Burton v. American Cyanamid Co et al

Filing 1078

ORDER signed by Judge Lynn Adelman on 11/2/18. IT IS ORDERED that plaintiffs motions for summary judgment on this issue of ARCO being successor-in-interest to the MacGregor Lead Company (No. 07-C-0303, 629 ; No. 07-C-0441, 562 ; No. 10-C-0075, 503 ) are GRANTED. (cc: all counsel) (jad)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
GLENN BURTON, JR.,
Plaintiff,
v.

Case No. 07-CV-0303

AMERICAN CYANAMID et al.,
Defendants;
RAVON OWENS,
Plaintiff,
v.

Case No. 07-CV-0441

AMERICAN CYANAMID et al.,
Defendants;
CESAR SIFUENTES,
Plaintiff,
v.

Case No. 10-CV-0075

AMERICAN CYANAMID et al.,
Defendants.

DECISION AND ORDER
These cases come before me on plaintiffs’ motion for summary judgment on the
question whether defendant Armstrong Containers, Inc. (“ARCO”) is successor-ininterest to the John R. MacGregor Lead Company (“MacGregor”). In addition, plaintiffs
allege that ARCO filed a brief opposing plaintiffs’ motion while withholding certain
evidence probative of the motion’s merits, in violation of Fed.R.Civ.P. 11(b)(4). Plaintiffs
request that I consider sanctions against ARCO for this alleged violation under my

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Fed.R.Civ.P. 11(c)(3) authority. (E.g., No. 07-CV-0303, ECF No. 1034). I will address
plaintiffs’ request in this decision and order.
I.

BACKGROUND

The briefing of this successorship issue requires some unpacking. In their initial
motion for summary judgment, plaintiffs presented this theory of successorship: In June
of 1971, MacGregor changed its name to LMC, Inc. The following December of 1971,
Armstrong Chemcon and LMC, Inc. merged, and the surviving corporation was
Armstrong Chemcon, a Delaware Corporation. Plaintiffs argue that, because this merger
did not make any explicit provision or arrangement as to LMC’s liabilities, Armstrong
Chemcon as the surviving business entity was subject to those liabilities under both
Wisconsin and Delaware law. Then, in 1975, Armstrong Chemcon changed its name to
Armstrong Containers, Inc, a Delaware corporation. Plaintiffs assumed that this
Armstrong Containers, Inc. was the same entity as the defendant Armstrong Containers,
Inc. in the present lawsuit, and concluded that therefore the defendant Armstrong
Containers is answerable for the liabilities incurred by MacGregor Lead.
ARCO filed a response brief, in which it stated that it did not dispute “the general
proposition that the surviving entity resulting from a merger may succeed to the liabilities
of the pre-merger entities in the absence of an express arrangement for those liabilities.”
(No. 07-CV-0303, ECF No. 832 at 6-7). ARCO also stated that it did not dispute (1) that
MacGregor changed its name to LMC in 1971; (2) that LMC merged with Armstrong
Chemcon, a Delaware Corporation; or (3) that Armstrong Chemcon changed its name to
Armstrong Containers in 1975. (Id. at 2). However, ARCO asserted that this Armstrong

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Containers is not the same entity as the Armstrong Containers, Inc. that is a defendant in
the present case. ARCO set forth certain new facts, as follows.
In 1983, Armstrong Chemcon 1 changed its name from
Armstrong Containers, Inc. to Armstrong Leasing, Inc.
On March 18, 1986, Armstrong Industries, Inc. was
formed. In 1993, Armstrong Industries adopted the name
Armstrong Containers, Inc., a Delaware corporation—the
defendant in this litigation.
In sum, defendant Armstrong was not in existence until
1986 and was not called “Armstrong Containers, Inc.” until
1993.
Id. at 2-3, (internal citations omitted).
Plaintiffs then contracted with a private investigator to investigate defendant
Armstrong’s corporate history. (No. 07-CV-0303, ECF No. 1034 at 2). The investigators
reviewed proceedings in related cases and located an affidavit that Robert P. Alpert,
counsel for Armstrong Containers in the present litigation and author of the brief-inopposition to the motion now at issue, had authored in the course of representing
Armstrong in another Wisconsin lead paint personal injury case. The affidavit chronicles
the corporate history of Armstrong and shows that the Armstrong Containers that
changed its name to Armstrong Leasing in 1983 is perhaps not so entirely unrelated from
the defendant Armstrong Containers in the present litigation as the brief-in-opposition
might seem to suggest. Specifically, the Alpert affidavit details this series of corporate
transactions:
15.

16.

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On June 30, 1971, MacGregor changed its name to
LMC, Inc.
On December 15, 1971, LMC, Inc. merged into its
parent corporation, Armstrong Chemcon, a Delaware
corporation.

I.e., the entity into which LMC (formerly known as MacGregor Lead) had merged.

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17.

Armstrong Chemcon later changed its name to
Armstrong Containers, Inc., a Delaware corporation,
on or about December 31, 1974.

18.

On June 16, 1983, Armstrong Containers, Inc., a
Delaware corporation, entered into an Assets
Purchase Agreement with Newarmco, Inc., an Illinois
corporation (“Newarmco”). 2 The Assets Purchase
Agreement provides, among other things, that
Newarmco acquired certain of Armstrong Containers,
Inc.’s assets and liabilities.

19.

On June 28, 1983, Newarmco changed its name to
Armstrong Containers, Inc., an Illinois corporation.

20.

On March 18, 1986, Armstrong Industries, Inc., a
Delaware corporation (“Industries”) was formed.

21.

In 1986, Industries acquired Armstrong Containers,
Inc., an Illinois corporation, through a series of
transactions.

22.

In 1993, Armstrong Containers, Inc., an Illinois
corporation, was merged into Industries. The surviving
entity was re-named Armstrong Containers, Inc., a
Delaware corporation. It is this Armstrong Containers,
Inc., that is a Defendant in this action.

No. 07-CV-0303, ECF No. 1035-2 at ¶¶ 15-22 (internal citations omitted).

Plaintiffs noted in their reply brief that, whereas Armstrong’s response to plaintiffs’
motion had characterized the 1993 transaction as a name change, the Alpert affidavit
identifies it as a merger between Armstrong Containers, Inc. (an Illinois Corporation) and
Armstrong Industries, Inc. (a Delaware Corporation) that resulted in a company named
Armstrong Containers, Inc., a Delaware Corporation and the defendant in the Wisconsin
lead paint cases. This characterization is supported by the Certificate of Merger

2

According to an exhibit submitted by Armstrong Containers in its response to Plaintiffs’ motion,
the amendment of the certificate of incorporation changing Armstrong Containers, Inc., to Armstrong
Leasing, Inc., was then filed the next day, on June 17,1983. No. 07-CV-0303, ECF No. 835-3.

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associated with the transaction, which plaintiffs filed as an exhibit to their reply brief.
Further, plaintiffs noted that the merger agreement contained no language providing for
liabilities; therefore, they argued, the surviving corporation (i.e., the defendant Armstrong
Containers) is answerable for the liabilities of the Illinois corporation that merged into it.
Because plaintiffs’ reply brief relied on new materials and made new arguments, I
permitted Armstrong to file a sur-reply. Armstrong did not contest plaintiffs’
characterization of the 1993 merger. Instead, Armstrong focused on the June 16, 1983
Assets Purchase Agreement in which Newarmco, an Illinois corporation, acquired certain
assets and liabilities of Armstrong Containers, the Delaware Corporation into which
MacGregor Lead (a.k.a. LMC) had merged in 1971. Armstrong argued that the language
of the Asset Purchase Agreement is such that Newarmco did not assume any of the
liabilities at issue in this case---meaning that it could not have passed any liabilities on to
the defendant through the 1993 merger.
Finally, to ensure complete briefing, I permitted plaintiffs to file a sur-sur-reply
presenting their analysis of the Newarmco Asset Purchase Agreement. They did so,
arguing that the Agreement did effectuate a transfer to Newarmco of the relevant
liabilities.
The upshot of this briefing history is that resolution of plaintiffs’ motion for partial
summary judgment will hinge on the proper interpretation of the 1983 Newarmco asset
purchase

agreement.

Armstrong

has

had

opportunities

to

contest

plaintiffs’

characterization of both the 1971 merger and the 1993 merger and has declined to take
them, effectively waiving those arguments. Arendt v. Vetta Sports, Inc., 99 F.3d 231, 237
(7th Cir. 1996).

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The parties agree that the language pertinent to the transfer of liabilities between
the first Armstrong Containers and Newarmco is contained in Paragraph 8 of the Assets
Purchase Agreement. It reads, in relevant part, as follows.
8. As of the Closing New Corporation 3 agrees to assume, discharge and
pay in accordance with their respective terms and obligations and to be
responsible for the liabilities and obligations of Sellers as of the Closing
Date set forth below . . . :
…
(i) Obligations with respect to litigation and claims against Sellers
other than litigation and claims involving or arising out of liabilities and
obligations expressly not assumed by New Corporation pursuant to
Paragraph 9 of this agreement.
(j) Except for the obligations and liabilities referred to in paragraph 9
below, and with the exceptions referred to in this paragraph 8 and
paragraph 23 below, New Corporation shall assume all other obligations of
sellers, whether accrued, contingent or future, based on, related to or
arising out of events or occurrences prior to the closing, whether known or
unknown and regardless of when arising or asserted.

II.

LEGAL ANALYSIS

Summary judgment is required where “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). When considering a motion for summary judgment, I view the evidence in the
light most favorable to the non-moving party and must grant the motion if no reasonable
juror could find for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 255
(1986).
To resolve the issue now before me, I must interpret the 1983 Assets Purchase
Agreement and determine whether it effectuated a transfer of the sort of liability at issue
in this case (i.e., liability for a tort claim for which the alleged culpable conduct occurred
3

I.e., Newarmco.

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before the execution of the Agreement, but for which the actual injury arose several
years after the execution of the Agreement). As a federal court sitting in diversity, I apply
state substantive law and federal procedural law. Camp v. TNT Logistics Corp, 553 F.3d
502, 505 (7th Cir. 2009). Because none of the parties have raised the choice of law
issue, I will apply the substantive law of Wisconsin, the forum state. Id. Therefore, I begin
my analysis with a survey of the relevant principles of contract interpretation under
Wisconsin law.
My goal in interpreting a contract is to give effect to the parties’ intentions. Ash
Park LLC v. Alexander and Bishop Ltd., 363 Wis. 2d 699, 712 (2015). I am to “presume
the parties’ intent is evidenced by the words they choose, if those words are
unambiguous.” Id. “When the terms of a contract are ambiguous, however, evidence
extrinsic to the contract itself may be used to determine the parties’ intent.” Id. at 713.
Specifically, when interpreting an ambiguous contract provision, I “must reject a
construction that renders an unfair or unreasonable result.” Gottsacker v. Monier, 281
Wis.2d 361, 375 (2005) (internal citations omitted). Likewise, I “should adopt a
construction that will render the contract a rational business instrument so far as
reasonably practicable.” Id. A contract provision is ambiguous if it is fairly susceptible of
more than one interpretation. Ash Park, 363 Wis. 2d at 713.
Furthermore, I am to construe contract language according to its plain or ordinary
meaning. Id. If a contract term is undefined, the contract should be considered as a
whole. MS Real Estate Holdings, LLC v. Donald P. Fox Family Trust, 362 Wis. 2d 258
(2015). “Interpretations that give reasonable meaning to each provision in the contract

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are preferred over interpretations that render a portion of the contract superfluous.” Ash
Park, 363 Wis. 2d at 713.
Under Subparagraph 8(i) of the Assets Purchase Agreement, Newarmco
assumes “obligations with respect to litigation and claims against sellers.” The word
“obligations” is not defined in the contract, and its meaning and scope in the context of ¶
8(i) is not self-evident. The word might be read broadly such that liability for unknown
and contingent personal injury claims falls under its umbrella; it might also be read
narrowly as denoting a category of obligation distinct from legal liability (a reading
supported to some extent by the recurrence of the phrase “liabilities and obligations”
throughout Paragraph 8, which suggests that the words have different meanings but
offers no final clarity as to the meaning of “obligations”). Because the word “obligations”
is undefined, I will attempt to discern its meaning by considering the contract as a whole.
Paragraph 8 is structured as a broad transfer of “liabilities and obligations,”
subject to certain exclusions. The initial, “umbrella” paragraph announces Newarmco’s
intent “to assume . . . and be responsible for the liabilities and obligations of Sellers as of
the Closing Date set forth below.” Subparagraphs (a)-(i) then “set forth” various
categories of obligations and liabilities that Newarmco agrees to assume, subject to
certain precisely delineated exceptions. 4 Holding to this pattern, subparagraph 8(i)

4

For example:
(b) Sellers’ obligations regarding employee compensation (other than
obligations with respect to or arising out of the Armstrong Containers, Inc.
Employees Retirement Income Plan and related Trust claims of employees for
workers compensation benefits resulting from accidents or occurrences prior to
the Closing and employees claims under Sellers’ group medical plan for
employees made in writing within 60 days following the closing with respect to
events and occurrences prior to the closing claims under Sellers’ group medical
plan by employers receiving benefits under the Armstrong Containers, Inc.
Employers Retirement Income Plan as of the Closing Date), whether accrued,

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announces Newarmco’s assumption of “obligations with respect to litigation and claims
against Sellers other than litigation and claims involving or arising out of liabilities and
obligations expressly not assumed by New Corporation pursuant to Paragraph 9 of this
agreement.” (Paragraph 9 is a failsafe provision that prevents Newarmco from assuming
liabilities or obligations in a manner that might disrupt insurance coverage; it is not
relevant here.) Finally, ¶ 8(j) is a catchall that again states Newarmco’s intention to
“assume all other obligations of Sellers, whether accrued, contingent or future, based on,
related to or arising out of events or occurrences prior to the closing, whether known or
unknown and regardless of when arising or asserted,” subject only to narrow exclusions
clearly delineated elsewhere in ¶ 8 or at other points in the contract. Because ¶ 8 clearly
indicates that the parties intent is a broad, inclusive transfer of liabilities and obligations, I
conclude that the term “obligations” in ¶ 8(i) is to be construed broadly. Cf. Columbia
Propane L.P. v. Wisconsin Gas Co., 261 Wis.2d 70, 88-89 (2003) (asset transfer
agreement was broadly structured to exclude liabilities and allow assumption of only
certain narrowly defined liabilities, so that narrow construction of the transferred liabilities
was appropriate).
contingent or arising as a result of this Agreement, including but not limited to,
salaries, wages, sick leave, holiday pay, pension obligations with respect to the
multiemployer plans referred to in Paragraph 25(b), below, overtime pay, vacation
pay, disability, and unemployment, including state, federal and local taxes based
thereon;
(c) Excluding the exceptions referred to in Paragraph 8(b), all liability
for sellers’ obligations, whether accrued, contingent or future, known or unknown
and regardless of when arising or asserted, to any employee of Sellers with
respect to litigation or claims before any court . . . ;
…
(e) Sellers’ obligations for other accrued liabilities, excluding obligations
for contributions to the Armstrong Containers, Inc. Employees Retirement Income
Plan, as recorded on Sellers respective financial statements;
(f) Sellers’ obligations for accrued taxes other than state and federal
income and franchise taxes . . . .
(Emphasis supplied).

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The overall document is less helpful when it comes to distinguishing the meaning
of “obligations” from the meaning of “liabilities.” Subparagraph 8(c) includes the language
“all liability for Sellers’ obligations . . . to any employee of sellers with respect to
litigation or claims….” Subparagraph 8(e) refers to “sellers’ obligations for other accrued
liabilities, excluding obligations for contributions to [a retirement plan].” So: obligations
can give rise to liabilities, but liabilities can also give rise to obligations.
Then, ¶ 8(i) announces that Newarmco will assume “obligations with respect to
litigation and claims against sellers other than litigation and claims involving or arising
out of liabilities and obligations” excluded under ¶ 9. So: obligations can arise from
litigation and claims, but litigation and claims can also involve or arise from both liabilities
and obligations.
Finally, ¶ 8(j) states that “except for the obligations and liabilities referred to in
Paragraph 9 below, New Corporation shall assume all other obligations of Sellers…”
This sentence suggests that, when used broadly, “obligations” is a general category that
can include both more narrowly-defined obligations and more narrowly-defined liabilities.
All of this means that I am unwilling to accept Armstrong’s argument that the
parties use of the term “obligations” in ¶ 8(i) reveals an intent to exclude liabilities for
legal claims against the sellers from the transaction. Instead, the meaning of the term
“obligations” as used in the contract is ambiguous, meaning that it is capable of more
than one reasonable interpretation. It could be a broad category inclusive of liabilities for
legal claims; it could be a more narrow category of obligations that may be related to or
coexist with legal claims, but that are not the same thing.

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Because the term “obligations” remains ambiguous, I will apply the principle that I
“should adopt a construction that will render the contract a rational business instrument
so far as reasonably practicable.” Gottsacker v. Monier, 281 Wis.2d at 375. Armstrong
argues that, by using only the term “obligations” in ¶ 8(i), Newarmco only assumed
litigation “obligations” such as defense costs and expenses, and did not assume
responsibility for any resulting “liabilities” such as judgments. Such a contract would not
be a “rational business instrument.” I find it incredible that a reasonable business would
contract to pay to defend against claims for which it would not, itself, bear ultimate
responsibility. The reasonable interpretation of ¶ 8(i) is that Newarmco agreed to bear
responsibility both for the costs of defending claims against the sellers, and for any
“obligations” (i.e., judgments) that might arise from those claims.
Thus, I conclude that the defendant Armstrong Containers, Inc. is successor-ininterest to MagGregor Lead. I will grant plaintiffs’ motions for summary judgment.
III.

SANCTIONS

Plaintiffs have asked that I consider using my Rule 11(c)(3) authority to sanction
ARCO for its response brief, which argued that the Armstrong Containers, Inc. into which
MacGregor Lead merged in 1971 was a different entity from the defendant Armstrong
Containers, but did not acknowledge what it knew of the series of transactions linking
those two organizations. I agree with plaintiffs that greater transparency by Armstrong
would have yielded a more efficient (and, for plaintiffs, inexpensive) resolution of the
issue on its merits. However, ARCO’s approach to the response brief was not
inappropriate given the limited arguments presented by plaintiffs in their opening brief.
ARCO’s task was only to demonstrate that Plaintiffs had not, at that stage, adduced

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evidence sufficient to establish its successorship as a matter of law. I will not initiate Rule
11(c)(3) sanctions against ARCO on these grounds.
IT IS ORDERED that plaintiffs motions for summary judgment on this issue of
ARCO being successor-in-interest to the MacGregor Lead Company (No. 07-C-0303, #
629; No. 07-C-0441, # 562 ; No. 10-C-0075, # 503 ) are GRANTED.
Dated in Milwaukee, Wisconsin, this 2nd day of November, 2018.

s/Lynn Adelman______________
LYNN ADELMAN
United States District Judge

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