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From Products Liability Law Daily, February 4, 2019

Former talcum powder manufacturer didn’t have to indemnify successor for later lawsuits

By Georgia D. Koutouzos, J.D.

An asset purchase agreement between two cosmetic manufacturers did not require the seller to reimburse the buyer for underlying asbestos-related product liability actions related to talcum powder products included in the sale.

The seller of a line of cosmetic products was not liable to the purchaser of those products for consumers’ subsequent product liability lawsuits arising from asbestos-containing talcum powder products included in the sale, the Connecticut federal court determined. The asset purchase agreement was clear and unambiguous, the court found, adding that a subsequent letter in which the seller had agreed to indemnify the buyer for one particular, post-sale lawsuit did not constitute an amendment to the parties’ agreement (Parfums de Coeur LTD v. Conopco Inc., January 31, 2019, Eginton, W.).

Beauty, personal care, and wellness product manufacturer Parfums de Coeur, Ltd. (PDC) entered into an asset purchase agreement under which it acquired the business operations related to certain lines of fragrance and cosmetic products from Conopco, Inc. Among the product lines purchased by PDC were talcum powder products that have been the subject of product liability suits asserting personal-injury claims allegedly caused by asbestos contained in the powder.

PDC ultimately filed the instant suit against Conopco, alleging that, as seller, Conopco retained liability for and must indemnify PDC for the underlying asbestos-related claims. Asserting that PDC had expressly assumed liability for those claims as buyer of the above-mentioned product lines, Conopco moved to dismiss PDC’s indemnification action.

Assumption of liability. PDC conceded that it had assumed certain responsibilities for product liability relating to the fragrance products produced by Conopco prior to the closing of the asset purchase agreement but maintained that it only had done so for "claims accruing, and products sold after said closing." The final asset purchase agreement defined the closing date as September 10, 1993, and the inventory closing date as November 1, 1993.

The agreement specified in Section 1.3 that:

At the Closing, Buyer shall assume and thereafter pay, perform and discharge when due, and indemnify and hold Seller harmless against, each and every of the Assumed Liabilities. The term "Assumed Liabilities" means … all liabilities and obligations for breach of warranty or product liability claims, the first written notice of which is received by the Seller or the Buyer at least 18 months after the Closing Date, relating to products of the Business produced by the Seller prior to the Inventory Closing Date (including but not limited to any products of the Business or components thereof included in the Assets).

Section 1.4 went on to state that:

The Buyer is not assuming, and shall not be deemed to have assumed, any liabilities or obligations of the Seller or of any kind or nature whatsoever, except as expressly provided above in section 1.3 hereof. Without limiting the generality of the foregoing, it is hereby agreed that the Buyer is not assuming any liability and shall not have any obligation for or with respect to:

(i) any liabilities of the Seller or its affiliates relating to the Assets or the Business that are incurred prior to, or otherwise arise out of or relate to the period prior to, the Closing Date, or with respect to the Inventory Sales Liabilities, the Inventory Closing Date (or November 12, 1993, as herein otherwise provided) (except as expressly provided in Section 1.3 hereof);

(v) except as expressly provided in Section 1.3, any liability or obligation of the Seller or its affiliates arising out of any action, suit, investigation or proceeding to the extent based upon an event occurring or a claim arising (A) prior to the Closing Date (or prior to the Inventory Closing Date [or November 12, 1993, as herein otherwise provided] in respect of sales by Seller pursuant to Section 5.8(a)) or (B) after the Closing Date (or the Inventory Closing Date, as the case may be) in the case of claims in respect of products or services sold or provided by the Seller prior to the Closing Date (or the Inventory Closing Date [or November 12, 1993, as herein otherwise provided], as the case may be) and attributable to acts performed or omitted by the Seller or its affiliates prior to the Closing Date (or the Inventory Closing Date [or November 12, 1993, as herein otherwise provided], as the case may be)[.]

PDC contended that Section 1.4 specifically disclaimed its liability related to products sold by Conopco prior to the closing dates, maintaining that it had assumed liability only for products sold after the specified closing dates. Nevertheless, the court found that the designation that product liability claims, as described in Section 1.3, would be assumed by PDC was clear and unambiguous. Thus, PDC’s claim that Conopco retained liability for and was required to indemnify PDC for the asbestos suits at issue was dismissed.

Expiration of indemnity. Conopco also pointed to the fact that the asset purchase agreement contained a provision dictating that any right to indemnification on behalf of PDC expired five years after the Closing Date, i.e., in 1998. PDC responded that the imposition of the five-year limitation on indemnification was per se unreasonable, namely because the asbestos claims at issue "simply did not exist" until 2015. As such, PDC contended that enforcement of the five-year limitations period made a timely lawsuit for indemnification impossible.

The court explained that the explicit purpose of a limitations period placed on contractual rights to indemnification render such actions impossible once the period has expired. Absent extenuating circumstances, which PDC did not demonstrate, a party to a contract cannot void an agreed-upon limitations period merely because it would decrease its own liability. It should have been clear to PDC that claims arising in 2015 fell outside the indemnification window that closed five years after the 1993 closing date, the court said.

Subsequent communications. On December 21, 2015, Conopco agreed by letter to PDC’s counsel to defend and indemnify PDC in the New York State asbestos litigation case of Friedman v. ABC Supply Co, Inc., et al. In that regard, PDC alleged that the letter constituted Conopco’s agreement to indemnify and defend PDC not only in the Friedman case but also in all other equivalent asbestos litigation. In the alternative, PDC asserted that the December 2015 letter constituted an enforceable amendment to the parties’ asset purchase agreement.

Contrary to PDC’s argument, the court held that the December 2015 letter was nothing more than a response to PDC’s request for defense and indemnity in the Friedman case, and could not reasonably be interpreted as an agreement to provide indemnity in any case other than that case. There was no manifestation of an unmistakable intention to indemnify beyond the Friedman case; therefore, the letter did not constitute an amendment to the asset purchase agreement, the court concluded, granting Conopco’s motion to dismiss PDC’s global indemnification claims.

The case is No. 3:18-cv-00749-WWE.

Attorneys: Jonathan P. Whitcomb (Diserio Martin O’Connor & Castiglioni, LLP) for Parfums De Coeur Ltd. Ari J. Hoffman (Cohen & Wolf, PC) and Gavin J. Rooney (Lowenstein Sandler LLP) for Conopco, Inc.

Companies: Parfums De Coeur Ltd; Conopco, Inc.

MainStory: TopStory SCLIssuesNews AsbestosNews SofLReposeNews ConnecticutNews

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