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POTOMAC ELEC. POWER CO. v. MIRANT CORP.

March 11, 2003

POTOMAC ELECTRIC POWER COMPANY, Plaintiff,
v.
MIRANT CORPORATION, Defendant.



The opinion of the court was delivered by: URBINA, District Judge.

MEMORANDUM OPINION

DENYING WITHOUT PREJUDICE THE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; DENYING WITHOUT PREJUDICE THE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
I. INTRODUCTION
The plaintiff, Potomac Electric Power Company ("Pepco"), brings this claim for breach of contract against the defendant, Mirant Corporation ("Mirant"). On June 7, 2002, the two parties entered into the Asset Purchase and Sales Agreement ("Agreement") whereby Mirant purchased several of Pepco's power generating facilities and related assets. This dispute centers on whether the Agreement requires Mirant to assume liability and indemnify Pepco for expenses related to an asbestos-related lawsuit that was filed before December 19, 2000 (the Agreement's closing date) but did not name Pepco as a defendant until after December 19, 2000. This matter comes before the court on the parties' respective motions for summary judgment. For the reasons that follow, the court denies both motions without prejudice.

  II. BACKGROUND

  Pepco is a District of Columbia corporation with its principal place of business in the District of Columbia. Compl. ¶ 1. Mirant is a Delaware corporation with its principal place of business in Atlanta, Georgia. Id. ¶ 2. On June 7, 2000, Pepco and Mirant entered into an Asset Purchase and Sale Agreement ("Agreement"). Pl.'s Statement

[251 F. Supp.2d 146]

      of Undisputed Material Facts ("Pl.'s Statement") ¶¶ 1-2. Mirant agreed to purchase certain power generating facilities and related assets owned by Pepco in Maryland, Virginia and the District of Columbia, some of which the parties identified collectively as the "Auctioned Assets." Pl.'s Mot. for Summ J. at 3. The Chalk Point generating facility ("Chalk Point"), located in Aquasco, Maryland, is one of the Auctioned Assets. Pl.'s Statement ¶ 2.

  Under Section 2.3(a)*fn1 of the Agreement, the Assumed Obligations section, Mirant assumed all liabilities and obligations relating to the Auctioned Assets "from and after the closing" of the Agreement. Id. ¶¶ 2-4. The closing date of the Agreement is December 19, 2000. Id. ¶ 3. These liabilities and obligations include any environmental or personal injury liabilities arising out of the use or presence of hazardous substances, such as asbestos. Id. Furthermore, under Section 10.1(b)*fn2 of the Agreement, Mirant agreed to indemnify Pepco for any losses arising out of these liabilities and obligations. Id. ¶ 13.

  Section 2.3(b) of the Agreement, the Retained Liabilities section, specifies that Pepco retained several categories of liabilities. Id. ¶ 7. Pepco's claim focuses on Section 2.3(b)(iii)(C) of the Agreement, which exempts Mirant from liability and indemnity obligations as they pertain to certain personal injury claims. Pl.'s Mot. for Summ. J. Ex. 1 at 9. Section 2.3(b)(iii)(C) reads:
Retained Liabilities. Buyer shall not assume or be obligated to pay, perform or otherwise discharge the following liabilities or obligations[:] . . . (C) any liability in respect of any personal injury claims relating to the exposure of a third party to asbestos at the Auctioned Assets or the Potomac River Station Site which have been filed with any state or federal court having jurisdiction prior to the Closing Date [December 19, 2000] . . . .
Id. In other words, under Section 2.3(b)(iii)(C), Pepco retained liability for personal injury claims related to asbestos exposure at the Auctioned Assets (including Chalk Point) and filed before December 19, 2000. Id.

  In 2000, a number of asbestos-related personal injury claims, known as the CT-4 Cases, were pending in the Circuit Court for Baltimore City. Def.'s Statement of Undisputed Material Facts ("Def.'s Statement") ¶ 2. Pursuant to a February 17, 1987 order, the Circuit Court for Baltimore City consolidated into one trial cluster all personal injury asbestos cases in which the plaintiff was not a tradesman or steelworker and filed on or after January 1, 1987. Id. The master complaint in the CT-4 Cases, filed on March 20, 1987, served as the foundation for the allegations of fact and legal claims for this trial cluster. Id. For all subsequent cases, the Circuit Court for Baltimore City required prospective plaintiffs to file a short-form complaint that adopted and incorporated the relevant paragraphs of the master complaint. Id.

  In November 1999, Alexander Wilson joined the CT-4 Cases by filing a

[251 F. Supp.2d 147]

      short-form complaint for personal injuries resulting from asbestos exposure ("Wilson Case"). Id. ¶ 3; Def.'s Mot. for Summ. J. Ex. F. Mr. Wilson's complaint requested relief in excess of $100 million and incorporated by reference "all Introductory Language and the Counts" set forth in the master complaint. Id. Mr. Wilson's complaint failed to allege specific facts or counts. Def.'s Statement ¶ 3.

  In January 2001, after Mr. Wilson passed away, Mr. Wilson's estate filed an amendment to add Pepco as a defendant in the Wilson Case. Id. ¶ 5. Containing no additional allegations of fact, the amendment simply stated that Pepco was a defendant. Id. In March 2001, Mr. Wilson's estate filed an amended complaint elaborating on its theories of negligence, and then filed a second amended complaint in August 2001. Id. ¶ 5 n. 1; Def.'s Mot. for Summ. J. Exs. H, I. As Mirant concedes, not until the August 2001 second amended complaint did the Wilson Case make specific allegations about Pepco, reference Chalk Point, and connect Mr. Wilson to Chalk Point. Id. ¶ 5 n. 1. On December 14, 2001, the Circuit Court for Baltimore City granted Pepco's motion for summary judgment in the Wilson Case and dismissed all claims related to Pepco. Id.; In re Baltimore City Asbestos Litig., 2001 WL 1757153 (Md. Cir. Ct. Dec. 14, 2001).

  In January 2001, Pepco called upon Mirant to indemnify Pepco for its expenses related to the Wilson Case. Pl.'s Statement ¶ 14. Since that time, Mirant has refused to indemnify Pepco. Id. ¶ 15. Pepco claims that it incurred more than $620,000 in "reasonable costs and expenses in preparation and defense of the Wilson Case." Id. ¶ 16. Consequently, Pepco filed a complaint seeking damages against Mirant in excess of $620,000, pre- and post-judgment interest, costs, and attorney's fees. Compl. ¶ 25. Pepco also asks for a declaratory judgment that Mirant is obligated to indemnify Pepco for all indemnifiable losses. Id. ¶ 29.

  In its motion for summary judgment, Pepco argues that under Section 2.3(a) of the Agreement, the Wilson Case constitutes an obligation that Mirant assumed because Mr. Wilson's estate did not file the amended complaint naming Pepco as a defendant until after the December 19, 2000 closing date of the Agreement. Pl.'s Mot. for Summ. J. at 2; Compl. ¶¶ 12, 16. Therefore, Pepco argues, Mirant must pay the costs of litigating the Wilson Case. In contrast, Mirant contends it need not pay these costs. In its motion for summary judgment, Mirant contends that Pepco retained liability for the Wilson Case pursuant to Section 2.3(b)(iii)(C) because the Wilson Case meets the requirements of this section and the original complaint in the Wilson Case was filed in 1999, before the December 19, 2000 closing date. Def.'s Cross-Mot. for Summ. J. at 10. Thus, Mirant asserts, it does not have to indemnify Pepco. Id.

  III. ANALYSIS

  A. Legal Standard for Motion for Summary Judgment

  Summary judgment is appropriate 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 a judgment as a matter of law." FED. R. CIV. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C. Cir. 1995). To determine which facts are "material," a court must look to the substantive law on ...


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