This case involved a lawsuit filed by Plaintiffs, several individuals in a Wisconsin federal district court against Buyer for injuries allegedly incurred from ingesting white lead carbonate pigments contained in paint manufactured by Seller.
Buyer purchased the assets of Seller in 1983 and had assumed all liabilities of Seller except for certain excluded liabilities described in the asset purchase agreement. Plaintiffs asked the court to rule that Buyer, under the 1983 asset purchase agreement, had assumed liabilities of Seller for the lead poisoning Plaintiffs claimed were caused by paint manufactured by Seller.
The court looked at the assumption language in the asset purchase agreement and found nothing in the language of the document that would exclude Plaintiff’s lead poisoning claims from Buyer’s assumption of Seller liabilities. Thus, the court ruled that Buyer had assumed in the asset purchase agreement, any liability of Seller for lead poisoning claims filed by Plaintiffs for ingesting lead from lead paint manufactured by Seller.
This case is referred to as 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).
Comment. The actual language used to describe what Buyer assumed was ambiguous enough to give Buyer a shot at avoiding responsibility for this lawsuit. However, the court saw through the ambiguities to interpret what the court felt was the intent of Buyer and Seller.
One of the most important benefits in doing an asset deal over a stock deal is that the buyer can generally pick and choose what seller liabilities buyer will assume. Often the agreement will say that buyer is assuming no liabilities of seller except for certain specified liabilities.
The language in this 1983 asset purchase agreement was much more favorable to Seller.
By John McCauley: I help people start, grow, buy and sell their businesses.
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