OPINION & ORDER
This matter comes before the Court on appeal from the Bankruptcy Court’s October 27, 2010 grant of summary judgment in favor of Debtor-Appellee. The Court heard oral argument on October 17, 2013. For reasons stated that day, as well as reasons discussed below, the decision by the Bankruptcy Court is affirmed.
Before the Bankruptcy Court was a motion for summary judgment on the amended proof of claim of PepsiAmericas, Inc. (“Appellant”), filed in the bankruptcy of Federal-Mogul Global, Inc. (“Appellee”), against two of Appellee’s subsidiaries, Federal-Mogul Corporation (“FMC”) and Federal-Mogul Products, Inc. (“FMP”). Appellant had alleged that Appellee improperly billed shared insurance policies, giving rise to claims based on tort, conversion, and breach of the implied covenant good faith and fair dealing. The Appellee argued that no factual basis existed to substantiate the validity of Appellant’s claims. The' Bankruptcy Court agreed and granted summary judgment in favor of Appellee.
Background
This dispute derives from both, parties’ relationship with the former Abex Corporation, a producer of brakes and other friction products that spawned countless cases of asbestos exposure. See In Re Federal-Mogul Global, Inc.,
The history of the corporate relationship between the two parties is long, muddled, and thoroughly documented. This Court approves and affirms the corporate histories explained in detail in past opinions. See In Re Federal-Mogul Global Inc.,
In 1968, Abex Corporation was acquired by IC Industries, Inc., predecessor to Whitman Corporation and ultimately PepsiAmericas, Inc. (“Appellant”). See In Re Federal-Mogul Global, Inc.,
In 1988, IC Industries sold Abex Corporation and PAC 1 stock to PA Holdings Corporation, which was owned by Henley Investment Inc., a subsidiary of The Henley Group, pursuant to the 1988 Stock Purchase Agreement (“1988 SPA”) in the record. Id.
In 1992, Henley Investments Inc., which owned PAC 2, changed its name to Abex Inc. Id. at 793. That same year, The Henley Group distributed Abex Inc. stock to its common stockholders, and transferred certain of its own assets and liabilities to PAC 2. Id. at 793 and Appendix A.
In 1994, PAC 2 sold certain assets of Abex Corporation to Wagner Electric Corporation, predecessor to FMP, pursuant to the 1994 Asset Purchase Agreement (“1994 APA”) in the record. Id. Under that agreement, Wagner agreed to indemnify PAC 2 with respect to certain liabilities.
In 1996, Wagner merged into Moog Automotive, Inc., another subsidiary of Cooper Industries, Inc. Id. at 794. Under a Purchase and Sale Agreement between Cooper and FMC, dated August 17, 1998 (“1998 P & SA”), Cooper sold its automotive products business, which included Moog, to FMC. Pursuant to the 1998 P & SA, FMC аssumed Cooper’s mutual guaranty obligations related to the 1994 APA for “the operation of and products manufactured or sold by the Wagner industrial brake business including” those liabilities related to asbestos in the brakes. Id. See also 1998 P & SA at Section 5.12(b), referring to Section 5.12(a)(x). Following the 1998 P & SA, Moog changed its name to Federal Mogul Products, Inc. (“FMP”). Id. at 792. FMP, therefore, was the successor to Wagner’s indemnity obligation under the 1994 APA. Id. Appendix B. Thus, an asbestos-related claim arising out of the Moog friction products division received by PAC 2, a distinct entity, would have been subject to the assumed liabilities under the 1994 APA and indemnified by FMP. Id. That is, FMP undertook Wagner’s obligations and FMC guaranteed FMP’s performance. Id. at 794.
Beside these facts, this Court adopts the Bankruptcy Court’s factual determination that Abex Corporation (not Abex Inc.), IC Industries, Whitman, Pneumo Corporation, and PAC 1 were, at one time or another, in the Appellant’s corporate chain. Id. at 789. Similarly, Wagner Electric Corporation and Moog Automotive, Inc., were in the FMC/FMP corporate chain. Id. PA Holdings, The Henley Group, Abex Inc. and PAC 2 are entirely distinct entities from the corporate chains оf Appellant and Appellee. Id.
Appellant has offered two groups of insurance policies that covered against Abex asbestos litigation. First, Appellant is the purchaser and first named insured for Comprehensive General Liability insurance policies purchased during the period of 1971-1985 to provide liability insurance coverage for Appellant and most of its then existing subsidiaries (“Appellant Policies”). Second, Appellant also has contractual rights to the proceeds paid from CGL insurance policies purchаsed by Abex Corporation prior to 1971 (herein “Pre1971 Policies”). Appellee has never been named insured under the Appellant Policies or Pre-1971 Policies. Under the terms of the 1994 Asset Purchase Agree
Essentially, Appellant alleged that Appellee inequitably allocated expenses to the Appellant Policies and the Pre-1971 Policies, and received proceeds from those policies to which it was not equitably or lawfully entitled. Appellant’s Amended Claim cited four examples of such alleged over-billing, which account for $1,400,000 in benefits from the Pre-1971 Policies and Appellant Policies. Upon seeing the bills sent to the Appellant Policies and Pre1971 Policies, Appellant requested information from Pneumo Abex to justify the expenditures. Outside counsel for Appellant also made requests to outside counsel for Appellee. No information was provided. An independent investigation revealed that, in at least one of the cases, the named plaintiff did not work with Abex products. Despite this, Appellee allegedly received benefits from the shared insurance plans designed to cover Abex claims. Appellant argues these four instances are proof of a larger scheme to bill the Pre1971 Policies and Appellant Policies for claims not covered under the Policies.
In addition to the Pre-1971 Policies, the Appellant Policies, the 1988 SPA, and the 1994 APA, Appellant provided the Court with three separate insurance settlement contracts signed by both Appellant and Appellee. Appellant claims that these contracts establish privity between it and Appellee, and that Appellee breached the implied covenant of good faith and fair dealing in these contracts by billing the Policies for non-Abex claims. The settlement contraсts provided by Appellant are described as follows.
The December 28, 2006 Settlement Agreement between the co-claimants and Equitas Escrow Account lists as claimants Appellant, Appellee, two other entities, and all entities that have a present ownership interest in those entities, as well as predecessors, successors, or assigns. It was meant to settle two insurance coverage actions, Certain Underwriters at Lloyds, London, et al. v. Pneumo Abex Corporation, et al. and Whitman Insurance Corporation, Ltd. v. Travelers Indemnity Company, et al. The policies in question, known as the “London Policies,” are defined by the contract. Also included in the contract is a statistical breakdown of the percentages of the settlement to which each entity was entitled. Appellant was entitled to 14.24% of the settlement and Appellee was entitled to 3.31% of the settlement.
The May 17, 2001 Settlement Agreement between Pneumo Abex Corporation and All State Insurance Company was signed by Appellant and Appellee. The various relevant policies issued by All State Insurancе Company are named and identified. No percentage breakdown is provided.
A December 6, 2005 Settlement Agreement between Stonewall Insurance Company and multiple claimants including Appellant and Appellee identifies two policies
In short, the Bankruptcy Court found that, because of the severance of the corporate relationships, Appellant’s remedies, if аny, are not against the Debtors in this case.
Under Section 8.3 PAC 2 agreed to retain certain liabilities under the Whitman Agreements “forever.” ... PAC 2 has the right either to perform remedial actions it is liable for under the agreement or to have Wagner (FMP) perform the work in which case PAC 2 will reimburse FMP, but Whitman ([Appellant]) nonetheless retained the right to control the details of the work or to perform the remediation. See Section 8.4(c) at 84. Section 8.5 recites limitations on PAC 2’s environmental indemnification obligation. Wagner (FMP) agreed not to take any action it knew would result in [PAC 2] violating the Whitman Agreements in any way. Section 8.5(d). Even if Wagner (FMP) did so, it is PAC 2, not [Appellant], that would have recourse against Wagner. If there is a breach, [Appellant’s remedies are with respect to PAC 2 to the exclusion of Wagner (FMP).
Appeal of Bankruptcy Court Decision
This Court has jurisdiction to hear an appeal from the bankruptcy court pursuant to 28 U.S.C. § 158(a). In undertaking a review of the issues on appeal, a district court reviews conclusions of law de novo, findings of fact on a clearly erroneous standard, and exercises of discretion for abuse thereof. See Officiаl Comm. Of Unsecured Creditors v. Am. Classic Voyages Co.,
Summary Judgment Standard
A court will grant a motion for summary judgment if there is no genuine issue of material fact and if, viewing the facts in the light most favorable to the non-moving party, the moving party is entitled to judgment as a matter of law. Pearson v. Component Tech. Corp.,
An issue is “genuine” if supported by evidence such that a reasonable jury could return a verdict jn the nonmoving party’s favor. Anderson v. Liberty Lobby, Inc.,
Initially, the moving party has the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323,
Appellant argues against the traditional summary judgment standard of review, in favor of a lighter burden for the' non-moving party. Appellant contrasts the instant case from Celotex by arguing that the lack of discovery warrants this lighter burden. (See Appellant Reply Br., p. 6.) As the Appellant notes, the Court in Celotex held that the non-moving party’s interests were protected because there was discovery prior to the summary judgment motion, alleviating any concerns that the non-movants were being “railroaded” by summary judgment. See Celotex, 477 U.S. at 526,
Analysis
This Court affirms the Bankruptcy Court’s decision that the undisputed facts alleged by Appellant do not give rise to any liability on the part of Appellant. As the Bankruptcy Court noted, “there is a difference between what the facts are and what they mean and [Appellant’s] challenge is to the meaning of undisputed facts.”
Although Appellant claimed “[t]ort, conversion, and breach of good faith and fair dealing regarding insurance policies,” the Bankruptcy Court found that “the claims do not even identify the alleged tort (except conversion), do not. explain how the policies were (allegedly) converted, or set forth the basis for any supposed duty of
Debtors were not parties to the 1988 APA, the Pre-1971 Insurance Policies, or the Appellant Insurance Policies, but Appellant argues that Appellee is bound by those documents through the doctrine of contract adoption. Third parties to a contract become parties who are bound by the contract’s terms by either explicitly or implicitly adopting the agreement. See American Legacy Foundation v. Lorillard Tobacco Co.,
There are no magic words to explicitly adopt a contract. Id. at 348. Statements made by a non-signatory confirming that it is bound by a contract can establish that it has adopted the contract. Id. at 349. Express adoption occurs in a variety of contexts. Id. Express adoption occurs when a successor adopts a contract of a predecessor as its own. Id. It also occurs when an agent acts on behalf of the principal and the principal agrees to be bound by the agent. Id. Any statement made by a third party confirming that it is bound by a contract is sufficient to adopt the agreement. Id.
Third parties can also implicitly adopt a contract through their conduct, rather than explicitly through their words. Implicit adoption occurs when a party accepts benefits intended for third party beneficiary. Id. Courts will often find imрlicit adoption when a party who has received benefits of a contract then tries to avoid burdens imposed by the same contract. Id.
Appellant has not identified any provisions or contractual language in the 1988 SPA to indicate that the original drafters of the 1988 SPA contemplated adoption by third parties. While not specifically addressing contract adoption, however, the 1988 SPA contains a provision that explicitly rejects third party beneficiaries. In relevant part, the SPA states “this Agreement is for the sole benefit of the рarties hereto and nothing herein expressed or implied shall give or be construed to give any person or entity, other than the parties hereto, any legal or equitable rights hereunder.” 1988 SPA, p. 70. That provision sheds light on the intent of the drafters, unequivocally stating that the agreement is for the “sole benefit of the parties hereto,” not a third party. Accordingly, Appellant failed to create a genuine issue of material fact with regard to Appellee’s potential contract adoption of the 1988 SPA. Moreover, the Court cannоt
Next, Appellant argued that Debtors were privy to the 1988 SPA and shared insurance contracts through the doctrine of equitable estoppel. When a party enjoys the benefits of a contract, it can become bound by the contract’s terms and obligations. See E.I. DuPont de Nemours and Co. v. Rhone Poulenc Fiber and Resin Intermediates,
Appellant argues that because Debtors requested and accepted monies produced by the 1988 SPA, Pre-1971 Policies, and Appellant Policies, they are equitably estopped from avoiding liability under the implied covenant of good faith and fair dealing. The implied warranty of good faith and fair dealing exists in every contract. See Dunlap v. State Farm Fire & Cas. Co.,
The implied covenant of good faith and fair dealing has its limitations. Id. The covenant cannot be used to circumvent the parties’ original bargain or create “a free floating duty ... unattached to the underlying legal document.” See id. at 441. Only when it is clear from the contract that the parties would have agreed to proscribe the act later complained of, had they thought to negotiate it, may a party invoke the protections of the covenant. Id. at 442. The covenant is not a catch-all to prevent any injustice, and Delaware courts have described invoking the covenant as a “cautious enterprise.” See Nemec v. Shrader,
Appellant’s claims for breach of the implied covenant оf good faith and fair dealing cannot be sustained. Regarding the 1988 SPA, there is no privity of con
Next, the Bankruptcy Court dismissed Appellant’s claim for “tort” because of the lack of specificity in the claim. See In Re Federal-Mogul Global, Inc.,
Conclusion
In conclusion, this Court affirms the decision of the Bankruptcy Court that Appellant failed to establish a right to pursue any claim against Debtors FMP/FMC. Summary judgment was granted appropriately.
IT IS ORDERED that the decision of the Bankruptcy Court is hereby AFFIRMED.
Notes
. The 1988 SPA contains a provision explicitly barring third party beneficiaries. See 1988 SPA at ¶ 15 ("this Agreement is for the sole benefit of the parties hereto and nothing herein expressed or implied shall give or be construed to give to any person or entity, other than the parties hereto, any legal or equitable rights hereunder.”).
. Under Section 2.3 of the 1994 APA, Wagner agreed that it would "assume and become
. The Bankruptcy Court noted three other insurance agreements not mentioned in the pleadings which Appellant filed under seal with leave of court. The three agreements under seal are (1) May 2000 Confidential Settlement Agreement between Pneumo Abex Corporation and Whitman Corporation, (2) December 2002 Final Settlement Agreement Between Pneumo Abex Corporation and Maryland Casualty Company, and (3) December 2006 Confidential Settlement Agreement and Release between Pneumo Abex LLC, Cooper Industries, Appellant, FMP, FMC and Certain Underwriters at Lloyd’s.