Castleman v. FCA US
Filing
50
MEMORANDUM DECISION AND ORDER denying 40 Defendant's Motion to Dismiss. Signed by Judge Jill N. Parrish on 3/28/2019. (jds)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
MINDY CASTLEMAN,
MEMORANDUM DECISION AND
ORDER DENYING DEFENDANT’S
MOTION TO DISMISS
Plaintiff,
v.
Case No. 2:18-cv-00342-JNP-PMW
FCA US LLC f/k/a CHRYSLER GROUP, LLC,
District Judge Jill N. Parrish
Defendant.
Before the court is the Motion to Dismiss Plaintiff Mindy Castleman’s First Amended
Complaint and Jury Demand (“Amended Complaint”) filed by Defendant FCA US LLC (“FCA”).
ECF No. 40. For the reasons articulated below, the court denies the motion.
BACKGROUND
On May 1, 2016, Plaintiff Mindy Castleman (“Castleman”) was driving eastbound on
Interstate 70, near mile post 183, when the 2004 Jeep Grand Cherokee Laredo (the “Vehicle”) she
was driving overturned resulting in severe injury. 1 Castleman alleges that her injuries were caused
by certain design flaws and defects common to the 1999-2004 Jeep model Grand Cherokees.
Castleman filed this lawsuit against Fiat Chrysler Automobiles U.S., LLC (FCA US LLC)
(“FCA”) seeking recovery for strict product liability, negligent product liability, breach of
warranties, and for punitive damages.
The Vehicle at issue was designed and manufactured by Chrysler, LLC, DaimlerChrysler
Corporation, Old Carco LLC and its affiliates (collectively “Old Chrysler”). Plaintiff alleges that
at the time of design and manufacture, the Vehicle was “defective in its design, manufacture,
1
“Ms. Castleman was diagnosed critically with (1) paralysis; (2) cervical spine instability; (3)
multiple rib fractures; (4) left scapular fracture; (5) an orbital floor fracture; (6) lacerations on her
left kidney, scalp and elbow; and (7) multiple abrasions.” See Am. Compl. at ¶ 21.
1
testing, maintenance, advertising, selling, distribution, and introduction into the stream of
commerce.” See Am. Compl. at ¶ 8. These defects allegedly include, but are not limited to:
being supplied without important crashworthiness and protection
systems . . . , inadequate roof strength, roof structures, inadequate
roof materials, inadequate roof-crush resistance, inadequate
restraint protection systems, lack of electronic stability control, and
inadequate center of gravity and overall vehicle design rendering it
dangerously prone to roll over during foreseeable driver maneuvers.
Id. Castleman alleges that Old Chrysler knew of these defects, but intended that the Vehicle be
purchased and operated regardless of the defects.
In April 2009, Old Chrysler filed for bankruptcy protection in the United States
Bankruptcy Court, Southern District of New York. On June 1, 2009, the Bankruptcy Court entered
an order authorizing the sale of Old Chrysler’s assets to FCA (“Sale Order”) 2 pursuant to the
Master Transaction Agreement (“MTA”). The sale closed on June 10, 2009 (“Closing” or the
“Sale”). Through the Sale Order, FCA purported to proscribe liability for any product liability or
successor liability claims not explicitly assumed in the MTA:
Except for the Assumed Liabilities expressly set forth in the
Purchase Agreement . . . [t]he Purchaser shall not be deemed, as a
result of any action taken in connection with the Purchase
Agreement or any of the transactions or documents ancillary thereto
or contemplated thereby or the acquisition of the Purchased Assets,
to: (a) be a legal successor, or otherwise be deemed a successor to
the Debtors (other than with respect to any obligations arising under
the Assumed Agreements from and after the Closing); . . . [and] the
Purchaser shall not have any successor, derivative or vicarious
liabilities of any kind or character for any Claims, including, but not
limited to, on any theory of successor or transferee liability, de
facto merger or continuity, environmental, labor and employment,
products or antitrust liability, whether known or unknown as of the
2
In re Old Chrysler LLC, et al., Case No. 09-50002, Order (I) Authorizing the Sale of Substantially
All of the Debtors’ Assets Free and Clear of All Liens, Claims, Interests and Encumbrances, (II)
Authorizing the Assumption and Assignment of Certain Executory Contracts and Unexpired
Leases in Connection Therewith and Related Procedures and (III) Granting Related Relief, (“Sale
Order”) (Bankr. S.D.N.Y. June 1, 2009).
2
Closing, now existing or hereafter arising, asserted or unasserted,
fixed or contingent, liquidated or unliquidated.
Sale Order ¶ 35 (emphasis added).
On November 19, 2009, the Bankruptcy Court entered a Stipulation and Agreed Order
Approving Amendment Number 4 (“Amendment 4”) to the MTA. 3 Pursuant to Amendment 4,
FCA assumed liability for:
All Product Liability Claims arising from the sale on or prior to the
Closing of motor vehicles or component parts, in each case
manufactured by Sellers or their Subsidiaries and distributed and
sold as a Chrysler, Jeep, or Dodge brand vehicle . . . solely to the
extent such Product Liability Claims (A) arise directly from motor
vehicle accidents occurring on or after Closing, (B) are not barred
by any statute of limitations, . . . and (D) do not include any claim
for exemplary or punitive damages.
Castleman’s accident occurred in May 2016, almost five years after the Closing, in a
Vehicle designed and manufactured pre-Closing. Castleman alleges that when the Vehicle rolled,
due in part to the inherent instability of the design, the flaws in the roof structure caused the roof
to collapse, crushing the “occupant survival space.” Allegedly these defects, as well as airbag
design flaws, caused Castleman’s injuries. Castleman seeks to hold FCA liable for Old Chrysler’s
negligent conduct in designing and manufacturing the Vehicle that caused her injury under the
MTA. Castleman also seeks punitive damages for FCA’s post-Closing conduct. FCA has moved
to dismiss Castleman’s Amended Complaint in its entirety.
ANALYSIS
I.
LEGAL STANDARD
FCA moves under Fed. R. Civ. P. 12(b)(6) to dismiss Castleman’s Amended Complaint
for failure to state a claim. “To survive a motion to dismiss, a complaint must contain sufficient
3
In re Old Chrysler LLC, et al., No. 09-50002 (Bankr. S.D.N.Y. Nov. 19, 2009), Docket No. 5988.
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factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“At the motion-to-dismiss stage, [the court] must accept all the well-pleaded allegations of the
complaint as true and must construe them in the light most favorable to the plaintiff.” Albers v. Bd.
of Cty. Comm’rs of Jefferson Cty., 771 F.3d 697, 700 (10th Cir. 2014) (quoting Cressman v.
Thompson, 719 F.3d 1139, 1152 (10th Cir. 2013)). “[A] court should disregard all conclusory
statements of law [in the complaint] and consider whether the remaining specific factual
allegations, if assumed to be true, plausibly suggest the defendant is liable.” Kansas Penn Gaming,
LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011).
“In evaluating a Rule 12(b)(6) motion to dismiss, courts may consider not only the
complaint itself,” but also “documents incorporated into the complaint by reference . . . ‘if the
documents are central to the plaintiff’s claim and the parties do not dispute the documents’
authenticity.’” Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009) (quoting Alvarado v.
KOB–TV, L.L.C., 493 F.3d 1210, 1215 (10th Cir. 2007)). The court will consider the Sale Order,
the MTA, and Amendment 4. These documents are referenced in the Amended Complaint, are
central to plaintiff’s claim, and are undisputed.
Castleman’s Amended Complaint alleges four causes of action: 1) strict product liability
(“Count I”), 2) negligent product liability (“Count II”); 3) breach of warranties (“Count III”); and
4) punitive damages for FCA’s knowing, reckless, and/or intentional misconduct after the
Bankruptcy Sale Closing Date (“Count IV”). FCA moves to dismiss the Amended Complaint,
arguing that the claims are barred by the Sale Order and the MTA.
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II.
SUBSTANTIVE ANALYSIS
A. COUNTS I-III
In two brief paragraphs, FCA asks the court to dismiss Castleman’s entire Amended
Complaint because it contains a single claim for punitive damages. See Mot. Dismiss at 16. FCA
argues this is required by the language of the MTA. In Amendment 4, FCA assumed liability for:
All Product Liability Claims arising from the sale on or prior to the
Closing of motor vehicles or component parts, in each case
manufactured by Sellers or their Subsidiaries and distributed and
sold as a Chrysler, Jeep, or Dodge brand vehicle . . . solely to the
extent such Product Liability Claims (A) arise directly from motor
vehicle accidents occurring on or after Closing, (B) are not barred
by any statute of limitations, . . . and (D) do not include any claim
for exemplary or punitive damages.
(emphasis added). Under FCA’s logic, the phrase “Product Liability Claims,” as used in
Amendment 4, would not refer to a single claim, but rather to any complaint that includes product
liability claims. But FCA offers no authority to support this conclusion, and the court finds the
argument unpersuasive. Complaints can allege many different claims for relief that are not
necessarily interrelated and may be pled in the alternative. For example, a complaint could include
claims for product liability alongside claims for breach of contract, without the action being
considered only a breach of contract case. The language of Amendment 4 clearly relates to
individual claims, not to a lawsuit or complaint as a whole. The court must therefore examine each
count individually to decide if it is a Product Liability claim for which FCA assumed liability.
Counts I–III of the Amended Complaint are product liability claims arising from an
accident that occurred on May 1, 2016 (after the 2009 Closing Date) in a 2004 Jeep Grand
Cherokee Laredo, designed, manufactured, advertised, sold, warranted and delivered by Old
Chrysler prior to the Closing Date. Each of the three individual product liability claims (one for
strict liability, one for negligent product liability, and one for breach of warranty) can stand alone
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and none of the three claims include a claim for “exemplary or punitive damages.” As FCA has
not offered any other reason why Castleman’s first three counts have failed to state a claim, the
court denies FCA’s motion to dismiss Counts I-III.
B. COUNT IV: PUNITIVE DAMAGES
In Count IV, Castleman seeks “an award of exemplary and punitive damages against FCA”
to compensate her for injury allegedly caused by FCA’s “intentional misrepresentations” regarding
the Vehicle’s safety features and its knowing, reckless, and indifferent failure to “give notice, warn,
recall, retrofit, or fix the defects” in the Vehicle after the Sale. See Am. Compl. at ¶¶ 78; 74. The
parties agree that punitive damages are available in Utah. 4 But to state a claim for punitive damages
under Utah law, a plaintiff must first make a claim that would entitle her to “compensatory or
general damages” and then must allege “that the acts or omissions of the tortfeasor are the result
of willful and malicious or intentionally fraudulent conduct, or conduct that manifests a knowing
and reckless indifference toward, and a disregard of, the rights of others.” See Utah Code Ann.
§ 78B-8-201 (also stating that to be entitled to punitive damages, plaintiff must establish the second
prong “by clear and convincing evidence”). In deciding the motion to dismiss, the court must
decide whether Castleman has pled sufficient facts to state a claim for relief for punitive damages
that is plausible on its face.
FCA argues that two provisions within the Sale Order preclude liability for Castleman’s
punitive damages claim. First, FCA argues that the claims underlying the punitive damages
actually arise from FCA’s potential successor liability and that those claims are excluded by the
Sale Order. Second, FCA argues that Castleman’s claim for punitive damages based on FCA’s
post-Closing conduct is barred by Amendment 4 because the proximate cause of her injuries was
4
Although the parties do not address this issue, the parties appear to stipulate that Utah law applies
to Castleman’s claims for relief.
6
actually Old Chrysler’s pre-Closing conduct, not FCA’s post-Closing conduct. The court addresses
each argument in turn.
1. Underlying Claims
Castleman’s punitive damages claim alleges that she was harmed by FCA’s post-Sale
intentional misconduct, including intentional misrepresentations and failure to give notice, warn,
recall, retrofit, or fix the defects in the Vehicle. FCA argues that the Sale Order precludes liability
for any type of successor or derivative liability claims and because the duty to warn is a species of
successor liability claims under Utah law, Castleman has failed to state a plausible claim for relief.
a. Intentional Misrepresentation
FCA does not address whether the Sale Order precludes FCA’s liability for post-Sale
intentional misrepresentation, nor does FCA argue that Castleman failed to state a claim for
intentional misrepresentation. The court addresses this issue only so far as to hold that Castleman
can base a claim for punitive damages on an underlying claim for intentional misrepresentation by
FCA because intentional misrepresentations by FCA regarding the safety of Jeep Grand Cherokees
designed by Old Chrysler would constitute post-Sale Conduct not covered by the Sale Order. See
In Matter of Motors Liquidation Co., 829 F.3d 135, 156–7 (2d Cir. 2016) (holding that a Sale
Order cannot reach “independent claims relating only to [a successor entity’s] conduct” such as
“claims involv[ing] misrepresentations by [purchasing entity] as to the safety of [predecessor
entity’s] cars.”).
b. Duty to Warn 5
FCA admits that Utah law imposes a post-Sale duty to warn, but argues that the duty to
warn is based entirely on successor liability and thus excluded by the language of the Sale Order
5
The court addresses Castleman’s claims that FCA breached its duty to warn, recall, retrofit, and
fix under the umbrella tort of duty to warn. The parties have not argued that the claims are
7
precluding “any theory of successor or transferee liability.” See Mot. Dismiss at 14–15. The court
disagrees. The Sale Order is not so broad as to preclude FCA’s liability for post-Sale duty to warn.
The court first examines whether a duty to warn arises under Utah law. It then examines whether
the Sale Order eviscerates or modifies any such duty.
First, the court finds that liability arising from the breach of a purchasing entity’s duty to
warn is distinct from traditional successor liability. Successor liability is addressed in section 12
of the Restatement (Third) of Torts: Products Liability (1988), 6 while, a purchasing entity’s duty
to warn is addressed in section 13. Although both sections refer to “successor liability,” they are
distinct types of liability as adopted by Utah law. “Utah imposes on a successor corporation an
independent post-sale duty to warn of a predecessor corporation’s product defects under the
conditions outlined in section 13 of the Restatement (Third) of Torts.” Tabor v. Metal Ware Corp.,
168 P.3d 814, 816 (Utah 2007) (addressing the question of duty to warn under Utah law on
certification from the Tenth Circuit). This duty can be imposed “whether or not [an entity is] liable
under the rule stated in [the Restatement (Third) of Torts] § 12.” See Restatement (Third) of Torts:
Prod. Liab. § 13 (1998). The Tenth Circuit recognized this distinction in Herrod v. Metal Powder
Products, 413 F. App’x 7, 13 (10th Cir. 2010), holding that “[a] corporation free from successor
liability may nevertheless owe a duty to warn of dangers posed by its predecessor’s products as a
result of its ongoing relationship with the predecessor’s customers.” To summarize, liability for
failure to warn is not dependent on whether a purchasing entity assumed liabilities incurred by its
inherently different, and the court finds that the analysis of whether the Sale Order precludes the
claims is identical.
6
“Utah adheres to the traditional rule of successor nonliability . . . , as set forth in section 12 of
the Restatement (Third) of Torts.” Tabor v. Metal Ware Corp., 168 P.3d 814, 816 (Utah 2007).
8
predecessor, but rather on the fact that a purchasing entity owes a duty to continuing customers
that is independent of those past liabilities.
The next question is whether the Sale Order can preclude liability for a purchasing entity’s
independent duty to warn. The court finds that it cannot, because doing so would be outside the
scope of the bankruptcy court’s authority. The Court of Appeals for the Second Circuit addressed
this issue as it related to FCA’s liability under the Sale Order in In Matter of Motors Liquidation
Co., 829 F.3d 135, 156 (2d Cir. 2016). It reasoned:
A bankruptcy court may approve a [bankruptcy] sale “free and
clear” of successor liability claims if those claims flow from the
debtor’s ownership of the sold assets. Such a claim must arise from
a (1) right to payment (2) that arose before the filing of the petition
or resulted from pre-petition conduct fairly giving rise to the claim.
Further, there must be some contact or relationship between the
debtor and the claimant such that the claimant is identifiable.
Id. The court then addressed the reach of the bankruptcy court’s authority as applied to different
types of claims. Although “the bankruptcy court assumed that the Sale Order’s broad [free and
clear] language” covered “(1) pre-closing accident claims, (2) economic loss claims arising from
the [product] defect . . . , (3) independent claims relating only to [the successor entity’s] conduct,
and (4) Used Car Purchasers’ claims,” the Sale Order could only cover “the first two sets of
claims.” Id. Accordingly, claims based on FCA’s post-Sale duty to warn relate to the successor
entity’s conduct and are not excludable by the Sale Order.
A similar issue was addressed by the United States Bankruptcy Court for the Southern
District of New York in In re Old Carco LLC, 582 B.R. 838, 845 (Bankr. S.D.N.Y. 2018). There,
the court noted that while the bankruptcy court presiding over the bankruptcy proceedings can (and
did) exclude FCA’s liability for Old Chrysler’s failure to “recall or retrofit,” the question of
whether FCA “had a duty to recall or retrofit previously sold Old [Chrysler] vehicles that [FCA]
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did not manufacture is a question of nonbankruptcy law.” Id. (quoting In re Motors Liquidation
Co., 541 B.R. 104, 141 (Bankr. S.D.N.Y. 2015)). And “non-bankruptcy law may impose on an
asset buyer a duty to warn owners of products manufactured by its seller that the products are
defective or pose a danger.” Id. This court agrees. Because bankruptcy law does not reach FCA’s
post-Sale conduct the court looks to Utah law, which does impose a post-sale duty to warn on
purchasing entities as laid out in section 13 of the Restatement. 7
For these reasons, the court finds that Castleman’s claim for breach of duty to warn is not
excluded by the Sale Order. In reaching this decision, the court does not in any way “modify the
Sale Order,” but “merely interpret[s] the Sale Order in accordance with bankruptcy law.” In Matter
of Motors Liquidation Co., 829 F.3d at 157. 8 Furthermore, the court finds that Castleman has
7
See Restatement (Third) of Torts: Prod. Liab. § 13 (1998):
(a) A successor corporation or other business entity that acquires assets of a
predecessor corporation or other business entity, whether or not liable under
the rule stated in § 12, is subject to liability for harm to persons or property
caused by the successor's failure to warn of a risk created by a product sold
or distributed by the predecessor if: (1) the successor undertakes or agrees
to provide services for maintenance or repair of the product or enters into a
similar relationship with purchasers of the predecessor's products giving
rise to actual or potential economic advantage to the successor, and (2) a
reasonable person in the position of the successor would provide a warning.
b) A reasonable person in the position of the successor would provide a
warning if: (1) the successor knows or reasonably should know that the
product poses a substantial risk of harm to persons or property; and (2) those
to whom a warning might be provided can be identified and can reasonably
be assumed to be unaware of the risk of harm; and (3) a warning can be
effectively communicated to and acted on by those to whom a warning
might be provided; and (4) the risk of harm is sufficiently great to justify
the burden of providing a warning.
8
Other courts have questioned the reach of the Sale Order at issue in this case. See In re Grumman
Olson Indus., Inc., 445 B.R. 243, 256 (Bankr. S.D.N.Y. 2011), aff'd, 467 B.R. 694 (S.D.N.Y. 2012)
(“[A]lthough the Chrysler sale order purported to extinguish the buyer's liability for potential
future tort claims, the Second Circuit questioned its reach.”) (citing In re Chrysler LLC, 576 F.3d
108, 127 (2d Cir.), cert. granted, judgment vacated sub nom. Indiana State Police Pension Tr. v.
Chrysler LLC, 558 U.S. 1087 (2009), and vacated sub nom. In re Chrysler, LLC, 592 F.3d 370 (2d
10
successfully stated a claim for breach of the duty to warn. Castleman made sufficient factual
allegations that FCA has enjoyed potential or actual economic advantage from providing
maintenance and repair services on Old Chrysler’s vehicles. Castleman has also alleged that a
reasonable person in FCA’s position would have provided a warning because “(1) FCA knew 2004
Jeep Grand Cherokees posed a substantial risk of harm to users due to defects; (2) reasonable users
were unaware of the risk of harm and defects; (3) a warning could have been effectively
communicated to and acted on by users . . . ; and (4) the risk of serious head/neck injury or death
justified the burden of providing a warning.” See Opp’n Mot. Dismiss at 14; Am. Compl. at
¶¶ 60–69, 74, 77–84. In short, Castleman has successfully alleged that FCA owed her a duty to
warn and that it breached that duty.
2. Proximate Cause
The next issue the court must address is whether Amendment 4 precludes Castleman’s
punitive damages claim because Old Chrysler’s pre-Closing conduct rather than FCA’s postClosing conduct, was the proximate cause of Castleman’s injuries. Castleman’s Amended
Complaint alleges that FCA’s post-Sale conduct was the proximate cause of her harm. But FCA
argues that even if FCA breached a post-Sale duty that was a cause of Castleman’s harm, it was
not the proximate cause. Specifically, it argues that the conduct of Old Chrysler in negligently
designing, testing, labeling, manufacturing, inspecting and selling the Grand Cherokee prior to the
closing date was the proximate cause of her harm and therefore Castleman’s claims for punitive
damages are excluded by the MTA.
Cir. 2010) (“[W]e decline to delineate the scope of the bankruptcy court’s authority to extinguish
future claims, until such time as we are presented with an actual claim for an injury that is caused
by Old Chrysler, that occurs after the Sale, and that is cognizable under state successor liability
law.”)).
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To decide this question, the court would have to determine whether the post-Closing or
pre-Closing conduct was the proximate cause of Castleman’s harm. But the question of proximate
cause is a question reserved for the fact finder. Accordingly, it is not appropriately decided at the
motion to dismiss stage. See Steffensen v. Smith’s Mgmt. Corp., 820 P.2d 482, 486–87 (Utah Ct.
App. 1991), aff’d, 862 P.2d 1342 (Utah 1993) (holding that when the evidence is in dispute,
proximate cause is reserved for the jury). As the Bankruptcy Court decided when addressing the
same issue in In re Old Carco LLC, 582 B.R. 838, 846 (Bankr. S.D.N.Y. 2018), if “Plaintiff can
assert legally sufficient claims based solely on [FCA]’s post-Closing wrongful conduct, the
question of what proximately caused the Decedents’ fatal injuries is for the factfinder.” Because
Castleman has alleged a legally sufficient basis on which a trier of fact could determine that FCA’s
post-closing conduct was a proximate cause 9 of Castleman’s injuries, the court denies FCA’s
motion to dismiss.
ORDER
Defendant FCA’s Motion to Dismiss Plaintiff’s First Amended Complaint is DENIED.
Signed March 28, 2019
BY THE COURT
_____________________________
Jill N. Parrish
United States District Court Judge
9
The post-Closing conduct does not have to be the only proximate cause of Castleman’s harm
because, under Utah law, “there can be more than one proximate cause of an injury so long as each
is a concurrent contributing factor in causing the injury.” Steffensen, 820 P.2d at 486.
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