Court Opinion

ID: 4641412
Source: CourtListenerOpinion
Date Created: 2020-12-10 15:02:23.951101+00
Date Added: 2024-06-11T08:00:21.636298
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

AMERICAN INTERNATIONAL
INDUSTRIES,

Plaintiff,
Vv. C.A. No. N19C-04-258 MMJ CCLD

THE NESLEMUR COMPANY,

Defendant

THE NESLEMUR COMPANY,
Plaintiff,
C.A. 2020-0461 MMJ

Vv.

AMERICAN INTERNATIONAL
INDUSTRIES,

Nowe Nee Nee Nee ee ee ee” ee” ee’ ee ee” ae Ne Ne Ne Ne ee ee ee ee Se SL

Defendant.

Submitted: October 23, 2020
Decided: December 10, 2020

ON THE NESLEMUR COMPANY’S
MOTION FOR PRELIMINARY INJUNCTION
GRANTED
OPINION

Seth J. Reidenberg, Esquire (Argued) Tybout Redfearn & Pell, Wilmington,
Delaware, Attorneys for American International Industries

Robert J. Katzenstien, Esq., (Argued) Smith Katzenstein Jenkins, LLP, Wilmington,
Delaware, and Patrick F. Hofer, Clyde & Co US LLP, Washington, DC Attorneys for
the Defendant, The Neslemur Company

JOHNSTON, J
PROCEDURAL CONTEXT

Defendant The Neslemur Company (“Neslemur’) seeks to enjoin Plaintiff
American International Industries (“AIT”) from continuing in other courts to litigate
claims first filed in Delaware. Litigation in other jurisdictions involves tort claims
based on asbestos-contaminated talcum powder. This action pending in Superior
Court is grounded in breach of contract, and requests declaratory relief.

AII acquired certain assets from Neslemur. The Asset Purchase Agreeement
(“APA”) provides that AII did not acquire any of Neslemur’s pre-existing liabilities
or assume liability for any defective products made or sold by Neslemur prior to
August 13, 1987. The APA also requires Neslemur to indemnify and hold AII
harmless for any liability AII did not assume.

AI is anamed defendant in tort lawsuits in jurisdictions including California,
New Jersey, Pennsylvania, North Carolina and New York. AII has asserted
crossclaims or third-party claims against Neslemur. AII claims entitlement to
contractual, statutory, equitable, or common law indemnification and contribution,
as well as declaratory relief.

AII filed suit in Delaware Superior Court on January 17, 2019. Neslemur has
moved to dismiss AII’s crossclaims and third-party claims in all other jurisdictions.
Neslemur filed an action in the Delaware Court of Chancery on June 11, 2020,

seeking to enjoin AII from pursuing crossclaims or third-party claims in courts
outside of Delaware. By Order dated July 28, 2020, Chief Justice Seitz of the
Delaware Supreme Court designated Superior Court Judge Mary M. Johnston to sit
in the Court of Chancery for the purpose of hearing all equitable matters asserted in
this action and the consolidated Court of Chancery case C.A. No, 2020-0461-JTL.

Following oral argument on September 30, 2020, this Court requested
additional briefing on three issues that were not previously addressed. First, whether
common law or statutory indemnification is available in the relevant non-Delaware
jurisdictions, if contractual indemnification is denied. Second, whether Neslemur is
a necessary party in a tort case for AII to take advantage of the product line exception
to successor liability. Third, whether there is any Delaware authority for the
imposition of an anti-claim injunction, as opposed to an anti-suit injunction.

ANTI-SUIT INJUNCTION STANDARD

In order to obtain a preliminary injunction, the plaintiff must demonstrate: (1)
a reasonable probability of success on the merits; (2) that irreparable harm will occur
absent the injunction; and (3) that the balance of the equities favors granting the
injunction. !

The purpose of an anti-suit injunction is: (1) to address a threat to the court’s

jurisdiction; (2) prevent evasion of an important public policy; (3) prevent a

 

'Revion, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 179 (Del. 1986).
multiplicity of suits; or (4) protect a party from vexatious or harassing litigation.’
Anti-suit injunctions should be entered sparingly. Such relief is appropriate only
where there is clear evidence of threatened irreparable harm, equity supports the
injunction, the relief will be effective, and comity has been fully exercised? The
Court’s power to enjoin the prosecution of a proceeding in another jurisdiction is
discretionary, and must be exercised cautiously.* Nevertheless, as a general matter,
all claims arising from a single chain of events should, where practicable, be
adjudicated in a single action in a forum having jurisdiction over all parties and
capable of doing prompt and complete justice.°
ANALYSIS

All filed this Superior Court action against Neslemur seeking
indemnification. Subsequently, AII brought claims against Neslemur in other
jurisdictions. Neslemur argues that the other actions request the same relief from
Neslemur as in this Delaware suit.

All counters that Neslemur has failed to establish: (1) a reasonable likelihood

of success on the merits; (2) that imminent, irreparable harm will result if a

 

2In re: TransPerfect Global, Inc, 2019 WL 5260362, at *14 (Del. Ch.).

North River Ins. Co. v. Mine Safety Appliances Co., 2013 WL 6713229, at *1 (Del. Ch.).
‘Fvanhoe Partners v. Newmont Mining Corp., 1988 WL 34526, at *3-4 (Del. Ch.).
>Household Intern., Inc. v. Eljer Industries, Inc., 1995 WL 405741, at *1 (Del. Ch.).
preliminary injunction is not granted; and (3) that the balance of equities does not
favor a preliminary injunction.

AII argues that injunctive relief would be useless because it would not stop
the tort plaintiffs from litigating their claims. Discovery, motions and trial would
still proceed. Additionally, the non-Delaware cases are not mirror-images of this
action. The other cases include claims for statutory and common law
indemnification, as well as for contribution. In California and New Jersey, Neslemur
faces potential liability under the product line exception to successor liability.®

Neslemur responds that although AII pleads additional theories of recovery
outside Delaware, AII still seeks the same relief --- reimbursement for any liability
for products sold before August 13, 1987. This Court is being asked to determine
the parties’ obligations under the APA. Neslemur argues that AII cannot be entitled

to more than this Court ultimately determines is due pursuant to the APA.

 

°For example, the elements of the product line exception in California are: “(1) the virtual
destruction of the plaintiff's remedies against the original manufacturer caused by the
successor’s acquisition of the business, (2) the successor’s ability to assume the original
manufacturer’s risk-spreading role, and (3) the fairness of requiring the successor to assume a
responsibility for defective products that was a burden necessarily attached to the original
manufacturer’s good will being enjoyed by the successor in the continued operation of the
business.” Ray v. Alad Corp., 19 Cal. 3d 22, 31 (Cal. 1977).
Common Law or Statutory Indemnification
Where Contractual Indemnification Exists

In BE & K Engineering Company, LLC v. RockTenn CP, LLC,’ the Court of
Chancery found that an anti-suit injunction was appropriate for claims that
“necessarily implicate” an agreement at issue in the Delaware Court. The Court of
Chancery held that it was not a requirement that the claims “expressly invoke” the
agreement. “The critical issue is whether the claim arises out of or relates to the
[agreement].’*

As a general matter, courts permit alternative pleading of common law or
statutory indemnification along with claims of contractual indemnity. However, all
relevant jurisdictions follow the maxim that where the terms of an applicable
contract address indemnification obligations, the contract controls.’

The Court finds that the APA specifically addresses the issue of
indemnification. Without deciding the merits of this pending Delaware case, for
purposes of the motion for preliminary injunction, the Court finds it reasonably
likely that the APA will control the issue of indemnification. Thus, the alternatively-
pled claims of common law and statutory indemnification will in all likelihood not

be the subject of independent judicial scrutiny.

 

72014 WL 186835 (Del. Ch.).

87d. at *25.

°See Hinson v. United Fin. Servs., Inc., 123 N.C. App. 469, 473 (N.C. App. 1996); Rossmoor
Sanitation, Inc. v. Pylon, Inc., 532 P.2d 97, 100-101 (Cal. 1975); Moser v. Milner Hotels, 78
A.2d 393, 394 (N.J. 1951).
Product Line Exception to Successor Liability

Both parties have offered case precedent supporting the proposition that when
a predecessor is a named defendant, courts consider that factor in determining
whether the plaintiff has a remedy against the predecessor company. However, no
authority has been presented supporting the proposition that the predecessor entity
must be joined for the exception to be considered.

Of course, AII would prefer to have Neslemur as a party in the personal injury
actions as evidence that AII is not liable. It may well be that having Neslemur as a
party would be the most effective way to prevent the tort plaintiffs from asserting
the product line exception against AII.

Nevertheless, the Court finds that none of the relevant jurisdictions require
that Neslemur be joined as a party for AII to prevail on the product line exception.
In the same way other liability can be apportioned among parties and non-parties, a
court could find the product line exception to successor liability applicable in favor
of a party and against a non-party.

Anti-Claim Injunction

Neither party provided any Delaware authority distinguishing between an
anti-suit injunction and an anti-claim injunction. This appears to be an issue of first
impression. The most obvious analysis is to apply the same standards to both forms

of relief (if indeed they are different in substance).
The issue directly before this Court is entitlement to indemnification. The
Court finds that the crossclaims and third-party claims in other jurisdictions present
the potential for judgments inconsistent with the outcome of the Delaware litigation.

AII first sought indemnification relief against Neslemur in this Court.
Subsequently, AII brought Neslemur into multiple cases in several other
jurisdictions, through crossclaims and third-party claims on the basis of entitlement
to indemnification. Neslemur contends that it will suffer harm if forced to litigate
the same issue in multiple jurisdictions. Further, Neslemur argues that the balance
of equities weighs in favor of injunctive relief.

Should Neslemur obtain a preliminary injunction, Neslemur will be
foreclosed from arguing the merits of the tort claims in other jurisdictions. Should
AII be found liable, and if this Court ultimately determines that Neslemur must
indemnify AII, in all likelihood such liability would be res judicata. During oral
argument, Neslemur acknowledged the probability that it would be unable to later
dispute those courts’ holdings as to the underlying tort liability — as to both factual
finding and legal rulings.

In Walt Disney Company Derivative Litigation,"" the Court of Chancery

found:

 

01997 WL 118402 (Del. Ch.).
In short, I do not believe that equity or fairness is served by allowing

plaintiffs’ counsel to repudiate the jurisdiction in which they have

deliberately chosen to litigate, a jurisdiction they selected while fully

aware of the convenience and efficiency concerns that they now invoke

as grounds for suspending operations on the Delaware front and moving

to an alternative battle ground. One must wonder what theory or

judicial efficiency or comity would promote a rule that encourages

plaintiffs’ counsel to file in multiple jurisdictions, force defendants to

commit resources from coast to coast, and then allow plaintiff's

counsel, at their own whim, to move the lines of battle after they have

already begun to form?"!

This Court finds that the concerns and reasoning expressed in Walt Disney
also apply in this instance.

CONCLUSION

The Court finds that the APA specifically addresses the issue of
indemnification. Without deciding the merits of this pending Delaware case, for
purposes of the motion for preliminary injunction, the Court finds it reasonably
likely that the APA will control the issue of indemnification. Thus, claims of
common law and statutory indemnification, alternatively pled in other jurisdictions,
will in all likelihood not be the subject of independent judicial scrutiny.

Additionally, the Court finds that none of the relevant jurisdictions require

that Neslemur be joined as a party for AII to prevail product line exception. In the

same way other liability can be apportioned among parties and non-parties, a court

 

"Td. at *3.
could find the product line exception to successor liability applicable in favor of a
party and against a non-party.

Further, equity or fairness would not be served by allowing AII to repudiate
this jurisdiction, in which they have deliberately chosen to litigate.

The Court finds that an anti-suit injunction is necessary to protect Neslemur
from “vexatious or harassing litigation.”!* Neslemur has established that it has a
reasonable likelihood of succeeding on the merits of its arguments that the APA
governs the issue of indemnity (rendering moot consideration of common law,
statutory, or equitable indemnification); that imminent, irreparable harm will result
if the injunction is not granted and Neslemur is required to participate in duplicative
litigation in multiple jurisdictions; and the balance of the equities favors granting the
injunction.”

THEREFORE, Neslemur’s Motion for Preliminary Injunction is hereby
GRANTED. An anti-suit/anti-claim injunction is hereby granted for all
indemnification claims asserted by AII against Neslemur in all juridictions
outside the State of Delaware.

IT IS SO ORDERED.

 

The  MonorabJeM ary M. Johnston

 

See Inre: TransPerfect Global, Inc, 2019 WL 5260362, at *14 (Del. Ch.).
'3See Revion, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 179 (Del. 1986).