United States District Court, S.D. New York
GERDAU AMERISTEEL U.S. INC., Plaintiff,
AMERON INTERNATIONAL CORPORATION, et al., Defendants.
OPINION AND ORDER
LORNA G. SCHOFIELD, District Judge.
Plaintiff Gerdau Ameristeel U.S. Inc. brings this action against Defendants Ameron International Corp., Mitsui & Co. and Tokyo Steel Manufacturing Co., Ltd. for breach of contract and declaratory judgment. Defendants in turn assert counterclaims against Plaintiff for breach of contract and declaratory judgment. The dispute arises from Plaintiff's $165 million purchase from Defendants of all of the shares of TAMCO (the "Company"), the operator of a steel mill located in Rancho Cucamonga, California. Before the Court is Plaintiff's motion, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss the counterclaim for breach of contract. For the reasons discussed below, Plaintiff's motion is granted.
A. Procedural History
On October 10, 2013, Plaintiff filed its Complaint in this case, alleging that Defendants falsely represented that the Company was in compliance with environmental laws and had all necessary permits. Plaintiffs further claim that Defendants breached their obligation to indemnify Plaintiff for its losses from Defendants' misrepresentations. On December 5, 2013, Defendants filed their Answer, which asserted a counterclaim against Plaintiff alleging that by bringing their breach of contract claim, Plaintiff breached its covenants not to sue based on released claims. On January 27, 2014, Plaintiff filed its motion to dismiss this counterclaim.
All contract language is taken directly from the agreements at issue. All other facts are taken from the Answer and, as required on this motion, assumed to be true.
On March 15, 2010, Plaintiff and Defendants entered into a confidentiality agreement regarding Plaintiff's offer to purchase all of the outstanding shares of TAMCO from Defendants. Plaintiff conducted due diligence regarding this potential purchase, including environmental due diligence. Plaintiff identified some environmental issues and discussed them with Defendants. The parties then agreed to reduce the purchase price from approximately $195 million to $165 million.
On September 14, 2010, Plaintiff and Defendants executed the Stock Purchase Agreement ("SPA"). Article IV of the SPA contains Defendants' representations and warranties to Plaintiff, the Buyer, including that (1) "the Company holds all Permits necessary for the conduct of the Company's business"; (2) "the Company is in compliance with all applicable laws, rules and regulations"; and (3) "the Company is in material compliance with applicable Environmental Laws."
The above sellers' representations were required to "be true and correct at and as of the Closing Date, " pursuant to §8.1 of the SPA. Defendants were further required "as of the Closing Date" to "furnish [Plaintiff] with a certificate to evidence compliance with" § 8.1., pursuant to § 8.4 of the SPA. As well, § 9.2 of the SPA provides that the above "representations and warranties... shall terminate and expire on the eighteen-month anniversary of the Closing Date."
The SPA also contains an indemnification provision in Article IX, which provides, in part, that Defendants "shall indemnify and hold harmless [Plaintiff] from and against any and all... Damages'  incurred by [Plaintiff] in connection with or arising out of or resulting from  any breach by [Defendants] of  any representation or warranty... contained in Article IV."
Pursuant to § 6.2 of the SPA, Plaintiff had the right to continue its due diligence between the execution and the closing of the SPA, which Plaintiff did. Pursuant to § 6.5 of the SPA, Plaintiff had the right to terminate the SPA before closing if it discovered that Defendants had materially breached any representation, warranty or covenant in the SPA. Yet, despite Plaintiff's knowledge of potential environmental violations at TAMCO's Rancho Cucamonga, California facility, Plaintiff chose to close on the SPA.
The closing occurred on October 21, 2010, and effected Plaintiff's purchase from Defendants of all of the shares of the Company. Section 3.2(i) of the SPA requires Plaintiff and Defendants to execute a ...