Wisconsin’s Uniform Fraudulent Transfer Act Found Not Applicable in Successor Liability Case Against Refractory Manufacturer

WISCONSIN — In a follow up to Asbestos Case Tracker’s previous post, the Supreme Court of Wisconsin reversed the Court of Appeals’ decision in a recent mesothelioma case involving allegations of fraudulent conveyance by a successor in interest entity.

The plaintiff originally filed suit against several defendants including Fire Brick Engineering and Powers Holding claiming they were responsible for her late husband’s development of mesothelioma. Mr. Springer was allegedly exposed to asbestos from 1963-69. The plaintiff filed her suit against Powers naming it as successor to Fire Brick Engineers (FBN1). FBN1 manufactured asbestos containing products including refractory materials. Years after being formed, investors formed an entity that would purchase the “assets only” of FBN1. The entity that bought the assets only was known as FBN2 until it was acquired by a different company that ultimately became Powers. The plaintiff sought to hold Powers liable for the development of Mr. Springer’s mesothelioma as a successor to FBN1 despite the fact that no entity assumed its liabilities.

The court determined that the exception to the Wisconsin’s Uniform Fraudulent Transfer Act (Act) should not be applied to Mrs. Springer’s case. The court was troubled by the Act’s focus upon the asset transferred rather than the intent of the transfer. The Act was also limited in its scope because of a short statute of limitations. Moreover, the Act does not take into account the “legislative policies embodied in our business related statutes.” Common law theories of fraudulent conveyance reasonably guides the court in the exception to non-liability of successors in interest. The application includes a look at the consideration paid for the assets and whether the consideration is adequate. However, the amount of the consideration paid is not necessarily controlling in determining whether the intent to convey was based in fraud.

As for the trial court’s dismissal of the defendant, the court noted the plaintiff sought to hold them liable under a theory of successor liability. However, the course taken by the plaintiff in the trial court was sounded in negligence and strict liability. According to the court, the defendant put the plaintiff on notice in its answer that she had sued the wrong company. The plaintiff did nothing throughout the litigation to amend the pleadings to address the fact that the defendant in question was formed after the plaintiff’s last exposure. Consequently, the grant of summary judgment was proper.

The court interpreted a lone dissent to argue that the court’s decision was sua sponte and should not have analyzed whether the plaintiff “adequately pled a claim of successor liability.”

Read the full decision here.