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Airgas, Inc. v. Cravath

August 3, 2010

AIRGAS, INC., PLAINTIFF,
v.
CRAVATH, SWAINE & MOORE LLP DEFENDANT.



The opinion of the court was delivered by: Eduardo C. Robreno, J.

MEMORANDUM

I. INTRODUCTION

Defendant Cravath, Swaine and Moore LLP ("Cravath") moves for judgment on the pleadings arguing that the pleadings fail to establish that Cravath's conduct caused Plaintiff to suffer any legally cognizable injury. Plaintiff Airgas, Inc. ("Airgas"), opposes the motion. For the following reasons, the motion will be denied.

II. BACKGROUND*fn1

Cravath is a New York-based law firm. Airgas is a Delaware corporation with its principal place of business in Pennsylvania. Air Products and Chemicals, Inc. ("Air Products") is a Delaware corporation with its principal place of business in Pennsylvania, located forty miles from Airgas. Airgas and Air Products are competitors in the industrial, packaged gases business. Cravath has provided legal representation to Air Products for over forty years. Meanwhile, Airgas was a client of Cravath for nine years.

The parties hotly dispute the nature of Cravath's representation of the parties, the scope of the representation and when Cravath's representation of Airgas came to an end. Also in dispute is the nature of the information Cravath learned while representing Airgas.

These issues came to the forefront in February 2010 when Air Products, with the assistance of Cravath, sought to engage Airgas in discussions about a possible merger of the two companies. On February 4, 2010, when these initial overtures were rejected by Airgas, Air Products publicly announced an all cash offer to purchase all outstanding Airgas shares. That same day, Air Products filed suit in the Delaware Chancery Court against Airgas and its Board of Directors alleging that their failure to consider Air Products' offer was a breach of fiduciary duty ("the Delaware Action"). Cravath is representing Air Products in that action.

The next day, on February 5, 2010, Airgas sued Cravath in the Philadelphia Court of Common Pleas for damages and also a special injunction (TRO) and preliminary injunction restraining Cravath from representing Air Products in the Delaware Action and from otherwise representing Air Products in the proposed acquisition of Airgas (the "Pennsylvania Action"). Airgas claims that Cravath violated Rule 1.7 of the Pennsylvania Rules of Professional Conduct*fn2 by simultaneously representing Airgas in financing related matters and advising Air Products on a potential takeover of Airgas. As discussed herein, the Pennsylvania Supreme Court in Maritrans established that a cause of action may be maintained against an attorney for breach of his or her fiduciary duty to a client through concurrent representation that results in a conflict of interest. Maritrans GP, Inc. v. Pepper, Hamilton, & Scheetz, 602 A.2d 1277 (Pa. 1992).

Airgas's complaint sets forth three counts, each premised on an alleged breach of fiduciary duty, seeking (1) an injunction precluding Cravath from representing Air Products in any matter related to a proposed transaction with Airgas, (2) damages, and (3) punitive damages, respectively. (Compl. ¶¶ 52-73.) To support its claim for breach of fiduciary duty, Airgas claims that it has suffered four discrete injuries as a result of Cravath's alleged misconduct.

First, Airgas alleges that, "[a]s a proximate result of Cravath's wrongful conduct, Airgas has been required to retain new outside counsel to seek to enforce Cravath's ethical and fiduciary obligations, and has incurred legal fees and costs in doing so, which legal fees and costs should be reimbursed by Cravath." (Id. ¶ 68.) Second, Airgas contends that it was "proximately damaged to the extent it has been required to retain replacement outside counsel to develop an understanding of Airgas's financing needs and objectives in order to provide legal services concerning the Airgas credit facilities and financing requirements that would otherwise have been provided by Cravath." (Id. ¶ 69.) Third, Airgas alleges that it has been "proximately damaged in that it has been unable to obtain new financing because of Air Products' takeover offer, and Cravath, Air Products' counsel with respect to the takeover, knew that the timing of Air Products' offer letter could negatively affect Airgas's ability to seek new financing." (Id. ¶ 70.) Fourth, Airgas seeks disgorgement of $322,800 in fees paid to Cravath in October 2009, during the time period Airgas alleges that Cravath simultaneously was working for and against its client Airgas. (Id. ¶ 10.)

Airgas, in the Pennsylvania Action, previously sought to enjoin Cravath from representing Air Products in any matter related to the attempted acquisition of Airgas, including banning Cravath from representing Air Products in the Delaware Action. On February 12, 2010, Cravath removed the Pennsylvania Action to this Court (the "Federal Action"). Immediately thereafter, Cravath moved for this Court to abstain and/or stay the Federal Action pending resolution of the issue of disqualification in the Delaware Action.

On February 22, 2010, this Court granted Cravath's motion to stay the action. See Airgas, Inc. v. Cravath, Swaine & Moore LLP, No. 10-612, 2010 WL 624955 (E.D. Pa. Feb. 22, 2010). On March 5, 2010, Chancellor Chandler determined that under Delaware law, Airgas had not demonstrated that Cravath's behavior sufficiently prejudiced the fairness of the proceedings to warrant the remedy of disqualification. (See Ex. D to Def.'s Mem. at 10-11.)*fn3

On May 26, 2010, this Court held a status conference with the parties. The Court was informed that the Delaware Action is scheduled for trial starting on October 4, 2010. (Hrg. Tr. at 6, May 26, 2010.) The Court ordered that discovery be stayed until October 15, 2010, but that Cravath could file the instant Rule 12(c) motion in the interim. (Id. at 21-22.) A status and scheduling conference currently is scheduled for October 15, 2010.

III. LEGAL STANDARD

Rule 12(c) permits a party to move for judgment on the pleadings "[a]fter the pleadings are closed-but early enough not to delay trial." Fed. R. Civ. P. 12(c). Where, as here, a Rule 12(c) motion challenges the plaintiff's failure to state a claim upon which relief can be granted, the court evaluates the motion under the same standard as a motion to dismiss pursuant to Rule 12(b)(6). Turbe v. Gov't of V.I., 938 F.2d 427, 428 (3d Cir. 1991); Foreman v. Lowe, 261 F. App'x 401, 403 n.1 (3d Cir. 2008).

"To survive a motion to dismiss [pursuant to Rule 12(b)(6)], a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Factual allegations "that are 'merely consistent with' a defendant's liability," or that permit the court to infer no more than "the mere possibility of misconduct" are not enough. Id. at 1949-50 (quoting Twombly, 550 U.S. at 557). Rather, the plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for misconduct alleged." Id. at 1949. In evaluating a motion to dismiss, the court "must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions." Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009); see also Iqbal, 129 S.Ct. at 1949 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.").

Moreover, when deciding a Rule 12(c) motion for judgment on the pleadings, a district court must view the facts and inferences to be drawn from the pleadings in the light most favorable to the non-moving party. Green v. ...


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