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Foskett v. Great Wolf Resorts

March 5, 2008

JAMES J. FOSKETT, MARY C. FOSKETT AND PHYSICIANS' BENEFITS TRUST LIFE INSURANCE CO., PLAINTIFFS,
v.
GREAT WOLF RESORTS, INC., GREAT BEAR LODGE OF WISCONSIN DELLS, LLC AND GREAT LAKES SERVICES, LLC, DEFENDANTS/THIRD-PARTY PLAINTIFFS-APPELLEES,
v.
BLACK WOLF LODGE, LLC, TALL PINES RENTAL, LLC, N/K/A J&A REAL ESTATE VENTURE, LLC, TALL PINES REALTY, LLC, ET AL., THIRD-PARTY DEFENDANTS-APPELLANTS.



Appeal from the United States District Court for the Western District of Wisconsin. No. 06 C 0503 S-John C. Shabaz, Judge.

The opinion of the court was delivered by: Cudahy, Circuit Judge

ARGUED DECEMBER 6, 2007

Before EASTERBROOK, Chief Judge, and CUDAHY and RIPPLE, Circuit Judges.

This case emerges from the sale of a Wisconsin water park by Black Wolf Lodge, LLC (Black Wolf), Tall Pines Rental, LLC, Tall Pines Realty, LLC and Tall Pines Development of Wisconsin Dells, LLC (collectively, Sellers) to Great Bear Lodge of Wisconsin Dells, LLC (Buyer).*fn1 The asset purchase agreement for the transaction required the Sellers to indemnify the Buyer against claims resulting from pre-closing acts, omissions or events and required the Buyer to indemnify the Sellers against claims resulting from post-closing acts, omissions or events. Almost seven years after the transaction was completed, the Buyer was sued by a park visitor who allegedly was injured on one of the park's attractions. The Buyer sued the Sellers for contributory negligence and the Sellers tried to invoke their right to indemnification under the asset purchase agreement. After the Buyer refused to indemnify the Sellers, the Sellers counterclaimed for indemnification. Both parties moved for summary judgment on the indemnification issue. The district court found that the Buyer's contributory negligence claim resulted from the Sellers' allegedly negligent pre-closing design, installation and maintenance of one of the rides. As a result, the court concluded, the Sellers were not entitled to indemnification under the agreement. The Sellers ap- peal that decision. We reverse and direct that judgment be entered in favor of the Sellers.

I. Background

Prior to 1999, Black Wolf owned and operated a water park and resort in Lake Delton, Wisconsin. In 1998, a new attraction, the Tree Wolf slide, was constructed at the park. In November 1999, the Buyer purchased the water park. The Buyer agreed to purchase the assets "asis," subject to exceptions expressly included in the asset purchase agreement. For their part, the Sellers represented that they were "in compliance with all applicable Laws and Orders" and that they "ha[d] not received notice of any violation or alleged violation of any Laws or Orders." The Buyer agreed to assume the following liabilities of the Sellers:

2.1.(a) Furniture, Fixture and Equipment Orders. Sellers' obligations to purchase furniture, fixtures and equipment on order as of the Closing Date.

2.1.(b) Contractual Liabilities. Sellers' Liabilities relating to the period beginning with the Closing Date under and pursuant to the Contracts.

2.1.(c) Liabilities Under Permits and Licenses. Sellers' Liabilities arising on and after the Closing Date under any permits or licenses listed in Schedule 4.9(b) and assigned to Buyer at the Closing.

2.1.(d) Prorated Liabilities. Liabilities of Sellers for which Buyer receives a credit against the Purchase Price (as defined below) at Closing.

Section 2.2 of the agreement expressly limited the Buyer's assumption of liabilities:

2.2 Liabilities Not to be Assumed.

Except as and to the extent specifically set forth in Section 2.1, Buyer is not assuming any Liabilities of Sellers and all such Liabilities shall be and remain the responsibility of Sellers. Without limiting the generality of the foregoing sentence, Buyer is not assuming and Sellers shall not be deemed to have transferred to Buyer the following Liabilities of Sellers, except to the extent specifically set forth in Section 2.1:

2.2.(e) Violation of Laws or Orders. Liabilities of Sellers for any violation of or failure to comply with any applicable statute, law, ordinance, rule or regulation (collectively, "Laws") or any order, writ, injunction, judgment, plan or decree (collectively, "Orders") of any court, arbitrator, department, commission, board, bureau, agency, authority, instrumentality or other ...


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