In Re Motors Liquidation Co.
447 B.R. 198
Bankr. S.D.N.Y.2011Background
- Debtors seek confirmation of a liquidating Plan that distributes New GM Securities to unsecured creditors and funds environmental settlements for government regulators.
- Plan creates four trusts: GUC Trust, Avoidance Trust, Environmental Trust, and Asbestos Trust to manage distributions, avoidance actions, and environmental/asbestos liabilities.
- Plan reserves for disputed claims; distributions to creditors occur on allowed claims with disputed claims funded by reserves.
- Wilmington Trust acts as administrator for the GUC and Avoidance Trusts; its role is limited post-Effective Date to fiduciary duties.
- Nova Scotia Noteholders and Green Hunt Wedlake object to claims and potential subordination or disallowance; discovery ongoing on merits.
- Court preliminarily approves confirmation with potential minor Plan modifications, relying on the Plan’s Self-Correcting Feature.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Good faith of the Plan | Nova Scotia Noteholders/Green Hunt Wedlake claim bad faith due to disputes over disputed claims. | Debtors argue plan is consistent with law; such provisions common and not bad faith. | Plan proposed in good faith; objections overruled. |
| Equal treatment of unsecured claims | Disputed and allowed unsecured claims within Class 3 must be treated equally; plan delays for disputed claims unfair. | Reserves funded, equal treatment preserved when claims are later allowed; no violation of 1123(a)(4). | No violation; equal treatment achieved via reserves and timing. |
| Segregated reserves for disputed claims | Disputed claim reserves must be segregated for each claimant. | Reserving aggregate funds is reasonable; segregated reserves are not required. | Segregated reserves not required; aggregate reserves are permissible. |
| Wilmington Trust conflicts | Trustee's dual roles may create conflicts harming unsecured creditors. | No concrete conflicts; fiduciary duties and knowledge support continuation. | No need to revise Plan for conflicts; fiduciary oversight remains adequate. |
| Exculpation and third-party releases | Exculpation provisions and third-party releases are impermissible under Second Circuit law. | Exculpation limited to appropriate matters; gatekeeping can address concerns; third-party releases not fully permissive. | Exculpation narrowed and third-party releases moderated; Plan confirmed with revisions. |
Key Cases Cited
- In re Weiss-Wolf, Inc., 59 B.R. 653 (Bankr. S.D.N.Y. 1986) (disputed claims must be provided for so allowed claims are treated identically)
- In re Adelphia Communications Corp., 368 B.R. 140 (Bankr. S.D.N.Y. 2007) (flexibility of plan provisions and existence of negotiated settlements; 'appropriate' provisions)
- In re Chemtura Corp., 439 B.R. 561 (Bankr. S.D.N.Y. 2010) (exculpation and third-party releases; impact on plan approval)
- In re DBSD North America, Inc., 419 B.R. 179 (Bankr. S.D.N.Y. 2009) (releases and business-judgment standards in plan confirmation)
- Deutsche Bank AG v. Metromedia Fiber Network, Inc., 416 F.3d 136 (2d Cir. 2005) (limits on third-party releases; standards after Metromedia)