Wade Clark Mulcahy LLP

In Axiall Corporation v. AllTranstek LLC, the Superior Court of Pennsylvania recent issued an unusual decision affirming a large jury verdict in a commercial contract dispute but rejected an equally large judgment awarding fees to the plaintiff. In that case, commercial chlorine manufacturer Axiall retained AllTranstek to provide railroad tank car fleet management services for Axiall’s transportation of its chlorine. AllTranstek was responsible for inspecting and maintaining the different tank cars. Axiall retained AllTranstek and another company performed repairs to an older car. After the repairs were completed, the older tank car ruptured, and more than 178,000 pounds of liquid chlorine spilled onto the ground. The liquid chlorine vaporized and spread a cloud of chlorine gas around the plant and its surrounding area. Some of Axiall’s employees suffered minor injuries and Axiall claimed that it sustained millions of dollars in property damage.

Axiall sued AllTranstek and other companies who worked on the car, attempting to recover for the chlorine lost in the leak, the damage to its property from the spilled chlorine, and money paid to settle third party claims. The case went to trial, with the jury returning a verdict in excess of $12 million, finding defendants 60% liable. Axiall requested $8,324,073.25 in attorney fees under the contract with AllTranstek which the trial court granted, raising the judgment amount to over $22,000,000. The trial court reasoned that fees were proper, as Axiall’s terms and conditions stated that the defendants had an obligation to indemnify, defend, and hold harmless Axiall against third-party claims, including paying “expenses.”

The defendants appealed the verdict and judgments on multiple grounds, which the Superior Court mostly rejected and affirmed the damages award based on the jury verdict. However, the Superior Court held that the award of attorney’s fees was improper, as the indemnity provision did not state express terms that vendors had to indemnify Axiall for attorney’s fees incurred, instead just stating “expenses”. The Court did state that the expenses provision would cover Axiall’s attorney fees for the defense and settlement of the third-party claims, but the entire amount awarded was overturned and the matter remanded to the trial court with the limited goal of determining which portion of the fees was for the defense and settlement of the third-party claims.

The takeaway for this decision is that an award of fees and costs in commercial litigation is often determined by the language of the parties’ agreement and that defense counsel should be prepared to oppose fee award requests that are excessive or inconsistent with the intent of the agreement.