FOLGER LEVIN & KAHN LLP Roger B. Mead (CA Bar No. 093251) Douglas W. Sullivan (CA Bar No. 088136) (pro hac vice application to be filed) Thomas F. Koegel (CA Bar No. 125852) (pro hac vice application to be filed) Embarcadero Center West 275 Battery Street, 23rd Floor San Francisco, CA 94111 Telephone: (415) 986-2800 Facsimile: (415) 986-2827 FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP Brian D. Pfeiffer Michael B. de Leeuw Jennifer L. Rodburg One New York Plaza, 23rd Floor New York, NY 10004 Telephone: (212) 859-8000 Facsimile: (212) 859-4000 Attorneys for Debtors and Debtors in Possession, and Plaintiffs Dana Driveshaft Manufacturing LLC, Dana Light Axle Manufacturing, LLC, Dana Automotive Systems Group, LLC, and Dana Canada Corporation UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re Dana Corporation, et al., Debtors. Chapter 11 Case No. 06-10354 (BRL) (Jointly Administered)
DANA DRIVESHAFT MANUFACTURING LLC, an Ohio limited liability company; DANA LIGHT AXLE MANUFACTURING, LLC, an Ohio limited liability company; DANA AUTOMOTIVE SYSTEMS GROUP, LLC, an Ohio limited liability corporation; DANA CANADA CORPORATION, a Canadian corporation, Adversary Proceeding No. Plaintiffs, v. CHRYSLER, LLC, a Delaware limited liability company; CHRYSLER COMPANY, LLC, a Delaware limited liability company; CHRYSLER MOTORS, LLC, a Delaware limited liability company; CHRYSLER CANADA INC., a Canadian corporation; OHIO MODULE MANUFACTURING CO., LLC, a Delaware limited liability company, Defendants. COMPLAINT FOR DECLARATORY RELIEF For its claims against Defendants, Plaintiffs allege as follows: I. THE PARTIES 1. Plaintiff Dana Driveshaft Manufacturing LLC was and is a limited liability corporation, duly organized and incorporated under the laws of Ohio, with a principal place of business in Toledo, Ohio. 2. Plaintiff Dana Light Axle Manufacturing, LLC was and is a limited liability company, duly organized and incorporated under the laws of Ohio, with a principal place of business in Toledo, Ohio. 3. Plaintiff Dana Automotive Systems Group, LLC was and is a limited liability company, duly organized and incorporated under the laws of Ohio, with a principal -2-
place of business in Toledo, Ohio. 4. Plaintiff Dana Canada Corporation was and is a corporation, duly organized and incorporated under the laws of Canada, with a principal place of business St. Catharines, Ontario, Canada. 5. On information and belief, Defendant Chrysler, LLC (hereinafter sometimes referred to as DCC ) was and is a limited liability company, duly organized and existing under the laws of Delaware, with a principal place of business in Auburn Hills, Michigan. 6. On information and belief, Defendant Chrysler Company, LLC was and is a limited liability company, duly organized and incorporated under the laws of Delaware, with a principal place of business in Auburn Hills, Michigan. 7. On information and belief, Defendant Chrysler Motors, LLC was and is a limited liability company, duly organized and incorporated under the laws of Delaware, with a principal place of business in Auburn Hills, Michigan. 8. On information and belief, Defendant Chrysler Canada Inc. was and is a corporation, duly organized and incorporated under the laws of Canada, with a principal place of business in Windsor, Ontario, Canada. 9. On information and belief, Defendant Ohio Module Manufacturing CO., LLC (hereinafter sometimes referred to as OMMC ) was and is a limited liability company, duly organized and incorporated under the laws of Delaware, with a principal place of business in Farmington Hills, Michigan. 10. Hereinafter, Plaintiffs and Defendants are sometimes collectively referred to as the Parties. Hereinafter, the Defendants are sometimes collectively referred to as the Chrysler Defendants. Hereafter, Plaintiffs are referred to individually and collectively as the Dana Plaintiffs. 11. At all times mentioned herein, with respect to the matters alleged herein, each of the Chrysler Defendants was the agent of the other Chrysler Defendants and acting -3-
within the course and scope of said agency. II. JURISDICTION AND VENUE 12. This Court has jurisdiction under 28 U.S.C. 157 and 1334. This is a core proceeding under 28 U.S.C. 157(b)(2)(A) and (O). This adversary proceeding arises out of and relates to a Settlement Agreement (dated August 30, 2007) that was approved by this Bankruptcy Court by Order of September 19, 2007. The Settlement Agreement, as approved by Bankruptcy Court Order, provides that the Bankruptcy Court shall have exclusive jurisdiction with respect to disputes arising out of or relating to the Settlement Agreement. Pursuant to the Third Amended Joint Plan of Reorganization (dated December 26, 2007) ( the Plan ), Article IX, this Bankruptcy Court has retained jurisdiction of such matters. The Settlement Agreement and Order approving the settlement have a close nexus to the Plan in that the Plan was predicated on settlements with major customers, including the Chrysler Defendants who were also creditors of the Debtor and with whom the Debtor and its affiliates conducted a significant amount of business. 13. Venue is proper before this Court under 28 U.S.C. 1408 and 1409. III. NATURE OF THE DISPUTE 14. For many years, the Dana Plaintiffs and their predecessors have supplied the Chrysler Defendants with component parts for the Chrysler Defendants motor vehicles. In this bankruptcy, the Dana Plaintiffs and their affiliates entered into a Settlement Agreement, dated August 30, 2007, with the Chrysler Defendants and their affiliates relating to their supply arrangements. The Settlement Agreement was approved by Order of this Bankruptcy Court on September 19, 2007. 15. As part of the Settlement Agreement, it was agreed that the Dana Plaintiffs would supply various component parts ( the Parts ), consisting principally of driveshafts and axles, pursuant to Purchase Orders modified by the settlement, to meet the requirements of the Chrysler Defendants up through December 31, 2008. It was also agreed that the Chrysler -4-
Defendants would not resource the Parts (i.e. change to other suppliers) until after December 31, 2008. Indeed, despite a request from the Dana Plaintiffs that, as part of the Settlement Agreement, the Chrysler Defendants be obligated to purchase their requirements for the Parts after January 1, 2009, the Chrysler Defendants refused. Instead, the Settlement Agreement specifically provided that the Chrysler Defendants were entitled to begin to take action before December 31, 2008 to obtain new sources for the Parts and, beginning January 1, 2009, to obtain all of the Parts from the new sources. 16. Under the Purchase Orders as modified by the Settlement Agreement, after December 31, 2008, the Chrysler Defendants are not obligated to order, and the Dana Plaintiffs are not obligated to supply, any Parts absent further agreement. In fact, there is no quantity specified for any Parts after December 31, 2008, such that beginning January 1, 2009, the Purchase Orders, as modified by the Settlement Agreement, are unenforceable, illusory and in violation of the statute of frauds. 17. Throughout 2007 and 2008, in compliance with the Settlement Agreement, the Dana Plaintiffs have supplied all of the Parts necessary to meet the Chrysler Defendants requirements. Unfortunately, the Dana Plaintiffs are currently losing tens of millions of dollars per year in supplying the Parts, including as a result of increases in the costs of materials. Accordingly, consistent with the Settlement Agreement and the law, in June 2008, the Dana Plaintiffs reiterated to the Chrysler Defendants that the Settlement Agreement would terminate on January 1, 2009 and that the Dana Plaintiffs would be not providing Parts after December 31, 2008. However, the Dana Plaintiffs did agree to supply Parts after December 31, 2008 so long as the Chrysler Defendants would pay specifically identified market prices for the Parts, covering the costs to the Dana Plaintiffs of manufacturing the Parts, plus a reasonable amount for overhead and profit. 18. In response, the Chrysler Defendants initially acknowledged (a) that the Dana Plaintiffs obligations to supply the Parts would terminate as of December 31, 2008, and -5-
(b) that the Parties needed to negotiate new pricing and terms for the Parts (if any) to be supplied after January 1, 2009. Unfortunately, however, the Chrysler Defendants failed to negotiate the new prices and other terms for Parts that might be ordered and supplied after December 31, 2008. Instead, in August 2008, the Chrysler Defendants advised (a) that the obligation to continue to supply Parts would not terminate on January 1, 2009, (b) that the Dana Plaintiffs have no right to terminate the supply of Parts and have improperly given notice of termination, (c) that the Chrysler Defendants intend to continue to order an unspecified amount of Parts from the Dana Plaintiffs for an indefinite amount of time after December 31, 2008, and (d) that, under the terms of the Settlement Agreement, the Dana Plaintiffs must continue to supply the Parts after December 31, 2008 at the current prices, such that the Dana Plaintiffs will lose tens of millions of dollars per year. 19. By this adversary proceeding, the Dana Plaintiffs seek declarations (a) that under the Purchase Orders as modified by the Settlement Agreement, the Chrysler Defendants are not obligated to order and the Dana Plaintiffs are not obligated to supply any Parts after December 31, 2008; (b) that as of January 1, 2009, the Purchase Orders, as modified by the Settlement Agreement, are illusory, unenforceable and in violation of the statute of frauds, given that they are no longer requirements Purchase Orders, given the failure to specify any quantity as of January 1, 2009, and given the fact that the general terms of the purchase orders also allowed the Chrysler Defendants to terminate the Purchase Orders unilaterally at any time for the convenience of the Chrysler Defendants; and (c) that having notified the Chrysler Defendants in June 2008 that, with the expiration of the Settlement Agreement, the Dana Plaintiffs would terminate the supply of Parts after December 31, 2008, to the extent the Chrysler Defendants order additional Parts for production after December 31, 2008, the Dana Plaintiffs are entitled to charge and be compensated at their market prices. 20. A judicial declaration is necessary and a legal remedy is inadequate because the Parties must understand their respective rights and obligations relating to the supply of Parts -6-
after December 31, 2008. Absent such a declaration, the Dana Plaintiffs will be severely and irreparably harmed in that, among other things, they will be forced to make arrangements for and investments in supplying Parts after December 31, 2008 (thereby diverting resources and funds from other endeavors) without any commitment by the Chrysler Defendants to buy any quantity of Parts for any duration and without any commitment by the Chrysler Defendants to fairly and equitably compensate the Dana Plaintiffs. IV. GENERAL ALLEGATIONS A. The Parts Being Supplied Pursuant to the Purchase Orders 21. As of March 3, 2006 (the date that the voluntary petitions for relief in this bankruptcy proceeding were filed) and continuing through this date, the Dana Corporation (Debtor) and its affiliates have been supplying Parts to the Chrysler Defendants for their motor vehicles pursuant to Purchase Orders. The Parts being supplied include, among others, the following, identified by Part No.: 52114533AE, 52114654AF, 68029132AB, 68029135AB, 52114537AE, 52114644AF, 52114645AE, 52114544AF, 52132300AB, 52114653AF, 52132301AB, 52132856AB, 52114545AG, 52132373AB, 52114855AF, 52114648AF, 52132650AB, 52114562AF, 52114528AF, 52114529AF, 52132031AB, 52098778AE, 52111420AA, 52132030AC, 05038416AB, 05038307AD, 56052947AC, 56052948AC, 56052946AC, 68034653AA, 68034651AA, 68034650AA, 68034551AB, 68034550AA, 68034652AA, 68034552AA, 68034553AA, 52105598AA, 52105603AD, 52105611AE, 52123001AA, 52123141AA, 52123145AA, 68001126AA, 52853098AA, 52853099AA, 52853317AC, 52853319AC, 52853321AC, 52853323AC, 52853325AC, 52853388AC, 52853327AC, 52853329AC, 52853330AC, 52853334AC, 52853336AC, 68022104AC, 68022105AC, 68022106AC, 68022107AC, 52853338AC, 52853344AC, 52853346AC, 52853349AC, 52853350AC, 68022101AC, 68022102AC, 68022103AC, 52853363AE, 52853364AE, 52853365AE, 52853440AE, 52853441AE, 52853442AE, 52853368AB, 52853369AB, 52853370AB, 52853372AC, 52853373AB, 52853375AB, 52853387AB, -7-
52853434AC, 52853435AB, 52853436AC, 52853438AB, 52853439AB, 52853466AB, 05037990AA, 52125309AA, 52125308AA, 52125293AA. 22. The Parts have been supplied pursuant to Purchase Orders that have issued either from Defendant DCC or one of its affiliates (the Chrysler Purchase Orders ) or from OMMC, a third party involved in the assembly of component Parts for the motor vehicles (the OMMC Purchase Orders ). The OMMC Purchase Orders specifically provide, in part, as follows: DCC is the ultimate purchaser of the components and materials, and is an express third party beneficiary of this [purchase] order with the right to enforce its terms against Seller [the Dana Plaintiffs] directly. 23. The Chrysler and OMMC Purchase Orders incorporated General Terms and Conditions which provide, in part, as follows: Termination at Chrysler s Option. Chrysler may terminate this order at any time without cause in whole or in part by written notice, whereupon Seller [the Dana Plaintiffs] will stop work on the date and to the extent specified in such notice and terminate all orders and subcontracts that relate to the terminated order. Thus, under the terms of the Chrysler and OMMC Purchase Orders, the Chrysler Defendants could terminate the Purchase Orders at any time for any reason such that there was no commitment to buy any quantity whatsoever. B. The Settlement Agreement With The Chrysler Defendants In This Bankruptcy Proceeding 24. On or about August 30, 2007, the Dana Plaintiffs and their affiliates and predecessors entered into a Settlement Agreement with the Chrysler Defendants and their affiliates. 25. A complete and accurate copy of the Settlement Agreement is attached hereto as Exhibit 1 and incorporated for all purposes. -8-
26. By Order of this Bankruptcy Court on September 19, 2007, the Settlement Agreement was approved, and the Dana Plaintiffs were authorized to enter into and assume all of the Chrysler and OMMC Purchase Orders as modified by the Settlement Agreement (collectively the Purchase Orders ). 27. A complete and accurate copy of the Order of September 19, 2007 is attached hereto as Exhibit 2. 28. During the negotiations of the Settlement Agreement, the representatives of the Dana Plaintiffs requested that the Chrysler Defendants agree to purchase all of the Parts that the Chrysler Defendants would require for their motor vehicles (i.e., Chrysler s requirements ) after January 1, 2009. The Chrysler Defendants refused this request. Instead, the Chrysler Defendants only agreed to purchase their requirements and not to resource through December 31, 2008. 29. In this regard, in Paragraph 2 of the Settlement Agreement, the Term of the Settlement Agreement is defined as the time period running from the Effective Date of April 1, 2007 through January 1, 2009. In Paragraph 5 of the Settlement Agreement, the Parties then agreed: Resourcing. During the Term [i.e., until January 1, 2009], notwithstanding anything to the contrary in the Purchase Orders, and subject to Dana and its applicable subsidiaries and affiliates meeting all material technical, quality, delivery and price requirements... (collectively, the Production Requirements ) under the Purchase Orders as modified by this [Settlement] Agreement, and any other purchase orders relating to current production and/or future business awarded by Chrysler to Dana and/or any of its affiliates and subsidiaries, Chrysler agrees not to resource current programs under the Purchase Orders to an alternative source. The foregoing limitation on resourcing shall not apply to (i) actions by Chrysler to prepare for resourcing; or (ii) resourcing any programs to which the Parties may mutually agree in writing. 30. Under the settlement, if the Chrysler Defendants chose to order Parts from -9-
the Dana Plaintiffs for production after December 31, 2008, and the Dana Plaintiffs voluntarily chose to supply Parts after January 1, 2009, then the prices for the Parts would be the same as those charged in 2008 unless a different price is agreed to between the Parties. The latter phrase would have been unnecessary if there were a legal obligation to continue supplying Parts at the 2008 prices. In fact, given that the obligation of the Chrysler Defendants to purchase their requirements for the Parts from the Dana Plaintiffs would expire on December 31, 2008, with no obligation to buy any Parts thereafter, the modified Purchase Orders specified no quantity to be supplied after December 31, 2008, such that they would be illusory, unenforceable and in violation of the statute of frauds as of January 1, 2009. 31. In Paragraph 19 of the Settlement Agreement, the Parties further agreed that the [Settlement] Agreement and all of the Parties obligations are binding in all respects on their respective successors and permitted assigns [i.e., the Dana Plaintiffs and the Chrysler Defendants]... and any affected third parties, and together with the rights and remedies of the Parties under this [Settlement] Agreement, inure to the benefit of the Parties and their respective successors and permitted assigns... and any affected third Parties. Pursuant to the Plan of Reorganization, the Purchase Orders, as modified by the Settlement Agreement, were assigned to the Dana Plaintiffs, as permitted assigns. 32. The Settlement Agreement provides for the exclusive jurisdiction of this Bankruptcy Court in Paragraph 15: Each Party irrevocably and unconditionally agrees that the Bankruptcy Court shall have exclusive jurisdiction with respect to any issues, actions, suits or proceedings arising out of or relating to this [settlement] agreement during such time as the Debtors shall be subject to the jurisdiction of the Bankruptcy Court. C. The Disputes 33. Among other times, in June and July, 2008, the Parties met to discuss terms and pricing for any Parts to be ordered and supplied after December 31, 2008. The Dana Plaintiffs proposed to supply all of the requirements of the Chrysler Defendants for the Parts at -10-
identified market prices for each of the Parts, covering Dana Plaintiffs costs of the materials and manufacturing, plus a reasonable amount for overhead and profit. By letter of June 20, 2008, the Dana Plaintiffs also notified the Chrysler Defendants that with the expiration the Settlement Agreement on January 1, 2009, the Dana Plaintiffs were terminating the supply of Parts after December 31, 2008, absent the Chrysler Defendants agreeing to pay the specified market prices for the Chrysler Defendants requirements commencing January 1, 2009. 34. In response, the Chrysler Defendants initially acknowledged that current arrangements would terminate as of December 31, 2008 and that there was a need to come to an agreement on terms and pricing for the Parts commencing January 1, 2009. However, the Chrysler Defendants refused to negotiate the new terms and pricing. Then, in August 2008, the Chrysler Defendants took the position that, under the terms of the Settlement Agreement, the Dana Plaintiffs must continue to supply at the current prices such Parts, as may be ordered by the Chrysler Defendants in its discretion without any commitment to any quantity or duration, resulting in approximately $75 million or more in annual losses to the Dana Plaintiffs. V. CLAIM FOR RELIEF CLAIM FOR DECLARATORY RELIEF 35. The Dana Plaintiffs reallege and incorporate herein by reference all of the allegations in Paragraphs 1-34 as though set forth in full. 36. As set forth above, an actual, ripe and justiciable controversy has arisen and now exists between the Parties, necessitating the following declarations from this Court: a. That under the Purchase Orders, as modified by the Settlement Agreement, the Chrysler Defendants are only obligated to order and the Dana Plaintiffs only obligated to supply Parts fulfilling the Chrysler Defendants requirements up through December 31, 2008 and not thereafter. b. That the Purchase Orders, as modified by the Settlement Agreement, are illusory, violate the statute of frauds and are unenforceable as of January 1, 2009, given the lack -11-
of a specified quantity or requirements obligation as of January 1, 2009 and given the general terms of the Purchase Orders also allowing the Chrysler Defendants to unilaterally terminate at any time for convenience. c. That with the contractual arrangements having been terminated as of January 1, 2009, to the extent that the Dana Plaintiffs do supply Parts commencing January 1, 2009, they are entitled to charge and be reimbursed at their specified prices. 34. A judicial declaration of the Parties rights and obligations under the Purchase Orders, as modified by the Settlement Agreement, is required, and there is no adequate legal remedy. Absent such declarations, the Dana Plaintiffs will not know to what extent, if at all, they are required to continue to supply Parts and at what prices, such that they will suffer irreparable harm, including, but not limited to, in making significant advance arrangements and investments to supply Parts without any commitment by the Chrysler Defendants as to price and quantity and without any certainty of adequate reimbursement by the Chrysler Defendants; in foregoing alternative strategies and opportunities; and in diverting resources. VI. PRAYER FOR RELIEF The Dana Plaintiffs pray for relief against the Chrysler Defendants as follows: 1. For a declaration of the rights and obligations of the Parties as set forth in the Claim for Relief. 2. For costs of suit. 3. For such other relief as the Court deems just and proper. Dated: August 6, 2008 Respectfully submitted, By: /s/ Roger B. Mead FOLGER LEVIN & KAHN LLP Roger B. Mead (CA Bar No. 093251) Douglas W. Sullivan (CA Bar No. 088136) Thomas F. Koegel (CA Bar No. 125852) Embarcadero Center West -12-
275 Battery Street, 23rd Floor San Francisco, CA 94111 Telephone: (415) 986-2800 Facsimile: (415) 986-2827 FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP Brian D. Pfeiffer Michael B. de Leeuw Jennifer L. Rodburg One New York Plaza, 23rd Floor New York, NY 10004 Telephone: (212) 859-8000 Facsimile: (212) 859-4000 Attorneys for Debtors and Debtors in Possession, and Plaintiffs Dana Driveshaft Manufacturing LLC, Dana Light Axle Manufacturing, LLC, Dana Automotive Systems Group, LLC, and Dana Canada Corporation 23047\2001\611399.2-13-