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Exxon Mobil Corporation v. Tredegar Corporation

September 12, 2012

EXXON MOBIL CORPORATION, PLAINTIFF,
v.
TREDEGAR CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Cedarbaum, J.

OPINION

Exxon Mobil Corporation ("Exxon") sues Tredegar Corporation ("Tredegar") for breach of an Asset Purchase Agreement ("APA"). The amended complaint alleges that Tredegar failed to indemnify Exxon for a settlement in a Pennsylvania personal injury action, and that Tredegar failed to cooperate with Exxon's defense of the action in violation of the APA. Tredegar moves to dismiss under Fed. R. Civ. P. 12(b)(6). For the reasons that follow, Tredegar's motion is granted in part and denied in part.

BACKGROUND

The following facts are set forth in the amended complaint and accepted as true for the purposes of the motion to dismiss. Exxon is a New Jersey corporation with its principal place of business in Texas. Tredegar is a Virginia corporation with its principal place of business in Virginia. On May 17, 1999 (the "Closing Date"), Tredegar acquired Exxon's film business, including a processing plant in Mar Lin, Pennsylvania, pursuant to the APA.

In April 2007, Leo Leinheiser, a maintenance mechanic at Tredegar's Mar Lin facility, severely injured his arm while cleaning an industrial cutting machine known as a "slitter." Tredegar paid Leinheiser workers' compensation benefits.

In April 2009, Leinheiser and his wife filed complaints against Exxon and several other entities, stating causes of action under theories of strict liability, negligence, breach of warranty, and loss of consortium. Exxon sent a notice of tender of defense and demand for indemnification to Tredegar in June 2009. Tredegar declined to indemnify Exxon.

Exxon alleges that Tredegar's prior Assistant General Counsel, Randy Reaves, agreed to cooperate with Exxon in its defense of the underlying litigation. For example, Exxon arranged to interview the employees that Tredegar intended to produce for deposition. However, less than one week before the scheduled interviews, Tredegar's outside counsel, Alexander Palutis, informed Exxon that the interviews could not take place because Exxon and Tredegar had adverse interests in the matter. The Tredegar employees revealed at their depositions that Tredegar had allowed counsel for the Leinheisers to participate at deposition preparation sessions. In addition, Tredegar voluntarily granted one of the Leinheisers' experts access to the Mar Lin facility to inspect the slitter machine without notifying Exxon.

Exxon also alleges that Palutis repeatedly assured Exxon that it would have an opportunity to inspect several documents in Tredegar's possession without a subpoena. Tredegar never provided the documents. Similarly, in December 2010, Tredegar informed Exxon that it would provide an affidavit from an employee with knowledge of the accident. After Exxon sent a draft affidavit to Tredegar in February 2011, Tredegar informed Exxon by letter that it would not make its employees available for interviews or depositions. By the time Exxon received the letter, discovery had closed.

In May 2011, the parties to the underlying litigation participated in a voluntary mediation. Palutis appeared on behalf of Tredegar. Exxon's co-defendants settled their disputes with the Leinheisers at the mediation, though Exxon did not. The Leinheisers subsequently submitted a memorandum to the Court of Common Pleas of Philadelphia County in which they demanded $2,000,000 from Exxon to settle the litigation. Exxon ultimately settled with the Leinheisers for $250,000, but Exxon and Tredegar were unable to resolve their dispute over liability for the settlement.

DISCUSSION

On a motion to dismiss under Rule 12(b)(6), the factual allegations of the complaint are accepted as true, and all reasonable inferences are drawn in favor of the plaintiff. ECA and Local 134 IBEW Joint Pension Trust v. JP Morgan Chase Co., 553 F.3d 187, 196 (2d Cir. 2009). In addition to the allegations of the complaint, I may consider documents that are attached to or incorporated into the complaint by reference. ATSI Commc'ns v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007). To survive a motion to dismiss, a complaint must "contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)).

I. Count I: Breach of the APA's Indemnification Provision

The parties dispute whether, under the APA, liability for Exxon's settlement with the Leinheisers falls under Exxon's Retained Liabilities or Tredegar's Assumed Liabilities. If the settlement costs are an Assumed and not a Retained Liability, Tredegar is contractually bound to indemnify Exxon.

When a party claims that a duty to indemnify is imposed by contract, that contract must be "strictly construed" and demonstrate an "unmistakable intent" to indemnify the negligent party. Haynes v. Kleinewefers & Lembo Corp., 921 F.2d 453, 456 (2d Cir. 1990) (citing Kurek v. Port Chester Housing Auth., 18 N.Y.2d 450, 456 (1966), and Levine v. Shell Oil Co., 28 N.Y.2d 205, 211 (1971)).*fn1 If there is no express language indemnifying a party, the unmistakable intent must be "clearly implied from ...

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