Summary Judgment Reversed Where Court Finds Genuine Dispute as to Fraudulent Transfer of Assets Court of Appeals of Wisconsin, District Four, June 23, 2016

The plaintiff filed this personal injury lawsuit under theories of negligence and strict liability following the death of her husband from mesothelioma. The plaintiff maintained that her husband was exposed to asbestos-containing products allegedly manufactured and/or sold by Fire Brick Engineers Company, Inc. (FBE Company) from approximately 1963-69. In approximately 1983, Fire Brick Engineers Corporation (FBE Corporation), whose investors included attorneys who had previously represented FBE Company, purchased the assets of FBE Company and eventually changed its name to Fire Brick Engineers Company, Inc. In the late 1980s, FBE Company, Inc. merged with Power Holdings, Inc. FBE Company, Inc. and Power Holdings, Inc. were sued in the case as successors to FBE Company.

The defendants moved for summary judgment, arguing that there was insufficient evidence that they distributed or sold any asbestos-containing products and, further, that “although they acquired the assets of FBE Company, there was no basis upon which to impose liability…as successors of FBE Company.” The motion included an affidavit from a representative of Powers Holdings, Inc. and a copy of the 1983 purchase agreement, which provided that FBE Corporation agreed to assume certain of the liabilities and obligations of FBE Company, but none which pertained to asbestos. Specifically, there was a provision that FBE Corporation “does not…assume or agree to pay or perform any other liabilities or obligations of [FBE Company] of any kind, whether or not related to the Subject’s Business, all of which liabilities and obligations remain the sole responsibility of [FBE Company].” The circuit court granted the defendants’ motion for summary judgment, and the plaintiff appealed.

On appeal, the plaintiff maintained that there was a factual dispute as to the application of an exception to the general rule in Wisconsin against successor liability; particularly, whether the sale of FBE Company’s assets to FBE corporation was fraudulent because it was executed to avoid FBE Company’s potential asbestos liability. The Court of Appeals agreed and determined that the issue was governed by Wisconsin’s Uniform Fraudulent Transfer Act at Wis. Stat. § 242.04(1)-(2), which deals with actual intent. According to the Court, “the issue of intent is generally not readily susceptible of determination on summary judgment.” It concluded that, viewing the facts in the light more favorable to the plaintiff, a jury could reasonably infer that FBE Company intended to sell its assets to FBE Corporation to avoid future liability from the sale and manufacture of asbestos-containing products  — particularly given the evidence that a director of, and attorneys for, FBE Company were the buyers of FBE Company’s assets.

The judgment of the circuit court was reversed and the case remanded for further proceedings.

Read the full decision here.

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