. Blizzard, 831 F. Supp. at 548.

A district court in Pennsylvania has also provided some additional
useful guidance on the issue of continuity. See Fiber-Lite Corp. v.
Molded Acoustical Prods., 186 B.R. 603, 609 (E.D. Penn. 1994),
aff'd, 66 F.3d 310 (3d Cir. 1995).3 The Fiber-Lite court suggests that
factors such as identity of the companies' assets, management, loca-
tion, and operations are relevant to the question of continuity. Id. at
609-10. More importantly, Fiber-Lite emphasizes that courts must not
"elevate form over substance" when addressing the issue of successor
liability. Id. at 610. Fiber-Lite is a case much like the instant one in
that the selling and buying corporations tried very hard to make the
new corporation appear to not be a successor; the court there, how-
ever, concluded that the corporations did not manage to hide the
essential character of the new company as a mere continuation. Id. at
610.

B

When the facts of the instant case are viewed in light of the factors
discussed above, it is apparent that Clary & Moore is in fact a mere
continuation of Clary, Lawrence.

As between Clary, Lawrence and Clary & Moore there is, to a large
degree, a common identity of ownership and directorship. First, at the
time of the creation of Clary & Moore, all of the officers and directors
of Clary, Lawrence resigned, save one. Clary III became the sole offi-
cer and sole director of Clary, Lawrence in October 1990, and
remained so through the eventual end of the company in 1992. Clary
III was also the sole director of Clary & Moore from its inception in
February 1991, to the present.
_________________________________________________________________
3 Although Fiber-Lite does not concern Virginia law, it nonetheless
provides us guidance. We note that there are relatively few Virginia
cases which directly address successor liability, and those cases do not
purport to set forth absolute rules regarding most aspects of the issue.

                    8
Clary & Moore argues that, prior to October 1990, Clary, Law-
rence had several directors, ranging from five to eight at any given
time between 1976 and early 1990. However, we note that, even when
Clary III was not the sole director, he was one of the directors
throughout the firm's life. Moreover, we are persuaded that the make-
up of Clary, Lawrence just prior to its conversion to Clary & Moore,
when it was responding to the Kaiser judgment, is more relevant than
its make-up at other points in its history.

Second, there is substantial overlap in the ownership of the two
companies. Clary III owns 100% of the stock of Clary & Moore and
he owned 42% of the stock in Clary, Lawrence. Clary Jr. owned 57%
of Clary, Lawrence stock. Further, even though Clary Jr. does not
own shares in Clary & Moore, he still has a substantial financial inter-
est in the company because he is a guarantor, along with his wife and
Clary III, of Sovran's loan to Clary & Moore of more than $260,000.
This money was used by Clary & Moore to purchase Clary, Law-
rence's furniture, fixtures, equipment and library.

Third, there is overlap between the officers of the two firms.
Between October 1990 and the eventual demise of Clary, Lawrence,
Clary III was the president and only officer of Clary, Lawrence.
When Clary & Moore opened its doors in February 1991, Clary III
was also the president of the new firm. Clary Jr. also played a role
in both firms. For years, prior to October 1990, he was president of
Clary, Lawrence and he became the vice president of Clary & Moore
from the time it opened. Another individual also held a lesser office
in both firms. Keith Swirsky became the secretary and treasurer of
Clary & Moore when it opened and he was also the treasurer of Clary,
Lawrence in 1990. Given that the new firm had only three officers
filling four positions, it is significant that all three had also been offi-
cers at Clary, Lawrence.

It is clear that there was substantial overlap in the ownership, the
officers, and the directors of the two firms, so we find that this factor
militates strongly in favor of a finding of successor liability. How-
ever, Clary & Moore urges us to find that this factor supports its posi-
tion because complete identity of directors, officers, and, especially,
shareholders, is lacking. We have reviewed the relevant Virginia case
law and, although it is far from clear on this point, we find that abso-

                     9
lutely identical ownership between the two corporations need not be
present. See Urban Telecom. v. Halsey, No. 95-00035-C, 1996 WL
76160 at *3 (W.D. Va. Feb. 8, 1996) (tracing Virginia law and find-
ing that determinative factor is whether ultimate control of the two
companies is the same, rather than strictly identical ownership), aff'd,
95 F.3d 41 , No. 96-1298, 1996 WL 492682 (4th Cir. Aug. 27, 1996).
We note that this is by no means a clearly settled rule of law.
Compare Halsey, 95 F.3d 41, 1996 WL 482682 at *3 (unpublished
opinion affirming district court's finding that absolute identity not
required), with Ney v. Landmark Educ. Corp., 16 F.3d 410, No. 92-
1979, 1994 WL 30973 at *8 (4th Cir. Feb. 2, 1994) (unpublished
opinion holding that 100% identity is required). Nonetheless, we
agree with the district court in Fiber-Lite, 186 B.R. at 610, that form
must not be elevated over substance in deciding the issue of successor
liability. We cannot allow a corporation which, by all indications is
under the same control as its predecessor, to avoid its legitimate debts
by manipulating superficial indicia of ownership. Therefore, we find
that in the instant case the strong commonality of ownership and con-
trol between Clary & Moore and Clary, Lawrence suggests that the
new firm is a mere continuation of the old one.

Another factor relevant to our decision is whether the business con-
ducted by the two corporations is the same. In the instant case, it is
undeniable that Clary & Moore not only entered the same general
type of business as that in which Clary, Lawrence was engaged, but
also assumed Clary, Lawrence's exact business. Clary & Moore took
over the overwhelming majority of Clary, Lawrence's clients when it
opened shop; in fact, Clary & Moore began to represent and bill
Clary, Lawrence's clientele before the new firm even had any lawyers
in its actual employ, while it was still leasing lawyers from Clary,
Lawrence. Tom Callahan, a lawyer who moved from the old firm to
the new one, testified as follows at his deposition:

          Q: And are you aware of whether there was a difference
          for the other lawyers who came with Clary & Moore?

          A: In terms of day-to-day practice, it was the same, same
          clients, same staff, same office, same firm.

          [. . .]

                    10
          Q: Did you -- what clients did you start doing work for
          on February 18, 1991?

          A: Exactly the same. There was no difference.

J.A. 211. When the new firm opened on February 18 it did so with
almost all of the same attorneys, the same staff, office, address, tele-
phone number, fixtures, furniture, equipment, files and clients as the
old firm. It is undeniable that Clary & Moore continued in the busi-
ness of its predecessor.

An additional factor for our consideration is the way in which the
transfer of assets from the old corporation to the new one was con-
ducted. Specifically, it is relevant whether the transfers were for ade-
quate consideration and whether they were bona fide arm's-length
transactions. See Blizzard, 661 F. Supp. at 885 (discussing Pepper v.
Dixie Splint Coal Co., 181 S.E. 406 (Va. 1935)); Harris, 413 S.E.2d
at 609. In the instant case, most of Clary, Lawrence's assets were
transferred to Clary & Moore in one way or another. As mentioned,
Clary, Lawrence leased its furniture, fixtures, equipment, attorneys
and staff to Clary & Moore for periods ranging from six weeks to five
months. Eventually, Clary & Moore purchased most of Clary, Law-
rence's assets at a foreclosure sale. We find that, although some of the
transactions were bona fide arm's-length transactions for consider-
ation, others were not.

Kaiser argues that all of these leases were for inadequate consider-
ation. With respect to the lease of the furniture, fixtures and equip-
ment, the only evidence presented to the district court indicates that
Clary & Moore paid more than market value for use of these physical
assets. This lease was a legitimate transaction. Although Clary &
Moore did not specifically lease the law library from Clary, Law-
rence, it paid enough for the other items to cover a reasonable lease
rate for the law books as well.

However, with respect to the lease of the services of Clary, Law-
rence's staff and attorneys to Clary & Moore, we conclude that ade-
quate consideration was not given. The evidence showed that Clary
& Moore paid or gave promissory notes for the amount that Clary,
Lawrence actually paid the employees. Clary & Moore then billed cli-

                     11
ents for these services at a much higher rate and passed none of these
profits back to Clary, Lawrence. Clary & Moore argues, and the dis-
trict court apparently accepted, that this lease arrangement cannot
have been improper because it was properly documented and Clary,
Lawrence did not lose money on the arrangement. We find, however,
that no business operating at arm's-length with another would lease
its most valuable asset at cost. Not only did Clary, Lawrence not
profit from this transaction, but it was precluded from making a profit
during the lease period because its attorneys were all primarily doing
work for another company. By leasing the services of its attorneys
and giving its case load to Clary & Moore, Clary, Lawrence diverted
its full income stream and received nothing in return. One cannot
avoid the impression that this action was taken to stop any new
money from filling Clary, Lawrence's coffers because that money
would have to be surrendered to Kaiser.

Kaiser argues that all of the sales of assets following the leases
were also illegitimate.4 Clary & Moore responds that, because the
transfer of assets occurred at a public foreclosure sale, it was neces-
sarily a bona fide arm's-length transaction and therefore beyond
reproach. We are not completely swayed by either argument. In
agreement with Clary & Moore, we find that, in general, the foreclo-
sure sale had indicia of a standard legitimate transaction. The sale was
conducted by a professional auction service, was very widely adver-
tised to the public and the legal community, and was fairly well
attended.

However, several other facts about the foreclosure sale do give us
considerable pause. First, the fact that almost all of the items for sale
went to Clary & Moore supports Kaiser's position that the new firm
merely continued in the very business of the old firm. Second, the sale
_________________________________________________________________
4 Among other allegations, Kaiser asserts that it was improper for
Clary, Lawrence's "intangible assets," including computer files and data-
base information, to be sold at the foreclosure sale because Sovran's lien
did not cover these assets and therefore they were not subject to foreclo-
sure. While we are unpersuaded that these intangibles were of value to
anyone but the attorneys who created them, our finding of successor lia-
bility obviates our need to decide whether it was improper for these items
to be included with the computers at the sale.

                    12
of the accounts receivable, the only item not directly transferred to
Clary & Moore, was done under suspicious circumstances. Clary Jr.
arranged for The Finance Company, a client of both the old and the
new firms, to purchase Clary, Lawrence's accounts receivable by per-
sonally guaranteeing that The Finance Company would not lose
money on its purchase. Clary Jr. also suggested the amount which the
Finance Company should bid for the item; as it turned out, that
amount, added to the amount that Clary & Moore intended to pay for
the furniture, fixtures, equipment and law library, would be just about
enough to cover the outstanding debt to Sovran but would not leave
anything for the Kaiser judgment. The guarantee offer made to The
Finance Company was not made to any other potential purchaser of
the accounts receivable and was not made public to any other parties.

Included in the accounts receivable was an $80,000 promissory
note from Clary & Moore to cover its earlier leasing obligations to
Clary, Lawrence. Less than a year after the auction, Clary Jr.'s wife,
Mary, purchased Clary & Moore's promissory note from The Finance
Company. Soon thereafter Clary Jr. himself paid almost $160,000 to
The Finance Company to make up the shortfall which The Finance
Company had remained unable to recover from Clary, Lawrence's
accounts receivable.

The unique circumstances surrounding the transfer of the accounts
receivable causes us to question whether two of the transactions
affecting Clary, Lawrence's assets were in fact legitimate. First, it
appears that Clary & Moore never actually paid its promissory note
to Clary, Lawrence for the lease of its various assets from February
through March, and in some cases, through April or August, because
Mary Clary purchased that note before it was collected. We become
less convinced, therefore, that the leases were bona fide arm's-length
transactions for consideration. Second, it appears that the accounts
receivable were not sold to an outside party, as Clary & Moore
asserts; instead, the principals of both the old and the new firms
orchestrated a series of transactions which resulted in this asset being
transferred from the old firm to Clary Jr., a major player in the new
firm. Although we decline to hold that the transfer of the accounts
receivable was in itself fraudulent, despite Kaiser's urgings, we find
that it weighs in favor of a conclusion of successor liability.

                     13
Finally, we note that soon after the transfer of all of Clary, Law-
rence's assets to Clary & Moore, Clary, Lawrence ceased doing busi-
ness entirely. A final factor for our consideration is whether the
transactions at issue resulted in the existence of only one company,
or whether two separate companies continued to do business. In this
case we find that the fact that Clary, Lawrence closed its doors sup-
ports our conclusion that Clary & Moore is simply a continuation of
the old firm in new clothing.

C

When we weigh the factors iterated in Virginia law for determining
successor liability, it becomes clear that Clary & Moore is a mere
continuation of Clary, Lawrence. Although we need not so hold in
order to hold Clary & Moore liable to Kaiser, we find specifically that
the new firm was created with the express purpose of avoiding Clary,
Lawrence's legitimate debt.5 Between the two firms we find transfer
of most assets, either directly or indirectly, for often inadequate con-
sideration; very substantial commonality of ownership, directorate
and administration; continuity of business; and continuity of control.
We believe this case to be like National Carloading Corp. v. Astro
Van Lines, 593 F.2d 559 (4th Cir. 1979), in which we found there to
be successor liability. There, we found that the old company had
transferred all of its assets, including those which were needed to con-
duct business, to a new company run by the same people.

        The purpose of the transaction was to avoid Van Lines'
        creditors. Astro purchased the only valuable asset of Van
        Lines (its right to do business) while Van Lines was in
        financial difficulty. With the transfer of the certificate
        (allowing the company to operate its trucks) Van Lines had
_________________________________________________________________

5 Clary & Moore argues that it was created to avoid all of the old firms'
debts, not just Kaiser's outstanding judgment. We find this to be unper-
suasive because Clary, Lawrence's other debts, including those to the
I.R.S. and Sovran Bank, were ultimately satisfied by the firm. However,
even if we were to credit Clary & Moore's argument, it would not be a
defense that it tried to illegitimately avoid the legitimate claims of sev-
eral creditors rather than the claim of one.

                     14
          neither money nor property nor operating ability. It was a
          shell with no way to pay its debts.

Id. at 562. In the same way, Clary, Lawrence transferred its employ-
ees, its clients, its office, its equipment and everything else to a new
company, leaving itself no way to make money to satisfy its debts.
Given the facts of this case, we hold that Clary & Moore must now
be responsible for those debts.

V

Because we find in favor of Kaiser on the issue of successor liabil-
ity, we decline to reach the related matter of fraudulent transfers. The
judgment of the district court is

REVERSED.

                     15
