Court Opinion

ID: 9489334
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:12:49.209481+00
Date Added: 2024-06-11T17:53:28.071286
License: Public Domain

STAPLETON, Circuit Judge,
dissenting:
I join Sections I and II-A of the court’s opinion. I would affirm, however, because I conclude that the 1978 purchase agreement unambiguously requires R & H to indemnify SKB for the costs of the cleanup of pre-1964 contamination.
The relevant provisions of the agreement are quite straightforward. Not surprisingly, the agreement begins by describing in its preamble the business being transferred from the “Seller” to the “Buyer.” That business is described in terms of business “operations” and the assets associated therewith. The preamble recites that “Seller manufactures and sells, and conducts research and development relating to, a line of animal health products, including veterinary pharmaceuticals, vaccines and diet supplements.” It states that “such business” is currently “conducted primarily by” New Whitmoyer and its affiliates and then lists a number of products, projects, and rights that are included in “such business.” Finally, the preamble stipulates that “[t]he worldwide operations of such business, together with all of the assets relating thereto ..., are referred to herein as the ‘Business’.”
In section 3.1 of the agreement, the Buyer assumes specifically described liabilities. In subsection 3.2, R & H “indemnifies and holds Buyer ... harmless from and against and in respect of:
(a) All material liabilities relating to the conduct of the Business prior to the First Closing Date (regardless when the related claim may be asserted) whether accrued, absolute, contingent, or otherwise, which are not assumed by Buyer pursuant to Subsection 3.1.”
In a reciprocal section, section 3.3, Buyer “indemnifies and holds R and H and its officers, directors and stockholders harmless from and against and in respect of:
(a) All losses, liabilities, damages or deficiencies to seller resulting from the operation of the Business by the Buyer after the First Closing Date....”
As the opinion of the court acknowledges “the language in the 1978 Purchase Agreement indemnity provisions clearly expresses the parties’ intent to allocate all present and future liabilities” relating to the business being transferred. (Maj. Op. at 160.) Putting aside the liabilities specifically assumed in section 3.1, R & H is to bear the ultimate responsibility for “all material liabilities relating to the conduct of the Business” prior to the closing date and SKB is to bear the ultimate responsibility for all liabilities “resulting from the operation of the Business by the Buyer” after that date. Insofar as liabili*165ties arising from the business being transferred before the closing date are concerned, the responsibility of R & H is not limited to liabilities arising out of its operation of the business being transferred. This is in sharp contrast to the responsibility of SKB which is limited to liabilities “resulting from the operation of the Business by Buyer." (Emphasis supplied.)
I do not understand R & H to dispute that the preamble of the agreement describes the business that is being transferred. Moreover, it acknowledges, as it must, that the business conducted by Old Whitmoyer from 1957 to 1964 is a part of the business being transferred. It necessarily follows, I believe, that the liabilities at issue here were “material liabilities relating to the conduct of the Business prior to the” closing date.
The court fails to focus on the obvious fact that “Business” as defined or described in the preamble consists of the operations and assets being transferred by the agreement. Understandably, those operations and associated assets are identified in part by reference to the legal entities that were conducting most of those operations at the time the agreement was entered. But as the parties were aware, those operations had been conducted for a number of years and R & H’s responsibilities under section 3.2 were obviously not intended to be limited to liabilities arising out of the conduct of those operations at the time the agreement was entered. R & H, of course, acknowledges this. At the same time, however, it tries to limit its responsibility to those liabilities arising out of its conduct of the business between 1964 when it purchased the business and the closing date in 1978. Neither the text of section 3.2 nor anything else in the agreement provides a basis for such a limitation. R & H’s indemnity responsibilities under the agreement are simply not limited to liabilities relating to the conduct of the operations being transferred while those operations and assets were under its control. The parties did not leave pre-1964 liabilities of the business out of their agreement for future resolution by a court. R & H unequivocally committed itself to indemnify SKB for “all material liabilities relating to the conduct of [the operations and assets being transferred] prior to the ... Closing Date.” The liabilities at issue here are clearly among those liabilities.