In 2018, we flagged an unpublished, per curiam decision by the Wisconsin Court of Appeals as unusual. It seemed that the court of appeals, while adhering to the most recent precedent, was strongly signaling that it thought that precedent was wrongly decided and that the Wisconsin Supreme Court should revisit the scope of exceptions to the general rule against successor liability.
The Wisconsin Supreme Court did indeed take the case up. And it has emphatically rejected the court of appeals’ invitation to alter the law, evincing no interest in a broader reading of the more recent precedent. The supreme court instead wiped the slate clean by insisting that any implication the earlier cases had taken a broader approach was in error. (The facts and the basic legal framework of successor liability are set forth in our earlier post.)
Without dissent, the supreme court held that the Tift decision had not “expanded the de facto and mere continuation exceptions” to the general rule against successor liability. Veritas Steel LLC v. Lunda Construction Co., 2020 WI 3, ¶26. The supreme court “decline[d] to broaden the exceptions to the rule against successor liability, as [it had] declined to do so in the past.” Id., ¶34.
The court reiterated that, under Wisconsin law, “Identity of ownership remains the sine qua non of successor liability.” Id., ¶31; see also id., ¶28 (both “the de facto and mere continuation exceptions to the rule against successor liability require evidence of identity of ownership”). Without evidence that there was not common ownership between Veritas and its predecessor, PDM, Lunda could not prevail under either exception. Id., ¶37.
Chief Justice Roggensack wrote a separate, concurring opinion in which she argued that the fraud analysis was unnecessary because the asset transfer was effected through a strict foreclosure in compliance with Wisconsin statutes enacting the Uniform Commercial Code. See id., ¶79 (Roggensack, C.J., concurring).
