Opinion
Case No. 4:19-cv-02563-SAL
2020-09-08
Janet TILLMAN and Melvin Wilkerson, individually and on behalf of all others similarly situated, Plaintiffs, v. HIGHLAND INDUSTRIES, INC., Defendant.
Christopher James Moore, Richardson Patrick Westbrook and Brickman, Barnwell, SC, Edward John Waelde, Gary W. Poliakoff, Poliakoff and Associates, Raymond P. Mullman, Jr., Spears Poliakoff and Poole, Spartanburg, SC, John D. Harrell, Harrell Law Firm, Charleston, SC, Joshua Slavin, The Law Offices of Joshua E. Slavin, Mount Pleasant, SC, William Camden Lewis, Richardson Patrick Westbrook and Brickman LLC, Richard R. Gleissner, Gleissner Law Firm, Columbia, SC, for Plaintiffs. Ethan Robert Ware, Jessica Jo King, Ruth Ann Levy, Williams Mullen, Francis B. Knowlton, Nelson Mullins Riley and Scarborough LLP, Kevin Joseph Malloy, Richard Hood Willis, Ashleigh Rayanna Wilson, Bowman and Brooke, Columbia, SC, for Defendant.
Christopher James Moore, Richardson Patrick Westbrook and Brickman, Barnwell, SC, Edward John Waelde, Gary W. Poliakoff, Poliakoff and Associates, Raymond P. Mullman, Jr., Spears Poliakoff and Poole, Spartanburg, SC, John D. Harrell, Harrell Law Firm, Charleston, SC, Joshua Slavin, The Law Offices of Joshua E. Slavin, Mount Pleasant, SC, William Camden Lewis, Richardson Patrick Westbrook and Brickman LLC, Richard R. Gleissner, Gleissner Law Firm, Columbia, SC, for Plaintiffs.
Ethan Robert Ware, Jessica Jo King, Ruth Ann Levy, Williams Mullen, Francis B. Knowlton, Nelson Mullins Riley and Scarborough LLP, Kevin Joseph Malloy, Richard Hood Willis, Ashleigh Rayanna Wilson, Bowman and Brooke, Columbia, SC, for Defendant.
OPINION AND ORDER
Sherri A. Lydon, United States District Judge
This action, filed by Plaintiffs Janet Tillman and Melvin Wilkerson on behalf of themselves and all others similarly situated, concerns alleged environmental contamination by the owner and operator of a manufacturing facility located in Cheraw, South Carolina. Burlington Industries, Inc. ("Burlington") owned and operated the plant until 1988, at which time Defendant Highland Industries, Inc. ("Highland") acquired the facility–as well as certain liabilities of Burlington–in an asset acquisition. The present dispute turns largely on whether and to what extent Highland expressly assumed Burlington's liabilities associated with the release or discharge of polychlorinated biphenyls ("PCBs") into the surrounding environment.
This matter is before the Court on Highland's Motion to Dismiss, ECF No. 46, filed on June 1, 2020, and its Motion for Partial Summary Judgment, ECF No. 47, filed on June 4, 2020. The motions have been fully briefed, and the Court heard arguments on the motions on July 16, 2020. In the motion to dismiss, Highland submits that the Amended Complaint fails to state cognizable claims for trespass and negligent failure to warn. In its motion for partial summary judgment, Highland argues, generally, that examination of the asset acquisition documents establishes Highland's entitlement to summary judgment in this action to the extent Plaintiffs’ claims are premised on Burlington's conduct. For the reasons stated herein, the Court denies Highland's motion to dismiss and grants Highland's motion for partial summary judgment in part.
BACKGROUND
Burlington owned the facility at issue in this case since the 1960s. As its operator, Burlington utilized the facility through two business divisions. One division manufactured woven fiberglass products, and the other manufactured industrial fabrics. The parties agree that Burlington's fiberglass division ceased operations prior to Highland's acquisition of the facility. In its 1988 acquisition, Highland purchased the industrial fabric portion of Burlington's business, named the "Burlington Industrial Fabrics Company" or "BIFCO." Highland was originally formed as a subsidiary of airbag manufacturer Takata Corporation ("Takata"), and the parties do not dispute that Highland was formed to operate the facility for the purpose of producing industrial fabric for use in Takata products. Importantly, Plaintiffs acknowledge that it was Burlington's woven fiberglass division, rather than the fabric division, which was responsible for the presence of PCBs at the facility. There is no evidence in the record to suggest Highland's conduct in manufacturing industrial fabric resulted in the release or discharge of PCBs.
Highland Industries has owned and operated the facility since 1988. In 2016, state and federal regulators began investigating environmental contamination at the facility, which revealed elevated concentrations of PCBs at and near the facility. Plaintiffs allege that Highland is liable for the release of PCBs into the surrounding soil and waterways, thereby reducing the value of their property. Plaintiffs seek injunctive relief and assert claims for negligence/recklessness, trespass, and nuisance.
I. Chemical Discharges and Soil Testing at the Facility
It is unclear when Burlington began discharging fluids at the facility; however, in 1970, state authorities received complaints "concerning the discharge of wastes ... into an open ditch." ECF No. 52-2 at 8. During an inspection, health officials confirmed that Burlington was indeed discharging a "green fluid" into an open ditch, which the parties agree was what they now refer to as the Western Ditch. The Western Ditch is located partially on property that Highland acquired from Burlington. After the state received the aforementioned complaints, Burlington established a new system for disposing of fluids. Burlington began pumping liquid waste into settlement tanks, where heavier sludge settled to the bottom. Burlington then pumped lighter liquids into the town's sewer system, while it pumped the heavier liquids into what the parties refer to as sludge drying beds. The sludge drying beds were located on property that Highland never acquired. See ECF No. 52-2 at 9.
The extent of PCB contamination at the facility was not discovered until several decades after it likely began. In October of 2015, a citizen contacted the South Carolina Department of Health and Environmental Control regarding the location of the sludge drying beds, which had been excavated, filled, and developed upon by that time. The subsequent investigation, undertaken by South Carolina authorities in addition to the Environmental Protection Agency ("EPA"), ultimately revealed elevated concentrations of PCB Aroclor 1248 and PCB Aroclor 1254 in and around the facility.
Because there is no evidence at this stage that Highland's conduct at the facility after its 1988 acquisition resulted in an increase in the level of PCBs at the facility, a critical issue in this case is whether and to what extent Highland may be liable for Burlington's conduct.
II. The Purchase Agreement Between Burlington and Takata
On February 19, 1988, Takata entered an agreement to purchase certain assets of the BIFCO division of Burlington. Section 2.01(a) of the Purchase Agreement states, "Purchaser agrees to purchase and accept from the Seller, ... the Business, as it shall exist on the Closing Date." The "Business" is defined in Section 1.01(e) to mean "the manufacture and sale by the Seller's BIFCO division of specified industrial fabrics, generally 210 denier and greater, manufactured at the [Plant] in Cheraw, South Carolina...." In Section 2.01(b), the contracting parties agreed that
The assets, goodwill and business of the Seller constituting the Business to be transferred to the Purchaser (the "Assets") are as follows: (i) all the Seller's right, title and interest in the real property and interests in real property described in items (1)-(2) of Section 1.01(o) of the Disclosure Schedule, together with all buildings, facilities and other improvements located on such real property, together with such additions thereto and deletions therefrom as shall have occurred in the ordinary course of business prior to the Closing Date[.]
ECF No. 52-4 at 4. One of the "Assets" transferred included 50.81 acres of land described in the Disclosure Schedule as the "James Fabrics plant, Cheraw, South Carolina." ECF No. 52-5 at 13, 37. As the EPA noted, "[t]he property sale to Highland Industries was only a subset of the overall property footprint owned by Burlington Industries and did not include the location on which the six, sludge drying-beds were located." ECF No. 52-1 at 4. Highland does acknowledge, however, that it purchased a portion of the Western Ditch.
The Purchase Agreement also provides in Section 2.02 that "[o]n the terms and subject to the conditions set forth in this Agreement, the Purchaser shall execute and deliver the Assumption Agreement to the Seller on the Closing Date." ECF No. 52-4 at 7.
III. The Assumption Agreement: Highland Acquired Liabilities Related to the "Business" or "Assets."
After executing the Purchase Agreement, Takata assigned the Purchase Agreement to its newly formed subsidiary, Highland. The Assumption Agreement was thus entered into between Burlington Industries and Highland Industries, and Highland served as the Purchaser within the meaning of both the Purchase Agreement and the Assumption Agreement. See ECF No. 52-6 at 2.
In the Assumption Agreement, Highland expressly assumed certain liabilities of Burlington and expressly rejected others. Section 1(a)-(b) of the Assumption Agreement provide as follows:
[Highland] hereby assumes and agrees to pay, perform and discharge, and to indemnify Burlington against and hold it harmless from, any and all liabilities and obligations of or claims against (and any and all losses, damages, costs and expenses resulting from such liabilities, obligations and claims) (referred to herein as the "Liabilities") of Burlington of whatever nature related to the Business or Assets as they existed at the Effective Time and as they have existed or shall exist after the Effective Time (whether fixed or contingent, arising by law or by contract or otherwise), whether such Liabilities arose prior to or arose or arise after the Effective Time, and (b) Burlington agrees to pay, perform and discharge and to indemnify [Highland] against, and hold it harmless from, any and all liabilities of Burlington of whatever nature which are not assumed by the Purchaser under this Agreement.
ECF No. 52-6 at 2. The Effective Time is defined to mean 12:01 a.m. on January 3, 1988. ECF No. 52-4 at 3. As incorporated from the Purchase Agreement, "Business" means "the manufacture and sale by the Seller's BIFCO division of specialized industrial fabrics, generally 210 denier and greater," and the "Assets" include, among other things, all real property acquired by Highland in the transaction, including a portion of the Western Ditch.
The foregoing assumption of liabilities is followed by descriptions of several liabilities that Highland expressly did not assume. Among other liabilities, the parties agreed that Highland "does not assume ... any Liability of Burlington whatsoever for ... (a) any Liabilities related in any way to the conduct of the operations or to the operating of assets of Burlington which are not part of the Business or the Assets as of the Effective Time[.]" ECF No. 52-6 at 2-3.
With this background, the Court proceeds to evaluate the merits of Highland's motions.
LEGAL STANDARDS
I. Motion for Summary Judgment
Rule 56 of the Federal Rules of Civil Procedure provides that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is "material" if proof of its existence or non-existence would affect disposition of the case under applicable law. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). An issue of material fact is "genuine" if the evidence offered is such that a reasonable jury might return a verdict for the non-movant. Id. at 257, 106 S.Ct. 2505. When determining whether a genuine issue has been raised, the court must construe all inferences and ambiguities against the movant and in favor of the non-moving party. United States v. Diebold, Inc. , 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962).
The party seeking summary judgment shoulders the initial burden of demonstrating to the court that there is no genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant has made this threshold demonstration, the non-moving party, to survive the motion for summary judgment, may not rest on the allegations averred in his pleadings. Id. at 324, 106 S.Ct. 2548. Rather, the non-moving party must demonstrate specific, material facts exist that give rise to a genuine issue. Id. Under this standard, the existence of a mere scintilla of evidence in support of the non-movant's position is insufficient to withstand the summary judgment motion. Anderson, 477 U.S. at 252, 106 S.Ct. 2505. Likewise, conclusory allegations or denials, without more, are insufficient to preclude granting the summary judgment motion. Ross v. Commc'ns Satellite Corp. , 759 F.2d 355, 365 (4th Cir. 1985), overruled on other grounds , Price Waterhouse v. Hopkins , 490 U.S. 228, 109 S.Ct. 1775, 104 L.Ed.2d 268 (1989). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson , 477 U.S. at 248, 106 S.Ct. 2505.
II. Motion to Dismiss Pursuant to Rule 12(b)(6) and 12(c)
Under Fed. R. Civ. P. 12(b)(6), a party may move to dismiss for "failure to state a claim upon which relief can be granted." When considering a Rule 12(b)(6) motion, the Court must accept the plaintiff's factual allegations as true and draw all reasonable inferences in the plaintiff's favor. See E.I. du Pont de Nemours & Co. v. Kolon Indus. , 637 F.3d 435, 440 (4th Cir. 2011). The Court need not, however, accept the plaintiff's legal conclusions. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). On a motion to dismiss, the Court's task is limited to determining whether the complaint states a "plausible claim for relief." Id. at 679, 129 S.Ct. 1937. Although Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief," a "formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain "sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). A motion filed after the pleadings are closed pursuant to Rule 12(c) are governed by the same standard as motions brought under Rule 12(b)(6). Massey v. Ojaniit , 759 F.3d 343, 347 (4th Cir. 2014).
DISCUSSION
A careful review of the terms of the Purchase Agreement and the Assumption Agreement reveals that Highland is entitled to judgment as a matter of law on the issue of whether it assumed liability for contamination resulting from Burlington's "off-site" disposal of PCBs in the sludge drying beds. This liability is not related to the Business or Assets Highland acquired. Conversely, Highland may have assumed liability related to Burlington's discharge of PCB-containing waste into the Western Ditch. The Court rejects Highland's argument that Burlington's 2001 bankruptcy or its failure to discharge additional duties under the assumption agreement relieves Highland of any express assumption of liability. Further, with regard to Highland's motion to dismiss, the Court finds sufficient factual allegations in the Amended Complaint to state plausible claims for both negligent failure to warn and trespass. The Court will address Highland's motion for summary judgment before turning to its motion to dismiss.
I. Because Liability for Burlington's Discharge of PCBs Into the Sludge Drying Beds is Not Related to the Business or Assets Highland Purchased, Highland is Entitled to Summary Judgment on the Issue of Whether it Assumed Such Liability.
The Court first addresses Highland Industries’ Motion for Partial Summary Judgment. In the motion, Highland Industries contends that it is entitled to summary judgment on the issue of whether it bears any liability for Burlington Industries’ conduct at the Cheraw facility. Highland argues that it did not expressly assume Burlington's liability and that, if it did, the contractual assumption is unenforceable due to Burlington's bankruptcy in 2001. The Court addresses each of these arguments in turn.
During the hearing on this matter and in subsequent filings, however, Highland narrowed its position to request only a determination that it is not liable for Burlington Industries’ off-site disposal of PCBs in the sludge drying beds.
A. Highland Expressly Assumed Liability for Burlington's Conduct, if at all, Only to the Extent the Liability is Related to the "Business" or "Assets" Defined by the 1988 Purchase Agreement.
Because liability for the sludge drying beds is not conceivably related to the "Business" or the "Assets" as contemplated by the contracting parties, Highland Industries cannot have assumed this liability. Accordingly, Highland Industries is entitled to summary judgment on this limited issue. The Court, however, finds a genuine issue of fact at this stage regarding Highland's assumption of Burlington's liability related to alleged PCB discharge into and migration from real property purchased by Highland as an "Asset" in 1988.
In an asset acquisition, the purchasing entity only assumes the liability of the seller if (1) the purchasing entity expressly or impliedly assumes liability; (2) the transaction constitutes a consolidation or de facto merger of the two business entities; (3) the successor is a "mere continuation" of the predecessor; or (4) the transaction is entered into fraudulently in order to escape liabilities. E.g. , Tommy Lee Handbags Mfg. Ltd. v. 1948 Corp. , 971 F. Supp. 2d 368, 378 (S.D.N.Y. 2013). The parties only dispute the issue of whether Highland expressly assumed Burlington's liability for PCB contamination.
Both the Purchase Agreement and the Assumption Agreement are governed by, and construed under, New York law. ECF Nos. 52-4 at 44, 52-6 at 6. In determining a motion for summary judgment involving the construction of contractual language, a court should accord that language its plain meaning, giving due consideration to "the surrounding circumstances [and] apparent purpose which the parties sought to accomplish." William C. Atwater & Co. v. Panama R.R. Co. , 246 N.Y. 519, 159 N.E. 418, 419 (1927). Where contractual language is ambiguous and subject to varying reasonable interpretations, intent becomes an issue of fact and summary judgment is inappropriate. Leberman v. John Blair & Co. , 880 F.2d 1555, 1559 (2d Cir. 1989). The mere assertion of an ambiguity, however, is not itself sufficient to survive summary judgment. Thompson v. Gjivoje , 896 F.2d 716, 721 (2d Cir. 1990). An ambiguity exists when more than one meaning may reasonably be ascribed to the language used. See Garza v. Marine Transp. Lines, Inc. , 861 F.2d 23, 27 (2d Cir. 1988) ; Bethlehem Steel Co. v. Turner Constr. Co. , 2 N.Y.2d 456, 161 N.Y.S.2d 90, 141 N.E.2d 590, 593 (1957). Where the language is unambiguous, a court may construe it as a matter of law and grant summary judgment accordingly. Am. Home Assurance Co. v. Baltimore Gas & Elec. , 845 F.2d 48, 50-51 (2d Cir. 1988).
There can be no doubt based on the record before the court that Highland did not assume liability related to PCBs disposed of by Burlington on real property that is not an "Asset" within the meaning of the Purchase Agreement in the course of a line of business other than the "Business" purchased by Highland. The parties agree and the record confirms that the real property on which the sludge drying beds are situated was not purchased by Highland in 1988. The property, accordingly, cannot be considered an "Asset," where that term only applies to that which was to be transferred to the purchaser. See ECF No. 52-4 at 4. Second, where the parties agree that Highland did not purchase the division of Burlington's business responsible for the existence of PCBs at the Cheraw facility, i.e. , Burlington's woven fiberglass manufacturing division, this liability also cannot be related to the "Business" as defined by the Purchase Agreement. The record simply contains no evidence that links Burlington's putative liability for discharge of PCBs into the sludge drying beds to the "Business" or the "Assets." Highland assumed liabilities, if at all, only where "related to" the "Business" or "Assets," and Highland has carried its burden to establish that liability for PCBs in the sludge drying beds is related to neither. Highland is, accordingly, entitled to judgment as a matter of law on this limited issue.
In their response to Highland's motion for partial summary judgment, Plaintiffs propose an overly broad reading of the Assumption Agreement, interpreting it to mean that "if Burlington was liable [on January 3, 1988], whether that liability arose twenty years prior, just before [that date], or arose after, then Highland assumed that liability." ECF No. 53 at 5. This reading overlooks the contracting parties’ agreement that Highland expressly "[did] not assume ... any Liabilities related in any way to the conduct of operations or the operating of assets of Burlington which are not part of the Business or the Assets...." ECF No. 48 at 51-52. Further, Plaintiffs cannot avoid summary judgment by identifying an ambiguity in the Assumption Agreement that is immaterial to the issue raised by Highland. Plaintiffs argue that the phrase "as they have existed or shall exist," as used in the Assumption Agreement, applies to the Business and Assets, rather than the liabilities. Defendant submits that the Court should, instead, view the Business and Assets in a "snapshot" taken at 12:01 a.m. on January 3, 1988. Even assuming the validity of Plaintiff's interpretation, liability for the sludge drying beds is still not related to the Business or Assets. Allowing the terms "Business" and "Assets" to take on different meanings through time does not allow the Court to otherwise expand their defined subsets. No matter when the "snapshot" is taken, the Business only includes industrial fabric manufacturing, and the Assets only include that which Highland in fact purchased. Moreover, it is illogical to conclude that Highland would have assumed liabilities unrelated to the Assets and Business that it was acquiring.
On the other hand, the record contains sufficient evidence to survive summary judgment on the question of Highland's assumed liability related to Burlington's discharge of PCBs on real property that Highland did acquire in 1988. Specifically, Highland acknowledges that the parcel it acquired from Burlington includes a portion of the Western Ditch. See ECF No. 52-2 at 7 ("The Western Ditch is located partially on and partially adjacent to the western boundary of the Highland Plant...."). In its 2017 internal memorandum, the EPA references a March 12, 1970 letter from the Pee Dee District Sanitation Director, which describes "complaints ... concerning the discharge of a waste product into an open ditch" at the facility, which was then owned and operated by Burlington. ECF No. 52-1 at 3. Highland entered a settlement and consent order with the EPA wherein this open ditch is presumed to be the Western Ditch. ECF No. 52-2 at 9. The state Sanitation Director confirmed by direct observation in 1970 that the plant was indeed discharging a green fluid into the open ditch at the rear of a housing development. Id. The EPA further found that concentrations of PCB Aroclor 1248 and PCB Aroclor 1254 were "highest at the western property boundary area near the Western Ditch and generally within about one hundred fifty (150) feet of the ditch." ECF No. 52-2 at 10.
There are genuine issues of fact regarding whether Highland assumed liability for Burlington's conduct related to the discharge of PCBs into this ditch, which Highland subsequently purchased as part of the real property "Assets" pursuant to the Purchase Agreement and the Assumption Agreement. Highland assumed "any and all liabilities ... of Burlington of whatever nature related to the Business or Assets as they existed at the Effective Time and as they have existed or shall exist after the Effective Time (whether fixed or contingent, arising by law or by contract or otherwise), whether such Liabilities arose prior to or arose or arise after the Effective Time." The only relevant exclusion of liabilities provides that Highland "does not assume ... any Liability of Burlington whatsoever for ... (a) any Liabilities related in any way to the conduct of the operations or to the operating of assets of Burlington which are not part of the Business or the Assets as of the Effective Time[.]" Liability for Burlington's discharge of PCBs is sufficiently "related to" the Western Ditch, and Highland acknowledges that part of the Western Ditch is an "Asset" within the meaning of the Purchase Agreement.
An issue remains, however, with respect to the temporal scope of liability related to the Assets Highland purchased. In its motion, Highland submits that it is entitled to summary judgment as to claims premised on "migration of PCBs from the Cheraw Plant prior to its acquisition by Highland." ECF No. 47 at 2. The Assumption Agreement, however, clearly provides that Highland assumed Burlington's liabilities whether such liabilities arose prior to or after the effective date of the acquisition, provided the liabilities are "related to" the "Assets" purchased. A plausible reading of the terms of the Assumption Agreement permits an inference that Highland assumed liability for pre-1988 migration of PCBs out of real property it later acquired: such liability is both sufficiently related to an Asset and it was arguably expressly assumed as a liability of Burlington arising prior to the effective time designated by the transaction.
For the foregoing reasons, the Court finds no genuine issue as to whether Highland assumed liability related to Burlington's disposal of PCBs in the sludge drying beds, which were not located on property Highland purchased. This particular liability is not related to any asset Highland purchased, and the disposal occurred in the course of a line of business Highland did not acquire. Highland may have assumed liability, however, for Burlington's conduct to the extent Burlington discharged PCBs into real property assets purchased by Highland.
B. Burlington's Bankruptcy did not Relieve Highland Industries of any Express Assumption of Liability.
Because the Purchase Agreement and the Assumption Agreement are properly construed as one contract, the Court rejects Highland's argument that its assumption of liability is without effect because of Burlington's bankruptcy or Burlington's failure to perform under the Assumption Agreement.
The Court begins with a brief explanation of the factual and legal bases for Highland's argument predicated on Burlington Industries’ bankruptcy. In 2003, the District Court for the District of Delaware confirmed a plan of reorganization for Burlington Industries and its debtor subsidiaries pursuant to Chapter 11 of the Bankruptcy Code. See ECF No. 47-1 at 103-130. The terms of the Confirmation Order provided that any "Executory Contract" not expressly assumed or assigned pursuant to the reorganization was rejected pursuant to 11 U.S.C. § 365. ECF No. 47-1 at 122. The Assumption Agreement does not appear on the exclusive list of contracts that were assumed or assigned in the reorganization. In turn, 11 U.S.C. § 365(g) provides, with certain exceptions to which no party assigns significance, that "the rejection of an executory contract ... constitutes a breach of such contract...." Id. Highland argues that the Assumption Agreement was an executory contract rejected by operation of the Confirmation Order and, therefore, Burlington breached the Assumption Agreement by operation of 11 U.S.C. § 365(g). Highland Industries further argues that Burlington Industries’ breach was material and that it is accordingly not bound by any assumption of Burlington Industries’ liabilities.
The Court need not reach the question of whether Highland may now obtain relief based on a seventeen-year-old deemed breach of the Assumption Agreement for which it never sought relief from Burlington Industries’ bankruptcy estate. Highland acknowledged during the hearing on this matter that if the Purchase Agreement and the Assumption Agreement are properly construed as a single contract, the contract was not executory, not rejected, and not breached by Burlington's bankruptcy.
The generally accepted definition of an executory contract in bankruptcy was given by Professor Countryman: an executory contract within the meaning of the Bankruptcy Act is "a contract under which the obligation of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would constitute a material breach excusing the performance of the other." Vern Countryman, Executory Contracts in Bankruptcy , Part I, 57 Minn. L. Rev. 439, 460 (1973); see In re Chateaugay Corp. , 130 B.R. 162, 164 (S.D.N.Y. 1991) (collecting cases adopting the Countryman definition).
In re Ames Dep't Stores, Inc. , No. 93 CIV. 4014 (KMW), 1995 WL 311764, at *3 (S.D.N.Y. May 18, 1995) ; see also Gloria Mfg. Corp. v. Int'l Ladies’ Garment Workers’ Union , 734 F.2d 1020, 1022 (4th Cir. 1984) (applying the Countryman definition). In turn, under New York law, a material breach is one that is "so substantial that it defeats the object of the parties in making the contract." Robert Cohn Assocs., Inc. v. Kosich , 63 A.D.3d 1388, 1389, 881 N.Y.S.2d 235, 237 (2009) (quotation omitted). A non-breaching party will only be discharged from further performance of its obligations when a breach "goes ‘to the root of the contract.’ " K.M.L. Labs. Ltd. v. Hopper , 830 F. Supp. 159, 163 (E.D.N.Y. 1993) (quoting Direction Associates, Inc. v. Programming & Systems, Inc. , 412 F.Supp. 714, 719 (S.D.N.Y. 1976) ).
To analyze whether nonperformance may constitute a material breach, the Court looks to the ratio of performed obligations to unperformed obligations. In re Exide Techs. , 607 F.3d 957, 963 (3d Cir. 2010), as amended (June 24, 2010). Here, Burlington's unperformed obligation arguably includes a duty to tender insurance proceeds applicable to the environmental liability Highland may have assumed:
With respect to claims for ... Liabilities assumed hereunder ... which have been covered by insurance policies of Burlington ... Burlington agrees to submit such claims for such Liabilities to the appropriate insurer and to continue as the named insured with respect to such Liabilities and to apply, for the benefit of [Highland] all proceeds of insurance remitted to Burlington with respect to each such Liability when received.
ECF No. 48 at 54. As Highland Industries acknowledges, Burlington Industries’ failure to make a claim to its carrier and tender proceeds is not enough to "defeat the object" of the entire 1988 asset acquisition transaction. See In re Interstate Bakeries Corp. , 751 F.3d 955, 964 (8th Cir. 2014) (holding asset acquisition agreement not executory for purposes of 11 U.S.C. § 365 despite "relatively minor" continuing obligations that did "not relate to the central purpose of the agreement to sell the ... operations and assets."); see also In re Exide Techs. , 607 F.3d at 963 (holding asset acquisition agreement not executory where any continuing obligations were not material in the context of a $135 million asset acquisition). The Court, accordingly, resolves Highland's argument on this point by determining only whether the Purchase Agreement and Assumption Agreement are to be construed as a single transaction.
Whether multiple writings should be construed as one contract depends on the intent of the parties. See Glen Banks, 28 N.Y. Practice Series–New York Contract Law § 8:28. In general, where two or more agreements are negotiated together as part of a single integrated transaction, the agreements will be considered to constitute one contract. See Bradford v. Weber , 138 A.D.2d 860, 862, 525 N.Y.S.2d 968 (1988) ; see also Restatement (Second) of Contracts § 202 ("[A]ll writings that are part of the same transaction are interpreted together."). "Generally, separate writings are construed as one agreement if they relate to the same subject matter and are executed simultaneously." Commander Oil Corp. v. Advance Food Serv. Equip. , 991 F.2d 49, 53 (2d Cir. 1993) (citations omitted); see also Polner v. Monchik Realty Co. , 9 Misc.3d 755, 760–61, 803 N.Y.S.2d 370 (N.Y. Sup. Ct. 2005) ("These two documents were executed at substantially the same time by the same parties, concern the same subject matter, and refer to each other. Consequently, they were contemporaneous writings, forming part of the same transaction and their provisions must be read and interpreted together and harmonized."). Even where writings are executed at different times, however, "contracts should be interpreted together if ‘the parties assented to all the promises as a whole, so that there would have been no bargain whatever if any promise or set of promises had been stricken.’ " Commander Oil Corp. , 991 F.2d at 53 (quoting 6 Williston, Contracts , § 863, at 275 (3rd ed. 1970)).
In Commander Oil Corp. , the Second Circuit agreed with the district court's construction of an asset purchase agreement and a lease agreement as a single contract. Id. at 52-53. Pursuant to the purchase agreement, one entity sold a business and assets to another. The lease agreement provided that the purchaser of the business and assets would lease two premises from the seller on which to operate the business sold under the purchase agreement. The Second Circuit found that "the two transactions were intertwined. They were component parts of a single business transaction." Id. at 53. Further, the court noted that the asset purchase agreement explicitly required that the counterparties execute the lease agreement: "Buyer and Seller shall have entered into a lease for the premises owned by the Seller ... in the forms attached as Exhibits." Id. Accordingly, the two agreements constituted a single contract. Id.
Here, the Purchase Agreement and the Assumption Agreement are subject to construction as a single, integrated transaction. It is unreasonable to infer that Burlington and Highland would have agreed to perform solely under the terms of the Purchase Agreement without the Assumption Agreement in place or vice versa. Indeed, as in the case of Commander Oil Corp. , the Purchase Agreement here obligated the Purchaser to execute the Assumption Agreement: "On the terms and subject to the conditions set forth in this Agreement, the Purchaser shall execute and deliver the Assumption Agreement to the Seller on the Closing Date." ECF No. 52-4 at 7. The terms of the Assumption Agreement had already been negotiated as part and parcel of the Purchase Agreement. See ECF No. 52-4 at 2 (defining "Assumption Agreement" in the Purchase Agreement as "the agreement to be entered into between the Seller and the Purchaser in the form attached hereto as Exhibit 1.01(b)."). Both agreements were negotiated as part of the same asset acquisition transaction, and the Court construes both agreements as one contract. Finally, it is immaterial that Takata executed the Purchase Agreement and Highland executed the Assumption Agreement. Highland appears to have acted as the "Purchaser" for purposes of the Purchase Agreement after Takata assigned the contract. It was Highland, not Takata, that discharged Takata's obligation to deliver the Assumption Agreement and Highland received the benefits of Takata's bargain.
For the foregoing reasons, the Court construes the Purchase Agreement and the Assumption Agreement as a single contract. As Highland agrees, such construction dictates that Burlington's failure to make a claim for the liabilities at issue in this case is not a material breach. The contract was, therefore, not executory for purposes of Burlington's bankruptcy, and Highland is not relieved of any liabilities assumed pursuant to the Assumption Agreement. Highland's Motion for Partial Summary Judgment is, therefore, granted in part.
II. Plaintiffs have Adequately Stated Plausible Claims for Negligent Failure to Warn and Trespass.
The Court next denies Highland's Motion to Dismiss, because the well-pleaded factual allegations of the Amended Complaint, the truth of which the Court assumes, establish a plausible entitlement to relief under both a negligent failure to warn theory and a trespass theory.
A. Negligent Failure to Warn
Because a claim for negligent failure to warn can be maintained absent a fiduciary or confidential relationship between Plaintiffs and Highland, Highland's motion to dismiss this claim is denied.
Under South Carolina negligence law, there is no general duty to warn potential victims to danger. See Faile v. S.C. Dep't of Juvenile Justice , 350 S.C. 315, 566 S.E.2d 536, 546 (2002) (citations omitted); see also Restatement (Second) of Torts § 314. There are five exceptions to this rule: 1) where the defendant has a special relationship to the victim; 2) where the defendant has a special relationship to the injurer; 3) where the defendant voluntarily undertakes a duty; 4) where the defendant negligently or intentionally creates the risk; and 5) where a statute imposes a duty on the defendant. Faile , 566 S.E.2d at 546 (citing Hubbard & Felix, The South Carolina Law of Torts 57-72 (1990)).
In its motion, Highland relies exclusively on the case of Hedgepath v. Am. Tel. & Tel. Co. , 348 S.C. 340, 559 S.E.2d 327 (S.C. Ct. App. 2001) in arguing that it had no duty to warn Plaintiffs of PCB contamination. In Hedgepath , the South Carolina Court of Appeals affirmed the trial court's dismissal of the plaintiffs’ claims, where the claims were brought beyond the statute of limitations. Id. at 339. Plaintiffs argued that the defendants should have been equitably estopped from asserting the statute of limitations, where the defendants failed to disclose a privately commissioned environmental report, which evinced environmental contamination, to the public. See id. The court analyzed three distinct scenarios in which silence by a defendant warrants application of the equitable estoppel doctrine to the defendant's assertion of the statute of limitations. Id. (citing Jacobson v. Yaschik , 249 S.C. 577, 155 S.E.2d 601, 605 (1967) ). Finding no requisite fiduciary or confidential relationship that would impose a duty to disclose the environmental report, the Court of Appeals held the trial court did not err in declining to apply the doctrine of equitable estoppel. Id.
The duty to disclose information for purposes of an equitable estoppel analysis, however, is not coextensive with the duty to warn in the context of an action for negligence. The Hedgepath decision itself does not answer the question of whether the defendants in that case may have been negligent in failing to warn of environmental contamination. It only provides that the defendants were entitled to argue that the plaintiffs should have brought their claim earlier. As noted, an action can be maintained for negligent failure to warn absent a fiduciary or confidential relationship.
Here, Plaintiff's motion to dismiss proceeds under a false legal premise, and the Amended Complaint contains sufficient factual matter to conclude Burlington negligently created the risk and that Highland thereafter assumed the duty to warn by assuming Burlington's liability. The Court accordingly denies Highland's motion to dismiss Plaintiffs’ claim for negligent failure to warn.
B. Trespass
In addition to Highland's alleged assumption of Burlington's putative trespass liability, the Court finds sufficient factual information in the Amended Complaint to state a claim for trespass directly against Highland.
A trespass is "[t]he unwarrantable entry on land in the peaceable possession of another." Ralph v. McLaughlin, 428 S.C. 320, 834 S.E.2d 213, 229 (S.C. Ct. App. 2019) (quoting Snow v. City of Columbia , 305 S.C. 544, 409 S.E.2d 797, 802 (S.C. Ct. App. 1991) ). This is so "without regard to the degree of force used, the means by which the enclosure is broken, or the extent of the damage inflicted." Id. To constitute an actionable trespass, however, "there must be an affirmative act, the invasion of the land must be intentional, and the harm caused must be the direct result of that invasion." Id. The requisite level of intent is shown if the defendant acted voluntarily and that he knew or should have known that the result would follow from his act. Snakenberg v. Hartford Casualty Ins. Co. , 299 S.C. 164, 383 S.E.2d 2, 7 (S.C. Ct. App. 1989).
Here, the Amended Complaint alleges that Highland "used and operated a storm water discharge pipe from its Northeast retention pond, ... causing and allowing movement of the contaminants from its site into the drainage ditch/creek and onto and into the properties of ... Plaintiffs." ECF No. 30 at 18. In addition, the Amended Complaint alleges sufficient factual matter to plausibly shows that Highland knew or should have known that use of the storm water discharge pipe would contribute to the migration of contaminants onto others’ property. See id. at ¶ 11 (alleging eleven sources of information that plausibly did or should have provided Highland with knowledge of likely contamination). The court agrees that merely passively "allowing" migration of PCBs is insufficient to state an affirmative, voluntary, and intentional act on the part of Highland; however, this liability is traceable to Burlington's voluntary acts, and the Amended Complaint adequately alleges that Highland assumed that trespass liability in 1988. Id. at ¶ 10.
For these reasons, the Court also denies Highland's motion to dismiss Plaintiffs’ cause of action for trespass.
CONCLUSION
After a thorough review of the record, the memoranda in support of and in opposition to the motions before the Court, the applicable law, and in consideration of the parties’ arguments during the hearing on this matter, the Court GRANTS Defendant Highland Industries, Inc.’s Motion for Partial Summary Judgment in part and DENIES its Motion to Dismiss Portions of Plaintiffs’ Amended Complaint. All claims against Highland Industries, Inc. premised on Burlington Industries, Inc.’s discharge of PCBs into or the migration of PCBs out of property not acquired by Highland in 1988 are DISMISSED with prejudice.
IT IS SO ORDERED.