Judge Davis Analyzes Transfer of Environmental Liabilities under Stock Purchase Agreement

June 18, 2020

Publication| Commercial Litigation

In Ashland LLC, et al. v. The Samuel J. Heyman 1981 Continuing Trust for Lazarus S. Heyman, et al., C.A. No. N15C-10-176 EMD CCLD, Judge Davis granted in part and denied in part a partial motion for summary judgment by plaintiffs/counterclaim defendants Ashland LLC, International Specialty Products Inc., ISP Environmental Services Inc., and ISP Chemco LLC (“Ashland”). In so holding, the court determined that collectively, certain provisions of the stock purchase agreement (“SPA”) at issue were unambiguous and that the defendants retained all environmental liabilities relating to an Administrative Consent Order with the New Jersey Department of Environmental Protection in regards to a specific property that had been included in the deal between the parties. Although the court had previously denied a similar motion for judgment on the pleadings, finding at that particular “stage of the proceedings, the Court [was] not comfortable that there are not ambiguities in the SPA or in the way the parties to this civil action interpret the parties’ responsibilities under the [consent order],” the court found that with a developed record, the parties’ post-closing conduct confirmed that the defendants retained all environmental liabilities under the consent agreement and that they breached their contractual obligations to Ashland under one of the provisions at issue.

Notwithstanding his holding on environmental liabilities, Judge Davis found that genuine issues of material fact existed as to all other claims raised in the cross motions for summary judgment and denied them. Of those remaining claims, Judge Davis expressed skepticism about Ashland’s fraud claim, noting the sophistication of the parties, that the parties were well represented throughout negotiations, and that the parties otherwise addressed the consent order contractually in the SPA, but ultimately left any decision on the fraud claim for trial.

Analysis: The CCLD has become a favored venue for litigating complex contract disputes involving purchase agreements. The transfer of environmental liabilities under such agreements has been the focus of several recent cases. Given its familiarity with such complex environmental disputes, it is expected that the CCLD will continue to be a favored venue for litigating such disputes in a swift and efficient manner.

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