Garrett Motion Files Complaint Against Honeywell in Asbestos Indemnity Suit
104-Page Filing Details How
The complaint details how
Honeywellexecutives devised Garrett’s spinoff to offload the financial burdens of its asbestos liabilities. In October 2018, Honeywellspun off what remained of its Transportation Systems business, primarily a turbocharger business, into what is now Garrett Motion. Garrett’s lawsuit arises from Honeywell’s unilateral imposition of a 30-year Indemnification Agreement as part of that spin. This agreement requires Garrett to compensate Honeywellfor payments made to resolve Honeywell’s asbestos liabilities arising from Honeywell’s legacy Bendix automotive brake business. That brake business is completely unrelated to Garrett’s turbocharger business.
Honeywelldid not negotiate the one-sided Indemnification Agreement with Garrett. Because no rational company would ever voluntarily agree to the egregious terms of the Indemnification Agreement, Honeywellinstalled one of its own in-house lawyers prior to the spinoff as Garrett’s president and sole director for the purpose of forcing these unconscionable terms on Garrett. In addition, Garrett did not have independent legal representation during the spinoff process: Honeywellretained the same lawyers to represent both Honeywelland Garrett in connection with the spinoff. The lawyers blindly acceded to Honeywell’s wishes, regardless of the best interest of their other client, Garrett.
The Indemnification Agreement violates
New Yorklaw. The Indemnification Agreement purports to illegally require Garrett to indemnify Honeywellfor punitive damages, which are meant to punish Honeywell, including for its reckless disregard of the dangers of asbestos. Under New Yorklaw, Garrett cannot be required to indemnify Honeywellfor any amount attributable to punitive damages or Honeywell'sown intentional misconduct, as well as attorneys' fees and related costs incurred in defending against or settling such claims.
Honeywellincorporated onerous and unlawful covenants into the Indemnification Agreement that were uniquely designed to give Honeywella veto over Garrett’s key corporate decisions for 30 years. These covenants hobbled Garrett’s ability, as an independent, publicly traded company, to refinance its debt and engage in corporate transactions, including mergers and acquisitions, that would benefit Garrett and its shareholders. As detailed in the complaint, Garrett has no right to prepay Honeywell, as it would a lender, which leaves Honeywellwith control over these decisions by Garrett for 30 years regardless of Garrett’s circumstances. The complaint describes how such extensive and long-lasting control by Honeywellover Garrett’s affairs has no legitimate basis and is unlawful.
Honeywellis not entitled to indemnification, and has breached the Indemnification Agreement it wrote for itself. Honeywelldenied many of Garrett’s requests for information concerning the liability for which it is indemnifying Honeywell, despite Garrett’s right to this information and its attempts for more than a year to obtain it. Honeywellhas also failed to establish its right to indemnity for each and every asbestos settlement of the thousands for which it seeks indemnification. Moreover, Honeywellhas not allocated between indemnifiable amounts and non-indemnifiable amounts, including punitive damages or intentional misconduct.
For more than a year since its spinoff, Garrett has attempted to resolve these critical governance and financial issues amicably with
During its negotiations,
Garrett’s lawsuit, initiated through a Summons with Notice filed on
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