Bennett v. FCA US et al

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	:
: 	Chapter 11
OLD CARCO LLC, et al., 	:
: 	Case No. 09-50002 (SMB)
Debtors. 	:
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:
MAKENNA BENNETT, 	:
:
Plaintiff, 	:
: 	Adv. Pro. No. 18-01035 (SMB)
– against – 	:
:
FCA US LLC, et al., 	:
:
Defendants. 	:
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MEMORANDUM DECISION
DENYING MOTION TO DISMISS
A P P E A R A N C E S:
EISENBERG, GILCHRIST & CUTT
215 South State Street, Suite 900
Salt Lake City, Utah 84111
Eric S. Olson, Esq.
Of Counsel
Attorneys for Plaintiffs
SULLIVAN & CROMWELL LLP
125 Broad Street
New York, NY 10004
Brian D. Glueckstein, Esq.
Of Counsel
Attorneys for Defendant FCA US LLC
STUART M. BERNSTEIN
United States Bankruptcy Judge:
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Plaintiff Makenna Bennett (“Plaintiff”) filed an action seeking, inter alia, to
recover compensatory damages from FCA US LLC f/k/a Chrysler Group, LLC (“New
Chrysler”) arising from a 2015 accident involving a 2004 Dodge Durango (the “Vehicle”)
in which she was a passenger. 1 New Chrysler has moved to dismiss the claims based on
negligence and failure to warn as alleged in her second cause of action, arguing that they
are barred by this Court’s order (the “Sale Order”)2 approving the sale of substantially
all of the assets of Old Carco LLC f/k/a Chrysler, LLC and its debtor affiliates
(collectively “Old Chrysler”) free and clear of all liens, claims and interests to New
Chrysler. (See Motion of FCA US LLC to Dismiss Complaint’s Second Cause of Action,
dated Apr. 13, 2018 (“Motion”) (ECF Doc. # 11); see also FCA US LLC’s Reply in
Support of Its Motion to Dismiss Complaint’s Second Cause of Action, dated May 11,
2018 (“Reply”) (ECF Doc. # 16).) 3 The Plaintiff opposes the Motion, contending that the
Second Cause of Action asserts claims that are not barred by the Sale Order. (See
Memorandum in Opposition to Motion of FCA US LLC to Dismiss Complaint’s Second
Cause of Action, dated Apr. 24, 2018 (“Plaintiff’s Opposition”) (ECF Doc. # 15).)
For the reasons that follow, the Motion is denied.
1 	The Plaintiff originally sought punitive damages as well, but dismissed her demand for punitive
damages with prejudice. (ECF Doc. # 1, Ex. 53.)
2 	The Sale Order is attached as Exhibit A to the Declaration of Brian D. Glueckstein in Support of
FCA US LLC’s Motion to Dismiss Complaint’s Second Cause of Action, dated Apr. 13, 2018 (“Glueckstein
Declaration”) (ECF Doc. # 12.)
3 	“ECF Doc. #” refers to the electronic docket in this adversary proceeding. “ECF Main Case Doc.
#” refers to the electronic docket in Case No. 09-50002 (SMB).
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BACKGROUND
According to the Complaint, 4 the Plaintiff was a passenger in the front seat of the
Vehicle when, on July 9, 2015, the tread/belt separated from the rear tire, the driver lost
control and the Vehicle went off the road and rolled. (¶¶ 6, 9-10.) 5 The Plaintiff was
wearing a seat belt, (¶ 17), but nonetheless sustained serious injuries as the result of the
accident, including a broken neck and a spinal cord injury that left her paralyzed. (¶ 15.)
The Plaintiff commenced this action against New Chrysler on or about June 22,
2017 in the United States District Court for the District of Utah. 6 The Complaint alleges,
in substance, that the Vehicle was not reasonably crashworthy due to defects in the
design, manufacture, marketing, warning, assembly and/or testing. (¶¶ 51, 53, 57, 69.)
It includes five causes of action: strict liability (First Cause of Action, ¶¶ 37-55),
negligence (Second Cause of Action, ¶¶ 56-70), breach of express warranty (Third Cause
of Action, ¶¶ 71-73), breach of implied warranty of merchantability (Fourth Cause of
Action, ¶¶ 74, 72-73) 7 and breach of the implied warranty of fitness for a particular
purpose (Fifth Cause of Action, ¶¶ 74-77).
New Chrysler filed a motion for partial summary judgment in the Utah District
Court to dismiss, inter alia, the Plaintiff’s conduct-based negligence and failure to warn
4 	A copy of the Complaint is annexed as Exhibit D to the Glueckstein Declaration.
5 	“(¶ _)” refers to the paragraphs in the Complaint.
6 	The Complaint names as defendants numerous New Chrysler affiliates as well as some of the
debtors in these chapter 11 cases (collectively, “Old Chrysler”). As used in this decision, New Chrysler
refers to the entity that purchased substantially all of the assets of Old Chrysler pursuant to the
agreements and the Sale Order described in the succeeding text.
7 	These paragraphs were misnumbered, and the paragraph numbers repeat in the Third and Fifth
Causes of Action.
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claims, and subsequently filed a motion to transfer venue to allow this Court to interpret
and enforce the Sale Order and the Master Transaction Agreement (“MTA”) pursuant to
which Old Chrysler sold substantially all of its assets to New Chrysler. On February 7,
2018, the Utah District Court issued a decision and order (the “Utah Decision”) 8
granting New Chrysler’s motion to transfer venue, and transferred the entire civil action
to this Court. Because the Sale Order and MTA, as amended, only affected the legal
viability of the Plaintiff’s Second Cause of Action, the Court subsequently severed the
Second Cause of Action, retained that claim pending the adjudication of the issues
relating to the Sale Order, and transferred the balance of the action back to the Utah
District Court. (Order Severing Second Cause of Action and Transferring Remainder
of Case, dated Mar. 23, 2018 (ECF Doc. # 9).)
New Chrysler has moved to dismiss only the Second Cause of Action arguing that
the Plaintiff’s negligence claim, including the failure to warn claim, is barred by the Sale
Order. To answer the question, it is necessary to consider the terms of the Sale Order
and the MTA, as amended.
A. 	The Bankruptcy Sale
On April 30, 2009, Old Chrysler filed these chapter 11 cases. That same day, Old
Chrysler and New Chrysler entered into the MTA 9 by which New Chrysler agreed to
purchase substantially all of the assets of Old Chrysler. The Bankruptcy Court approved
8 	A copy of the Utah Decision is attached as Exhibit E to the Glueckstein Declaration.
9 	A copy of the MTA is attached as Exhibit B to the Glueckstein Declaration.
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the transaction set forth in the MTA with certain immaterial amendments, and the sale
closed on June 10, 2009 the (“Closing Date”).
The Sale Order authorized the transfer of the purchased assets “free and clear of
all Claims except for Assumed Liabilities” (as defined in the MTA) and free of successor
liability. (Sale Order ¶ 9.) It stated, in pertinent part:
Except for the Assumed Liabilities expressly set forth in the
Purchase Agreement or described therein or Claims against any Purchased
Company, none of the Purchaser, its successors or assigns or any of their
respective affiliates shall have any liability for any Claim that (a) arose
prior to the Closing Date, (b) relates to the production of vehicles prior to
the Closing Date or (c) otherwise is assertable against the Debtors or is
related to the Purchased Assets prior to the Closing Date. . . . Without
limiting the foregoing, the Purchaser shall not have any successor,
derivative or vicarious liabilities of any kind or character for any Claims . .
. now existing or hereafter arising, asserted or unasserted, fixed or
contingent, liquidated or unliquidated.
(Sale Order ¶ 35 (emphasis added); see also ¶¶ 39, 42.) The MTA reinforced this
limitation on assumed liabilities, and in particular, the exclusion of any liabilities
relating to vehicles produced and sold by Old Chrysler prior to the Closing Date:
Assumption of Liabilities. On the terms and subject to the conditions
and limitations set forth in this Agreement, at the Closing, Purchaser shall
assume, effective as of the Closing, and shall timely perform and discharge
in accordance with their respective terms, the Assumed Liabilities and no
others. For purposes of this Agreement, “Assumed Liabilities” means
(without duplication) each of the following Liabilities of Sellers existing as
of immediately prior to the Closing: . . .
(h) all Product Liability Claims arising from the sale after the Closing of
Products or Inventory manufactured by Sellers or their Subsidiaries in
whole or in part prior to the Closing. . . .
(MTA § 2.08(h) (emphasis added).) The MTA broadly defined a Product Liability Claim
as:
any Action arising out of, or otherwise relating to in any way in respect of
claims for personal injury, wrongful death or property damage resulting
from exposure to, or any other warranty claims, refunds, rebates,
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property damage, product recalls, defective material claims, merchandise
returns and/or any similar claims, or any other claim or cause of action
with respect to, Products or items purchased, sold, consigned, marketed,
stored, delivered, distributed or transported by [Old Chrysler].
(MTA Definitions Addendum, at p. 90, as amended by Amendment No. 1 to MTA, at ¶
36.)
Section 2.09 of the MTA enumerated the Excluded Liabilities. They essentially
covered any liability that was not one of the Assumed Liabilities under the MTA. “[F]or
avoidance of doubt,” these included “all Product Liability Claims arising from the sale of
Products or Inventory prior to the Closing,” (MTA § 2.09(i) (emphasis added), and “all
Liabilities in strict liability, negligence, gross negligence or recklessness for acts or
omissions arising prior to or ongoing at the Closing.” (MTA § 2.09(j) (emphasis
added).) “Liabilities” was defined to mean “any and all debts, liabilities and obligations
of any kind whatsoever, whether asserted or unasserted, accrued or fixed, contingent or
absolute, determined or determinable, or otherwise, including those arising under any
Law, Action or Governmental Order and those arising under any Contract.” (MTA
Definitions Addendum, at p. 87.) In short, the Sale Order and original MTA excluded
any Liabilities, including Product Liability Claims, relating to any vehicle manufactured
by Old Chrysler unless it was sold by New Chrysler.
Subsequent to the Sale Order, however, New Chrysler agreed to expand the
category of Assumed Liabilities. By Stipulation and Order, dated Nov. 19, 2009
(“Amendment No. 4,” and with the MTA, the “Amended MTA”), the parties amended
section 2.08(h) to the MTA to expand New Chrysler’s liability for Product Liability
Claims. (ECF Main Case Doc. # 5988.) Under the Amended MTA, New Chrysler
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assumed liability for post-Closing Date accidents involving vehicles manufactured and
sold by Old Chrysler before the Closing Date. Assumed Liabilities now included:
(i) all Product Liability Claims arising from the sale after the Closing of
Products or Inventory manufactured by Sellers or their Subsidiaries in
whole or in part prior to the Closing and (ii) all Product Liability
Claims arising from the sale on or prior to the Closing of motor
vehicles . . . solely to the extent such Product Liability Claims (A) arise
directly from motor vehicle accidents occurring on or after Closing, (B)
are not barred by any statute of limitations, (C) are not claims including
or related to any alleged exposure to any asbestos-containing material
or any other Hazardous Material and (D) do not include any claim for
exemplary or punitive damages.
(Amendment No. 4, ¶ 1 (emphasis added).)10 A corresponding change to section 2.09(i)
of the MTA was made to exclude liability for “all Product Liability Claims arising from
the sale of Products or Inventory on or prior to the Closing that are not described in
Section 2.08(h).” (Id., ¶ 2) (emphasis added.) Finally, paragraph 3 of Amendment No.
4 reiterated that except for the changes made by the amendment, the exclusion of
liabilities under the original MTA remained in place:
Except as expressly provided herein, all of the terms and provisions in the
MTA are and shall remain in full force and effect, on the terms and subject
to the conditions set forth therein. This Amendment does not constitute,
directly or by implication, an amendment or waiver of any provision of the
MTA, or any other right, remedy, power or privilege of any party to the
MTA, except as expressly set forth herein.
(emphasis added.) Hence, and in contrast to the MTA, the Amended MTA added
to the list of Assumed Liabilities compensatory damages arising from post-
Closing accidents involving a motor vehicle sold by Old Chrysler prior to the
Closing. All other Excluded Liabilities under the MTA remained unchanged.
10 	Copies of the November 19, 2009 Stipulation and Order and Amendment No. 4 are annexed to
the Glueckstein Declaration as Exhibit C.
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The Sale Order also acknowledged New Chrysler’s obligation to comply with the
National Transportation and Motor Vehicle Safety Act (“NTMVSA”), as applicable to the
business of New Chrysler after the Closing, and New Chrysler further
agreed to assume as Assumed Liabilities under the Purchase Agreement
and this Sale Order the Debtors’ notification, remedy and other obligations
under 49 U.S.C. §§ 30116 through 30120 of the NTMVSA relating to
vehicles manufactured by the Debtors prior to the Closing Date that have a
defect related to motor vehicle safety or do not to [sic] comply with
applicable motor vehicle safety standards prescribed under the NTMVSA.
The Purchaser shall not otherwise be liable for any failure by the Debtors
to comply with the provisions of the NTMVSA.
(Sale Order ¶ EE.) Aside from any obligations that the NTMVSA might impose relating
to safety concerns, New Chrysler did not undertake a contractual obligation to repair
any defects in cars manufactured by Old Chrysler, Grimstad v. FCA US LLC (In re Old
Carco LLC), Adv. Pro. No. 16–01204 (SMB), 2017 WL 1628888, at *4 (Bankr. S.D.N.Y.
Apr. 27, 2017), except to the extent required by the factory or extended warranties, and
in those cases, New Chrysler’s obligation is limited to the cost of parts and labor. 11
Burton v. Chrysler Group, LLC (In re Old Carco LLC), 492 B.R. 392, 398 (Bankr.
S.D.N.Y. 2013).
B. 	The Motion
New Chrysler has moved to dismiss the Second Cause of Action pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure, made applicable to this adversary
proceeding by Rule 7012 of the Federal Rules of Bankruptcy Procedure. The principal
issue is whether a claim based on negligence as alleged in the Second Cause of Action is
11 	Given the age of the Vehicle at the time of the accident (over ten years), I assume that any factory
or extended warranty had expired long before the sale. In any event, the Complaint does not assert a
repair claim under a factory or extended warranty.
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barred by the Sale Order and the Amended MTA. The Vehicle was manufactured and
sold by Old Chrysler, the accident occurred post-Closing, and the Plaintiff is now
seeking only compensatory damages. The broad definition of Product Liability Claims
in the original MTA was never modified, and her Second Cause of Action would seem to
come within the scope of the Assumed Liabilities added by Amendment No. 4. New
Chrysler nevertheless argues, in the main, that the negligence and failure to warn claims
alleged in the Second Cause of Action are based on Old Chrysler’s “conduct” rather than
its “products,” (see Motion at ¶ 2), and New Chrysler never assumed liability based on
Old Chrysler’s “conduct.” (Motion at ¶ 3 (“FCA US agreed to assume certain limited
liabilities with respect to Old Chrysler products but did not generally assume liabilities
with respect to the conduct of Old Chrysler or its employees. . . . There is no basis to
force FCA US to defend claims based on Old Chrysler’s conduct. . . .”) (emphasis in
original).)
DISCUSSION
The legal standard governing the Motion requires some brief discussion. The
standard that governs a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) is a familiar one. Briefly, “[t]o survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations omitted);
accord Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). In addition to the
four corners of the complaint, a court may consider documents subject to judicial notice,
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including, in this case, the Sale Order, the MTA and the amendments to the MTA.
Burton, 492 B.R. at 402.
While these principles apply to the Motion, the Court’s role is more limited. It
acts a “gatekeeper,” and must determine whether the Amended Complaint purports to
allege a claim that is barred by the Sale Order or the Amended MTA. If the claim passes
the gate, the non-bankruptcy court presiding over the action must decide if any
surviving claim is a legally sufficient claim under applicable non-bankruptcy law. See
Dearden v. FCA US LLC (In re Old Carco LLC), 582 B.R. 838, 843 (Bankr. S.D.N.Y.
2018); In re Motors Liquidation Co., 568 B.R. 217, 231 (Bankr. S.D.N.Y. 2017).
The issue raised by the Motion is whether the Sale Order, but more particularly
the Amended MTA, excludes liability for negligence. The answer requires the
interpretation of the Amended MTA, which is governed by New York law. 12 The initial
inquiry asks “whether the contract is unambiguous with respect to the question disputed
by the parties.” Law Debenture Trust Co. of New York v. Maverick Tube Corp., 595
F.3d 458, 465 (2d Cir. 2010) (quoting Int’l Multifoods Corp. v. Commercial Union Ins.
Co., 309 F.3d 76, 83 (2d Cir. 2002)). In interpreting a contract and considering whether
ambiguities exist, words should not be read in isolation; a contract’s terms should be
examined in the context of the whole agreement. Horowitz v. Am. Int’l Grp., Inc., 498
F. App’x 51, 53 (2d Cir. 2012); In re Young Broad. Inc., 430 B.R. 99, 116 (Bankr.
S.D.N.Y. 2010). Furthermore, courts must “seek to give ‘[e]ffect and meaning . . . to
every term of [a] contract.’” XL Specialty Ins. Co. v. Level Glob. Inv’rs, L.P., 874 F.
12 	New York law governs the interpretation of the MTA, (MTA § 11.08), as well as Amendment No.
4. (§ 6.)
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Supp. 2d 263, 284 (S.D.N.Y. 2012) (quoting Reda v. Eastman Kodak Co., 649 N.Y.S.2d
555, 557 (N.Y. App. Div. 1996)).
Although an ambiguity presents a question of fact, where no extrinsic evidence
exists the Court may resolve the ambiguity as a question of law. See Peterson v. Regina,
935 F. Supp. 2d 628, 635 (S.D.N.Y. 2013) (“[T]he meaning of an ambiguous agreement
as to which no extrinsic evidence exists is a question of law to be determined solely by
the court.” (citing Revson v. Cinque & Cinque, P.C., 221 F.3d 59, 66 (2d Cir. 2000));
Hartford Acc. & Indem. Co. v. Wesolowski, 305 N.E.2d 907, 909 (N.Y. 1973) (“[I]f the
equivocality must be resolved wholly without reference to extrinsic evidence the issue is
to be determined as a question of law for the court.”) The parties conceded at oral
argument that they were unaware of any extrinsic evidence that would aid in the
interpretation of the relevant provisions in the MTA or Amendment No. 4. Thus, their
meaning presents a question of law whether or not they are ambiguous.
The Plaintiff maintains that she has asserted a Product Liability Claim in the
Utah District Court that is one of the Assumed Liabilities under Amendment No. 4. A
“Product Liability Claim” includes “any Action arising out of, or otherwise relating to in
any way in respect of claims for personal injury, . . . , or any other claim or cause of
action with respect to, Products or items purchased, sold, consigned, marketed, stored,
delivered, distributed or transported by [Old Chrysler].” (MTA Definitions Addendum,
at p. 90, as amended by Amendment No. 1 to MTA, at ¶ 36.) “Products means any and
all products developed, designed, manufactured, marketed or sold in connection with
[Old Chrysler’s business] including all parts and components of the foregoing
manufactured or licensed by any Selling Group Member.” (Id.) (internal quotation
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marks omitted.) The Plaintiff’s litigation pending in the Utah District Court is an Action
that arises out of, relates to or is in respect to a claim for personal injury with respect to
a Product sold by Old Chrysler. It is, therefore, a “Product Liability Claim” within the
meaning of the MTA under any reasonable interpretation.
A “Product Liability Claim” is an “Assumed Liability” if, inter alia, if it arises
from the sale before the Closing Date of a Product manufactured by Old Chrysler or a
motor vehicle or component part manufactured by Old Chrysler and distributed and
sold as a Dodge solely to the extent that (i) the Product Liability Claim arises directly
from a post-Closing Date motor vehicle accident, (ii) is not barred by the statute of
limitations, (iii) does not relate to exposure to asbestos or other Hazardous Material and
(iv) does not include a claim for punitive damages. (Amendment No. 4, ¶ 1.) Here, the
post-Closing Date accident arises from the rollover of a Dodge Durango during a motor
vehicle accident. Old Chrysler manufactured, distributed and sold the Dodge prior to
the Closing Date. There is no assertion that the claim is barred by any statute of
limitations or involves exposure to asbestos or another Hazardous Material, and the
Plaintiff has waived her claim for punitive damages. Accordingly, the Plaintiff’s
“Product Liability Claim” is one of the “Assumed Liabilities,” under section 2.08(h) that
was withdrawn from the category of “Excluded Liabilities” under amended section
2.09(i). (Amendment No. 4, ¶ 2.)
The Motion mischaracterizes the MTA and attempts to draw a distinction
between “conduct-related” liabilities and “product-related” liabilities that is not
supported by the language of the Amended MTA. New Chrysler maintains that it
assumed liability only for “strict product liability” claims, (see Motion at ¶ 35), but that
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phrase does not appear in the Amended MTA; instead, New Chrysler assumed liability
for “Product Liability Claims.” “Product liability” refers to the “legal theory by which
liability is imposed on the manufacturer or seller of a defective product,” and “can be
based on a theory of negligence, strict liability, or breach of warranty,” B RYAN A.
GARNER , B LACK ’S L AW D ICTIONARY 1402 (2014); accord McCarthy v. Olin Corp., 119
F.3d 148 163 n. 13 (2d Cir. 1997) (“Traditionally, products liability actions have been
allowed to proceed on a number of grounds, including negligence and strict liability.”);
Voss v. Black & Decker Mfg. Co., 450 N.E.2d 204, 207 (N.Y. 1983) (“In New York, a
plaintiff injured by an allegedly defective product may seek recovery against the
manufacturer on the basis of any one or more of four theories of liability. ‘Depending on
the factual context in which the claim arises, the injured plaintiff ... may state a cause of
action in contract, express or implied, on the ground of negligence, or ... on the theory of
strict products liability.’”) (quoting Victorson v. Bock Laundry Mach. Co., 335 N.E.2d
275, 277 (N.Y. 1975)). 13 Thus, although claims based on negligence, breach of warranty
and strict liability may proceed on different theories and require different proof, id.
(“Strict products liability for design defect thus differs from a cause of action for a
negligently designed product in that the plaintiff is not required to prove that the
manufacturer acted unreasonably in designing the product. The focus shifts from the
conduct of the manufacturer to whether the product, as designed, was not reasonably
safe.”), all are still product liability claims. Moreover, New York law treats strict product
13 	The Plaintiff also argues that her negligence and failure to warn claims are product liability claims
under Utah law. (Plaintiff’s Opposition at ¶¶ 14-16.) Although Utah law may govern the question of
liability and damages, the meaning of “Product Liability Claim” must be interpreted under New York law,
the governing law selected by the parties to the MTA and Amendment No. 4. In any event, neither party
suggests that a conflict exists between the definitions of “product liability” under Utah and New York law.
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liability and negligent design liability as “functionally synonymous.” Simon v. Smith &
Nephew, Inc., 990 F. Supp. 2d 395, 406 (S.D.N.Y. 2013); accord Denny v. Ford Motor
Co., 662 N.E.2d 730, 735 (N.Y. 1995) (“[A]n assessment of the manufacturer’s conduct
[under a strict liability theory] is virtually inevitable, and, as one commentator observed,
‘[i]n general, * * * the strict liability concept of ‘defective design’ [is] functionally
synonymous with the earlier negligence concept of unreasonable designing.’” (quoting
Schwartz, New Products, Old Products, Evolving Law, Retroactive Law, 58
N.Y.U.L.Rev. 796, 803 (1983)); Giunta v. Delta Int’l Mach., 751 N.Y.S.2d 512, 515 (N.Y.
App. Div. 2002) (“To prevail on a cause of action sounding in negligent design, a
plaintiff must prove that the manufacturer failed to exercise reasonable care in
designing the product. To prevail on a cause of action sounding in strict products
liability, a plaintiff must prove that the product contained an unreasonably dangerous
design defect. . . . New York courts have deemed these concepts ‘functionally
synonymous' with respect to the manufacturer of the product.”)
New Chrysler’s contrary interpretation is derived primarily from section 2.09(j)
of the original MTA. It provides:
Purchaser shall not assume and shall be deemed not to have assumed, and
Sellers shall be solely and exclusively liable with respect to, any Liabilities
of Sellers other than the Assumed Liabilities (collectively, the “Excluded
Liabilities”). For the avoidance of doubt, the Excluded Liabilities include .
. . all Liabilities in strict liability, negligence, gross negligence or
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recklessness for acts or omissions arising prior to or ongoing at the
Closing.
(MTA § 2.09(j) (emphasis added).) Seizing on the exclusion of liability for Old
Chrysler’s “acts and omissions,” New Chrysler argues that the Amended MTA excludes
negligence claims.
New Chrysler’s interpretation ignores the phrase “other than Assumed
Liabilities” which restricts the scope of “Excluded Liabilities” under section 2.09(j).
Instead, New Chrysler reads section 2.09(j) to limit its liability for “Assumed Liabilities”
(here, the Plaintiff’s “Product Liability Claim”). (See Motion at ¶ 41 (“To the extent a
liability expressly assumed in Section 2.08 overlaps with one excluded in Section 2.09,
the MTA is clear and unambiguous that any liability assumed in Section 2.08 remains
subordinate to the express exclusions contained in Section 2.09, along with all other
provisions contained in the MTA.”) This is precisely opposite to the way section 2.09(j)
works. While section 2.09(j) excludes certain Liabilities, the exclusion is subject to and
limited by the list of Assumed Liabilities. New Chrysler’s contrary interpretation leads
to the absurd result that the Amended MTA excludes liabilities it expressly assumes. In
short, Excluded Liabilities under section 2.09(j) are subject to and limited by the
liabilities New Chrysler subsequently (and expressly) assumed under section 2.08(h) in
Amendment No. 4 rather than the other way around.
In addition, New Chrysler’s interpretation is internally inconsistent and leads to
another absurd result. Section 2.09(j), standing alone, expressly excludes liability for
claims that arose from pre-Closing Date sales based on theories of strict liability as well
as negligence. It does not distinguish between the two. If section 2.09(j) continues to
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exclude a negligence claim that nevertheless meets the definition of a “Products Liability
Claim” and became an Assumed Liability under Amendment No. 4, it should also
exclude a strict liability claim that otherwise meets the definition of a “Product Liability
Claim.” New Chrysler concedes, however, that the Plaintiff’s strict liability claim (her
First Cause of Action) is “product-related” and was assumed under Amendment No. 4.
New Chrysler has not explained the inconsistency — section 2.09(j) does not support it
— and neither the definition of Product Liability Claim nor the expansion of Assumed
Liabilities draws a distinction between the two types of claims.
Accordingly, the Motion is denied, and the Second Cause of Action is transferred
to the Utah District Court. In light of the Court’s conclusion, it is unnecessary to
consider whether the Complaint sets forth an independent claim that is based on New
Chrysler’s post-Closing Date conduct. (See Motion at ¶¶ 44-48.) Settle Order on notice.
Dated: New York, New York
June 26, 2018
/s/ Stuart M. Bernstein
STUART M. BERNSTEIN
United States Bankruptcy Judge
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