When one corporation buys the assets of another similiar corporation, they may also being buying the liabilities of that corporation.  In most cases, the buyer of a firm or corporation’s assets does not inherit the seller’s liabilities.  However, there is an exception when the acquiring corporation is similiar and possibly viewed as a continuation of seller’s operation.  In an instance like this, the buyer may be strictly liable for injuries caused by defects, even if the product was previously manufactured and distributed by the selling corporation.   

A perfect example of this is SFCA, Inc’ purchase of Simplicity, Inc.  SFCA, Inc., an affiliate of Blackstreet Capital Partners, LLC purchased the debt and then purchased the assets through a Foreclosure sale of Simplicity, Inc.   Simplicity, Inc. was a leading juvenile and baby furniture designer, importer and distributor.  SFCA, Inc designs, distributes and imports cribs, changing tables, toddler beds, bassinets, etc. so there is a definite similiarity between SFCA and Simplicity.

Currently, the Attorney General Lisa Madigan of Illinois, has brought a lawsuit against SFCA, Inc. because SFCA acquired the inventory of Simplicity in March of 2008 and continued to sell design-flawed bassinets to retailers, despite knowing the bassinet design was responsible for, at least, one infant death.  Apparently, SFCA refused to participate in the recall because it claimed it was not responsible for the design flaws, since it did not design the defective bassinets.

The million dollar question in my mind is – did SFCA act on the advice of their legal counsel or was this an executive decision by one or more of the officers of the company not to fully participate in the recall of these defective bassinets?   Surely, SFCA’s legal counsel would have made them aware of this legal precedent.  Regardless of who was responsible for this curious decision, I am guessing if SFCA only spends a million dollars to resolve this mess, they will consider themselves fortunate.  Hopefully, SFCA, Inc. carried both product liability and product recall insurance.