United States ex rel. Ceas v. Chrysler Grp. LLC, Case No.: 12–cv–2870

• Decision Date: 28 January 2015
• Docket Number: Case No.: 12–cv–2870
• Citation: 78 F.Supp.3d 869
• Parties: United States of America ex rel. William Ceas Jr. and William Ceas Jr., individually, Plaintiffs, v. Chrysler Group LLC, Defendant.
• Court: U.S. District Court — Northern District of Illinois

78 F.Supp.3d 869

United States of America ex rel. William Ceas Jr. and William Ceas Jr., individually, Plaintiffs

v.Chrysler Group LLC, Defendant.

Case No.: 12–cv–2870

United States District Court, N.D. Illinois, Eastern Division.

Signed January 28, 2015

Michael Charles Rosenblat, Michael C. Rosenblat, P.C., Northbrook, IL, AUSA, United States Attorney's Office, Clinton A. Krislov, Kenneth Todd Goldstein, Krislov & Associates, Ltd., Chicago, IL, for Plaintiffs.

Brian William Bell, Anthony Joseph Monaco, Julie D. Miller, Swanson, Martin & Bell, LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

Robert M. Dow, Jr. United States District Judge

Before the Court is Defendant's motion to dismiss [20]. For the reasons stated below, Defendant's motion to dismiss [20] is granted without prejudice. Plaintiff has 60 days to file a second amended complaint, should he so choose. If Plaintiff does not file a second amended complaint within 60 days, the Court will dismiss the case with prejudice.

I. Background¹

On April 30, 2009, Chrysler LLC, formerly known as DaimlerChrysler Corporation, and certain of its affiliates (collectively, “Old Chrysler”), filed a pre-packaged bankruptcy petition under chapter 11 in the United States Bankruptcy Court for the Southern District of New York. On that same day, in a “well-publicized transaction,”² Old Chrysler entered into a Master Transaction Agreement (“MTA”) agreeing to sell substantially all of its assets free and clear of all claims and liabilities—other than those expressly listed in the MTA (the “Assumed Liabilities”)—to defendant Chrysler Group LLC (“New Chrysler”) for $2 billion in cash. On June 1, 2009, the bankruptcy court entered an order approving the sale (the “Sale Order,” In re Chrysler LLC, No. 09–50002(AJG) (Bankr.S.D.N.Y. June 1, 2009) (ECF No. 3232)) pursuant to 11 U.S.C. § 363(f) of the Bankruptcy Code. See In re Chrysler LLC, 405 B.R. 84 (Bankr.S.D.N.Y.2009) (opinion accompanying sale order), aff'd 576 F.3d 108 (2d Cir.2009), vacated and remanded sub nom. Ind. State Police Pension Trust v. Chrysler LLC, 558 U.S. 1087, 130 S.Ct. 1015, 175 L.Ed.2d 614 (2009), dismissed as moot sub nom. In re Chrysler LLC, 592 F.3d 370 (2d Cir.2010).

On April 18, 2012, Plaintiff William Ceas, Jr. filed this qui tam False Claims Act (“FCA”) complaint [1], both individually and on behalf of the United States, alleging that New Chrysler (or, assumedly, its purported predecessors) made false statements to the United States regarding the warranties on certain vehicles that Old Chrysler sold to the United States in 2004 and 2005. Specifically, Plaintiff alleges that “Chrysler fraudulently induced the Government into purchasing * * * Chrysler vehicle[s] after the Government was advised that the vehicle[s] would have a 7 year/70,000 mile powertrain warranty,” when in fact “these vehicles purchased by the United States did not come with a 7 year/70,000 mile powertrain warranty.” [24, at 8.] The United States declined to intervene in this action pursuant to the False Claims Act, 31 U.S.C. § 3730(b)(2)(A) [6], and Ceas is continuing the action as a relator in the name of the United States. Plaintiff filed an amended complaint on July 17, 2014[12], doubling his tally of alleged False Claims Act violations from three to six. Defendant New Chrysler has moved to dismiss all six counts in Plaintiff's amended complaint [20] on the grounds that (a) Plaintiff's claims are barred by the Sales Order issued in the chapter 11 bankruptcy proceedings and, alternatively, that (b) Plaintiff failed to plead his claims with sufficient particularity as required by Federal Rule of Civil Procedure 9(b).

II. Analysis

A. Whether New Chrysler Assumed FCA Liability in the MTA

1. Assumed liabilities

As a threshold matter, in order to rule on the legal issue of whether Plaintiff's FCA claims are barred by the bankruptcy court's 2009 injunction, the Court must review and interpret the Sales Order and MTA, which describe the liabilities that New Chrysler assumed in purchasing Old Chrysler's assets. Federal Rule of Civil Procedure 12(d) says that “[i]f, on a motion under Rule 12(b)(6) * * * matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.” Fed.R.Civ.P. 12(d). The Seventh Circuit recognizes a narrow exception to this rule, see Levenstein v. Salafsky, 164 F.3d 345, 347 (7th Cir.1998), noting that the rule's purpose is to “prevent parties from surviving a motion to dismiss by artful pleading or by failing to attach relevant documents.” 188 LLC v. Trinity Indus., Inc., 300 F.3d 730, 735 (7th Cir.2002) (citation omitted). Specifically, documents that are referred to in the complaint and are central to the claim may be considered on a motion to dismiss. Albany Bank & Trust Co. v. Exxon Mobil Corp., 310 F.3d 969, 971 (7th Cir.2002) ; Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir.1993) ; Wright v. Assoc. Ins. Cos., Inc., 29 F.3d 1244, 1248 (7th Cir.1994) (discussing Venture Associates and determining that a contract on which the claim is based is central to the claim and may be considered on a motion to dismiss). A district court is also permitted to take judicial notice of public documents, including public court documents, while considering a motion to dismiss under Rule 12(b)(6). See Pierce v. Ill. Dep't of Human Servs., 128 Fed.Appx. 534, 536 n. 1 (7th Cir.2005) (citing Henson v. CSC Credit Servs., 29 F.3d 280, 284 (7th Cir.1994) ). Here, the Sale Agreement and the MTA are public documents—both via the bankruptcy court's docket and Chrysler's SEC filings—and are contracts that are central to Plaintiff's claims. Accordingly, the Court is permitted to review these documents without converting Defendant's motion to dismiss into a motion for summary judgment. See Enne n ga v. Starns, 677 F.3d 766, 774 (7th Cir.2012) ( “Taking judicial notice of matters of public record need not convert a motion to dismiss into a motion for summary judgment.”); Quincy Mall, Inc. v. Parisian, Inc., 27 Fed.Appx. 631, 636 (7th Cir.2001) (“In reviewing a motion to dismiss, we may look to matters of public record outside the pleadings, including the public court documents filed in the bankruptcy proceeding.”).

The Sale Order explicitly states that New Chrysler purchased Old Chrysler's assets “free and clear” of all “claims” (save for the Assumed Liabilities),³ whether arising before or after the petition date. [Sale Order, 21–2, at 4, 10.] The Sale Order adopted a broad, inclusive definition of “claim”:

[L]iens, claims (as such term is defined by section 101(5) of the Bankruptcy Code ), liabilities, encumbrances, rights, remedies, restrictions and interests and encumbrances of any kind or nature whatsoever whether arising before or after the Petition Date, whether at law or in equity, including all claims or rights based on any successor or transferee liability, all environmental claims, all change in control provisions, all rights to object or consent to the effectiveness of the transfer of the Purchased Assets to the Purchaser or to be excused from accepting performance by the Purchaser or performing for the benefit of the Purchaser under any Assumed Agreement and all rights at law or in equity (collectively, “Claims”) * * *.

[Sale Order, 21–2, at 4.] And the definition of “claim” in § 101(5) the Bankruptcy Code (as referenced in the Sale Order) is also broad, such that it includes FCA and other fraud claims:

(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or

(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.

11 U.S.C.A. § 101(5). And the Sale Order makes clear that the “Assumed Liabilities” are the only liabilities (and claims) that passed from Old Chrysler to New Chrysler:

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.

[Sale Order, 21–2, at 19.] Further (and somewhat redundantly) expanding on New Chrysler's limited liability pursuant to the asset purchase, the Sale Order enjoins all legal and equitable actions in conflict with the terms of the Sale Order:

Effective upon the Closing * * * all persons and entities are forever prohibited and enjoined from commencing or continuing in any matter any action or other proceeding, whether in law or equity, in any judicial, administrative, arbitral or other proceeding against the Purchaser, its successors and assigns, or the Purchased Assets, with respect to any (a) Claim other than (i) Assumed Liabilities or (ii) Claims against any Purchased Company or (b) successor liability of the Purchaser for any of the Debtors, including, without limitation, the following actions with respect to clauses (a) and (b): * * * (v) commencing or continuing any action, in any manner or place, that does not comply, or is inconsistent with, the provision of this Sale Order or other orders of this Court, or the agreements or actions contemplated or taken in respect thereof * * *.

[Sale Order, 21–2, at 20.] Plaintiff's claims relate to fraudulent statements that Old Chrysler allegedly made to the government in 2004 and 2005 regarding the warranties of certain vehicles. Plaintiff does not allege that New Chrysler ...