In Veritas Steel, LLC v. Lunda Construction Co. (2017AP822), the Court of Appeals District IV maintained a narrow application of the “de facto merger” and “mere continuation” exceptions to Wisconsin’s general rule against successor liability.

Construction contractor Lunda had secured a $16 million judgment against steel fabricator PDM Bridge, LLC. PDM also owed other lenders approximately $76 million. Those lenders used a series of transactions to acquire PDM’s assets, which were ultimately obtained by the entity Veritas. PDM could not satisfy Lunda’s $16 million judgment, and Lunda sought the instant successor liability claim against Veritas.

Relying on Wisconsin Supreme Court precedent in Fish v. Amsted Indus. Inc., the court of appeals dismissed Lunda’s claim for an exception to successor liability because there was not evidence showing identity of ownership between the original and successor entity. Under Fish, exceptions to successor liability include de facto mergers and cases where “the purchaser corporation is merely a continuation of the seller corporation.” Fish stated that these exceptions apply when there is an identity of ownership, evidenced by a transfer of ownership for stock or a continuity of owners between the selling and purchasing entities.

Lunda argued that an identity of control could show a mere continuation from seller to purchaser, establishing successor liability. In this case, Lunda said the purchasing entity had pre-acquisition control over seller PDM; therefore, the transaction was a mere continuation. The court acknowledged the tension between its narrow reading of the de facto merger and mere continuation exceptions in Fish and the ability of entities to achieve what is essentially a merger or continuation without satisfying the strict “identity of ownership” requirement. However, the court said it is bound by Fish, and only the Supreme Court could change this interpretation of the exceptions. Since Lunda failed to establish an identity of ownership between Veritas and PDM, the court dismissed its successor liability claim based on the mere continuation and de facto merger exceptions.

In Official Committee on Unsecured Creditors of Great Lakes Quick Lube LP v. John Theisen (2018AP333), the Court of Appeals District I held that the fraudulent transfer statute of limitations begins when plaintiffs could reasonably have discovered the fraudulent nature of the transfer, rather than when the transfer itself occurred.

The instant state case arises from a federal bankruptcy case between the plaintiff creditors of Great Lakes Quick Lube and the debtors who sold their oil change businesses to Great Lakes Quick Lube. The creditors alleged fraudulent transfer against the sellers, but the sellers argued the claims were barred under the one-year statute of limitations for fraudulent transfer in Wis. Stat. § 893.425.

The court sided with the creditors in this case, holding that plaintiffs must file fraudulent transfer actions within one year after the fraudulent transfer could reasonably been discovered. The court rejected the sellers’ reading of the statute that the clock begins one year after the transfer itself. The decision cited cases in other states that ruled similarly on the Uniform Fraudulent Transfer Act.

Since the plaintiffs in this case could not reasonably have discovered the fraudulent nature of the debtors’ transfer more than one year before the date the instant action was initiated, the court dismissed the debtors’ motion for summary judgement and remanded the case to circuit court for further proceedings.

In Stelpflug v. Rural Mutual Insurance Co. (2018AP34), the Court of Appeals District IV held that, when a barn burned down due to damages from a tornado a year earlier, the “inception of the loss” was the date of the barn fire, not the date of the tornado.

A tornado damaged the Stelpflugs’ barn in 2015. Rural Mutual covered damages from the tornado. Almost a year later, a fire started in the barn because the barn’s wiring had been pulled free by the tornado. When Rural Mutual stopped making payments to the Stelpflugs for the fire damages, the Stelpflugs filed the instant lawsuit. Rural Mutual argued the claim was barred by the statute of limitations in Wis. Stat. § 631.83(1)(a) because the “inception of the loss” was the tornado that led to the exposed wiring.

The court agreed with the Stelpflugs that the “inception of the loss” was the fire because the losses from the fire were separate and distinct from the losses from the tornado. The court cited several previous cases stating that the “inception of the loss” is not the causation of the loss, but the date on which the loss occurred. In this case, the loss occurred on the date of the fire, so the Stelpflugs did file a timely claim.

In Lang v. Lions Club of Cudahy Wisconsin, Inc. (2017AP2510), the Court of Appeals District 1 held that recreational immunity did not apply to a sound engineer who set up cords that injured a woman at a music performance.

At an event run by the Lions Club, plaintiff Antoinette Lang tripped over an electrical cord placed by sound engineer Fryed Audio, LLC. Fryed’s principal and a member of the band using the cords, Steve Fryed, positioned the cord prior to the event.

While a separate case ruled the Lions Club was entitled to recreational immunity, the court said Fryed was not an “agent” or “occupier” immune under the statute (Wis. Stat. § 895.52). The appeals court relied on two recent Supreme Court cases, Westmas v. Creekside and Roberts v. T.H.E. Insurance Co., deeming contractors are not property owners entitled to recreational immunity. Fryed was not an “agent” because he was not following specific instructions from the Lions Club. Furthermore, Fryed was not an “occupier” because his presence on the festival property was not permanent and his potential immunity would not affect whether the property would be open to the public in keeping with the intent of Wis. Stat. § 895.52.

Judge Brash wrote a dissent in the case arguing that Fryed actually was an “agent” because the Lions Club had ample opportunity to offer specific cord set-up instructions when it performed a safety check on the grounds. If both the Lions Club and the band are entitled to recreational immunity, Brash argued Fryed as an agent of the two entities should also be immune from liability.

In Thomas Zimmer Builders, LLC v. Roots (2017AP2037), the Court of Appeals District IV held that an arbitration clause was enforceable because the complaint challenged the contract as a whole and because a company’s employee may invoke an arbitration clause even if the employee is not a signatory party to the contract.

Kurt and Monika Roots entered into a Design Consultant Agreement with Udvari-Solner Design Co. The Rootses later challenged the contract on the basis that employee Mark Udvari-Solner misrepresented himself as an architect before they signed the agreement. Udvari-Solner moved to compel arbitration pursuant to the contract’s arbitration clause.

The appeals court reversed the circuit court’s denial of Udvari-Solner’s motion to compel arbitration because:

1. Federal and state cases have held that challenges to the validity of a contract as a whole must be arbitrated when the contract has an arbitration provision.
2. An established legal rule states that employees may compel arbitration under a contract between their employer and a third party, even if the employee is not named in the contract, if the employee is acting within the scope of their employment.