Amdura Corporation fka American Hoist & Derrick Company v. Terex Cranes Wilmington, Inc. fka American Crane Corp. and Terex USA, LLC
-- March 31, 2011
MEMORANDUM OF DECISION MOTION TO STRIKE # 122
On November 29, 2009, the plaintiff Amdura Corporation, as successor in interest to the American Hoist and Derrick Co., commenced the present action in two counts for a declaratory judgment and a breach of contract.1 The named defendant, Terex Cranes Wilmington, Inc. is the successor to American Crane Corporation and Terex USA, LLC (collectively “Terex”). On September 28, 2010 the plaintiff submitted a Second Revised Complaint which is the operative complaint. The Revised Complaint alleges that the parties entered into an Asset Purchase Agreement on June 19, 1987 which agreement contained provisions for indemnification and duty to defend that the defendant has refused to satisfy.
On November 5, 2010 the defendant filed a motion to strike the Second Revised Complaint in its entirety. The plaintiff submitted a memorandum in opposition on December 15, 2010 with a supporting appendix. The defendant submitted a reply to the opposition dated January 31, 2011 and the plaintiff submitted a sur-reply dated February 17, 2011. The parties appeared and argued the motion to strike on March 18, 2011.
The predecessor of Amdura LLC, American Hoist & Derrick Company, was a corporation engaged in the business of designing, manufacturing, selling and distributing industrial cranes and related lifting, pulling and material handling products. In June 1987, American Hoist and Derrick Company entered into an agreement, the Asset Purchase Agreement, to sell certain crane products to American Crane Corporation, the predecessor of the defendant Terex. The Asset Purchase Agreement entered into between these parties contained several provisions which are the basis of this litigation and the present motion to strike.2
The Asset Purchase Agreement contained a paragraph which provided that Terex assumed and accepted and would fully pay or discharge any duties, debts, and liabilities in connection with the purchase and that it would defend and indemnify and hold Amdura harmless with respect to these duties and liabilities. (Asset Purchase Agreement paragraph 5.) This same paragraph referred to the provisions of paragraph 14. Additionally, the Asset Purchase Agreement provided that the defendant Terex shall “procure and maintain policies of insurance covering product liability claims relating to the business of Mobile Crane, naming seller [Amdura] as a beneficiary, the coverage of such policies to be on terms as determined by buyer and reasonably satisfactory to seller.” (Asset Purchase Agreement, paragraph 9A.)
In December 2008, the plaintiff tendered to Terex a letter concerning a claim from Bruce Wojno, filed in the New York court, alleging a product liability theory arising out of exposure to asbestos from a crane that the plaintiff contends was covered by the Asset Purchase Agreement. The defendant refused to defend and indemnify. Thereafter, in May 2009, the plaintiff received a claim from Danny Ray Bates and Carla Jean Bates that had been filed in the West Virginia court, alleging a product liability theory arising out of exposure to asbestos from various products that this plaintiff contends were covered by the Asset Purchase Agreement. Thereafter, the defendant requested that before agreeing to defend or indemnify, the plaintiff enter into an agreement establishing conditions for the defense and indemnification. (Complaint Exhs. C and F.) The plaintiff would not agree to the conditions and the defendant refused to defend and indemnify for this action.
On November 24, 2009, the plaintiff filed this action for declaratory judgment and breach of contract alleging that Paragraphs 5(c) and 14 of the Asset Purchase Agreement provide a duty to defend and indemnify “product liability claims and warranty claims involving allegations of personal injury, regardless of their foundation or merit and regardless of the stated theory of recovery (including without limitation, theories of negligence, breach of warranty, strict liability in tort, or breach of statutory duty, or theories of punitive damages), not pending or, to the best knowledge of [Amdura], threatened on or before the closing date, with respect to all products manufactured by Mobile Crane. The defendant Terex has filed a motion to strike the Second Revised Complaint contending there is no cause of action for either count because the duty to defend and indemnify is limited to two years after the closing date. The defendant argues this duty expired in June 1989. The defendant further contends that Paragraph 16 of the Agreement specifically and unambiguously provides a two-year limitation and thus, it is proper to grant the motion to strike the second revised complaint in its entirety.
The plaintiff contends the complaint provides a factual basis to support a cause of action based upon the conduct of the defendant and the provisions of the Asset Purchase Agreement. The plaintiff argues that the provisions cited by the defendant are ambiguous and do not support the present claim of a two-year limitation to defend and indemnify.
“The purpose of a motion to strike is to contest ․ the legal sufficiency of the allegations of any complaint ․ to state a claim upon which relief can be granted.” (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). “[T]he moving party admits all facts well pleaded.” RK Constructors, Inc. v. Fusco Corp. et al., 231 Conn. 381, 383 n.2, 650 A.2d 153 (1994). It is fundamental that in determining the sufficiency of a [pleading] challenged by a [party's] motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted.” (Internal quotation marks omitted.) Gazo v. Stamford, 255 Conn. 245, 260, 765 A.2d 505 (2001). “A motion to strike is the proper vehicle ․ to test whether Connecticut is ready to recognize some newly emerging ground of liability.” (Internal quotation marks omitted.) Ortiz v. Waterbury Hospital, judicial district of Waterbury, Docket No. CV 99 154112 (March 9, 2000, Pellegrino, J.) (26 Conn. L. Rptr. 547). “If facts provable in the complaint would support a cause of action, the motion to strike must be denied.” (Internal quotation marks omitted.) Batte–Holmgren v. Commissioner of Public Health, 281 Conn. 277, 294, 914 A.2d 996 (2007). “A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged.” (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, supra, 498. The court should “construe the complaint in the manner most favorable to sustaining its legal sufficiency.” (Internal quotation marks omitted.) Sullivan v. Lake Compounce Theme Park, Inc., 277 Conn. 113, 117, 889 A.2d 810 (2006). Further, our Supreme Court “will not uphold the granting of [a] motion to strike on a ground not alleged in the motion.” Blancato v. Feldspar Corp., 203 Conn. 34, 44, 522 A.2d 1235 (1987).
“In ruling on a motion to strike, the court is limited to the facts alleged in the [challenged pleading].” (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., supra, 240 Conn. 580. “Where the legal grounds for such a motion [to strike] are dependent upon underlying facts not alleged in the ․ pleadings, the [party that filed the motion] must await the evidence which may be adduced at trial, and the motion should be denied.” 3 (Citations omitted; internal quotation marks omitted.) Liljedahl Bros., Inc. v. Grigsby, 215 Conn. 345, 348, 576 A.2d 149 (1990). “It is of no moment that the defendants might prove facts which operate to bar the plaintiff's claim, the sole inquiry at this stage of the pleadings is whether the plaintiff's allegations, if proved, would state a basis for standing ․ [An] argument [that] would require the court to consider facts outside the face of the pleadings ․ would be improper on a motion to strike ․” (Citations omitted.) Miller v. Insilco Corp., Superior Court, judicial district of New Haven, Docket No. 27 92 67 (May 22, 1990, Schimelman, J.) (1 Conn. L. Rptr. 651).
The Asset Purchase Agreement provides that the laws of the State of Minnesota shall be the controlling law in the construction of the agreement (Asset Purchase Agreement Paragraph 23).
The defendant argues that the provisions of the Asset Purchase Agreement unambiguously provide that the duty to defend and indemnify is restricted to two years from the Closing Date, and thus the court should strike the complaint because the claim is beyond the two years. The plaintiff contends that contract interpretation is not appropriately resolved in the context of a motion to strike and that the construction of the Asset Purchase Agreement is at variance with the express terms of the Asset Purchase Agreement and the Minnesota rules of contract construction.
Paragraph 5 of the Asset Purchase Agreement is the controlling provision for indemnification. It provides in part that: “[Terex] assumes, accepts and undertakes all of the duties, debts and liabilities incurred and identified by Seller [Amdura] in connection with the business of Mobile Crane, including but not limited to those duties, debts and liabilities specifically excluded on Schedule D hereto.” It further provides: [Terex] “shall fully pay or discharge all such duties, debts and liabilities” and “shall, in accordance with the provisions of paragraph 14 hereof, fully and timely defend, indemnify and hold Seller [Amdura] harmless in respect thereof.” This paragraph on its face requires that the Seller of the business and its various parts retains responsibility for a legal action and will indemnify the buyer in the event of such liability. However, the defendant argues that this duty and liability is not without restriction and cites paragraphs 14 and 16 of the Asset Purchase Agreement for its position that the duty and liability is limited to a period of time two years after the closing date. The closing date was June 1987 which according to the defendant's argument would restrict the duty to defend and indemnify until June 1989. Paragraph 14 of the agreement provides in part that: (a) Except as otherwise specifically set forth in this Agreement, Seller shall defend, indemnify and hold harmless buyer against and in respect of: ․ “(ii) any and all actions, suits, proceedings, demands, assessments, judgments, costs and expenses incident to any of the foregoing; ․ provided, further, however, that no such amounts shall become indemnifiable unless the claim with respect to which such indemnification relates shall have been made to Seller within two years after the Closing Date.”
The defendant argues that a product liability claim, such as those that are the subject of these indemnification claims, are controlled by the two-year limitation period.
The defendant further argues that Paragraph 16 unambiguously restricts the duty to defend and indemnify to two years. It provides in part: “Unless a different time period is otherwise specifically provided herein, all such representations and warranties and agreements made in this Agreement or any exhibit hereto shall survive for a period of two (2) years from the Closing Date and shall not be affected by any investigation conducted by, or separate information given to, the party to whom made.”
The plaintiff argues that the defendant has not fully addressed the language in Paragraph 16 because they ignore the word “such” which restricts the scope of the agreements that are intended to be subject to the two-year survival period. In particular, the plaintiff contends that the language contained in paragraph 16 is consistent with the ordinary provision which ensures that “the buyer's consummation of the closing will not be construed as a waiver or termination of the seller's representations, warranties and agreements,” which are simply statements of facts that parties make to one another on the date an acquisition agreement is executed. The plaintiff argues that the provision is not meant to limit the duty to defend or indemnify.
However, the plaintiff's Second Revised Complaint also contains additional actions and inactions of the defendant in support of the claims for declaratory judgment and breach of contract. Paragraph 9A(c) of the Asset Purchase Agreement provides that Terex shall “procure and maintain policies of insurance covering product liability claims relating to the business of Mobile Crane, naming [Amdura] as a beneficiary, the coverage of such policies to be on terms as determined by [Terex] and reasonably satisfactory to [Amdura].” The plaintiff contends that the defendant has not complied with this provision. The plaintiff alleges that the defendant failed to provide a copy of the insurance policy to them upon demand in accordance with this provision. (Second Revised Complaint Paragraph 21.) Lastly, the plaintiff argues that the contract interpretation is ambiguous not only because of the use of “such” to describe the agreements but also because the defendant has acted in a manner inconsistent with the proposed interpretation. The plaintiff contends in the Second Revised Complaint, Paragraph 14 that: “Notwithstanding its obligations under, inter alia, paragraph 5(C) of the Agreement, by letter dated January 22, 2009, Terex, responded to the December 23rd letter by conditioning its defense and indemnification of Amdura upon Amdura's acceptance of additional conditions and limitations not contained in the Agreement. A copy of the letter dated January 22, 2009 shall be referred to as Exhibit C.” The plaintiff also stated in Paragraph 18 of the Second Revised Complaint that: “Notwithstanding its obligations under, inter alia, paragraph 5(C) of the Agreement, by letter dated May 22, 2009, Terex responded to the May 21st letter by conditioning its defense and indemnification of Amdura upon Amdura's acceptance of additional conditions and limitations and contained in the Agreement. A copy of the letter dated May 22, 2009 shall be referred to as Exhibit F.” 4
The plaintiff has brought this complaint under two theories of law. The first is a declaratory judgment action which asks the court to resolve a controversy concerning the parties' obligations under the terms of the Agreement. Conn. Practice Bk. § 17–54 provides that “[t]he judicial authority will ․ render declaratory judgments as to the existence or non-existence (1) of any right, power, privilege or immunity; or (2) of any fact upon which the existence or nonexistence of such right power, privilege or immunity now exists or will arise in the future.” Practice Book § 17–55 provides that; “A declaratory judgment may be maintained if all of the following conditions have been met: (1) the party seeking the declaratory judgment has an interest, legal or equitable, by reason of danger of loss or of uncertainty as to the party's rights or other jural relations; (2) There is an actual bona fide and substantial question or issue in dispute or substantial uncertainty of legal relations which requires settlement between the parties; and (3) In the event that there is another form of proceeding that can provide the party seeking the declaratory judgment immediate redress, the court is of the opinion that such party should be allowed to proceed with the claim for declaratory judgment despite the existence of such alternate procedures.”
In the declaratory judgment, the plaintiff contends that the defendant “is obligated to procure and maintain insurance for the benefit of Amdura that provides coverage for the Bruce Wojo lawsuit, the Danny Ray Bates and Carla Jean Bates lawsuit and any other lawsuits concerning product liability claims relating to the Mobile Crane business in which Amdura is named.” The plaintiff also alleges that the defendant had a duty to defend and indemnify but after the plaintiff refused to accept additional conditions or limitations the defendant refused to defend or indemnify. These allegations provide the essential elements for a cause of action seeking a declaratory judgment.
The second count is a claim of breach of contract. A valid cause of action for a breach of contract alleges: 1) the formation of a contract, 2) its performance of conditions precedent and 3) breach of the contract. Briggs Transportation Co. v. Ranzenberger, 299 Minn. 127, 129 (1974). In the instant action the plaintiff has alleged there was an agreement and attached it as an exhibit to the complaint. The plaintiff alleges that the crane equipment was conveyed and the parties had agreed to terms that covered the exchange. The plaintiff further alleges that a provision of the agreement, Paragraph 5(c), required that the defendant would defend and indemnify for any action including a product liability action. The plaintiff alleges that consistent with this provision it tendered correspondence notifying the defendant of two separate legal actions which required them to defend and indemnify pursuant to the Asset Purchase Agreement. The defendant, after an exchange of correspondence, refused to defend and indemnify for either of the actions.5 These factual allegations contained in the Second Revised Complaint satisfy the pleading requirements for a breach of contract claim.
The defendant argues that this court can view the contract which was attached as part of the complaint and determine that Paragraph 16 of the Asset Purchase Agreement is unambiguous and does not require the defendant to defend and or indemnify for the mobile crane products that have been converted to the defendant after the passage of two years. In particular, the defendant argues that this court should review the highlighted provisions and interpret whether the agreement established a two-year limit for defending and indemnifying. Interpretation of a contract, “is a matter for the court.” Bank Midwest Minn. v. Lipetzky, 674 N.W.2d 176, 179 (Minn.2004). Determination of this issue requires contract interpretation which may include a determination of the intent of the parties. The defendant relies upon the decision in Pierson Sand & Gravel, Inc. v. Pierson Township, 851 N.W.2d 850 (W.D.Mich.1994), to support its argument that the language in Paragraph 16 requires a finding by this court that there is an unambiguous two-year restriction for defense and indemnification. Although the language in this Asset Purchase Agreement is very similar to that challenged in Pierson, there are a number of differences which have an impact upon this motion. First of all, the Pierson case did not involve a declaratory judgment. It involved some similar contractual language but as argued by the plaintiff in this action it did not use the qualifying term of “such” in restricting its meaning. The qualifying term “such” was not included or argued in the Pierson action. Additionally, the Pierson action was decided on a motion for summary judgment and not a motion to strike. There were no allegations of conduct by the defendant in Pierson that would question the time limitation or the intent of the provisions within the agreement. The time set forth in Pierson was consistent with the applicable statute of limitations of three years and there is no such time correlation in this action. Lastly, this Second Revised Complaint contains additional claims of conduct, that is, conduct and correspondence concerning the indemnification which may have an impact upon the intent of the parties. Under Michigan law, the court's primary task in construing a contract is to give effect to the parties' intentions at the time that they entered into the contract. Sobczak v. Korwicki, 347 Mich. 242, 79 N.W.2d 471 (1956), SSC Assoc. Ltd. Partnership v. General Retirement System., 210 Mich.App. 449, 553 N.W.2d 160 (1995). Although the defendant argues that the language is unambiguous and has no other meaning, to request that the court now rule on the language in this motion to strike without the opportunity to fully address, argue and develop admissible extrinsic evidence is premature and contrary to the court's cautionary approach to providing a fair and reasonable result. In Connecticut, “Questions concerning contract interpretation, however are inappropriate on a motion to strike.” Marotti v. Saint Paul Guardian Ins. Co., Superior Court, judicial district of New Haven, Docket. No. CV 00 0444878 (Feb. 11, 2002, Zoarski, J.T.R.) citing Dime Savings Bank v. DiMenna, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. CV 137779 (October 2, 1996, Ryan, J.) In Giannini, the court found that the issue of contract interpretation as to whether the disputed contract language controlled the termination agreement was not a proper subject of a motion to strike. Giannini, Jr. v. Guardian Life Insurance Company of America, Inc., Superior Court, judicial district of New Haven, CV 054008629, (October 26, 2005, Zoarski, J.T.R.) In a factual scenario such as the one now before the court, it becomes obvious that a contract dispute with claims other than the simple contractual obligation involves a wide range of interpretations and considerations by the court which would prevent the granting of a motion to strike. In the instant action, Paragraph 16 of the contract provisions cannot be read in a vacuum. The complaint in the instant action alleges not only a declaratory judgment regarding the duty to defend and indemnify but also contends that the defendant's recent actions in both the Wojno and Bates legal actions interpreted the Asset Purchase Agreement in a manner that was contrary to the present argument. (Paragraphs 14 and 18.) In particular the correspondence from counsel for the defendant which are also included as exhibits to the complaint (Exhibits C and F) cannot be ignored by the court as support for the plaintiff's interpretation of the existence of a duty to defend and indemnify. The court cannot ignore these exhibits which support the plaintiff's argument that the interpretation is ambiguous. These exhibits and the questionable interpretation underscore the decisions of this court which have determined that contract interpretation is not appropriate for a motion to strike.
The Second Revised complaint also alleges that pursuant to paragraph 9A of the Purchase Agreement the defendant was to procure an insurance policy but no such policy was provided upon demand by the plaintiff. (Second Revised Complaint, Paragraph 21.) This allegation also raises an issue as to whether there was a breach of the terms of the contract.
The instant motion is a motion to strike both counts because they do not support a cause of action for either a declaratory judgment or a breach of contract. However, the Second Revised Complaint sets forth a factual analysis that satisfies the elements of the two causes of action even with the inclusion of the Asset Purchase Agreement. This court does not conclude that the defendant's arguments are without merit. However, the law in Connecticut frowns upon striking the complaint when there are some facts that, if proven, would support the cause of action. Therefore, the motion to strike is denied.
1. FN1. The June 19, 1987 Asset Purchase Agreement which is the basis of this action was originally entered into with American Hoist and Derrick Company which was in the business of manufacturing, selling and distributing various parts and equipment for the mobile crane business. The successor of American Hoist and Derrick Company is Amdura Corporation. Thereafter, Amdura Corporation filed a conversion of the corporation to a Delaware limited liability company and the court granted the motion to substitute Amdura, LLC as the sole party plaintiff in this action on March 18, 2011.
2. FN2. There is no argument that the parties are not obligated by the Asset Purchase Agreement. The agreement, Paragraph 17 provides that it “shall be binding upon and inure to the benefit of the respective successors, assigns or legal representatives of the parties hereto, but shall not otherwise inure to the benefit of any third parties.”
3. FN3. The plaintiffs attached deposition transcripts to their memorandum in opposition and cited to portions of these transcripts in the memorandum and at argument. These are not considered by the court in ruling upon this motion. The court considers the motion only within the confines of the Second Revised Complaint and not external documents. Zirinsky v. Zirinsky, 87 Conn.App. 257, 268 n.9, 865 A.2d 488, cert. denied, 273 Conn. 916, 871 A.2d 372 (2005).
4. FN4. The plaintiff attached eight exhibits as part of the complaint. The first exhibit is the Asset Purchase Agreement. The remaining exhibits are correspondence related to the two product liability actions that are the basis of this legal action. Exhibit B is the December 23, 2008 letter to counsel for the defendant Terex informing them of the filing of the Wojno legal action and requesting indemnification. Exhibit C is the January 22, 2009 response by Terex agreeing to defend and indemnify in the Wojno legal action subject to acceptance of conditions and limitations. Exhibit D is the August 14, 2009 letter by Terex withdrawing its offer of January 22, 2009. Exhibit E is the May 21, 2009 letter to Terex informing them of the Bates legal action and requesting indemnification. Thereafter, Exhibit F is the May 22, 2009 letter from Terex agreeing to defend and indemnify the Bates legal action subject to the acceptance of conditions and limitations. Exhibit G is an August 17, 2009 letter from Terex revoking its offer of May 22, 2009 in the Bates action.
5. FN5. See footnote 4 which outlines the sequence of correspondence.
Brazzel–Massaro, Barbara, J.