Buyer of Bassinet Maker’s Assets Says it Didn’t Take on Liabilities
A hedge fund affiliate claims that it did not assume the legal liabilities of a troubled baby furniture maker, Simplicity for Children, when it purchased its assets in an April deal.
SFCA, an affiliate of Blackstreet Capital Management, bought the assets before last week’s recall of Simplicity bassinets but after problems had emerged, the Washington Post reports. A 4-month-old girl had died in one of Simplicity’s bassinets last September, and the company issued a crib recall last year, the fourth since 2005.
The purchase was structured as an Article IX asset sale under the Uniform Commercial Code, according to a press release announcing the deal.
SFCA maintains it is not responsible for last week’s recall because it has the right to sell products under the Simplicity name but no liability for products on the market, the Post story says. SFCA lawyer Rick Locker explained in an interview with the publication.
“New investors and new directors brought in new money to keep this new company going,” Locker said. “It was about reinvigorating the business and keeping employees working in the area. It’s not a successor. It’s a new company.”
But courts have differed over questions of assets and liabilities, according to the story. In a 1991 ruling, an appeals court in Maryland protected a company that bought the assets of a treadmill maker. But in 1977, the California Supreme Court said a manufacturer that bought the assets of a ladder company was liable for a defective ladder because the business retained its identity and continued to operate as it did in the past.
