Motors liquidating


30-Jun-2017 22:21

From February until October 2014, New GM would issue over 60 recalls, with the number of affected vehicles in the United States alone surpassing 25 million. Here, no party seeks to undo the sale of Old GM's assets to New GM, as executed through the Sale Order. New GM hired attorney Anton Valukas of the law firm Jenner & Block to investigate; he did so and prepared an extensive report (the “Valukas Report”). Instead, plaintiffs challenge the extent to which the bankruptcy court may absolve New GM, as a successor corporation, of Old GM's liabilities. 2013) [hereinafter “Collier on Bankruptcy”] (noting that “use of a section 363 sale probably reached its zenith” with the GM bankruptcy). Mc Alister, King & Spalding LLP, Atlanta, Georgia, and Edward L. This case involves one of the consequences of the GM bankruptcy. In these instances, courts require “a relationship between the [ ] right to demand ․ payments from the debtors and the use to which the debtors had put their assets.” Trans World Airlines, 322 F.3d at 289. We hold, however, that the first two sets of claims are covered by the Sale Order but that the latter two sets of claims are not. “An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. While private shareholders expect their investments to be profitable, the government does not necessarily share the same profit motive. Third, we must price in the real cost of disrupting the bankruptcy process. Second, many of the peculiar facts discussed apply with less force to the Non-Ignition Switch Plaintiffs, who assert claims arising from other defects. To conclude, we reverse the bankruptcy court's decision insofar as it enforced the Sale Order to enjoin claims relating to the ignition switch defect. Other courts have focused instead on the doctrine's statutory underpinnings and role in “fill[ing] the interstices of the Code.” In re UNR Indus., Inc., 20 F.3d 766, 769 (7th Cir. “[E]quitable mootness bears only upon the proper remedy, and does not raise a threshold question of our power to rule.” In re Metromedia Fiber Network, Inc., 416 F.3d 136, 144 (2d Cir. Ripley, King & Spalding LLP, Houston, Texas, and Richard C. Bloomer, Kirkland & Ellis LLP, Chicago, Illinois, for Appellee–Cross– Appellant General Motors LLC. Beginning in February 2014, New GM began recalling cars due to a defect in their ignition switches. § 363 of the Bankruptcy Code (the “Code”) to sell its assets to New GM “free and clear.” In plain terms, where individuals might have had claims against Old GM, a “free and clear” provision in the bankruptcy court's sale order (the “Sale Order”) barred those same claims from being brought against New GM as the successor corporation. At minimum, the language in § 363(f) permits the sale of property free and clear of in rem interests in the property, such as liens that attach to the property. Qualitech Steel SBQ, LLC, 327 F.3d 537, 545 (7th Cir. We agree that successor liability claims can be “interests” when they flow from a debtor's ownership of transferred assets. First, the pre-closing accident claims clearly fall within the scope of the Sale Order. Treasury injected hundreds of billions of dollars into the economy during the financial crisis, not on the expectation that it would make a reasonable rate of return but on the understanding that millions of Americans would be affected if the economy were to collapse. From the middle of 2007 through the first quarter of 2009, Old GM's average net loss exceeded billion per quarter; a day's worth of delay would cost over 5 million, a week almost a billion dollars. The bankruptcy court entered judgment against the Non-Ignition Switch Plaintiffs based on its opinion determining the rights of the other plaintiffs, but left as an open question whether Old GM knew of the Non-Ignition Switch Plaintiffs' claims based in other defects. 1994) (explaining also difference between “inability to alter the outcome (real mootness) and unwillingness to alter the outcome (‘equitable mootness')”). 2005) (emphasis added).“The oldest and most consistent thread in the federal law of justiciability is that federal courts will not give advisory opinions.” 13 Wright & Miller § 3529.1. As of March 31, 2014, GUC Trust had distributed roughly ninety percent of its New GM securities and nearly 32 million units of GUC Trust; the expected value of unsecured claims against Old GM totaled roughly billion, not enough to trigger the accordion feature and involve New GM in the bankruptcy. We address two issues: (1) what notice plaintiffs were entitled to as a matter of procedural due process, and (2) if they were provided inadequate notice, whether the bankruptcy court erred in denying relief on the basis that most plaintiffs were not “prejudiced.”We review factual findings for clear error and legal conclusions, including interpretations of the Constitution, de novo. The GM bankruptcy that began five years earlier appeared to be approaching its end. Ignition Switch Defect On February 7, 2014, New GM first informed the National Highway Traffic Safety Administration (“NHTSA”) that it would be recalling, among other vehicles, the 2005 Chevrolet Cobalt. The defect was potentially lethal: while in motion, a car's ignition could accidentally turn off, shutting down the engine, disabling power steering and braking, and deactivating the airbags. Various individuals nonetheless initiated class action lawsuits against New GM, asserting “successor liability” claims and seeking damages for losses and injuries arising from the ignition switch defect and other defects. Among those objections were arguments against the imposition of a “free and clear” provision to bar claims against New GM as the successor to Old GM made by consumer organizations, state attorneys general, and accident victims. See In re Trans World Airlines, Inc., 322 F.3d 283, 288 (3d Cir. But courts have permitted a “broader definition that encompasses other obligations that may flow from ownership of the property.” 3 Collier on Bankruptcy ¶ 363.06[1]. 2003) (“[T]he term ‘interest’ is a broad term no doubt selected by Congress to avoid ‘rigid and technical definitions drawn from other areas of the law.’ ” (quoting Russello v. See 3 Collier in Bankruptcy ¶¶ 363.06[1], [7]; Trans World Airlines, 322 F.3d at 289. § 363(f) (“free and clear of any interest in such property”), with § 1141(c) (“free and clear of all claims and interests”). A claim is (1) a right to payment (2) that arose before the filing of the petition. Those claims directly relate to the ownership of the GM automaker's business—Old GM built cars with ignition switch defects. If the ignition switch defect were revealed in the course of bankruptcy, plaintiffs could have petitioned the government, as the majority owner of New GM, to consider how millions of faultless individuals with defective Old GM cars could be affected. We do not know whether the proceedings would have been delayed, but some delay was certainly possible. Indeed, several provisions of the Code prohibit modification of bankruptcy orders unless those orders are stayed pending appeal. A controversy that is “appropriate for judicial determination ․ must be definite and concrete, touching the legal relations of parties having adverse legal interests.” Aetna Life Ins. Many of the cars in question were built years before the GM bankruptcy, but individuals claiming harm from the ignition switch defect faced a potential barrier created by the bankruptcy process. New GM argued that, because of the “free and clear” provision, claims could only be brought against Old GM, and not New GM. Next, the bankruptcy court issued the Sale Order, which entered into effect the final sale agreement between Old GM and New GM (the “Sale Agreement”). 2001) (“[V]acatur eliminates an appellate precedent that would otherwise control decision on a contested question throughout the circuit.”). Sister courts have held that § 363(f) may be used to bar a variety of successor liability claims that relate to ownership of property: an “interest” might encompass Coal Act obligations otherwise placed upon a successor purchasing coal assets, In re Leckie Smokeless Coal Co., 99 F.3d 573, 581-82 (4th Cir. But successor liability claims must also still qualify as “claims” under Chapter 11. § 101(5), it makes sense to “harmonize” Chapter 11 reorganizations and § 363 sales “to the extent permited by the statutory language.” Chrysler, 576 F.3d at 125; see Lionel, 722 F.2d at 1071 (“[S]ome play for the operation of both § 363(b) and Chapter 11 must be allowed for.”). We thus consider what claims may be barred under Chapter 11 generally. And those plaintiffs' claims are properly thought of as tort claims that arose before the filing of the petition; indeed, the claims arise from accidents that occurred pre-closing involving Old GM cars. Once due process is triggered, the question becomes what process is due. Indeed, during the later congressional hearings, Representatives and Senators questioned New GM's CEO on her invocation of the liability shield when the government guided the process. Senator Richard Blumenthal, for instance, indicated that he would have objected in bankruptcy had he known, because he “opposed it at the time, as Attorney General for the state of Connecticut, not [foreseeing] that the material adverse fact being concealed was as gigantic as this one.” April 2, 2014 Senate Hearing, supra note 13, at 22-23 (statement of Sen. For instance, Congress called the GM CEO to testify over the course of four days.

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C., Dallas Texas, for Appellants–Cross–Appellees Ignition Switch Plaintiffs. Flaxer, Golenbock Eiseman Assor Bell & Peskoe LLP, New York, New York, for Appellants Groman Plaintiffs. STEINBERG (Scott Davidson, on the brief), King & Spalding LLP, New York, New York, and Merritt E. During the financial crisis of 20, as access to credit tightened and consumer spending diminished, Old GM posted net losses of billion over the course of a year and a half. When Old GM's private efforts failed, President Barack Obama announced to the nation a solution—“a quick, surgical bankruptcy.” Old GM petitioned for Chapter 11 bankruptcy protection, and only forty days later the new General Motors LLC (“New GM”) emerged. The bankruptcy court assumed that the Sale Order's broad language suggested that all of these claims fell within the scope of the “free and clear” provision. Instead, the President and Treasury oversaw its affairs during the bailout and Treasury owned a majority stake following the bankruptcy. The facts here were peculiar and are no doubt colored by the inadequate notice and plaintiffs' lack of any meaningful opportunity to be heard. Given the bankruptcy court's focus on consumer confidence, the involvement of Treasury, the financial stakes at the time, and all the business circumstances, there was a reasonable possibility that plaintiffs could have negotiated some relief from the Sale Order. First, the bankruptcy court stated that it “would not have let GM go into the liquidation that would have resulted if [it] denied approval of the 363 Sale.” MLC II, 529 B. The choice was not just between the Sale Order as issued and liquidation; accommodations could have been made. Without factual findings relevant to determining knowledge, we have no basis for deciding whether notice was adequate let alone whether enforcement of the Sale Order would violate procedural due process as to these claims. Our Circuit has acknowledged that the doctrine draws on “equitable considerations as well as the constitutional requirement that there be a case or controversy.” Chateaugay III, 10 F.3d at 952. However broad the doctrine of equitable mootness, Article III requires a case or controversy before relief may be equitably mooted. Through this proposed sale, Old GM was attempting not a traditional Chapter 11 reorganization, but a transaction pursuant to 11 U. The initial distribution released more than seventy-five percent of the New GM securities. See In re Millenium Seacarriers, Inc., 419 F.3d 83, 96 (2d Cir. At a minimum, a bankruptcy court's “arising in” jurisdiction includes claims that “are not based on any right expressly created by [T]itle 11, but nevertheless, would have no existence outside of the bankruptcy.” Id. An order consummating a debtor's sale of property would not exist but for the Code, see 11 U. § 105(a) (providing that bankruptcy court “may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title”). In certain parts of the Sale Order, the bankruptcy court had included language that successor liability claims would be “forever prohibited and enjoined.” J. In other words, New GM “did not seek a new injunction but, rather, ‘[sought] to enforce an injunction already in place.’ ” In re Kalikow, 602 F.3d 82, 93 (2d Cir. Accordingly, we affirm the bankruptcy court's decision not to enjoin independent claims, see MLC II, 529 B. at 568-70, and reverse its decision to enjoin the Used Car Purchasers' claims, see id. The Sale Order, if enforced, would thus bar those claims. On February 8, 2012, the bankruptcy court ordered that no further claims against Old GM and payable by GUC Trust would be allowed unless the claim amended a prior claim, was filed with GUC Trust's consent, or was deemed timely filed by the bankruptcy court. 2005).“[T]he meaning of the statutory language ‘arising in’ may not be entirely clear.” Baker v. Hence, a bankruptcy court “plainly ha[s] jurisdiction to interpret and enforce its own prior orders.” Travelers Indem. Plaintiffs contend on appeal that enforcing the Sale Order would violate procedural due process. Our clear error standard is a deferential one, and if the bankruptcy court's “ ‘account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been siting as the trier of fact, it would have weighed the evidence differently.’ ” Amadeo v. Geman, Lieff Cabraser Heimann & Bernstein, LLP, New York, New York, and Edward S. Esserman, Stutzman, Bromberg, Esserman & Plifka, P. Fox, on the brief), Goodwin Procter LLP, New York, New York, for Appellants–Cross–Appellees Ignition Switch Pre–Closing Accident Plaintiffs. Davis, Josh Davis Law Firm, Houston, Texas, for Appellant–Cross–Appellee Doris Powledge Phillips. SCHMIDT, Wolf Haldenstein Adler Freeman & Herz LLP, New York, New York, and Jonathan L. Gillett, Gibson, Dunn & Crutcher LLP, New York, New York, for Trustee–Appellee–Cross–Appellant Wilmington Trust Company. SHAH, Akin Gump Strauss Hauer & Feld LLP, Washington, D. On June 1, 2009, General Motors Corporation (“Old GM”), the nation's largest manufacturer of automobiles and the creator of such iconic American brands as Chevrolet and Cadillac, filed for bankruptcy. Department of the Treasury (“Treasury”) loaned billions of dollars from the Troubled Asset Relief Program (“TARP”) to buy the company time to revamp its business model. Further, there must be some contact or relationship between the debtor and the claimant such that the claimant is identifiable. Application We apply these principles to: (1) pre-closing accident claims, (2) economic loss claims arising from the ignition switch defect or other defects, (3) independent claims relating only to New GM's conduct, and (4) Used Car Purchasers' claims. Second, New GM was not a truly private corporation. Under these circumstances, we cannot be confident that the Sale Order would have been negotiated and approved exactly as it was if Old GM had revealed the ignition switch defect in bankruptcy. at 765 (directing courts to consider “all that happened without stripping the erroneous action from the whole”). While we agree that liquidation would have been catastrophic, we are confident that Old GM, New GM, Treasury, and the bankruptcy court itself would have endeavored to address the ignition switch claims in the Sale Order if doing so was good for the GM business. Because enforcing the Sale Order would violate procedural due process in these circumstances, the bankruptcy court erred in granting New GM's motion to enforce and these plaintiffs thus cannot be “bound by the terms of the [Sale] Order[ ].” In re Johns-Manville Corp., 600 F.3d 135, 158 (2d Cir. As to claims based in non-ignition switch defects, we vacate the bankruptcy court's decision to enjoin those claims, see MLC III, 531 B. at 360, and remand for further proceedings consistent with this opinion. Equitable Mootness Finally, we address the bankruptcy court's decision that relief for any would-be claims against GUC Trust was equitably moot. 1996) (en banc) (Alito, J., dissenting) (labeling it a “curious doctrine”).

C., for Creditors–Appellants–Cross–Appellees Celestine Elliott, Lawrence Elliott, and Berenice Summerville, and Appellants–Cross–Appellees Sesay and Bledsoe Plaintiffs. Cabraser, Lieff Cabraser Heimann & Bernstein, LLP, San Francisco, California, and Rachel J. Steel, Brown Rudnick LLP, New York, New York, and Sandra L. Newman, Akin Gump Strauss Hauer & Feld LLP, New York, New York, for Creditors–Appellees–Cross–Appellants Participating Unitholders. If the right to payment is contingent on future events, the claim must instead “result from pre-petition conduct fairly giving rise to that contingent claim.” In re Chateaugay Corp. Thus, “ ‘claim’ cannot be extended to include ․ claimants whom the record indicates were completely unknown and unidentified at the time [the debtor] filed its petition and whose rights depended entirely on the fortuity of future occurrences.” Lemelle v. Such a claim must arise from a (1) right to payment (2) that arose before the filing of the petition or resulted from pre-petition conduct fairly giving rise to the claim. “[T]he road and the automobile” are, in American history, “sanctuaries, hidden from the intrusive gaze of the state, [where] individuals live freely.” Sarah Seo, The New Public, 125 Yale L. As the head of President Obama's auto task force put it, in relation to Chrysler's bankruptcy: “what consumer would buy another Chrysler if the company didn't honor its warranties? In other words, plaintiffs could have tried to convince the bankruptcy parties that it made good business sense to spend substantial sums to preserve customer goodwill in the GM brand and, in turn, GM's business value. The reasonable conclusion is that, with the likelihood and price of disruption to the bankruptcy proceedings being so high, plaintiffs at least had a basis for making business-minded arguments for why they should receive some accommodation in or carve-out from the Sale Order. In other words, the bankruptcy court suggested that it would have approved the § 363 sale anyway, because the alternative was liquidation—and liquidation would have been catastrophic. Under these circumstances, we exercise our “independent obligation” to ensure that the case “satisfies the ‘case-or-controversy’ requirement of Article III, Section 2 of the Constitution.” United States v. See In re Continental Airlines, 91 F.3d 553, 567 (3d Cir. “[F]ederal courts are without power to decide questions that cannot affect the rights of litigants in the case before them.” North Carolina v. We affirm, reverse, and vacate in part the bankruptcy court's decision to enforce the Sale Order against plaintiffs and vacate as advisory its decision on equitable mootness. Bailout In the final two quarters of 2007, as the American economy suffered a significant downturn, Old GM posted net losses of approximately billion and 2 million. The company also purchased parts from over eleven thousand suppliers and marketed through roughly six thousand dealerships. Other than a few liabilities that New GM would assume as its own, this “free and clear” provision would act as a liability shield to prevent individuals with claims against Old GM from suing New GM. The sale notice specified that interested parties would have until June 19, 2009 to submit to the bankruptcy court responses and objections to the proposed sale order. On July 10, 2009, the § 363 sale officially closed, and New GM began operating the automaker business. GUC Trust thus asserts that there was no right to payment prior to the petition. The economic losses claimed by these individuals were “contingent” claims. By definition, independent claims are claims based on New GM's own post-closing wrongful conduct. Generally, legal claims are sufficient to constitute property such that a deprivation would trigger due process scrutiny.