Court Opinion

ID: 4641717
Source: CourtListenerOpinion
Date Created: 2020-12-10 20:02:41.951088+00
Date Added: 2024-06-11T08:00:24.207652
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

AMERICAN INTERNATIONAL                     )
    INDUSTRIES,                            )
                                           )
       Plaintiff,                          )
                                           )
       v.                                  )       C.A. No. N19C-04-258 MMJ CCLD
                                           )
THE NESLEMUR COMPANY,                      )
                                           )
    Defendant                              )
____________________                       )
                                           )
THE NESLEMUR COMPANY,                      )
                                           )
       Plaintiff,                          )
                                           )
       v.                                  )       C.A. 2020-0461 MMJ
                                           )
AMERICAN INTERNATIONAL                     )
    INDUSTRIES,                            )
                                           )
       Defendant.                          )

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

                       ON THE NESLEMUR COMPANY’S
                    MOTION FOR PRELIMINARY INJUNCTION
                                GRANTED

                               CORRECTED* OPINION

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

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

JOHNSTON, J
*Correcting the spelling of Mr. Katzenstein’s name and adding that Mr. Hofer argued.
                                               1
                            PROCEDURAL CONTEXT

      Defendant The Neslemur Company (“Neslemur”) seeks to enjoin Plaintiff

American International Industries (“AII”) 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.

      AII is a named 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

                                          2
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.1

          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

multiplicity of suits; or (4) protect a party from vexatious or harassing litigation. 2

Anti-suit injunctions should be entered sparingly. Such relief is appropriate only

1
    Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 179 (Del. 1986).
2
    In re: TransPerfect Global, Inc, 2019 WL 5260362, at *14 (Del. Ch.).
                                                 3
where there is clear evidence of threatened irreparable harm, equity supports the

injunction, the relief will be effective, and comity has been fully exercised. 3 The

Court’s power to enjoin the prosecution of a proceeding in another jurisdiction is

discretionary, and must be exercised cautiously. 4 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. 5

                                        ANALYSIS

       AII    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.

       AII 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

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

3
  North River Ins. Co. v. Mine Safety Appliances Co., 2013 WL 6713229, at *1 (Del. Ch.).
4
  Ivanhoe Partners v. Newmont Mining Corp., 1988 WL 34526, at *3-4 (Del. Ch.).
5
  Household Intern., Inc. v. Eljer Industries, Inc., 1995 WL 405741, at *1 (Del. Ch.).
                                                   4
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. 6

       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.

                      Common Law or Statutory Indemnification
                      Where Contractual Indemnification Exists

       In BE & K Engineering Company, LLC v. RockTenn CP, LLC,7 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].”8

6
  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).
7
  2014 WL 186835 (Del. Ch.).
8
  Id. at *25.
                                                  5
       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. 9

       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.

                     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

9
 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).
                                                  6
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.

                                            7
           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,10 the Court of Chancery

found:

           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?11

           This Court finds that the concerns and reasoning expressed in Walt Disney

also apply in this instance.

10
     1997 WL 118402 (Del. Ch.).
11
     Id. at *3.

                                               8
                                         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

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.”12 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

12
     See In re: TransPerfect Global, Inc, 2019 WL 5260362, at *14 (Del. Ch.).
                                                 9
litigation in multiple jurisdictions; and the balance of the equities favors granting the

injunction.13

          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.

                                                     ____/s/_Mary M. Johnston___________
                                                     The Honorable Mary M. Johnston

13
     See Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 179 (Del. 1986).
                                               10