Berg Chilling Systems, Inc. v. VICARB, INC., ALFA LAVAL, INC. ALFA LAVAL VICARB, JOHN L. HULL, LEWIS W. HULL, Third…

PRECEDENTIAL
UNITED STATES COURT OF
APPEALS
FOR THE THIRD CIRCUIT
Nos. 03-2977 and 03-3020
BERG CHILLING SYSTEMS, INC.;
ACCEPTANCE INSURANCE
COMPANY
v.
HULL CORPORATION;
SP INDUSTRIES, INC.,
d/b/a Hull Company,
Defendants/Third-Party
Plaintiffs
v.
VICARB, INC., ALFA LAVAL, INC.
ALFA LAVAL VICARB, JOHN L.
HULL,
LEWIS W. HULL,
Third Party Defendants
BERG CHILLING
SYSTEMS, INC.,
Appellant in No. 03-2977
BERG CHILLING SYSTEMS, INC.;
ACCEPTANCE INSURANCE
COMPANY
v.
HULL CORPORATION;
SP INDUSTRIES, INC.,
d/b/a Hull Company,
Defendants/Third-Party
Plaintiffs
v.
VICARB, INC., ALFA LAVAL, INC.
ALFA LAVAL VICARB, JOHN L.
HULL,
LEWIS W. HULL,
Third Party Defendants
SP INDUSTRIES, INC.,
Appellant in No. 03-3020
On Appeal from the United States
District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 00-05075)
Honorable Berle M. Schiller,
District Judge
Argued April 21, 2004
BEFORE: SCIRICA, Chief Judge, and
ROSENN and GREENBERG,
Circuit Judges
(Filed: May 25, 2004)
John J. Soroko (argued)
Patrick J. Loftus
James H. Steigerwald

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2
Duane M orris
1650 Market Street
One Liberty Place, 37th Floor
Philadelphia, PA 19103-7396
Attorneys for Appellant-Appellee
Berg Chilling Systems, Inc.
Michael O. Adelman (argued)
Rebecca S. Rimmer
Michael P. Daly
Drinker, Biddle & Reath
One Logan Square
18th & Cherry Streets
One Logan Square
Philadelphia, PA 19103-6996
Attorneys for Appellee-Appellant SP
Industries, Inc.
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. FACTUAL AND PROCEDURAL
HISTORY
This matter comes on before this
court on appeals by Berg Chilling
Systems, Inc. (“Berg”) and SP Industries,
Inc. (“SPI”) from an order for judgment
entered by the district court on June 11,
2003, following a four-day bench trial in
this breach of contract action. The
district court set forth its opinion in Berg
Chilling Systems, Inc. v. Hull Corp., No.
Civ. A. 00-5075, 2003 WL 21362805
(E.D. Pa. June 10, 2003) (“Berg”). The
case, which has an unusual international
character as it implicates entities from
four countries on three continents,
though not all as parties, arises from the
failure of a freeze drying system to
perform to specifications. Though there
were many factual disputes at the trial,
the basic circumstances of the case are
clear and we set forth the facts in the
light most supportive of the district
court’s result.1
The origin of the case may be
traced to March 30, 1995, when Berg, a
Canadian Corporation,2 entered into a
contract with a Chinese Company named
Huadu Meat Products Company
(“Huadu”)3 to supply the food freeze
drying system (“Equipment Contract”) at
a cost of $2,800,000 in United States
1Certain of the various orders and
determinations to which we make
reference have not been appealed. The
parties’ attorneys took some of the
actions and wrote certain correspondence
that we attribute to the parties.
2Berg’s principal place of business is
in Toronto, Ontario.
3At various points in the record
reference is made to other Chinese
corporate entities related to Huadu, such
as the China National Overseas Trading
Corporation and the Beijing World Trade
Corporation. For simplicity’s sake we
will refer to the entities collectively as
Huadu. We also note that Huadu
sometimes is referred to as Hua Du.

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3
dollars. The freeze drying system
contained several components which
Berg intended to acquire from
subcontractors and suppliers. Thus, prior
to entering into the Equipment Contract,
Berg ascertained which manufacturers
would produce the system’s various
component parts.4
Berg approached the Hull
Corporation (“Hull”), a Pennsylvania
entity,5 and asked it to produce the freeze
dryers, a critical component for the
system. In the weeks prior to signing the
Equipment Contract with Huadu, Berg
was in constant contact with Hull
regarding the freezer dryers’ technical
specifications.6 On April 20, 1995, Berg
formally agreed to purchase two freeze
dryers from Hull for the Huadu freeze
drying system (“Purchase Order”).
Under this Purchase Order, Hull assumed
responsibility for the design,
manufacture, start-up and testing of the
freeze dryers.7 The freeze dryers were
4Berg manufactured one component of
the freeze drying system, the blast
freezers. According to the arbitration
award we describe below, Huadu dealt
with a Canadian company to acquire the
freeze drying system in order to take
advantage of financing for the purchase
available through the Export
Development Corporation of Canada.
Thus, in the transaction Berg largely was
a facilitator for financing and a
coordinator for the supply of other
companies’ products. This unusual role
in no way diminished Berg’s
responsibility to Huadu.
5Hull has its principal place of
business in Pennsylvania. Hull should
not be confused with the Hull Company
which we describe below. Hull is not
participating in this appeal.
6At trial Donald Berggren, the
president of Berg testified:
We would send preliminary
specifications off to Hull.
They would work up a
quotation or specification –
a specification based on the
information that they
received. We would take
it, forward it off to our
customer, Huadu, and –
and then they would come
back to us and ask more
questions on what we had
previously supplied. We
then took that information,
forwarded it back, and so it
was a back-and-forth
process of negotiation.
JA at 77.
7The Purchase Order incorporated the
specifications of the freeze dryers set
forth in the Equipment Contract between
Berg and Huadu. That contract provided,
“[o]nce the units are mounted in place by
the end user, under supervision by the
Hull Service Engineer, Hull Corporation
will send a qualified engineer to check

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required to be able to process a specified
volume of food at a high quality level
within a 24-hour period or, in industry
terms, to meet the “through-put”
specifications.
After confirming the delivery date
with Hull, Berg entered into an amended
agreement with Huadu specifying a
delivery date of June 15, 1996, for the
freeze drying apparatus. Nevertheless,
the freeze dryers were not shipped until
October 1996 because one of their
component parts was not available.
Once Hull completed manufacturing the
freeze dryers, their shipping to China
was delayed further when the vessel on
which they were to be shipped failed on
the way to pick up the equipment at the
port in Camden, New Jersey. Berg, who
was responsible for shipping the freeze
dryers, then made arrangements for their
transportation on trucks across North
America to Vancouver, British
Columbia, for shipment by sea to China.
Unfortunately, one of the trucks, while
en route to Vancouver, was involved in
an accident in which one of the freeze
dryers was damaged.8 Berg did not
repair the damaged freeze dryer prior to
its shipment by sea to China. Rather,
after the freeze dryers were shipped to
China the damaged freeze dryer was
repaired at Huadu’s facility in Beijing.
The equipment then was installed and
prepared for trial runs.
In April 1997, at the direction of a
Hull service technician, preliminary
testing began on the freeze drying
system. This testing revealed several
deficiencies in the freeze drying
equipment which led Huadu in early May
1997 to send a list of concerns regarding
the functioning of the machinery to Berg
which, in turn, forwarded the list to Hull.
Hull then responded to those concerns.
Nevertheless the Hull service technician
returned to the United States prior to
conducting performance tests on the
machinery as required by the Equipment
Contract, an action leading Huadu to
refuse to accept the freeze drying system.
According to Berg, during the
early summer of 1997 Hull refused to
cooperate with Berg and Huadu in
addressing the problems with the freeze
dryers.9 Huadu obviously was
out the systems, start up the units and
provide on site training for a total of 20
days.” JA at 854.
8The principle of Murphy’s Law seems
to have been at work here: what can go
wrong will go wrong.
9Berg’s president testified at trial:
We were having a very
tough time obtaining
cooperation [from Hull].
They didn’t seem to be
interested in working with
us on the project. They –
they were very
uncooperative, and at this
time, we felt that in order

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dissatisfied and thus threatened to send
the equipment back and cancel the
contract. As a result of Hull’s perceived
lack of cooperation during that time
period, Berg threatened to sue it. In late
August, however, Berg and Hull began
negotiating a compromise to solve the
difficulties with the machinery. These
negotiations culminated in the signing of
a modified agreement on October 8,
1997, among Huadu, Berg and Hull
designed to address the deficiencies in
the Hull freeze dryers (“Modified
Agreement”).10 The Modified
Agreement set forth performance-level
goals for the freeze dryers and the
required quality level of the product,
providing that “through a cooperative
effort, Hull and Berg will ensure” that
these standards would be met. JA at
1074. It established the end of March
1998 as the date by which the
modifications would be completed and
final acceptance would take place. JA at
1074.
While Hull, Berg and Huadu were
addressing the problems with the freeze
dryers, Hull, on August 27, 1997, entered
into an Asset Purchase Agreement with
SP Industries, Inc. (“SPI”), a New Jersey
Corporation,11 providing for SPI to
acquire Hull’s Food, Drug & Chemical
Division (“FDC division”) which had
designed and manufactured the freeze
dryers for the Huadu project. Article 1.2
of the Asset Purchase Agreement
between Hull and SPI listed the
purchased assets, which included “all
contracts and agreements, including,
without limitation, sales orders and sales
contracts.”12 JA at 1825-26. Under
Section 7.8, entitled Product Warranties,
the agreement provided that “[p]urchaser
does not hereby assume any liability to
any third party claimant.”13 JA at 1849.
Section 10.6 of the Asset Purchase
Agreement stated, “[t]his agreement shall
be governed and controlled as to validity,
enforcement, interpretation, construction,
to satisfy our customer’s
concerns, that we were
going to have to be looking
at performing some of the
modifications or changes to
the equipment to try to
bring it to specification.
JA at 139.
10Berg’s president testified that its
threat to sue Hull became moot after the
signing of the Modified Agreement.
11SPI has its principal place of
business in New Jersey.
12Section 1.3 of the Asset Purchase
Agreement listed assets excluded from
the agreement. The freeze dryers related
to the Equipment Contract were not
among these excluded assets.
13However, Berg’s president testified
at trial that prior to the signing of the
Asset Purchase Agreement Hull’s
president informed Berg that any new
entity would assume the liabilities of the
entity being purchased.

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6
effect and in all other respects by the
internal laws of the State of New Jersey
applicable to contracts made in that
State.” JA at 1857.
Hull and SPI closed on the sale
provided for by the Asset Purchase
Agreement on October 15, 1997, exactly
one week after Huadu, Hull and Berg
had signed the Modified Agreement. At
the closing on the Asset Purchase
Agreement, as a result of concerns that
SPI raised about the costs of the
remaining work on the Huadu freeze
dryers, SPI and Hull entered into a side
letter agreement relating to the Huadu
project.14 The side letter agreement,
which the parties signed on the same day
as the closing on the Asset Purchase
Agreement, provided that SPI would
complete any needed design
modifications and repairs to the freeze
dryers. While SPI agreed to pay the out-
of-pocket costs for the repairs, Hull
agreed to reimburse SPI for a portion of
its expenses.15 The side letter agreement
provided that, “[e]xcept as amended
hereby, the terms and provisions of the
Asset Purchase Agreement shall remain
in full force and effect.” JA at 1890.
Hull and SPI made various public
statements after signing the Asset
Purchase Agreement to the end that the
transaction constituted a merger of SPI
and Hull’s FDC division. Moreover,
Lewis Hull, president of the Hull
Corporation, sent a letter to Berg after
the Asset Purchase Agreement was
signed, but before the closing, stating
that “[i]f Hull’s freeze drying division
should be transferred to another entity,
Hull’s responsibility will of course be
assumed by the successor.” JA at 1020.
After the closing, the FDC
division of the Hull Corporation began
operating as a wholly-owned subsidiary
of SPI under the name Hull Company.
Although SPI through the Hull Company
made various modifications to the freeze
dryers from late 1997 into early 1998, the
dryers, at least during this period and at
all times material to this litigation, did
not meet the specifications contained in
the Modified Agreement. Huadu, which
seems to have been quite
accommodating, agreed, however, to
extend the date set forth in the Modified
Agreement for acceptance of the freeze
dryers until April 27, 1998. When it
became clear that the freeze dryers would
not satisfy the specifications by that date,
SPI directly requested another extension
from Huadu. Huadu granted the request,
giving SPI until May 20, 1998, to
complete modification and testing of the
14Hull at no time during the
negotiations and closing with SPI
informed SPI that Berg had threatened to
file suit against it in connection with the
Huadu project.
15Hull agreed to reimburse all of SPI’s
out-of-pocket costs, including payments
to suppliers and travel costs, while SPI
agree to absorb the normal payroll
expenses of the employees working to fix
the freeze dryers.

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freeze dryers with the understanding that
this would be the final extension.
On May 13, 1998, Huadu sent a
facsimile to Berg with a carbon copy to
the Hull Corporation listing the freeze
dryers’ remaining problems. The
facsimile concluded that because the
freeze dryers still had “fatal
weakness[es]” that prevented them from
meeting the through-put requirements for
freeze drying food at the contracted
quality level, they were “not
acceptable.”16 JA at 1113. Nevertheless,
neither Berg nor SPI made an attempt to
fix these problems or conduct
performance tests prior to the May 20,
1998 deadline. After it received this
letter from Huadu, SPI notified Berg for
the first time that, under Section 7.8 of
the Asset Purchase Agreement between
SPI and Hull, SPI had not assumed any
liability for any work done by Hull or
SPI pursuant to the Equipment Contract
or the Modified Agreement.
In an effort to salvage the
situation after Huadu refused to accept
the equipment, Berg hired Walter Pebley,
who had relevant expertise, to go to
China and evaluate the problems with the
freeze dryers. The evidence at the trial
indicated that from June to December
1998, “there was a letter writing
campaign between [Berg] and Huadu, as
[Berg] tried to get Hull back in to do the
necessary changes that they felt were
required to show that the equipment
could work.” JA at 189-91. When
Huadu refused to give Hull another
opportunity to repair the equipment, Berg
sent a letter to Huadu in March 1999
purporting to end any obligation under
the various contracts.
Pursuant to Section 11.2 of the
Equipment Contract, Huadu, on March
29, 1999, filed a request for arbitration of
16In a communication dated May 5,
1998, Huadu had informed Berg and the
Hull Corporation that if the freeze dryers
did not satisfy the specifications and
could not be accepted, “we will claim for
returning of goods and for our loss
caused by failure of this project.” JA at
1106. Section 8.8 of the Equipment
Contract provided:
If due to the Seller’s
responsibility the
performance tests cannot
reach one or several items
of guarantee figures in
Appendix No. 4 after three
repeated performance tests,
and in case no other mutual
agreement can be reached,
then the Buyer shall have
the right to terminate the
Contract partially or
wholly, relative to the
value of defective
equipment item as other
wise agree [sic].
JA at 786.

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its claims against Berg with the
Arbitration Institute of the Stockholm,
Sweden, Chamber of Commerce. Huadu
did not attempt to make either Hull or
SPI a party to the arbitration.17 But after
it learned about the institution of the
arbitration proceedings, Berg notified
John Hull, the former vice chairman of
the Hull Corporation and a consultant to
the new Hull Company. Berg wanted
Hull to participate in the proceedings and
thus it sent a letter dated May 24, 2000,
to John Hull informing “Hull” that it was
obligated “to participate in the arbitration
and defend its equipment given that it is
a party to the Modified Agreement.” JA
at 1181. Berg requested Hull to engage
in a joint defense of Huadu’s claims. JA
at 194. The Berg letter stated that Hull
had refused to be added as a party to the
arbitration or to cooperate in the defense
of the arbitration. JA at 1182. As a
result, Berg informed Hull:
Accordingly, you
are hereby put on notice
that in the event Berg is
unsuccessful in defending
the arbitration Berg will be
looking to Hull, and any
successor company to Hull,
for full contribution and
indemnity with respect to
any damage award, as well
as its legal and other costs.
You are further put on
notice that Berg will rely
on Hull’s refusal to defend
the Claimants’ allegations
as precluding it from
subsequently raising any
such defence to the
allegations in any action
commenced by Berg
against Hull in the event
Berg is unsuccessful in
defending the arbitration.
JA at 1182.
The arbitration proceedings went
forward in Stockholm for approximately
one year before, on March 8, 2000, Berg
formally objected to the proceedings on
the basis of its assertion that the Hull
Corporation was a necessary and proper
party to the arbitration. However, the
arbitration proceedings continued
without any participation from Hull or
SPI.18 On December 7, 2000, the
17This omission is understandable as
Huadu’s contract providing for
arbitration was solely with Berg so there
was no way that Huadu could join Hull
or SPI in the arbitration.
18Berg formally informed SPI of the
arbitration by letter dated October 3,
2000, in which it stated that the letter, as
well as the previous letter of May 24,
2000, to John Hull, “constitutes written
notice of the Arbitration Proceeding.”
JA at 1179. The letter further stated that
“Berg Chilling hereby requests that you
come in and defend the Arbitration
Proceeding. Should you not do so, you
will be bound in any action brought

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9
Arbitration Institute issued its award in
favor of Huadu and against Berg for
$2,494,034.84, a sum that includes
interest.
The arbitrators found that due to
the inability of the Hull freeze dryers to
function as required by the specifications
of the Equipment Contract and Modified
Agreement, Huadu was entitled to a
refund of the portion of the purchase
price in the Equipment Contract for the
freeze dryers but that Berg, upon
payment, could reclaim them. Although
the arbitrators recognized that the
remainder of the freeze drying system
was functional and the only deficiency
was in the Hull-manufactured freeze
dryers, it found that “Berg Chilling bears
full responsibility towards [Huadu] for
any breaches of contract with relation to
the Hull equipment. It is outside the
scope of this arbitration to determine
whether and to what extent Hull shall
answer for such breaches in relation to
Berg Chilling.” JA at 1206-07. In
defending itself in the arbitration Berg
incurred legal fees, including expert
witness fees and costs, of $454,115.26.
At the time the arbitration
proceedings between Huadu and Berg
were pending, Berg, on October 6, 2000,
brought suit against the Hull Corporation
and SPI in the district court, asserting
claims for breach of contract, breach of
express warranty, breach of implied
warranty, and indemnity and
contribution. Hull then filed a cross-
claim against SPI for indemnity or
contribution. SPI responded by filing a
counter-cross-claim against the Hull
Corporation for breach of representation
and warranty and breach of the
indemnification and defense provisions
of the Asset Purchase Agreement
between SPI and Hull.19
After the conclusion of the
arbitration proceedings and prior to trial
in the district court, Berg and Huadu on
June 10, 2002, entered into a Settlement
Contract resolving all claims between
them. In the Settlement Contract Berg
against you by Berg Chilling as to any
determination of fact made in the
Arbitration Proceeding common to the
two litigations.” JA at 1179.
19SPI also filed a third-party complaint
against the Hull Corporation’s corporate
officers John Hull and Lewis Hull for
breach of contract, fraud and
misrepresentation. John Hull and Lewis
Hull then filed a counterclaim against
SPI, maintaining that SPI had a duty to
defend and/or indemnify them in this
litigation. The district court entered
judgment in favor of John Hull and
Lewis Hull on SPI’s third-party
complaint against them and entered
judgment in favor of SPI and against
John Hull and Lewis Hull on John Hull
and Lewis Hulls’ third-party complaint
against SPI. These dispositions are not at
issue on this appeal and thus we do not
make further reference to them.

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agreed to pay Huadu $1,000,000 and to
permit Huadu to retain ownership of the
freeze dryers which Huadu and Berg
agreed in their then current condition
were valued at $650,000. We refer to
this $650,000 as an “Equipment Credit.”
Thus, Berg and Huadu valued the
settlement at $1,650,000. The Settlement
Contract provided that in the event that
Berg was successful in this litigation, it
would retain the first $1,650,000 of the
award, Huadu would be entitled to the
next $350,000, and Berg and Huadu
would share equally in any recovery in
excess of $2,000,000. The $1,650,000
figure clearly was predicated on the
payment that Berg made to Huadu in a
combination of cash and the waiver of
any claim by Berg to reclaim the
equipment.
The litigation in the district court
proceeded to trial on January 13, 2003,
where the court at the bench trial heard
four days of testimony. In its
Memorandum and Order of June 11,
2003, the district court issued its findings
of fact and conclusions of law. The court
determined that the award issued on
December 7, 2000, by the Arbitration
Institute was not binding on Hull because
Berg failed to vouch it in properly. It
further held that SPI was not equitably or
judicially estopped from arguing that it
did not assume any liability to Berg for
the freeze dryers sold to Huadu. Berg
does not challenge these findings on this
appeal.20 The court further found that
under the terms of the Asset Purchase
Agreement between SPI and Hull, SPI
assumed Hull’s responsibilities for the
freeze dryers pursuant to the Purchase
Order, the Equipment Contract and the
Modified Agreement.
Concluding that Berg, Hull and
SPI were equally at fault for the breach
of the various agreements to Huadu, the
court apportioned the $1,000,000
damages from the Settlement Contract
equally but separately among Berg, Hull
and SPI.21 The court, however, did not
hold Hull and SPI jointly and severally
liable to Berg. Moreover, the court
declined to grant Berg damages
predicated on the $650,000 Equipment
Credit for the freeze dryers which Huadu
had retained pursuant to the Settlement
Contract because, in the court’s view,
Berg had not established the value of the
equipment and did not demonstrate what
its costs would have been to retrieve the
equipment or find a purchaser for it if
Huadu had not retained it.
20Berg does assert that the court’s
ruling with respect to vouching in was
erroneous but indicates that it became
moot when the court later found “that
SPI and Hull had committed a breach of
contract.” Berg br. at 52.
21The court entered separate judgments
in favor of Berg and against Hull and SPI
for $333,333. Thus, the court left Berg
with the loss for the remaining $333,334
paid on the Settlement Contract.

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The district court rejected Berg’s
claim for attorneys’ fees and expert
witness fees in the arbitration
proceedings, finding that “[w]hile
ordinarily Berg Chilling might be entitled
to recover such fees, in this case such an
award would be unconscionable.” Berg,
2003 W L 21362805, at *11. In support
of this conclusion the court explained
that Berg had not represented Hull and
SPIs’ interests adequately in the
arbitration proceedings. The court also
stated that “since Berg Chilling was
equally liable with the Defendants
herein, each must bear its own costs and
counsel fees.” Id. The court further
found that the Hull Corporation had not
breached certain portions of the Asset
Purchase Agreement with SPI by failing
to inform SPI of Berg’s threat of
litigation during the summer of 1997.
Additionally, it rejected SPI’s claim for
indemnification against Hull. These
appeals followed.22 In our opinion we
deal with the specific issues advanced by
the parties. The Hull Corporation is not
participating in this appeal.23
II. DISCUSSION
A. STANDARDS OF REVIEW
We exercise plenary review over
the district court’s legal determinations.
Shire US Inc. v. Barr Labs. Inc., 329
F.3d 348, 352 (3d Cir. 2003). Our
standard of review is plenary with
respect to whether the district court
applied the appropriate measure of
contract damages in a legal sense. Scully
v. US WATS, Inc., 238 F.3d 497, 507
(3d Cir. 2001) (citing William B. Tanner
Co. v. WIOO, Inc., 528 F.2d 262, 271
(3d Cir. 1975)). We review the factual
determinations of the district court under
a clearly erroneous standard. Medtronic
Ave, Inc. v. Advanced Cardiovascular
Sys., Inc., 247 F.3d 44, 53 (3d Cir.
2001). A finding of fact is clearly
erroneous when it is “completely devoid
of minimum evidentiary support
displaying some hue of credibility or
bears no rational relationship to the
supportive evidentiary data.” Kool,
Mann, Coffee & Co. v. Coffey, 300 F.3d
340, 353 (3d Cir. 2002) (quoting Hoots
v. Pennsylvania, 703 F.2d 722, 725 (3d
Cir. 1983)).
B. FAULT AND THE EQUAL
22The district court exercised diversity
jurisdiction pursuant to 28 U.S.C. § 1332
and we have jurisdiction under 28 U.S.C.
§ 1291.
23It appears that the Hull Corporation
is in financial distress and thus,
according to Berg, the judgment against
it is not collectible. We are aware,
however, that Hull is seeking insurance
indemnification and consequently it is
possible that ultimately a judgment
against it would be satisfied. See Berg
Chilling Sys. Inc. v. Hull Corp., 70 Fed.
Appx. 620 (3d Cir. 2003).

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12
APPORTIONMENT OF
DAMAGES AMONG BERG,
HULL AND SPI
Berg challenges the district
court’s action in allocating damages to it.
The court found that under S.J. Groves &
Sons Co. v. Warner Co., 576 F.2d 524,
527-58 (3d Cir. 1978), it had the
authority to apportion damages according
to the relative fault of the three parties,
Berg, Hull and SPI. We conclude,
however, that it had no basis on which to
find Berg at fault for the breach of the
Equipment Contract and Modified
Agreement, and thus the court erred in
apportioning any damages to Berg.
The court found that Berg, Hull
and SPI were equally at fault for the
breach of contract in failing to make a
timely shipment of a working freeze
drying system to Huadu. In finding that
Berg was partly to blame for the breach
of contract the court rejected Berg’s
argument that it was a mere
“middleman” between Huadu and Hull.24
Berg, 2003 WL 21362805, at *11. The
court found that Berg was responsible for
the late shipment of the machinery and
the damage to one of the freeze dryers
during shipment. The court further
emphasized that, “[m]ore importantly,
Berg Chilling, like Hull Corporation and
SPI, took part in the design and/or
approval of the design of the freeze
dryers and modification thereto.” Id. In
support of this finding, the court cited the
testimony of Donald Berggren, the
president of Berg. At the trial, Berggren
testified as to the process of negotiation
with Huadu and Hull prior to Berg
entering into the contract with Huadu to
provide the freeze drying system,
indicating that “[w]e would send
preliminary specifications off to Hull.”
JA at 77.
Though it is unclear from the
foregoing portion of Berggren’s
testimony whether Huadu or Berg
developed the specifications, review of
his testimony as a whole makes it clear
that Berg did not develop the
specifications for the freeze dryers, but
merely forwarded the specifications
requested by Huadu to Hull during the
negotiations.25 On direct examination,
Berggren was asked “[i]n the back and
forth that you described with Huadu, did
Berg Chilling provide technical input on
the freeze dryers.” JA at 82. He
responded “[w]e weren’t capable of
24In essence this conclusion rejected
the view of the Arbitration Institute.
25Berggren testified, “Huadu read
through the quote, and there was usually
generated more – more questions. Every
time we’d send off technical
specifications, it generated more
questions that we would in turn send off
to the various suppliers that – that we
had.” JA at 81. Berggren’s testimony is
corroborated by the testimony of Wayne
Hinton, the sales manager at Berg who
worked on the Huadu project.

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13
providing technical input. We relied on
Hull for that.” JA at 82.
Berg maintains that the finding by
the district court that Berg “took part in
the design and/or approval of the design
of the freeze dryers and modification
thereto,” was clearly erroneous. We
agree. Neither the court nor SPI points
to evidence supporting a conclusion that
Berg played any role other than relaying
information back and forth between
Huadu and Hull regarding the
specifications of the freeze dryers. In
arguing that we should affirm the district
court on this point SPI cites to the
portion of the trial transcript on which
the district court relied. However, as
stated above, Berggren made clear that
Berg did not approve the design of the
freeze dryers in the sense of judging its
efficacy, but only forwarded the
specifications requested by its customer,
Huadu, to its supplier, Hull, and
attempted to put together an agreement
relying on other entities’ capabilities. All
of the testimony at the trial established
that Hull designed the freeze dryers and
attempted to install them successfully in
China. Furthermore, after the closing of
the Asset Purchase Agreement, SPI
performed all of the obligations of Hull
under the M odified Agreement.26
Indeed, the court recognized that “SPI
performed all work under the Modified
Agreement, including the flawed
engineering of the modified freeze-
dryers, the unsuccessful preliminary
testing of the equipment, and the start-up
activities at the Huadu facility.” Berg,
2003 WL 21362805, at *11.
Berg disputes the district court’s
findings as to its culpability for the
breach of the Equipment Contract with
Huadu in other respects as well. The
court found that Berg was partially
responsible for the breach of contract
because it delivered the freeze dryers late
to China and one of the dryers was
damaged while being transported to
Vancouver for shipment. While we
agree that Berg’s late shipment of the
machinery qualified as a breach of
contract, this approximately one-month
delay was not the reason that Huadu
ultimately refused to accept the
equipment. The record is clear that
Hull’s difficulty in obtaining a
component of the freeze dryers caused
most of the delay prior to shipment.
Furthermore, any delay prior to the
26In its brief, SPI cites to a memo
written by Berg’s president to John Hull
of the Hull Corporation dated September
29, 1997. As a means of reaching a
compromise solution in the face of the
initial failure of the freeze dryers, Berg
offered to “provide on-site labor to make
the necessary refrigeration piping
changes to accommodate the new
condensers.” JA at 2015. But SPI did
not offer evidence that any Berg
personnel ever undertook any design or
modification work pursuant to the
Modified Agreement.

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14
signing of the Modified Agreement
which extended the deadlines for the
completion of the project is irrelevant
because Huadu did not refuse to accept
the freeze drying machinery in May 1998
on account of the late delivery in 1997.
Rather, it refused to accept the
equipment because, even after the
various modifications, the freeze dryers
failed to perform to specifications.
Therefore, any breach of the delivery
dates by Berg set forth in the original
Equipment Contract should not have
been a basis for finding Berg in any way
responsible for the failure of the freeze
drying apparatus to function properly.
Moreover there is no evidence
that the damage during the accident
while the equipment was being
transported to Vancouver caused the
problems with the freeze dryers. In fact,
only one of the freeze dryers was
involved in the accident but the record
clearly shows that the freeze dryer
problems related to both dryers. Thus,
Huadu declined to accept the freeze
dryers because neither could satisfy the
through-put requirements in the
Equipment Contract by reason of a
design defect in both pieces of
machinery. Clearly, the design of the
freeze dryers by Hull rather than the
accident was the cause of the
equipment’s failure to function as
promised.27 Overall, we are constrained
to conclude that the factual findings of
the district court with respect to Berg’s
fault for the breach of the Equipment
Contract and the Modified Agreement
lack evidentiary support and thus are
clearly erroneous.
We recognize that, as the
Arbitration Institute found, while Berg
was certainly liable to Huadu as a
signatory to the Equipment Contract and
Modified Agreement for the failure of
the freeze dryers to function as required
by those agreements, such liability was
imposed merely because it did not
comply with the contract. But Berg’s
liability differs in nature from that of
Hull which was culpable because of its
technological failures and which as
between Berg and Hull was responsible
for the freeze dryers not functioning as
required by the specifications in the
Equipment Contract. Moreover, if, on
the remand we are ordering, SPI is held
liable on a theory that it is Hull’s
successor SPI will be in the same
position as Hull. Overall, therefore, it is
clear that among Berg, Hull and SPI no
damages should have been assessed
against Berg. Thus, the district court
clearly erred in apportioning any
27The district court implicitly
recognized that the deficiency with the
freeze dryers related to design defects
rather than the accident. The court stated
that “[w]ithout remedying the problem
associated with the diameter of the pipe,
the freeze dryers could not have met the
through-put requirements.” Berg, 2003
WL 21362805, at *7.

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15
damages to Berg. We therefore will
reverse the judgment of the district court
to the extent that it allocated any
damages to Berg and will remand the
case to the district court with instructions
that it vacate that portion of its order for
judgment holding Berg responsible for
Huadu’s damages.28
C. THE LIABILITY AND
INDEMNIFICATION TERMS
OF THE ASSET PURCHASE
AGREEMENT
1. Liability
The next issue we deal with
concerns SPI’s challenge to the order for
judgment assessing damages against it
pursuant to the Asset Purchase
Agreement. Section 7.8 of the Asset
Purchase Agreement states that:
Purchaser will, as
appropriate, agree to repair
(at the Real Estate or as
necessary, at the location
of the customer) or accept
returns of products of the
Business shipped by Seller
on and prior to the Closing
Date . . . which are
defective or which fail to
conform to the customer’s
order in accordance with
the following provisions
(but Purchaser does not
hereby assume any liability
to any third party claimant.
. . .)
JA at 1848-49 (emphasis added). The
district court concluded that Section 7.8
of the Asset Purchase Agreement,
entitled Product Warranties, did not
apply because Huadu never accepted the
freeze dryers and therefore any work SPI
did was not warranty work governed by
Section 7.8. The court stated:
At various points
during the trial and in
related briefing, certain
parties have referred to the
work performed on the
Huadu Project as
‘warranty’ work. Because
‘warranty’ work would
have begun only after
Huadu’s final acceptance
of the freeze dryers (Ex. P-
20, Section 7.4) and final
acceptance never actually
28We realize that the order for
judgment in terms did not hold Berg at
fault but in substance it did exactly that
as the court only assessed against Hull
and SPI two-thirds of the $1,000,000
paid pursuant to the Settlement Contract
by Berg to Huadu. In fact, the entire
$1,000,000 plus, as will be seen,
$650,000 for the Equipment Credit,
should be assessed against Hull.
Whether these also should have been
assessed against SPI will have to await
determination on the remand with respect
to its possible successor liability.

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16
occurred, no ‘warranty’
work was performed. SPI
argues that the work
performed after the closing
of the Asset Purchase
Agreement is warranty
work within the meaning of
Section 7.8 of the Asset
Purchase Agreement.
Section 7.8, however, is
inconsistent with Section
1.2(i) and the side letter
(Ex. P-186), and, therefore,
does not support SPI’s
contentions.
Berg, 2003 WL 21362805, at *10 n.10.
Section 1.2 lists the purchased assets, and
subsection (i) includes, in relevant part,
“all contracts and agreements.”29 JA at
1825-26.
We reject the district court’s
interpretation of the Asset Purchase
Agreement as it is clearly erroneous. See
Medtronic, 247 F.3d at 53 n.2.30 There is
no inconsistency between Sections 7.8
and 1.2(i) of the agreement. Even
assuming that the Equipment Contract
and M odified Agreement constitute
purchased assets under the Asset
Purchase Agreement, it does not follow
that SPI could not limit its liability to
third parties with respect to those assets.
Furthermore, the district court’s analysis
is flawed because in interpreting the
Asset Purchase Agreement it looked to
Section 7.4 of the Equipment Contract
between Huadu and Berg. That
provision specifies that if the freeze
dryers satisfy the requirements set forth
in that agreement, “[t]his shall be the
Acceptance of the Equipment by the
Buyer and shall be considered [the] start
of the warranty period.” JA at 782.
Therefore, the court concluded that the
warranty period on the freeze dryers had
not started because Huadu never
“accepted” them and as a result Section
7.8 of the Asset Purchase Agreement
could not apply.
The district court did not address
the obvious differences between the
Asset Purchase Agreement and the
Equipment Contract. For purposes of
determining whether SPI assumed
liability for the Huadu Project, it was
irrelevant whether Huadu had “accepted”
the freeze dryers in accordance with
29The district court concluded that
Section 1.2 of the Asset Purchase
Agreement was unambiguous and
therefore the agreement between Berg
and Hull to provide two freeze dryers to
Huadu qualified as a purchased asset.
Furthermore, Section 1.3 did not list the
Huadu Equipment Contract or Modified
Agreement as excluded assets.
30SPI regards the Section 7.8 issue as
being a matter of contractual
construction subject to plenary review.
In light of our result we need not
consider this contention as the district
court’s conclusions cannot survive even
deferential review.

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17
Section 7.4 of the Equipment Contract.
The relevant provision was Section 7.8
of the Asset Purchase Agreement which
made clear that the limitation of liability
to third parties applied to “products of
the Business shipped by Seller on and
prior to the Closing Date.” JA at 1848-
49. It is undisputed that the freeze dryers
were shipped to Huadu prior to the
closing of the Asset Purchase Agreement
on October 15, 1997. Therefore, Section
7.8 of the Asset Purchase Agreement
clearly applies to the dispute between
SPI and third-party claimant Berg.
Nevertheless the district court
held that because “SPI acquired the Hull
Purchase Order and Modified
Agreement” it was “liable for the work it
performed under those contracts.” JA at
24 n.13. Clearly this conclusion was
incorrect as the plain language of the
Asset Purchase Agreement precludes a
finding of liability against SPI and in
favor of Berg on the basis articulated by
the district court, i.e. that SPI assumed
Hull’s responsibilities by entering into
the Asset Purchase Agreement.
Moreover, the fact that SPI did not
adequately modify the equipment does
not matter as Hull shipped the equipment
before the Hull-SPI closing date and thus
SPI could not be liable to Berg under the
Asset Purchase Agreement.
Accordingly, we will reverse the
judgment of the district court to the
extent that it imposes liability on SPI.31
In considering this point we have
not overlooked Berg’s contention “that
any purported disclaimer of liability
under Section 7.8 would [not] be binding
on non-parties to the Hull-SPI
Agreement, such as Berg.” Berg’s reply
br. at 24. Rather, we reject that argument
for if, as is the case, Berg seeks to
impose liability on SPI on the basis of
the Asset Purchase Agreement it cannot
pick and choose which of its provisions
are applicable. Thus, the exculpatory
language of Section 7.8 binds Berg.
Our conclusion, however, does
not necessarily free SPI from liability on
a different theory inasmuch as the district
court explained that “[b]ecause SPI’s
liability is established on this [i.e.
contractual] basis, it is not necessary to
reach Berg Chilling’s arguments related
to successor liability under the de facto
merger and continuation doctrines.”
Berg, 2003 WL 21362805, at *10 n.13.
On appeal, Berg renews its argument that
even if SPI is not liable under the terms
of the Asset Purchase Agreement, it
should be held liable under these
alternate theories. In view of the
31Berg maintains that Section 7.8 is
void as against public policy. Inasmuch
as the district court incorrectly
interpreted that provision it never
reached this issue. On remand, the
district court should address Berg’s
argument in the first instance.

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18
circumstance that the district court did
not address the applicability of successor
liability under the de facto merger and
continuation doctrines, we will remand
this claim to the district court for an
analysis of SPI’s possible liability on the
applicability of these doctrines.32
2. Indemnification
SPI challenges the district court’s
refusal to grant it indemnification from
Hull. Section 8.2 of the Asset Purchase
Agreement provides as follows:
8.2 Indemnification
Obligations of Seller.
Subject to Section 8.3
hereof, Seller shall defend,
indemnify, save and keep
harmless Purchaser, its
Affiliates and their
respective successors and
permitted assigns . . .
against and from all
Damages sustained or
incurred by any of them
resulting from or arising
out of or by virtue of:
. . .
(c) the failure to
discharge when due any
liability or obligation of
Seller other than the
Assumed Liabilities, or any
claim against Purchaser
with respect to any such
liability or obligation or
alleged liability or
obligation;
(d) any claims by
parties other than
Purchaser to the extent
caused by acts or omissions
of Seller on or prior to the
Closing Date, including,
without limitation, claims
for Damages which arise or
arose out of Seller’s
operation of the Business
or by virtue of Seller’s
ownership of the Purchased
Assets on or prior to the
Closing Date[.]
JA at 1852.33 Section 8.5 of the Asset
32The district court also should
determine whether to apply New Jersey
or Pennsylvania law to Berg’s successor
liability claims against SPI, though it
may not need to make a choice if the law
of the states is the same or the result
would be the same under either state’s
law.
33The execution of the side letter
agreement between Hull and SPI in
relation to the Huadu Project did not alter
SPI’s rights under the Asset Purchase
Agreement as that letter provided that:
Except as amended hereby,

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19
Purchase Agreement sets forth a
procedure by which SPI is required to
notify Hull of any third-party claim
lodged against SPI. As required by this
provision, after receiving a copy of the
summons and complaint in this action,
SPI on November 9, 2000, wrote a letter
to Hull stating:
Pursuant to Section 8.5 of
the Agreement34
the terms and provisions of
the Asset Purchase
Agreement shall remain in
full force and effect, it
being understood that the
execution of this letter
agreement, and any actions
taken pursuant hereto, shall
in no way limit, or
otherwise constitute a
waiver of any of the rights
to which Purchaser is
entitled pursuant to the
Asset Purchase Agreement
including, without
limitation, those provided
for under Article VIII
thereof.
JA at 1890.
34Section 8.5 of the Asset Purchase
Agreement provides, in pertinent part:
No failure by an
Indemnifying Party to
acknowledge in writing its
indemnification obligations
under this Article VIII shall
relieve it of such
obligations to the extent
they exist. If an
Indemnified Party is
entitled to indemnification
against a Third Party
Claim, and the
Indemnifying Party fails to
accept a tender of, or
assume, the defense of a
Third Party Claim pursuant
to this Section 8.5 . . . the
Indemnified Party shall
have the right, without
prejudice to its right to
indemnification hereunder,
in its discretion exercised
in good faith and upon
advice of counsel, to
contest, defend and litigate
such Third Party Claim . . .
. If, pursuant to this
Section 8.5, the
Indemnified Party so
contests, defends, litigates
or settles a Third Party
Claim for which it is
entitled to indemnification
hereunder as hereinabove
provided, the Indemnified
Party shall be reimbursed
by the Indemnifying Party
for the reasonable
attorneys’ fees and other
expenses of defending,
contesting, litigating and/or
settling the Third Party

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20
you are hereby put on
notice of the above
captioned matter.
Purchaser hereby tenders
the defense of the above
captioned matter to Seller
together with Purchaser’s
demand for
indemnification. Pursuant
to Section 8.5 of the
Agreement, please
acknowledge your
indemnification and
defense obligations
promptly and in writing.
JA at 1184. Hull responded on
December 5, 2000, that “it does not have
an obligation to tender a defense on
behalf of SP Industries, Inc.” in this
matter. JA at 1185.
The district court rejected SPI’s
indemnification claim, stating that “SPI’s
argument is unpersuasive because SPI is
liable . . . for its own post-closing
conduct.” Berg, 2003 WL 21362805, at
*12. The court relied on Section 8.2(d)
of the Asset Purchase Agreement, which
provided for indemnification by Hull for
actions brought by third parties related to
conduct “prior to the Closing Date.” JA
at 1852. Therefore, the district court
concluded that the actions taken by SPI
in attempting to repair the freeze dryers
after the closing of the Asset Purchase
Agreement were not subject to the
indemnification provision of that
agreement.
The district court reached its
conclusion as a consequence of its
misinterpretation of Section 7.8, which,
as explained above, expressly provided
that SPI “does not hereby assume any
liability to any third party claimant” for
any items shipped prior to the closing of
the Asset Purchase Agreement. JA at
1849. Under Section 8.2(c) Hull was
obligated to defend and indemnify SPI as
to any “liability or obligation of Seller.”
JA at 1852. Therefore, pursuant to
Section 7.8, the Huadu freeze dryers
qualified as a “liability or obligation” of
Hull. We do not see why SPI’s inability
to overcome Hull’s earlier failure to
produce a system complying with the
specifications of the Equipment Contract
should impair SPI’s indemnification
claim. In this regard we point out that
SPI’s inability to modify the equipment
to comply with the specifications was at
most a contractual failure. We see no
reason why Hull and SPI should not have
been free to place the losses from the
failure as between themselves as they
saw fit and that is what they did in
Claim[s] which are
incurred from time to time,
forthwith following the
presentation to the
Indemnifying Party of
itemized bills for said
attorneys’ fees and other
expenses.
JA at 1854.

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21
Section 7.8.
Accordingly, we will reverse the
order for judgment entered by the district
court against SPI and in favor of Hull
denying SPI’s indemnification claim and
will remand SPI’s indemnification claim
to the district court with instructions to
grant judgment in favor of SPI and
against Hull on this claim. The district
court then must make an award pursuant
to Section 8.5 of the Asset Purchase
Agreement in favor of SPI and against
Hull as to SPI’s “reasonable attorneys’
fees and other expenses of defending,
contesting, [and] litigating,” this action.
JA at 1854.
D. BERG’S INDEMNIFICATION
CLAIM AGAINST HULL AND
SPI
1. Indemnification
The district court did not directly
address Berg’s claim for indemnification
against Hull and SPI, although by finding
that Berg was partially at fault for the
breach of contract to Huadu, it implicitly
rejected it. Therefore, the district court
did not analyze whether Pennsylvania or
New Jersey law applies to this claim. At
the beginning of the breach of contract
section of its opinion, the district court
indicated that “[i]n a previous
memorandum addressing the parties’
motions for summary judgment, I
determined that New Jersey law governs
this action.” Berg, 2003 WL 21362805,
at *10. However, in its prior opinion the
court only held that as to any claims
between Hull and SPI related to the
Asset Purchase Agreement the choice of
law provision in that agreement
providing that New Jersey law applies
governed. Berg Chilling Sys., Inc. v.
Hull Corp., No. CIV. A. 00-5075, 2002
WL 31681955, at *5 (E.D. Pa. Nov. 26,
2002). Therefore, rather than addressing
whether Berg’s indemnification claim
against both Hull and SPI also should be
governed by New Jersey law, the district
court merely assumed that it should be.35
On remand the district court must
address Berg’s indemnification claim
against SPI in the first instance, though
35In any event, there is no conflict
between Pennsylvania or New Jersey law
with respect to the indemnification issue.
See Duall Bldg. Restoration, Inc. v. 1143
East Jersey Ave. Assoc., Inc., 652 A.2d
1225, 1233-34 (N.J. Super. Ct. App. Div.
1995) (affirming trial court holding that
paint manufacturer had duty to indemnify
builder who used manufacturer’s paint
on a building when the paint peeled off);
Moscatiello v. Pittsburgh Contractors
Equip. Co., 595 A.2d 1198, 1201-02 (Pa.
Super. Ct. 1991) (affirming decision that
seller of concrete paving equipment was
entitled to indemnification for damage
award in underlying breach of contract
action from manufacturer of machinery
because seller was “mere conduit”). In
fact Duall cited Moscatiello and followed
it.

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22
based on our analysis of both
Pennsylvania and New Jersey law, we
hold that Berg is entitled to
indemnification against Hull as the
manufacturer of the freeze drying
equipment. As explained earlier, Berg
primarily served as the distributor of the
equipment and negotiated the agreement
with Huadu. Hull designed the freeze
dryers and shouldered the responsibility
to install them. Furthermore, under the
Equipment Contract and the Modified
Agreement, Hull was required to conduct
testing to ascertain the functionality of
the equipment.
The determination of the viability
of Berg’s claim for indemnification from
SPI must await the conclusions of the
district court on remand. If the district
court decides that SPI is liable as a
successor to Hull under the de facto
merger or continuation doctrines, the
court then will have to analyze whether
Berg is entitled to common law
indemnification from SPI. However, if
the district court rejects the successor
liability claim then there will be no basis
upon which Berg can assert an
indemnification claim against SPI
because Section 7.8 of the Asset
Purchase Agreement negates the
possibility of SPI assuming Hull’s
liability by reason of the failure of the
freeze dryers which had been shipped to
Huadu.36
2. Attorneys’ fees and costs
Berg sought to recover its
attorneys’ fees and expert witness fees
from Hull and SPI in connection with the
defense of the arbitration proceedings in
Sweden. The district court rejected this
claim, stating that:
While ordinarily Berg
Chilling might be entitled
to recover such fees, in this
case such an award would
be unconscionable. As
discussed above, Berg
Chilling did not adequately
represent the interests of
Hull Corporation, or, by
extension, SPI, and for this
reason it cannot recover its
fees. Moreover, since Berg
Chilling was equally liable
with the Defendants herein,
each must bear its own
costs and counsel fees.
Berg, 2003 WL 21362805, at *11. The
district court previously had noted that in
the arbitration proceedings Berg offered
the testimony of its expert, Walter
Pebley, that the freeze dryers “could
produce quality product but at
significantly lower through-puts.” JA at
519-20; see also JA at 489 (stating that
he testified at the arbitration proceeding
that “the equipment would function but
not at the through-put rates in the
36In any event, under Section 8.2 of the
Asset Purchase Agreement SPI would be entitled to indemnification from Hull.

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23
contract specifications”). The court
characterized this as testimony offered by
Berg “that the freeze dryers were
improperly designed.” Berg, 2003 WL
21362805, at *8. The court then
concluded that “[s]uch testimony did not
represent the interests of Hull
Corporation.”
Berg argues that the adequacy of
its representation efforts in the arbitration
are irrelevant in determining whether it is
entitled to attorneys’ fees. Inasmuch as
Berg was not primarily the cause of
Huadu suffering damage and Hull and
SPI did not overcome the equipment’s
deficiencies as contemplated by the
Modified Agreement, Berg contends that
the district court should have awarded it
all damages flowing from that failure,
including reasonable attorneys’ fees and
costs. Berg further maintains that the
court’s rejection of Berg’s claims was
anomalous because “[t]he court
disallowed as part of Berg’s damages its
litigation expenses in the Arbitration
based on the very same testimony which
the court itself later found to be true and
conclusive and the basis for holding
defendants liable in the instant case!”
Berg’s br. at 55. Berg stresses that due
to the clear defects in the freeze dryers, it
defended the machinery at the arbitration
“as best we could.” JA at 200.
SPI counters that because the
district court found Berg to be at fault in
part, it was not entitled to attorneys’ fees
and costs. SPI argues, alternatively, that
in the absence of a relevant statutory or
contractual provision providing for
attorneys’ fees, Berg cannot prevail on
this claim.
As with Berg’s indemnification
claim against Hull and SPI, the district
court did not state whether it was
applying Pennsylvania or New Jersey law
on the attorneys’ fees and costs issue. In
their briefs in this court neither Berg nor
SPI directly addresses which law should
apply. However, Berg relies solely upon
Pennsylvania law in arguing for
attorneys’ fees and costs while SPI points
to both New Jersey and Pennsylvania law
on the indemnification issue. See Fleck
v. KDI Sylvan Pools, Inc., 981 F.2d 107,
117 (3d Cir. 1992) (finding that under
Pennsylvania law “an indemnitee may
recover attorney’s fees and costs incurred
in defense of the liability indemnified
against from the indemnitor”); McAdam
v. Dean Witter Reynolds, Inc., 896 F.2d
750, 777 (3d Cir. 1990) (finding that
New Jersey law requires a stronger
showing than other states in order to
overcome the presumption in New Jersey
that “attorneys’ fees are not a recoverable
item of damages”).
Inasmuch as the district court
based its denial of attorneys’ fees in part
on its finding the Berg was partially at
fault for the breach of the Equipment
Contract and Modified Agreement with
Huadu, we must remand this claim to
that court for further consideration in
light of our rejection of this finding.
First, the court should address whether
Pennsylvania or New Jersey law applies

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24
to Berg’s claim for attorneys’ fees and
costs incurred in the arbitration
proceedings, though the choice may not
be necessary if the court concludes that
they are the same or that regardless of
which state’s law applies its result would
be the same. The court also should
address the issue of successor liability
with respect to SPI to determine whether
it might have any liability for attorneys’
fees if Berg is entitled to them under
either Pennsylvania or New Jersey law.
As stated above, if SPI is not liable as a
successor to Hull under either the de
facto merger or continuation doctrines,
then Section 7.8 of the Asset Purchase
Agreement bars any liability against it,
including liability for attorneys’ fees and
costs.
As for the claim of attorneys’ fees
against Hull (and SPI should the district
court find it liable as a successor to
Hull), the district court erred in stating
that “since Berg Chilling was equally
liable with the Defendants herein, each
must bear its own costs and counsel
fees.” Berg, 2003 WL 21362805, at *11.
Berg had not brought a motion for
attorneys’ fees incurred in the present
action. Rather, it sought attorneys’ fees
and costs from the arbitration
proceedings which arose out of the
dispute involving the freeze drying
equipment. As explained above, if on
remand the district court determines that
either Hull or SPI has a duty to
indemnify Berg, such indemnification
should include the reasonable attorneys’
fees and expert witness fees incurred in
the arbitration proceedings.
The district court found that Berg
was not entitled to attorneys’ fees
because it failed to represent Hull and
SPIs’ interests adequately in the
arbitration.37 We reject this basis for
denying Berg’s claim for attorneys’ fees.
Berg’s entitlement vel non for attorneys’
fees from Hull and SPI is grounded on its
claim for indemnification. If Berg is
entitled to indemnification from Hull,
SPI or both, then the district court must
analyze whether, under New Jersey or
Pennsylvania law, such indemnification
includes the attorneys’ fees and expert
witness fees incurred by Berg in the
arbitration proceedings. Any
consideration of the adequacy of Berg’s
representation of Hull and SPI in the
arbitration proceedings is irrelevant.
37We question the district court’s
conclusion that inasmuch as Berg’s
testimony was “that the freeze dryers
were improperly designed [the]
testimony did not represent the interests
of Hull Corporation.” While the court’s
view of the testimony may be accurate,
we do not believe that the viability of an
indemnification claim for fees and costs
should depend on the indemnitee
disregarding the facts in the applicable
proceeding. In short, if, as clearly was
the case, Hull improperly designed the
equipment then Berg was not required to
fabricate a defense in the arbitration
proceedings to justify its claim for
indemnification.

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Moreover, it is significant that
even though Hull and SPI had received
notice of the arbitration proceedings,
both stood on the sidelines during them
requiring Berg to defend the equipment.38
Now Hull and SPI have engaged in
Monday morning quarterbacking in
assailing the defense provided by Berg.
The record clearly shows that given the
circumstances in which it found itself
Berg defended the deficient machinery as
best it could. The district court should
not have rewarded Hull and SPI for their
lack of participation in the arbitration
proceedings.
SPI further contends that the
attorneys’ fees and costs which Berg
expended were unreasonable. If the
machinery was as deficient as Berg
claimed before the district court, then, in
SPI’s view, Berg spent an unreasonable
amount of money defending machinery
that according to Berg was indefensible.
Should the district court find that Berg is
entitled to attorneys’ fees, it must
determine the appropriate amount to
award. The district court should conduct
a thorough analysis of the attorneys’ fees
and costs expended by Berg in the
arbitration proceeding to determine
whether they were reasonable and to
issue an appropriate award.
E. JOINT AND SEVERAL
LIABILITY
Berg maintains that the district
court erred in failing to hold Hull and
SPI jointly and severally liable for the
$333,000 each party was required to pay
to Berg. In its Memorandum and Order,
the district court stated that “Berg
Chilling has not provided any persuasive
authority for holding defendants jointly
and severally liable in a breach of
contract action when the plaintiff has
also been shown to have been at fault.”39
Berg, 2003 WL 21362805, at *11 n.16.
Therefore, the district court entered
judgment in favor of Berg and against
Hull in the amount of $333,333 and in
favor of Berg and against SPI for the
same amount.
We need not address this issue at
this time because we hold that under
Section 7.8 of the Asset Purchase
Agreement SPI is not liable for the
defective freeze drying machinery and
the issue of joint and several or only
several liability ultimately may not be
material in this case. As stated above, on
remand the district court must address
Berg’s claim that SPI is liable as a
successor to Hull under the de facto
38However, at one point SPI did write
a letter to Berg putting forth various
arguments that it should use in defending
the freeze dryers during the arbitration
proceedings. Berg’s president testified at
trial that Berg did in fact assert some of
these defenses in the arbitration.
39As explained above, the district court
erred in finding Berg partially at fault.

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merger and continuation doctrines. If,
after conducting this analysis the court
finds that SPI is liable, it should make
detailed findings of fact and conclusions
of law as to whether SPI and Hull should
be held jointly and severally liable.40 On
the other hand, if the district court finds
that SPI is not liable to Berg as a
successor to Hull under either the de
facto merger or continuation doctrines,
then SPI would have no liability and the
issue of joint and several liability would
be moot.
F. THE EQUIPM ENT CREDIT
As stated above, when Berg
entered into a Settlement Contract with
Huadu, in addition to making a payment
of $1,000,000, it agreed to permit Huadu
to retain the freeze drying equipment. In
the Settlement Contract Berg and Huadu
agreed that in their current condition the
freeze dryers should be valued at
$650,000. The court rejected Berg’s
claim for damages predicated on the
$650,000 Equipment Credit, stating that
Berg “has not established that this
amount accurately reflects the value of
the equipment. In addition, even if the
$650,000 figure were accurate, it does
not take into account the costs Berg
Chilling would have incurred in
retrieving the equipment and/or finding
another purchaser for the equipment.”
Berg, 2003 WL 21362805, at *11.
Berg maintains that this finding
was clearly erroneous. In support of this
argument, Berg contends that the best
evidence of the value of the equipment
was the $650,000 value agreed to by it
and Huadu in their arms-length
negotiation. Berg contends that Huadu
had an incentive to set the lowest
possible value for the equipment because
it was entitled to receive additional
moneys from Berg only if Berg was
successful in this action and made a
recovery in excess of $1,650,000, a
figure representing Berg’s payment to it
in cash and Huadu’s right to retain the
equipment. Thus, if the value had been
less Huadu would have been more likely
to share in a recovery in this action as its
threshold for participation would have
been reduced pro tanto. Berg further
argues that because the freeze dryers
were purchased from Hull for
$1,150,000, and they could produce
quality product at lower through-puts,
$650,000 was a reasonable value for the
equipment. Finally, Berg points to the
fact that neither Hull nor SPI offered any
40In denying Berg’s claim that SPI and
Hull should be held jointly and severally
liable the district court did not address
whether Pennsylvania or New Jersey law
applies. Furthermore, the court did not
analyze the prevailing case law or
explain the reasons for denying relief to
Berg. On remand it will have an
opportunity to conduct such an analysis
and reach a conclusion in accordance
with our instructions if the issue is
germane and its resolution is necessary.

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evidence to refute the $650,000 figure
and that their position at trial was that the
equipment complied with the contract
specifications.
As might be expected, SPI
contends that the district court’s denial of
the $650,000 claim for damages was not
clearly erroneous. It argues that Berg
failed to proffer sufficient evidence as to
the value of the equipment and as a result
the district court correctly declined to
engage in “guess work.” SPI’s br. at 49.
We recognize that damages must
be proven to a reasonable degree of
certainty, Pugh v. Holmes, 405 A.2d 897,
909-10 (Pa. 1979); William B. Tanner
Co., 528 F.2d at 271-72, though absolute
precision is not required. Bigelow v.
RKO Radio Pictures Inc., 327 U.S. 251,
264, 66 S.Ct. 574, 579-80 (1946).
Considering the governing legal
principles and the evidence presented at
trial, we conclude that the district court’s
denial of the $650,000 in damages was
clearly erroneous. While it is true that
Berg did not supply evidence with
respect to the value of the equipment
apart from the figure it negotiated with
Huadu for the Settlement Contract, still
in the unusual circumstances here in
which it was clearly in Huadu’s interest
to value the equipment at the lowest
possible value in order to enhance its
chances of sharing in a possible district
court recovery in this case the district
court should have had confidence in that
figure. Furthermore, if the methodology
for computation of damages is accepted,
i.e. damages in the amount of the agreed
valuation of the equipment, then
damages were established with precision.
We have not lost sight of the
reality that it undoubtedly would have
been expensive for Berg to recover the
equipment, a point SPI advances.41
Nevertheless we think that it would
prove too much to deny Berg a recovery
by reason of that circumstance. After all,
any time that an entity makes a payment
in kind it relieves itself of expenses
relating to the item involved. For
example, if an entity settles a dispute by
conveying real estate the entity will
relieve itself of expenses for taxes,
maintenance and insurance. But still it is
fair to say that the value of the real estate
reflects the amount of the settlement.
Thus, we will not deny Berg the
$650,000 recovery on the theory that it
saved money by leaving the equipment
with Huadu.42
41SPI contends that except for Huadu’s
retention of the equipment Berg would
“have been contractually required to
remove the freeze dryers from Huadu’s
facilities.” SPI’s br. at 49. SPI,
however, does not refer to the contractual
provision that imposes this duty. But
even if it is correct our result would be
the same.
42Berg points out that Huadu and Berg
were aware that Berg avoided costs by
not having to take possession of the
equipment and this factor “presumably
[was] considered by [them] in their arms-

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Overall, we are satisfied that
inasmuch as there was no valid reason to
reject the claim for damages predicated
on the value of the equipment, the district
court’s decision rejecting damages
predicated on the Equipment Credit was
“completely devoid of minimum
evidentiary support displaying some hue
of credibility or bears no rational
relationship to the supportive evidentiary
data.” Kool, 300 F.3d at 353 (citation
omitted). Thus, we will reverse it.43
III. CONCLUSION
We will reverse the order of the
district court entered June 11, 2003, to
the extent that we have explained and
will remand the matter to the district
court for further proceedings. The court
erred in finding Berg equally at fault
with Hull and SPI and indeed at fault at
all. We therefore will remand this case
for the district court to vacate that
portion of its decision holding Berg
equally at fault for Huadu’s damages or
at fault at all. Inasmuch as the district
court’s denial of attorneys’ fees to Berg
was based in part on its faulty finding
that Berg was partially culpable for the
defective freeze dryers, we must remand
that claim as well for further
consideration in light of our opinion.
The district court also erred in its
interpretation of Section 7.8 of the Asset
length negotiations in which they arrived
at the market value of $650,000.” Berg’s
br. at 62.
43Actually there is another possible
basis to reject Berg’s claim. Berg asserts
that it had “rights to [the] equipment”
and relinquished them to Huadu as a
portion of the settlement. See, e.g.,
Berg’s reply br. at 43. It squarely bases
this right on its “payment of the
[arbitration] award.” Berg’s br. at 3.
While it is true that under the arbitration
award if Berg had paid Huadu the cash
awarded it could have taken the freeze
dryers back, this recapture merely would
have lessened the value of Huadu’s
recovery. Yet when Berg settled by
paying the $1,000,000 and allowing
Huadu to retain the equipment, it is not
clear that it gave up anything it had a
right to reclaim as it appears that Huadu
had paid 97% of the purchase price
specified in the Equipment Contract and
thus we do not understand why Berg
under the contract could have reclaimed
the equipment. Of course, once the
settlement was reached the parties’ rights
under the arbitration award were
superseded. Viewed from this
perspective by giving up the equipment
Berg suffered no damage and thus, other
than for its expenses its damages were
only $1,000,000 not $1,650,000. But we
make no ruling on this point for while
SPI contends that Berg did not show that
it was entitled to the $650,000 in
damages related to the Equipment Credit,
SPI predicates this contention on a theory
relating to the possible value of the
equipment and not on the theory we
advance.

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29
Purchase Agreement between Hull and
SPI, and as a result incorrectly held SPI
liable for breach of the Equipment
Contract and Modified Agreement.44
Under Section 7.8 of the Asset Purchase
Agreement, SPI did not agree to assume
any liability as to third-party claimants
such as Berg for any machinery shipped
prior to the closing of the agreement.
Because the district court made this
finding, it did not address Berg’s claims
that SPI was liable as a successor to Hull
under the de facto merger and
continuation doctrines. Accordingly, we
will remand this matter for the court to
consider SPI’s successor liability on
these theories and, if it is liable, also to
consider Berg’s claim that Hull and SPI
should be held jointly and severally liable
to it.
The court also erred in denying
SPI’s claim for indemnification from
Hull and we accordingly will reverse the
order for judgment to the extent it did so.
Under Section 8.2(c) of the Asset
Purchase Agreement, Hull was obligated
to defend and indemnify SPI as to any
“liability or obligation of Seller.” On
remand, the district court should vacate
the order denying indemnification and
should enter judgment in favor of SPI
and against Hull on SPI’s
indemnification claim. The district court
in entering the judgment should
determine the reasonable attorneys’ fees
and costs which SPI expended in
defending this litigation and issue an
award pursuant to Section 8.5 of the
Asset Purchase Agreement in its favor
and against Hull.
We also find that Berg is entitled
to indemnification from Hull and we will
reverse the order for judgment to the
extent that it denied that claim and will
remand the matter to the district court to
enter a judgment for indemnification.
But Berg’s claim for indemnification
from SPI must await the determination of
the district court on remand on Berg’s
successor liability arguments under the
de facto merger and continuation
doctrines. Finally, we will reverse the
judgment to the extent that it denied Berg
recovery of damages based on the
$650,000 Equipment Credit and will
reverse the order of the district court to
the extent that it denied these damages.
As between themselves Berg and
SPI shall bear their own costs on this
appeal but costs shall be taxed in favor of
each of them against the Hull
Corporation. 44Berg maintains that Section 7.8 is
void as against public policy. Inasmuch
as the district court incorrectly
interpreted that provision it never
reached this issue. On remand, the
district court should address Berg’s
argument.

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