In re Chateaugay Corp.
| Decision Date | 25 October 1991 |
| Docket Number | 86 B 11402 (BRL) and 86 B 11464 (BRL).,Bankruptcy No. 86 B 11270 (BRL) to 86 B 11334 (BRL) |
| Citation | 132 BR 818 |
| Parties | In re CHATEAUGAY CORPORATION, Reomar, Inc., the LTV Corporation, et al., Debtors. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Kaye, Scholer, Fierman, Hays & Handler by Herbert S. Edelman, Steven E. Fox, Skadden, Arps, Slate, Meagher & Flom by Bert L. Wolff, Gary E. Crawford, Katherine Armstrong, New York City, for debtors.
Paul William Beltz, P.C. by Kevin J. Sullivan, Buffalo, N.Y., for claimants Seufert, Willis and MacNeil.
Harvey, Pennington, Herting & Renneisen by William G. Adamson, Philadelphia, Pa., for claimant Robert Rodgers.
The controversy addressed here emanates from the decision of the United States Postal Service to enter the "used car" business. On September 19, 1983 (the "Acquisition Date"), pursuant to a stock purchase agreement dated July 24, 1983, Nakoma Corporation, an indirect subsidiary of LTV Corporation ("LTV"), acquired all of the capital stock of AM General Corporation ("AM General"), a wholly owned subsidiary of American Motors Corporation ("AMC"). On September 21, 1983, Nakoma Corporation transferred the stock of AM General to LTV Aerospace and Defense Company ("LTVAD"). Since September 21, 1983, AM General has been a wholly owned subsidiary of LTVAD.
On July 17, 1986 (the "Filing Date") and thereafter, LTV, LTVAD, AM General and their affiliates each filed a petition for reorganization under chapter 11 of the Bankruptcy Code (the "Code"), and have continued in the management and possession of their businesses and assets as debtors-in-possession pursuant to §§ 1107 and 1108 of the Code. No trustee or examiner has been appointed herein.
On October 6, 1989, LTV, LTVAD and AM General on behalf of themselves and the other debtors and debtors-in-possession (collectively, the "Debtors") filed their objection (the "Objection") to 32 claims (the "Claims") which allege, inter alia, that the damages to the claimants or the claimant's decedents (the "Claimants") resulted from an occurrence involving an AM General designed and manufactured motor vehicle known as the "Postal Dispatcher".2 The Claimants allege that AM General designed and sold a vehicle that has a resistance to rollover that is lower than typical passenger cars, a characteristic which they state is a product defect known as "rollover propensity". Each of the Claims is based upon the allegedly defective design of the Postal Dispatcher and a failure to warn of risks associated with the allegedly defective design.
The Claims sound in breach of warranty (i.e., contract law), negligence, strict tort liability, or other state law theories of recovery. In order to fully understand the question at issue, it is important to summarize the substance of the Objection. Debtors assert that AM General designed, manufactured and sold over 100,000 of these vehicles to the United States Post Office and its successor, the United States Postal Service (collectively, the "Post Office") to be employed as mail delivery vehicles, pursuant to contracts with the United States government. The Debtors further allege that AM General did not sell any Postal Dispatchers to any of the Claimants referred to herein. It is also alleged that LTV and LTVAD did not design, manufacture, or sell the Postal Dispatchers, and are not proper parties against whom claims involving the Postal Dispatchers can be asserted. Moreover, the Debtors state that LTV never held any ownership interest in AM General, and that LTVAD did not acquire any ownership interest prior to the production of some units of the last model of the Postal Dispatchers manufactured by AM General. Debtors assert that LTVAD as owner of the stock of AM General was not involved in the design, manufacture, or sale of any Postal Dispatchers.
Finally, the Debtors argue that as a result of recent case law recognizing the "government contractor defense," including the decision of the Supreme Court in Boyle v. United Technologies Corp., 487 U.S. 500, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988), a government contractor cannot be held liable for defective design or failure to provide warnings, when the product was manufactured in accordance with reasonably precise specifications approved by the government. The Debtors assert that the Post Office and the United States Government approved reasonably precise specifications with regard to the Postal Dispatchers, which conformed to those specifications. The Debtors also contend that the manufacturers of the Postal Dispatchers did not know of any risks in the use of the vehicle that were not known to the Post Office and the United States Government.
On March 7, 1990, this Court held that it does have subject matter jurisdiction to determine the threshold issues of whether or not: (1) the LTV and LTVAD assertions in the Objection that the claims against them must be disallowed because they had no involvement whatsoever in the design, manufacture, or sale of Postal Dispatchers, are valid3; and (2) LTV, LTVAD, and AM General are entitled to immunity from civil liability under the government contractor defense enunciated by the Supreme Court in Boyle, supra, and, consequently, that as a matter of law, the Claims must be disallowed.4 However, this Court does not have jurisdiction to liquidate or estimate these Claims for purposes of distribution, if, as a threshold matter, it is determined that the Claims are sustainable as a matter of law. See In re Chateaugay Corp., 111 B.R. at 67.
In order to prevail on the Objection to claimants proofs of claim, Debtors have the burden of establishing in a summary judgment-type disposition that there are no genuine issues of material fact and that they are entitled to prevail as a matter of law with respect to the preclusive impact of the government contractor defense. This Court is not being called upon to determine damages based upon a finding of liability, but rather, simply that the Claims have no legal basis. The Debtors request summary judgment disallowing the claims to the extent inter alia that they allege that the Postal Dispatcher was defectively designed or that Debtors are liable for failure to warn of the risks associated with the design.
Whether this Court should grant Debtors' motion for summary judgment on objection to allowance of claims involving postal dispatchers, on the basis of the "government contractor defense" as established in Boyle.
Rule 56 of the Federal Rules of Civil Procedure states that summary judgment shall be granted to the moving party if the court determines that "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issues as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986) (quoting Fed.R.Civ.P. 56(c)). Although the movant initially bears the burden of showing that there are no genuine issues of material fact when a motion for summary judgment is made and supported by the movant, as in the instant case, Federal Rule 56(e) requires the adverse party to set forth specific facts showing that there is a genuine issue for trial. See, Resource Developers, Inc. v. The Statue of Liberty-Ellis Island Found., Inc., 926 F.2d 134 (2d Cir.1991) quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986) (). See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986) (). If he does not do so, summary judgment, if appropriate, shall be entered against him. See First National Bank of Arizona v. Service Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968); Wyler v. United States, 725 F.2d 156, 160 (2d Cir.1983).
The court is required to go beyond the mere pleadings of the parties and consider all of the admissible evidence set forth in the papers and all inferences reasonably deductible from such evidence to determine whether there is a genuine issue for trial. Schwabenbauer v. Board of Education, 667 F.2d 305, 313 (2d Cir.1981). Evidence on collateral issues that do not pertain to the basis upon which summary judgment is sought cannot defeat the motion. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986). The issue must also be genuine. Accordingly, the nonmoving party may not merely "show that there is some metaphysical doubt as to the material facts." Id. Evidence which "is merely colorable . . . or is not significantly probative" will not suffice. Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2510-11. Similarly, the nonmoving party cannot evade this burden with "vague assertions that further discovery would develop genuine issues of material fact." United States v. Bob Stofer Oldsmobile-Cadillac, Inc., 766 F.2d 1147, 1152 (7th Cir.1985).
Local Bankruptcy Rule 13(h), in pertinent part, provides:
On any motion for summary judgment pursuant to Bankruptcy Rule 7056, there shall be annexed to the notice of motion a separate, short and concise statement of the material facts as to which the moving party contends there is no genuine issue to be tried. Failure to submit such a statement constitutes grounds for...
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