Asset purchase agreement did not pass liability for malfunctioning portable generator 

By Joe Forward, Legal Writer, State Bar of Wisconsin

Feb. 10, 2011 – Under an asset purchase agreement, the purchasing entity did not assume liability for products manufactured before the creation of a specific division, the District I Wisconsin Appeals Court recently concluded.

Generac Power Systems Inc. (Generac) created a “Portable Products Division” in 1997 in preparation for sale of the portable products aspect of its business. But Generac had been manufacturing portable generators since the 1960s.

In 1998, Generac sold the assets of the Portable Products Division and assigned related liabilities to GPPC, Inc. In turn, GPPC in 2001 sold the rights and obligations under the 1998 asset purchase agreement to Briggs & Stratton Corp. (Briggs & Stratton).

In 2005, Kimberly Thompson was injured in Alabama while using a portable gas generator manufactured by Generac in 1992. Thompson sued Generac in federal court, and Generac tendered the defense to Briggs & Stratton according to its interpretation of the 1998 agreement.

Briggs & Stratton declined to accept the defense, and filed a declaratory action seeking a determination of rights and obligations under the 1998 agreement. The circuit court granted summary judgment, ruling that Briggs & Stratton was not liable to defend actions that arose from products manufactured by Generac before the creation of its Portable Products Division.

In Briggs & Stratton Power Products Group LLC v. Generac Power Systems Inc., 2010AP344 (Feb. 8, 2011), the appeals court affirmed, ruling that the clear terms of the agreement determined that Briggs & Stratton did not assume liability to defend the suit against Generac.

The 1998 asset purchase agreement limited Briggs & Stratton’s liability to obligations arising from ownership and operation of “the Division” prior to the closing date. The agreement defined “the Division” as Generac’s “Portable Products Division,” which did not come into existence until 1997.

Thus, the appeals court held that the agreement clearly limited liability to actions that arose out of Generac’s manufacturing operations after it created the Portable Products Division.

Generac argued that Briggs & Stratton was liable to defend the Thompson suit because the generator that malfunctioned was a “purchased asset” under the agreement and it malfunctioned after Briggs & Stratton assumed the liabilities.

But the appeals court rejected that argument, concluding that Generac put forth no evidence that the portable generator at issue in the Thompson suit was part of the “purchased assets” for which Briggs & Stratton assumed liability under the agreement.