FIFTH CIRCUIT
CIVIL NEWS
Alford v. Kuhlman Electric Corp.
STEWART, GARZA AND ELROD • MAY 24, 2013
APPEAL FROM S.D. MISS. • DIST. JUDGE WINGATE
James Alford and other plaintiffs sued Kuhlman Electric Corp., Kuhlman Corp., and
BorgWarner, Inc., under Mississippi law for negligent disposal of toxic chemicals at a facility
where Kuhlman Electric manufactured transformers. This appeal involves BorgWarner’s
obligations to Kuhlman Electric in connection with settlement, under Mississippi law, of
the Alford claims.
In 1999, about eight years before Alford sued, BorgWarner bought Kuhlman and its
subsidiaries, including Kuhlman Electric. As part of the sale, “Kuhlman and BorgWarner agreed
to indemnify [Kuhlman Electric] and hold [it] harmless with respect to any damages, expenses,
or obligations incurred related to all liabilities for pre-closing environmental matters.” After the
contamination-related lawsuits started but before Alford filed this one, BorgWarner, Kuhlman
and Kuhlman Electric agreed in 2005 that BorgWarner would lead their settlement efforts; in
return, BorgWarner would “indemnify Kuhlman Electric ... with respect to settlement amounts
and defense costs and expenses,” and would “‘waive any and all claims it may have against’
[Kuhlman Electric] ‘to recoup or otherwise recover or be reimbursed for amounts paid in
connection with such settlements.’”
Consistently, the Alford settlement required BorgWarner to pay “‘the [s]ettlement [f]unds
[in two installments] on behalf of [Kuhlman Electric] pursuant to’” the 1999 sale agreement. But
while BorgWarner was settling Alford on behalf of Kuhlman Electric, it sued Kuhlman Electric
in Illinois (whose law applied to the 1999 and 2005 agreements) for a judgment that Kuhlman
Electric violated the 1999 purchase agreement and, therefore, it could demand reimbursement
from Kuhlman Electric for the settlement, notwithstanding the 1999 and 2005 agreements.
Kuhlman Electric responded in Alford by moving for a declaration that BorgWarner had no right
to abandon its obligations under the 1999 and 2005 agreements, and enforcing its obligations
under those agreements.
The district court observed that none of the Alford defendants had filed a cross-claim
against any other or had otherwise put the 1999 or 2005 agreement at issue. In its view, the only
question was whether BorgWarner satisfied its payment obligations on behalf of Kuhlman
Electric under the settlement agreement (which was governed by Mississippi law). Finding that
BorgWarner had paid the second installment by the time it ruled, it denied Kuhlman Electric’s
motion and granted BorgWarner’s motion to dismiss Alford.
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Holding: Affirmed. “Because the defendants have filed no counterclaim or cross-claim
among themselves, the terms of the defendants’ [1999 and 2005 agreements] are not relevant
unless their terms are incorporated into the [Alford settlement agreement].” The settlement
agreement made no specific reference at all to the 2005 agreement, so it was not incorporated.
The settlement agreement did, on the other hand, require BorgWarner to pay the Alford plaintiffs
“‘pursuant to’” the 1999 agreement, but this was too bare a reference to incorporate, under
Mississippi law, that agreement’s requirement for BorgWarner to indemnify Kuhlman Electric
and hold it harmless. Judge Elrod briefly dissented.
Counsel in Fifth Circuit No. 11-60728:
Tim K. Goss (Dallas) for James Alford, et al.
Steven J. Levine (Baton Rouge, La.) for BorgWarner, Inc., and Kuhlman Corp.
Marie R. Yeates (Houston) Kuhlman Electric Corp.
© 2013 Fifth Circuit Civil News, LLC
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