In re Old Carco LLC

500 B.R. 683, 2013 WL 5951858, 2013 Bankr. LEXIS 4732, 58 Bankr. Ct. Dec. (CRR) 193
CourtUnited States Bankruptcy Court, S.D. New York
DecidedNovember 8, 2013
DocketCase No. 09-50002 (SMB)
StatusPublished
Cited by12 cases

This text of 500 B.R. 683 (In re Old Carco LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Old Carco LLC, 500 B.R. 683, 2013 WL 5951858, 2013 Bankr. LEXIS 4732, 58 Bankr. Ct. Dec. (CRR) 193 (N.Y. 2013).

Opinion

Chapter 11

MEMORANDUM DECISION DENYING MOTION TO ENFORCE PRIOR ORDERS AND PREVENT FURTHER VIOLATIONS

STUART M. BERNSTEIN, United States Bankruptcy Judge:

Prior to bankruptcy, the plaintiff Rhonda Masquat commenced a class action against Old Careo LLC f/k/a Chrysler LLC (“Chrysler”) relating to a defect in its vehicles. Chrysler and Masquat subsequently entered into a stipulation pursuant to which Chrysler agreed to relief from the stay, Masquat agreed to limit any recovery to insurance coverage and Masquat otherwise waived the class’s claims against the estate. Discovering that there is no insurance, Masquat intends to use any judgment against Chrysler as a predicate to sue the manufacturer of the defective component, TRW Automotive US, LLC and TRW Automotive Holdings, Corp. (collectively, “TRW’).

TRW has moved to prevent Masquat from using the judgment as the predicate to sue TRW, and seeks a declaration that the use of the judgment for that purpose is void as violative of the stipulation and the confirmation order. For the reasons that follow, the Court denies the motion but with certain limitations noted at the end of this decision.

BACKGROUND

At all relevant times, Chrysler was engaged in the business of manufacturing and selling motor vehicles. Between 1993 and 2004, Chrysler sold vehicles that included a power rack and pinion steering system known as a “center take off’ system. (.Motion of TRW Automotive US, LLC and TRW Automotive Holdings, Corp. to Enforce and Prevent Further Vio-[687]*687lotion of Prior Orders of This Court, dated August 9, 2013 (“TRW Motion ”), Ex. A, at 6-7 (“First Amended Petition”) (ECF Doc. #8201).) TRW manufactured the steering system and sold it to Chrysler pursuant to purchase agreements dated 1987, 1994 and 2000 (collectively, the “Agreements”).1 (Opposition of Rhonda Masquat to Motion of TRW Automotive USAA [sic] LLC and TRW Automotive Holdings, Corp. to Enforce and Prevent Further Violation of Prior Orders of This Court, dated August 20, 2013 (“Masquat Opposition ”), at ¶¶ 9-10 (ECF Doc. # 8207).)

The Agreements, which are governed by Michigan law, imposed insurance and indemnification obligations on TRW that ran in favor of Chrysler. First, TRW was required to “provide ... comprehensive general liability ... insurance in amounts and coverages sufficient to cover all claims hereunder.” (Id., Ex. 3, at ¶ 11(a); accord Ex. 4, at ¶ 11(a); Ex. 5, at ¶ 10.) Second, two of the Agreements required TRW to name Chrysler as an additional insured under the policies. (Id., Ex. 3, at ¶ 11(a); accord Ex. 4, at ¶ 11(a).) Third, each of the policies required TRW to “defend, indemnify, and hold Chrysler harmless against all claims, liabilities, losses, damages and settlement expenses in connection with any breach by Seller of these general conditions or for injury or death of any person and damage or loss of any property” resulting from TRW’s omission or negligence. (Id., Ex. 3, at ¶ 11(b); accord Ex. 4, at ¶ 11(b); Ex. 5, at ¶ 10.) Thus, TRW had the duty to procure appropriate insurance and name Chrysler as an additional insured (in two of the Agreements) (collectively, the “TRW Insurance Obligations”) and indemnify Chrysler (the “TRW Indemnity Obligation”).

On January 28, 2005, Masquat filed a class action against Chrysler in the Oklahoma state court (the “Litigation”). (See TRW Motion, Ex. A.) The complaint centered on Chrysler’s sale of vehicles with the defective steering system, (id., at pp. 7-14 of 33), and asserted two counts: breach of express warranty and breach of implied warranty. (Id., at pp. 14-15 of 33.)2 The proposed class consisted of all entities and adult persons residing in the United States or the District of Columbia who had purchased or leased at least one model year 1993-2001 automobile marketed as the Dodge Intrepid, Eagle Vision, Chrysler New Yorker, Chrysler LHS, Chrysler Concorde or Chrysler 300M. The proposed class expressly excluded any person who had suffered personal injuries from a steering system failure. (See id., at p. 5 of 33.) The trial court certified the class with some additional exclusions, approved the appointment of Masquat as class representative, and Oklahoma Supreme Court affirmed. Masquat v. DaimlerChrysler Corp., 195 P.3d 48, 51, 58 (Okla.2008).

The debtors (collectively “Chrysler”) filed chapter 11 petitions in this Court on April 30, 2009. The bankruptcy automatically stayed the Litigation, and Masquat moved for relief from the automatic stay. According to her motion, she sought to continue the action against Chrysler as a nominal defendant in order to access cer[688]*688tain insurance that Masquat believed covered Chrysler’s liability. (Motion of Rhonda Masquat for Relief from the Automatic Stay Pursuant to 11 U.S.C. § 362, dated Nov. 19, 2009, at ¶¶1-2.)3 She maintained that the manufacturer of the steering system, who she did not name, had acquired insurance coverage for Chrysler and was required to name Chrysler as an additional insured relating to claims connected with the manufacture of defective parts. {Id. at ¶¶ 10-11.)

Chrysler did not respond to the motion, and instead, the parties entered into a stipulation that resolved it. {See Stipulation and Agreed Order Granting Rhonda Masquat, as Class Representative, Limited Relief from the Automatic Stay, dated Jan. 6, 2010 (the “Stipulation ”).)4 The Stipulation modified the automatic stay to the limited extent of allowing the class plaintiffs and “any insurer under any Policy” to prosecute or defend against the Litigation. {Id. at ¶ 1.) It permitted the class plaintiffs to enforce any judgment or settlement only by pursuing the proceeds of the Policy (defined as the insurance policy procured by the supplier of the steering system that named Chrysler as an additional insured and covered the claims asserted in the Litigation), {id. at ¶¶ 2, D), but Chrysler represented that it was not in possession of any Policy and could not represent that a Policy existed. {Id. at ¶ E.) The Stipulation expressly prohibited the class plaintiffs from enforcing any judgment or settlement from, or imposing any costs, expenses or other burdens on Chrysler, the estate or its property, and the class plaintiffs waived and agreed not to file any claim against the Chrysler estate relating to the Litigation. {Id. at ¶ 3.) Finally, the Stipulation could not be modified, altered, amended or vacated without the prior written consent of all parties. {Id. at ¶ 7.)

Chrysler subsequently confirmed its Second Amended Joint Plan of Liquidation (the “Plan”). {Order Confirming Second, Amended Joint Plan of Liquidation of Debtors and Debtors in Possession, as Modified, dated Apr. 23, 2010 {“Confirmation Order”) (ECF Doc. # 6875).)5 The Confirmation Order included the following pertinent provisions:

1. The property of the estate vested in the Liquidating Trust created under the plan free and clear of any claims, liens, encumbrances, charges and other interests of creditors except as otherwise provided in the plan or the Confirmation Order. {Confirmation Order, at ¶ 23.)

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Bluebook (online)
500 B.R. 683, 2013 WL 5951858, 2013 Bankr. LEXIS 4732, 58 Bankr. Ct. Dec. (CRR) 193, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-old-carco-llc-nysb-2013.