Change In Corporate Ownership Does Not Breach Non-Assignment Clause in Contract
INEOS POLYMERS v. BASF CATALYSTS (January 13, 2009)
In 1992, Amoco Chemical Company (“Amoco”) and Catalyst Resources, Inc. (“CRI”) entered into a long-term supply agreement for polypropylene catalyst. CRI agreed to build a facility for production of the catalyst – Amoco agreed to fund it over time with its purchase commitments. The contract was quite long and detailed. Article 17 was a Right of First Refusal – it provided that neither CRI nor its parent could dispose of CRI or the plant without first giving Amoco a right to purchase. Article 17 did not apply to a disposition to another company wholly owned by CRI’s parent. Article 19 dealt with assignments. It provided that neither party could assign the agreement without the consent of the other. Article 19 permitted an assignment, without consent, by Amoco to any company owned 50% or more by its parent and by CRI to any company owned 100% by its parent. Both companies underwent significant changes over the following fifteen years. Among the many changes on the Amoco side was its sale by its then parent in 2005 to INEOS US Intermediate Holding Company. The company was renamed INEOS Polymers (“INEOS”). Meanwhile, on the CRI side, the assets were sold in 1993 to Mallinckrodt and sold again in 1998 to Engelhard. On both occasions, Amoco waived its Article 17 right of first refusal. In 2006, BASF acquired Engelhard and renamed it BASF Catalysts (“BASF”). INEOS advised BASF and Engelhard that the transaction triggered its Article 17 right of first refusal. BASF disagreed. INEOS brought an action, alleging breach of contract and tortious interference. The district court dismissed the complaint. It held that the sale of Amoco to INEOS was an assignment to a party not owned 50% or more by Amoco’s parent and thus triggered Article 19. INEOS was, therefore, an impermissible assignee of the contract and could not sue to enforce it. INEOS appeals.
In their opinion, Judges Ripple, Evans and Sykes reversed and remanded. In order to affirm the dismissal, the Court began, it must conclude that the plain and unambiguous meaning of Article 19 is that each party was required to get the other party’s consent to any change in control. That it could not do. First, the general rule is that a change in ownership has no effect on a corporation’s contractual obligations and does not constitute an assignment of those obligations. Second, there is nothing in the contract, contrary to BASF’s argument, that contractually modified the general rule. In fact, quite the contrary: a) Article 19 does not even mention change in ownership, b) Article 17, which does explicitly address changes in ownership, would be rendered moot if Article 19 applied to a change in ownership, and c) the contract treats successors and assigns separately – treating every successor as an assign would be inconsistent. The Court could not conclude that the clear and unambiguous terms of the contract led only to the conclusion reached by the district court. The Court noted also that the course of performance of the parties was inconsistent with the district court’s conclusion. Every prior change in ownership was treated by the parties under Article 17, not Article 19. The dismissal of the complaint was error.
