SGS U.S. TESTING COMPANY, INC. v. TAKATA CORPORATION et al
Filing
86
OPINION. Signed by Judge Dennis M. Cavanaugh on 7/24/12. (jd, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
SGS U.S. TESTING COMPANY, INC.,
Plaintiff,
v.
TAKATA CORPORATION and TK
HOLDINGS, INC.,
Defendants.
:
:
:
:
:
:
:
:
:
:
:
:
Hon. Dennis M. Cavanaugh
OPINION
Civil Action No. 09-cv-6007 (DMC)(MF)
DENNIS M. CAVANAUGH, U.S.D.J.:
This matter comes before the Court upon the Motion of Defendants Takata Corporation and
TK Holdings, Inc. (collectively, “Takata” or “Defendants”) for Summary Judgment, and upon the
Motion of Plaintiff SGS U.S. Testing Company, Inc. (“SGS” or “Plaintiff”) for Summary Judgment.
ECF Nos. 75, 76. Pursuant to FED. R. CIV. P. 78, no oral argument was heard. After carefully
considering the submissions of the parties, and based upon the following, it is the finding of this
Court that Defendants’ Motion is granted and that Plaintiff’s Motion is denied.
I.
BACKGROUND
This indemnification action concerns a series of lawsuits relating to the production and safety
testing of automotive seat belts. SGS performs independent testing on automotive restraint systems
to verify compliance with Federal Motor Safety Standard (“FMVSS”) 209.1 Defs.’ Statement of
Material Facts (“Defs.’ Statement”) ¶ 1, ECF No. 75-32; Pl.’s Response to Material Facts (“Pl.’s
Response”) ¶1, ECF No. 81-1. Takata manufactures and sells seatbelts to automobile manufacturers.
The primary issues in these Motions concern the manner in which SGS performs tests for Takata,
the business relationship between Takata and SGS, and the parties’ litigation strategies in certain
underlying lawsuits.
Since 1985, SGS has performed periodic FMVSS 209 seat belt buckle testing for Takata.
Pl.’s Statement of Material Facts (“Pl.’s Statement”) ¶ 3, ECF No. 76-1; Defs.’ Response to Material
Facts (“Defs.’ Response”) ¶ 3, ECF No. 80. A series of contracts between the parties governed their
business relationship. Pursuant to these contractual arrangements, SGS did not test every seatbelt
that Takata manufactured; rather, SGS performed what it calls “sample” or “snapshot” testing. Pl.’s
Statement ¶¶ 5, 6; Defs.’ Response ¶ 5. One part of the FMVSS 209 testing is referred to as “partial
engagement testing.” Pl.’s Statement ¶ 12; Defs.’ Response ¶ 12. A technician performing partial
engagement testing would insert the “tongue end” of a Takata seat belt buckle into the “receptacle
end” to achieve partial engagement, also known as a “false latch.” Pl.’s Statement ¶ 13; Defs.’
Response ¶ 13. If the technician achieved partial engagement, he or she would use a force gauge to
measure the pounds of force necessary to pull the buckle apart. Pl.’s Statement ¶ 14; Defs.’
Response ¶ 14. If, however, the seat belt did not partially engage, the technician could not measure
the force necessary to separate the belt tongue and receptacle end, and the test was complete. Pl.’s
Statement ¶ 15; Defs.’ Response ¶ 15. In certain instances when the seat belt did not partially
1
References to SGS include its predecessor, United States Testing Company, Inc.
(“USTC”).
-2-
engage, the technician would indicate “N.A.” or “.5 lbs” on testing forms, to show either that the test
was not applicable, or that only a nominal amount of force was required to achieve separation. Pl.’s
Statement ¶ 16; Defs.’ Response ¶ 16. SGS alleges that conflicting testimony concerning these
instances “exposed SGS to bear the expense of several lawsuits.” Pl.’s Mot. Br. 27, ECF No. 76-3.
In 1996, an SGS employee named Frank Pepe (“Pepe”) gave a deposition in Chastain v.
General Motors. Defs.’ Statement ¶ 2; Pl.’s Response ¶ 2. Pepe testified that if partial engagement
was not achieved, he would write “not applicable” on the data sheet, and that if it did occur, he or
the technician testing would measure the release force required. Defs.’ Statement ¶ 3; Pl.’s Response
¶ 3. In regards to one specific instance of testing, Pepe stated that it was “fair to say” that a
technician was not able to obtain a partial engagement since he did not write “not applicable,” but
rather noted a release force of .5 lbs. Defs.’ Statement ¶ 4; Pl.’s Response ¶ 4.
In 2000 and 2001, an SGS employee named Frank Savino (“Savino”) gave a deposition and
signed two affidavits in Castro v. Mazda Motor of America Inc., et al.. Defs.’ Statement ¶ 5; Pl.’s
Response ¶ 5. Savino testified that SGS considered the partial engagement test to be “not
applicable” to certain “ejector spring buckles,” and stopped testing those ejector spring buckles for
partial engagement in the early 1990's Defs.’ Statement ¶ 6; Pl.’s Response ¶ 6. Savino further
testified that the National Highway Traffic Safety Administration (“NHTSA”) would not allow SGS
to write “not applicable” on the data sheet, so SGS would instead write a nominal value of .5 lbs on
the data sheet. Defs.’ Statement ¶ 6; Pl.’s Response ¶ 6. Savino went on to state that if Pepe said
that if the .5 lbs figure meant there was a partial engagement and that it took .5 lbs of force to
separate the parts, then Pepe was wrong. Defs.’ Statement ¶ 7; Pl.’s Response ¶ 7.
Following the testimony of Pepe and Savino in Chastain and Castro, various plaintiffs filed
-3-
the following lawsuits underlying SGS’s indemnification claims:
Fernandez v. Takata Corp, SGS U.S. Testing Company Inc., et al., Superior Court of
Arizona, County of Maricopa, Case No. CV 2002-022227 (“Fernandez”)
Lohman v. Takata Corp., SGS U.S. Testing Company Inc., et al., 1st Judicial District
Court, County of Santa Fe, New Mexico, Case No. D-0101-CV-200201279
(“Lohman”)
Zavala v. Takata Corp., United States Testing Company, Inc., et al., Superior Court
of California, County of Los Angeles, Case No. BC 277327 (“Zavala”)
Baggett d/b/a American Motors v. Takata Corp., SGS U.S. Testing Company, Inc.,
et al., Circuit Court for the State of Tennessee, 28th Judicial District, Haywood
County, Case No. 3594 (“Baggett”)
Price v. Takata Corp, U.S. Testing Company, Inc., et al, United States District Court,
Northern District of Texas, Amarillo Division, Case No. 2:08-CV-151-J (“Price”)
Everett v. TK-Taito, LLC, Takata Seat Belts, Inc., 30th Judicial District Court of
Wichita County, Texas, Case No. 157,896A (“Everett”)
Stevic v. Nissan Motor Co., Ltd., TK Holdings, Inc. aka Takata Seat Belts, Inc., et
al., Ninth Judicial Circuit in Orange County, Florida, Case No. 06-CA-8631
(“Stevic”)
Pl.’s Statement ¶ 50; Defs.’ Response ¶ 50. SGS asserts the cases were based on allegations that
Takata’s TK-52 seatbelts were defective, and that SGS’s alleged liability for failure to perform
FMVSS 209 testing in those cases was only ancillary. Pl.’s Statement ¶¶ 50-63. SGS further asserts
that their presence in those lawsuits was caused by Takata’s alleged “misuse of SGS confidential
snapshot testing reports,” and by Takata’s revelations of this information while defending prior
lawsuits. Pl.’s Mot. Br. 22. Takata maintains, however, that the primary theory driving each of the
underlying cases was that SGS “skipped a test,” and that SGS and Takata failed to disclose this fact
to consumers. Defs.’ Response ¶ 50. Takata therefore asserts SGS’s presence in those lawsuits was
occasioned by allegations of its own independent fault.
-4-
Both Takata and SGS prevailed with defense verdicts in Zavala, and prevailed in each of the
other underlying actions either through voluntary dismissal or by a court finding that they were not
liable. Defs.’ Statement ¶¶ 45, 46; Pl.’s Response ¶¶ 45, 46. Plaintiff SGS filed the present lawsuit
on November 24, 2009, demanding common law indemnification from Takata for any and all
attorneys’ fees, litigation expenses, and other costs of suit related to SGS’s involvement. Compl.
¶¶ 33-36, ECF No. 1.2
Defendants filed their Motion for Summary Judgment on December 29, 2011. Plaintiff filed
Opposition to Defendants’ Motion on February 6, 2012. ECF No. 81. Defendants filed a Reply on
February 13, 2012. ECF No. 83. Plaintiff filed its own Motion for Summary Judgment on January
2, 2012. Defendants filed Opposition to Plaintiff’s Motion on February 6, 2012. ECF No. 79.
Plaintiff filed a Reply on February 13, 2012. ECF No. 82. The Matter is now before this Court.
II.
STANDARD OF REVIEW
Summary judgment is granted only if all probative materials of record, viewed with all
inferences in favor of the non-moving party, demonstrate that there is no genuine issue of material
fact and that the movant is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c);
Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986). The moving party bears the burden of showing
that there is no genuine issue of fact. Id. “The burden has two distinct components: an initial burden
of production, which shifts to the nonmoving party if satisfied by the moving party; and an ultimate
burden of persuasion, which always remains on the moving party.” Id. The non-moving party “may
2
This Court entered an Opinion and Order on August 3, 2010, dismissing all of
Plaintiff’s causes of action except for the common law indemnity claim. ECF Nos. 14, 15.
-5-
not rest upon the mere allegations or denials of his pleading” to satisfy this burden, but must produce
sufficient evidence to support a jury verdict in his favor. See FED. R. CIV. P. 56(e); see also
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). “[U]nsupported
allegations in [a] memorandum and pleadings are insufficient to repel summary judgment.” Schoch
v. First Fid. Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). “In determining whether there are
any issues of material fact, the Court must resolve all doubts as to the existence of a material fact
against the moving party and draw all reasonable inferences - including issues of credibility - in favor
of the nonmoving party.” Newsome v. Admin. Office of the Courts of the State of N.J., 103 F.
Supp.2d 807, 815 (D.N.J. 2000), aff’d, 51 Fed. App’x 76 (3d Cir. 2002) (citing Watts v. Univ. of
Del., 622 F.2d 47, 50 (D.N.J. 1980)).
III.
DISCUSSION
Both parties have moved for summary judgment on the sole remaining count in the
complaint, which seeks common law indemnity. “[C]ommon-law indemnity [is] an equitable
doctrine that allows a court to shift the cost from one tortfeaser to another.” Promaulayko v. Johns
Manville Sales Corp., 562 A.2d 202, 205 (N.J. 1989). “The right to common-law indemnity arises
‘without agreement, and by operation of law to prevent a result which is regarded as unjust or
unsatisfactory.’” Id. (citing W. KEETON, D. DOBBS, R. KEETON, & D. OWENS, PROSSER & KEETON
ON THE LAW OF TORTS §
51 at 341 (5th ed. 1984).
Application of New Jersey’s law of indemnification is often a troublesome task. New Jersey
law creates a right to indemnification in two situations: (1) explicitly by contract; or (2) when a
special relationship between the parties demonstrates that indemnification should be implied. Allied
-6-
Corp. v. Frola, No. 87–462, 1993 WL 388970 at *10 (D.N.J. Sept. 21, 1993). “In either instance,
however, a party is entitled to indemnification only if it demonstrates that it is free of fault and its
liability is purely constructive, secondary or vicarious.” Id. (citing Merrill, Lynch, Pierce, Fenner
& Smith, Inc. v. Staiman, 771 F.Supp. 102, 105 (M.D.Pa.1991); Ramos v. Browning Ferris Indus.,
Inc., 510 A.2d 1152, 1158 (N.J. 1986)). As for the special relationship requirement, while “the case
law is not exhaustive, examples of special relationships are: principal-agent, employer-employee,
lessor-lessee, and bailor-bailee.” In re Tarragon Corp., No. 2010 WL 3928496 at *5 (Bankr. D.N.J.
Oct. 1, 2010) (citing Ramos, 510 A.2d at 1158). Further, certain New Jersey case law indicates that
a right to indemnification may be implied in the absence of a specific contractual agreement, and
even when a special relationship is not present between the parties, where one party is entirely free
of fault. See Adler’s Quality Bakery, Inc. v. Gaseteria, Inc., 159 A.2d 97 (N.J. 1960) (focusing on
statutory imposition of absolute liability on airplane owner while finding owner factually free from
fault). Later New Jersey decisions have indicated that to the extent that this case law recognizes an
indemnity claim in the absence of a special relationship, it “illustrates the proposition that it is
extremely difficult to state any general rule or principle as to when indemnity will be allowed and
when it will not.” Ramos, 510 A.2d at 1158 (internal citations and quotation marks omitted).
A party forced to defend claims for which its liability is only vicarious is entitled both to the
cost of the judgment and to the costs of defense occasioned by the indemnitor’s fault. Mantilla v.
NC Mall Associates 770 A.2d 1144, 1149 (N.J. 2001) (quoting Central Motor Parts Corp. v. E.I.
duPont deNemours & Co., Inc., 596 A.2d 759, 761 (N.J. Super Ct. App. Div. 1991)). A finding of
vicarious liability is important, however, as “an indemnitee who has defended against allegations of
its independent fault may not recover its costs.” Id. In Mantilla, the New Jersey Supreme Court
-7-
recognized that “reported cases diverge on the question [of] what it means for a party to defend
against allegations of its independent fault, . . . and how to determine whether the party has done so.”
770 A.2d at 1149 (internal citations omitted). Although “[s]ome decisions suggest that courts should
look to the pleadings to find the answer[,]” the Court held “the better decisions, whose principles
we hold shall apply in New Jersey, take an after-the-fact approach and permit an indemnitee’s
recovery of counsel fees ‘so long as the indemnitee is [adjudicated] free from active wrongdoing
regarding the injury to the plaintiff and has tendered the defense to the indemnitor at the start of the
litigation.’” Id. at 1149-50 (internal citation omitted).
The parties agree that the relationship between SGS and Takata does not fall within one of
the four commonly cited examples of special relationships that would confer a right of common law
indemnity. Takata relies on Savino’s description of SGS as “an independent testing company,” and
states that SGS is an independent company “that, for a price, performs testing to verify a product’s
compliance with FMVSS 209. That is the relationship between SGS and the Takata Defendants,
nothing less, nothing more.” Defs.’ Mot. Br. 19, ECF No. 75-33. Takata further relies upon
admonitions of New Jersey case law that implied indemnification is a “narrow doctrine” that
excludes many business relationships from coverage, such as vendor-vendee relationships. Defs.’
Opp’n Br. 19 (citing Robinson v. Rheon Automatic Machinery Co., LTD, No. 10-1916, 2011 WL
832241, at *2 (D.N.J. March 3, 2011)). Takata therefore relies heavily on the description of SGS as
an “independent testing company,” and asserts that the relationship between Takata and SGS does
not rise to the level of a “special relationship” for indemnity purposes.
SGS, meanwhile reminds the Court that “the application of common law indemnification is
context-sensitive and the absence of a special legal relationship is not necessarily dispositive.” Pl.’s
-8-
Opp’n Br. 10 (citing In re Tarragon Corp., 2010 WL 3928496 at *10, n.9) (emphasis in original).
SGS goes on to assert that the special relationship in this case derives from the parties’ “longstanding
business relationship that [has] developed during more than thirty (30) years.” Pl.’s Opp’n Br. 10
(internal quotations omitted). SGS contends that this special relationship arises from the numerous
contracts between the parties, and is evidenced by Takata’s reliance on SGS employees such as
Savino in its own legal defense. Pl.’s Opp’n Br. 10-12.
Neither party’s argument on this issue is particularly compelling; an understandable result
considering that nebulous set of rules governing this type of action. Both parties rely heavily on
descriptions of the other as either an “independent testing company,” or one that has reaped the
rewards of a “longstanding business relationship.” SGS’s position takes a more detailed view of the
particular facts of this case, as shown by its discussion of Takata’s use of Savino and other SGS
employees for its legal defense. The Court is mindful, however, that implied indemnification by way
of a special relationship is a “narrow doctrine” that is not frequently stretched beyond the examples
of principal-agent, employer-employee, lessor-lessee, and bailor-bailee. See, e.g., Allied Corp. v.
Frola, 730 F.Supp. 626, 639 (D.N.J. 1990) (refusing to recognize special relationship where no
lessor-lessee relationship existed in fact) (abrogated on other grounds).
In truth, the actual relationship between SGS and Takata appears closer to the vendor-vendee
relationship rejected by the courts of New Jersey than to any of the four commonly accepted
relationships. SGS provided a service to Takata, and Takata paid SGS for this service. The fact that
the parties engaged in this activity over a number of years does not change the fundamental structure
of this relationship. Nor is the Court convinced that Takata’s use of Savino and other SGS
employees in litigation evidences a special relationship. As Takata points out, Savino was a logical
-9-
choice for his testimony, since he is the “lab manager who directly supervises the technicians who
perform the testing, and who prepares the test reports for SGS’s clients.” Defs.’ Reply Br. 4 (internal
quotation marks omitted). Further, while SGS argues Savino’s decision not to involve SGS’s inhouse counsel with his deposition testimony indicates the closeness of the parties, Takata correctly
points to Savino’s own testimony stating that in-house counsel “knew nothing about seat belt
testing,” thus sufficiently explaining Savino’s decision. Defs.’ Reply Br. 5. SGS has therefore not
demonstrated that the relationship between the parties is a sufficiently “special relationship” to fit
within the narrow bounds of implied indemnity.
As SGS has indicated, however, the lack of a special relationship does not end this Court’s
inquiry. As noted above, in certain circumstances New Jersey courts will imply a right to
indemnification between parties who do not share a special relationship where the indemnitee is
entirely free of fault. The lone cases cited to by SGS for this proposition, however, contains
markedly different facts. In Alder’s Quality Bakery, Inc. v. Gaseteria, Inc., the Supreme Court of
New Jersey permitted the owner of an airplane that crashed into a television tower to maintain an
indemnity claim against the party in possession of the tower. 159 A.2d at 109. Rather than focus
on the absence of a special relationship between the indemnitor and the indemnitee, the Court’s
Opinion instead considered the imposition of absolute liability on the airplane owner, and held “if
the aircraft owner is able to demonstrate that he is free of fault, and that the strict liability imposed
by N.J.S.A. 6:2-7 is merely an imputed or constructive fault, then a showing of another’s sole
responsibility for the losses will entitle the aircraft owner to indemnity from the person who actually
caused the injuries originally complained of.” Id. In this matter, SGS did not face allegations
premised on absolute or strict liability.
Further, there was no showing of Takata’s “sole
-10-
responsibility for the losses,” as neither party was found to be at fault in any of the underlying
actions. Accordingly, the Court will not apply the holding of Alder to the circumstances of this case,
and will therefore not permit SGS to pursue an action for indemnification in the absence of a special
relationship.
Although not stated as such, SGS appears to advance an alternative theory of liability
throughout its papers. In addition to the suggestion that Takata is liable to SGS based on cases filed
against the parties for defective manufacturing, SGS also discusses an argument that Takata’s alleged
misuse of confidential information exposed SGS to potential liability in the underlying lawsuits.
Pl.’s Mot. Br. 22-23. There are two problems with this theory. First, this Court has rejected the
notion that Plaintiff’s reports “were never meant to be used by Defendant for any purpose” as an
argument that “strains credulity.” May 4, 2011 Opinion 7, ECF No. 57. Accordingly, the suggestion
that Takata was the primary defendant because its use of those reports exposed SGS to liability also
strains credulity. A second problem with this theory is that it is based on Takata’s alleged liability
to SGS, and not to the original plaintiffs. This District has already considered and rejected such a
proposition. See Joint Meeting of Essex and Union Counties v. Parsons Engineering-Science, Inc.,
No. 02-5116, 2005 WL 2416979, at *6 (D.N.J. Sept. 29, 2005) (agreeing with assertion that “claims
for indemnification are sustainable based on a third-party defendant’s liability to the original
plaintiff, not to the third-party plaintiff, regardless of the theory of liability asserted against it.”).
SGS’s arguments on this front suffer from the same problems as their arguments on the special
relationship: permitting SGS to recover for indemnification on such a theory would stretch the
narrow doctrine of implied indemnity beyond its intended borders. Accordingly, SGS is not entitled
to indemnification from Takata.
-11-
IV.
CONCLUSION
For the foregoing reasons, Takata’s Motion for Summary Judgment is granted, and SGS’s
Motion for Summary Judgment is denied. An appropriate Order accompanies this Opinion.
S/ Dennis M. Cavanaugh
Dennis M. Cavanaugh, U.S.D.J.
Date:
Orig.:
cc:
July 24 , 2012
Clerk
All Counsel of Record
Hon. Mark Falk, U.S.M.J.
File
-12-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?