Precision Kidd Acquisition v. Pass. J.
888 WDA 2021
| Pa. Super. Ct. | May 13, 2022Background
- Precision Kidd Acquisition, LLC (PKA) purchased Precision Kidd Steel Co.; merger agreement included indemnities, a $100,000 basket and a $50,000 offset for shareholder indemnity claims.
- PKA alleged the sellers (represented by Pass) failed to disclose that Snap‑on, a major customer, had terminated its contract pre‑closing.
- After a bench trial, the court found breaches (Sections 3.08, 3.15(a), and 5.05(a)) and awarded $36,000 in damages; trial court later awarded substantial attorneys’ fees.
- Superior Court affirmed but remanded to decide whether the Merger Agreement’s $50,000 offset applied.
- On remand the trial court applied the $50,000 offset, awarded an additional $14,913 in post‑trial fees, denied appellate/remand fees, and PKA appealed.
- The Superior Court affirmed the trial court: offset applies; fee recovery limited to reasonable fees for enforcing an existing indemnity right; appellate fees discretionary and properly denied here.
Issues
| Issue | PKA's Argument | Pass's Argument | Held |
|---|---|---|---|
| Whether the $50,000 offset in Section 8.04(a)(i) applies to damages from breach of Section 5.05(a) (a covenant) | Section 5.05(a) is an affirmative covenant; losses from covenant breach fall under Section 8.02(b), which is not subject to the $50,000 offset | The offset applies to losses arising from breaches of representations/warranties under Section 8.02(a); nothing in the agreement eliminates the offset simply because other covenant breaches also occurred | Court applied contract interpretation rules and held the $50,000 offset applies; parties could have drafted an exception but did not |
| Whether attorneys’ fees and costs are encompassed by the defined term "Losses" and thus fully recoverable as enforcement costs | The Merger Agreement defines "Losses" to include attorneys’ fees and enforcement costs, so all fees incurred enforcing indemnity are contractually recoverable | Fees are recoverable only if reasonable and only to enforce an actual right to indemnification (i.e., indemnity must be due); court must assess reasonableness | Court held fees are recoverable in principle but limited to reasonable fees incurred enforcing a right to indemnification; not all fees automatically recoverable |
| Whether PKA should recover appellate attorneys’ fees based on overall success in litigation rather than success on appeal | Appellate fees should be awarded because PKA prevailed overall (liability, some fees affirmed, remand on offset) and was enforcing its indemnity right | Awarding appellate fees is discretionary; court may focus on success of the appeal when deciding appellate fee awards; PKA’s appeal did not prevail on the primary damages issue | Court found no abuse of discretion: trial court permissibly weighed "results obtained" (PKA did not prevail on the main appellate issue) and declined to award appellate fees |
Key Cases Cited
- Salamone v. Gorman, 106 A.3d 354 (Del. 2014) (Delaware contract interpretation emphasizes objective intent from the four corners of the agreement)
- Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153 (Del. 2010) (contra proferentem not applied where parties jointly drafted an agreement)
- Mahani v. Edix Media Group, Inc., 935 A.2d 242 (Del. 2007) (factors for assessing reasonableness of attorneys’ fees in contractual fee‑shifting cases)
- Johnston the Florist, Inc. v. TEDCO Const. Corp., 657 A.2d 511 (Pa. Super. 1995) (notice‑of‑appeal filed after announcement but before entry of order treated as filed on day of entry)