United States District Court, D. Delaware
In re: Federal-Mogul Global, Inc. PepsiAmericas, Inc., n/k/a Pepsi-Cola Metropolitan, Bottling Company, Inc., Appellant,
Federal-Mogul Global Inc., et al., Debtor-Appellee. No. 11-cv-813.
OPINION & ORDER
JOSEPH H. RODRIGUEZ, District Judge.
This matter comes before the Court on appeal from the Bankruptcy Court's October 27, 2010 grant of summary judgment in favor of Debtor-Appellee. The Court heard oral argument on October 17, 2013. For reasons stated that day, as well as reasons discussed below, the decision by the Bankruptcy Court is affirmed.
Before the Bankruptcy Court was a motion for summary judgment on the amended proof of claim of PepsiAmericas, Inc. ("Appellant"), filed in the bankruptcy of Federal-Mogul Global, Inc. ("Appellee"), against two of Appellee's subsidiaries, Federal-Mogul Corporation ("FMC") and Federal-Mogul Products, Inc. ("FMP"). Appellant had alleged that Appellee improperly billed shared insurance policies, giving rise to claims based on tort, conversion, and breach of the implied covenant good faith and fair dealing. The Appellee argued that no factual basis existed to substantiate the validity of Appellant's claims. The Bankruptcy Court agreed and granted summary judgment in favor of Appellee.
This dispute derives from both parties' relationship with the former Abex Corporation, a producer of brakes and other friction products that spawned countless cases of asbestos exposure. See In Re Federal-Mogul Global, Inc., 438 B.R. 787, 800 (Bankr. D. Del. 2010). The assets and liabilities of Abex Corporation were divided and sold through several mergers and acquisitions resulting Appellant and Appellee, among others, owning a portion. See In Re Federal-Mogul Global Inc., 438 B.R. at 793. That is, along with owning assets from Abex Corporation, both parties owned liabilities from asbestos-related litigation filed against Abex. Id . Both Appellant and Appellee collected proceeds from Comprehensive General Liability Insurance Policies which insured against those asbestos claims. However, Abex Corporation was not the only source of Appellee's asbestos-related liability, as it owned six other streams of such asbestos liability. See In Re Federal-Mogul Global Inc., 2007 WL 4180545, at *13-15 (Bankr. D. Del. Nov. 16, 2007). Appellant has argued that Appellee improperly collected insurance proceeds from the shared Comprehensive General Liability plans to compensate for cases deriving from its six non-Abex streams of liability, and as a result benefited from the insurance policies without indemnifying Appellant for litigation costs and expenses.
The history of the corporate relationship between the two parties is long, muddled, and thoroughly documented. This Court approves and affirms the corporate histories explained in detail in past opinions. See In Re Federal-Mogul Global Inc., 438 B.R. at 792-94; In re Federal-Mogul Global, Inc., 411 B.R. 148, 160-162 and Appendix A (Bankr. D. Del. 2008); In re Federal-Mogul Global Inc., 2007 WL 4180545, *13-15. The relevant corporate history is repeated here.
In 1968, Abex Corporation was acquired by IC Industries, Inc., predecessor to Whitman Corporation and ultimately PepsiAmericas, Inc. ("Appellant"). See In Re Federal-Mogul Global, Inc., 438 B.R. at 792-93. In 1984, IC Industries also acquired Pneumo Corporation, which it renamed Pneumo Abex Corporation ("PAC 1") in 1985. Id. at 793.
In 1988, IC Industries sold Abex Corporation and PAC 1 stock to PA Holdings Corporation, which was owned by Henley Investment Inc., a subsidiary of The Henley Group, pursuant to the 1988 Stock Purchase Agreement ("1988 SPA") in the record. Id. The 1988 SPA between IC Industries and PA Holdings Corporation was amended on August 29, 1988. In 1990, the assets and liabilities of Abex Corporation and PAC 1 were consolidated into their parent, PA Holdings. Id . By the time the second amendment to the 1988 SPA was executed on September 23, 1991, IC Industries had changed its name to Whitman Corporation. Id . Additionally, PA Holdings had undergone a name change to become another Pneumo Abex Corporation ("PAC 2"). As such, the Pneumo Abex Corporation that signed the Second Amendment to the 1988 Stock Purchase Agreement, PAC 2 formerly PA Holdings, was not the entity acquired by IC Industries in 1984. Id . The original 1988 SPA and its two amendments are referred to collectively as "the Whitman Agreements." Id. at 790.
In 1992, Henley Investments Inc., which owned PAC 2, changed its name to Abex Inc. Id. at 793. That same year, The Henley Group distributed Abex Inc. stock to its common stockholders, and transferred certain of its own assets and liabilities to PAC 2. Id. at 793 and Appendix A.
In 1994, PAC 2 sold certain assets of Abex Corporation to Wagner Electric Corporation, predecessor to FMP, pursuant to the 1994 Asset Purchase Agreement ("1994 APA") in the record. Id . Under that agreement, Wagner agreed to indemnify PAC 2 with respect to certain liabilities.
A Mutual Guaranty Agreement between Abex Inc., parent of PAC 2, and Cooper Industries, Inc., Wagner's parent, was executed on December 30, 1994, with respect to the 1994 APA. See id. In the Mutual Guaranty, Abex Inc. and Cooper guaranteed, as direct obligors and not as sureties, to each other and to each other's subsidiaries (the parties to the 1994 APA) "absolutely and unconditionally... the full and prompt payment when and as due of all amounts payable under the [APA] by such Guarantor's subsidiary which is a party to the [APA] and the full and prompt performance by such Guarantor's subsidiary which is a party to the [APA] of all its undertakings and obligations under the [APA]." Section 1. There was also an insurance agreement executed between PAC 2 and Wagner on December 30, 1994 in connection with the 1994 APA. Id. at 791.
In 1996, Wagner merged into Moog Automotive, Inc., another subsidiary of Cooper Industries, Inc. Id. at 794. Under a Purchase and Sale Agreement between Cooper and FMC, dated August 17, 1998 ("1998 P & SA"), Cooper sold its automotive products business, which included Moog, to FMC. Pursuant to the 1998 P & SA, FMC assumed Cooper's mutual guaranty obligations related to the 1994 APA for "the operation of and products manufactured or sold by the Wagner industrial brake business including" those liabilities related to asbestos in the brakes. Id . See also 1998 P & SA at Section 5.12(b), referring to Section 5.12(a)(x). Following the 1998 P & SA, Moog changed its name to Federal Mogul Products, Inc. ("FMP"). Id. at 792. FMP, therefore, was the successor to Wagner's indemnity obligation under the 1994 APA. Id . Appendix B. Thus, an asbestos-related claim arising out of the Moog friction products division received by PAC 2, a distinct entity, would have been subject to the assumed liabilities under the 1994 APA and indemnified by FMP. Id . That is, FMP undertook Wagner's obligations and FMC guaranteed FMP's performance. Id. at 794.
Beside these facts, this Court adopts the Bankruptcy Court's factual determination that Abex Corporation (not Abex Inc.), IC Industries, Whitman, Pneumo Corporation, and PAC 1 were, at one time or another, in the Appellant's corporate chain. Id. at 789. Similarly, Wagner Electric Corporation and Moog Automotive, Inc., were in the FMC/FMP corporate chain. Id . PA Holdings, The Henley Group, Abex Inc. and PAC 2 are entirely distinct entities from the corporate chains of Appellant and Appellee. Id.
Appellant has offered two groups of insurance policies that covered against Abex asbestos litigation. First, Appellant is the purchaser and first named insured for Comprehensive General Liability insurance policies purchased during the period of 1971-1985 to provide liability insurance coverage for Appellant and most of its then existing subsidiaries ("Appellant Policies"). Second, Appellant also has contractual rights to the proceeds paid from CGL insurance policies purchased by Abex Corporation prior to 1971 (herein "Pre-1971 Policies"). Appellee has never been named insured under the Appellant Policies or Pre-1971 Policies. Under the terms of the 1994 Asset Purchase Agreement, FMP claimed proceeds from the Appellant Policies and Pre-1971 Policies to compensate asbestos claims against portions ...