The opinion of the court was delivered by: MARSH
This diversity ex-contractu case was tried non-jury. The stipulations of the parties were made part of the evidence. The Pennsylvania conflict of laws rules apply. Klaxon Co. v. Stentor Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941). The contracts to be construed are a Sales Agreement (PX 110) and a Letter Agreement (PX 146) which involved a sale by plaintiffs and counterdefendants, Emor, Inc. and Delcalo, Inc., of the assets and business of Rome Cable Corporation (Rome) to the defendant and counterclaimant, Cyprus Mines Corporation (Cyprus). Emor, Inc. and Delcalo, Inc. are wholly owned subsidiaries of the Aluminum Company of America (Alcoa) which guaranteed the performance of the Sales Agreement.
The last acts which put the contracts in force occurred in Pennsylvania on October 2, 1967, when Rome and Alcoa accepted Cyprus' written offer to buy Rome's assets, which contract became the Sales Agreement, and on October 31, 1967, when counsel for the parties signed the Letter Agreement. The closing was held in Pittsburgh on October 31, 1967, at which time the assets of Rome were transferred to Cyprus. In addition, it appears that Pennsylvania has the most significant contacts with the matters in dispute and was the center of gravity. Frankel v. Johns-Manville Corporation, 257 F.2d 508, 510-511 (3d Cir. 1958); Seneca Falls Machine Company v. McBeth, 368 F.2d 915 (3d Cir. 1966). Since the Sales Agreement and the Letter Agreement were made and to be performed in Pennsylvania, and that state was the center of gravity, the law of Pennsylvania applies to the interpretation and application of these agreements. The parties agree with this conclusion (see Stipulation of May 12, 1970, p. 3, item 10).
Hereinafter, for convenience, we will treat Alcoa as the seller of the assets of Rome to Cyprus.
The controversy involves the determination of the total purchase price which Cyprus is obligated to pay for the assets and business of Rome pursuant to the Sales Agreement and the Letter Agreement. The court finds that the total purchase price is $42,362,741 and the balance due Alcoa's subsidiaries is $1,261,520.
Although the contract documents were prepared by experts after lengthy investigation, reflection and discussion, the problems of interpretation presented are fraught with difficulty in the light of the unusual circumstances of the sale, extensive evidence presented, meticulous trial preparation and massive argumentation.
In 1964, the Supreme Court of the United States held that Alcoa was in violation of Section 7 of the Clayton Act and ordered Alcoa to divest itself of the assets and business of Rome, 377 U.S. 271, 84 S. Ct. 1283, 12 L. Ed. 2d 314. On April 27, 1966, Judge Brennan of the United States District Court for the Northern District of New York entered final judgment (PX 36) providing for such divestiture. This judgment substantially followed the consent judgment entered by the District Court in Rhode Island in the anti-trust case of United States v. Kaiser Aluminum & Chemical Corporation, Civil Action No. 2795, which ordered Kaiser (a competitor of Alcoa) to divest itself of Kaiser's Bristol, Rhode Island wire and cable plant (a competitor of Rome). Under the terms of the final judgment, Alcoa was ordered to sell the assets and business of Rome to such purchaser as would be approved by the Court and at a price which was to be "no less than the total of" several described amounts, two of which (and the ones relevant in this case) were as follows:
"(a) The adjusted book value of the land, plant and equipment of the Plants as of the date of sale, said adjusted book value being $16,238,000 as of December 31, 1964;
"(b) The book value as of date of sale of all raw materials, operating supplies, work in process, finished goods, plant inventories and finished goods inventories as the same appears on the books of Rome Cable before deducting reserves for lifo, except, however, that said book value shall be adjusted to include aluminum, copper and steel content at market value as of date of sale".
Cyprus began an extensive, broad and thorough investigation of the possible acquisition of Rome in June, 1967, which included a review of Rome's accounting principles and practices, various financial analyses, market studies, studies of Rome's plant and equipment and their relative competitive efficiency, a review of sources of raw materials used in the manufacture of aluminum, steel and copper products, a review of Rome's employee benefit contracts and labor contracts, and the pertinent provisions of Judge Brennan's final judgment and the underlying evidence.
Cyprus was aware that other companies were also investigating the possible acquisition of Rome, and in early August, 1967, learned that Alcoa had received offers from two other companies at or above the minimum upset price provided in the final judgment. At the request of Cyprus, Alcoa agreed to make no other commitment ...