Explore a recent Wisconsin court decision on an M&A case where a buyer assumed liabilities for lead paint poisoning. Gain insights into the court’s interpretation of the asset purchase agreement and its impact on M&A transactions.
M&A Stories
November 14, 2018
In a recent case, a Wisconsin federal district court ruled on a lawsuit involving the assumption of liabilities by a buyer in a 1983 asset purchase agreement. The case centered on injuries from lead paint manufactured by the seller.
Background: Buyer acquired Seller’s assets in 1983, expressly assuming all liabilities, except those explicitly excluded in the asset purchase agreement. Several individuals filed a lawsuit, asserting that Buyer should be held responsible for lead poisoning caused by paint manufactured by Seller.
Court Ruling: The court examined the language of the asset purchase agreement and found no exclusion of the lead poisoning claims. Consequently, the court ruled that Buyer had indeed assumed any liability of Seller related to lead poisoning claims.
Key Points: The court interpreted the ambiguous language in the agreement to align with the intent of both Buyer and Seller.
This case underscores the advantage of asset deals, where buyers can selectively assume seller liabilities. Typically, agreements specify the liabilities assumed by the buyer, excluding certain identified ones.
Comment: While the agreement’s wording provided some ambiguity, the court concluded that Buyer had, in fact, assumed responsibility for the lead poisoning claims. This case highlights the importance of clarity in defining assumed liabilities in M&A transactions.
Case Reference:
Burton v. American Cyanamid, Case Nos. 07-CV-0303, 07-CV-0441, 10-CV-0075, United States District Court, E.D. Wisconsin (November 2, 2018).
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