TRW Automotive US, LLC v. Old Carco Liquidation Trust (In re Old Carco LLC)

529 B.R. 42
CourtUnited States Bankruptcy Court, S.D. New York
DecidedApril 13, 2015
DocketCase No. 09-50002 (SMB) (Jointly Administered); Adv. Proc. No. 14-02055 (SMB)
StatusPublished
Cited by1 cases

This text of 529 B.R. 42 (TRW Automotive US, LLC v. Old Carco Liquidation Trust (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
TRW Automotive US, LLC v. Old Carco Liquidation Trust (In re Old Carco LLC), 529 B.R. 42 (N.Y. 2015).

Opinion

MEMORANDUM DECISION GRANTING SUMMARY JUDGMENT TO PLAINTIFF

STUART M. BERNSTEIN, United States Bankruptcy Judge:

TRW Automotive US, LLC and TRW Automotive Holdings Corp. (collectively, “TRW”) initiated this adversary proceeding against Old Careo Liquidation Trust (the “Liquidation Trust”) seeking a declaration that rights purportedly assigned by the Liquidation Trust to the defendant, Rhonda Masquat, the class representative in an Oklahoma class action, had already been extinguished by prior agreement or assigned to New Chrysler, the purchaser of substantially all of the debtors’ assets. Masquat moved to intervene and to dismiss the adversary proceeding pursuant to Fed. R. Civ. P. 12(b)(6), made applicable to this proceeding by Fed. R. Bankr. P. 7012(b). Upon notice to the parties, the Court converted the motion to one for summary judgment, and for the following reasons, grants summary judgment to TRW.

BACKGROUND

The underlying facts are not in dispute. From 1993 to 2001, Old Careo LLC f/k/a Chrysler LLC (“Old Chrysler”) manufactured and sold certain motor vehicles known as the “LH platform vehicles” that [45]*45incorporated steering components manufactured by TRW. The components were supplied subject to the general terms and conditions provided in several purchase agreements with Old Chrysler, which the Complaint refers to as the “Supply Agreements.” 1 The Supply Agreements re- - quired TRW to maintain a comprehensive general liability insurance policy and to name Old Chrysler as an additional insured under the policy. (Motion to Dismiss, Ex. 2 at ¶ 11(a); Ex. 3 at ¶ 11(a).) The Supply Agreements also required TRW to indemnify and hold Old Chrysler harmless against “all claims, liabilities, losses, damages, and settlement expenses in connection with any breach by Seller [TRW] of these general conditions or for injury or death of any person and damage or loss of any property” resulting from TRW’s “act, omission or negligent work” in fulfilling the orders. (Id., Ex. 2 at ¶ 11(b); Ex. 3 at ¶ 11(b).)

In 2005, Rhonda Masquat initiated a class action against Old Chrysler in Oklahoma state court (the “Oklahoma Litigation”) for breach of express and implied warranties (“Class Claims”), alleging that the LH platform vehicles were equipped with defective power rack and pinion steering systems. (Complaint at ¶¶ 4-5.)2 Old Chrysler and affiliated entities3 filed chapter 11 petitions in this Court on April 30, 2009 (the “Petition Date”), automatically staying the Oklahoma Litigation.

A. The Sale of Old Chrysler’s Assets

Prior to the commencement of the bankruptcy cases, Old Chrysler entered into an agreement with Fiat S.p.A. and New Car-eo Acquisition LLC (collectively, “New Chrysler”) to sell substantially all of Old Chrysler’s operating assets free and clear of liens, claims and interests to New Chrysler in exchange for the assumption of certain liabilities and the payment of $2 billion in cash.4 By then, Old Chrysler owed secured debt aggregating more than $13 billion, (Sale Motion at ¶¶ 13-15), and additional trade debt of approximately $5.34 billion. (Id. at ¶ 16.) Shortly after the commencement of the chapter 11 case, Old Chrysler filed the Sale Motion to approve the transaction. Among other things, the motion sought to establish procedures for competitive bidding (the “Bidding Procedures”) and the assumption and assignment of executory contracts and unexpired leases (the “Contract Procedures”) in conjunction with the sale. The Court approved the Contract Procedures [46]*46along with Bidding Procedures by order dated May 7, 2009.5

To the extent pertinent to the pending motions, the Bidding Procedures Order required Old Chrysler to identify the exec-utory contracts and unexpired leases it intended to assume and assign (the “Designated Agreements”) and provide notice to the counterparties. (Id. at ¶ 19(a)-(c).) The Designated Agreements were among the “Purchased Assets.” (See Master Transaction Agreement, dated as of Apr. 30, 2009 (the “Purchase Agreement”), at § 2.06(a) (identifying “Assumed Contracts” as Purchased Assets).)6

The Purchased Assets also included “the claims and causes of action listed on Section 2.06(q) of the Company Disclosure Letter.” (Purchase Agreement at § 2.06(q).) Section 2.06(q) of the Company Disclosure Letter identified for assignment all claims and causes of action “arising under or related to an Assumed Contract” or “subject to Section 2.07(i) of the Master Transaction Agreement, against any party to an Assumed Contract that is a supplier ... with whom the Purchaser and/or its subsidiaries expects to have an ongoing commercial relationship .... ” (Article II Company Disclosure Letter to Master Transaction Agreement, as amended May 31, 2009).)7 Under section 2.06(j) of the Purchase Agreement, the Purchased Assets included “all defenses, counterclaims, rights of recovery, rights of setoff and rights of recoupment, in each case only to the extent primarily related to the Purchased Assets or the Assumed Liabilities,” and section 2.07(i) excluded “all of Sellers’ defenses, counterclaims, rights of recovery, rights of setoff and rights of recoupment that are not described in Section 2.06(j).” The net effect of these provisions was that New Chrysler purchased all claims, including defenses, counterclaims, rights of recovery and rights of setoff and re-coupment related to the Assumed Contracts with a supplier like TRW and Old Chrysler retained all other defenses, counterclaims, rights of recovery, rights of setoff and rights of recoupment.

On May 15, 2009, Old Chrysler filed an Assignment Notice designating certain supplier agreements,8 including its contracts with TRW. (See Assignment Notice, Annex B, at 36.) The Addendum to the Assignment Notice stated that Old Chrysler was designating all agreements with the supplier unless stated otherwise, including “all contracts, purchase orders or similar agreements providing for the sale or provision of goods or services to the [47]*47Debtors, and all related modifications, amendments, supplements, addenda and restatements thereof, related memoranda of understanding, ancillary agreements thereto and any and all similar agreements.” The Contract Procedures required the non-debtor party to object in writing. (Bidding Procedures Order at ¶ 19(g).) Objecting counterparties were obligated to meet and confer in good faith with Old Chrysler and New Chrysler, (id.), and unresolved objections would be considered by the Court at an omnibus hearing on objections to assumption and assignment. (Id. at ¶ 19(h).) Designated Agreements were deemed assumed and assigned upon resolution of an objection either by agreement of the parties or by order of the Court approving an assumption and assignment. (Id. at ¶ 19(j).) Subject to satisfaction of the conditions relating to resolution of cure or assignment disputes in ¶ 19(j), Old Chrysler was deemed to have assumed and assigned the Designated Agreement as of the date of and effective only upon the closing date of the sale. (Id. at ¶ 19(k).)

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Bluebook (online)
529 B.R. 42, Counsel Stack Legal Research, https://law.counselstack.com/opinion/trw-automotive-us-llc-v-old-carco-liquidation-trust-in-re-old-carco-llc-nysb-2015.