In re Old Carco LLC
| Citation | 636 B.R. 347 |
| Decision Date | 27 January 2022 |
| Docket Number | Case No. 09-50002 (MG) |
| Parties | IN RE: OLD CARCO LLC, et al., Debtors. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York |
GIBBONS P.C., Attorneys for FCA US LLC, One Pennsylvania Plaza, 37th Floor, New York, New York 10119, By: Robert K. Malone, Esq., Brett S. Theisen, Esq. (NJ Ofc)
CLARK HILL PLC, Attorneys for FCA in MDL Action, 500 Woodward Avenue, #3500, Detroit, Michigan 48226, By: John Berg, Esq.
PODHURST ORSECK, P.A., Attorneys for MDL Plaintiffs, One S.E. 3rd Avenue, Suite 2300, Miami, Florida 33131, By: Peter Prieto, Esq., Matthew P. Weinshall, Esq., -and-
STUTZMAN BROMBERG ESSERMAN PLIFKA, 2323 Bryan Street, Suite 2200, Dallas, Texas 75201, By: Peter D'Apice, Esq., Sander L. Esserman, Esq., Kaitlyn Fletcher, Esq.
This opinion addresses important issues about the gatekeeping role of a bankruptcy court that is asked to interpret and enforce a section 363 sale order that provided for a free and clear sale of a debtor's assets. FCA US LLC's ("FCA"), the section 363 purchaser of most of Old Chrysler's assets, is a defendant in a multi-district litigation involving Takata airbags that is pending in a federal district court in Florida. FCA raised the free and clear sale issue with the Florida district court in 2015, and again in a motion to dismiss filed in the Florida district court in 2018. As explained below, this Court and the Florida district court have concurrent jurisdiction to interpret the sale order. The Florida district court granted FCA's motion to dismiss in part and denied it in part, but the district court decision is not a final judgment. Dissatisfied with the result in Florida, FCA now asks this Court to enforce the sale order and bar the claims against FCA in the multi-district case. The plaintiffs make clear that their claims against FCA are based solely on FCA's post-sale conduct and not on any alleged conduct of prebankruptcy Chrysler. The Court concludes below that FCA should only get one bite at the apple; the Court therefore applies permissive abstention under 28 U.S.C. § 1334(c)(1), declines to interpret the sale order and denies the motion to enforce filed in this Court.
Pending before the Court is FCA's motion to enforce ("Motion," ECF Doc. # 8560) the Order (I) Authorizing the Sale of Substantially All of the Debtors’ Assets Free and Clear of All Liens, Claims, Interests and Encumbrances, (II) Authorizing the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases in Connection Therewith and Related Procedures and (III) Granting Related Relief ("Sale Order," ECF Doc. # 3232). The Motion arises from a June 1, 2020 order that granted in part and denied in part FCA's motion to dismiss ("MDL Order," Takata MDL ECF Doc. # 3839) filed in the multi-district litigation In re Takata Airbag Product Liability Litigation , MDL No. 15-02599, Economic Loss No. 14-24009 (S.D. Fla.) (the "Takata MDL") currently pending before Judge Federico A. Moreno in the United States District Court for the Southern District of Florida (the "MDL Court").
The Motion is opposed by Plaintiffs, Chair Lead Counsel, Lead Counsel, and Plaintiffs’ Steering Committee in the Takata MDL, on behalf of the named plaintiffs in two putative class actions in the Takata MDL before Judge Moreno and subject to eventual class certification on behalf of others similarly situated (collectively, "Plaintiffs"). ("Opposition," ECF Doc. # 8568). FCA filed a reply in further support of the Motion and in response to the Opposition. ("Reply," ECF Doc. # 8572.)
On April 30, 2009, Chrysler, Inc. and certain of its affiliated debtors and debtors in possession (collectively, "Old Chrysler") filed chapter 11 petitions in this Court. (Motion ¶ 8.) Upon commencing their chapter 11 cases, Old Chrysler focused on an expedited sale of certain assets to FCA's predecessor (then known as New CarCo Acquisition LLC) (the "Sale"). (Id. ¶ 9.) On April 30, 2009, FCA entered into a Master Transaction Agreement (as amended, the "MTA") by and among FCA, Fiat S.p.A., Old Carco, and certain other sellers identified therein. (Id .)
On May 27, 2009, FCA was the successful bidder in Old Chrysler's asset sale. (Id. ¶ 11.) On June 1, 2009, the Court entered the Sale Order granting the Sale Motion and approving the transaction as set forth in the MTA. (Id .; Sale Order.) The Sale closed on June 10, 2009 (the "Closing Date" or "Closing"). (Motion ¶ 12.) 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]." (Sale Order ¶ 9.) The Sale Order provided that:
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. The Purchaser shall not be deemed, as a result of any action taken in connection with the Purchase Agreement or any of the transactions or documents ancillary thereto or contemplated thereby or the acquisition of the Purchased Assets to: (a) be a legal successor, or otherwise be deemed a successor to the Debtors (other than with respect to any obligations arising under the Assumed Agreements from and after the Closing); (b) have, de facto, or otherwise, merged with or into the Debtors; or (c) be a mere continuation or substantial continuation of the Debtors or the enterprise of the Debtors. Without limiting the foregoing, the Purchaser shall not have any successor, derivative or vicarious liabilities of any kind or character for any Claims, including, but not limited to, on any theory of successor or transferee liability, de facto merger or continuity, environmental, labor and employment, products or antitrust liability, whether known or unknown as of the Closing, now existing or hereafter arising, asserted or unasserted, fixed or contingent, liquidated or unliquidated.
(Id . ¶ 35.) The Sale Order further provides that, except for any expressly Assumed Liabilities, FCA:
shall not be liable for any claims against the Debtors or any of their predecessors or affiliates, and the Purchaser shall have no successor or vicarious liabilities of any kind or character, including, but not limited to, any theory of successor or transferee liability now existing or hereafter arising.
(Id. ¶ 39.)
The Sale Order contains an injunction directing that "all persons and entities ... holding Claims ... arising under or out of, in connection with, or in any way relating to, the Debtors, the Purchased Assets, [or] the operation of the business prior to Closing," except for Assumed Liabilities, are "forever barred, estopped and permanently enjoined from asserting such Claims against [FCA]." (Id . ¶ 12.) On November 19, 2009, the Court entered an order approving an amendment to the MTA that expanded the scope of assumed liabilities relating to Product Liability Claims to include certain motor vehicle accident claims involving vehicles sold by Old Chrysler before Closing. (Motion ¶ 14; ECF Doc. # 5988.) On April 23, 2010, the Court entered the confirmation order with respect to Old Chrysler's second amended joint plan of liquidation. ("Plan," ECF Doc. # 6875.)
The Takata MDL consolidates allegations of economic loss and personal injury related to airbags manufactured by Takata Corporation and TK Holdings and equipped in vehicles manufactured, sold, and distributed by numerous car makers, including Old Chrysler and FCA. (Motion ¶ 17.) FCA vehicles were equipped with Takata airbags containing ammonium nitrate, which creates a small explosion to inflate the airbags during a crash. (Id .) Plaintiffs in the Takata MDL are purchasers of vehicles manufactured and sold both pre-and post-Sale. (Id. ) Plaintiffs contend that when exposed to high heat and humidity, the explosion is more forceful and can cause injuries. (Id .) Approximately two dozen individuals are known to have died and hundreds have been injured because of the Takata defect that auto manufacturers failed to disclose. (Opposition ¶ 12.) The Plaintiffs allege that those who purchased or leased these vehicles understood them to be equipped with a reliable safety device and, had they known of the defect, they would not have purchased FCA vehicles, or would have paid less for them. (Id. , see also Motion ¶ 17.)
As it pertains to FCA, the Takata MDL is split into two actions: the Boyd "Consumer Action" and the Butler "Recycler Action." (Motion ¶ 18.)1 In the complaints before the MDL Court, the Plaintiffs assert claims against FCA related to (i) Old Chrysler vehicles manufactured and sold prior to the Closing Date, and (ii) vehicles manufactured and sold by FCA after the Closing Date. (Id .)
Initially, the Consumer Complaint advanced claims of thirty-three named plaintiffs—seven of whom purchased vehicles manufactured by Old Chrysler—and putative class members under (i) the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 (a "lemon law"), (ii) Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c), (iii) various states’ common law (for fraud, unjust enrichment and negligence), and (iv) various states’ statutory consumer protection laws, including for breach of implied warranty. (Id . ¶ 19.) The MDL Court dismissed (i) all of the Magnuson-Moss Warranty Act claims and (ii) all of the RICO claims. (Id . ¶ 20.) While some of the state law claims were dismissed, there are surviving claims against FCA for unjust enrichment, fraud, negligence, breach of...
To continue reading
Request your trial
-
In re Solutia, Inc.
...Further, a bankruptcy court may abstain "in favor of another federal court or tribunal, just as it can abstain in favor of a state court." Id. (quoting In re Motors Liquidation Co., 457 B.R. 288-89 (abstaining in favor of another federal court)). V. DISCUSSION A. Motion to Reopen As an init......
- In re Paduch