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Contractor, steel maker battle over $16M judgement before high court

By: Michaela Paukner, [email protected]//September 19, 2019//

Contractor, steel maker battle over $16M judgement before high court

By: Michaela Paukner, [email protected]//September 19, 2019//

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A case now before the Wisconsin Supreme Court will determine if Lunda Construction should be out $16 million because the company it has the claim against was acquired by another.

The dispute stems from a $16 million judgement that Lunda Construction of Black River Falls obtained in June 2014 against the steel fabricator PDM Bridge for a bridge project. In 2013, Veritas Steel acquired PDM through a series of complex transactions in exchange for letting PDM, which had also begun to default on $76 million owed to other lenders, out of its outstanding debts. 

Lunda filed both a successor-liability claim and fraudulent-transfer claim against Veritas Steel, saying its purchase of PDM had prevented Lunda from satisfying its judgement against PDM. The circuit court dismissed Lunda’s claim in March 2017, and the Court of Appeals affirmed the judgement in November 2018. 

The Wisconsin Supreme Court heard oral arguments in the case on Thursday. Lunda sought clarification of Wisconsin corporate law, asking about claims for successor liability. 

Generally under the law, when one company buys another, the purchasing company doesn’t assume the selling company’s debts and liabilities. Exceptions occur, though, either when a purchasing company consolidates or merges with a selling company or when a purchasing company is a mere continuation of a selling company.

Appearing on the behalf of Lunda, Paul Ratelle of Fabyanske Westra Hart & Thomson in Minneapolis, said: “When we talk about continuity of ownership, my view is, and what I’m proposing to this court, is that continuity of ownership isn’t limited to a seller with an interest in the buyer. I don’t think there’s any dispute of fact that Veritas continued the business operations of PDM.”

Representing Veritas, Richard Mancino of Willkie Farr & Gallagher in New York City, contended: “This court is being asked by an unsecured contract creditor, who had no prospect of recovering on its debt, to rewrite settled Wisconsin law on the two key exceptions to the general rule of nonliability and asset transfers.”

The arguments lasted about an hour. They can be watched here.

The justices have not yet scheduled a date for issuing a decision in this case.

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