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  • Writer's pictureKirk Hartley

Fraudulent Conveyance Claims Arising from Shut Down of Company, With Its Lawyers Involved as Investo

Another part of the complexity of asbestos litigation lies in the efforts of some to shut down former makers of asbestos containing products, and the work of lawyers and other professionals in those efforts.  A current example arises from a case now on appeal to the Wisconsin Supreme Court. The intermediate appellate opinion in the case was previously reported in detail in a June 23,  2016  post at the Goldberg Segalla Asbestos Case Tracker blog.  The facts, as alleged, illustrate how the situation may become even more complex when investors in the new company are lawyers who were defense lawyers for the old company. As explained by Goldberg:

“In approximately 1983, Fire Brick Engineers Corporation (FBE Corporation), whose investors included attorneys who had previously represented FBE Company, purchased the assets of FBE Company and eventually changed its name to Fire Brick Engineers Company, Inc. In the late 1980s, FBE Company, Inc. merged with Power Holdings, Inc. FBE Company, Inc. and Power Holdings, Inc. were sued in the case as successors to FBE Company.


On appeal, the plaintiff maintained that there was a factual dispute as to the application of an exception to the general rule in Wisconsin against successor liability; particularly, whether the sale of FBE Company’s assets to FBE corporation was fraudulent because it was executed to avoid FBE Company’s potential asbestos liability. The Court of Appeals agreed and determined that the issue was governed by Wisconsin’s Uniform Fraudulent Transfer Act at Wis. Stat. § 242.04(1)-(2), which deals with actual intent. According to the Court, “the issue of intent is generally not readily susceptible of determination on summary judgment.” It concluded that, viewing the facts in the light more favorable to the plaintiff, a jury could reasonably infer that FBE Company intended to sell its assets to FBE Corporation to avoid future liability from the sale and manufacture of asbestos-containing products  — particularly given the evidence that a director of, and attorneys for, FBE Company were the buyers of FBE Company’s assets.”

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