E. I. Du Pont De Nemours & Co. v. Chemtura Corp.
| Decision Date | 02 July 2020 |
| Docket Number | SC 20329 |
| Citation | 244 A.3d 130,336 Conn. 194 |
| Court | Connecticut Supreme Court |
| Parties | E. I. DU PONT DE NEMOURS AND COMPANY v. CHEMTURA CORPORATION |
Proloy K. Das, Hartford, with whom were Jennifer M. DelMonico and, on the brief, Terence J. Brunau, New Haven, for the appellant (substitute plaintiff).
Thomas J. Donlon, Stanford, with whom, on the brief, were Joseph L. Clasen and Brian J. Wheelin, Stanford, for the appellee (defendant).
Robinson, C. J., and Palmer, McDonald, D'Auria, Mullins, Kahn and Ecker, Js.*
The principal issue in this appeal is whether New York law requires a party to strictly comply with a notice provision in a commercial contract in order to recover for the other party's breach of the contract. The trial court concluded that the plaintiff, E. I. du Pont de Nemours and Company (DuPont),1 had not strictly complied with the notice provisions of an asset purchase agreement (APA) and rendered judgment in favor of the defendant, Chemtura Corporation. On appeal, the plaintiff contends that the trial court improperly required strict compliance with the APA's notice provisions because New York law distinguishes between public contracts and private commercial contracts, and does not require strict compliance in commercial contracts when the contracting party receives actual notice and suffers no prejudice from the deviation. We agree with the plaintiff and, accordingly, reverse the judgment of the trial court.
The record reveals the following relevant facts, as found by the trial court and supplemented by the record, and procedural history. In 2007, the parties, DuPont and the defendant, negotiated the purchase of the defendant's fluorine chemical business and related equipment located in El Dorado, Arkansas. On behalf of DuPont, Brian Engler negotiated the terms of the APA with Arthur Fullerton, the defendant's associate general counsel, and Arthur Wienslaw, the defendant's director of strategy and licensing. The parties ultimately entered into the APA on December 14, 2007. Because the parties were competitors in this field, DuPont's precontractual ability to inspect the defendant's plant and equipment and to conduct other due diligence was limited. Officials of DuPont conducted only one brief, after-hours tour of the plant prior to signing the APA. As a result, the defendant made certain representations and warranties in the APA, including that the transferred assets were in good repair and condition and were sufficient to conduct business as of the closing date, and that the business had been and was currently being operated in accordance with applicable laws.
To further protect DuPont, given its limited ability to inspect the plant, the parties also entered into a side letter dated January 31, 2008, which confirmed "additional understandings" of the parties. The side letter included the disclosure and discussion of all potential violations of codes and regulations that controlled the operation of the plant and its products, including potential violations of the ozone depleting substances regulations.2 The side letter primarily addressed any past deficiencies or violations that continued to impact the operation of the plant at the time of closing that DuPont would not have been able to discover given its limited inspection of the plant. The parties closed on the sale on January 31, 2008.
The APA contains two provisions, §§ 3.16 and 3.17, that set forth a number of representations and warranties by the defendant related to the facility's prior and ongoing compliance with various laws in connection with the operation of the plant. Under article 8 of the APA, the defendant agreed to indemnify DuPont from any losses arising from any breach of those representations or warranties.3 Section 8.4 (a) of the APA provides a four year time period for indemnification as a result of a breach of the representations or warranties contained in §§ 3.16 and 3.17 and requires that DuPont notify the defendant in writing within four years of the closing date, "specifying the amount and factual basis of that claim in reasonable detail to the extent known." The APA's notice provision, § 11.4, provides in relevant part: "All notices, consents, waivers and other communications under this [a]greement must be in writing and will be deemed given to a party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the individual (by name or title) designated below (or to such other address, facsimile number, e-mail address or individual as a party may designate by notice to the other parties) ...." To properly notify the defendant, § 11.4 of the APA provides that the notice shall be sent to the defendant's general counsel "with a simultaneous copy" to the defendant's outside counsel, Baker & McKenzie, LLP.
Following the closing, the parties remained in regular contact because DuPont purchased only a portion of the Arkansas facility and the defendant continued to operate the remainder. Specifically, DuPont's plant manager, Donald Kuhlmann, communicated with Fullerton, the defendant's associate general counsel, and Frank DiCristina, one of the defendant's plant managers. DuPont did not communicate with the defendant's general counsel. DuPont subsequently discovered that certain areas of the plant required repair or replacement, and DuPont requested reimbursement pursuant to the defendant's indemnification obligations. Namely, DuPont asserted that certain refrigeration units were leaking refrigerant at an unacceptable rate, and the fire suppression systems were not operating within applicable laws at the time of the purchase. From the closing in 2008 until 2011, the parties held discussions and corresponded to resolve those deficiencies.4 During this time, in March, 2009, the defendant filed for Chapter 11 bankruptcy. For the reorganized company to assume the APA, the defendant had to cure any prebankruptcy defaults under the APA. See 11 U.S.C. § 365 (b) (2006). This led to extensive negotiations between the parties over "cure claims."5 Ultimately, the parties summarized their positions on various items in a claims list, which included, among other things, the refrigeration and fire suppression system claims. These discussions did not resolve all of the claims, and the present action followed.
DuPont commenced this action in June, 2014, asserting two claims sounding in breach of contract against the defendant. The complaint alleged violations of the side letter and §§ 3.16 and 3.17 of the APA. DuPont alleged that, in accordance with the APA and the side letter, the defendant is obligated to repair or replace refrigeration units that either are not properly working or violate applicable regulations, as well as certain fire suppression systems that did not comply with the applicable laws at the time of the sale. Specifically, in count one, DuPont alleged that the defendant breached the APA because, at the time of closing, the defendant had been operating nine areas of the plant in violation of applicable fire safety laws and regulations. Count two alleged that multiple refrigeration units were leaking refrigerant at rates impermissible under applicable environmental law.
After three and one-half years of pretrial litigation, the case was tried in January, 2018. On the last day of trial, the defendant claimed—for the first time, in a motion for a directed verdict—that DuPont failed to provide notice in accordance with the terms of the APA. The defendant argued that DuPont did not comply with the APA's notice provision because it had been communicating with the defendant's associate general counsel rather than the general counsel. The court requested briefing on the issue, and the plaintiff and the defendant submitted posttrial briefs. The plaintiff and the defendant agreed that, under § 11.16 of the APA, New York law governs this dispute. The defendant argued that New York law requires strict compliance with notice provisions in a contract and that the plaintiff failed to prove all the elements of breach of contract. The plaintiff disagreed and argued that New York law did not require strict compliance, and that the claims list and the correspondence between the parties to the APA satisfied New York law because they provided the defendant actual notice.
The trial court determined that at no time after the closing did DuPont provide notice in accordance with § 11.4 of the APA. The court noted that a number of the plaintiff's exhibits submitted as proof of actual notice did not rise to the level of actual notice of a violation of the contract purchase provisions. The court relied on a New York intermediate appellate court decision, Fortune Limousine Service, Inc. v. Nextel Communications , 35 App. Div. 3d 350, 826 N.Y.S.2d 392 (2006), appeal denied, 8 N.Y.3d 816, 839 N.Y.S.2d 454, 870 N.E.2d 695 (2007), for the proposition that, when there is a denial of actual notice, the plaintiff must present some evidence of notice. In the present case, the court explained, the plaintiff described an ongoing discussion over a period of years, but at no point "ha[d] the plaintiff been able to demonstrate that the defendant was notified within the applicable four year period that [DuPont] alleged a breach of the provisions of § 3.16 or § 3.17 [of the APA]." The court rejected the plaintiff's contention that the defendant had actual notice of the claims based on various correspondence, namely, the claims list, because these documents were "only discussion for purposes of reimbursement of items pursuant to the [APA]." The court...
To continue reading
Request your trial