Ashland LLC v. Heyman
N15C-10-176 EMD CCLD
| Del. Super. Ct. | Mar 29, 2017Background
- Ashland purchased ISP, IES, and Chemco from the Heyman defendants in 2011 via a Stock Purchase Agreement (SPA); immediately after closing IES conveyed the Linden Property back to Heyman for $1 and Linden Property Holdings LLC (LPH) began operating the site.
- The Linden Property was subject to a 1989 Administrative Consent Order (ACO) with NJDEP addressing onsite contamination; a 2006 ACO amendment reiterated IES’s continuing obligations under the ACO.
- SPA Schedule 5.19 allocated liabilities: Section 2(e) had the Seller Parties (Heyman) assume Linden-related liabilities but excluded pre-closing off‑site migration/disposal liability; Section 2(f) required Seller Parties to use "reasonable best efforts" to amend consent decrees, substitute financial assurances, add the Linden transferee, and remove ISP from governmental orders if permitted.
- After the transfer LPH obtained RAPs and replenished a remediation letter of credit, but NJDEP denied LPH’s request for full satisfaction and directed additional off‑site investigation/remediation; NJDEP/AG indicated the replacement remediation funding could be drawn for off‑site work.
- Ashland sued seeking declaratory relief and breach of contract alleging Heyman breached Section 2(f) by failing to secure ACO amendments and remove ISP; Heyman moved for partial judgment on the pleadings under Rule 12(c) seeking judgment on Count I (Ashland) and Counterclaims II–III.
- The court evaluated contractual language and pleadings, viewing facts in Ashland’s favor, and denied the Heyman defendants’ motion, finding material factual issues and possible ambiguities about Section 2(f) obligations and performance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 2(f) required Heyman to secure ACO amendments, substitute financial assurances, add LPH as an ordered party, and remove ISP from the ACO | Ashland: 2(f) imposes affirmative obligations on Heyman to effectuate those changes (incl. financial assurances) and Heyman failed to use reasonable best efforts | Heyman: 2(f) is narrow, applies only to Linden Excluded Liabilities and does not obligate Heyman to cover pre‑closing off‑site migration liability or to obtain removal of ISP where NJDEP would not permit | Denied Heyman’s Rule 12(c) motion — factual disputes/ambiguities exist about the scope of 2(f) and whether Heyman used reasonable best efforts; not appropriate for judgment on pleadings |
| Whether Section 2(e)’s exclusion of pre‑closing off‑site migration liability bars Ashland’s claims that Heyman is responsible for off‑site remediation | Ashland: Sections 2(e) and 2(f) must be read together; 2(f) specifically governs consent decrees and financial assurances, thus Heyman retained obligations under the ACO beyond the 2(e) exclusion | Heyman: 2(e) plainly allocates pre‑closing off‑site migration to buyer (Ashland), so 2(f) cannot be read to override that allocation | Court found ambiguity in harmonizing 2(e) and 2(f); resolution requires factual development, so judgment on pleadings denied |
| Whether Heyman’s alleged failure to use "reasonable best efforts" is determinative on the pleadings | Ashland: pleads Heyman did not inform NJDEP properly and failed to obtain required amendments/extensions — creates triable issue on reasonable best efforts | Heyman: contends it satisfied its contractual duties and that 2(f) obligations are limited | Court: Ashland’s allegations raise material issues of fact on whether Heyman used reasonable best efforts; not resolvable on pleadings |
| Whether specific contract terms (2(f)) control over general terms (2(e)) as a matter of law now | Ashland: 2(f) is the specific provision for the Linden Transfer/ACO and can narrow or define obligations allocated under 2(e) | Heyman: relies on the general allocation in 2(e) and the express exclusion language for off‑site pre‑closing migration | Court: acknowledged rule that specific terms govern general ones but found ambiguities in application here; factual record needed, so no judgment on pleadings |
Key Cases Cited
- Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153 (Del. 2010) (court may interpret an unambiguous contract as a matter of law)
- Martin Marietta Materials, Inc. v. Vulcan Materials Co., 68 A.3d 1208 (Del. 2012) (cardinal rule is to give effect to all contract provisions)
- DCV Holdings, Inc. v. ConAgra, Inc., 889 A.2d 954 (Del. 2005) (specific contract terms supersede more general terms)
- Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A.2d 1199 (Del. 1993) (pleadings are viewed in the light most favorable to the non‑moving party for Rule 12(c) analysis)