SUBMITTED ON BRIEFS: ORAL ARGUMENT: September 19, 2019
OF DECISION OF THE COURT OF APPEALS Reported at 385 Wis.2d
210, 923 N.W.2d 181 (2018 - unpublished)
Circuit Court, Dane County, L.C. No. 2015CV509 Frank D.
there were briefs filed by Saul C. Glazer, Michael D. Hahn,
and Axley Brynelson, Madison. With whom on the brief was Dean
Thomson, Paul Ratelle, and Fabyanske Westra Hart &
Thomson 2 PA, Minneapolis, Minnesota. There was an oral
argument by Paul Ratelle.
the third-party-defendants-respondents, there was a brief
filed by Michael D. Leffel, Kevin M. LeRoy, Thomas L.
Shriner, Jr. and Foley & Lardener LLP, Madison and
Milwaukee. With whom on the brief was Richard Mancino, Jill
K. Grant, Stuart R. Lombardi, William O'Brien, Patricia
O. Haynes, Joseph G. Davis, and Willkie Farr & Gallagher
LLP, New York, New York and Washington, DC. There was an oral
argument by Richard Macino.
DALLET, J., delivered the majority opinion of the Court, in
which ANN WALSH BRADLEY, ZIEGLER, REBECCA GRASSL BRADLEY,
KELLY and HAGEDORN, JJ., joined. ROGGENSACK, C.J., filed a
REBECCA FRANK DALLET, J.
Lunda Construction Company (Lunda) alleges that Veritas
Steel, LLC (Veritas), and third-party defendants Atlas
Holdings, LLC (Atlas), and Bridge Fabrication Holdings, LLC,
took unfair advantage of PDM Bridge, LLC's (PDM) loan
defaults, "with the intent to gain ownership of
PDM's lucrative steel fabrication business for grossly
inadequate consideration through a secretive, unlawful and
fraudulent process designed to render PDM an empty shell with
no assets remaining to satisfy PDM's eight-figure
liability to Lunda."
The circuit court granted summary judgment to Veritas on
Lunda's successor liability claim because there was no
genuine issue of material fact as to the de facto merger,
mere continuation, and fraudulent transaction exceptions to
the general rule against successor liability. The court of
appeals affirmed as to the de facto merger and mere
continuation exceptions, the only exceptions Lunda raised on
The question before us is whether the de facto merger, mere
continuation, and fraudulent transaction exceptions to the
rule against successor liability apply in this case to impose
successor liability on Veritas. Lunda asks this court to read
Fish v. Amsted Indus., Inc., 126 Wis.2d 293, 376
N.W.2d 820 (1985), as having expanded the de facto merger and
mere continuation exceptions. Lunda further asserts that the
court of appeals erroneously dismissed its successor
liability claim in light of the fraudulent transaction
We reject Lunda's expanded reading of Fish, 126
Wis.2d 293, and conclude that Lunda has not raised a genuine
issue of material fact as to an "identity of
ownership" between Veritas and PDM, the key component
necessary to satisfy the de facto merger and mere
continuation exceptions. We further conclude that by not
raising the fraudulent transaction exception before the court
of appeals, Lunda forfeited that argument. We therefore
affirm the court of appeals.
FACTUAL BACKGROUND AND PROCEDURAL POSTURE
The facts of this case are lengthy and fairly complex. PDM
operated a steel fabrication business. In 2006, PDM
entered into a credit agreement with a syndicate of lenders
for a $115 million term and $25 million revolving loan. As
security for repayment, the lenders obtained a first priority
lien on "substantially all of PDM's assets."
PDM's financial condition had begun to significantly
decline by 2011. PDM eventually defaulted on its obligations
to the lenders under the 2006 credit agreement. By 2013, PDM
was indebted to the lenders on secured debt with a face value
of approximately $76 million. In June 2013, the lenders and
PDM executed a forbearance agreement in which PDM agreed to
either sell itself to an interested acquirer or restructure
with the assistance of an investment banker.
Pursuant to the forbearance agreement, PDM retained an
investment banker to market a sale of the company for the
highest possible price. Of 136 potential acquirers contacted
by the investment banker, none of them offered a price that
came close to satisfying PDM's outstanding secured debt.
The highest bid came from Atlas, a private equity firm.
Rather than purchase PDM's assets directly, Atlas and the
lenders agreed that Atlas would acquire the lenders'
secured claims against PDM and then foreclose on PDM's
assets. Atlas caused the creation of a new entity, Bridge
Resources, LLC, to aid in the acquisition of PDM's
assets. Bridge Resources subsequently filed amended Uniform
Commercial Code (UCC) financing statements, in which it
confirmed itself as the new administrative agent under the
credit agreement and verified its protected security interest
in PDM's assets. Through a series of transactions,
affiliates of Atlas and a co-investor purchased all of
PDM's outstanding debt directly from the lenders for
approximately $22 million, which was indicative of the value
of PDM's assets.
PDM, having no prospect of paying back the outstanding debt
under the credit agreement, entered into a "transaction
support agreement" with Bridge Resources in October
2013. The agreement anticipated that the parties would work
towards a strict foreclosure on the collateral securing
PDM's loans in exchange for partial satisfaction of
PDM's obligations under the 2006 credit agreement. To
carry out the strict foreclosure, Atlas created a subsidiary
called Veritas, which was assigned a first priority lien on
PDM's assets and eventually became the sole secured
lender under the credit agreement.
In November 2013, PDM, Bridge Resources, and Veritas executed
a strict foreclosure agreement. PDM conveyed to Veritas the
collateral securing the loan in exchange for the discharge of
approximately $71 million out of $76 million of unpaid,
secured debt that PDM owed under the credit
agreement. The strict foreclosure agreement did not
change the ownership or board structure of PDM. It is
undisputed that there was no stock or other indicia of
equitable ownership transferred from Veritas to PDM. Further,
no director or owner of PDM became a director or owner of
Meanwhile, in 2010, Lunda, a civil construction contractor,
entered into a subcontract with PDM, which required PDM to
provide steel for a bridge construction project. In 2012,
after PDM failed to perform, Lunda sued for breach of
contract. At the time that Veritas foreclosed on PDM's
assets, Lunda had a contingent, unsecured breach of contract
claim. It was not until 2014, after the strict foreclosure
agreement was finalized, that Lunda obtained a $16 million
judgment against PDM. Lunda, as an unsecured creditor,
subsequently took steps under Wis.Stat. § 779.155 to
assert a lien on funds owed to Veritas by the Wisconsin
Department of Transportation (DOT) for projects on which PDM
In February 2015, Veritas commenced this action against Lunda
and sought a declaration that Lunda had no claim to payments
by the DOT for the projects at issue. Lunda asserted eight
counterclaims against Veritas and commenced a third-party
action against Atlas, Bridge Fabrication Holdings, and two
former officers of PDM. The circuit court granted Veritas's
motion to dismiss on six of Lunda's counterclaims. Only
two claims remained: a successor liability claim against
Veritas and a claim against Veritas, Atlas, and
Bridge Fabrication Holdings under the Wisconsin Uniform
Fraudulent Transfer Act (WUFTA claim). Summary judgment
motions on the remaining two claims were granted by the
On appeal, Lunda challenged the dismissal of its successor
liability claim against Veritas under the de facto merger and
mere continuation exceptions. Lunda also appealed the
dismissal of its WUFTA claim against Veritas and the
third-party defendants. The court of appeals affirmed the
circuit court as to both issues.
Lunda petitioned this court for review and challenges the
dismissal of its successor liability claim against Veritas as
it relates to the de facto and mere continuation exceptions.
Lunda also alleges that the court of appeals erroneously
dismissed its successor liability claim in light of the
fraudulent transaction exception to the rule against
STANDARD OF REVIEW
We review a decision on summary judgment using the same
methodology as the circuit court. Green Spring Farms v.
Kersten, 136 Wis.2d 304, 314-15, 401 N.W.2d 816 (1987).
Summary judgment shall be granted where the record
demonstrates "that there is no genuine issue as to any
material fact and that the moving party is entitled to a
judgment as a matter of law." Wis.Stat. §
We first discuss the purpose of the general rule against
successor liability and the exceptions to that rule as
developed in Wisconsin jurisprudence. We next clarify the de
facto merger and mere continuation exceptions and determine
whether Lunda raised a genuine issue of material fact as to
these exceptions. Finally, we decide whether Lunda forfeited
its successor liability claim as to the fraudulent
transaction exception by failing to raise it before the court
general rule against successor liability: its purpose and
It is well established that when a company sells or transfers
all of its assets to another company, the purchasing company
does not become liable for the transferring company's
debts and liabilities. See Fish, 126 Wis.2d at 298
(quoting Leannais v. Cincinnati, Inc., 565 F.2d 437,
439 (7th Cir. 1977))("'[a] corporation which
purchases the assets of another corporation does not succeed
to the liabilities of the selling corporation.'").
This general rule against successor liability was designed to
protect a bona fide purchaser from assuming the liabilities
of a predecessor corporation. See Springer v. Nohl Elec.
Prods. Corp., 2018 WI 48, ¶15, 381 Wis.2d 438, 912
N.W.2d 1. "'The traditional rule of nonliability was
developed . . . to protect the rights of commercial creditors
and dissenting shareholders following corporate acquisitions,
as well as to determine successor corporation liability for
tax assessments and contractual obligations of the
predecessor.'" Fish, 126 Wis.2d at 303
(quoting Ramirez v. Amsted Indus., Inc., 431 A.2d
811, 815-16 (N.J. 1981)).
We have recognized four exceptions to the rule against
successor liability under the following circumstances:
(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 transaction is entered into
fraudulently to escape liability for such obligations.
Tift v. Forage King Indus., Inc., 108 Wis.2d 72,
75-76, 322 N.W.2d 14');">322 N.W.2d 14 (1982) (quoting Leannais, 565
F.2d at 439). These exceptions illustrate the balance in
successor liability law between "two competing, and
often conflicting, policy goals: to provide a necessary
remedy to injured parties, often tort claimants, and to
provide transactional clarity and certainty for business
parties engaged in fundamental corporate transactions."
Matheson, John H., Successor Liability, 96 Minn. L.
Rev. 371, 372-73 (2011).
We focus our discussion on exceptions two and three, also
known as the de facto merger and mere continuation
exceptions. Both exceptions "are declaratory of tests to
be applied to encourage 'piercing the corporate
veil'" and thus examine "the substance and
effect of business transformations or reorganizations to
determine whether the original organization continues to have
life or identity in a subsequent and existing business
organization." Tift, 108 Wis.2d at 79. We resolve the
parties' dispute over the type of "identity"
evidence necessary for purposes of establishing these
de facto merger and mere continuation exceptions defined
The de facto merger and mere continuation exceptions were
defined and then developed in three main cases: Tift, Cody
and Fish. This court first explicitly recognized the
exceptions in Tift, 108 Wis.2d 72, a products liability
action alleging injuries caused by a "chopper box"
tractor attachment. The chopper box was first manufactured by
a sole proprietorship, which turned into a partnership and
eventually "metamorphosed into" a corporation,
Forage King Industries. Id. at 74. Forage King
Industries consisted of two shareholders who had formed the
partnership, one of whom was the original sole proprietor.
Id. Throughout its different business forms, the
company retained the same employees, manufactured the same
products, and sold to the same dealers. Id. at
In 1975, just before the plaintiff was injured, all of the
Forage King Industries stock was purchased by another
corporation that continued to operate as Forage King
Industries and manufacture the same products. Id. at
75. The plaintiff commenced an action against Forage King
Industries and its insurer, alleging that the company was a
successor to the manufacturer of the chopper box and was
therefore responsible for the plaintiff's injuries.
We applied the "rules of corporate law" and
reasoned that the de facto merger and mere continuation
exceptions "demonstrate that, when it is the same
business organization that one is dealing with, whether it be
by consolidation, merger, or continuation, liability may be
enforced" because "[t]hese are tests of
identity." Id. at 79. We thus concluded that,
despite organizational transformation, the present Forage
King Industries was "substantially identical to the
organization that manufactured the allegedly defective
chopper box and [was] therefore liable."Id.
The mere continuation exception to successor liability was
further developed in Cody v. Sheboygan Mach. Co.,
108 Wis.2d 105, 321 N.W.2d 142 (1982). The plaintiff sued
Sheboygan Machine Company for injuries caused by a defective
sander. Id. at 109. The defective sander had been
manufactured by the original Sheboygan Machine Company, but
that company sold its assets and its name to a different
company, who again resold the company assets and name.
Id. at 107-08. The plaintiff brought suit against
Sheboygan Machine Company, a corporation that shared the same
name as the manufacturer of the sander but functioned
exclusively as a repair shop. Id. at 108-09.
Sheboygan Machine Company shared none of the officers,
directors, or stockholders as the predecessor companies.
Id. at 108.
Citing to the facts of Tift and the principles enunciated in
that case, the Cody court concluded that the mere
continuation exception did not apply because the facts did
"not demonstrate any continuity or identity of business
organizations" between the two entities in question.
Id. at 106. The Cody court concluded that the second
corporation "was an entirely different corporation"
and that the "subsequent businesses were markedly
different in character and purpose from the original
manufacturer" and "were not continuations of the
original business." Id. at 111.
This court refined the de facto merger and mere continuation
exceptions several years later in Fish, 126 Wis.2d 293. The
Fish plaintiffs alleged injuries resulting from the use of a
power press manufactured by Bontrager Construction Company.
Id. at 295-96. The plaintiffs filed suit against
Amsted Industries, Inc., the company that acquired
Bontrager's assets and continued to make the power press,
and South Bend II, the company who subsequently bought the
power press line from Amsted. Id. at 295-97. They
alleged that, as successor corporations, Amsted and South
Bend II were liable for the acts of Bontrager in
manufacturing the allegedly defective power press.
Id. at 297. All parties agreed that the traditional
exceptions to the rule against successor liability did not
apply to the case, but the plaintiffs argued that Tift
expanded both the de facto merger and mere continuation
exceptions. Id. at 298. The plaintiffs argued that
"identity" meant "identity of assets,
operations and identity of the product, rather than identity
of ownership." Id. at 300-01 (emphasis added).
The Fish court plainly rejected the argument that Tift
expanded the de facto and mere continuation exceptions:
"the [p]laintiffs are in error in alleging that the Tift
decision has expanded the exceptions to the rule of
nonliability." Id. at 301. The court specified
that "[i]dentity refers to identity of ownership, not
identity of product line." Id. The court
affirmed dismissal of the successor liability claim as
related to both exceptions because "there [was] not
sufficient identity between Bontrager and either Amsted or
South Bend II to justify holding them liable for the acts of
their predecessor." Id. at 295.
The Fish court also delineated the "key elements"
required to meet the de facto and mere continuation
exceptions. In determining whether a de facto merger has
occurred, the "key element" "is that the
transfer of ownership was for stock in the successor
corporation rather than cash." Id. at 301. The
"key element" to resolve whether the successor is a
mere continuation of the seller corporation "'is a
common identity of the officers, directors and stockholders
in the selling and purchasing corporations.'"
Id. at 302 (quoting Leannais, 565 F.2d at 440).
requirement of identity of ownership
As Fish made clear, the de facto and mere continuation
exceptions to the rule against successor liability require
evidence of identity of ownership. For the de facto merger
exception, identity of ownership hinges on whether "the
transfer of ownership was for stock in the successor
corporation rather than cash." Fish, 126 Wis.2d at 301.
It is important to recognize that transfer of ownership may
still exist even where the successor entity does not have
stock to offer the acquired entity. In such cases, proof of
identity of ownership may be established through equity
ownership. For example, equity ownership could take
the form of membership interests in a limited liability
As to the mere continuation exception, identity of ownership
is established where there "'is a common identity of
the officers, directors and stockholders in the selling and
purchasing corporations.'" Fish, 126 Wis.2d at 302
(quoting Leannais, 565 F.2d at 440). Some evidence, like the
common identity of stockholders, will support application of
both the de facto merger and mere continuation exceptions.
However, unlike the de facto merger exception, the mere
continuation exception may be established with evidence of
the continuation of the same officers, directors, and
stockholders under circumstances where there is no transfer
of equity or stock ownership.
Despite Fish's clear mandate that identity of ownership
is the key inquiry, Lunda asserts that Fish significantly
expanded the de facto merger and mere continuation exceptions
to allow the substitution of "identity of management and
control" for identity of ownership. In support of its
argument, Lunda highlights the Fish court's use of the
phrase "identity of management and control" twice
in the decision: once, in addressing Tift, where the court
said there was an "identity of management and control
throughout the transformation from sole proprietorship to
partnership;" and again, in discussing Cody, where the
court said there was "no identity of management and
control throughout the transfers of ownership." Fish,
126 Wis.2d at 302. Lunda further cites to IGL and Gallenberg
for the proposition that courts post-Fish have not required
identity of ownership. IGL-Wis. Awning, Tent &
Trailer Co., Inc. v. Greater Milwaukee Air & Water Show,
Inc., 185 Wis.2d 864, 520 N.W.2d 279');">520 N.W.2d 279 (Ct. App. 1994);
Gallenberg Equip., Inc. v. Agromac Int'l, Inc.,
10 F.Supp.2d 1050 (E.D. Wis. 1998).
Identity of ownership remains the sine qua non of successor
liability. Although the phrase "identity of management
and control" was used to describe the transfers of
ownership in Tift and Cody, the Fish court maintained that
identity of ownership is required to meet the de facto merger
and mere continuation exceptions. The Fish court explained
that in Tift there was identity of ownership because
"the identical organization continued to manufacture the
same product" and in Cody there was not identity of
ownership because "the successor corporation was an
entirely different corporation" with "'no