2004 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit

5-25-2004 

# B e rg C hi l lin g S ys v

. Hul l C or p

P r e c e de n t i al or N on-P r e c e de n t i al : P r e c e de n t i al

D ocke t N o . 03-2977

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Thi s de c i sion i s br ou gh t t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sit y S choo l of L a

w Di g it al Re posit or y

. It h as be e n a c c e pt e d for inclusion in 2004 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a no va U nive r sit y S choo l of L a

w Di g it al Re posit or y

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w
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UNITED STA TES COUR T OF

APPEALS FO R T HE TH IRD CIR CU IT

Nos. 03-2977 and 03-3020

BE RG CH ILL IN G S YS TE M S, IN C.; ACCEPTANCE INSURANCE

COMPANY

v.

HULL COR PORATI ON; SP IN DU ST RIE S, IN C., d/ b/ a H ul l C om pa ny,

De fend ants/T hird-P arty Plaintiffs

v.

VICARB, INC. , ALF A LAVAL, I NC. ALFA LAVAL VICARB, JOHN L.

HULL, LEWIS W. HULL,

Third Party D efen dants

BERG CHI LLI NG SY ST EM S, IN C.,

Appellant

in No. 03-2977

BE RG CH ILL IN G S YS TE M S, IN C.; ACCEPTANCE I NSURANCE

COMPANY v.

HULL COR PORATI ON; SP IN DU ST RIE S, IN C., d/ b/ a H ul l C om pa ny,

D ef en da nt s/T hi rd -P ar ty Plaintiffs

v.

VICARB, INC. , ALF A LAVAL, I NC. ALFA LAVAL VICARB, JOHN L.

HULL, LEWIS W. HULL,

Third Party D efen dants

SP IN DU ST RIE S, IN C.,

Appellant

in No. 03-3020

On A ppeal from the United States

District Cou rt for the Easte rn D istrict of P enns ylvania (D.C. Civ. No. 00-05075) Ho nor able Be rle M . Sch iller, Distri ct Judge

Argued April 21, 2004

BEFORE: SCIR ICA
, Chief Judge , and RO SE NN and GR EE NB ER G, Circuit Judges

(Fil ed: May 25, 2004)

John J. Sor oko (argued) Patri ck J. Loftus Jam es H . Steige rwa ld2

Du ane M orris 1650 Market Stree t One LibertyPlace, 37th Floor Philadelphia, PA 19103-7396

Attorney s for Appell ant-Appell ee Berg Chill ing Sy stems, Inc.

Michael O. Adelman (ar gued) Rebecca S. Rimmer M ichae l P. D aly Drin ker, B iddle & Rea th One Loga n Squ are 18th & C herry Stre ets One Loga n Squ are Philadelphia, PA 19103-6996

Attorney s for

Appell ee-Appe ll ant SP Industries, Inc.

OPINI ON OF THE COURT

GR EE NB ER G, Circu it Judge

. I. FACTUAL AND PROCEDURAL HIST ORY

This matte r com es on befo re this court on appe als byBerg Chill ing Systems, I nc. (“Berg”) and SP Industries, Inc. ( “SPI”) fr om an order for j udgment
entere d by the dist

rict court on J une 11, 200 3, follo win g a fo ur-da y bench trial in this breach of cont

ract a ction. The dist rict court s et fort

h its opinion i n Berg Chilli ng Systems, Inc. v. Hull Corp. , No. Civ. A. 00-5075, 2003 WL 21362805 (E.D. Pa . June 10, 20 03) (“ Berg ”). The case, whic h has an unusualinternationa l charact er as i t impl icat es enti ties from four countries on three continents
, though not al l as parties , ari ses from the failure of a f reeze drying system to perform to specifications. T hough there

we re ma ny factu al dispu tes at the trial, the basic circum stances of the case are clear and we set fort

h the fact s in the light most supportive of the dist rict

cour t’s result. 1

The origi n of the cas e may be
trace d to M arch 30, 1 995 , wh en B erg , a Canadian Corporation, 2 entere d into a
contrac t with a Chi nese Company named Huadu M eat Product s Company (“Huadu”) 3 to suppl y the food freeze dry ing sy stem (“Equi pment Contract ”) at a cost of $2, 800,000 in United State s

1 Certai n of the various orde rs and determi nations to which we make referenc e have not been appealed. The parti es’ attorney s took some of t he acti ons and wrote certain c orresponde nce that we attri bute to the parti es.

2 Berg ’s princ ipal pla ce of busin ess is in Toronto, Ontario.

3 At variou s points in the reco rd reference is made to other Chinese corporate enti ties related to Huadu, such as the China

National Overseas Tradi ng Corporati on and the Beij ing World Trade Corpor atio n. For

si mpl ic it

y ’s sa ke we will r efer t o the entiti es coll ecti velyas Huadu. We also note t

hat Huadu sometimes i s refer

red to as Hua Du.3

dollar s. The fre eze dry ing sy stem contai ned severalcomponents which Berg inte nded to acqui re from subcontr actors and suppli ers. Thus, pri or to ente ring into the E quip men t Con tract, Berg a scertained w hich ma nufacture rs would produce the sys tem’s various componen t parts. 4

Berg appr oach ed the Hu ll Co rpora tion (“H ull”), a P enns ylvania

en tity, 5 and asked it

to produce t

he freeze dry ers, a crit

ical component for t

he sys tem. I n the weeks pri or to si gning the Equipm ent Con tract with H uadu, B erg

wa s in co nstan t conta ct with Hu ll regardi ng the fre ezer dry ers’ technical specificati ons. 6 On A pril 20, 1995, B erg formall y agr eed to purc hase two freez e dry ers fr om Hull for the Huadu freeze drying system (“P urc has e O rde r”). Under this Purchase Order , Hull a ssumed responsi bili ty for the de sign, manufacture, start-up and testi ng of the freeze dryers. 7 The f reeze dryers we re

4 Berg manufacture d one component of the freeze dryi ng system, t he blast freezer s. Accordi ng to the arbit rati on

aw ard w e des cribe b elow , Hu adu d ealt with a Canadian c ompany to a cquire t he freeze dryi ng sys tem in orde r to t ake advantage of financing for the purchase available throug h the Ex port De velo pm ent C orp ora tion of C ana da. Thus, in t

he trans acti on Berg large ly was a facil itator for fi nancing and a coordinator for the supplyof other

com panie s’ prod ucts. T his un usua l role in no w ay diminished B erg’s responsi bili ty to Huadu.

5 Hull has i ts pri ncipal place of busin ess in P enns ylvania. H ull sho uld not be confuse d with the HullCompany which we describe below. Hull is not particip ating in this app eal. 6 At tri al Donald Berggr en, the presi dent of Berg t esti fied:

We wou ld send pre liminary spe cific ation s of f to H ull. They would work up a quotati on or speci fication – a specif ication based on t

he information that

they recei ved. We would take it, forward it

off to our customer, Huadu, and – and th en t

heywoul d co me back to u s and ask more questi ons on what we had pr ev i ou sl y su pp l i ed

. We then took t

hat inf ormation, forw arded it back , and s o it

wa s a ba ck-an d-fo rth process of

negotiation.

JA at 77.

7 The Purchase Order i ncorporated the specifi cati ons of the freeze dry ers set forth i n the Equipment Cont ract be tween Berg and Huadu. That cont ract pr ovided, “[o]nce the units are mounted i n place by the end user , under s upervis ion by the Hull Servi ce Engineer, Hull Corporation will s end a quali fied engi neer to c heck4

requir ed to be abl e to proce ss a speci fied volume of food at a

high quali ty level within a 24 -hour period or, in industry
terms , to me et the “ throu gh-p ut” spe cific ation s.

Af ter con firmin g the d elivery da te with Hull, Berg enter ed into a n amended agreement wit

h Huadu specify ing a delive ry date of June 15, 1996, f or the freeze dryi ng apparatus. Nevertheless, the fre eze d ryers we re no t shipp ed un til Oc tober 1 996 beca use o ne of their

com pon ent p arts w as n ot av ailab le. Once Hull complete d manufacturi ng the freeze dryer s, their s hipping t o China was delay ed furthe r when the vess el on which theywere to be shi pped fail ed on the way to pick up the equipment at the port i n Camden, New Jersey. Berg, who was responsi ble for s hipping t he freeze dryers, then mad e arran gem ents fo r their transp ortation on tru cks a cross N orth America to Van couver, British Co lum bia, f or sh ipm ent b y sea to Ch ina. Un fortun ately, one o f the tru cks, w hile

en ro ute to V anco uver , was invo lved in an accident

in which one of the freeze dry ers was damaged. 8 Berg did not repair th e dam aged freez e dryer pr ior to its shipment by sea to C hina. Rathe r, after th e free ze dryers we re ship ped to China the damaged fr eeze dry er was rep aired at H uad u’s f acility in Be ijing

. The equipment then was inst alle d and pre par ed f or tria l run s.
In April 1997, at

the directi on of a Hull service tec hnician, prelimina ry testing began on the freeze dryi ng sys tem. This testing revea led sever al defici encies i n the fre eze dry ing equipment which l ed Huadu in earl y May 1997 to send a l ist

of concerns regarding the function ing of the m achinery to Berg wh ich, in turn , for wa rde d th e list to Hu ll. Hu ll the n re spo nde d to tho se c onc ern s. Neverthel ess the Hull service t echnici an return ed to th e U nited S tates prio r to conducti ng performance tests on t he machineryas requi red by the Equipment Co ntract, an action leadin g H uadu to refu se to acc ept th e fre eze drying system

. According to Ber g, duri ng the early sum mer o f 19 97 H ull refu sed to coop erate w ith Be rg an d H uadu in addressi ng the probl ems with the f reeze dryers. 9 Huadu obviouslywas

out the s ystems, st art up t he units and provide on s ite t

raini ng for a tot al of 20 days .” JA at 854.

8 The p ri nci pl e of

Murp hy ’s Law s eems to have been at

work here: what c an go wrong will go wrong. 9 Berg ’s pres ident te stified a t trial:

We were h aving a v ery tough ti me obtaini ng

coo per ation [fro m H ull]. They di dn’t se em to be intereste d in w orkin g w ith

us on th e p ro jec t. T he y – they were very

unco oper ative, an d at this time, we f elt that in order5

dissat isfi ed and thus t

hreate ned to send the equi pment back and cancelthe
contrac t. As a r esult

of Hull’s percei ved la ck o f co ope ra ti on d ur in g that ti me period , Berg threate ned to sue it. In la te August, however, Berg and Hull began negotiating a c ompromise to s olve the difficulti es with the machinery. These negotiations culminat ed in the signi ng of a modified agreement on October 8, 199 7, am ong Hu adu, B erg an d H ull desig ned to addr ess the defic iencie s in the Hull f

reeze dryer s (“Modified Agree ment”). 10 The Modified Agreement set

forth performance-l evel goals for the fre eze dry ers and the requ ired qu ality level of the pro duct, providi ng that “ through a coope rati ve effort, Hull and Berg wil l ensur e” that these s tandards would be met. J A at 1074. It establ ished t

he end of March 1998 as the date by which t he modifications would be comple ted and final acceptanc e would take pl ace. JA at 1074. Wh ile Hull, Berg a nd H uadu w ere addressi ng the probl ems with the f reeze dry ers, Hull, on August 27, 1997, e ntered into an Ass et Pu rchas e A greem ent w ith SP Industries, Inc. ( “SPI”), a New Jersey Corporati on, 11 prov iding f or SP I to acquire Hull’s Food, Drug & Chem ical Divisi on (“FDC divisi on”) which had designed and manufac tured t he freeze dryers for the H uad u pr ojec t. Ar ticle 1 .2 of the Asset

Purchase Agreement between Hull and SPI l ist ed the purc hase d asse ts, wh ich inc luded “all
contrac ts and agr eements, includi ng, without l imit ation, sales orders a nd sales

con tract s.” 12 JA at 1825-26. Under Section 7.8, enti tled Product Warranties, the agre ement provi ded that “[p]urchas er does not h ereby ass um e any liab ility to any th ird p arty cla ima nt.” 13 JA at 18 49. Section 10.6 of the Asset Purchase Ag reem ent state d, “[t]h is agre eme nt sha ll be go ve rn ed an d c on tro lle d a s to va lid ity, enforcement, inter

pretat ion, c onstruc tion,

to satisfy our custome r’s

concern s, that we w ere going to have to be looki ng at perf orming some of the

mo difica tions o r chan ges to the eq uipm ent to try to bring i t to s pecifi cati on.

JA at 139.

10 Berg ’s pres ident te stified th at its threat to sue Hullbecame moot after the sign ing of th e M odi fied Ag reem ent. 11 SPI has it s princ ipal pl ace of bu sin es s in N ew Je rse y.

12 Section 1.3 of the Asset Purchase Agreement li sted as sets e xcluded fr om the agre ement. The fr eeze dry ers re late d to the Equi pment Contract were not

am ong thes e ex clud ed a ssets

.

13 However, Berg’s pr esident testifie d
at trial t hat pri or to t

he signi ng of the Asset P urchase A greeme nt Hull’s presi dent inf

ormed Berg that

any new entit y would as sume the li abili ties of the entit y bein g pu rch ase d.6

effect and i n all ot

her res pects bythe internal la ws of the State of New Jersey applic able t o contrac ts made in t hat State. ” JA at 1857.

Hu ll and S PI clo sed o n the s ale provided for by the Asset Purchase Ag reem ent on Oc tober 1 5, 199 7, exa ctly

one w eek after H uadu, H ull and B erg ha d s ig ne d the Modi fi ed Agr ee men t. At the closing on the Asset Purchase Agreement, as a resul t of concerns that SPI rais ed about the costs of the remaini ng work on the Huadu freeze dry ers, SPI and Hull ent ered into a side letter agree ment rel ating to the Huadu projec t. 14 The side lette r agree men t, which the parties signed on t he same day as the closing on the Asset Purchase Ag reem ent, pro vided that SP I wo uld complete any

needed desi gn modifications and r epairs to the f reeze dryers. W hile SP I agree d to p ay the ou tof-p ocke t costs f or the r epairs , Hu ll agreed t o reimburs e SPI for a portion of its expenses. 15 The side l ette r agreement provided t

hat, “[e]xcept

as amended hereby , the terms and pr ovisi ons of the Ass et Pu rchas e A greem ent sh all rem ain in fu ll for ce a nd e ffe ct.” J A a t 18 90.

Hu ll and S PI m ade v arious pub lic
stat ements aft er si gning the Asse t Purchase Agreement

to the e nd that t

he
transaction c onstituteda merge r of SPI and H ull’s FDC division. M oreover, Lew is Hu ll, preside nt of th e H ull Corporati on, sent

a letter t o Berg after the Asset Purchase Agreement

was signed, but before the cl osing, stating that “ [i]f Hull ’s fre eze dry ing divi sion sh ou ld be tra ns fe rre d t o a no th er en tity, Hull’s responsibi lit

y wil l of cours e be assumed by the succe ssor. ” JA at 1020.

Aft erth e c lo si ng, th e FD C divis ion of the Hull Corporation began operating as a who lly-owned sub sidiary of S PI u nde r the nam e H ull C om pan y. Although SPI through the Hull Company made various modi fications t o the fre eze dry ers fr om late 1997 i nto earl y 1998, the dry ers, at le ast during thi s peri od and at all times mate rial to this litiga tion, did
not m eet the spec ification s con tained in the Modified Agreement . Huadu, which

seem s to ha ve be en qu ite

acco mm odatin g, agre ed, ho we ver, to extend the date se t fort

h in the Modifi ed Agreement for acce ptance of t he freeze dryers un til April 2 7, 199 8. W hen it beca me c lear tha t the fre eze d ryers wo uld
not satisfythe speci fications bythat date, SPI direc tly

request ed another

extensi on from Hu adu. H uadu gran ted the requ est, giving SPI u ntil M ay 20, 19 98, to complete modi fication and te sti ng of the 14 Hull at no t

ime during t

he negotiations and cl osi ng with SPI inform ed S PI tha t Berg had th reaten ed to file suit against it i n connecti on with the Hu adu pro ject.

15 Hull agree d to reimbu rse all of SPI’s
out-o f-po cket c osts, inc luding payme nts to s uppli ers and tr avel cost s, whi le SPI agree to abs orb th e nor mal p ayroll expe nses o f the e mp loyees w orkin g to fix the f reez e dr yers.7

freeze dryer s with the underst anding that this w oul d be the f inal e xten sion

.

On M ay 13, 19 98, H uadu sent a facsim ile to B erg w ith a ca rbon copy to the Hull Corpor ation l isting the f reeze dry ers’ remaining pr oblems. The facsimi le concl uded that because the freeze dryer s sti ll had “ fatal weakness[es]” that prevented them from meeting t

he through- put requi rements for freeze dryi ng food at the contra cted qualit y l evel, theywere “not

acc epta ble.” 16 JA at 1113. Neve rtheless, neithe r Ber g no r SPI mad e an a ttemp t to fix the se probl ems or conduct performance tests prior t o the May 20, 199 8 dea dline. A fter it rece ived th is letter from Huadu, SPI notifie d Berg for the fi rst t ime that , under Sect

ion 7.8 of the Asset Purchase Agreement

between SPI and Hull, SPI had not ass umed any liabi lit y for any work done byHull or SPI pursuant

to the Equi pment Contract or th e M odi fied Ag reem ent.

In an effort

to sal vage the situation a fter Huadu ref used to acc ept th e e qu ip m en t, B er g h ire d W alt er Pe bl ey, wh o had releva nt exp ertise, to g o to China and evaluate the problems wit h the freeze dryer s. The evi dence at t he tri al indicated that from June t o December 1998, “there was a le tter writi ng campaign between [Berg] and Huadu, as [Berg] tried to ge t Hull bac k in to do t he necessary chan ges that they felt were requir ed to show that

the equi pment could work.” J A at 189-91. When Huadu refused to gi ve Hull another opportun ity t o repair the eq uipmen t, Berg sent a l ette r to Huadu in March 1999 purporting to end a ny obl igati on under the v ario us c ont racts

.

Pursuant to Section 11. 2 of the Equipment Contrac t, Huadu, on March 29, 1999, f

iled a request for arbi tration of 16 In a communicati on dated May 5, 1998, Huadu had informed Berg and the Hull C orporation tha t if the freeze dryers did not s atis fy t

he specif ications and could not be accepted, “we will cl aim for returning of goods and for our loss caused by fail ure of thi s proje ct. ” JA at 1106. Sect ion 8.8 of t

he Equipment Contract provided:

If due to the S eller’s responsi bili ty the performance tests c annot

re ach one orse ver al items of g uaran tee fig ures in Appendix No. 4 after

three repeated performance tests, and in case no other mutua l agreement ca n be reached, then the Buyer s hall ha ve the ri ght to terminat e the Contract parti ally or wholly , rel ative to the value of defec tive equipment i tem as othe r wise ag ree [sic].

JA at 786.8

its clai ms against

Berg with the Arbi tr at io n I nst

it ut e of th e St ockhol m, Sweden, Chamber of Commerce. Huadu did not at

tempt t o make either

Hull or SPI a party t o the arbi tration. 17 But after it l earned about

the ins tit

ution of t he arbit rati on proceedi ngs, Berg notifie d John Hull, the former

vice chai rman of the H ull Co rpora tion an d a co nsultan t to the new Hull Company. Berg wanted Hull to par

ticipate i n the proce edings and thus i t sent

a letter dated May 24, 2000, to John Hull informing “ Hull” that it was obligated “to participate i n the arbi tration and d efen d its equ ipme nt give n that it is a party to the Mod ified Agreement.” JA at 1181. Berg requested Hull to e ngage in a joint defense of Huadu’s claims. JA at 194 . The Berg letter stated that H ull had refused to be added as a party to the arbitration or to cooperate in the defense of the arbitration. JA at 1182. As a result, B erg inf orm ed H ull:

Accordingly , y ou are here by put

on notice that in th e eve nt Be rg is unsuccessf

ul in def ending the arbi tration Berg willbe looking t o Hull, a nd any

succ essor c om pany to H ull, for fullcontri bution and indem nity with re spec t to any dam age a wa rd, as w ell as its lega l and oth er co sts. You are further

put on notice that B erg w ill rely on Hull’s refusal to defend the Clai mants’ al legations as precl uding it

from subsequent ly rais ing any such defence t o the alle gations in anyacti on

comm enced b y Berg against Hull in t he event Berg is unsu ccess ful in defending the arbit

rati on.

JA at 1182.

The arbit rati on proceedi ngs went forw ard in S tockh olm f or ap prox imate ly one year befo re, on M arch 8, 200 0, Berg formall y obj ected t o the proce edings on the ba sis of its a ssertion that the Hu ll Corporati on was a necessary and pr oper partyto the arbit

rati on. However, the arbit rati on proceedi ngs conti nued without any

parti cipation from Hull or SPI. 18 On December 7, 2000, the

17 This omiss ion is underst andable as Huadu’s contr act provi ding for arbitration was so lely with Berg so the re

wa s no w ay that H uadu could join H ull or SPI in t

he arbit rati on. 18 Berg formall y i nformed SPI of the arbit rati on by l ette r dated Oct ober 3, 2000, in whic h it s tate d that t he letter, as well as t he previous letter of May 24, 2000, to J ohn Hull, “ consti tutes writt en notice of the Arbit

rati on Proceeding. ” JA at 1179. The l ette r further st ated that “Berg Chill ing hereby

request s that

you come in and defend the Arbitr ation Proceeding. Should y ou not do so, you will be bound i n any ac tion br ought9

Arb itration In stitute issu ed its aw ard in favor of Huadu and agains t Berg for $2,494,034. 84, a sum that includes inter est.

The arbitrato rs fou nd th at due to the ina bility of the H ull free ze dryers to functi on as requi red bythe speci fications of the Equipment

Contract and Modified Agreement, Huadu was enti tled to a refund of the portion of the purchase price i n the Equipment Cont ract f or the freeze dryer s but that Berg, upon payment , coul d recla im them. Alt hough the arbi trat ors rec ognized that the remainder

of the fre eze dry ing sy stem was functiona l and the only defici ency was in the Hull -manufactur ed freeze dryers, it found that “Be rg Chilling be ars full responsibi lit

y t owards [Huadu] for any brea ches of co ntract w ith relation to the Hull e quipment. It i s outsi de the scope of thi s arbi tration to determine wh ether a nd to wh at exte nt H ull shall

answ er for such breac hes in relation to Berg C hilling.” JA at 120 6-07. In defend ing itself in the arbitration Be rg incurred lega l fees, including ex pert wit nes s fe es a nd c osts , of $ 454 ,115 .26.

At the ti me the arbi tration proceed ings betw een H uadu a nd B erg were pending, Berg, on October 6, 2000, brought sui t agai nst the Hull Corporat ion and SPI in the dist rict court, assert

ing clai ms for breach of c ontract , breac h of express warr anty , breac h of impli ed warranty , and i ndemnityand contribution. Hull then filed a crossclai m against SPIfor indemni ty or contri bution. SPI responded byfili ng a

coun ter-cros s-claim again st the H ull Corporati on for breach of repres entation and warranty

and breach of t

he indemnifi cati on and defense provi sions of the Asset

Purchase Agreement betw een S PI an d H ull. 19

After the conclusi on of the arbit rati on proceedi ngs and pri or to t rial in the di stri ct court , Berg and Huadu on June 10, 2002, entere d into a Set tlement Contract resol ving allclai ms between them. In the S ettlement Co ntract Berg

against you byBerg Chill ing as t o any determi nation of

fact made i n the Arbitr ation Pr oceeding common to the two litigati ons.” J A at 1179. 19 SPI also fi led a third- partycomplaint again st the H ull Co rpora tion’s c orpo rate officer s John Hull and Lewis Hull for breach of cont

ract, fraud and misre prese ntation . John Hu ll and L ew is Hull then filed a counterclai m against SPI, m aintain ing tha t SPI h ad a d uty to defe nd an d/or ind emn ify them in this litigati on. The dis tri ct court entere d judgment i n favor of John Hulland Lew is Hu ll on S PI’s third -party complaint

against them and entered judgment in favor of SPI and ag ainst John Hu ll and L ew is Hu ll on Jo hn H ull and Lewis Hulls’ thir d-party compla int against SPI. These di spositions ar e not at issue on t

his appealand thus we do not make furth erre ferenc e t o t hem.10

agree d to p ay Hu adu $ 1,000 ,000 a nd to permit Huadu t o retai n ownership of the freeze dryers w hich H uadu a nd B erg agreed i n their

then current condi tion

we re valu ed at $ 650 ,000. W e refe r to this $650,000 as an “Equi pment Credit .” Thus, Berg and Huadu valued t he
settlement at

$1,650,000. The Settl ement Contract provided t

hat in t he event that Berg wa s succ essfu l in this litigatio n, it would retai n the fi rst $1, 650,000 of the award, Huadu would be enti tled to the next $350, 000, and Berg and Huadu

wo uld sh are eq ually in an y recove ry in excess of $2, 000,000. The $1, 650,000 figure c learl y was pre dicat ed on the payment that Ber g made to Huadu in a combinati on of cash and the waiver of any cl aim by Ber g to recl aim the equ ipm ent.

The litigation in the d istrict court proceeded t o tri al on January 13, 2003, whe re the court at the b ench trial heard fou r days of testimo ny. In its Memorandum and O rder of J une 11, 2003, the dist

rict court i ssued it s findi ngs of fact an d conc lusions of law . The cou rt determi ned that

the award i ssued on December 7, 2000, by

the Arbit

rati on Instit ute was not binding on H ull because Berg f ailed to vouc h it in properly. It further held that SPI was not equi tably or judicia lly estoppe d fro m arg uing that it did not as sume any l iabil ity to Berg for the freeze d ryers sold to Huad u. Berg does not ch alleng e these findin gs on this appe al. 20 The court further found t hat under the terms of the Asset Purchase Agreement

betwee n SPI andHull, SPI assumed Hull’ s respons ibil iti es for the freeze dryers purs uant to the Purchase Order, t he Equipment Contra ct and the M odi fied Ag reem ent.

Concluding that Berg, Hull and SPI were equall y at

fault for the breach of the various agr eements t o Huadu, the court appor

tioned t he $1,000, 000 damages from the Set

tlement Contract equa lly but sepa rately amo ng B erg, H ull and SP I. 21 The court, however, did not hold Hu ll and S PI join tly and sev erally liable to Berg. M oreover, the co urt decli ned to grant

Berg damages predicated on the $650,000 Equipment Credit f or the freeze dry ers which Huadu had reta ined purs uant to t he Settl ement Con tr ac t b ec au se , i n the co ur t’ s v ie w, Berg had not est ablis hed the val ue of the equipment and di d not demonstr ate what its costs would ha ve been to r etri eve the equip men t or find a pur chas er for it if Hu adu had not retai ned it.

20 Berg d oes assert that the co urt’s ruli ng with res pect t o vouching in was

erro neo us b utin di cates th atit bec ame moot when the court

late r found “that SPI and Hull had committed a bre ach of
contrac t.” Berg br. at

52.

21 The cour t entere d sep arate ju dgm ents in fa vor of Be rg andagai nstHull a nd SPI for $33 3,333. Th us, the court left B erg with the l oss for t

he remaini ng $333,334 paid o n the S ettleme nt Co ntract.11

The d istrict court rejected Berg’s claim for attorne ys’ fees and exp ert witness f ees in t he arbit rati on proc eedin gs, find ing tha t “[w ]hile ordinarily

Berg Chill ing might

be enti tled
to recove r such fees , in t his cas e such an award would be unconsci onable. ” Berg
, 2003 W L 213 62805 , at *11. In supp ort of this conclusi on the court explai ned that Ber g had not represented Hulland SPIs’ i nteres ts adequatelyin the arbitration proceedings. The court also
stat ed that

“since Ber g Chilli ng was equa lly liable with the D efen dants herein, each must bear

its own costs and counsel fe es.” Id . The court further found that

the Hull Corpor ation ha d not breached certain por

tions of the Asset Purchase Agreement

with SPI byfail ing to inform SPI of Berg’s threat of litiga tion dur ing the s um me r of 199 7. Additional ly , it

rejec ted SPI’s clai m for indemnification against Hull. These appeals f ollowed. 22 In our

opi ni on w e deal with the speci fic i ssues advanc ed by the part ies. The Hull Corporation is not particip ating in this app eal. 23 II . D IS CUSSI ON

A. STANDARDS OF REV IEW

We exercise pl enary review over the d istrict cou rt’s le gal d eterm inati ons

. Shire US Inc. v. Barr Labs. Inc. , 329 F.3d 348, 352 ( 3d Cir. 2003) . Our stand ard o f revie w is p lenary w ith respect to w hether the district court applie d the appropriate measure of

con tract dam age s in a lega l sen se. Scu lly v. US WA TS, Inc. , 238 F.3d 497, 507 (3d Cir. 2001) (ci ting Willi am B. Tanner Co. v. WIOO, Inc. , 528 F.2d 262, 271 (3d Cir. 1975)). We review the fact ual determi nations of the di stri ct court under a cle arly err one ous stan dar d. M edtron ic Ave, Inc. v. Advanced Cardiovas cular Sys. , Inc. , 247 F.3d 44, 53 (3d Cir. 200 1). A findin g of fact is c learly

erron eous wh en it is “c om pletely dev oid of minim um ev identiary support displ ayi ng some hue of credi bili ty or bears no r ationa l rel ations hip to t he supporti ve evidentiarydata. ” Ko ol, Mann, Coffee & Co. v. Coffey , 300 F.3d 340, 353 (3d Cir . 2002) ( quoting Ho ots v. Pen nsylvan ia , 703 F.2d 722, 725 (3d Cir. 1983 )).

B. FAULT AND THE EQ UAL 22 The district co urt exe rcised divers ity juri sdiction pursua nt to 28 U.S. C. § 1332 and we ha ve j ur is di ct io n un der 28 U. S. C. § 1291.

23 It appears that the HullCorporati on is in financialdistress and thus, according to Berg, the judgment against it i s not col lectible. We are aware, however, that Hull i s seeki ng insura nce indem nifica tion an d con sequ ently it is possibl e that

ulti matelya judgment aga inst it w oul d be satis fied

. See Berg Chilli ng Sys. Inc. v. Hull Corp. , 70 Fed. App x. 620 (3d Cir. 2003 ).12

APPOR TI ONMENT OF DAMAGES AMONG BER G, HULL A ND SPI

Berg chall enges the di stri ct

cou rt’s a ction in all oca ting dam age s to it. The co urt found that under S.J. Groves & Sons Co. v. Warner Co. , 576 F.2d 524, 527-58 (3d Cir . 1978), it had t he authori ty to apportion damages according to the relative fault of the three part ies, Berg, Hull and SPI. We conclude, how ever, th at it had no b asis on wh ich to find Berg at

fault for the breach of the Equipment Contrac t and Modified Ag reem ent, an d thu s the co urt erred in apporti oning anydamages to Berg.

The cour t foun d that B erg, H ull and SPI were equall y at fault for the breach of cont

ract i n fail ing to make a timel y shipment of a working fr eeze dry ing sy stem to Huadu. In findi ng that Berg was partl y t o blame for the breach of con tract the court rejected B erg’s argum ent that it was a m ere “mid dlem an” b etwe en H uadu and H ull. 24 Berg , 2003 WL 21362805, at *11. The court found t

hat Berg was res ponsibl e for the late shi pment of the machi nery and the dam age to on e of the free ze dryers during shipment. The court furt her

em ph as ize d t ha t, “ [m ]o re im po rta nt ly, Berg Chill ing, l ike Hull Corpor ation a nd SPI, t ook part i n the desi gn and/or approval of

the desi gn of the fre eze dry ers and modifi cati on thereto.” Id . In support of

this finding, the court

cite d the
testimony of Donal d Berggren, t he presi dent of Berg. At the trial, Berggren
testifie d as to t

he process of negoti ation with H uadu a nd H ull prior to Berg enterin g into th e con tract w ith H uadu to pr ovi de t he f re eze dr y in g sy st em, indicating t

hat “[w]e would send preli minaryspecifi cati ons off to Hull .” JA at 77

. Though it i s unclear

from the foregoin g portion of Bergg ren’s testimony wh ether Hu adu or B erg developed the specif

ications, review of his t esti mony as a whole makes it cl ear that Ber g did not deve lop the specifi cati ons for the freeze dryer s, but merelyforwarded the s pecifi cati ons request ed by Huadu to Hullduring t he negotiations. 25 On direct e xaminati on, Berggren was asked “[i ]n the bac k and forth th at you de scribe d w ith H uadu , did Berg Chill ing provi de techni cal i nput on th e f re ez e d ry er s. ” J A at

82. He responded “[w]e weren’ t capabl e of

24 In essenc e this conclusi on rejec ted the vie w of the Arbitr ation I nsti tute. 25 Berggren te sti fied, “Huadu read throu gh th e quo te, and there w as usu ally generated more – more q uestions. Eve ry time we’d send of

f techni cal specifications, it generated more questi ons that

we would in turn s end off
to th e v ar io us su ppl ie rs th at – tha t we had.” JA a t 81. B ergg ren’s te stimo ny is corrobor ated bythe te sti mony of Wayne Hinton, t he sales manager at Berg who

wo rke d on the H uad u pr ojec t.13

providi ng techni cal i nput. We rel ied on Hull for t

hat. ” JA at 82.

Berg maintai ns that

the fi nding by the distric t court th at Be rg “too k par t in the desi gn and/or appr oval of the design of the fre eze dry ers and modifi cati on ther eto,” wa s cle arly err one ous . W e agree . Neith er the c ourt n or SP I poin ts to evide nce supporting a concl usion that Berg play ed any r ole othe r than r elay ing information back and forth between Huadu and Hull regar ding the specifications of the freeze d ryers. In arguing t hat we should af

firm the dist

rict
court on t

his poi nt SPI ci tes t o the porti on of the trialtrans cript on which the dis tri ct court

reli ed. However, as
stat ed above, Berggr en made clear that Berg did not approve the de sign of the freez e dryers in the sen se of judg ing its efficacy , but onl y forwarded the specifications req uested by its custome r, Huadu, to i ts suppl ier, Hull, a nd
atte mpted to put

togethe r an agree ment relying on other e ntities’ ca pabilities . All of the t esti mony at t

he tri al est ablis hed that Hulldesigned t

he freeze dryer s and
attem pted to install the m su ccess fully in China. Furt

hermore, after

the cl osing of the Ass et Purchase Agreement , SPI perfo rmed all of th e oblig ations o f H ull und er the M odifie d A greem ent. 26 Indee d, the court re cogni zed that “ SPI performed al l work under t he Modified Agreement, i ncluding t

he flawed engineering of the modified fr eezedryers, the unsuccessf ul preliminary
testing of the equipment, and the st art- up acti viti es at t

he Huadu facili ty .” Berg
, 2003 WL 21362805, at *11.

Berg d isputes the district court’s findings as to i ts cul pabili ty for the breac h of the E quip men t Con tract w ith Huadu in other respects as well. The

cour t foun d that B erg w as pa rtially responsi ble for t

he breach of cont

ract beca use it de livered the fre eze d ryers late to China and one of t

he dry ers was dam aged wh ile bein g trans ported to Van co uve r f

orsh ip men t. Whi le we agree that Berg’s late shipment of t he machineryqualif

ied as a breach of
contra ct, this ap prox imate ly one-m onth delaywas not the r eason that Huadu ulti matelyrefused t o accept t he equipment. The record i s clear that Hull’s di fficul ty in obtai ning a component of the f

reeze dryer s caused

mo st of the d elay p rior to ship me nt. Furthermore, anydelayprior to the

26 In it s brie f, SPI ci te s t o a me mo written by Berg ’s pres ident to John Hu ll of the Hull Corporati on dated Sept ember 29, 1997. As a means of reachi ng a compromise sol ution i n the face of t he initial failure of the freeze d ryers, Berg

offered t o “provide on- sit e labor to make the neces saryrefri gerati on piping changes to a ccommodate the new cond ense rs.” JA at 201 5. Bu t SPI d id not offe r evidence that any Berg personnelever undertook any des ign or modification work pursuant to the M odifie d A greem ent.14

signi ng of the Modified Agreement which extended t

he deadli nes for the completi on of the proj ect i s irrelevant because Huadu did not

refuse t o accept the fre eze dry ing machinery i n May 1998

on a cco unt of th e late deliv ery in 1 997

. Rather, it r efused to a ccept the equipment because, even a fter t he various m odifications, the free ze dryers faile d to per for m to spe cific ation s. Theref ore, any breach o f the delivery dates byBerg set forth in t he origi nal Equipment Contrac t shoul d not have been a basi s for fi nding Berg in a ny way responsi ble for t

he fail ure of the freeze dr yin g a pp ar atu s to fu nc tio n p ro pe rly.

Moreover there is no evi dence that t he damage during t

he accident while the equipment was bei ng trans ported t o Vancouver caused the prob lems w ith the f reeze dryers. In f act, only one of the fr eeze dry ers was involved in the acciden t but the record clear ly shows that t

he freeze dryer problems r elat ed to both dryers. Thus, Huadu declined t o accept t he freeze dry ers becaus e neither could s atis fy t he through- put requi rements i n the Equipment Contrac t by reason of a design defe ct in bot

h pieces of machinery . Clearly , the design of t he freeze dryer s by Hullrather than the accident was the cause of t

he equipment’ s fail ure to func tion as promised. 27 Overall, we are constr ained to concl ude that the fact ual fi ndings of the district court with respe ct to Berg’s fault for the breach of the Equi pment Contract and the Modified Agreement lack eviden tiary support and thus a re clea rly erro neo us.
We recognize that, as the Arbitration Institute fou nd, wh ile Berg was certainly liable t o Huadu as a signat ory to the Equi pment Contract and Modified Agreement for t he fail ure of the fre eze dry ers t o functi on as requi red by those agreement s, suc h liabi lit y was imposed merel y because it did not comp ly with the contract. Bu t Berg’s liabi lit y di ffers i n nature f

rom that of Hu ll wh ich w as cu lpable beca use o f its technol ogical fail ures and which as betw een B erg an d H ull w as resp onsib le for the freeze dry ers not functi oning as requir ed by t

he specif ications i n the Equipment Contrac t. Moreover, if, on the rem and w e are o rderin g, SP I is held liable on a theo ry that it i s Hull’s

suc ces sor

SPI wil l b e i n t he s ame positio n as H ull. Ov erall, there fore, it is clear that a mong Berg, Hull and SPI no damages should have been asses sed against Be rg. Thus, the d istrict court clear ly erred i n apporti oning any

27 The district co urt imp licitly recogniz ed that

the defi ciencywith the freez e dryers re lated to desig n def ects rather than the accident . The court stat ed that “ [w]ithout

remedyi ng the probl em associ ated with the dia meter of the pipe, the fre eze dry ers coul d not have met t he through- put requi rements. ” Berg , 2003 WL 21362805, at *7.15

dam ages to Be rg. W e there fore w ill reverse the jud gmen t of the district court to the e xtent t

hat it alloc ated any damages to Berg and wil l remand the
case to t he dist rict court wit

h inst ructi ons that i t vacat e that

porti on of its order for judgment hol ding Berg res ponsibl e for Huadu’s dam ages. 28

C. THE LI ABI LI TY AND I NDE MNI FI CAT I ON T ER MS OF THE ASSET PURCHASE AGREEMENT

1. Lia bility

The next iss ue w e dea l with concerns SPI’ s chall enge to the order for judg men t assess ing d ama ges a gains t it pursuant to the Asset Purchase Agreement. Sect

ion 7.8 of t

he Asset Purc hase Ag reem ent state s that: Purchaser will, as appr opriate , agree to repa ir (at t he Real Estate or as

necessary, at the location of the customer) or acc ept returns of product s of the Business s hipped bySeller on and prior

to the Cl osing Date . . . which are defe ctive o r wh ich fa il to confo rm to the cu stomer’s orde r in acc orda nce w ith the fol lowing provi sions ( but Purchas er does not hereb y assum e any liab ility to any third party claim ant.

. . . )

JA at 1848-49 (e mphasis added) . The distr ict co urt c onc lud ed th at S ectio n 7.8 of the Ass et Pu rchas e A greem ent, entitled Product

Warranti es, di d not applybecause Huadu never acc epted the free ze dry ers and the refore anywork SPI did was not warr antywork governed by Section 7. 8. The court

stat ed:

At v arious poin ts durin g the tria l and in related briefin g, certa in parti es have refe rred t o the work performed on the Huadu Project a s ‘warranty’ work. Because ‘wa rranty’ w ork w ould have begun onlyafter Huadu’s finalacceptanc e of the free ze dry ers ( Ex. P20, Section 7.4) and final

acce ptanc e nev er actu ally 28 We realize that t

he order for judgment i n terms di d not hold Berg at fault but in s ubstance i t did exa ctly that as the c ourt o nly assess ed ag ainst H ull and SPI two-thirds of the $1,000, 000 paid purs uant to t

he Settl ement Contract by Berg to H uadu. In fa ct, the entire $1,000,000 plus, as will be s een, $65 0,000 for the Equ ipme nt Cr edit, sho uld be a sses sed aga inst H ull. Whether thes e also s hould have been

assess ed ag ainst S PI w ill have to aw ait determi nation on t

he remand with r espect to its p oss ible s ucc esso r liab ility.16

oc cu rre d, n o ‘ w ar ra nt y’ work was performed. SPI argues that the w ork performed aft er the c losi ng of the Asset Purchase Ag reem ent is w arranty work within t

he meaning of Section 7. 8 of the Asset Pu rch ase Ag reem ent. Sectio n 7.8, h ow ever, is inconsi stent

with Secti on 1.2(i ) and the s ide le tter (Ex. P-186) , and, theref ore, does no t support SP I’s contentions.

Berg , 200 3 W L 2 136 280 5, at * 10 n .10. Section 1. 2 lis ts the purchased a ssets , and subs ection (i) includ es, in rele vant p art, “all c ont racts and agr eem ents .” 29 JA at 1825-26.

We reject the district court’s interpret ation of the Asset Purchase Ag reem ent a s it is c learl y erron eou s. See M edtron ic , 247 F.3d at

53 n.2. 30 The re is no i nco nsis tenc y betw een Sec tion s 7.8 and 1.2(i ) of the a greement. Even assuming that the Equipment Contrac t and M odifie d A greem ent co nstitute purchased as sets unde r the Asset Purchase Agreement , it does not fol low that SP I cou ld no t limit its liability to third par ties w ith re spe ct to t hos e as sets. Furth ermo re, the d istrict cou rt’s ana lysis is fl awed because in i nterpr eting t he Ass et Pu rchas e A greem ent it loo ked to Section 7. 4 of the Equipment Contract between Huadu and Berg. That provisi on specifi es that if the freeze dryers satisf y the requ ireme nts set f orth in that agreement, “[t]hi s shallbe the Acceptance of the Equipment bythe Buyer and shall be con sidered [the] start of th e w arra nty pe riod .” JA at 78 2. Therefore, the court

concluded that the warrantyperiod on t

he freeze dryer s had
not st arted be cause Huadu never “accepte d” them and as a r esult Section 7.8 of the Asset Purchas e Agreement

cou ld n ot ap ply.

The district court

did not address the obvious differe nces between the Asset Purchas e Agreement and the Equipment Contrac t. For purposes of determi ning whether SPI assumed liabi lit y for the Huadu Projec t, i t was irr elevant

whether Huadu had “accept ed” the fre eze d ryers in acc orda nce w ith 29 The district c ourt concluded that Section 1.2 of the Asset Purchase Agreement was unambiguous and therefore the a greeme nt betwe en Be rg and H ull to pro vide tw o free ze dryers to Hu adu qua lified as a pur cha sed asse t. Furthermore, Section 1.3 di d not li st the Huadu Equipment Contract or Modified Agreemen t as excluded assets.

30 SPI regards the Section 7.8 i ssue as being a matter of contractua l

con struc tion sub ject to plen ary rev iew

. In li ght of our r esult we need not consider this contention as t

he dist rict court’ s conclus ions cannot survive even de fe re nt ia l rev ie w.17

Sec tion 7.4 o f the Eq uip me nt C ont ract. Th e rele van t pro visio n w as S ectio n 7.8 of the Asset

Purchase Agreement

which mad e clear that the limitation of liab ility to thi rd parties appl ied to “ products of the Busines s shipped by Seller on and prior to the Cl osing Date. ” JA at 1848- 49. It is undisputed that the freeze d ryers were shipped t o Huadu prior t o the closi ng of the Asset

Purchase Agreement on October 15, 1997. Therefore, Section 7.8 of the Asset Purchas e Agreement clear ly applie s to the disput e between SP I an d th ird-p arty cla ima nt B erg

.

Nev ertheless the district court held th at bec ause “SP I acqu ired the Hu ll Purchase Order

and Modified Ag reem ent” it w as “liab le for th e w ork it performed under

those cont

racts .” JA at 24 n.13. Cl early

this conclusi on was incorr ect as t

he plai n language of t

he Asset Purchase Agreem ent precludes a findin g of liability again st SPI and in favor of Berg on the basis arti culat ed by the d istrict cou rt, i.e

. that SPIassumed Hu ll’s respo nsibilities b y entering into the A sset P urc has e A gre em ent. Moreover, the fact that SPI di d not adequatel y modify

the equi pment does
not matt er as Hullshipped t he equipment before the Hull-SPI c losi ng date and thus SPI could not

be liable to Ber g under the As set P urc has e A gre em ent. Accordingly , we will revers e the judgment of t

he dist rict court t o the extent that it imposes liabilityon SP I. 31

In consi dering t

his poi nt we have not overl ooked Berg’s contention “ that any pur ported disclaim er of lia bility under Secti on 7.8 would [not] be binding

on non-parties to the Hull -SPI Ag reem ent, suc h as B erg.” B erg’s re ply br. at 24. Rather , we reje ct that argument for if, a s is the c ase, B erg se eks to impose li abili ty on SPI on the basi s of the Asset Purchase Agreement

it ca nnot pick and choose which of it s provis ions are applicable. T hus, the excu lpatory lang uag e of Sec tion 7.8 b ind s B erg

.

Our conclusi on, however, does
not necess aril y fr ee SPI from li abili ty on a differ ent the ory inasmuch as t he dist rict court explaine d that “[b]ec ause SP I’s liabil ityis establi shed on this [ i.e

. contra ctual] b asis, it is no t nece ssary to reach Berg Chil ling’ s arguments related
to suc cesso r liability unde r the de facto merger and continuati on doctri nes.” Berg , 200 3 W L 2 136 280 5, at * 10 n .13. On appeal, Berg r enews its argument that

eve n i f SPIis not

li abl e un der

th e t er ms of the Ass et Pu rchas e A greem ent, it should be held liable under these alte rnate t

heories . In vi ew of the

31 Berg main tains tha t Sectio n 7.8 is void as agai nst publ ic poli cy. Inasmuch as the d istrict cou rt incorre ctly inter preted t hat provi sion i t never reached this i ssue. On remand, the district court should ad dress Be rg’s argument i n the fi rst i nstance.18

circum stance that the district co urt did not addres s the appl icabi lit y of s uccessor liabi lit y under the de fact o merger and continuation doct

rines , we will remand this clai m to the di stri ct court for an analy sis of SPI ’s possible li abili ty on the applicabili ty of t

hese doctrines. 32

2. Indemni fication

SPI cha llenges the district court’s refusalto grant

it i ndemnificat

ion from Hu ll. Section 8.2 of the Asset Purchase Agreemen t provides as follows:

8.2 Indemnifi cati on Obligati ons of Sell er

. Su bjec t to S ectio n 8.3 hereof, Seller

shalldefend, indemnify , save and ke ep harm less Pu rchas er, its Af filiates an d their respective succe ssors a nd per mitte d as sign s . . . again st and from all Damages sustai ned or incurr ed by any

of them resul ting fr om or aris ing out of or byvirt

ue of: . . .
(c) the fa ilure to dischar ge when due any liabi lit y or obligat ion of Seller other t han the Assumed Liabili ties , or any clai m against Purchaser with res pect t o any s uch liabi lit y or obligat ion or alle ged liabili ty or obligat ion;

(d) any cl aims by parti es other

than Purchaser

to the e xtent caused by acts or

omissi ons of Selle r on or pri or to t he Closing Date, includi ng, withou t l imi tati on, cl ai ms for Damages which ari se or arose out o f Seller’s operation of the Business or by virtue of Seller’s ownership of the Purchased Assets on or

prior to the Clo sing Da te[.]

JA at 1852. 33 Section 8. 5 of the Asset

32 The district co urt also shou ld determi ne whether t o applyNew Jersey or Pennsy lvania

law to Berg’s successor liability claims again st SPI , thoug h it may not ne ed to make a choi ce if the law of the states is th e sam e or the result

wou ld be the sam e unde r either state’s la w. 33 The executi on of the si de letter agree men t betw een H ull and SPI in relat ion to t he Huadu Project

did not al ter SPI’s rights under the Asset Purchase Ag reem ent as th at letter pro vided that:

Ex cep t as a me nde d he reb y,19

Purchase Agreement

sets f orth a proc edur e by w hich S PI is req uired to notify H ull of a ny third-p arty claim lodg ed ag ainst S PI. A s requ ired by this provisi on, aft er rece iving a c opy of t he summons and complaint in thi s acti on, SPI on November 9, 2000, wrot e a letter to Hull s tati ng:

Pursuant to Section 8. 5 of the Agreement 34

the te rms and provi sions of the Asset Purchase Ag reem ent sh all rem ain in full fo rce an d eff ect, it being unders tood that

the executi on of this letter agreement, and any a ctions taken pursu ant he reto, sha ll in no way l imit , or otherwis e consti tute a

wa iver of any of th e rights
to w hich P urch aser is entitled purs uant to t

he Asset Purchas e Agreement includi ng, without limi tati on, thos e provided for und er Article V III thereof

.

JA at 1890.

34 Section 8.5 of the Asset Purchase Ag reem ent pro vides , in pertin ent pa rt:

No failure by an Inde mn ifying Pa rty to ackn ow ledge in w riting its indemnifi cati on obligat ions und er this A rticle V III shall reli eve it of such obligat ions t o the ext ent theyexist . If an Inde mn ified P arty is entitled to i ndemnificat ion again st a Th ird Pa rty Claim, and t

he Inde mn ifying Pa rty fails to accept a tender of, or assume, t he defense of a Third Party Clai m pursuant to thi s Secti on 8.5 . . . the Inde mn ified P arty shall have the right, without prejud ice to its rig ht to indemn ification hereun der, in it s discretion e xercis ed in good fai th and upon advic e of c oun sel, to
conte st, defe nd an d litigate

suc h T hird Par ty Cla im . . . . If, purs uant to this Section 8. 5, the Indemnified Party so
contest s, defends , li tigates or settles a Th ird Pa rty Claim for w hich it is entitled to i ndemnificat ion hereunder a s herei nabove provided, the Indemni fied Partyshallbe reimburs ed by the Ind emn ifying Pa rty for the reaso nable
attorneys ’ fees and ot

her expenses of defe nding,
contesting, l iti gating a nd/or

se ttli ng th e T hi rd Pa rty20

you ar e herebyput on notice of the above cap tion ed m atter

. Purcha ser hereby tenders the defens e of the above capti oned matter

to Sell er together w ith Purchase r’s demand for indemnifi cati on. Pursua nt to Secti on 8.5 of the Agreemen t, please acknowledge y our indemnifi cati on and defense obl igati ons promptly and in writing.

JA at 1184. Hullresponded on December 5, 2000, t

hat “i t does not

have an obligation t o tender a defense on beha lf of S P Ind ustries, In c.” in this
matter . JA at 1185.

The d istrict court rejected SPI’s indemn ification claim, stating that “SP I’s argu men t is unp ersua sive b ecau se SP I is liabl e . . . for i ts own post- closi ng conduct. ” Berg , 2003 WL 21362805, at *12. The court reli ed on Secti on 8.2(d) of the Asset

Purchase Agreement , which provided for

indemnifi cati on by Hullfor action s brou ght b y third partie s related to conduct “prior to the Closing Date.” JA at 1852. T herefore, the d istrict court concl uded that t

he actions take n by SPI in attempting to rep air the freeze dryers after the closi ng of the Asset Purchase Agreement were not s ubject to the indemnifi cati on provisi on of that agr eem ent.

The district co urt reac hed its

conc lusion as a co nseq uenc e of its misinterpret ation of

Section 7. 8, which, as explai ned above, expr essly provided that SPI“does not hereby as sume any liabi lit y t o any t hird party clai mant” for any i tems shi pped prior to the c losi ng of the Asset Purchase Agreement . JA at 1849. Under Secti on 8.2(c) Hull was obligated to defend and i ndemnify SPI as to any“liabili ty or obli gation of Seller .” JA a t 185 2. Th erefo re, purs uant to Section 7.8, the H uadu f reeze dryers qualif ied as a “ liabi lit

y or obligat ion” of Hu ll. We d o no t see w hy SPI’ s inab ility
to ov ercom e H ull’s earlie r failure to produce a sy stem comply ing with t he specifi cati ons of the Equi pment Contract should i mpair SPI’s indemnifi cati on clai m. In thi s regar d we point out t hat SPI’s i nabili ty to modifythe equi pment to complywith the s pecifi cati ons was at most a contr actualfail ure. We see no reason why Hull and SPI shoul d not have been free t o place the losse s from the fail ure as between themselves as they

saw fit and that is w hat the y did in Claim[ s] which are incurr ed from ti me to ti me, forthwit h following t

he present ation to the Indemnify ing Party of itemize d bills fo r said
attorneys ’ fees and ot

her expenses.

JA at 1854.21

Sec tion 7.8.

Accordingly , we will revers e the order for judgment ent ered by the dis tri ct

cour t again st SPI and in favo r of H ull denyi ng SPI’s i ndemnificat ion cla im and will rem and S PI’s ind emn ification claim to the d istrict cou rt with in struction s to grant j udgment in favor of SPI and against Hull on thi s clai m. The dist rict
court t hen must make an award purs uant to Section 8.5 of the Asset Purchase Agreemen t in favor of SPI and against Hull as to SPI’s “reasonable attorneys’ fees and other expenses of defending,

con testin g, [a nd] litiga ting ,” this actio n. JA at 1854.

D. BERG’ S I NDEMNIF ICA TI ON CLAI M AGAINS T HULL AND SPI

1. Indemni fication

The district co urt did n ot direc tly address Ber g’s cl aim for i ndemnificat ion against Hull and SPI, although by finding that Ber g was parti ally

at faul t for t

he breac h of contra ct to H uadu , it implicitly rejected it. Therefo re, the district court did not ana ly ze whether Pennsy lvania or New J er se y la w ap pl ie s t o thi s c la im . A t the begi nning of the breach of cont ract secti on of its opinion, the district court indicated that “[i ]n a previ ous memorand um addressing the parties’

mo tion s fo r sum ma ry judg me nt, I determi ned that

New Jersey l aw governs this acti on.” Berg , 2003 WL 21362805, at *10. However, in it s prior opinion t

he

cou rt onl y hel d t hat

as to anycl ai ms between Hull and SPI relat ed to the Asset Purchas e Agreement the c hoice of law provis ion in t

hat agre ement providi ng that New Jers ey l aw applies gov ern ed. Berg Chill ing Sy s., Inc. v. Hull Corp. , No. CIV. A. 00-5075, 2002 WL 31681955, at *5 (E.D. Pa. Nov. 26, 2002). There fore, r ather t han address ing wh ether B erg’s in dem nifica tion cla im against both Hull and SPIalso shoul d be governed by New Jersey l aw, the di stri ct court mere ly assumed that it s hould be. 35 On reman d the distri ct court must addr ess B erg’s in dem nifica tion cla im against SPI in the firs t ins tance, though

35 In any event, there i s no confli ct between Pennsy lvania

or New Jersey law wit h re spe ct to t he in dem nific ation issu e. See Duall Bldg. Restoration, I nc. v. 1143 East Jer sey Ave. Assoc., Inc. , 652 A.2d 1225, 1233-34 ( N.J. Super . Ct. App. Div. 1995) (affi rming trial c ourt hol ding that paint manufac turer

had dutyto indemni fy builder who used manufacturer ’s pai nt on a bu ilding wh en the pain t peeled off ); Mo scatiello v. Pittsburgh C ontractors Equip. Co. , 595 A.2d 1198, 1201-02 (Pa. Super. Ct. 1991) (affi rming deci sion that sell er of concre te pavi ng equipment was entitled to i ndemnificat ion for damage award in underl yi ng breach of cont ract action from manu facturer of m achinery because seller was “m ere cond uit”). In fact Du all cite d M osca tiello and foll owed it.22

base d on our a nalysis of both Pen ns y lv an iaan d Ne w Je rs eyla w, we hold that B erg is e ntitled to indemnifi cati on against Hull as t he manufacturer

of the fre eze dry ing equipm ent. As ex plained earlier, Berg primari ly served as the dis tri butor of t he equipment and negot

iate d the agre ement with Huadu. Hull designed t he freeze dryers an d sho uldere d the re spon sibility to ins tallthem. Furt

hermore, under the Equipment Contrac t and the Modified Agreement, Hullwas requir ed to conduct
testing to as certa in the f unctiona lit

y of the eq uipm ent.

The determ ination of the viability of Berg’s cl aim for i ndemnificat ion from SPI must await

the concl usions of t

he dist rict court on r emand. If t

he dist rict court decides that SPI is l iable as a

succ essor to Hu ll unde r the de facto merger or cont

inuati on doctri nes, t

he
court t hen will ha ve to anal yze whether Berg is entitl ed to common law indem nifica tion fro m S PI. H ow ever, if the dis tri ct court

rejec ts the success or liability claim th en the re w ill be no basis upon which Berg can asse rt an inde mnifi cati on cl aim aga ins t SPI because Section 7.8 of t he Asset Purchase Agreement

negates t

he possibility of SPI assum ing Hu ll’s liabi lit y byreason of t

he fail ure of the freez e dryers w hich h ad be en sh ipped to Huadu. 36 2. A ttorneys’ f ees an d cos ts

Berg soug ht to rec over its
attorneys ’ fees and expe rt witness fees from Hull and SPI i n connecti on with the defe nse o f the a rbitration proc eedin gs in Sw eden . The district co urt rejec ted this claim , stating th at:

Wh ile ordinarily Berg Chilli ng might be entitl ed
to reco ver su ch fe es, in this

case s uch a n aw ard w ould be unc ons ci onabl e. As discussed a bove, B erg Ch illing did not ad equa tely repres ent the interests of Hull Corporation, or , by
exten sion, S PI, an d fo r this

reaso n it can not rec over its fees. M oreover, since B erg Ch illing w as eq ually liable with the Defendant s herei n,

ea ch mus t b ea r i ts own costs and counsel fees.

Berg , 2003 WL 21362805, at *11. The district co urt pre viou sly had n oted th at in the arbi tration procee dings Berg offered the te sti mony of it s expert , Walter Peb ley, that the f reeze dryers “c ould produce qual ity

product but

at signi ficantly lower thr ough-puts. ” JA at 519 -20; see also JA at 489 (st ating t hat he testifie d at the arbit

rati on proceedi ng that “ the equi pment would functi on but
not at t he through- put rates in t he

36 In any event, under Secti on 8.2 of the Asset Purchas e Agreement SPI would be entitled to indem nifica tion fro m H ull.23

contract spec ifications”). The c ourt charact erize d this as tes timonyoffered by Berg “ that the freeze d ryers were improperl y des igned. ” Berg
, 20 03 WL 21362805, at

*8. The court

then concluded that “[s] uch testimony di d not repres ent the interests of H ull Corporati on.”

Berg argues t

hat the adequacy of its repres entation effort s in the arbit rati on are irrele vant in determ ining w hethe r it is entitled to attorneys ’ fees. Inasmuch as Berg was not pri marily

the cause of Huadu suffering damage and Hulland SPI did n ot overcom e the equip ment’s defici encies a s contemplated bythe Modified Agreement, Berg contends t hat the distric t court s hou ld hav e aw arded it all da mages flowing fr om that fai lure, includi ng reasonabl e att orney s’ fees and
costs. Berg furthe r maintains that the court’ s rej ecti on of Berg’s cl aims was

anom alous beca use “[t]he co urt disallow ed as part of Berg ’s dam ages its litigati on expenses i n the Arbit rati on based on the ve ry same testimony which the court its elf l ater f

ound to be tr

ue and conclusi ve and the bas is for holding defendants liabl e in the inst ant case !” Berg’s br. at 55. Berg str esses t hat due to the c lear de fects in the fre eze d ryers, it defended the machi nery at the arbit rati on “as best we could.” JA at

200.

SPI counter s that

because the district co urt fou nd B erg to b e at fa ult in part, it was not

entitled to attorneys ’ fees and costs . SPI ar gues, al ternat ively , that in the absence of a re levant stat utoryor contrac tual pr ovisi on providi ng for

attorneys ’ fees, Berg cannot pr evail on th is cl ai m.
As with Berg’s i ndemnificat ion clai m against Hulland SPI, the dist rict court di d not st ate whether it was apply ing Pennsy lvania

or New Jersey law on the attorneys’ fees a nd costs issue. In their briefs in thi s court

neithe r Berg nor SPI d irectly addr esses w hich la w sh ould apply . However, Berg r elie s solel y upon Pennsyl vania l aw in arguing f or attorne ys’ fees a nd co sts w hile SP I poin ts to both New Jerse y and Penns yl vania l aw on t he in dem nific ation issu e. See Fleck v. KDI Sylvan Pools, Inc. , 981 F.2d 107, 117 (3d Cir. 1992) (fi nding that under Pennsyl vania l aw “an indemnite e may

recover attorney’ s fees and cos ts i ncurred in defense of the l iabil ity indemnifi ed again st from the ind emn itor”); McA dam v. Dean Witte r Reynol ds, I nc. , 896 F.2d 750, 777 (3d Cir . 1990) ( finding t hat New Jersey l aw requires a str onger show ing tha n oth er states in orde r to overcome the pr esumption i n New Jersey that “a ttorneys’ f ees are not a re cove rable item of da mage s”).

Inasmu ch as the district court based its den ial of attorneys’ fees in part on its finding t

he Berg was parti ally

at fault for the breach of the Equi pment Co ntract a nd M odifie d A greem ent w ith Hu adu, w e mu st rem and th is claim to that co urt for furthe r con sidera tion in ligh t of o ur re jectio n of this f ind ing

. First , the court s hould addres s whether Pennsyl vania or New Jers ey l aw applies24

to Berg’s clai m for att orney s’ fees and costs i ncurred i n the arbi tration proceedi ngs, though the choi ce may not be necessary i f the court concl udes that theyare the same or that regardl ess of wh ich state ’s law applie s its result w ould be the sam e. Th e cou rt also sh ould addr ess the issue o f suc cesso r liability with res pect t o SPI to det ermine whether it might have any l iabili ty for at torneys’ fees if Ber g is entitl ed to the m under eithe r Pe nns ylvan ia or Ne w J erse y law

. As stated above, if SPI is not li able as a

successor

to Hull under

eithe r the de facto merger or continuation doctri nes, then Section 7.8 of the Asset Purchase Ag reem ent ba rs any liability aga inst it, includi ng liabi lit

y for attorneys ’ fees and

cos ts.

As for the cl aim of att orney s’ fees against Hull (and SPI s hould the di stri ct

cour t find it liab le as a s ucce ssor to Hull), the dis tri ct court

erred i n stating that “sin ce B erg C hilling w as eq ually liabl e with the Defendants here in, e ach must bear i ts own costs and counsel fees.” Berg , 200 3 W L 2 136 280 5, at * 11. Berg had not brought

a motion for
attorneys ’ fees i ncurred i n the pres ent acti on. Rather , it

sought attorney s’ fees and costs from the ar

bitr ation proceedi ngs which arose out of the disput e involvi ng the fre eze dry ing equipment. As explained above, i f on remand the di stri ct court determi nes that either H ull or S PI ha s a du ty to indemnifyBerg, such i ndemnificat ion should include the reasonable att orneys’ fees a nd ex pert w itness f ees inc urred in the arbitr ation proceedings.

The d istrict court found tha t Berg was not enti tled to attorneys ’ fees because i t fai led to represent Hull and SPIs’ i nteres ts adequatelyin the arbit rati on. 37 We reject t

his basi s for den ying B erg ’s cla im f or a ttorn eys’ fe es. Berg ’s entitlem ent vel non for attorney s’ fees f rom Hu ll and S PI is gro und ed on its claim for ind emn ification . If Be rg is entitled to indem nifica tion fro m H ull, SPI or both, then the district court must analy ze whether, under New Jerseyor Pennsyl vania l aw, such indemni fication includes the attorn eys’ fees and ex pert witness f ees incur red by Berg in the arbit rati on proceedi ngs. Any consideration of the ade quacy of B erg’s repres entation of Hull a nd SPI in the arb itratio n pr oce edin gs is irrele van t.

37 We question the d istrict court’s conclusion that inasmuc h as Be rg’s testimony was “ that the freeze d ryers were improperl y des igned [the] testimo ny did n ot repr esen t the inter ests of H ull Corpo ration.” Wh ile the court’s view of the t esti mony may be accurat e,

w e d o n ot be lie ve th at t he vi ab ilit y of an indem nifica tion cla im fo r fees and c osts should depend on t

he indemnit ee disreg arding the fa cts in the applic able proceedi ng. In s hort, if, a s clearly was the case , Hull i mproperly designed t

he equip men t then B erg w as no t require d to fabric ate a defens e in the arbit rati on proceedi ngs to j usti fy i ts cl aim for indemnifi cati on.25

Moreover, it

is si gnific ant that even though Hull and SPI had recei ved notice of the arbit

ration proceedings, both st ood on the si deline s during t hem requ iring B erg to d efen d the e quip men t. 38 No w H ull and SPI h ave e ngag ed in M ond ay morn ing q uarterb ackin g in

assa iling the d efe nse pro vid ed b y Ber g. The record cl early

shows that gi ven the circum stance s in w hich it f oun d itself Berg defended the de fici ent machiner y as best it co uld. T he dis trict cou rt shou ld not h ave re wa rded Hu ll and S PI fo r their lack of participation i n the arbi tration proceedings.

SPI furthe r contends that t he attorneys’ fees and c osts wh ich Berg expended were unreas onable. If the mach inery was as de ficient as Berg claim ed be fore th e district c ourt, the n, in SPI’ s view , Berg spen t an un reaso nable

amou nt of mo ney defend ing mac hinery that a cco rdin g to Be rg w as in def ens ible. Sho uld the district co urt find that B erg is entitl ed to attorney s’ fees, it must determ ine the appr opriate amo unt to award. The dis tri ct court should conduct a thorough ana ly sis of t he att orney s’ fees and costs expended by Berg in the arbit rati on proceedi ng to dete rmine wh ether th ey wer e reaso nable and to issue a n appropri ate award.

E. JOI NT AND SE VERAL LIABILI TY

Berg maintai ns that

the dis tri ct court er red in fa ili ng to hold Hulland SPI joint ly and several ly liabl e for the $333,000 each party was requir ed to pay to Berg. In its M emoran dum and O rder, the district court stated that “Be rg Chilli ng has not pr ovided anypersuasi ve autho rity for hold ing d efen dants jointly and several ly liabl e in a bre ach of
contrac t action when the pl ainti ff has also bee n sh ow n to hav e be en a t fau lt.” 39 Berg , 200 3 W L 2 136 280 5, at * 11 n .16. Therefore, the dis tri ct court entere d judgment in favor of Berg and against Hu ll in the am oun t of $3 33,33 3 and in favor of Berg and agai nst SPI for the

sam e am oun t.

We need not address this issue at this time becaus e we hold that under Section 7.8 of the Asset Purchase Agreement SPI is not li able for the defecti ve freeze dryi ng machineryand the issu e of jo int and seve ral or o nly severalliabi lit

y ul timat elymay not be materi al in t

his cas e. As st ated above, on remand the district

court must address Berg’s claim that SPI is l iable as a

succ essor to Hu ll unde r the de facto 38 Ho we ver, at o ne po int SP I did w rite a letter t o Berg putti ng forth various arguments t

hat it should use i n defending the fre eze dry ers duri ng the arbi tration proceedi ngs. Berg’ s presi dent te sti fied at tri al that Berg did i n fact as sert some of thes e de fen ses in the a rbitra tion

. 39 As ex plained ab ove, the district court erred in findin g B erg p artially at fau lt.26

merger and continuati on doctri nes. I f, after cond ucting this analysis the court finds that SPI i s li able, it s hould make detai led fi ndings of fact and conclusi ons of law as to w hethe r SPI and H ull sho uld be held j ointl y and s everal ly liabl e. 40 On the othe r hand, i f the di stri ct court finds that SPI is not l iable to Berg as a

successor

to Hull under

eithe r the de facto merger or continuation doctri nes, then SPI would have no l iabil ity and the issue o f joint a nd se veral liab ility would be m oot.

F. TH E EQ UIPM EN T C RE DIT

As stated a bove, w hen B erg entere d into a Settlem ent C ontrac t with Huadu, in addi tion t o making a pay ment of $1,000, 000, it

agreed t o permit Huadu to retain the freeze d rying equipme nt. In the Settlement Contr act Berg and Huadu agreed that in t

heir cur rent condi tion t

he freeze dryer s should be va lued at $650,00 0. The co urt rejected Be rg’s clai m for damages predi cated on the $650,000 Equipment Cre dit, stating that Berg “has not es tablishe d that th is
amount accuratelyrefle cts t he value of the equi pment. I n additi on, even i f the $650,000 figure were accurate, i t does not take into ac count the c osts Berg Ch illing w ould have incurr ed in
retrieving t

he equipment and/or findi ng another purchaser for

the equi pment.” Berg , 2003 WL 21362805, at *11.

Berg maintai ns that

this finding

wa s clearly erro neou s. In sup port o f this argument, Berg contends that the best evidence of t

he value of t

he equipment

wa s the $ 650 ,000 v alue a greed to by it and H uadu in their a rms-le ngth neg otiat ion

. Berg contends t hat Huadu had an incentive to set the l owest possible value for the equipment because it was entitl ed to rec eive addi tional moneys fr om Berg only i f Berg was successf ul in t his action and made a

reco ver y in ex ces s of $1,6 50,0 00, a figure repres enting Berg ’s paym ent to it in cash and Huadu’s right to ret ain the equipment. Thus, if t

he value had bee n less H uadu wo uld h ave b een m ore like ly to sha re in a re cove ry in this actio n as its thres hold for participation would ha ve been reduced pro tanto

. Berg furthe r argues that be cause the f reeze dryers were purchased fr om Hull for $1,150,000, and theycould produce qualityproduct at lower through-puts, $650,000 was a reas onable val ue for the equipment. Finall y, Berg points to the fact that nei ther Hullnor SPI offere d any 40 In deny ing Berg’s clai m that SPI and Hu ll shou ld be h eld join tly and sev erally liable t he district

court did not address whether Pennsy lvania

or New Jersey law applie s. Furt

hermore, the court

did not analy ze the pr evail ing case l aw or expla in the re ason s for d enying re lief to Berg. On remand it

will have an opp ortun ity to cond uct su ch an analysis and reach a conclusion i n accordance with our in struction s if the iss ue is ge rm an e a nd its re so lu tio n i s n ec es sa ry.27

evidence to refute the $6 50,000 f igure and that their position at t

rialwas that t

he equipment compl ied with t he contra ct spe cific ation s.
As might be expe cted , SPI contends t

hat the dist

rict court’ s denialof the $650, 000 clai m for damages was not clearly erroneous. It argues tha t Berg failed to pro ffer s uffic ient ev idenc e as to the va lue of the eq uipm ent an d as a result the distric t court c orrectly de clined to engage in “gues s work.” SPI’ s br. at 49.

We recognize that damages m ust be proven to a

reasonabl e degree of
certa inty, Pugh v. Holmes , 405 A.2d 897, 909 -10 (P a. 197 9); Willi am B. Tanner Co. , 528 F .2d at 2 71-7 2, thou gh ab solute pre cisio n is n ot re qui red

. Bigelow v. RKO Radio Pictures Inc

. , 327 U.S. 251, 264 , 66 S .Ct. 5 74, 5 79- 80 ( 194 6). Consideri ng the governi ng legal princi ples and t

he evidence presented at trial, we conclud e that the district court’s denial of the $650, 000 in damages was clear ly erroneous . While i t is true t hat Berg did n ot sup ply evide nce w ith respect to the va lue of the equipment apart f rom the fig ure it ne gotiate d w ith Hu adu f or the S ettleme nt Co ntract, still in the u nusu al circu mstan ces h ere in which it was clearly i n Huadu ’s interes t to value the equipment at the lowest poss ible va lue in o rder to enha nce its chances of sharing in a pos sibl e dist rict
court r ecoveryin thi s case the dist rict
court s hould have had confi dence in that figure. Furthermore, i f the methodol ogy for computation of damages i s accept ed, i.e

. damages in the amount of the a greed valuation of the equipment, then damages were est ablis hed with prec isi on.

We have not lost

sight of the reali ty that i t undoubtedl y would have been expensi ve for Berg t o recover t he equipment, a point SPI advances. 41 Ne verthe less w e think that it w ould prove too much to deny Berg a recovery by reaso n of that circu mstan ce. A fter all, any time that

an enti ty makes a pay ment in kind i t rel ieves i tsel f of expenses relat ing to t he ite m involved. For example, i f an enti ty settles a di spute by

conv eying rea l estate th e entity w ill relieve it self of expenses for taxes, main tenan ce an d insu rance . But still it is fair to sa y that the v alue o f the re al estate refl ects the a mo unt of th e se ttlem ent. Thus, we will not denyBerg the $65 0,000 recov ery on the theory tha t it saved money by

leavi ng the equi pment with Huadu. 42

41 SPI con tends that exce pt for H uadu’s retentio n of the eq uipm ent B erg w ould “hav e bee n con tractua lly required to

remov e the freeze dryers from H uadu’s facilities.” SPI’s br. at 49. SPI, however, does not

refer to the contractua l provisi on that i mposes thi s duty . But even if i t is correct

our resul t would be the same.

42 Berg p oints out that H uadu a nd B erg were aware that

Berg avoided cos ts by not having to take poss ession of the equip men t and th is facto r “pres um ably [was] considered by [them] in their arms-28

Overall, we are sati sfied t hat inasm uch a s there wa s no v alid rea son to rejec t the c laim for

damages predi cated on the val ue of the equi pment, the dist rict court’ s decis ion rej ecti ng damages predicated on the Equipment Credit was “completel y devoi d of minimum evidentiarysupport di splay ing some hue of credi bili ty or bears no rati onal relationship to the sup portive eviden tiary data. ” Kool , 300 F.3d at 353 (cit ation

om itted). Th us, w e w ill reverse it. 43 II I. CONCLUS ION

We will rever se the or der of the district co urt ente red Ju ne 11 , 2003 , to the ext ent that we have explai ned and will r emand the matt er to t he dist rict court for fu rther proceed ings. The c ourt erred in findin g B erg eq ually at fau lt with Hull and SPIand indeed at fault at all. We therefore will remand this case for the di stri ct court

to vacat e that portion of its dec ision holding B erg equall y at

fault for Huadu’s damages or at fau lt at all. Inasmuch as t he dist rict court’s denial of attorneys’ fees to Be rg was based in part on it s faulty fi nding that Ber g was parti ally

culpabl e for the defecti ve freeze dryer s, we must r emand that c laim as wel l for further consider ation i n light

of our opini on.

The district co urt also erred in its inter pretat ion of Section 7.8 of t

he Asset length ne gotiat

ions i n which theyarri ved at the marke t value of $ 650,000 .” Berg’s br. at 62.

43 Ac tually there is a noth er po ssible basis to reject B erg’s c laim. B erg as serts that it had “rights to [the ] equ ipme nt” and relinquished them to Huadu as a por tion of th e se ttlem ent. See
, e.g. , Berg’s re ply br. at

43. It squarel y bas es this right on its “payment

of the [arb itratio n] a wa rd.” Be rg’s br. a t 3. While it is t rue that under the arbit

rati on award if Berg had p aid Huadu the cash awarded it

could have t aken the fr eeze dryers ba ck, this re captu re me rely wo uld have lessen ed the valu e of H uadu’s recovery . Yet when Berg settled by payi ng the $1, 000,000 and al lowing Huadu to reta in the e quipment, it i s not clear that i t gave up any thing i t had a right to recl aim as it

appears t

hat Huadu had paid 97% of the purcha se pri ce specifi ed in the Equipment Contrac t and thus we do not u nderstand why Be rg under the c ontract

could have r eclai med the equi pment. Of course , once the settlem ent w as reac hed th e partie s’ rights under the a rbitration award were supe rsede d. V iewe d fro m this perspective bygiving up t he equipment Berg suffered no da mage and thus, other than for its exp enses its dam ages w ere onl y $1, 000 ,0 00 n ot$1, 650 ,0 00. But we mak e no r uling o n this p oint fo r wh ile SPI contends t

hat Berg di d not show that it was entitled to the $6 50,00 0 in dam ages related to the E quip men t Cred it, SPI pred icates this contention o n a theory relat ing to t he possibl e value of t

he eq ui pme ntan d no t o n the th eo rywe advance.29

Purchase Agreement

between Hull and SPI, and as a res ult

inco rre ctl y he ld SPI liabl e for breac h of the Equipment Co ntract a nd M odifie d A greem ent. 44 Under Section 7.8 of the Asset Purchase Agre emen t, SPI di d no t a gr ee to as sum e any liability as to th ird-pa rty claiman ts such as Berg for

any machi nery shipped prio r to th e clo sing of th e ag reem ent. Bec ause the distric t court m ade th is fi ndi ng, it

di d no t a ddr es s Be rg ’s cl ai ms that SP I wa s liable a s a suc cesso r to H ull under the de facto merger and

co nt in ua ti on d oc trin es . A cc or di ngl y , w e will rem and th is matte r for th e cou rt to consider SPI’s succ essor l iabil ity on these th eories and, if it is liable, also to consi der Ber g’s c lai m that Hull a nd SPI shou ld be h eld join tly and sev erally liable to it.

The court al so erre d in deny ing SPI’s cl aim for i ndemnificat ion from Hull and we accordi ngly will r everse t he ord er fo r jud gm ent to the e xten t it did so. Under Section 8. 2(c) of t he Asset Purchase Agreement , Hull was obl igate d to defend and i ndemnify SPI as to any “l iabi li ty orobl ig atio n of

Sel le r. ” On

rema nd, the district co urt sho uld v acate the order denyi ng indemnifi cati on and shoul d ent er j udgment in fa vor of S PI and ag ainst Hull on SPI’s ind em nific ation claim

. The d istrict court in ente ring the judg men t shou ld determi ne the re asonable attorneys ’ fees and c osts w hich S PI ex pend ed in defending this l iti gation a nd issue a n award pursuant

to Secti on 8.5 of the Asset Purchas e Agreement in i ts favor and a gains t Hu ll.

We also find that Berg i s enti tled to inde mn ification from Hu ll and w e w ill

revers e the orde r for j udgment to the
exten t that it den ied tha t claim a nd w ill

rema nd th e ma tter to the district co urt to ente r a ju dgm ent f or in dem nific ation

. But Berg’s cl aim for i ndemnificat ion from SPI must await

the det ermination of the district court on rem and on Berg’s

successor

liabi lit y ar guments under t

he de facto merge r and conti nuation doctri nes. Fi nally , we will revers e the judgm ent to the exten t that it denied Berg recovery of damages based on the $65 0,000 Equ ipme nt Cr edit an d w ill

revers e the o rder o f the d istrict cou rt to the extent that i t denied these damages.

As between themsel ves Berg and SPI s hall be ar their o wn costs o n this appeal but

costs s hall be taxed i n favor of each of the m ag ainst the Hu ll Corporati on. 44 Berg main tains tha t Sectio n 7.8 is void as agai nst publ ic poli cy. Inasmuch as the d istrict cou rt incorre ctly inter preted t hat provi sion i t never reached this i ssue. On remand, the district court should ad dress Be rg’s argu men t.