Davis Oil Company v. TS Inc ( 1998 )

REVISED, July 16, 1998
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 97-30408
_______________
DAVIS OIL COMPANY,
Plaintiff-Appellant,
VERSUS
TS, INC.,
Defendant-Appellee.
_________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
_________________________
June 26, 1998
Before JONES and SMITH, Circuit Judges, and SHAW,* District Judge.
JERRY E. SMITH, Circuit Judge:
Davis Oil Company (“Davis Oil”) brought this Louisiana
diversity suit seeking recovery of cleanup costs for an abandoned
oil lease. Finding error, we reverse and render judgment for the
plaintiff.
*
District Judge of the Western District of Louisiana, sitting by
designation.
I.
A.
The State of Louisiana granted Davis Oil an oil and gas lease
for a certain portion of state land in 1976. State Lease 7027
contains a covenant by Davis Oil to clean and cap the area at the
expiration of the lease term. By its terms, the lease would
terminate automatically three months after production from the
wells on the tract ceased.
In 1981, Davis Oil assigned 92.5% of the lease to HPC, Inc.
(“HPC”), a subsidiary of Hiram-Walker-Gooderham-Worts, Ltd.
(“HW-GW”). Davis Oil assigned the other 7.5% to ENI Oil & Gas
Drilling Program 1976-A (“ENI”). The state mineral board approved
the change in operator from Davis Oil to HPC.1
Davis Oil and HPC entered into a Purchase Agreement regarding
State Lease 7027. This contract contains a clause in which HPC
consents to be responsible for Davis Oil's obligations under the
lease.2 It is this clause that forms the basis for Davis Oil's
1
State acknowledgment of operator change did not relieve Davis Oil of its
cleanup obligations under the lease.
2
The clause specifically reads:
Section 2.14 Assumption of Certain Obligations. Subject to the
other provisions hereof, Buyer [HPC] agrees to assume and will pay,
perform and discharge all obligations of Seller [Davis Oil] relating
to the Properties to the extent such obligations (a) are
attributable to the Properties, and (b) attributable to any time or
period of time after the Effective Time, and (c) arise out of
legally binding obligations to which the Properties are shown to be
subject in the documents pursuant to which conveyances are made to
Buyer hereunder, and (d) which are not the subjects of Title Defects
(continued...)
2
suit against the successor to HPC's oil and gas assetsSSTS, Inc.
HPC subsequently assigned its portion of the lease to its
subsidiary, Home Petroleum Company. The change in operator was
again approved by the state mineral board. In 1982, Home Petroleum
Company and ENI assigned their respective interests to Davis Fuel,
Inc. (an entity not affiliated with Davis Oil). Again, the state
mineral board approved the change in operator. Davis Fuel, Inc.,
subsequently assigned its interest in the lease to Spartan
Minerals, Inc. (“Spartan”), and the state mineral board approved
the operator change. Spartan thereafter apportioned out its
ownership of the lease while retaining its operator rights. In
June 1985, production from the wells on the tract ceased, thereby
triggering an expiration of the lease in September 1985.
Spartan failed to cap the wells or clean up the site when the
lease expired. In 1992, the State of Louisiana summoned all listed
operators3 to a hearing to determine which should pay for cleanup.
(...continued)
or breaches of any representation or warranty of Seller hereunder.
Notwithstanding the foregoing, Buyer shall take title to the
Properties subject only to such matters that relate specifically to
the Properties and such matters shall not include any contractual
arrangements personal to the Seller or any documents evidencing or
securing any indebtedness of the Seller or of any predecessor in
title to the Seller . . . .
Davis Oil Co. v. TS, Inc., 962 F. Supp. 872, 885-86 (E.D. La. 1997) (quoting the
Purchase Agreement).
3
These included Davis Oil, HPC, Davis Fuel, Inc., and Spartan.
3
Only Davis Oil appeared.4 Thereafter, the state assessed Davis Oil
with the entire cleanup cost. Davis Oil now seeks to enforce its
Purchase Agreement with HPC by means of this suit against the
successor to HPC's oil and gas assets, TS, Inc.5
B.
In 1988, TS, Inc., assumed HPC's assets and certain of its
obligations as a result of a larger arrangement between both
companies' parents (thereby becoming, for our purposes,
“TS/Home”SSsee note 7 below). HPC was a subsidiary of HW-GW,
which, in turn, was a subsidiary of Hiram Walker Resources (“HR”),
a Canadian liquor company.
TS, Inc., is a subsidiary of Gulf Canada Corporation (“Gulf
Canada”), which bought HR and made it one of its subsidiaries. As
part of its restructuring following the acquisition of HR, Gulf
Canada wished to divest HR of HW-GW. Gulf Canada, therefore, sold
HW-GW to Allied-Lyons, PLC (“Allied-Lyons”), which, however, was
interested only in the liquor businessesSSand not the oil and gas
businessesSSof HW-GW and its subsidiary, HPC, and HPC's subsidiary,
Home Petroleum Company.
4
HPC was dissolved after its asset sale to TS, Inc. Davis Fuel, Inc., and
Spartan are otherwise defunct or insolvent.
5
To recover, Davis Oil must show that TS, Inc., assumed HPC's Purchase
Agreement obligations pursuant to the assumption agreements between TS, Inc., and
HPC. The relevant agreements concerning the assumption are the Option Agreement,
the Memorandum of Understanding, and the Sale Agreement. These are discussed
more fully below. See infra parts III-VI.
4
Consequently, as part of its deal to sell HW-GW, Gulf Canada
gave Allied-Lyons an irrevocable put option in the form of the
Option Agreement. Within a certain amount of time after Allied-
Lyons acquired HW-GW, it could sell the oil and gas businesses of
HPC and of HPC's subsidiaries back to Gulf Canada or to Gulf
Canada's designated subsidiary.
Before the time to exercise the option had expired, Allied-
Lyons and Gulf Canada entered into a “Memorandum of Understanding”
that served to notify Gulf Canada that Allied-Lyons was exercising
its option. The Memorandum of Understanding designates TS, Inc.,
as the Gulf Canada subsidiary to assume HPC's oil and gas
businesses.
TS, Inc., and HPC thereafter, entered into a Sale Agreement.6
When it assumed HPC's oil and gas businesses, TS, Inc., changed its
name to Home Petroleum Company. A few years later, it returned to
the name TS, Inc.7
C.
The parties submitted to the district court a stipulated
record with their trial briefs. The district court granted
judgment for the defendant and issued an opinion containing
6
To facilitate the sale, HPC merged with its subsidiary, Home Petroleum
Company, contemporaneously with this transaction; HPC was the surviving entity.
7
For ease of explanation, we will refer to the company that assumed the
assets of HPC as “TS/Home” rather than TS, Inc., or Home Petroleum Company.
5
findings of fact and conclusions of law. See Davis Oil Co. v. TS,
Inc., 962 F. Supp. 872 (E.D. La. 1997).
II.
“[C]onstruction of a written instrument is normally a question
of law and findings and conclusions of the trial court are not
binding on the appellate court.” Rutgers, State Univ. v. Martin
Woodlands Gas Co., 974 F.2d 659, 661 (5th Cir. 1992) (citation
omitted). We review the district court's factual findings for
clear error. See id.
“Whether there is a 'plain meaning' to a contract or whether
an ambiguity exists is a legal question also subject to de novo
interpretation.” See Lloyds of London v. Transcontinental Gas Pipe
Line Corp., 101 F.3d 425, 429 (5th Cir. 1996) (citation omitted).
“Under Louisiana law, a contract is ambiguous when it is uncertain
as to the parties' intentions and susceptible to more than one
reasonable meaning under the circumstances and after applying
established rules of construction.” Id. (citation omitted). Once
the district court considers parol evidence, we review its factual
findings based thereon for clear error. See American Druggists
Ins. Co. v. Henry Contracting, Inc., 505 So. 2d 734, 737 (La. App.
3d Cir.), writ denied, 511 So. 2d 1156 (La. 1987).
III.
6
Davis Oil seeks to enforce HPC's lease cleanup obligations
against HPC's successor, TS/Home. To do so, Davis Oil must show
that the relevant assumption agreements between HPC and TS/Home
made TS/Home liable to Davis Oil for the State Lease 7027
obligations for which HPC was responsible under the Purchase
Agreement.
As a threshold matter, TS/Home argues that even if it is
responsible for HPC's Purchase Agreement obligations, the choice of
law clause in the Option Agreement8 between the parent companies of
HPC and TS/Home prevents Davis Oil from suing TS/Home directly,
rather than suing HPC and then making HPC seek recovery from
TS/Home. TS/Home represents that Ontario law, the law adopted in
the Option Agreement, requires strict privity for suits to enforce
contracts. Intended third-party beneficiaries are unable to sue to
enforce a contract if they are not parties to the original
agreement.
Davis Oil was not a party to the assumption agreements between
HPC and TS/Home and is thus only a third-party beneficiary of HPC's
delegation9 of its State Lease 7027 obligations to TS/Home.
8
The Option Agreement is the agreement in which Gulf Canada granted
Allied-Lyons the option to sell HPC's oil and gas assets and obligations to Gulf
Canada.
9
An explanation of our terminology might be helpful: “At the outset, it
is vital to distinguish the assignment of rights from the delegation of
performance of duties. An obligee's transfer of a contract right is known as an
assignment of the right. . . . An obligor's empowering of another to perform the
obligor's duty is known as a delegation of the performance of that duty.”
FARNSWORTH ON CONTRACTS § 11.1, at 778 (2d ed. 1990) (emphasis in original).
7
Arguing that a party's contractual choice of law binds an intended
beneficiary as well as the parties, see Barzda v. Quality Courts
Motel, Inc., 386 F.2d 417, 418 (5th Cir. 1967) (per curiam)
(construing Florida law), TS/Home maintains that we should dismiss
this action.
A.
Our research reveals that TS/Home's representations about
Ontario's privity requirement may not be entirely representative of
the modern view that the Ontario courts are taking of the issue.
Although Ontario courts continue to adhere strictly to the common
law privity of contract requirement, we have found that some have
recently begun to carve more exceptions to that ruleSSincluding one
for third-party beneficiaries of contract.
The General Division of the Ontario Court recently cited a
case of the Supreme Court of Canada for the following proposition:
The common law rule of privity of contract provides that
a contract cannot confer rights or impose obligations on
anyone except the parties to it. However, the rule is
relaxed in appropriate circumstances, including that of
third-party beneficiaries. London Drugs Ltd. v. Kuehne
& Nagel Int'l Ltd. [1992] 3 SCR 299 [Can. Supr. Ct.].
Evanov v. Burlington Broad. Inc., 1997 Ont. C.J. LEXIS 964 (Ont.
Gen. Div.). If the emerging Ontario law indeed would permit
plaintiff's suit in this instance, then the choice of law issue
becomes moot. Ontario law and Louisiana law would not be in
conflict and thus we could proceed to employ the forum's law. See
8
infra note 14.
B.
Even assuming that Ontario law does require strict privity of
contract for this third-party beneficiary, Gulf Canada and Allied-
Lyons did not intend, by their stipulation of Ontario law in the
Option Agreement, for that choice of law to apply to the transfer
of HPC's assets and liabilities. TS/Home argues that Ontario law
controls the Sale Agreement because, in its view, the Option
Agreement adopts Ontario law as the governing law for the
interpretation of all of the transfer agreements. In our view,
however, the parties meant their choice of law solely to govern the
manner in which the option was exercised and construed.10
The Option Agreement is a contract that bound Gulf Canada, a
Canadian corporation, headquartered in Toronto, Ontario, to buy the
oil and gas businesses of HPC. That agreement required HPC to
notify Gulf Canada by a written instrument delivered to Gulf Canada
in Toronto.
Logically, Gulf CanadaSSthe party granting the optionSSwanted
to make sure that it knew how that option would be exercised by the
option holder. Because of the great differences in laws among
jurisdictions concerning the construction of option contracts, the
10
Note that unlike other provisions in the Option Agreement, the choice
of law provision appears only in that agreement and is not repeated in the later
Memorandum of Understanding or in the Sale AgreementSSthe two documents actually
setting forth the details of the asset and obligation transfer.
9
parties likely intended to increase certainty by choosing the local
law of the option makerSSGulf Canada.
The nexus with Ontario apparent in the Option Agreement does
not also appear to exist in the Sale Agreement. In the latter
agreement, HPC, a Delaware Corporation headquartered in Denver,
Colorado, sold its oil and gas obligations to TS, Inc., a Georgia
Corporation. The assets and obligations transferred were located
in both the United States and Canada. There is no apparent
justification to find that the parties wanted Ontario law to govern
this transfer aspect of their agreement.
Even if HPC and TS/Home intended Ontario law to govern the
transfer part of their dealSSin addition to how the option would be
exercisedSSthe parties do not appear to have meant that choice of
law to adopt a privity requirement. It would be peculiar if the
parties effected the purpose of the Option AgreementSSHW-GW's clean
break from the oil and gas businessesSSby requiring HPC (HW-GW's
subsidiary) to stand in as the defendant for any and all failures
of TS/Home to perform its obligations to HPC's oil and gas
obligees.11 This argument is especially weak given the fact that
HPC was dissolved soon after the asset sale.
If Ontario law does not govern this aspect of the transfer
11
HPC would then have to seek reimbursement from TS/Home under the
assumption agreements. It is still true that unless HPC obtained novations from
its obligees, it too could be held liable for any and all defaults by TS/Home.
Without allowing obligees, as third party beneficiaries, to sue TS/Home directly,
however, suing HPC would be the only avenue for such suits.
10
agreements, we might wonder which jurisdiction's law does apply.
We do not need to conduct a conflict of laws analysis, however,
because all of the possible jurisdictions whose laws might apply12
do not require the (assumed) strict privity of contract of
Ontario.13 There being no conflict of laws with the forum's laws,
we can proceed to apply Louisiana law.14
IV.
A.
1.
TS/Home argues that even under Louisiana law, an implicit
assumption of HPC's indemnification obligation is not sufficient
for the obligee to bring an action against the delegate under
LA. CIV. CODE art. 1821. TS/Home maintains that because we have held
that an indemnification agreement is a personal obligation under
12
These include Colorado, Delaware, Georgia, and Louisiana.
13
See, e.g., LA. CIV. CODE ANN. art. 1821; Montezuma Plumbing & Heating,
Inc. v. Housing Auth., 651 P.2d 426, 428 (Colo. Ct. App. 1982); Pierce v.
International Ins. Co., 671 A.2d 1361, 1364 (Del. 1996); Lincoln Land Co. v.
Palfery, 203 S.E.2d 597, 605 (Ga. Ct. App. 1973).
Although, in the final analysis, there may be yet another state that might
be found to have a more significant relationship with the transfer agreements
between HPC and TS/Home, mostSSif not allSSAmerican jurisdictions have long since
abandoned privity as an absolute bar to third-party beneficiaries suing on a
contract. See FARNSWORTH ON CONTRACTS § 11.11, at 831 (2d ed. 1990).
14
See LA CIV. CODE ANN. art. 3537 (West 1994). Under art. 3537, “an issue
of conventional obligations is governed by the law of the state whose policies
would be most seriously impaired if its laws were not applied to that issue.”
In this case, however, because all of the interested states' laws are fairly
similar, none would be “most seriously impaired” if not applied. Therefore, we
can apply the forum law without fear of conflict.
11
Louisiana law, see Joslyn Mfg. Co. v. Koppers Co., Inc., 40 F.3d
750, 756 (5th Cir. 1994), the assumption of the obligation here
must be made with a specific contractual provision. See id.
Louisiana law is settled that for there to be a
stipulation pour autrui there must be not only a third-
party advantage, but the benefit derived from the
contract by the third party may not merely be incidental
to the contract. Rather, the third-party benefit must
form the condition or the consideration of the contract
in order for it to be a stipulation pour autrui.
Moreover, a stipulation pour autrui will be found only
when the contract clearly contemplates the benefit to the
third person as its condition or consideration.15
TS/Home maintains that this “clearly contemplates” language means
that the assumption must be made by an explicit reference to the
assumed obligation in the written assumption agreement.
As the district court correctly concluded, and assuming that
this agreement fits within the confines of the Joslyn rule,
Louisiana law does not go so far as to require explicit reference
15
Chevron, U.S.A., Inc. v. Traillour Oil Co., 987 F.2d 1138, 1147 (5th
Cir. 1993) (quoting New Orleans Pub. Serv., Inc. v. United Gas Pipe Line Co.,
732 F.2d 452, 467 (5th Cir. 1984) (en banc) (internal quotations and citations
omitted) (“NOPSI”)).
In NOPSI, we stated the relevant rule for understanding the instant case:
Where the promisor's performance is to be made to, and is subject to
the control of, the promisee, the Louisiana courts have refused to
find a stipulation pour autrui despite the fact that the promisor
and promisee may have contemplated that the promisor's performance
would as a practical matter enable or facilitate the promisee's
performance of its obligations to a third party.
NOPSI, 732 F.2d at 468 (citations omitted) (emphasis added). In the present
case, the delegation was not “to be made to” and was not “subject to the control
of the promisee.” Quite the contrary. Unlike, for example, the letter of credit
contract at issue in Chevron, here, HPC, as promisee, exercised no control once
the agreement was signed; it could not have, because it ceased to exist.
12
to the individual, assumed obligation.16 Rather, state law requires
that it must be apparent from the face of the document assuming the
obligation that “the contract clearly contemplates the benefit to
the third person as its condition or consideration.” Chevron,
987 F.2d at 1147. That is, the party must be an intended third-
party beneficiary, rather than an incidental one. Consequently, we
must look to the language of the assumption agreements between
TS/Home and HPC to determine whether these parties “clearly
contemplated,” as the basis for their bargain, TS/Home's assumption
of HPC's cleanup obligations under the Purchase Agreement.
2.
Before turning to the language of the contracts, however, we
respond to the serious charges leveled by the dissent. We conclude
below that, under our caselaw construing art. 1821, the relevant
portions of this labyrinth of contractsSSthe Sale Agreement, which
refers to the Memorandum of Understanding, which in turn refers to
the Option AgreementSS“clearly contemplate” TS/Home's assumption of
HPC's obligation to clean up the site.17 Thus, we find TS/Home
16
See Davis Oil, 962 F. Supp. at 882 (“[T]he reasoning of Chevron and
Joslyn simply cannot support the sweeping prohibition against general assumptions
that defendant advocates.”).
17
As the district court noted, there is also a subsidiary question whether
§ 2.14 of the Purchase Agreement between Davis Oil and HPC “clearly contemplated”
HPC's assumption of Davis Oil's obligation to the state for cleanup costs. For
the reasons stated by the district court, we agree that HPC did assume Davis
Oil's cleanup obligations under State Lease 7027 in the Purchase Agreement. See
(continued...)
13
directly liable to Davis Oil for HPC's cleanup obligation.
The dissent stridently disagrees, as it finds this case
“indistinguishable” from Chevron. Thus, the best place to start,
it would seem, is with Chevron itself.
In that case, Traillour had an obligation to Chevron and
secured a “side agreement” with the Rocky Mountain investors by
which the investors promised Traillour a letter of credit for it to
fulfill its obligation to Chevron. In order to seek satisfaction
of the obligation from Traillour, Chevron attempted to bypass
Traillour by suing the Rocky Mountain investors directly. We
rejected Chevron's attempt to do so, stating:
We think that the district court, by finding an
unambiguous intent to confer a benefit on Chevron,
misread the purpose of the side agreement between Rocky
Mountain and Traillour. From the face of the agreement,
there is no clear manifestation of an intent by Rocky
Mountain to confer a benefit on Chevron. Instead, the
side agreement indicates that the letter of credit Rocky
Mountain agreed to obtain was to be “made available for
the benefit of Traillour at the closing of the purchase
of the Bayou of Couba Field.” It is undisputed that
Traillour, at the time it entered the side agreement with
Rocky Mountain, had agreed to keep in force a letter of
credit in favor of Chevron; however, it is also
undisputed that Chevron, in the letter accepting
Traillour's offer to purchase the Bayou Couba lease,
expressly conditioned the sale on Traillour and Marsh's
“acquisition of a $2,000,000.00 performance bond or
irrevocable letter of credit." Therefore, Rocky
Mountain's agreement to obtain the initial letter of
credit helped Traillour fulfill a condition precedent to
Chevron's obligation to assign the Bayou Couba lease.
Finally, the recital in the side agreement, on which the
(...continued)
Davis Oil, 962 F. Supp. at 885-87.
14
district court placed heavy reliance in finding an intent
to benefit Chevron, simply does not reveal a clear intent
to benefit Chevron. The recital, like the provisions of
the side agreement itself, reveals Rocky Mountain's
intent to help Traillour close the deal with Chevron.
Any benefit derived by Chevron from this side agreement
was, in our view, merely incidental.
Chevron, 987 F.2d at 1147-48 (some emphasis added).
Chevron involved a contract in which the promisor provided a
continuing and directed benefit to the promisee, while not
providing such a benefit to the third-party beneficiary. We quite
rationally used the above-mentioned factors to determine that the
promisor and promisee expected that the contractual obligations
would remain between the two. See id. (noting that the contract
did not intend to confer continuing benefits on the third-party
beneficiary).
The instant contract, by contrast, is noticeably different
from the one in Chevron. The instant parties inserted no
comparable language that this contract is “for the benefit of HPC.”
Although HPC undoubtedly benefited from the assumption agreement,
its benefit was non-exclusive and finite.
But there is a more important distinction. Here, the benefit
to HPC's oil and gas creditors is continuous and contemplated:
TS/Home, through its assumptions, undertook to step into HPC's
shoes in running its oil and gas business. Indeed, TS/Home changed
its name to HPC and undertook to be HPC itself. Far from being
“indistinguishable” from Chevron then, this case appears to be
15
terra nova.
The argument advanced by TS/Home and the dissent for the
extension of the stipulation pour autrui argument beyond that
outlined in Chevron is logically flawed; it proves too much under
the facts of this case. Their argument is as follows: Even if the
defendant did assume this obligation, it was merely an incidental
assumption, as it was not assumed through explicit contractual
language. Therefore, Davis Oil must recover from HPC and not from
TS/Home directly.
Although superficially attractive, this argument does not
logically square with the structure of the deal between TS/Home and
HPC. The reasoning of TS/Home and the dissent also applies to all
of the day-to-day obligations assumed through the general, rather
than explicit, contractual language. Therefore, under this
reasoning, TS/Home (even though it is running HPC's oil and gas
businesses) apparently cannot be sued by most, if any, creditors of
HPC's assumed oil and gas businesses. A consequence of this is
that Allied-Lyons must have agreed that it, or one of its
subsidiaries, would be a necessary stand-in to HPC's obligees when
TS/Home failed to meet its assumed obligations.
That is peculiar, though, in light of the only reason for the
deal in the first place: Allied-Lyons intendedSSthrough its having
and use of an irrevocable put optionSSto rid itself entirely of all
of HPC's oil and gas business. The put option, after all, was
16
meant to sell back to Gulf Canada (through TS/Home) the obligations
it already owned before the larger deal between the two parents
took place. Indeed, far from an unanticipated obligation for the
defendant, this obligation was once owned by the defendant's
parent, Gulf Canada, then sold to Allied-Lyons with an irrevocable
put option to sell it back to Gulf Canada. Accordingly, it makes
more sense, under the structure of the deal, to conclude that
TS/Home intended to make itself directly liable to obligees on
HPC's obligations it re-assumed.
Although we can readily understand why TS/Home chooses to make
this untenable argument, the dissent's adoption of it is less easy
to comprehend. The dissent's apparent failure to understand the
larger components of the deal between Allied-Lyons and Gulf Canada
reflects an evident concern about the development of the law of
third-party beneficiaries.
The dissent apparently worries about (1) the equity to
defendants in environmental cleanups and (2) the possibility that
our ruling will open the flood gates to new liability actions in
this area. Although we find these concerns commendable, we cannot
accept the dissent's desire to use its desired policy results “[to]
work[] backward from [its] desired 'equitable' result to the legal
principle that achieves [its] goal.”18 Dissent at 1. In sum,
18
As for the dissent's “parade of horribles” (e.g., tax collectors,
“roustabouts” and the like), its fears might have been allayed had it looked
beyond the language of the Sale Agreement to the limiting language in the
(continued...)
17
because TS/Home agreed to assume this obligation to Davis Oil, it
must be accountable for it now.
B.
We now turn to the language of the assumption agreements at
issue. In the Sale Agreement, TS/Home assumes four types of HPC's
liabilities:
And for the same [$100.00 and other good and
valuable] consideration, Assignee [TS/Home] hereby
assumes, subject to the Option Agreement and Memorandum
of Understanding, the following obligations and
liabilities:
1. All obligations of Assignor to deliver oil, gas or
other minerals pursuant to any balancing agreement,
gas purchase agreement or other agreement to
compensate any party for any previous over-
production by Assignor or for any “take or pay” or
other advance payment;
2. All obligations and liabilities of Assignor at the
Effective Date that have arisen in the ordinary
course of its business;
3. All obligations to past or present employees of
Assignor in respect of accrued pay and salaries,
commissions, vacation and holiday pay, workman's
compensation levies, statutory and other
withholding deductions, other payroll deductions
including union dues and pension plan
contributions; and
4. All liabilities and obligations under equipment
(including, without limitation, data processing) or
real property leases or licenses or contracts
therein entered into by HPC in the ordinary course
of business.
(...continued)
Memorandum of Understanding and in the Option Agreement to which the Sale
Agreement refers and to the Purchase Agreement.
18
Sale Agreement (emphasis added), cited in Davis Oil, 962 F. Supp.
at 882. The district court correctly found that HPC's cleanup
obligations under the Purchase Agreement arose in the ordinary
course of business before the effective date, thus falling within
the scope of paragraph 2.19
The district court, however, found that TS/Home had not
assumed HPC's cleanup obligations, because the obligations fell
within one of the Sale Agreement's exceptions to the aforementioned
assumed obligations. The exclusionary language at issue reads as
follows:
Except to the extent expressly assumed or required
to be assumed pursuant to this Assignment, the Option
Agreement or the Memorandum of Understanding, the
liabilities assumed by Assignee hereunder shall not
include, and Assignee shall not assume or in any way be
liable or responsible for (a) any liability or obligation
of any kind incurred by or on behalf of Assignor after
the Effective Date (b) any liability or obligation which
19
For essentially the same reasons outlined by the district court, see
Davis Oil, 962 F. Supp. at 884-85, we agree that this obligation arose in the
ordinary course of business prior to the closing date of December 15, 1988.
State Lease 7027 provided for its own expiration three months after oil and gas
production from the leased tract ceased. Once the lease expired, the obligation
to cap the wells and clean the site “arose.” No demand was required for the
obligation to accrue.
Production ceased on the land covered by State Lease 7027 in June 1985.
As a result, the lease automatically expired in September 1985. At that time,
Davis Oil's contractual obligation under the lease agreement became due. Under
the Purchase Agreement transferring Davis Oil's interest in the lease to HPC, HPC
also became obliged to clean up the site at that time.
In the district court, Davis Oil also argued that paragraph 4 of the Sale
Agreement assumed this obligation because it was an obligation from a “real
property lease.” The district court rejected this contention, stating that “it
is evident from other provisions in the Sale Agreement that when the parties
referred to oil and gas leases they used the term 'oil and gas leases.'” Davis
Oil, 962 F. Supp. at 883. Davis Oil does not raise this argument on appeal and
we, as a consequence, do not address it.
19
may in the future be asserted against Assignee arising
out of, resulting from or in connection with, Assignor's
operation of its business and (c) any liability or
obligation of any kind to any shareholder of Assignor to
any corporation, entity or person related to or
affiliated with such a shareholder.
Sale Agreement (emphasis added), cited in Davis Oil, 962 F. Supp.
at 887. Specifically, the district court held that the cleanup
obligations did not meet exception (b) because, although they arose
prior to December 15, 1988, they were not asserted against TS/Home
until approximately four years after the closing date.20 See Davis
Oil, 962 F. Supp. at 888.
The exclusionary language in the Sale Agreement starts with
the phrase “Except to the extent expressly assumed or required to
be assumed pursuant to this Assignment, the Option Agreement or the
Memorandum of Understanding . . . .” Sale Agreement, cited in
Davis Oil, 962 F. Supp. at 887. Although we agree with the
district court's interpretation that the Option Agreement does not
require assumption, the court's interpretation of the Memorandum of
Understanding is flawed, and that document does indeed require
TS/Home's assumption of HPC's obligation to Davis Oil.
Accordingly, the exceptions of the Sale Agreement are not
applicable.
20
We need not consider the propriety of the district court's reading of
the exclusionary prongs in the Sale Agreement, because we find this obligation
expressly assumed by the Memorandum of Understanding. See infra part VI.
20
V.
Davis Oil argues that the Option Agreement plainly
contemplates TS/Home's acquisition of this liability. It points to
the following definition of “Oil and Gas Assets and Liabilities”
that the Option Agreement adopts:
[T]hose assets and liabilities of HW-GW and its
subsidiaries (excluding any Consolidated Indebtedness but
including, without limitation, assets and liabilities of
HPC Inc.) habitually designated as part of the oil and
gas division of such corporations, which assets and
liabilities as at August 31, 1985 were those set forth in
Schedule D annexed hereto.21
Davis Oil maintains that the emphasized language shows that Allied-
Lyons intended to rid itself of all oil and gas assets and
liabilities, notwithstanding what the specific provisions of the
Memorandum of Understanding and the Sale Agreement might state.
Because, however, the Option Agreement only outlines the
possible range of things Allied-Lyons could sell to Gulf Canada, we
must look to the Memorandum of Understanding and the Sale Agreement
to determine what the parties actually did transfer. By itself,
the Option Agreement determines only the frontier. The Memorandum
of Understanding and the Sale Agreement, by contrast, hammer out
the details of the eventual transfer.
21
Supplemental Share Purchase Agreement (emphasis added). The Option
Agreement adopts its definition of Oil and Gas Assets and Liabilities from the
“Restated Agreement,” which includes the Supplemental Share Purchase Agreement.
The aforementioned definition of Oil and Gas Assets in the Supplemental Share
Purchase Agreement also contains a reference to “Schedule D.” That appendix,
however, contains only aggregate monetary estimates of the values of the assets
and liabilities to be assumed.
21
VI.
Davis Oil contends that the Memorandum of Understanding shows
that the parties meant to have Gulf CanadaSSthrough TS/HomeSSassume
the entire scope of the assets and liabilities defined in the
Option Agreement. Specifically, Davis Oil points to the following
in the Memorandum of Understanding:
Without limiting the provisions of the [Option]
Agreement or the foregoing provisions hereof but subject
as hereinafter provided in this Section (m), the
following liabilities shall be part of the Oil and Gas
Assets and Liabilities:
(i) except as contemplated herein, all obligations
and liabilities of HPC and its subsidiaries at
Closing, whether or not contingent, that have
arisen in the ordinary course of the oil and
gas business of HPC or any of its subsidiaries
carried on with the Oil and Gas Assets and
Liabilities;
* * *
(iv) except as contemplated herein, all liabilities
and obligations accruing or falling due after
closing, whether or not contingent, in
relation to the oil and gas business
theretofore conducted by HPC or any of its
subsidiaries carried on with the Oil and Gas
Assets and Liabilities.
Memorandum of Understanding (emphasis added), cited in part in
Davis Oil, 962 F. Supp. at 888-89.
A.
The district court found that the above-quoted passage from
the Memorandum of Understanding requires that the liabilities
22
assumed be tied to an asset forming part of the “Oil and Gas Assets
and Liabilities” at closing. Reading the words “business . . .
carried on with the Oil and Gas Assets and Liabilities” as
“business carried on with the assets forming part of the Oil and
Gas Assets and Liabilities,” Davis Oil, 962 F. Supp. at 889
(emphasis added), the court concluded that the obligation under
State Lease 7027 could not possibly have been assumed. HPC had
sold its interests in State Lease 7027 well before the closing
date; HPC's obligations to Davis Oil with regard to State Lease
7027 were not tied to an identifiable asset forming part of the Oil
and Gas Assets and Liabilities at closing. Thus, HPC's obligation
to Davis Oil under the Purchase Agreement fell outside the
obligations that TS/Home assumed in the Memorandum of
Understanding.22
The district court dismissed the idea that “the obligation in
question relates to business carried on with the liabilities
constituting the Oil and Gas Assets and Liabilities,” because the
argument was “circular and le[d] nowhere.” Davis Oil, 962 F. Supp.
at 889. “In essence, the argument would be that the obligation in
question falls within the subsection (i) or (iv) because it meets
the requirements of that subsection if the last phrase is ignored.”
22
Because we decline to adopt the district court's reading of a presently
existing asset requirement in § (m) of the Memorandum of Understanding, we need
not address Davis Oil's contention that because of a defective title transfer,
HPC still legally owned its interest in State Lease 7027 on December 15, 1988.
Accordingly, we express no view on the matter.
23
Id. The court's reasoning is troublesome for the reasons that we
outline below.
B.
The district court's reading of a presently existing asset
requirement into § (m)(i) and (m)(iv) is strained in light of the
language of the Option AgreementSSan agreement to which § (m)
specifically refers.23 Even though the court had reason to be
suspicious of Davis Oil's reading of the phrase “business . . .
carried on with the Oil and Gas Assets and Liabilities,” its own
alternative similarly lacks force.
At bottom, the district court reads into the contract a
requirement that the liabilities assumed in this section be tied to
an identifiable asset assumed at closing. This requirement has the
effect of excluding a great deal of general oil and gas
obligationsSSones that the spirit of the transfer agreements would
seem to encompass.24
23
The district court never discussed the phrase “without limiting the
provisions of the [Option Agreement]” that appears before the specific exclusions
mentioned thereafter. As Davis Oil correctly notes, this phrase is important,
because it shows that the parties intended the Option Agreement's expansive
definition of Oil and Gas Assets and Liabilities to play a role in the Memorandum
of Understanding. Thus, when reading the more specific passages of § (m)(i) and
(m)(iv), we should keep in mind the language initially adopted by the Option
Agreement.
24
The district court's insertion of a “related asset” requirement seems
especially tenuous when, in another part of the same subsection of the Memorandum
of Understanding, the drafters used that phrase when they meant to include such
a requirement:
(continued...)
24
We note that it was HR that originally owned HPC and Home
Petroleum Company through HR's subsidiary, HW-GW. When HR was
acquired by Gulf Canada, the deal was to sell HW-GW but to retain
HW-GW's oil and gas holdings. Thus, there is good reason to
believe that TS/HomeSSthe designated subsidiary of Gulf CanadaSSdid
in fact intend to assume HPC's general oil and gas obliga-
tionsSSincluding those untied to a “related asset.” These
obligations were originally Gulf Canada'sSSby way of HRSSto begin
with. As a basis for the bargain of selling HW-GW, Gulf Canada
agreed to keep its oil and gas obligations.
C.
The better view of the phrase “Oil and Gas Assets and
Liabilities” in § (m) is to read it in conjunction with the Option
Agreement. After all, this section of the Memorandum of
Understanding starts with the admonition: “Without limiting the
(...continued)
For greater certainty, the following liabilities of HPC shall
not constitute a portion of the Oil and Gas Assets and Liabilities
and shall not be assumed by Gulf:
(1) liabilities to any affiliate of HPC (other than to a
subsidiary of HPC where the related asset is also included as
part of the Oil and Gas Assets and Liabilities and other than
liabilities to affiliates arising in connection with bona fide
transactions entered into in the ordinary course of the oil
and gas business carried on by HPC or its subsidiaries with
the Oil and Gas Assets and Liabilities) . . . .
Memorandum of Understanding, § (m) (emphasis added). Note that the contract
drafters included the “related asset” requirement explicitly in one instance, and
then immediately afterwardSSin the same sentenceSSdid not; instead the drafters
used the same phrasing that they used in subsections (i) and (iv).
25
provisions of the [Option] Agreement . . . .” Accordingly, if we
insert the Option Agreement's definition of “Oil and Gas Assets and
Liabilities” for that phrase in § (m), we reach a more congruent
result.
Here is how the relevant subsections of § (m) would read if we
inserted the Option Agreement's definition of “Oil and Gas Assets
and Liabilities” for that phrase:
Without limiting the provisions of the [Option]
Agreement or the foregoing provisions hereof but subject
as hereinafter provided in this Section (m), the
following liabilities shall be part of the Oil and Gas
Assets and Liabilities:
(i) except as contemplated herein, all obligations
and liabilities of HPC and its subsidiaries at
Closing, whether or not contingent, that have
arisen in the ordinary course of the oil and
gas business of HPC or any of its subsidiaries
carried on with those assets . . . habitually
designated as part of the oil and gas division
of such corporations.
* * *
(iv) except as contemplated herein, all liabilities
and obligations accruing or falling due after
closing, whether or not contingent, in
relation to the oil and gas business
theretofore conducted by HPC or any of its
subsidiaries carried on with those assets . .
. habitually designated as part of the oil and
gas division of such corporations.
The use of the Option Agreement's “assets . . . habitually
designated as part of the oil and gas division of such
corporations” extricates us from the vicious circle of trying to
define the liabilities forming the “Oil and Gas Assets and
26
Liabilities” by self-referencing to the assets forming part of the
“Oil and Gas Assets and Liabilities.” Instead, if we use an
external definitionSSwhich seems to adopt a common understanding of
the partiesSSthings start to make more sense.
Under this reading, an assumed liability can outlive an asset.
The liability need only be one incurred with assets thatSSat some
point in timeSSwere “habitually designated as part of the oil and
gas division of” HPC or Home Petroleum Company. HPC's obligations
incurred as a result of its assumption of State Lease 7027 plainly
meet this standard.
VII.
Because the Memorandum of Understanding expressly assumes the
obligation that HPC incurred under the Purchase Agreement, the
exclusions in the Sale Agreement do not apply. The district court
therefore erred in finding that TS/Home did not assume Davis Oil's
cleanup obligation under State Lease 7027. Accordingly, we REVERSE
and RENDER judgment for Davis Oil.
By EDITH H. JONES, Dissenting:
With due respect to the panel majority, I must dissent
from the improbable result in this case. The majority hold,
27
overruling the district court, that TS/Home, which acquired oil and
gas assets of HPC in a transnational corporate reorganization in
1988, also acquired environmental cleanup obligations pertaining to
a lease that HPC had sold to another party in 1982. In other
words, the corporate reorganization transaction somehow revived a
liability that had been shed by HPC for all practical purposes six
years earlier. The majority accomplishes this Phoenix-like
resurrection of liability by misconstruing Louisiana’s law
concerning a stipulation pour autrui, or in the common law, a third
party beneficiary contract.25 The majority cites the applicable law
but evidently does not understand what it means and misconstrues
the application of that law in a recent carefully considered
decision of our own court. See Chevron v. Traillour Oil Co., 987
F.2d 1138 (5th Cir. 1993).
Putting the facts in perspective, it appears that the
majority has worked backward from a desired “equitable” result to
the legal principle that achieves their goal. Davis, the plaintiff
here, acquired State Lease 7027 from Louisiana in 1975 and assigned
its interest in the lease to HPC in 1981.26 Eighteen months later,
HPC conveyed State Lease 7027 to another company. Several
25
See Louisiana Civil Code Art. 1821 (“An obligor and a third
person may agree to an assumption by the latter of an obligation of
the former. To be enforceable by the obligee against the third
person, the agreement must be in writing.”).
26
HPC and Home Petroleum are related entities, but the
intracorporate dealings are unnecessary to relate here.
28
intervening conveyances occurred until in 1985, production from the
lease ceased. The last operator apparently failed to plug and
abandon the wells as required by the terms of the lease.
In 1988, pursuant to a much larger transaction between
Canadian liquor companies, HPC transferred its oil and gas assets
to TS, Inc., which became TS/Home, the target defendant here. HPC
later dissolved.
The state caught up with the status of Lease 7027 in 1991
and began looking for parties to hold liable for the clean-up
costs. The state fastened its gaze on Davis Oil, which naturally
began to seek others in the chain of title who could contribute to
the clean-up costs. HPC no longer existed, and several other
transferees were apparently defunct, so Davis went after TS/Home.
Davis alleged (1) that HPC, Inc. originally had a contractual
obligation to indemnify Davis Oil for plugging and abandoning
operations on State Lease 7027 and (2) that TS/Home assumed HPC’s
obligation to Davis Oil in the assignment transaction that occurred
in 1988. Lacking any direct contractual relationship with TS or
any of the subsequent owners of Lease 7027, Davis has to prove
itself an obligee of the HPC-TS/Home transaction.27
Davis has persuaded the majority that when TS/Home
27
Davis makes no argument against TS/Home founded on § 128 of
the Louisiana Mineral Code. La. Rev. Stat. Ann. § 31:128 (West
1998); see also Chevron, 987 F.2d at 1158 (construing § 128). I
will not speculate on any such claim.
29
acquired hundreds of oil and gas properties in the United States
and Canada from HPC in the 1988 reorganization, it also voluntarily
assumed the obligation to clean up Lease 7027 in Louisiana on a
property that HPC had sold and divested itself of six years
earlier. That any rational business would voluntarily assume such
remote liabilities defies common sense. Not surprisingly, the
imposition of liability under these circumstances also defies
Louisiana’s law. Louisiana does not readily permit a third-party
stranger to a contract to enforce its provisions against one of the
contracting parties. As this court has put it in an en banc
opinion, a third-party beneficiary provision in Louisiana requires
the following: that “the benefit derived form the contract by the
third party may not be merely incidental to the contract;” that
“the third-party benefit must form ‘the condition or consideration’
of the contract in order to be a stipulation pour autrui;” and that
the provision will be found “only when the contract clearly
contemplates the benefit to the third person as its ‘condition or
consideration.’” New Orleans Pub. Serv., Inc. v. United Gas
Pipeline Co., 732 F.2d 452, 467-68 (5th Cir. 1984) (en banc).
Louisiana law requires either that there be an express declaration
of intent to benefit the third party “or an extremely strong
implication.” Id.
Nothing in the contractual provisions laboriously
construed by the majority “clearly contemplates” any benefit to
30
third parties as remote to the corporate reorganization of HPC and
TS/Home as the clean-up costs for wells that had stopped producing
three years after HPC sold them and three years before the
corporate reorganization occurred. This particular obligation
could not have been a known potential claim in the context of the
1988 transaction, because although the wells had stopped producing
in 1985, the state’s claim for environmental cleanup costs was
first asserted in 1991, three years after the transaction here at
issue. Indeed, because HPC had sold its interest in 1982, how
could it possibly have known that, after several intervening
transfers, the wells would cease production without proper plugging
and abandoning three years later?
In a strikingly similar case, this court exhaustively
considered Louisiana’s law of stipulation pour autrui and ruled
against the party in Davis’s position. See Chevron v. Traillour
Oil Co., 987 F.2d 1138 (5th Cir. 1993). Chevron makes it clear
that in Louisiana, a stipulation pour autrui “is never presumed.
Rather, the intent of the contracting parties to stipulate a
benefit in favor of a third party must be made manifestly clear.”
Id. at 1147 (internal citation omitted). In Chevron, the court
held that when Traillour, which purchased Chevron’s interest in an
oil field, re-assigned that interest to Rocky Mountain,
conditioning Rocky Mountain’s performance on providing a letter of
credit (which Chevron required) to secure the plugging and
31
abandoning of the wells, that was not a third-party beneficiary
provision in favor of Chevron. Rocky Mountain executed a contract
to benefit only Traillour, the court held, and this benefit could
not flow back to Chevron directly. The Chevron opinion also holds
that remote investors in the field, who purchased from Traillour
and assumed “all obligations” resulting from their ownership of the
conveyed interests, did not execute a stipulation pour autrui on
behalf of Chevron. Their contract with Traillour did not clearly
contemplate a benefit to Chevron as its condition or consideration.
See id. at 1159-60.28
This analysis appears to me dispositive of the present
situation, where any “intent to benefit” Davis was much more vague
and inspecific than the language Chevron dealt with. There was far
more equity in Chevron’s position than there is in this case,
because Chevron clearly contemplated and sought to avoid the
possibility that Traillour might not be able to bear the costs of
plugging and abandoning the wells. Here, by contrast, neither
TS/Home nor HPC had any conception at the time of the 1988
reorganization either that Lease 7027, which HPC no longer owned,
had ceased production without proper environmental controls or that
28
Neither this case nor Chevron deals expressly with the
liabilities of owners in the lease’s chain of title to the original
lessor for cleanup costs. Any such obligation would be a real
obligation, whereas the intermediate owners’ liability on indemnity
provisions is a personal obligation under Louisiana law. See
Chevron, 987 F.2d at 1149.
32
Davis Oil lurked in the shadows, waiting to pounce on TS/Home after
having been itself mugged by the Lease 7027 plug and abandonment
costs. It is illogical for this later panel to hold that there was
a clear intent to benefit Davis Oil in this case after our court
has concluded that no intent to benefit Chevron existed in the
prior case.
The majority fails to adequately distinguish Chevron, yet
as a prior precedent of this Court construing Louisiana law, it is
dispositive. See, e.g., Batts v. Tow-Motor Forklift Co., 978 F.2d
1386, 1393 (5th Cir. 1992). The majority also fails to deal with
the wealth of Louisiana caselaw, summarized in the accompanying
footnote, that narrowly construes the doctrine of stipulation pour
autrui.29
29
The following is a sample of cases in which either the
Louisiana courts or this court sitting in diversity has examined
Louisiana third party beneficiary law:
Liquid Drill, Inc. v. U.S. Turnkey, 48 F.3d 927 (5th Cir.
1995) (holding that a stipulation pour autrui did not exist even
though a drilling contract provided that the contracting party was
to be “solely responsible and assumes all liability for all
consequences of operations by both parties while on a day work
basis, including results and all other risks or liabilities
incurred in or incident to such operations”); Dartez v. Dixon, 502
So. 2d 163 (La. 1987) (finding stipulation pour autrui where benefit
to third party “was not merely incidental to the agreement but was
a calculated and essential part of the negotiations” between the
parties); Broussard v. Northcott Exploration Co., 481 So. 2d 125
(La. 1986) (holding that mineral lease did not create a stipulation
pour autrui despite the fact that the lessee assumed responsibility
for “all surface damages”); Hargroder v. Columbia Gulf Transmission
Co., 290 So. 2d 874 (La. 1974) (finding stipulation pour autrui only
(continued...)
33
The majority’s rough-and-ready decision to diffuse
liability for clean-up costs may well have consequences far beyond
the incorrect result reached here. As the preceding discussion of
Chevron and Louisiana law demonstrate, contract law generally does
not lightly presuppose that strangers to a contract may enforce the
contract in court. The potential for confusion and inconsistency
ought to be obvious. Suppose, for instance that a local tax
assessor decided, years after HPC had sold its interest in Lease
29
(...continued)
after concluding that the servitude agreement “contain[ed] no
restriction as to beneficiaries”); Andrepont v. Acadia Drilling
Co., 231 So. 2d 347 (La. 1969) (finding stipulation pour autrui
where the contracting parties modified their lease to expand
liability beyond damages to the lessor); Oswalt v. Irby Const. Co.,
424 So. 2d 348, 354 (La. App. 1982) (holding that agreement of
grantee in right-of-way deed, where grantor reserved right to grow
crops in right-of-way, to pay grantor for any future damage to
crops on submittal of bill by grantor, was not stipulation pour
autrui in favor of grantor’s lessee); Logan v. Hollier, 424 So. 2d
1279 (La. Ct. App. 1982) (holding that a stipulation pour autrui
did not exist despite insurance policy language which provided that
when “the amount of ultimate loss becomes certain, the company
will, upon request of the insured, make such payment to claimant on
behalf of the insured”); Crowley v. Hermitage Health & Life Ins.
Co., 391 So. 2d 53 (La. App. 1980) (holding that health and accident
insurance policy in which employer is insured, providing for
benefits in the event of employee work-related injury to be paid to
employer or persons furnishing services to employee, is not
stipulation pour autrui in favor of employee injured on job); HMC
Mgmt. Corp. v. New Orleans Basketball Club, 375 So. 2d 700 (La. Ct.
App. 1979) (holding that lease agreement did not clearly
contemplate any intention to benefit third party “as it was simply
an agreement between two entities for their mutual benefit”); Hertz
Equip. Rental Corp. v. Homer Knost Constr. Co., 273 So. 2d 685 (La.
Ct. App. 1973) (holding that insurance contract did not create a
stipulation pour autrui because it did not “purport to name the
third party as an insured”).
34
7027, that HPC had underpaid local school taxes. Suppose, as
another example, that a roustabout who once worked for HPC on Lease
7027 sues a third-party who seeks contribution from HPC on the
theory that plaintiff’s real injury occurred during his employment
by HPC. Under the majority’s rule, either of these parties could
now sue TS/Home directly, even though no claim had been made before
HPC sold its interest in Lease 7027 or even before the 1988
reorganization.30 Suppose, as another complication, that HPC was
still in business, having sold only its “oil and gas” assets to
TS/Home but retained other properties. Could the plaintiffs still
sue TS/Home? Because the potential liabilities are obviously
endless, and because reasonable expectations of contracting parties
are thwarted when a stranger can sue to “enforce” their deal, no
case in Louisiana construes a general assumption of liabilities
clause in a contract as a stipulation pour autrui.31 I hope this
30
It goes without saying that such plaintiffs could sue HPC.
And if HPC had become defunct without properly accounting for
potential known claims, state law affords remedies, e.g., by means
of fraudulent conveyance law. This case has no such allegations,
and the only question is whether plaintiffs unknown to the
contracting parties will now have two potential defendants.
31
The maxim never say never is useful in law as in life. Thus,
I would not contend that no assumption of liabilities provision in
a complex corporate reorganization or acquisition will ever result
in a stipulation pour autrui, a provision in favor of a third
party. Boilerplate language like that included here, however, is
likely to characterize such provisions and falls far short of
showing that the benefit to a specific third party was contemplated
as part of the transaction’s condition or consideration. See New
Orleans Pub. Serv., 732 F.2d at 467-78.
35
is the last case ever to do so.
36