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Burton v. American Cyanamid

United States District Court, E.D. Wisconsin

May 11, 2018

GLENN BURTON, JR., Plaintiff,
v.
AMERICAN CYANAMID et al., Defendants; RAVON OWENS, Plaintiff,
v.
AMERICAN CYANAMID et al., Defendants; CESAR SIFUENTES, Plaintiff,
v.
AMERICAN CYANAMID et al., Defendants.

          ORDER

          LYNN ADELMAN DISTRICT JUDGE

         Plaintiffs bring these negligence and failure to warn actions against various lead paint and pigment manufacturers alleging they were harmed by ingesting lead paint as children. Plaintiffs sue Defendant Atlantic Richfield Corporation (“ARCO”) as successor in liability to four now-defunct corporations: International Smelting and Refining Company (“IS&R”), Anaconda Lead Products Company (“ALPC”), The Anaconda Company (formerly known as Anaconda Copper Mining Company and identified hereinafter as “ACMC”), and Anaconda Sales Company (“ASC”).[1] ARCO now moves for partial summary judgment on the issue of its status as successor in liability to these corporations.

         As a matter of context, I note that the parties are in agreement on several key issues. First, they agree that ARCO is successor in liability to both ACMC and IS&R. IS&R merged into ACMC in 1973, making ACMC the successor to IS&R's liabilities; ACMC then merged into ARCO in 1981, making ARCO the successor to ACMC's liabilities (including those derived from IS&R). Second, they agree that ACMC did not itself make or sell white lead carbonate pigment, meaning that ACMC's potential liabilities in this case are limited to those to which it succeeded from IS&R.

         The parties also agree that ARCO is not a direct successor in liability to ASC. To the extent that ARCO is liable for acts of ASC, such liability derives from ASC's status as an agent of IS&R or ALPC. ARCO does not dispute that it succeeded to the liabilities of IS&R, which include any liabilities that IS&R might have had for acts of ASC as its agent. If ARCO is found to have succeeded to the liabilities of ALPC, such liabilities might include those that ALPC might have had for acts of ASC as its agent.

         Thus, the critical issue for summary judgment is ARCO's status as successor to the liabilities of ALPC. Plaintiffs allege that IS&R succeeded to ALPC's liabilities when IS&R purchased ALPC and shortly thereafter dissolved it and took ownership of its assets in October of 1936; these liabilities would then have been passed on from IS&R to ACMC and ultimately to ARCO. ARCO now argues that IS&R's purchase and subsequent dissolution of ALPC was an arms-length transaction involving no transfer of liability. I am to grant summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). I find that ARCO has not satisfied this standard.

         I. FACTS

         When I consider a motion for summary judgment, I am to treat the evidence of the non-movant as true and draw all reasonable inferences in the non-movant's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). With that directive in mind, the facts of the 1936 transactions are as follows.

         Prior to June 1936, ACMC was a publicly held corporation engaged in a variety of metals-related businesses. IS&R was at that time a wholly-owned subsidiary of ACMC, with lead, zinc and copper operations in several states. ACMC also owned 89% of ALPC's shares. ALPC had been operating a lead pigment manufacturing plant in East Chicago, Indiana for more than a decade. In June 1936, ACMC acquired all remaining shares in ALPC, making ALPC its wholly-owned subsidiary.

         On September 28, 1936, ACMC offered to sell 13, 650 shares of ALPC stock to IS&R in exchange for 13, 500 shares of IS&R stock. This offer was accepted on October 1, 1936, and IS&R acquired the shares, becoming the owner of 100% of ALPC's outstanding stock. Then, on October 27, 1936, the IS&R board of directors passed a resolution authorizing the dissolution of ALPC. The following day, the ALPC Board of Directors and shareholder approved a plan that provided for the dissolution of the company and the distribution of all its assets, including the lead pigment manufacturing facility in East Chicago, to its sole shareholder, IS&R. An accounting ledger produced by ARCO dated Oct. 31, 1936 states the following: “Anaconda Lead Products Company was dissolved, its assets and liabilities transferred to International Smelting and Refining Company and its capital stock cancelled.” Notably, when these transactions took place in 1936, there was substantial overlap in the boards of directors and officers of ALPC, IS&R and ACMC. C.F. Kelly was a director of all three companies, as well as President of ACMC and IS&R; R.E. Dwyer was a director all three companies, as well as Vice President and Treasurer of ACMC and President of ALPC; DB Hennessy was a director of ALPC and IS&R, as well as Secretary and Assistant Treasurer of ACMC; J.R. Hobbins was a director of IS&R and ACMC, as well as Executive Vice President of ACMC; James Dickson was a director of ALPC and General Auditor of ACMC; Frederick Laist was a director of ALPC and IS&R, as well as Vice President of ALPC and Vice President of IS&R.

         Following the dissolution of ALPC, IS&R continued operations at the East Chicago facility, producing the same lead products under the same trade names. IS&R continued to operate that East Chicago facility until 1946.

         II. SUCCESSOR LIABILITY

         When a federal court sits in diversity jurisdiction pursuant to 28 U.S.C. § 1332, as here, it applies state substantive law. Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 426 (1996); Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). Therefore, to decide which state's substantive law to apply to the merits of the case, I look to Wisconsin choice of law rules. However, I need not apply choice of law rules at all unless the parties point to an outcome-determinative difference among potentially applicable state laws. Ziolkowski v. Caterpillar, Inc., 800 F.Supp. 767, 778 (E.D.Wis.1992). In the present case, both parties treat Wisconsin law as applicable and neither has identified any outcome determinative conflicts between the laws of Wisconsin and the laws of any other state. Therefore, I will apply Wisconsin law.

         In general, under Wisconsin law the purchaser of a corporation's assets does not succeed to its liabilities. See Fish v. Amsted Indus., Inc., 126 Wis.2d 293, 298, 376 N.W.2d 820 (1985); see also generally Gallenberg Equip., Inc. v. Agromac Int'l, Inc., 10 F.Supp.2d 1050 (E.D.Wis.1998). Therefore IS&R did not succeed to ALPC's liabilities when it purchased ALPC's stock and then dissolved ALPC in 1936, unless an exception to the successor liability rule applies. Wisconsin recognizes four exceptions to the general rule:

(1) when the purchasing corporation expressly or impliedly agreed to assume the selling corporation's liability; (2) when the transaction amounts to a consolidation or merger of the purchaser and seller corporations; (3) when the purchaser corporation is merely a continuation of the seller corporation; or (4) when the ...

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