Drill Masters-Eldorado Tool, Inc. v. PCC Specialty Prods., Inc.

49 F.Supp.3d 188

DRILL MASTERS–ELDORADO TOOL, INC., and Drill Masters Realty, LLC, Plaintiffs

v.PCC SPECIALTY PRODUCTS, INC., Defendant.

PCC Specialty Products, Inc., Plaintiff

v.Thomas J. Hall, and John Hall, Defendants.

Civil Nos. 3:08–cv–01733AWT

3:09–cv–00221AWT.

United States District Court, D. Connecticut.

Signed Sept. 30, 2014.

Eric J. Stockman, Robert Thomas Gradoville, Simon I. Allentuch, Neubert, Pepe & Monteith, P.C., New Haven, CT, for Plaintiffs.

Joel A. Mullin, Reilley D. Keating, Stoel Rivers LLP, Portland, OR, Steven I. Frenkel, Cummings & Lockwood, Stamford, CT, for Defendants.

RULING ON CROSS MOTIONS FOR SUMMARY JUDGMENT

ALVIN W. THOMPSON, District Judge.

These consolidated cases, Drill Masters Eldorado Tool Inc., et al. v. PCC Specialty Products Inc., (“Drill Masters v. PCC”), and PCC Specialty Products, Inc. v. Thomas J. Hall, et al., (“PCC v. Hall”) arise out of the purchase of certain business assets pursuant to an asset purchase agreement and entered into by the parties in Drill Masters v. PCC.

In Drill Masters v. PCC, Drill Masters–Eldorado Tool, Inc. (“Drill Masters, Inc.”) and Drill Masters Realty, LLC (“Drill Masters Realty”) (collectively, “Drill Masters”) filed a four-count Second Amended Complaint against PCC Specialty Products, Inc. (“PCC”). In Count One, Drill Masters asserts a claim for breach of an Asset Purchase Agreement, dated October 9, 2002, entered into by PCC, Drill Masters, Inc. and Drill Masters Realty (the “Asset Purchase Agreement”). In particular, Drill Masters claims that PCC failed to fulfill its obligations under the Asset Purchase Agreement to comply with the Connecticut Property Transfer Act, Conn. Gen.Stat. § 22a–134 et seq. (the “Transfer Act”), and to reimburse Drill Masters, Inc. for costs relating to the termination of PCC employees. In Count Two, Drill Masters asserts a claim for breach of the implied covenant of good faith and fair dealing. In Count Three, Drill Masters asserts a negligence claim based on PCC's alleged breach of a duty under the Asset Purchase Agreement to investigate, characterize, and remediate environmental contamination. In Count Four, Drill Masters asserts a claim under the Connecticut Unfair Trade Practices Act, Conn. Gen.Stat. § 42–110a et seq. (“CUTPA”).

PCC filed an Answer to the Second Amended Complaint and Amended Counterclaims. In its first counterclaim, PCC asserts a claim for breach of contract, alleging that Drill Masters failed to pay a $1,162,000 promissory note (the “Note”) issued pursuant to the Asset Purchase Agreement, and continues to fail to pay interest on the Note. In its second counterclaim, PCC asserts a claim for a declaratory judgment under 28 U.S.C. § 2201, claiming that Drill Masters violated covenants that were incorporated by reference into the Asset Purchase Agreement by Amendment No. 1 to the Asset Purchase Agreement (“Amendment No. 1”).

In PCC v. Hall, PCC brings two claims against defendants Thomas J. Hall and John Hall (collectively, the “Halls”). The Halls are co-owners and employees of Drill Masters; they were not parties to the Asset Purchase Agreement. The first claim is for tortious interference with contractual relations, and alleges that the Halls caused Drill Masters to breach covenants and contractual obligations to pay the Note. In the second claim, PCC asserts that the Halls were unjustly enriched by receipt and use of funds that should have been used to pay the Note.

In its motion for partial summary judgment, PCC has moved for summary judgment with respect to all claims and counterclaims except for (i) the terms of an Environmental Land Use Restriction that may be placed on the property pursuant to the Asset Purchase Agreement and (ii) PCC's claims against the Halls. In their motion for summary judgment, Drill Masters, Thomas Hall and John Hall have moved for summary judgment with respect to all claims and counterclaims “except for [Drill Masters'] claim that it lost a sale because [PCC] failed to timely investigate the contamination at the Drill Masters Building.” (Motion for Summary Judgment (Doc. No. 115)). For the reasons set forth below, PCC's motion for summary judgment is being granted in part and denied in part, and Drill Masters' and the Halls' motion for summary judgment is being denied.

I. FACTUAL BACKGROUND

On October 9, 2002, Drill Masters and PCC entered into the Asset Purchase Agreement. The Asset Purchase Agreement provided for, among other things, the sale of certain assets of PCC's former Eldorado Tool division (the “Tooling Business”) to Drill Masters. Included in these assets was real property located at 336 Boston Post Road, Milford, Connecticut (the “Property”). The Property is a 4.6–acre site that includes a building (the “Building”) that is approximately 67,900 square feet. The Building has been occupied by a machine and tool manufacturer since some time in the mid–20th century. The area where the Property is located is populated by commercial businesses, as well as residential properties. Billberry Swamp, which is owned by the City of Milford, is located nearby the Property.

In the Asset Purchase Agreement, PCC agreed that, to its knowledge, the Transfer Act applied to the transaction. Drill Masters and PCC further agreed that PCC would be the “certifying party” under the Transfer Act and that PCC:

shall, at its sole cost and expense, conduct and complete the investigation, remediation, and monitoring of the Premises including the operation and maintenance of remediation systems (collectively referred to as “Environmental Work”) in accordance with the Remediation Standard Regulations, § 22a–133k–1 through –3 of the Regulations of Connecticut State Agencies. [PCC] shall not impose an environmental land use restriction (“ELUR”) on the Premises until and unless [Drill Masters Realty] has given its written approval of such ELUR, which approval shall not be unreasonably withheld or delayed. [PCC] shall perform the necessary Environmental Work in order to receive either a final written approval from the Commissioner of the DEP or, if the Environmental Work may be verified by a Licensed Environmental Professional (“LEP”), a final written verification from a LEP for the investigation and remedial actions taken.

(Asset Purchase Agreement (Doc. No. 113–3, Ex. 3) § 7.4(a).)

PCC and Drill Masters each have had experts investigate environmental contamination at the Property and at Billberry Swamp. The investigations have revealed polychlorinated biphenyl (“PCB”) in soil on the Property (including under the Building and outside its footprint), in the Building's concrete floor, and in sediment from Billberry Swamp. PCB levels higher than 1ppm were identified in samples from each of these locations, and PCC acknowledges that PCBs are present in concentrations greater than 10ppm below the concrete floor. The parties dispute whether PCC fully investigated and characterized the Property on a timely basis, although Drill Masters acknowledges that characterization of the soils at the Property is now complete. The parties also dispute whether the PCB contamination at Billberry Swamp is covered by the Asset Purchase Agreement and whether such contamination has been fully characterized. On the other hand, the parties agree that PCC has not completed remediation of the Property.

The Asset Purchase Agreement provides that PCC would “not impose an environmental land use restriction (‘ELUR’) on the Premises until and unless [Drill Masters Realty] has given its written approval of such ELUR, which approval shall not be unreasonably withheld or delayed.” (Asset Purchase Agreement § 7.4(a).) In June 2006, PCC proposed to Drill Masters an ELUR that would isolate PCBs below the Building floor. Discussions about the ELUR occurred from 2006 to 2008. Ultimately, Drill Masters did not approve the proposed ELUR. PCC contends that Drill Masters rejected the ELUR because Drill Masters hoped to sell the Property to a developer of a Big Y supermarket, who opposed the ELUR because the developer planned to demolish the Building, break up the concrete floor, and re-grade the property. Drill Masters, on the other hand, implies that the ELUR was rejected because the site was not eligible for an ELUR, at least until a few months before September 2011, due to the fact that the contamination there had not been fully characterized.

In the Asset Purchase Agreement, the parties recognized that there would be certain post-closing costs with respect to former employees of PCC's Tooling Business, the assets of which were being sold to Drill Masters. PCC agreed to terminate all then-current employees of the Tooling Business as of the closing date. PCC agreed that it would “be responsible for all costs and expenses that may arise out of or in connection with the termination of such terminated” employees and for compliance with health care continuation requirements for certain group health plans. (Asset Purchase Agreement § 11.2.) PCC further agreed to certain indemnity provisions in favor of Drill Masters with respect to former employees of the Tooling Business; it agreed that PCC would be liable for losses, liabilities, assessments and taxes relating to employees and employee benefit plans with respect to periods prior to the closing date. Drill Masters, Inc. agreed to assume, pay, perform, and discharge Tooling Business liabilities on and after the closing date.

PCC terminated Tooling Business employees on the closing date. After the closing date, Drill Masters, Inc. did not hire all the Tooling Business employees who had been terminated by PCC. The former Tooling Business employees who were not hired by Drill Masters, Inc. were eligible for unemployment benefits accruing in the post-closing period. Subsequently, the Connecticut Department of Labor (“DOL”) determined that Drill Masters, Inc. was the full successor of the Tooling Business for purposes of employment issues under the DOL's jurisdiction, and also that Drill Masters, Inc....