Millennium Holdings LLC v. Glidden Co.

• Decision Date: 17 January 2017
• Parties: MILLENNIUM HOLDINGS LLC, Plaintiff, The Northern Assurance Company of America, Plaintiff–Appellant, Certain Underwriters at Lloyd's, et al., Intervenor Plaintiffs–Appellants, v. The GLIDDEN COMPANY, now known as Akzo Nobel Paints, et al., Defendants–Respondents.
• Court: New York Supreme Court — Appellate Division

146 A.D.3d 539
46 N.Y.S.3d 528
2017 N.Y. Slip Op. 00258

MILLENNIUM HOLDINGS LLC, Plaintiff,

The Northern Assurance Company of America, Plaintiff–Appellant,

Certain Underwriters at Lloyd's, et al., Intervenor Plaintiffs–Appellants,
v.
The GLIDDEN COMPANY, now known as Akzo Nobel Paints, et al., Defendants–Respondents.

Supreme Court, Appellate Division, First Department, New York.

Jan. 17, 2017.

46 N.Y.S.3d 529

Zuckerman Spaeder LLP, Washington, D.C. (Jason M. Knott of the bar of the District of Columbia, admitted pro hac vice, of counsel), for appellants.

Debevoise & Plimpton LLP, New York (Maura K. Monaghan and James Amler of counsel), for respondents.

SWEENY, J.P., RENWICK, ANDRIAS, MOSKOWITZ, MANZANET–DANIELS, JJ.

146 A.D.3d 539

Upon remittitur from the Court of Appeals (27 N.Y.3d 406, 33 N.Y.S.3d 846, 53 N.E.3d 723 [2016] ), order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered November 26, 2013, which granted defendants the Glidden Company, now known as Akzo Nobel Paints LLC and Akzo Nobel Paints LLC's (collectively ANP), motion for summary judgment dismissing the complaint, modified, on the law, to remand for a limited determination of whether the insurers are entitled to recover defense costs as against ANP on the basis of express subrogation, and otherwise affirmed, without costs.

Background

The Original Glidden and SCM

The original Glidden was an Ohio corporation that manufactured and sold lead-based paints and coatings. In 1924, Glidden acquired Euston Lead Company, a

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producer of lead pigments used in paints. The lead pigment was a key ingredient in Glidden's lead paint, which was sold under the Glidden name for four decades. In 1958, Glidden sold the lead pigment operation to Dumont Airplane and Marine Instruments, Inc. and exited the lead pigment business. Within several years it stopped selling paint containing lead.

In 1967, Glidden was acquired by and merged into SCM Corporation. Glidden's paint business was housed in SCM's Glidden–Durkee Division. In 1976, the paint business was transferred to the Coatings & Resins Division. The pigments

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business—limited to non-lead pigments following the sale of Euston—was placed in the chemical/metallurgical division of SCM.

The Insurance Policies

Certain Underwriters at Lloyd's, London and certain London market insurance companies (London), subscribed to primary and excess policies in favor of Glidden and SCM's Glidden–Durkee Division for the period from 1962 to 1970. Plaintiff Northern Assurance Company of America's predecessor issued an excess policy to SCM for the period June 27, 1968 to January 1, 1970. The policies covered liability for property damage sustained during the policy period. The primary policy issued between 1965 and 1968, to which the excess policies followed form, contained the following express subrogation clause:

"Subrogation: Upon payment of any claim, demand, suit or judgment covered hereby the Underwriters (or other insurers or the Assured in the event that more than one insurer or the Assured as self-insurer has paid any part of such claim it being understood that other insurance or excess insurance or self-insurance is permitted) shall be subrogated to all rights which the Assured may have against any and every person, partnership or corporation in respect of such claim, demand, suit or judgment ..."

Hanson Acquisition

In 1985, Hanson Trust PLC attempted a hostile takeover of SCM. As part of an effort to thwart the takeover, SCM in September 1985 transferred the assets of the domestic pigments business to ABC Chemicals, a newly-formed and wholly-owned subsidiary of SCM.

In 1986, Hanson succeeded in acquiring SCM in a hostile takeover. The plan of liquidation and dissolution distributed the company's remaining assets and liabilities among 20 "fan companies" known as HSCM 1 through 20. The paints, resins, coatings, caulking and adhesives business (i.e., the Coatings & Resins Division) was transferred to HSCM–6. The memorandum of distribution in liquidation between SCM and HSCM–6 provided that "HSCM–6 hereby assumes all of the obligations and liabilities relating to the Business, including all claims, whether asserted or unasserted, known or unknown, contingent or otherwise ... attributable to all periods prior to the date hereof."

By another memorandum of distribution in liquidation, SCM distributed to HSCM–20 the assets "constitut[ing] all the remaining assets of SCM" that had not been transferred to other fan companies. Those assets included the stock of the

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new fan company subsidiaries, as well as the stock of ABC Chemicals, which then owned the pigments business. HSCM–20 assumed all of the obligations and liabilities related to such assets.

Thus, HSCM–20 separately owned both SCM's paint business (HSCM–6) and SCM's pigment business (ABC Chemicals).

Asset Purchase Agreement

Shortly thereafter, HSCM–20 sold HSCM–6 to ICI American Holdings, a

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subsidiary of Imperial Chemical Industries, PLC. The sale was memorialized in a purchase agreement dated August 14, 1986. HSCM–6 was later renamed "The Glidden Company," the predecessor of defendant ANP herein.

Under the asset purchase agreement, Millennium Holdings LLC and its predecessors were required to indemnify ANP and its predecessors from 1986 through 1994 for liabilities arising out of or resulting from "environmental events or environmental conditions" resulting from the use, manufacture, handling, etc., of "materials, substances or wastes in, about or relating to the Business, including, without limitation, the paints, coatings, resins, adhesives, caulkings or related businesses owned or held by any predecessor entity (‘Predecessor Business') or formerly owned or held by Seller, HSCM–6, any of the Subsidiaries or any predecessor of any of the foregoing (‘Former Business'), and to indemnify ANP in respect of any personal injury or property damage claims of or relating to the Business, the Predecessor Business or the Former Business."

ANP and its predecessors were required to indemnify Millennium and its predecessors thereafter "against and in respect of [claims] ... relating to the Business arising from or relating to acts, omissions, events or conditions of or relating to the Business, the Predecessor Business or the Former Business occurring or existing prior to, on or after the Closing or otherwise arising out of or relating to the conduct of the Business, the Predecessor Business or the Former Business ... for matters referred to in Section 9.1(b)[i.e., environmental liabilities], 9.1[c] [i.e., personal injury and property damage claims], and 9.1(e) [i.e., other claims]."

Lead Paint Litigation

Beginning in 1987, a number of lawsuits were filed against ANP (the paint company) and Millennium (the pigment company), alleging property damage, personal injuries, and/or public nuisance arising from the presence of old lead paint in inner city housing.

From 1986 onward, Millennium indemnified ANP in accordance

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with the asset purchase agreement. Shortly before the end of Millennium's indemnification period, a dispute arose as to the scope of ANP's obligations (scheduled to commence in 1994 under the terms of the asset purchase agreement). ANP argued that it was not obligated to provide Millennium with indemnification for "pigment cases," but rather, only paint cases, contending that "pigment cases" fell outside the scope of the indemnity.

The dispute led to litigation in Ohio (Glidden Co. v. HM Holdings, Case. No. 269218, Ohio Court of Common Pleas 1994) and New York (HM Holdings, Inc. v. ICI American Holdings and The Glidden Company, Index No. 110533/94, Sup. Ct. N.Y. County 1994). Both litigations were settled in 2000 with the parties executing an amended purchase agreement. Millennium assumed the rights and obligations of HSCM–20, including the pigment business, and ANP assumed the rights of ICI and ICI American (HSCM–6), including the paint business. The settlement left open the parties' indemnification obligations regarding the lead paint cases.

Between 1995 and 2000, the insurers paid defense costs for and on behalf of both Millennium and ANP for their joint defense of the lead litigation cases. The insurers terminated funding in 2000 and sought a declaration in Ohio state court that they were not required to provide ANP with a defense and indemnification in the lead cases. In 2006, the Ohio Supreme Court held that ANP was not covered under the relevant policies since it was not a named insured and was not the corporate

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successor to...