Chrysler LLC v. Plastech Engineered Products Inc.

382 B.R. 90 (2008)

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Nature of the Case

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Facts

D is a tier-one automobile supplier and designer and maker of blow-molded and injected-molded plastic products primarily for use in the automotive industry. D has been in business since 1988. D's major customers are General Motors (GM), Ford Motor Company, Chrysler, and Johnson Controls, Inc. (JCI). D has 36 manufacturing facilities in North America and 2 corporate locations. D employs over 7,700 individuals. The Debtor's annual sales are approximately $1.2 billion. To assist it in obtaining refinancing, D received commitments from the Major Customers to provide the Debtor with certain financial accommodations. The Major Customers deposited $46,000,000 in a special account with Goldman. P's share was $6,900,000. This was a deposit provided by P to contribute to D's liquidity and enable the D to obtain the refinancing. In exchange for this accommodation, D provided the Major Customers with various rights under a First Accommodation Agreement. Over a ten-year period, P had paid D approximately another $167,000,000 for tooling. D produced 500 component parts for P using approximately 3,000 tools. P's general terms and conditions authorize P to terminate any or all of its purchase orders with D, at P's option, without cause, upon 30 days' written notice. On August 30, 2006, P and D entered into a long-term productivity agreement that would remain in effect until December 31, 2008. On the same day as the refinancing and the First Accommodation Agreement, February 12, 2007, P and D entered into an amended long-term productivity agreement. The amended long-term productivity agreement contained a new provision in paragraph 2 stating that P 'may not terminate for convenience.' It also added a provision allowing P to 'resource' certain programs 'immediately upon the occurrence of any D responsible crisis.' The Financial Accommodation Agreement grants certain rights in the tooling used in D's manufacture of components. Neither D nor any other person or entity other than the Major Customers have any right, title, or interest in the Major Customer Owned Tooling other than D's obligation, subject to the Major Customers' respective unfettered discretion, to utilize the Major Customer Owned Tooling in the manufacture of the Major Customers' component and service parts. The Major Customers and their respective designee(s) shall have the right to take immediate possession of the Major Customer Owned Tooling at any time without payment of any kind. The tooling acknowledgment contained in the First Accommodation Agreement provides P with several benefits in that neither D nor any other party has an interest in the tooling that P has paid for. P has the right to demand immediate possession of the tooling paid for by D. If there is a dispute over whether tooling is paid or unpaid, the tooling acknowledgment permits P to take possession of such tooling while-any dispute over payment for it is being resolved. In late 2007, D again requested additional financial accommodations. D requested that P agree to an advance of its payables, which P declined to do. In January 2008, D entered into further discussions concerning additional financial accommodations. P did enter into a Second Financial Accommodation Agreement. The Second Accommodation Agreement also contained a tooling acknowledgment. D was in serious trouble and needed too much help. A draft of a Third Financial Accommodation Agreement was presented. The draft recited that D was seeking an out-of-court resolution to its liquidity crisis but also warned that the Debtor may need to seek protection under Chapter 11 of the Bankruptcy Code. The Third Accommodation Agreement was never executed. On Friday morning, February 1, 2008, P noticed D that it required all of its toolings. P immediately filed suit against D and obtained an ex parte temporary restraining order and order of possession. The restraining order was signed on Friday, February 1, 2008, at 3:35 p.m. Later that same day, D filed this Chapter 11 case. On February 2, 2008, P filed a motion for relief from the automatic stay so that it could be permitted to immediately enter onto the Debtor's premises and remove the tooling. P requests that the Court lift the automatic stay. P has paid over $ 167,000,000 for tooling used by D to make parts for P and asserts that it owns the tooling that it has paid for. There is approximately $13,400, 000 of unpaid tooling and P has offered to immediately pay the $13,400,000 into an escrow account. P relies upon the tooling acknowledgments contained in the First and Second Accommodation Agreements. D asserts that it is premature in such an early stage of this Chapter 11 case to grant any relief from the automatic stay. D maintains that it still has an interest in both the paid and unpaid tooling and that all of this tooling is necessary to an effective reorganization of D. Dr contends it would be inconsistent with the policies of Chapter 11 to permit P to take possession of the tooling as this moment in time. If so D would immediately be forced to close many of its plants and would be unable to continue to provide its other Major Customers with their component parts, thereby effectively ending D's business. The Revolving Lenders assert that any relief for P should be conditioned upon P paying its accounts receivable purchasing P inventory and paying for any unpaid tooling. The First Lien Term Lenders assert that they hold a lien upon both the paid and unpaid tooling and that the tooling acknowledgments contained in the First and Second Accommodation Agreements are ineffective to extinguish their interest in the tooling.