SGS U.S. Testing Co. v. Takata Corp.
| Decision Date | 06 April 2016 |
| Docket Number | Civ. No. 09-6007 (KM) |
| Parties | SGS U.S. Testing Company, Inc., Plaintiff, v. TAKATA CORPORATION, TK HOLDINGS, INC., TAKATA, INC., TAKATA RESTRAINT SYSTEMS, INC., TAKATA SEAT BELTS, INC., TK-TAITO, LLC, and JOHN DOE COMPANIES (1-50), Defendants. |
| Court | U.S. District Court — District of New Jersey |
The plaintiff, SGS U.S. Testing Company (formerly U.S. Testing Company, or USTC), tested seatbelts for the defendants, Takata Corporation and its affiliates (collectively, "Takata"). Multiple lawsuits were brought against either or both, claiming that the testing was inadequate and the seatbelts substandard. None of the lawsuits were successful. SGS seeks from Takata indemnification of the costs of defense of those actions. District Judge Dennis M. Cavanaugh granted summary judgment to Takata on Count II of the complaint (common law indemnity), and he also dismissed Count I (breach of contract) and Count III (breach of the implied covenant of good faith and fair dealing) for failure to state a claim. The United States Court of Appeals for the Third Circuit affirmed summary judgment for defendant on Count II, but reversed the dismissals of Counts I and III, and remanded for further proceedings. (ECF nos. 94, 94-1) After Judge Cavanaugh's retirement, the matter was reassigned to me. (ECF no. 103) Now before the Court are cross-motions of Takata (ECF no. 121) and SGS (ECF no. 122), pursuant to Fed. R. Civ. P. 56, for summary judgment on the remaining counts, Counts I and III. For the reasons expressed herein, the motion of Takata will be conditionally granted, and the motion of SGS will be conditionally denied, reserving only the apportionment issue, as provided in Section III.A.4, infra.
SGS is an independent testing laboratory. From 1985 through 2002, SGS contracted with Takata, a seatbelt manufacturer, to perform representative sample safety tests under Federal Motor Vehicle Safety Standard 209 ("FMVSS 209"). Among the items tested were samples of Takata's TI-22 series ejector spring buckle. (PSMF ¶¶ 1-6, DSMF ¶¶ 1-7) As relevant here, the SGS testers would perform a "partial engagement" test. That is, they would attempt to induce a "false latch," a condition wherein the belt appears to be fully latched, but is not. (DSMF ¶¶ 14, 15) In such a case, the testers would measure the "release force" required to disengage the buckle. (DSMF ¶ 17)
The fee for each test was in the range of $2000 to $2500. Each time SGS undertook to perform testing for Takata, it issued an order form, containing "Terms and Conditions" which evolved over time. (PSMF ¶ 8)
The 1986 Terms and Conditions contained the following indemnification provision:
[Takata] agrees, in consideration of [SGS's] undertaking to perform the test program hereunder, to protect, defend, indemnify, save harmless and exonerate [SGS] from any and all claims, damages, expenses either direct or consequential for injuries to persons or property arising out of or in consequence of the performance of the testing or inspections hereunder and/or the performance of the products tested or inspected hereunder.
(PSMF ¶ 9)
The 1995 Terms and Conditions contained the following indemnification provision:
[Takata] AGREES, IN CONSIDERATION OF SGS USTC UNDERTAKING TO PERFORM THE TEST(S) OR PROGRAM HEREUNDER, TO PROTECT, DEFEND, INDEMNIFY, SAVE HARMLESS AND EXONERATE SGS USTC FROM ANY AND ALL CLAIMS, DAMAGES, EXPENSES EITHER DIRECT OR CONSEQUENTIAL FOR INJURIES TO PERSONS OR PROPERTY ARISING OUT OF OR IN CONSEQUENCE OF THE PERFORMANCE OF THE TESTING OR INSPECTIONS HEREUNDER AND/OR THE PERFORMANCE OF THE PRODUCTS TESTED OR INSPECTED HEREUNDER UNLESS CAUSED BY THE NEGLIGENCE OF USTC.
The 2000 Terms and Conditions contained the following indemnification provision:
THE CLIENT [Takata] SHALL GUARANTEE, HOLD HARMLESS AND INDEMNIFY THE COMPANY [SGS] AND ITS OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS AGAINST ALL CLAIMS MADE BY ANY THIRD PARTY OR LOSS DAMAGE OR EXPENSE OF WHATSOEVER NATURE INCLUDING REASONABLE LEGAL EXPENSES AND HOWSOEVER ARISING RELATING TO THE PERFORMANCE, PURPORTED PERFORMANCE OR NONPERFORMANCE, OF ANY SERVICES TO THE EXTENT THAT THE AGGREGATE OF ANY SUCH CLAIMS RELATING TO ANY ONE SERVICE EXCEED THE LIMIT MENTIONED IN CONDITION 9 [relating to fee paid by Takata to SGS].
Starting in 2002, six actions were filed2 concerning SGS's testing of seatbelt assemblies, particularly the "partial engagement test." (DSMF ¶ 4) In those class actions, the plaintiffs essentially claimed that the partial engagement test was required by FMVSS 209, but that SGS stopped performing it because the Takata belts could not pass, and then falsified results. Those results were allegedly passed back to Takata, which passed them along to the auto makers that purchased the belts. (DSMF ¶¶ 28-42)
SGS tendered written requests for indemnification and defense at or near the time the actions were filed. (PSMF ¶¶ 18, 19; DR ¶¶ 18, 19) Takata declined, in letters stating, inter alia, that the parties' agreements did not require it to indemnify SGS for SGS's own intentional or negligent acts. (PSMF ¶ 20; DR ¶ 20) SGS therefore conducted its own defense. (PSMF ¶ 22; DR ¶ 22)
Takata alleges that the genesis of the claims lay in the deposition testimony of SGS employees. (DSMF, PR ¶¶ 11-24) Particularly pertinent was the testimony of Frank Pepe, Director of Standard Testing and Material Evaluation for SGS. Pepe stated that a 1986 recorded release result of one half pound signified a false latch, and an actual release force of one half pound. (DSMF, PR ¶¶ 13-16) Then, in the 1990s, SGS allegedly stopped performing the test. (E.g., DSMF, PR ¶¶ 24-25, 39) Takata and SGS appear to agree that this was a misinterpretation; what happened was that, when a false latch was not achieved, the technicians would make a nominal entry of one half pound, because the Department of Transportation would not accept "not applicable." (DSMF, PR ¶¶ 20-23)
The allegations focus primarily on one class action, Zavala, which went to a bench trial (DSMF, PR ¶¶ 28, 29, 37-49) The judge entered a decision absolving Takata and SGS of all liability. (ECF no. 75-24; DSMF, PR ¶ 52).
In Fernandez, Takata and SGS were initially named as defendants, but eventually dismissed. In Lohman, Takata was never served, and the case was eventually dismissed against SGS. (DSMF, PR ¶ 52 n.5)
In the remaining actions, SGS was not named as a defendant, although some included allegations regarding its testing. Price, an action by an individual, went to trial, ending with a jury verdict in favor of Takata and an automobile manufacturer. (ECF no. 75-26) In Stevic, all claims against Takata and an automobile manufacturer were dismissed for lack of standing. (ECF no. 75-28) Baggett resulted in a voluntary dismissal as against Takata. (ECF no. 75-25)
In short, the defense of all of these actions was entirely successful. Neither SGS nor Takata was found negligent or held liable. (PSMF ¶ 26; DR ¶ 26) That success, at least in some cases, required SGS to defend itself factually, by introducing evidence that it had not skipped required tests and had not falsely reported results. (See DSMF, PR ¶¶ 38-49)
Federal Rule of Civil Procedure 56(a) provides that summary judgment should be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Kreschollek v. S. Stevedoring Co., 223 F.3d 202, 204 (3d Cir. 2000).
In determining whether there is a "dispute as to any material fact," a court must construe all facts and inferences in the light most favorable to the nonmoving party. See Boyle v. Cnty. of Allegheny Pa., 139 F.3d 386, 393 (3d Cir. 1998). The moving party bears the burden of establishing that no genuine issue of material fact remains. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). "[W]ith respect to an issue on which the nonmoving party bears the burden of proof ... the burden on the moving party may be discharged by 'showing'—that is, pointing out to the district court—that there is an absence of evidence to support the nonmoving party's case." Celotex, 477 U.S. at 325.
Once the moving party has met that threshold burden, the non-moving party "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The opposing party must present actual evidence that creates a genuine issue as to a material fact for trial. Anderson, 477 U.S. at 248; see also Fed. R. Civ. P. 56(c) (). "[U]nsupported allegations ... and pleadings are insufficient to repel summary judgment." Schoch v. First Fid. Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990); see also Gleason v. Norwest Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001) (). If the nonmoving party has failed "to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial, ... there can be 'no genuine issue of material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Katz v. Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex, 477 U.S. at 322-23).
In determining whether a party is "entitled to judgment as a matter of law" in this diversity case, I must apply State...
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