Weed Wizard Acquisition Corp. v. A.A.B.B., Inc., Civil Action No. 2:00-CV-0129-RWS.

• Decision Date: 17 May 2002
• Docket Number: Civil Action No. 2:00-CV-0129-RWS.
• Parties: WEED WIZARD ACQUISITION CORPORATION, Plaintiff, v. A.A.B.B., INC., formerly known as Weed Wizard, Inc., Pam Butler, Don Bryan, Mable Bryan, Norman Adams, James Anderson, Z.V. Major, Defendants.
• Court: U.S. District Court — Northern District of Georgia

201 F.Supp.2d 1252

WEED WIZARD ACQUISITION CORPORATION, Plaintiff, v. A.A.B.B., INC., formerly known as Weed Wizard, Inc., Pam Butler, Don Bryan, Mable Bryan, Norman Adams, James Anderson, Z.V. Major, Defendants.

Civil Action No. 2:00-CV-0129-RWS.

United States District Court, N.D. Georgia, Gainesville Division.

May 17, 2002.

Julius M. Hulsey, Joseph D. Cooley, III, Hulsey, Oliver & Mahar, Gainesville, Harris N. Cogan, Blank, Rome, Tenzer, Greenblatt, New York City, for Plaintiff.

Jon Douglas Stewart, Stewart, Melvin & Frost, Gainesville, William Vance Custer, IV, Nicole Jennings Wade, Powell, Goldstein, Frazer & Murphy, Atlanta, GA, for Defendants.

ORDER

STORY, District Judge.

Now before the Court for consideration are Defendants' Motion To Dismiss Count Two of Plaintiff's Amended Complaint with Prejudice [49-1], Motion To Determine Sufficiency of Plaintiff's Responses to A.A.B.B., Inc.'s Second Request for Admissions [53-1], Motion To Compel Further Responses to A.A.B.B., Inc.'s First Request for Production of Documents and To Deposition of Richard Raleigh [60-1], Defendants' Motion for Partial Summary Judgment on Counts One, Two, and Three of Plaintiff's Amended Complaint [61-1], Consent Motion for Extension of Discovery [64-1], Motion To Quash Subpoena Served by Defendants Upon BDO Seidman, LLP [80-1], Motion To Compel Responses to Subpoena Duces Tecum Served on BDO Seidman, LLP [88-1], and Defendants' Motion To File Documents Under Seal [95-1].

As a preliminary matter, the Court notes that subsequent to the filing of the Consent Motion for Extension of Discovery through February 28, 2002, the Court signed a Consent Order extending discovery through March 31, 2002. Therefore, the Consent Motion for Extension of Discovery [64-1] is hereby DENIED AS MOOT. Further, Plaintiff has not filed a response to Defendants' Motion To File Documents Under Seal. Under the Local Rules, failure to file a response indicates that there is no opposition to the motion. L.R. 7.1(B), NDGa. Thus, because Plaintiff does not oppose Defendants' motion, the Court GRANTS Defendants' Motion To File Documents Under Seal [95-1]. After reviewing the record and considering the parties' arguments on the remaining motions, the Court enters the following Order.

FACTUAL BACKGROUND

This dispute originated in the sale of Weed Wizard, Inc. ("WWI") to Weed Wizard Acquisition Corp. ("WWAC"), a wholly-owned subsidiary of U.S. Home and Garden, Inc. ("USH & G"). WWI, a Georgia corporation based in Dahlonega, Georgia, was engaged in the manufacture, sale, and distribution of lawn maintenance products.

In the fall of 1997, USH & G commenced negotiations with WWI to acquire the assets of WWI. After the parties negotiated a purchase price and the terms of the acquisition through letters of intent, WWAC conducted due diligence. During the due diligence investigation, USH & G became aware of several products liability claims against WWI relating to its Weed Wizard product — a chain that replaces the nylon string on string trimmers. WWAC retained outside product liability counsel to research the product liability issues involved with the Weed Wizard product. The outside law firm retained Meridian One, an engineering firm that had expertise in testing outdoor power equipment, to test the product. After significant testing, Meridian One concluded that the Weed Wizard product was safe when used for its intended purposes.

On February 25, 1998, pursuant to an Asset Purchase Agreement ("APA"), WWAC purchased substantially all of the WWI's assets for $14 million. The APA set forth various representations made by Defendants with regard to the product liability claims against WWI. The APA states:

4.11. Litigation. Other than as set forth in Schedule 4.11 there are no claims, suits, actions, arbitration, investigations, inquiry or other proceeding before any governmental agency, court or tribunal, domestic or foreign, or before any private arbitration tribunal, pending or, to the best of the knowledge of the Company, threatened, against or relating to the Company, the Business or any of the Purchased Assets. Other than as set forth on Schedule 4.11, there are no judgments, orders, stipulations, injunctions, decrees or awards in effect which name the Company, the effect of which is (A) to materially limit, restrict, regulate, enjoin or prohibit any business practice in any area, or the acquisition of any properties, assets or businesses, or (B) otherwise materially adverse to the Business or any of the Purchased Assets....

APA § 4.11 (Cogan Aff. [87-1] Ex. A.) The APA also contained a merger clause, which provides as follows:

10.5 Entire Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supercedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

APA § 10.5 (Cogan Aff. [87-1] Ex. A.)

After the closing, WWAC began manufacturing and selling Weed Wizard products. WWAC then learned that the Queensland Government of Australia had previously banned the Weed Wizard metal chain product because it was unsafe. In June 1992, pursuant to Workplace Health and Safety Regulations, the Government of Queensland issued a Prohibition Notice banning the sale of the Weed Wizard product because it was "likely to cause an immediate risk to the health and safety of any person." (Cogan Aff. Ex. R.) On June 30, 1992, the Minister for Employment, Training and Industrial Relations issued a Media Release informing the public that the government had "banned the sale of potentially-lethal weed cutter and [was] issuing a statewide alert to home gardeners." (Cogan Aff. Ex. S.) Thereafter, the Queensland Government issued an order entitled "Fair Trading (Weed Wizard) Order 1993," which described the device known as the "Weed Wizard" and prohibited the supply of Weed Wizard products and similar devices in Queensland. (Cogan Aff. Ex. V.) The Court will refer to these items collectively as the "Australian Ban Order."

In June 1999, the United States Consumer Product Safety Commission ("CPSC"), after becoming aware of the Australian Ban Order and the product liability claims pending against WWI, began an investigation which led to a recall of the dangerous Weed Wizard product. After the recall in the United States, WWAC stopped selling the Weed Wizard I, but continued selling other model Weed Wizard products.

WWAC brought this action against WWI, the principal officer of WWI, and WWI shareholders. WWAC alleges fraud (Count One), breach of the representations and warranties set forth in section 4.11 of the APA (Count Three), and breach of section 4.9 of the APA (Count Four). Additionally, WWAC claims it is entitled to rescission of the APA (Count Two). Defendants move for partial summary judgment on Counts One, Two, and Three of the Amended Complaint.

Furthermore, the parties have filed various discovery motions that involve Defendants' attempts to elicit information about Plaintiff's knowledge regarding the safety of the Weed Wizard products prior to Plaintiff's acquisition of the assets. The Court will consider Defendants' motion for summary judgment before considering the discovery motions.

DISCUSSION

I. Defendants' Motion for Partial Summary Judgment

Federal Rule of Civil Procedure 56(c) provides that a district court shall grant summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The applicable substantive law identifies which facts are material, and a fact is not material if a dispute over that fact will not affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

When the non-moving party has the burden of proof at trial, the movant may carry its burden at summary judgment by demonstrating the absence of an essential element of the non-moving party's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In determining whether the movant has met this burden, the district court must view the evidence and all factual inferences in the light most favorable to the non-moving party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505; Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Clark v. Coats & Clark, Inc., 929 F.2d 604, 606 (11th Cir. 1991).

If the movant meets this burden, the non-moving party then has the burden of showing that summary judgment is not appropriate by setting forth "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). An issue is genuine when the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Thornton v. E.I. Du Pont De Nemours & Co., 22 F.3d 284, 288 (11th Cir.1994). The non-moving party cannot rely on his pleadings, but must file a response that includes other evidence showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); Combs v. Plantation Patterns, 106 F.3d 1519, 1526 (11th Cir.1997); Isenbergh v. Knight-Ridder Newspaper Sales, Inc., 97 F.3d 436, 439 (11th Cir.1996). Mere conclusory allegations and assertions are insufficient to create a disputed issue of material fact. Earley v. Champion Int'l Corp., 907 F.2d 1077, 1081 (11th Cir.1990); Mack v. W.R. Grace Co., 578 F.Supp. 626, 630 (N.D.Ga. 1983).

A. Counts One and Two: Fraud and Rescission

In this case, Plaintiff alleges that "Defendants knowingly and intentionally misrepresented to Plaintiff that the Weed Wizard products...