Parker Hannifin Corp. v. Standard Motor Prods., Inc.

• Decision Date: 23 October 2019
• Docket Number: Case No. 1:19cv00617
• Parties: Parker Hannifin Corp., Plaintiff, v. Standard Motor Products, Inc., Defendant
• Court: U.S. District Court — Northern District of Ohio

Parker Hannifin Corp., Plaintiff, v. Standard Motor Products, Inc., Defendant

Case No. 1:19cv00617

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO

October 23, 2019

JUDGE PAMELA A. BARKER

MEMORANDUM OPINION AND ORDER

Currently pending is Defendant Standard Motor Products, Inc.'s Motion to Dismiss Complaint or, in the Alternative, to Stay Proceedings. (Doc. No. 12.) Plaintiff Parker Hannifin Corporation filed a Brief in Opposition on August 19, 2019, to which Defendant replied on September 9, 2019. (Doc. Nos. 17, 18.) Plaintiff was later granted leave to file a sur-reply on September 16, 2019. (Doc. No. 20.) For the following reasons, Defendant's Motion is GRANTED IN PART and DENIED IN PART, as set forth below.

I. Procedural History

On March 20, 2019, Plaintiff Parker Hannifin Corporation (hereinafter "Parker Hannifin" or "Parker") filed a Complaint in this Court against Defendant Standard Motor Products, Inc. on the basis of diversity jurisdiction, asserting claims for breach of contract (Counts I and II), breach of the duty to defend and settle (Count III), breach of the duty of good faith and fair dealing (Count IV), breach of duty imposed by law (Count V), and declaratory judgment (Count VI). (Doc. No. 1.)

Defendant Standard Motor Products, Inc. (hereinafter "Standard Motor" or "SMP") filed a Motion to Dismiss or, in the alternative, Motion to Stay Proceedings on June 5, 2019. (Doc. No. 12.) Therein, Standard Motor argued that the Complaint should be dismissed for lack of personal jurisdiction under Fed. R. Civ. P. 12(b)(2) or, in the alternative, for failure to state a claim upon relief could be granted pursuant to Fed. R. Civ. P. 12(b)(6) with respect to all six of Parker Hannifin's claims. (Id.) In the alternative, Standard Motor requested the Court stay the instant proceedings. (Id.) Parker Hannifin filed a Brief in Opposition on August 19, 2019, to which Standard Motor replied on September 9, 2019. (Doc. Nos. 17, 18.) Parker Hannifin was later granted leave to file a sur-reply on September 16, 2019. (Doc. No. 20.)

On October 2, 2019, the Court ordered the parties to submit supplemental briefing regarding Parker Hannifin's Declaratory Judgment claim. (Doc. No. 21.) The parties timely complied on October 16, 2019. (Doc. Nos. 22, 23.)

Thus, this matter is now ripe and ready for resolution.

II. Factual Allegations

The Complaint contains the following factual allegations.¹ On August 4, 1986, Parker Hannifin and Standard Motor entered into an agreement for the sale of Parker Hannifin's EIS Division to Standard Motor (hereinafter "the 1986 Agreement"). (Doc. No. 1 at ¶ 7.) This Division was engaged in the business of manufacturing and remanufacturing brake parts for vehicle brake systems. (Id.) Specifically, during the time period that Parker Hannifin owned the EIS Division, that Division manufactured and sold automotive friction products (i.e., brake shoes), some of which were made using asbestos-containing friction lining from outside vendors. (Id. at ¶ 9.)

For a number of years prior to the 1986 Agreement, civil lawsuits were filed against Parker Hannifin alleging bodily injury as a result of alleged exposure to asbestos contained in the EIS frictionproducts. (Id. at ¶ 10.) Parker Hannifin disclosed the existence of these asbestos claims to Standard Motor during the due diligence that preceded the 1986 Agreement, and the parties expressly accounted for these types of actions in allocating liabilities arising out of post-Closing product liability claims. (Id. at ¶¶ 11, 17.)

The 1986 Agreement contains the following provisions relevant to this issue. Section 2.1 provides, in relevant part, that "at the Closing, Purchaser [i.e., Standard Motor] will assume and become directly and solely responsible for the payment or discharge of all of the Assumed Liabilities." (Id. at ¶ 12). See also Doc. No. 12-2 at PageID# 104. The term "Assumed Liabilities" is defined in Section 2.4 as "all liabilities and obligations of the Seller as of the Closing arising solely out of Seller's conduct of the Business . . . but excluding the Excluded Liabilities."² (Id. at ¶ 14.) See also Doc. No. 12-2 at PageID# 107. Section 2.4 further explains:

Without limiting the generality of the foregoing, the Assumed Liabilities will include the following liabilities and obligations (other than Excluded Liabilities) which arise or have arisen solely out of Seller's conduct of the Business at or prior to the Closing:

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(d) Except as provided in Sections 7.4 and 7.5 hereof, all liabilities and obligations arising out of, resulting from, or relating to claims, whether founded upon negligence, breach of warranty, strict liability in tort, and/or other similar legal theory, seeking compensation or recovery for or relating to injury to person or damage to property occurring after the Closing and arising out of a defect or alleged defect of a Product whether manufactured or purchased for resale by Seller before the Closing or by Purchaser after the Closing

See Doc. No. 12-2 at PageID# 107-108 (emphasis added).

Section 7.4 then goes on to specifically allocate liability relating to asbestos claims, as follows:

7.4 Asbestos Claims. Notwithstanding the allocation in Sections 2.4(d) and 2.5(c) between the parties of responsibility for claims whether founded upon negligence, breach of warranty, strict liability in tort, and/or other similar legal theory, seeking compensation or recovery for or relating to injury to persons arising out of a defect or alleged defect of a Product, the parties hereto agree that claims alleging any illness, disease, injury or other physical damage arising out of or relating in any way to alleged exposure to asbestos-containing Products asserted, in writing, on or prior to the fifteenth (15th) annual anniversary of the Closing Date shall be deemed Excluded Liabilities. Claims alleging any illness, disease, injury or other physical damage arising out of or relating in any way to alleged exposure to asbestos-containing Products asserted, in writing, after the fifteenth (15th) anniversary of the Closing Date shall be deemed Assumed Liabilities

. The special allocation provisions established in this Section 7.4 relate only to personal injury claims arising out of alleged exposure to asbestos-contained Products, are based on the parties recognition of the difficulties in establishing liability between the parties hereto as to any one Product for such claims, and shall not apply to any other type of claims, including, but not limited to, alleged asbestos-related property damages. Notwithstanding the foregoing, Purchaser shall be responsible for all claims alleging any illness, disease, injury or other physical damage arising out of or relating in any way to alleged exposure to asbestos-containing Products asserted, in writing, after the Closing Date, if claimant's first alleged exposure to asbestos-containing Products occurred after the Closing Date.

(Doc. No. 12-2 at PageID# 148) (emphasis added).

Thus, Parker Hannifin alleges that, in allocating liability arising out of post-Closing product liability claims, the 1986 Agreement expressly anticipated and accounted for potential liabilities arising from asbestos claims and distinguished those claims from other product liability claims that did not involve asbestos.³ (Doc. No. 1 at ¶ 16.) With respect to asbestos claims, Parker Hannifinalleges the Agreement is clear and unambiguous that Parker "agreed to assume 100% responsibility for any Asbestos Claim asserted in writing during the 15-year period following the Closing [i.e., from August 31, 1986 to August 31, 2001] (unless the claimant's first exposure to asbestos occurred after the Closing Date), and Standard Motor agreed, using the language in Section 2.1 of the 1986 Agreement, to 'assume and become directly and solely responsible for the payment or discharge of any Asbestos Claims asserted in writing thereafter." (Id. at ¶ 18.)

The 1986 Agreement also contains the following indemnification and duty to defend provisions relevant to this dispute:

9.1 Indemnification of Seller. Purchaser will indemnify, defend, and hold Seller harmless from and against any and all liabilities, damages, losses, claims, costs, and expenses (including reasonable attorneys' fees) arising out of or resulting from any misrepresentation or breach of warranty by Purchaser for which notice is given by Seller within the period specified in Section 3.5 hereof, Purchaser's failure to pay or satisfy or cause to be paid or satisfied any of the Assumed Liabilities when due and payable, or nonperformance of any obligations to be performed on the part of Purchaser under this Agreement.

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9.3 Claims. In the event that any legal proceedings shall be instituted or that any claim or demand shall be asserted by any person in respect of which payment may be sought by either Purchaser or Seller (the "Claimant") from the other (the "Indemnitor") under the provisions of this Article IX, the Claimant shall promptly cause written notice of the assertion of any claims of which it has knowledge which is covered by this indemnity to be forwarded to the Indemnitor, and the Indemnitor shall have the right, at its option and expense, to be represented by counsel of its choice and to defend against, negotiate, settle or otherwise deal with any proceeding, claim or demand which relates to any loss, liability, damage or deficiency indemnified against hereunder; provided, however, that the Claimant may participate in any such proceeding with counsel of its choice and at its expense. To the extent the Indemnitor elects not to defend such proceeding, claim or demand and the Claimant defends against, settles or otherwise deals with any such proceeding, claim or demand, the Claimant will act reasonably and in accordance with its good faith business judgment. The parties hereto agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any

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