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Dresser-Rand Co. v. Ingersoll Rand Co.

United States District Court, S.D. New York

July 14, 2015

DRESSER-RAND COMPANY, et al., Plaintiffs,
v.
INGERSOLL RAND COMPANY, et al., Defendants.

OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge.

On August 21, 2012, a fire broke out at a nitrogen fertilizer plant located near the town of Belle Plaine, in the province of Saskatchewan, Canada. The owner of the facility - Yara Belle Plaine Inc. ("Yara Belle") - brought suit in the Court of Queen's Bench for Saskatchewan against Dresser-Rand Company, Dresser-Rand Canada, Inc., and Dresser-Rand Group, Inc. (collectively, "Dresser-Rand"), as well as Ingersoll Rand Company and Ingersoll Rand Company Limited (collectively, "Ingersoll Rand"), to recover damages for property losses and business interruption losses. Yara Belle grounds its action against Dresser-Rand and Ingersoll Rand (the "Canadian Action") in allegations that these companies either manufactured or serviced the piece of equipment that caused the fire.

On September 8, 2014, with the Canadian Action pending, Dresser-Rand commenced the instant suit against Ingersoll Rand, seeking, inter alia, a declaration under the Declaratory Judgment Act, 28 U.S.C. § 2201, that Ingersoll Rand was required to defend and indemnify Dresser-Rand in the Canadian Action. Ingersoll Rand has moved to dismiss the instant complaint (the "Complaint") as premature and not ripe for adjudication while issues of liability remain undecided in the Canadian Action. For the reasons discussed herein, Ingersoll Rand's motion is granted, and Dresser-Rand's Complaint is dismissed without prejudice.

BACKGROUND[1]

A. Factual Background

1. The Equity Purchase Agreement

In 1987, Dresser-Rand Company was formed by Ingersoll Rand Corporation and Dresser Industries, Inc., as a New York general partnership. (Compl. ¶ 2). In 2004, FRC Acquisitions LLC ("FRC" or the "Buyers") purchased Ingersoll Rand's ownership interest in Dresser-Rand Company by entering into an Equity Purchase Agreement (the "EPA"). ( See id. ). The transaction closed on October 29, 2004 (the "Closing Date"). ( See Leibowitz Decl., Ex. 2 at 7). The EPA memorializes the defense and indemnification obligations at issue in this action. ( See Compl. ¶¶ 32-34 (citing EPA §§ 8.1(a), 9.10(g))). It also contains a forum selection clause in which the parties to the EPA consented to the exclusive jurisdiction of the state and federal courts located within the Southern District of New York "for all actions or proceedings arising out of or relating to" the EPA. (EPA § 9.14).

Section 8 of the EPA contains reciprocal indemnification provisions between "the Sellers" (i.e., Ingersoll Rand) and "the Buyers" (i.e., FRC). ( See EPA § 8.1(a), (b)). Section 8.1(a) requires Ingersoll Rand to defend and indemnify Dresser-Rand under certain circumstances:

Indemnification by the Sellers. Subject to the limits set forth in this Section 8.1, the Sellers agree, jointly and severally, to indemnify, defend and hold the Buyers and their Affiliates (including, after the Closing Date, ... Dresser-Rand...)... harmless from and in respect of any and all losses, claims, liabilities, damages, fines, penalties, costs (in each case including reasonable out-of-pocket expenses (including, without limitation, reasonable fees and expenses of counsel)[)] (collectively, "Losses"), that they may incur arising out of, relating to, or due to any... (iv) Products Liabilities Losses.

(EPA § 8.1(a)).

"Products Liabilities" is defined elsewhere in the EPA, and specifically excludes liability based on acts or omissions following the Closing Date:

"Products Liability" (and collectively "Products Liabilities") means, to the extent related to Products shipped prior to the Closing Date and except to the extent based on acts or omissions (excluding omissions in respect of an alleged failure to warn based solely on events, activities or occurrences prior to the Closing) following the Closing, any claim or Proceeding of a third party against Dresser-Rand... to the extent such claim or Proceeding alleges personal injury or property damage[.]

(EPA § 9.10(g)).

As noted, indemnification duties flow both ways under the EPA, depending on the circumstances and the claims at issue. Section 8.1(b) obligates the "Buyers" (initially, FRC) to indemnify the "Sellers" (i.e., Ingersoll Rand) for losses due to Dresser-Rand's post-Closing "conduct of business":

Indemnification by the Buyers. Subject to the limits set forth in this Section 8.1, the Buyers jointly and severally agree to indemnify, defend and hold the Sellers harmless from and in respect of any and all Losses that they may incur arising... as a result of the conduct of business of... Dresser-Rand... after the Closing Date.

(EPA § 8.1(b)).

Sections 8.1(e) and 8.1(f) deal specifically with defense obligations. To that end, Section 8.1(e) gives Ingersoll Rand the "opportunity" to assume the defense when notified that an indemnifiable event has potentially occurred:

Notice and Opportunity to Defend. If there occurs an event which a party asserts is an indemnifiable event pursuant to Sections 8.1(a)... the party or parties seeking indemnification (the "Indemnified Party") shall notify the other party or parties obligated to provide indemnification (the "Indemnifying Party") promptly.... In case any such action shall be brought against any party seeking indemnification and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate therein and to assume the defense thereof with counsel selected by the Indemnifying Party and, after notice from the Indemnifying Party to such party or parties seeking indemnification of such election so to assume the defense thereof, the Indemnifying Party shall not be liable to the party or parties seeking indemnification hereunder for any legal expenses of other counsel or any other expenses subsequently incurred by such party or parties in connection with the defense thereof; provided, however, that ...

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