Explore a critical M&A case involving product liability claims related to asbestos in talcum powder products. Understand the key disagreement, contractual language, arguments from both parties, and the court’s decision. Learn why precise language in asset purchase agreements is crucial. Reference to Parfums De Coeur LTD. v. Conopco, Inc., 3:18-cv-00749-WWE.
M&A Stories
February 18, 2019
Introduction:
In 1993, a M&A deal took place, involving the sale of fragrance and cosmetic product lines, including talcum powder products. Years later, legal battles ensued regarding product liability claims related to asbestos in the talcum powder. This dispute landed in a Connecticut federal court.
Key Disagreement:
The heart of the dispute lay in determining who was responsible for product liability claims for talcum powder products sold before the closing date. The buyer asserted that the seller should indemnify them for these asbestos-related claims. The seller countered, claiming the buyer had assumed certain of seller’s liabilities.
Contractual Language:
The crux of the matter was in the wording of the asset purchase agreement. Section 1.4 explicitly stated that the buyer did not assume any of the seller’s liabilities, except for those listed in section 1.3, which expressly allocated seller’s product liability to buyer for claims that were made more than 18 months after the closing..
Buyer’s Argument:
The buyer pointed to general language under Section 1.4, which said that they were not responsible for product liability claims related to products sold before the closing date.
Seller’s Argument:
The seller pointed out that Section 1.3 had specific a assumption by buyer of seller’s product liability for claims made more than 18 months after the closing date, which takes precedent for the general language of Section 1.4.
Court Decision:
The court ruled in favor of the seller, interpreting the contract’s intent as the buyer assuming product claims for items sold before closing, but only when the claim was made more than 18 months after the closing date.
Conclusion:
This case highlights the importance of precise language in asset purchase agreements. A single, clear section specifying what the buyer assumes and what the seller retains would have prevented this dispute.
Case Reference:
In this case you might say in one section (not like here in two sections) that Buyer is not assuming any of Seller’s liabilities except for a list of specified liabilities.
This case is referred to Parfums De Coeur LTD. v. Conopco, Inc., No. 3:18-cv-00749-WWE., United States District Court, D. Connecticut, (January 31, 2019).
https://casetext.com/case/parfums-de-coeur-ltd-v-conopco-inc
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