Greif Industrial Packaging and Services, LLC v. Sharp (In re Evans Industries Inc.)

Summarized by Aaron Kaufman , Gray Reed LLP
14 years 8 months ago

Citation:

Case No. 10-30387 (5th Cir. June 21, 2011) (per curiam)

Tag(s):

5th Circuit

Ruling:

In a de novo contract interpretation of an asset purchase agreement (APA) between purchaser Greif Industrial Packaging (“Purchaser”) and seller-debtor Evans Industries, Inc. (“Debtor”), the Court of Appeals held that Purchaser was not entitled to repayment from the escrow established under the APA for waste remediation and other payments made to the Debtor’s creditors after the sale closing. The Fifth Circuit concluded that, while the APA consigned responsibility to the Debtor for the disposal of hazardous material, it did not entitle the Purchaser to unilaterally engage in the disposal itself and then send the Debtor a bill for Purchaser’s costs. Further, that the Purchaser voluntarily paid one of the Debtor’s creditors but had no obligation to do so under the APA did not entitle Purchaser to be repaid out of the escrow. However, because the APA provided for all assets to be transferred to the Purchaser (including insurance policies) but did not expressly obligate the Purchaser to pay the prorated share of any insurance premiums, the Court of Appeals held that the Purchaser could benefit from the insurance policies without paying for them.

Procedural context:

Appeal from the district court, which affirmed the bankruptcy court’s ruling that Purchaser had no rights to repayment for waste disposal and voluntary payments to the Debtor’s creditors, but reversed the bankruptcy court’s ruling that Purchaser had no obligation pay the Debtor for prorated insurance premiums.

Facts:

This action was a dispute between the Purchaser and the post-confirmation trustee for the Debtor over an interpretation of the APA. The Purchaser argued that it should be repaid for the funds it spend disposing of hazardous waste which remained in the Debtor’s facilities after the Purchaser took over. The Purchaser also argued that it should be able to recover for the payments it made to one of the Debtor’s creditors for equipment acquired under the APA but which carried an undisclosed balance. The Trustee responded that the Purchaser had benefited for insurance policies acquired post-petition but did not pay any share of the premiums. The bankruptcy court held that the APA did not provide for Purchaser to be repaid for the waste disposal or creditor payments, but also did not obligate the Purchaser to pay any part of the insurance premiums even though the policies were clearly transferred to the Purchaser under the APA. Both parties cross-appealed.

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