Ashland Inc. v. G-I Holdings Inc. (In re G-I Holdings, Inc.)

• Citation: 564 B.R. 217
• Decision Date: 21 December 2016
• Docket Number: Case No.: 01–38790(RG) Jointly Administered,Adv. No.: 15–2379(RG),Case No.: 01–30135(RG)
• Parties: IN RE: G–I HOLDINGS, INC. and ACI Inc., Debtors. Ashland Inc., International Specialty Products, Inc., and ISP Environmental Services, Inc., Plaintiff(s), v. G–I Holdings Inc., Building Materials Corporation of America d/b/a GAF Materials Corporation, GAF Corporation, John and Jane Does 1–20 and ABC Companies 1–20, Defendant(s).
• Court: U.S. Bankruptcy Court — District of New Jersey

564 B.R. 217

IN RE: G–I HOLDINGS, INC. and ACI Inc., Debtors.

Ashland Inc., International Specialty Products, Inc., and ISP Environmental Services, Inc., Plaintiff(s),

v.G–I Holdings Inc., Building Materials Corporation of America d/b/a GAF Materials Corporation, GAF Corporation, John and Jane Does 1–20 and ABC Companies 1–20, Defendant(s).

Case No.: 01–30135(RG)

Case No.: 01–38790(RG) Jointly Administered

Adv. No.: 15–2379(RG)

United States Bankruptcy Court, D. New Jersey.

Signed December 21, 2016

Riker, Danzig, Scherer, Hyland & Perretti LLP, BY: DENNIS J. O'GRADY, ESQ., MARK E. HALL, ESQ., Headquarters Plaza, One Speedwell Avenue, Morristown, New Jersey 07962, Co–Counsel to Defendants G–I Holdings Inc., Building Materials Corporation of America and GAF Corporation

Quinn Emanuel Urquhart & Sullivan, LLP, BY: ANDREW J. ROSSMAN, ESQ., SCOTT C. SHELLEY, ESQ., SYLVIA E. SIMSON, ESQ., JONATHAN B. OBLAK, ESQ., 51 Madison Avenue, 22^ndFloor, New York, New York 10010, Co–Counsel to Defendants G–I Holdings Inc., Building Materials Corporation of America and GAF Corporation

Gibbons P.C., BY: MICHAEL R. GRIFFINGER, ESQ., CAMILLE V. OTERO, ESQ., BRETT S. THEISEN, ESQ., WILLIAM S. HATFIELD, ESQ., JEFFREY A. POLUMBO, ESQ., One Gateway Center, Newark, New Jersey 07102–5310, Attorney(s) for Plaintiffs Ashland Inc., International Specialty Products, Inc., and ISP Environmental Services, Inc.

OPINION

Rosemary Gambardella, Bankruptcy Judge

MATTER BEFORE THE COURT

Before the Court is a Motion filed by Ashland, Inc., International Specialty Products, Inc. ("ISP"), ISP Environmental Services, Inc. ("IES") (collectively "Ashland" or "Plaintiffs") to Remand a certain proceeding to the Superior Court of New Jersey, Law Division, Morris County. A Response in Opposition was filed by G–I Holdings, Inc. ("G–I"), Buildings Materials Corporation of America ("BMCA"),¹ and GAF Corporation ("GAF") (collectively "G–I" or "Defendants"), and a Reply was filed by Plaintiffs. On June 2, 2016 the Court held a hearing on the Motion for Remand. At the conclusion of the hearing, the Court reserved decision. The following constitutes this Court's findings of fact and conclusions of law.

STATEMENT OF FACTS AND PROCEDURAL BACKGROUND

This dispute arises in connection with Defendants' potential liability for remediation of a Superfund site located in Linden, New Jersey (the "LCP Site"),² and Plaintiffs' claim seeking indemnification from Defendants for costs and expenses paid by Plaintiffs or asserted against them by governmental entities or third parties related to the LCP Site, based on an Indemnification Agreement between the parties.

A. Corporate History

GAF Corporation ("GAF") G–I's predecessor, owned and conducted operations at the LCP Site from the 1950s until it sold the LCP Site in 1972.

In 1989, GAF was liquidated, and its liabilities were transferred to five separate entities: Dorset Inc. ("Dorset"), GAF Building Materials Corporation (formerly known as Edgecliff Inc.), Merick Inc., Perth Inc., and Clover Inc. According to G–I, Dorset received "all the assets and liabilities, known and unknown, relating to [GAF's] acetylenic chemicals, surfacetants, specialty chemicals, organometalics, mineral products, industrial filters and filter vessels business (collectively, the ‘Chemical Businesses')," while GAF Building Materials Corporation, formerly known as Edgecliff Inc., received "all the assets and liabilities, known and unknown, relating to [GAF's] commercial and residential roofing materials business."³ See Motion to Dismiss Adversary Proceeding at 6, Ashland Inc. v. G–I Holdings, Inc., Adv. Pro. No. 15–02379, ECF No. 12 (citing the 1989 Liquidation Plan). To effectuate the Liquidation Plan, on April 10, 1989, GAF entered into instruments of Assignment and Assumption with Dorset and GAF Building Materials Corporation, which transferred, in relevant part, "100% of the liabilities arising out of ... environmental claims arising out of plants currently operating in the Chemical Businesses" to Dorset, and "100% of all liabilities arising out of ... environmental claims from plants no longer operating and from oil and waste pollution" to GAF Building Materials Corporation. Id. at 7.

Ashland claims that the liabilities in connection with the LCP Site were transferred to Edgecliff Inc., which later became GAF Building Materials Corporation, because such liability fell under the umbrella of "environmental liabilities associated with plants that were no longer operating," such as the LCP Site, whereas G–I claims the liabilities in connection with the LCP Site were transferred to Dorset, because such liability is related to the Chemical Businesses. Ashland asserts here that ISP and IES were later incorporated in 1991 as subsidiaries of GAF, and thus ISP and IES were never in the corporate lineage of Edgecliff Inc./GAF Building Materials (one of the Defendant–Indemnitors) which assumed responsibility for the LCP Site before ISP and IES were even formed. G–I on the other hand takes the position that none of the G–I Defendants are responsible for any environmental liabilities or obligations at Linden as these liabilities and obligations were assumed by IES in 1991 and that even if these liabilities resulted in G–I following the series of corporate transactions referred to herein, which G–I claims they did not, these liabilities were discharged in G–I's bankruptcy case.

Subsequently, in 1989, GAF Chemicals Corporation ("GAF Chemicals"), a subsidiary of GAF, merged with Dorset. G–I claims that because Dorset acquired liability in the 1989 Liquidation, liability in connection with the LCP Site was again transferred to GAF Chemicals when it merged with Dorset.

In 1991, International Specialty Products, Inc. ("ISP") and ISP Environmental Services, Inc. ("IES") were incorporated as subsidiaries of GAF Chemicals. On May 8, 1991, GAF Chemicals, GAF, and ISP 9 Corporation ("ISP 9")⁴ entered an agreement whereby ISP 9 assumed certain liabilities and obligations of GAF Chemicals, including "[a]ll liabilities and obligations relating to the manufacture and sale of specialty chemicals at Linden, NJ, known and unknown, contingent or otherwise, including liabilities for the remediation of the Linden site..." (the "1991 Agreement"). Additionally, the 1991 Agreement stated that IES "shall indemnify, defend, and hold harmless [GAF Chemicals], GAF and its other subsidiaries from and against any and all [liabilities and obligations described in the 1991 Assumption Agreement Schedule] and any and all liabilities, costs and expenses in connection with any investigations, claims, actions, suits or proceedings arising out of or resulting from the conduct of any business, ownership or any assets or incurrence of any liabilities or obligations on and after May 9, 1991 by [IES]." Id at 1.

Therefore, G–I alleges that IES assumed all GAF and GAF Chemicals' liabilities, including those associated with the LCP Site. Plaintiffs allege, conversely, that because liability originally passed from GAF to GAF Buildings Materials Corporation, and not to Dorset/GAF Chemicals, liability in connection with the LCP Site was not transferred to ISP and IES in the 1991 Agreement.

In 1994, GAF Buildings Materials Corporation formed a new corporation as a wholly-owned subsidiary, known as Building Materials Corporation of America (now Standard Industries, Inc.) ("BMCA"). BMCA, which is also an indirect subsidiary of G–I Holdings, is the primary operating subsidiary and principal asset of G–I Holdings. BMCA acquired the operating assets and certain liabilities of GAF Building Materials Corporation's roofing commercial and residential roofing materials business. G–I asserts that BMCA did not assume any liabilities associated with "closed manufacturing facilities," and therefore cannot be held liable in connection with the LCP Site.

On October 18, 1996, GAF Corporation (including its successor "GAF") G–I, G Industries Corp., GAF Chemicals, and ISP Holdings Inc. (the parent of ISP and IES at the time) entered into an indemnification agreement in connection with certain "Spin Off Transactions" involving GAF and its subsidiaries (the "Indemnification Agreement"). Section 2.2(a) of the Indemnification Agreement entitled "Indemnification and Release" provides:

GAF and G–I [ ] shall jointly and severally indemnify, defend and hold harmless ISP Holdings, its Post Spin Subsidiaries and each of their respective present and future Representatives and Affiliates from and against all GAF Liabilities and any and all Indemnifiable Losses of ISP Holdings, its Post Spin Subsidiaries and each of their respective Representatives and Affiliates arising out of or due to, directly or indirectly, the GAF Liabilities, whether such GAF Liabilities arose before, or arise after, the Spin Off Date.

See Appx. 6, Affidavit of Robin E. Lamkin, Exh. A.

As part of the spin-off transactions, ISP Holdings and its subsidiaries, including IES and ISP, were spun off from the GAF Entities. At that time, Samuel J. Heyman ("Heyman") owned 96% of ISP Holdings and its subsidiaries.⁵ On or around August 23, 2011, Ashland Inc. ("Ashland")⁶ acquired ISP Holdings and its subsidiaries, and is currently the parent company of ISP and IES.

B. G–I's Bankruptcy filing and Confirmation of the Plan of Reorganization

On January 5, 2001, G–I Holdings, a Delaware corporation with its principal place of business in the State of New Jersey, filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Chapter 11 Voluntary Petition, In re G–I Holdings, Inc., Case No. 01–30135, ECF No. 1. The Court's docket entries for the same day reflect that the first meeting of creditors was scheduled for 9:00 a.m. on January 31, 2001 and that the last day to assert claims of non-dischargeability was April 2, 2001. Id. On August 3, 2001, ACI, Inc. ("ACI"), a subsidiary of G–I, also filed a voluntary petition for relief under Chapter 11. Chapter 11 Voluntary Petition, In re ACI, Inc.,...