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Nissan North America, Inc. v. Continental Automotive Systems, Inc.

United States District Court, M.D. Tennessee, Nashville Division

October 1, 2019

NISSAN NORTH AMERICA, INC., Plaintiff,
v.
CONTINENTAL AUTOMOTIVE SYSTEMS, INC., CONTITECH NORTH AMERICA, INC., and CONTINENTAL TIRE THE AMERICAS, LLC, Defendants.

          MEMORANDUM & ORDER

          Aleta A. Trauger United States District Judge.

         Nissan North America, Inc. (“Nissan”) has filed a Motion to Amend Complaint (Docket No. 35), to which ContiTech North America, Inc. (“ContiTech”), Continental Automotive Systems, Inc. (“CAS”), and Continental Tire the Americas, LLC (“Continental Tire”) have filed a Response (Docket No. 38), and Nissan has filed a Reply (Docket No. 39). For the reasons set out herein, that motion will be granted in part and denied in part.

         I. BACKGROUND[1]

         Nissan manufactures cars, and the defendants manufacture parts for cars. (Docket No. 35-1 ¶¶ 10-12.) At some point no later than July 29, 2002, Nissan and Continental Teves, Inc. (“Continental Teves”), a predecessor of CAS, came to share a mutual desire to draft and finalize a Master Purchase Agreement (“MPA”) that would govern sales of parts from Continental Teves to Nissan. (Id. ¶ 12; Docket No. 38-4 at 2.) In the meantime, however, from 2002 until late October 2004, Nissan regularly purchased and used Continental Teves parts without the parties' finalizing an MPA. Nissan's purchases during this time period appear, at least generally, to have been made pursuant to written purchase orders. Nissan has apparently been able to locate some of those purchase orders, from September 2003 through May 2004, related to Nissan's purchase of braking system components from Continental Teves. (Docket No. 35-1 ¶ 15.) According to Nissan, those purchase orders set forth written Terms and Conditions, which included a provision stating that, “[i]n addition to what is specified elsewhere on the document, Seller's liability shall also include . . . damage or cost arising from claims of personal injury or property damages caused directly or indirectly by defective parts supplied by Seller.” (Id. ¶ 16.) The Terms and Conditions stated that they “shall be construed and governed according to the laws of the State of Tennessee.” (Id. ¶ 17.)

         On October 22, 2004, Nissan and the Continental companies finally entered into an MPA, which refers to Continental Teves and other Continental companies collectively as the “Supplier.” (Id. ¶ 19; see Docket No. 1-1 at 22.) The MPA stated that it “shall be governed by and construed in accordance with the laws of the state of Tennessee.” (Id. ¶ 21.) The MPA included the following indemnity provision:

In addition to what is specified elsewhere in this Agreement, Supplier shall indemnify and hold harmless Nissan and its dealers (to the extent indemnified by Nissan or Nissan Affiliates), its Affiliates and their dealers (to the extent indemnified by Nissan or Nissan Affiliates), and their respective officers[, ] directors and employees (the “Nissan Indemnified Parties”), in full against all loss, liability, damages, costs and all expenses, including attorney fees and expert fees, arising out of claims or lawsuits for personal injury, property damage or economic damage alleging:
(1) defects in design (to the extent that supplier has furnished the design), warnings (to the extent that Supplier has furnished the warnings), materials, workmanship and performance . . . .

(Id. ¶ 24.)

         One of the products that Continental Teves had been providing to Nissan was a “Delta Stroke Sensor, ” or “DSS, ” that was used in the brake system of the 2004 Nissan Infiniti QX56. Continental shipped some number of Delta Stroke Sensors to Nissan, which installed them and released the cars for sale to the general public. According to Nissan, the Continental companies began shipping the DSS to Nissan before the MPA was finalized and continued providing Nissan with the DSS after the signing of the MPA. (Id. ¶ 23.)

         In June and November 2011, Nissan was sued by putative class action plaintiffs in, respectively, the U.S. District Court for the Northern District of California and the Circuit Court of Miller County, Arkansas. The California-based case is known by the parties as the “Banks Action, ” and the Arkansas-based case is known as the “West Action, ” after the surnames of the cases' respective plaintiffs. (Id. ¶¶ 25-26.) The plaintiffs in both cases alleged that the braking system of the 2004 Infiniti QX56 had been defective, leading to a loss in braking power. Central to those allegations were alleged defects with the DSS. (Id. ¶ 27.) Nissan requested that the Continental companies defend and indemnify Nissan in the lawsuits. The Continental companies agreed to do so and funded the defense and settlement costs of the Banks and West Actions, which are now resolved. (Id. ¶ 32.)

         Later, Nissan and CAS were named as defendants in three consolidated non-class action cases involving the wrongful deaths of Saida Mendez-Bernadino and her two children in a 2012 automobile collision involving a 2004 Infiniti QX56. (Id. ¶ 34; Docket No. 38-2 ¶ 1.) The parties refer to that lawsuit as the “Bernadino Lawsuit” and refer to the specific 2004 Infiniti QX56 involved as the “Subject Vehicle.” (Docket No. 35-1 ¶¶ 34-35.) The plaintiffs in the Bernadino Lawsuit alleged that the fatal collision had been caused by the Subject Vehicle's DSS. (Id. ¶ 36.)

         Unlike in the West and Banks Actions, the Continental companies refused to defend or indemnify Nissan with regard to Nissan's portion of the Bernadino claims, and, shortly before the case went to trial, CAS settled the claims against it. (Id. ¶ 42.) Nissan went to trial, where a jury found that the defective DSS had been a substantial factor in the collision. The jury awarded judgment against Nissan for slightly less than $25 million. (Id. ¶ 43.) The Continental companies have taken the position that they do not have an indemnification obligation to Nissan with regard to the Bernadino Lawsuit because the Subject Vehicle was assembled and shipped before Nissan and the suppliers entered into the MPA. (Id. ¶ 51.)

         On April 5, 2019, Nissan sued the defendants in Rutherford County, Tennessee Circuit Court, seeking indemnification for its liability in the Bernandino Lawsuit. (Docket No. 1-1 at 7.) On May 14, 2019, Continental filed a Notice of Removal in this court. (Docket No. 1.) Nissan initially contested removal on the ground that Continental had waived its removal rights (Docket No. 17), but it ultimately withdrew its remand request “in order to avoid unnecessary delay in the adjudication of the merits of Nissan's claims.” (Docket No. 30 ¶ 2.)

         On September 4, 2019, Nissan filed its Motion to Amend Complaint, seeking leave to amend its Complaint in four ways:

1. To allege additional facts regarding the parties' course of dealing before and after the ...

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