HOUSTON – ExxonMobil Corp. and Lockheed Martin Corp. have reached a confidential agreement to settle a contract dispute between the two companies over asbestos litigation.
On Jan. 3, the companies filed a joint stipulation of dismissal with the Houston Division of the Southern District of Texas confirming that they had reached a confidential agreement, which included each party covering its own costs and fees. U.S. District Judge Keith P. Ellison accepted the dismissal with prejudice on Jan. 4.
ExxonMobil filed its suit against Lockheed Martin in the Houston Division of the Southern District of Texas on April 4, 2016, asking the court “to declare that Lockheed Martin is not entitled to past, present, or future indemnity or defense” in lawsuits brought against it connected to a product line Exxon’s predecessor, Mobil Finishes, had purchased in 1963 from Lockheed Martin’s predecessor, Martin-Marietta.
According to the complaint, Lockheed Martin’s insurer, Continental Casualty Co. (CCC), demanded in a letter dated Feb. 4, 2016, that ExxonMobil reimburse the company almost $16 million in costs related to lawsuits over Dum Dum products, which allegedly contained asbestos. The Dum Dum products were a line of caulk, putty and protective coatings. It also asked that ExxonMobil participate in discussions with Lockheed Martin and CCC to decide how to handle future Dum Dum claims.
Mobil Finishes had purchased the product line from Martin-Marietta on July 1, 1963, and CCC argued that the agreement of sale sets out that Mobil would be responsible for settling any claims related to the Dum Dum products arising after that date.
In its complaint, however, ExxonMobil argued that the language in the agreement only leaves ExxonMobil responsible for claims arising from asbestos exposure after the purchase date, and therefore it was under no obligation to reimburse the defendant for any costs or to indemnify it for future costs. The company asked the court for “a declaratory judgment and judicial determination of the rights and duties of ExxonMobil and Lockheed Martin with respect to an actual controversy arising out of the agreement of sale.” The plaintiff also sought all costs, including attorneys’ fees, and further relief as the court deemed proper.
In response, Lockheed Martin filed a counterclaim on May 15, 2017, which asked the court for a declaratory judgment “that ExxonMobil is obligated to reimburse and/or pay certain past and future defense costs and indemnity amounts incurred by Martin Marietta, Lockheed Martin, or their subrogee, Continental Casualty Company (CCC), for asbestos bodily injury claims related to the Dum Dum product line.” It points to a passage in the agreement of sale that sets out that “liabilities and obligations [are] to be assumed by purchaser,” which includes “all obligations and liabilities accruing as the result of the operation of the business from and after June 30, 1963.”
The counterclaim argued that even if the original sale agreement does not leave ExxonMobil responsible for all defense and indemnity costs, “the special nature of the contractual relationship between Martin Marietta and Mobil Finishes demonstrates that the parties intended Mobil Finishes and its successors to bear the responsibility for certain business liabilities arising after Mobil Finishes took over the manufacture and sale of the Dum Dum product line.”