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ESG Holdings, LLC v. Lear Corp.

United States District Court, D. Delaware

August 14, 2017

ESG HOLDINGS, LLC, Plaintiff,
v.
LEAR CORPORATION, Defendant.

          Michael F. Bonkowski and Nicholas J. Brannick, COLE SCHOTZ P.C., Wilmington, DE Thomas L. Shriner, Jr. and Philip C. Babler, FOLEY & LARDNER LLP, Milwaukee, WI Attorneys for Plaintiff ESG Holdings, LLC

          Robert W. Whetzel and Todd A. Coomes, RICHARDS, LAYTON & FINGER, P.A. James P. Smith III and Matthew L. DiRisio, WINSTON & STRAWN LLP, New York, NY Attorneys for Defendant Lear Corporation

          MEMORANDUM OPINION

          STARK, U.S. District Judge

         I. BACKGROUND

          In 2015, Defendant Lear Corporation ("Lear") purchased Everett Smith Group, Ltd. ("Everett") from Plaintiff ESG Holdings, LLC ("ESG"). (See generally D.I. 10-1 Ex. A ("Purchase Agreement")) As part of the deal, ESG agreed to indemnify Lear for, among other things, future losses related to Everett's potential liability for cleanup of a Superfund Site. (See D.I. 10-1 at 86 of 124) As security, the parties agreed that ESG would put $59.5 million of the sale proceeds in escrow. (See D.I. 10-1 Ex. B ("Escrow Agreement"))

         The Escrow Agreement gave Lear 18 months to seek disbursements from the escrow account by serving ESG and U.S. Bank, the escrow agent, with notice of an indemnification claim. (See, e.g., Escrow Agreement § 3(c)(i)) In the absence of such a timely claim, the funds would be disbursed to ESG. (See Id. § 3(d))

         On July 1, 2016 - four days before the close of the 18-month window - Lear sent a letter to ESG and U.S. Bank (see D.I. 10-1 Ex. C ("Notice")) informing them that Everett had received a March 31, 2016 notice of potential liability from the U.S. Environmental Protection Agency ("EPA"). In the Notice, Lear advised ESG that the EPA had informed Everett that it had selected a remedy for the Superfund Site, which was estimated to cost $1.38 billion, and expressed Lear's view that Everett "may be jointly and severally liable for the cost of implementing the remedy." (Notice at 1) Lear demanded that U.S. Bank refrain from releasing any portion of the $59.5 million in escrow.

         On July 29, 2016, ESG sent a letter objecting to Lear's Notice, which ESG contended was invalid. (See D.I. 10-1 Ex. D) As a result, the escrow funds remain frozen in U.S. Bank's possession. (See generally Escrow Agreement § 3(c)(ii))

         ESG sued Lear on August 23, 2016. (See generally D.I. 1) It seeks a declaratory judgment "to break the escrow." (D.I. 13 at 4; see D.I. 1 at 6-8) On October 4, 2016, Lear moved to dismiss. (D.I. 8) The parties completed briefing (see D.I. 9, 13, 14), and the Court heard oral argument on February 22, 2017 (see D.I. 17 ("Tr.")).

         II. LEGAL STANDARDS

         Evaluating a motion to dismiss under Rule 12(b)(6) requires the Court to accept as true all material allegations of the complaint. See Spruill v. Gillis, 372 F.3d 218, 223 (3d Cir. 2004). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat Factory Sec. Litig., 114F.3dl410, 1420 (3d Cir. 1997) (internal quotation marks omitted). Thus, the Court may grant such a motion to dismiss only if, after "accepting all well pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, [the] plaintiff is not entitled to relief." Id.

         However, "[t]o survive a motion to dismiss, a civil plaintiff must allege facts that 'raise a right to relief above the speculative level on the assumption that the allegations in the complaint are true (even if doubtful in fact).'" Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). At bottom, "[t]he complaint must state enough facts to raise a reasonable expectation that discovery will reveal evidence of [each] necessary element" of a plaintiff s claim. Wilkerson v. New Media Tech. Charter Sch. Inc., 522 F.3d 315, 321 (3d Cir. 2008) (internal quotation marks omitted). The Court is not obligated to accept as true "bald assertions, " Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997) (internal quotation marks omitted), "unsupported conclusions and unwarranted inferences, " Schuylkill Energy Res., Inc. v. Pa. Power & Light Co., 113 F.3d 405, 417 (3d Cir. 1997), or allegations that are "self-evidently false, " Nami v. Fauver, 82 F.3d 63, 69 (3d Cir. 1996).

         Although a district court ruling on a motion to dismiss generally "may not consider matters extraneous to the pleadings, " there is an exception for documents "integral to or explicitly relied upon in the complaint, " which may be considered "without converting the motion [to dismiss] into one for summary judgment." In re Burlington Coat, 114 F.3d at 1426 (internal quotation marks and emphasis omitted) (alteration in original).

         III. ...


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