Opinion ID: 172078
Heading Depth: 1
Heading Rank: 3

Heading: Negotiations and the Sale

Text: Simplot knew it might be subject to suit by Ashley Creek if it purchased Chevron's pipeline, and it entered negotiations with Chevron over who would be responsible for the defense of the pending Ashley Creek litigation. Chevron informed Simplot, [i]t is our preference to sell the business as is and reflect the risk of possible pre-closing liabilities in the closing price. If this should be unacceptable, Chevron might be willing to accept pre-closing liabilities on a cost sharing basis for a limited time. 8 Aplt.App. at 2105. Simplot counter-offered that it would take control of the Ashley Creek litigation at Chevron's expense. The parties met and tentatively agreed that Chevron w[ould] retain responsibility [over the litigation] but w[ould] consult with [Simplot] regarding any settlement. Id. at 2112 (capitalization omitted). Simplot circulated a draft sale agreement following the face-to-face negotiations. The draft provided that Simplot would assume control over the defense of the Ashley Creek litigation, but that Chevron would be responsible for attorneys' fees, costs, and damages resulting from the litigation. Chevron did not accept Simplot's draft, stating that the principal issue continues to be the liability provisions. Id. at 2140. Simplot circulated revised drafts. The drafts stated that Chevron would retain control over the defense of the Ashley Creek litigation, advise Simplot of the status of the proceedings, consult with Simplot concerning defense strategy, settle the litigation only with Simplot's permission, and pay all [resulting] penalties, damages, and costs. Id. at 2149, 2163. Simplot would assume only the responsibility and cost of prospective compliance with the tariff when set in the [STB] Case. Id. at 2163. Simplot circulated three additional drafts. None of the drafts materially altered these revised terms. Simplot and Chevron closed the sale in 1992. Two final agreements were central to this sale: the Phosphate Slurry Pipeline Asset Sale Agreement (Pipeline Agreement) and the Phosphate Fertilizer Business Asset Sale Agreement (Plant Agreement). The Agreements contain virtually identical pertinent terms, discussed more fully infra, which include indemnification provisions and an integration clause. The Agreements provide, as of the closing date, that Simplot would assume (i) liabilities relating to its purchase that arose after the closing date and (ii) liabilities specifically set forth in particular provisions. Chevron retained responsibility for its defense in the pending Ashley Creek litigation and any concomitant damages and costs. The Agreements also provide that Chevron would, inter alia, indemnify and defend Simplot for liabilities (i) arising from the operation of the pipeline before the closing date or (ii) arising from a breach of any representation, warranty, or covenant. In exchange, Simplot agreed to indemnify and to defend Chevron for liabilities (i) arising from the operation of the pipeline after the closing date or (ii) arising from a breach of any representation, warranty, or covenant.