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LEAR CORPORATION v. JOHNSON ELECTRIC HOLDINGS LIMITED

May 30, 2003

LEAR CORPORATION, PLAINTIFF, VS. JOHNSON ELECTRIC HOLDINGS LIMITED AND NEVADA BOND INVESTMENT CORP. II, DEFENDANTS.


The opinion of the court was delivered by: Joan Humphrey Lefkow, United States District Judge

MEMORANDUM OPINION AND ORDER

On August 28, 2001, three residents of Columbus, Mississippi, brought suit in a Mississippi state court against, among others, Lear Corporation (plaintiff in this action, hereinafter referred to as "Lear"), Johnson Electric Holdings Limited (a defendant in this action, hereinafter referred to as "Johnson Electric") and affiliates of Nevada Bond Investment Corp. II (a defendant in this action, hereinafter referred to as "Nevada Bond") under theories of personal injury and property damage purportedly caused by environmental contamination from an automobile parts manufacturing facility located in Columbus (the "Mississippi Action"). On September 19, 2002, Lear filed the instant action against Johnson Electric and Nevada Bond seeking a declaratory judgment that (1) Johnson Electric must defend and indemnify Lear in the Mississippi action (Count I) and (2) Lear is not obligated to defend or indemnify Johnson Electric in the Mississippi action (Count II), or, in the alterative, (3) Nevada Bond must defend and indemnify Lear and that Lear is not obligated to defend or indemnify Nevada Bond (Count III).

Before the court is Johnson Electric's motion to dismiss Lear's Complaint under Rules 12(b)(1) and 12(b)(6), Fed.R.Civ.P. Lear is a Delaware corporation with its principal place of business in Michigan. Johnson Electric is a Bermuda corporation with its principal place of business in Hong Kong. Nevada Bond is a Nevada corporation with its principal place of business in Connecticut. The amount in controversy exceeds $75,000. The court, therefore, rests its jurisdiction in 28 U.S.C. § 1332 (diversity). For the reasons stated below, Johnson Electric's motion to dismiss is granted.

MOTION TO DISMISS STANDARDS

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges the court's subject matter jurisdiction. In determining whether subject matter jurisdiction exists, the court must accept all well pleaded facts alleged in the complaint, and it draws all reasonable inferences from those facts in the plaintiff's favor. Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999); Meridian Rail Prods. Corp. v. Amsted Indus., Inc., No. 02 C 3708, 2002 WL 31103479, at *2 (N.D.Ill. Sept. 18, 2002). "When evidence pertinent to subject matter jurisdiction has been submitted, however, `the district court may properly look beyond the jurisdictional allegations of the complaint . . . to determine whether in fact subject matter jurisdiction exists.'" Sapperstein, 188 F.3d at 855, quoting United Transp. Union v. Gateway W. Ry. Co., 78 F.3d 1208, 1210 (7th Cir. 1996) (internal citations omitted).

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the sufficiency of the complaint for failure to state a claim upon which relief may be granted. General Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). Dismissal is appropriate under Rule 12(b)(6) only if it appears beyond a doubt that the plaintiff can prove no set of facts in support of its claim that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Kennedy v. Nat'l Juvenile Det. Assoc., 187 F.3d 690, 695 (7th Cir. 1999). In ruling on a 12(b)(6) motion, the court accepts as true all well pleaded facts alleged in the complaint, and it draws all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002); Jackson v. E.J. Brach Corp., 176 F.3d 971, 977 (7th Cir. 1999).

BACKGROUND

On March 16, 1999, Lear entered into a Stock Purchase Agreement (the "UTA Agreement") with Nevada Bond to purchase all of the outstanding capital stock of UT Automotive, Inc. ("UT Automotive"). (Compl. ¶ 7.) Soon thereafter, substantially all of the assets and liabilities of UT Automotive were placed into a separate subsidiary corporation called Motors Acquisition Corporation ("Motors Acquisition"). (Compl. ¶ 8.) Lear then sold Motors Acquisition to Johnson Electric pursuant to a Stock Purchase Agreement dated May 7, 1999 (the "Johnson Agreement"). (Id.) Johnson Electric was aware of Lear's purchase of UT Automotive from Nevada Bond, as well as the terms of the UTA Agreement. (These two agreements were apparently modeled after one another).

Lear's claims are based both on the UTA Automotive agreement in which Lear purchased stock and assets from Nevada Bond and the May 1999 Johnson Agreement between Lear and Johnson Electric. Under Section 10.2 of the Johnson Agreement,*fn1 Johnson Electric is obligated to indemnify Lear pursuant to Section 10.2, which provides, in pertinent part, as follows,

From and after the Closing Date, [Johnson Electric] shall indemnify and hold harmless [Lear] . . . from and against any and all Covered Liabilities incurred by or asserted against [Lear] in connection with or arising from . . . (iii) any Covered Liability of the Company or any of the Subsidiaries or arising out of or in connection with the Motors Business, as heretofore, currently or hereafter owned or conducted, as the case may be, including, without limitation, any Covered Liability based on negligence, gross negligence, strict liability or any other theory of liability, whether in law (whether common or statutory) or equity; provided, however, that there shall be excluded from the foregoing indemnity obligation . . . Covered Liabilities with respect to Retained Liability.
Johnson Agreement § 10.2 (emphasis added).

Section 10.3 of the Johnson Agreement provides the circumstances in which Lear shall indemnify Johnson Electric. It provides as follows,

From and after the Closing Date, [Lear] shall indemnify and hold harmless [Johnson Electric] . . . from and against any and all Covered Liabilities incurred by or asserted against [Johnson Electric] in connection with or arising from . . . (ii) the Retained Liabilities. . . .
Id. at § 10.3 (emphasis added).

The term "Covered Liabilities" as used in the Johnson Agreement is defined in Article I to be

any and all debts, losses, liabilities, claims, damages, fines, penalties, obligations, payments (including, without limitation, those arising out of any demand, assessment, settlement, judgment or compromise relating to any Action), costs and expenses (including, without limitation, costs and expenses of investigation and fees and disbursements of counsel and other experts), mature or unmature, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown, including, without limitation, any of the foregoing arising under, out of or in connection with any Environmental Liabilities or any Action, order or ...

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