Source: This is an excerpt of a press release disseminated by Garrett Motion. The entire release can be read by clicking on this sentence.
ROLLE, Switzerland — Garrett Motion Inc. (NYSE: GTX) today filed a lawsuit in the Supreme Court of the State of New York against Honeywell International Inc. (NYSE: HON), related entities and certain affiliated officers and directors. The lawsuit follows Garrett’s unsuccessful efforts to reach a negotiated solution with Honeywell’s executive team to avoid litigation.
The lawsuit arises from Honeywell’s unilateral imposition of an unusual 30-year Indemnification Agreement on Garrett immediately prior to the spinoff of Garrett in October 2018. This agreement, which was not negotiated at arm’s-length, requires Garrett to compensate Honeywell for payments relating to asbestos exposure arising from Honeywell’s legacy Bendix automotive brake business, including payments relating to punitive damages and defense costs.
Garrett asserts that requiring it to make these payments to Honeywell is unacceptable as the historical asbestos liability is Honeywell’s and not Garrett’s. Furthermore, Honeywell has enabled itself to potentially exercise control of key Garrett corporate decisions by inserting a set of loan-like covenants into the 30-year agreement term.
For more than a year since its spinoff, Garrett has attempted to resolve these important governance and financial issues amicably with Honeywell. After repeated, but unsuccessful discussions with Honeywell, Garrett believes it has no alternative but to turn to the Court for relief.
Garrett’s decision was the result of a comprehensive analysis undertaken by its management, informed by the input of outside advisors, and made with the approval of its Board of Directors, who believe this unacceptable agreement limits Garrett’s ability to reach its full potential.
During its negotiations with Honeywell, despite asserting that Honeywell’s agreement is unacceptable, Garrett continued to comply with the terms of the agreement, including making timely quarterly indemnity payments under protest. Garrett’s exposure remains capped at $175 million annually throughout the agreement.
Garrett’s lawsuit that seeks compensatory damages, rescission of the Indemnification Agreement, as well as other relief from the Court, can be read here.