On July 19, 2010, the Federal District Court for the Southern District of New York decided a case in which it interpreted an asset purchase agreement (“APA”). The Court in Koch Industries, Inc. v. Aktiengesellschaft, — F.Supp.2d –, 2010 WL 2927441 (S.D.N.Y.) held that “when defendants sold plaintiffs a polyester manufacturing business in 1998, defendants fraudulently concealed that the business was violating antitrust laws.” Under the indemnification provision of the APA, , the plaintiffs would be entitled to damages for the period prior to the closing.  The reason was that the terms of the APA clearly applied to that situation,

 

“[u]nder the APA, defendants agreed to indemnify plaintiffs for losses associated with the conduct of the polyester business prior to the Closing. Specifically, Section 2.4 of the APA requires Hoechst to pay all “Retained Liabilities” and provides that the “Buyer [Kosa] shall not assume or become liable for any obligations, liabilities or indebtedness of any member of the Seller Group, and … the members of the Seller Group shall retain all of their respective liabilities, other than the Assumed Liabilities, whether or not relating to the ownership or operation of the Polyester Business.” Section 17.2(a)(i) of the APA requires Hoechst “to defend, indemnify and hold harmless the Buyer Indemnified Parties from and against … [a]ny and all Losses resulting from or in connection with, directly or indirectly, the failure of Seller and its Affiliates to pay, perform and discharge when due all Retained Liabilities.”
Id. at 1-2.

 

The Court held that “Plaintiffs have satisfied their burden at summary judgment to show that defendants are liable, under the indemnification provision of the APA, for a portion of the Defense Costs that constitutes “Retained Liabilities.” The calculation of proper damages on the indemnity claim remains an issue for trial.” Id. at 23.

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