In re: Federal Mogul Global Inc. et al

Filing 34

OPINION & ORDER re 8 Bankruptcy Appeal, filed by PepsiAmericas Inc.; IT IS ORDERED that the decision of the Bankruptcy Court is hereby AFFIRMED. Signed by Judge Joseph H. Rodriguez on 2/5/15. (bkb)

UNITED STATES DISTRICT COURT
DISTRICT OF DELAWARE
In re: Federal-Mogul Global, Inc.

:

Hon. Joseph H. Rodriguez

PepsiAmericas, Inc., n/k/a
Pepsi-Cola Metropolitan,
Bottling Company, Inc.,

:

Civil Action Nos. 10-cv-986 & 11-cv-813

Appellant,
v.

:
OPINION
& ORDER

:
:

Federal-Mogul Global Inc., et al.,
Debtor-Appellee.

:
:

This matter comes before the Court on appeal from the Bankruptcy Court’s
October 27, 2010 grant of summary judgment in favor of Debtor-Appellee. The Court
heard oral argument on October 17, 2013. For reasons stated that day, as well as
reasons discussed below, the decision by the Bankruptcy Court is affirmed.
Before the Bankruptcy Court was a motion for summary judgment on the
amended proof of claim of PepsiAmericas, Inc. (“Appellant”), filed in the bankruptcy of
Federal-Mogul Global, Inc. (“Appellee”), against two of Appellee’s subsidiaries, FederalMogul Corporation (“FMC”) and Federal-Mogul Products, Inc. (“FMP”). Appellant had
alleged that Appellee improperly billed shared insurance policies, giving rise to claims
based on tort, conversion, and breach of the implied covenant good faith and fair
dealing. The Appellee argued that no factual basis existed to substantiate the validity of
Appellant’s claims. The Bankruptcy Court agreed and granted summary judgment in
favor of Appellee.
Background
This dispute derives from both parties’ relationship with the former Abex
Corporation, a producer of brakes and other friction products that spawned countless
cases of asbestos exposure. See In Re Federal-Mogul Global, Inc., 438 B.R. 787, 800
(Bankr. D. Del. 2010). The assets and liabilities of Abex Corporation were divided and
sold through several mergers and acquisitions resulting Appellant and Appellee, among
others, owning a portion. See In Re Federal-Mogul Global Inc., 438 B.R. at 793. That is,
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along with owning assets from Abex Corporation, both parties owned liabilities from
asbestos-related litigation filed against Abex. Id. Both Appellant and Appellee collected
proceeds from Comprehensive General Liability Insurance Policies which insured
against those asbestos claims. However, Abex Corporation was not the only source of
Appellee’s asbestos-related liability, as it owned six other streams of such asbestos
liability. See In Re Federal-Mogul Global Inc., 2007 WL 4180545, at *13-15 (Bankr. D.
Del. Nov. 16, 2007). Appellant has argued that Appellee improperly collected insurance
proceeds from the shared Comprehensive General Liability plans to compensate for
cases deriving from its six non-Abex streams of liability, and as a result benefited from
the insurance policies without indemnifying Appellant for litigation costs and expenses.
The history of the corporate relationship between the two parties is long,
muddled, and thoroughly documented. This Court approves and affirms the corporate
histories explained in detail in past opinions. See In Re Federal-Mogul Global Inc., 438
B.R. at 792-94; In re Federal-Mogul Global, Inc., 411 B.R. 148, 160-162 and Appendix A
(Bankr. D. Del. 2008); In re Federal-Mogul Global Inc., 2007 WL 4180545, *13-15. The
relevant corporate history is repeated here.
In 1968, Abex Corporation was acquired by IC Industries, Inc., predecessor to
Whitman Corporation and ultimately PepsiAmericas, Inc. (“Appellant”). See In Re
Federal-Mogul Global, Inc., 438 B.R. at 792-93. In 1984, IC Industries also acquired
Pneumo Corporation, which it renamed Pneumo Abex Corporation (“PAC 1”) in 1985.
Id. at 793.
In 1988, IC Industries sold Abex Corporation and PAC 1 stock to PA Holdings
Corporation, which was owned by Henley Investment Inc., a subsidiary of The Henley
Group, pursuant to the 1988 Stock Purchase Agreement (“1988 SPA”) in the record. Id. 1
The 1988 SPA between IC Industries and PA Holdings Corporation was amended on
August 29, 1988. In 1990, the assets and liabilities of Abex Corporation and PAC 1 were
consolidated into their parent, PA Holdings. Id. By the time the second amendment to

The 1988 SPA contains a provision explicitly barring third party beneficiaries. See
1988 SPA at ¶ 15 (“this Agreement is for the sole benefit of the parties hereto and
nothing herein expressed or implied shall give or be construed to give to any person or
entity, other than the parties hereto, any legal or equitable rights hereunder.”).
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2

the 1988 SPA was executed on September 23, 1991, IC Industries had changed its name
to Whitman Corporation. Id. Additionally, PA Holdings had undergone a name change
to become another Pneumo Abex Corporation (“PAC 2”). As such, the Pneumo Abex
Corporation that signed the Second Amendment to the 1988 Stock Purchase Agreement,
PAC 2 formerly PA Holdings, was not the entity acquired by IC Industries in 1984. Id.
The original 1988 SPA and its two amendments are referred to collectively as “the
Whitman Agreements.” Id. at 790.
In 1992, Henley Investments Inc., which owned PAC 2, changed its name to Abex
Inc. Id. at 793. That same year, The Henley Group distributed Abex Inc. stock to its
common stockholders, and transferred certain of its own assets and liabilities to PAC 2.
Id. at 793 and Appendix A.
In 1994, PAC 2 sold certain assets of Abex Corporation to Wagner Electric
Corporation, predecessor to FMP, pursuant to the 1994 Asset Purchase Agreement
(“1994 APA”) in the record. Id. Under that agreement, Wagner agreed to indemnify
PAC 2 with respect to certain liabilities. 2
A Mutual Guaranty Agreement between Abex Inc., parent of PAC 2, and Cooper
Industries, Inc., Wagner’s parent, was executed on December 30, 1994, with respect to
the 1994 APA. See id. In the Mutual Guaranty, Abex Inc. and Cooper guaranteed, as
direct obligors and not as sureties, to each other and to each other’s subsidiaries (the
parties to the 1994 APA) “absolutely and unconditionally . . . the full and prompt
payment when and as due of all amounts payable under the [APA] by such Guarantor’s
subsidiary which is a party to the [APA] and the full and prompt performance by such
Guarantor’s subsidiary which is a party to the [APA] of all its undertakings and
obligations under the [APA].” Section 1. There was also an insurance agreement

Under Section 2.3 of the 1994 APA, Wagner agreed that it would “assume and become
liable for, and shall pay, perform and discharge as and when due all of the Assumed
Liabilities.” Section 2.3 defines Assumed Liabilities, excluding “Retained Liabilities”
which are defined in Section 2.4. That section defines Retained Liabilities to include “all
liabilities and obligations of Seller to Whitman under the Whitman Agreements.”
Section 2.4(g). Thus, Debtor FMP, successor to Wagner, agreed to indemnify PAC 2
only for the Assumed Liabilities. The Retained Liabilities stayed with what is now PAC
2. Section 13.3 of the 1994 APA provides that there is to be no third party beneficiary.
2

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executed between PAC 2 and Wagner on December 30, 1994 in connection with the
1994 APA. Id. at 791.
In 1996, Wagner merged into Moog Automotive, Inc., another subsidiary of
Cooper Industries, Inc. Id. at 794. Under a Purchase and Sale Agreement between
Cooper and FMC, dated August 17, 1998 (“1998 P & SA”), Cooper sold its automotive
products business, which included Moog, to FMC. Pursuant to the 1998 P & SA, FMC
assumed Cooper’s mutual guaranty obligations related to the 1994 APA for “the
operation of and products manufactured or sold by the Wagner industrial brake
business including” those liabilities related to asbestos in the brakes. Id. See also 1998
P & SA at Section 5.12(b), referring to Section 5.12(a)(x). Following the 1998 P & SA,
Moog changed its name to Federal Mogul Products, Inc. (“FMP”). Id. at 792. FMP,
therefore, was the successor to Wagner’s indemnity obligation under the 1994 APA. Id.
Appendix B. Thus, an asbestos-related claim arising out of the Moog friction products
division received by PAC 2, a distinct entity, would have been subject to the assumed
liabilities under the 1994 APA and indemnified by FMP. Id. That is, FMP undertook
Wagner’s obligations and FMC guaranteed FMP’s performance. Id. at 794.
Beside these facts, this Court adopts the Bankruptcy Court’s factual
determination that Abex Corporation (not Abex Inc.), IC Industries, Whitman, Pneumo
Corporation, and PAC 1 were, at one time or another, in the Appellant’s corporate chain.
Id. at 789. Similarly, Wagner Electric Corporation and Moog Automotive, Inc., were in
the FMC/FMP corporate chain. Id. PA Holdings, The Henley Group, Abex Inc. and
PAC 2 are entirely distinct entities from the corporate chains of Appellant and Appellee.
Id.
Appellant has offered two groups of insurance policies that covered against Abex
asbestos litigation. First, Appellant is the purchaser and first named insured for
Comprehensive General Liability insurance policies purchased during the period of
1971-1985 to provide liability insurance coverage for Appellant and most of its then
existing subsidiaries (“Appellant Policies”). Second, Appellant also has contractual
rights to the proceeds paid from CGL insurance policies purchased by Abex Corporation
prior to 1971 (herein “Pre-1971 Policies”). Appellee has never been named insured
under the Appellant Policies or Pre-1971 Policies. Under the terms of the 1994 Asset
Purchase Agreement, FMP claimed proceeds from the Appellant Policies and Pre-1971
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Policies to compensate asbestos claims against portions of the “friction products”
business of Abex Corporation. Those policies contained aggregate limits to certain
categories of claims, and once those limits were reached, benefits would no longer be
paid. 3
Essentially, Appellant alleged that Appellee inequitably allocated expenses to the
Appellant Policies and the Pre-1971 Policies, and received proceeds from those policies
to which it was not equitably or lawfully entitled. Appellant’s Amended Claim cited four
examples of such alleged overbilling, which account for $1,400,000 in benefits from the
Pre-1971 Policies and Appellant Policies. Upon seeing the bills sent to the Appellant
Policies and Pre-1971 Policies, Appellant requested information from Pneumo Abex to
justify the expenditures. Outside counsel for Appellant also made requests to outside
counsel for Appellee. No information was provided. An independent investigation
revealed that, in at least one of the cases, the named plaintiff did not work with Abex
products. Despite this, Appellee allegedly received benefits from the shared insurance
plans designed to cover Abex claims. Appellant argues these four instances are proof of
a larger scheme to bill the Pre-1971 Policies and Appellant Policies for claims not
covered under the Policies.
In addition to the Pre-1971 Policies, the Appellant Policies, the 1988 SPA, and the
1994 APA, Appellant provided the Court with three separate insurance settlement
contracts signed by both Appellant and Appellee. Appellant claims that these contracts
establish privity between it and Appellee, and that Appellee breached the implied
covenant of good faith and fair dealing in these contracts by billing the Policies for nonAbex claims. The settlement contracts provided by Appellant are described as follows.
The December 28, 2006 Settlement Agreement between the co-claimants and
Equitas Escrow Account lists as claimants Appellant, Appellee, two other entities, and
The Bankruptcy Court noted three other insurance agreements not mentioned in the
pleadings which Appellant filed under seal with leave of court. The three agreements
under seal are (1) May 2000 Confidential Settlement Agreement between Pneumo Abex
Corporation and Whitman Corporation, (2) December 2002 Final Settlement
Agreement Between Pneumo Abex Corporation and Maryland Casualty Company, and
(3) December 2006 Confidential Settlement Agreement and Release between Pneumo
Abex LLC, Cooper Industries, Appellant, FMP, FMC and Certain Underwriters at
Lloyd’s.
3

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all entities that have a present ownership interest in those entities, as well as
predecessors, successors, or assigns. It was meant to settle two insurance coverage
actions, Certain Underwriters at Lloyds, London, et al. v. Pneumo Abex Corporation, et
al. and Whitman Insurance Corporation, Ltd. v. Travelers Indemnity Company, et al.
The policies in question, known as the “London Policies,” are defined by the contract.
Also included in the contract is a statistical breakdown of the percentages of the
settlement to which each entity was entitled. Appellant was entitled to 14.24% of the
settlement and Appellee was entitled to 3.31% of the settlement.
The May 17, 2001 Settlement Agreement between Pneumo Abex Corporation and
All State Insurance Company was signed by Appellant and Appellee. The various
relevant policies issued by All State Insurance Company are named and identified. No
percentage breakdown is provided.
A December 6, 2005 Settlement Agreement between Stonewall Insurance
Company and multiple claimants including Appellant and Appellee identifies two
policies that released funds pursuant to the agreement. The settlement agreement did
not address the allocation of any of the funds provided by Stonewall.
In short, the Bankruptcy Court found that, because of the severance of the
corporate relationships, Appellant’s remedies, if any, are not against the Debtors in this
case. 438 B.R. at 796.
Under Section 8.3 PAC 2 agreed to retain certain liabilities
under the Whitman Agreements “forever.” . . . PAC 2 has
the right either to perform remedial actions it is liable for
under the agreement or to have Wagner (FMP) perform the
work in which case PAC 2 will reimburse FMP, but Whitman
([Appellant]) nonetheless retained the right to control the
details of the work or to perform the remediation. See
Section 8.4(c) at 84. Section 8.5 recites limitations on PAC
2’s environmental indemnification obligation. Wagner
(FMP) agreed not to take any action it knew would result in
[PAC 2] violating the Whitman Agreements in any way.
Section 8.5(d). Even if Wagner (FMP) did so, it is PAC 2, not
[Appellant], that would have recourse against Wagner. If
there is a breach, [Appellant]’s remedies are with respect to
PAC 2 to the exclusion of Wagner (FMP).
438 B.R. at 796-97 (citing 1994 APA).

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Appeal of Bankruptcy Court Decision
This Court has jurisdiction to hear an appeal from the bankruptcy court pursuant
to 28 U.S.C. § 158(a). In undertaking a review of the issues on appeal, a district court
reviews conclusions of law de novo, findings of fact on a clearly erroneous standard, and
exercises of discretion for abuse thereof. See Official Comm. Of Unsecured Creditors v.
Am. Classic Voyages Co., 405 F.3d 127, 130 (3d Cir. 2005). With mixed questions of law
and fact, the court must accept the bankruptcy court’s “finding of historical or narrative
facts unless clearly erroneous, but exercise[s] ‘plenary review of the [bankruptcy] court’s
choice and interpretation of legal precepts and its application of those precepts to the
historical facts.’” Mellon Bank, N.A. v. Metro Communications, Inc., 945 F.2d 635, 642
(3d Cir. 1991). The district court’s appellate responsibilities are further informed by the
directive of the United States Court of Appeals for the Third Circuit, which effectively
reviews on a de novo basis bankruptcy court opinions. In re Hechinger, 298 F.3d 219,
224 (3d Cir. 2002); In re Telegroup, 281 F.3d 133, 136 (3d Cir. 2002).
Summary Judgment Standard
A court will grant a motion for summary judgment if there is no genuine issue of
material fact and if, viewing the facts in the light most favorable to the non-moving
party, the moving party is entitled to judgment as a matter of law. Pearson v.
Component Tech. Corp., 247 F.3d 471, 482 n.1 (3d Cir. 2001) (citing Celotex Corp. v.
Catrett, 477 U.S. 317 (1986)); accord Fed. R. Civ. P. 56 (c). Thus, this Court will enter
summary judgment only when “the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56 (c).
An issue is “genuine” if supported by evidence such that a reasonable jury could
return a verdict in the nonmoving party’s favor. Anderson v. Liberty Lobby, Inc., 477
U.S. 242 (1986). A fact is “material” if, under the governing substantive law, a dispute
about the fact might affect the outcome of the suit. Id. In determining whether a
genuine issue of material fact exists, the court must view the facts and all reasonable
inferences drawn from those facts in the light most favorable to the nonmoving party.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
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Initially, the moving party has the burden of demonstrating the absence of a
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 moving party has met this burden, the
nonmoving party must identify, by affidavits or otherwise, specific facts showing that
there is a genuine issue for trial. Id.; Maidenbaum v. Bally’s Park Place, Inc., 870 F.
Supp. 1254, 1258 (D.N.J. 1994). Thus, to withstand a properly supported motion for
summary judgment, the nonmoving party must identify specific facts and affirmative
evidence that contradict those offered by the moving party. See Anderson, 477 U.S. at
256-57. Indeed, the plain language of Fed. R. Civ. P. 56(c) mandates the entry of
summary judgment, after adequate time for discovery and upon motion, against a party
who fails to make a showing sufficient to establish the existence of an element essential
to that party’s case, and on which that party will bear the burden of proof at trial. See
Celotex, 477 U.S. at 322.
Appellant argues against the traditional summary judgment standard of review,
in favor of a lighter burden for the non-moving party. Appellant contrasts the instant
case from Celotex by arguing that the lack of discovery warrants this lighter burden. (See
Appellant Reply Br., p. 6.) As the Appellant notes, the Court in Celotex held that the
non-moving party’s interests were protected because there was discovery prior to the
summary judgment motion, alleviating any concerns that the non-movants were being
“railroaded” by summary judgment. See Celotex, 477 U.S. at 526. Pointing to the lack of
any discovery in the underlying case, Appellant claims that Appellee filed “essentially a
Rule 12(b)(6) motion” with the Bankruptcy Court, that Appellee should be required to
establish “complete legal insufficiency of PepsiAmericas claims” while conceding the
truth of Appellant’s factual assertions. See Appellant Reply Br., p. 6-7. In short,
Appellant requests that the underlying motion for summary judgment be reviewed as a
motion to dismiss and adjudged by a Fed. R. Civ. P. 12(b)(6) standard. See Fed. R. Civ.
P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In Celotex, however,
the Court instructs that any fear of being “railroaded” can be alleviated through Fed. R.
Civ. P. 56(f), which “allows the motion for summary judgment to be denied, or the
hearing on the motion to be continued, if the non-moving party has not had an
opportunity to make full discovery.” See Celotex, 477 U.S. at 326 (citing Fed. R. Civ. P.
56(f)). Appellant did not request relief under 56(f).
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Analysis
This Court affirms the Bankruptcy Court’s decision that the undisputed facts
alleged by Appellant do not give rise to any liability on the part of Appellant. As the
Bankruptcy Court noted, “there is a difference between what the facts are and what they
mean and [Appellant’s] challenge is to the meaning of undisputed facts.” 438 B.R. at
789.
Although Appellant claimed “[t]ort, conversion, and breach of good faith and fair
dealing regarding insurance policies,” the Bankruptcy Court found that “the claims do
not even identify the alleged tort (except conversion), do not explain how the policies
were (allegedly) converted, or set forth the basis for any supposed duty of good faith or
fair dealing owed by the Debtors to [Appellant].” 438 B.R. at 788. Indeed, Appellant
agrees that FMP was not a party to the 1988 SPA, but asserts “common law obligations.”
Id. at 789. Appellant also agrees that neither it nor any of its predecessors was a party
to the 1994 APA or 1998 P & SA. Id. Nonetheless, Appellant re-argues that Debtors are
liable for “over-billing” shared insurance policies that it purchased to cover asbestosrelated liabilities created by Abex Corporation, because Debtors’ claims actually were
not covered by the Abex policies but arose from six other “streams” of asbestos-related
liability. In doing so, Appellant contends that the Bankruptcy Court failed to consider
alternative avenues of privity between the Appellant and Appellee, namely through the
doctrines of contract adoption, equitable estoppel with regard to the 1988 SPA,
equitable estoppel of the shared insurance policies, and direct privity through the
insurance settlement agreements that both Appellant and Appellee signed.
Debtors were not parties to the 1988 APA, the Pre-1971 Insurance Policies, or the
Appellant Insurance Policies, but Appellant argues that Appellee is bound by those
documents through the doctrine of contract adoption. Third parties to a contract
become parties who are bound by the contract’s terms by either explicitly or implicitly
adopting the agreement. See American Legacy Foundation v. Lorillard Tobacco Co., 831
A.2d 335, 343 (Del. Ch. 2003). The contract itself, however, must contemplate that
third parties might adopt it. Id. at 344. Whether the contract itself contemplates
adoption is a question of contract interpretation. Id. Courts look to the language of the

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contract to determine whether the original signatories intended adoption. See id. at
344-45.
There are no magic words to explicitly adopt a contract. Id. at 348. Statements
made by a non-signatory confirming that it is bound by a contract can establish that it
has adopted the contract. Id. at 349. Express adoption occurs in a variety of contexts.
Id. Express adoption occurs when a successor adopts a contract of a predecessor as its
own. Id. It also occurs when an agent acts on behalf of the principal and the principal
agrees to be bound by the agent. Id. Any statement made by a third party confirming
that it is bound by a contract is sufficient to adopt the agreement. Id.
Third parties can also implicitly adopt a contract through their conduct, rather
than explicitly through their words. Implicit adoption occurs when a party accepts
benefits intended for third party beneficiary. Id. Courts will often find implicit
adoption when a party who has received benefits of a contract then tries to avoid
burdens imposed by the same contract. Id.
Appellant has not identified any provisions or contractual language in the 1988
SPA to indicate that the original drafters of the 1988 SPA contemplated adoption by
third parties. While not specifically addressing contract adoption, however, the 1988
SPA contains a provision that explicitly rejects third party beneficiaries. In relevant
part, the SPA states “this Agreement is for the sole benefit of the parties hereto and
nothing herein expressed or implied shall give or be construed to give any person or
entity, other than the parties hereto, any legal or equitable rights hereunder.” 1988 SPA,
p. 70. That provision sheds light on the intent of the drafters, unequivocally stating that
the agreement is for the “sole benefit of the parties hereto,” not a third party.
Accordingly, Appellant failed to create a genuine issue of material fact with regard to
Appellee’s potential contract adoption of the 1988 SPA. Moreover, the Court cannot
find that Appellant established an intent of the drafters of the Pre-1971 Policies and the
Appellant Policies to allow for third party adoption without these contracts.
Next, Appellant argued that Debtors were privy to the 1988 SPA and shared
insurance contracts through the doctrine of equitable estoppel. When a party enjoys the
benefits of a contract, it can become bound by the contract’s terms and obligations. See
E.I. DuPont de Nemours and Co. v. Rhone Poulenc Fiber and Resin Intermediates, 269
F.3d 187, 199 (3d Cir. 2001). This prevents parties from embracing certain portions of
10

the contract, while turning their backs on more distasteful clauses in the agreement. Id.
at 200. As the Fourth Circuit explained, a party may be estopped from asserting that his
lack of signature on a written contract precludes enforcement a contractual provision
when he had consistently maintained that other provisions of the contract should be
enforced to benefit him. See id. (citing Int’l Paper Co. v. Schwabedissen Maschinen &
Anlagen GMBH, 206 F.3d. 411, 418 (4th Cir. 2000)). Courts refer to a non-signatory’s
behavior during the life of the contract to determine if the third party embraced a
contract until the prospect of litigation caused the same party to repudiate the
agreement. Id. In order to invoke estoppel, the non-signatory must have embraced a
direct benefit of the contract, rather than an indirect benefit. Id.; See also ThomasonCSF, S.A. v. American Arbitration Ass’n, 64 F.3d 773, 779 (2d Cir. 1995) (denying
invocation of estoppel against a party who only indirectly benefited from the
agreement). A direct benefit is a benefit that derives from the party asserting a term of
the contract, rather than a benefit a third party will receive when another party acts in
accordance with the contract. See Thomason-CSF, S.A., 64 F.3d at 779.
Appellant argues that because Debtors requested and accepted monies produced
by the 1988 SPA, Pre-1971 Policies, and Appellant Policies, they are equitably estopped
from avoiding liability under the implied covenant of good faith and fair dealing. The
implied warranty of good faith and fair dealing exists in every contract. See Dunlap v.
State Farm Fire & Cas. Co., 878 A.2d 434, 440 (Del. 2005). The term, “good faith,”
however, has no set meaning, and instead prevents a wide range of forms of bad faith.
Id. The implied covenant of good faith and fair dealing requires a party in a contractual
relationship to refrain from arbitrary or unreasonable conduct, which could preclude the
other party from enjoying the benefit of the original bargain. Id.
The implied covenant of good faith and fair dealing has its limitations. Id. The
covenant cannot be used to circumvent the parties’ original bargain or create “a free
floating duty . . . unattached to the underlying legal document.” See id. at 441. Only
when it is clear from the contract that the parties would have agreed to proscribe the act
later complained of, had they thought to negotiate it, may a party invoke the protections
of the covenant. Id. at 442. The covenant is not a catch-all to prevent any injustice, and
Delaware courts have described invoking the covenant as a “cautious enterprise.” See
Nemec v. Shrader, 991 A.2d 1120, 1123 (Del. 2010). The implied covenant of good faith
11

and fair dealing cannot be applied to provide contractual protections that were not
secured at the bargaining table. See Windshall v. Viacom Intern., Inc., 76 A.3d 808, 816
(Del. 2013).
Appellant’s claims for breach of the implied covenant of good faith and fair
dealing cannot be sustained. Regarding the 1988 SPA, there is no privity of contract and
the equitable estoppel argument in attempt to forge privity between the parties through
the shared insurance policies lacks specific proof in the record. Regarding the
settlement contracts provided in conjunction with four instances of alleged overbilling
and a general allegation that there were more occurrences, Appellant has not attached
its claim of breach to an actual contract; in no instance of the shared settlement
contracts has Appellant shown inappropriate billing by Debtors. Rather, Appellant cited
four instances of alleged overbilling as examples of a larger course of conduct, and asked
the court to assume this course of conduct implicated one of the settlement contracts
that had capacity for privity. Again, the covenant of good faith and fair dealing is not a
catch-all that can be used to prevent any injustice. See Nemec, 991 A.2d at 1123.
Rather, the covenant of good faith and fair dealing ensures that arbitrary conduct does
not deprive the parties of the original benefit of their bargain. See Dunlap, 878 A.2d at
440. Appellant has not established that, as to a particular settlement contract, it was
precluded from enjoying the original benefit of its bargain.
Next, the Bankruptcy Court dismissed Appellant’s claim for “tort” because of the
lack of specificity in the claim. See In Re Federal-Mogul Global, Inc., 438 B.R. at 788.
On appeal, Appellant is more specific, alleging that it has a claim against FMP for the
tort of conversion or waste, for misusing assets of an implied trust, or for destruction of
a shared asset. However, this specificity is nowhere to be found in Appellant’s amended
claims. The Bankruptcy Court appropriately dismissed the generalized tort claim, and
Appellant is foreclosed from bringing claims here that were not originally pled. Further,
when a claim in tort arises out of the same facts that amount to a breach of contract, the
claim must be brought in contract, rather than in tort. Kuroda v. SPJJ Holdings, 971
A.2d 872, 890 (Del. Ch. 2009) (citing Data Management Int’l, Inc. v. Saraga, No. 05C05-108, 2007 WL 2142848 (Sup. Ct. Del. Jul. 25, 2007)). To bring a tort claim along
with a contract claim, the tortfeasor must have violated an independent legal duty apart
from that imposed by contract. Id. Appellant has not made such a showing here.
12

Conclusion
In conclusion, this Court affirms the decision of the Bankruptcy Court that
Appellant failed to establish a right to pursue any claim against Debtors FMP/FMC.
Summary judgment was granted appropriately.
IT IS ORDERED that the decision of the Bankruptcy Court is hereby AFFIRMED.

Dated: February 5, 2015

/s/ Joseph H. Rodriguez
JOSEPH H. RODRIGUEZ
U.S.D.J.

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