The opinion of the court was delivered by: BERLE M. SCHILLER, District Judge
Plaintiff Berg Chilling Systems, Inc. ("Berg") brings this
action against Defendants Hull Corporation ("Hull") and SP
Industries, Inc. ("SPI") seeking contractual damages and
indemnification from settlement payments made by Berg to Huadu
Meat Products Company ("Huadu"). After a bench trial, the Court
entered a judgment on June 10, 2003 (the "District Court Order"),
Berg Chilling Sys., Inc. v. Hull Corp., Civ. No. 00-5275, 2003
WL 21362805 (E.D. Pa. June 10, 2003), which was reversed on
appeal by the United States Court of Appeals for the Third
Circuit on May 25, 2004 (the "Third Circuit Opinion"), Berg
Chilling Sys., Inc. v. Hull Corp., 369 F.3d 745 (3d Cir. 2004).
Presently before this Court are several issues remanded by the
Court of Appeals.
In 1995, Berg contracted to provide an industrial freeze-drying
system to Huadu, a Chinese company. Id. at 747. Berg then
contracted with Hull to obtain the freeze dryers that comprised a
significant portion of the freeze-drying system. Id. at 748.
Various problems arose in Hull's delivery of the freeze dryers to Berg and Berg's subsequent shipment of
them to Huadu, as a result of which the freeze dryers did not
function properly when Huadu received them in April 1997. Id.
On August 27, 1997, while Huadu, Hull, and Berg were attempting
to negotiate a solution to the freeze dryer situation, Hull
entered into an Asset Purchase Agreement ("the Agreement") with
SPI. Id. at 749. Pursuant to the Agreement, the food, drug, and
chemical ("FDC") division of Hull, which was the division that
had produced the freeze dryers for Berg, was sold to SPI. Id.
In exchange, SPI gave Hull $6 million cash (Asset Purchase
Agreement § 3.1) and assumed some of the FDC division's operating
liabilities (Asset Purchase Agreement § 2.1). The Asset Purchase
Agreement also contained, inter alia, a choice-of-law provision
requiring the application of New Jersey law (Asset Purchase
Agreement § 10.6), and a clause providing that SPI "does not
assume any liability to any third party claimant" (Asset Purchase
Agreement § 7.8).
Prior to closing on the asset sale, the president of Hull sent
a letter to Berg stating that if the FDC division were sold to
another corporation, Hull's responsibility to Berg would be
transferred to "the successor." Berg Chilling, 369 F.3d 745 at
750. Hull and SPI also made public statements characterizing
their transaction as a merger of SPI and the FDC division. Id.
After the closing, SPI operated the former FDC division as a
division of SPI known as the "Hull Company," id., and named
Hull's chairman the honorary chairman of the new division. (See
R. at 192-93 (Jan. 14, 2003).)
Through the Hull Company, SPI attempted to repair the Huadu
freeze dryers, but was unsuccessful. Berg Chilling,
369 F.3d 745 at 750. Accordingly, Huadu filed an international arbitration
action against Berg on March 29, 1999. Id. at 750-51. Berg
requested that Hull engage in a joint defense against Huadu, but
Hull refused to participate in the proceedings. Id. at 751. On December 7, 2000, Huadu won an arbitral award of approximately
$2.5 million against Berg. Id. at 752. The arbitrators
expressly declined to make any findings concerning Hull's
liability to Berg for any portion of this award. Id.
While the arbitration proceedings were ongoing, Berg filed suit
against Hull and SPI in this Court, seeking, inter alia,
indemnification from any damages awarded to Huadu in the
arbitration. Id. Hull and SPI then filed cross-claims against
each other for indemnification. Id. After the arbitration award
but before the District Court action had advanced significantly,
Berg and Huadu entered into a settlement agreement under which
Berg agreed to refund $1 million to Huadu. Id. Berg also agreed
to allow Huadu to retain the freeze dryers an "equipment
credit" that Berg and Huadu valued at $650,000. Id.
This Court held a bench trial in January 2003 and issued its
ruling on June 11, 2003, entering judgment: (a) against Berg on
its claim for indemnification from the equipment credit and
attorneys' fees and costs; (b) in favor of Berg and against Hull
for one-third of the $1 million settlement payment; (c) in favor
of Berg and against SPI for another one-third of that payment;
and (d) against each of Hull and SPI on their respective
cross-claims for indemnification. Berg Chilling, 2003 WL
21362805, at *12-13. Berg and SPI appealed the portions of these
decisions adverse to them,*fn2 and the Third Circuit
reversed, holding that: (a) Hull is liable to Berg in the amount
of $1 million plus the equipment credit*fn3 and attorneys'
fees and costs incurred in the arbitration proceeding; and (b)
Hull is liable to SPI for indemnification, including attorneys' fees
and costs. Berg Chilling, 369 F.3d at 766. The Third Circuit
remanded the question of whether SPI is liable to Berg and, if
so, whether SPI and Hull's liability is several or joint and
Hull is not participating in these remand proceedings, as it is
no longer in business and has no assets. (Mot. of Gregory
Liacouras, Esq. and Liacouras & Smith, LLP for Leave to Withdraw
as Counsel for Hull Corporation at 1); see also Berg Chilling,
369 F.3d at 753 & n. 23.
The Third Circuit held that § 7.8 of the Asset Purchase
Agreement, which provides that SPI "does not assume any liability
to any third party claimant," precluded a finding that SPI was
liable to Berg on the basis of the Agreement. The Third Circuit
noted, however, that SPI could be held liable to Berg if § 7.8
were void as against public policy. In addition, the appellate
court directed this Court to determine whether SPI is liable to Berg under the doctrine of
successor liability. Each of these issues is discussed below.
A. Validity of § 7.8 of the Asset Purchase Agreement
In a prior opinion, this Court held that the interpretation of
the Asset Purchase Agreement is governed by New Jersey law
pursuant to the Agreement's choice-of-law clause. Berg Chilling
Sys., Inc. v. Hull Corp., Civ. No. 00-5075, 2002 WL 31681955, at
*5 (E.D. Pa. Nov. 26, 2002). Although the Third Circuit reversed
the extension of this holding to Berg's indemnification claims
against Hull and SPI, the Third Circuit Opinion did not address
or call into question this Court's holding that the choice-of-law
clause governs interpretation of the contract itself. See Berg,
369 F.3d at ...