Cont'l Holdings, Inc. v. Crown Holdings Inc.

• Citation: 672 F.3d 567
• Decision Date: 05 March 2012
• Docket Number: No. 11–2203.,11–2203.
• Parties: CONTINENTAL HOLDINGS, INC., Successor, Continental Can Company, Inc., Plaintiff–Appellant, v. CROWN HOLDINGS INCORPORATED; Crown Cork & Seal Company; Crown Beverage Packaging, Inc., Defendants–Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

672 F.3d 567

CONTINENTAL HOLDINGS, INC., Successor, Continental Can Company, Inc., Plaintiff–Appellant,

v.CROWN HOLDINGS INCORPORATED; Crown Cork & Seal Company; Crown Beverage Packaging, Inc., Defendants–Appellees.

No. 11–2203.

United States Court of Appeals, Eighth Circuit.

Submitted: Jan. 11, 2012.Filed: March 5, 2012.

Joseph Edward Jones, argued, Michael Leo Schleich and Elizabeth A. Culhane, on the brief, Omaha, NE, for appellant.

Victoria H. Buter, argued, Thomas Harlan Dahlk, on the brief, Omaha, NE, for appellees.

Before BYE, SMITH, and COLLOTON, Circuit Judges.

BYE, Circuit Judge.

Continental Holdings, Inc. (“Continental”) sold its food and beverage metal can and can-end technology business to Crown Holdings, Inc. (“Crown”) via a stock purchase agreement (“SPA”) in March 1990. The parties disputed the extent of each other's resultant liabilities, as defined by section 10.3(a)(iv) of the SPA—the indemnity provision—in concurrent binding arbitration and judicial proceedings. After the arbitrator issued a decision interpreting the provision at issue, the district court granted summary judgment in favor of Crown on issue preclusion grounds, dismissed Continental's claims, and denied Continental's motion for reconsideration and motion to alter or amend the judgment. Continental appeals. We affirm in part, reverse in part, and remand for further proceedings.

I

By the 1980s, Continental had become a large, diversified, international conglomerate. It owned a number of companies related to producing metal cans for the food and beverage industry—its “core” business—as well as many other non-related businesses. Around that time, Continental decided to reduce assets and exit the metal can business. It began by selling off many of its non-core assets, i.e., assets not related to the metal can business, including paper plants and mills, glass bottling plants, and financial firms. Continental then sold its remaining core, metal can business to Crown in 1990. Continental claims the purpose of the sale was to exit the food and beverage packaging industry altogether. Notably, this sale was structured as a stock sale, not an asset sale. Continental further claims it purposefully structured the sale as such so as to allow it to transfer to Crown all assets, as well as liabilities, related to the metal can business.

The parties agree the SPA clearly defines some of their respective liabilities. For example, Continental agreed to retain liability related to an ERISA class action, as well as 50% of known environmental liabilities associated with metal can plants which were active at the time of the SPA. Continental also agreed to indemnify Crown for any liabilities arising from businesses—past and existing—which may have been associated with the stock transferred pursuant to the SPA, but were not related to the metal can business. This would include liability for occupational exposure claims made by employees who once worked at those unrelated plants. Continental explains it needed to include this exception for unrelated businesses within the SPA terms because, as a result of some asset sales and restructuring which occurred prior to the stock sale, some of the liabilities for non-metal can businesses had been consolidated into Continental Beverage Packaging, Inc., one of the two companies sold to Crown pursuant to the SPA. According to Continental, it structured the stock sale so only liabilities associated with the metal can businesses would transfer to Crown.

Yet, while some responsibilities are clear, the parties continue to argue over the extent to which Continental agreed to indemnify Crown for other liabilities. To resolve those disputes, the parties agreed to arbitrate the claims related to environmental liabilities. Continental, however, chose to litigate the parties' respective liability for former employees' occupational claims. The case before us on appeal turns on the interplay between those two proceedings.

Regarding the environmental claims, the parties agree Section 10.3(a)(iii) ¹ of the SPA requires Continental to indemnify Crown for 50% of all liabilities relating to then-existing or known environmental issues associated with the assets sold as part of the SPA. However, the parties disputed in arbitration whether Section 10.3(a)(iv) of the SPA required Continental to indemnify Crown for environmental liabilities associated with plants related to the metal can business, which were closed or otherwise inactive at the time of the stock sale. Section 10.3(a)(iv) provides, in relevant part, as follows: (a) Seller agrees to indemnify Buyer and its affiliates against ... (iv) all Liabilities relating to past or existing Businesses of the Companies and Subsidiaries other than the Business....” J.A. at 87. Specifically, the parties argued over whether the phrase “other than the Business” modified “past or existing Businesses,” or simply “existing Businesses,” not including the term “past.” The former interpretation, advanced by Continental, would mean Continental retained no liability for past businesses (i.e., those closed or otherwise inactive at the time of the SPA), or businesses existing at the time of the SPA, so long as the businesses were related to metal can production. The latter interpretation, advanced by Crown, would mean Continental retained liability for all past businesses—regardless whether they related to metal can production—in addition to all businesses in existence at the time of the SPA that did not relate to metal can production.

While arbitration was pending, the parties began arguing over their respective liability for occupational hazards arising from plants which were inactive at the time of the sale, but which were related to the metal can business. The parties' arbitration agreement on environmental liabilities arguably did not encompass occupational hazard claims. Continental chose to file suit in Douglas County, Nebraska, on September 15, 2009, which Crown removed to federal court: this is the case which is now before us on appeal. This diversity case similarly required the district court to determine the extent of the parties' liability under the same provision of the SPA, Section 10.3(a)(iv).

Shortly after Continental filed its occupational hazard lawsuit, Crown filed a motion with the arbitrator. Crown requested a ruling that by seeking a potentially binding judicial interpretation of the exact same clause—Section 10.3(a)(iv), which was at the heart of the arbitration—Continental had violated Paragraph Four of the Arbitration Agreement. Paragraph Four stated that the parties had agreed they would not, during the pendency of the arbitration, prosecute or commence any suit or action against the other party “relating to” any of the matters which are the subject of the arbitration. While Continental admitted the interpretation of the indemnification provision was relevant to both the Nebraska lawsuit and the arbitration, it argued the parties had only agreed to arbitrate their environmental liabilities, and thus it was free to file suit to determine the parties' occupational liabilities. The arbitrator agreed with Continental and issued a written ruling on November 7, 2009. While the arbitrator was concerned “his view of the dispute might allow for inconsistent adjudications of the meaning of Section 10.3(a)(iv) of the SPA, and agree[d] with Crown that inconsistent adjudications are not appealing to litigants[,]” the arbitrator concluded that the language of Paragraph Four of the Arbitration Agreement precluding litigation of matters “related to” the arbitration was not sufficiently clear to deny Continental a forum in which to bring its occupational hazard claims. Appellant's Mot. to Supp. R., Jan. 10, 2010, Ex. C at 6.

Shortly after the arbitrator issued his ruling, Crown filed a motion in district court to stay the proceedings pending arbitration. In its motion, Crown explained the “[a]rbitration involves a dispute concerning past and future environmental response costs and defense costs arising out of ... [the SPA] ... and involves the interpretation of Section 10 of the SPA.” J.A. at 13. Furthermore, Crown informed the court that, through arbitration, the parties were seeking “a determination of Continental's indemnification responsibilities for third party claims, as well as a definitive interpretation of Article 10 of the SPA.” Id. at 14. Finally, Crown urged the district court to stay the proceedings “[i]n light of the overlap of issues, ... and the upcoming Arbitration hearing that will address the very issue before this Court[, and] ... to avoid inconsistent adjudications and the burdensome and duplicative nature of dual proceedings.” Id.

Continental opposed Crown's motion, and urged the court not to stay the proceedings. Continental warned the court arbitration may take too long in light of the contentious relationship of the parties, and the additional document and discovery requests pending. In support of its memorandum in opposition to the motion to stay, Continental submitted a number of documents it had prepared and submitted to the arbitrator in response to Crown's previous, similar motion. Continental argued, as it had before the arbitrator, the parties had intended to limit the arbitration to resolution of “environmental claims and defenses,” which did not include the occupational exposure claims then-pending before the district court. Evidence in Support of Opp. to Def.'s Mot. to Stay, Ex. 4 at 6. Furthermore, Continental argued the underlying facts of each claim were sufficiently different to allow parallel proceedings. Id. at 7–10. At the same time, Continental recognized the arbitration would require an interpretation of Section 10.3(a)(iv). In a letter dated November 4, 2009, which Continental submitted to the district court, Continental reiterated its position that “the environmental claims and defenses at issue in [the] arbitration...