HERCULES INCORPORATED v. HEXCEL CORPORATION (2008)

Order, Supreme Court, New York County (Bernard J. Fried, J.), entered April 30, 2007, which granted defendant's motion for summary judgment to the extent of dismissing the first and second claims in the complaint, and denied plaintiff's cross motion for summary judgment on those claims, unanimously affirmed, with costs.

Plaintiff, the owner of assets used in the production of carbon fiber and prepreg, entered into an agreement to sell the operation to defendant in June 1996.   Thereafter, both parties and others were sued in a series of class actions alleging antitrust violations and civil fraud in connection with the sale of carbon fiber and prepreg products.   Plaintiff and defendant separately settled the litigation against them.   Plaintiff commenced the instant action, in part, for contractual indemnification for the claims against it, relying on the sale and purchase agreement between the parties.

It is undisputed that Delaware law applies to the transaction at issue.   When the contract is read in a plain and integrated matter (see Northwestern Natl. Ins. Co. v. Esmark, Inc., 672 A.2d 41, 43 [Del.1996] ), it is clear that defendant assumed only those liabilities that arose after the closing of the sale, and plaintiff retained responsibility for all liabilities that were based on acts occurring prior to that time.   Notwithstanding the fact that section 12.7 of the agreement, dealing with overlapping claims for indemnification, requires each party to indemnify the other “only to the extent of its respective share of the responsibility,” plaintiff would compel defendant to indemnify it for what took place before the closing, thus shifting its own responsibility to defendant.   In order to achieve such a result, plaintiff takes out of context a single contractual provision while disregarding the remainder of the agreement.