943 F.3d 125
2d Cir.2019Background
- In 2009 Old GM filed Chapter 11 and sold substantially all assets under 11 U.S.C. § 363 to New GM; the Sale Agreement and Sale Order limited New GM’s assumption to enumerated "Assumed Liabilities," later amended to include some post‑closing product‑liability claims.
- In 2014 New GM issued recalls of Old GM vehicles, prompting lawsuits by post‑closing plaintiffs seeking compensatory and punitive damages based on Old GM’s pre‑sale conduct.
- The bankruptcy court (Nov. 2015) held punitive damages were not part of New GM’s Assumed Liabilities; that ruling was not appealed.
- In July 2017 the bankruptcy court applied the Nov. 2015 decision as law of the case and additionally concluded successor liability for punitive damages was barred given Old GM’s insolvency; the district court affirmed in May 2018.
- The remaining appellants (plaintiffs in Eason) sued after Nov. 2015 and appealed; the Second Circuit considered jurisdiction, res judicata, contract interpretation, and successor‑liability effects of the Sale Order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of the Notice of Appeal / Appellate jurisdiction | Appellants: notice naming "certain Post‑Closing Accident Plaintiffs" by law firms (and later identifications) suffices. | New GM: notice failed to name appellants as required by Fed. R. App. P. 3(c), depriving court of jurisdiction. | Court: Liberal construction; notice was barely adequate (appellants ascertainable by firm); jurisdiction exists. |
| Res judicata (does Nov. 2015 ruling preclude challenge?) | Eason: not a party to the bankruptcy proceedings before Nov. 2015, so not bound. | New GM: appellants were part of the larger bankruptcy litigation and thus bound by the unappealed ruling. | Court: Eason plaintiffs were not brought into the proceedings before Nov. 2015; res judicata does not bar their challenge. |
| Contractual assumption (did Sale Agreement assume punitive damages?) | Appellants: the Sale Agreement’s term "all Liabilities" includes punitive damages. | New GM: Assumption language is limited to liabilities "for" and "arising directly out of" death/injury; punitive damages are punitive, not "for" injury, and the list of Assumed Liabilities is exclusive. | Court: Held New GM did not assume punitive damages; contract language and extrinsic evidence exclude punitive damages. |
| Successor liability / Sale Order effectiveness for post‑closing plaintiffs | Appellants: under Second Circuit precedent, claims by claimants without pre‑sale relationship should not be swept by a § 363 "free and clear" sale. | New GM: Sale Order expressly bars successor/transferee liability claims; punitive claims based on pre‑sale conduct were complete at sale and thus covered. | Court: Sale Order bars punitive‑damage successor claims here; no need to resolve the Bankruptcy Code priority question. |
Key Cases Cited
- In re Motors Liquidation Co., 829 F.3d 135 (2d Cir. 2016) (framework for when a § 363 sale can extinguish successor‑liability claims)
- In re Motors Liquidation Co., 541 B.R. 104 (Bankr. S.D.N.Y. 2015) (bankruptcy court ruling that punitive damages are not Assumed Liabilities)
- In re Motors Liquidation Co., 571 B.R. 565 (Bankr. S.D.N.Y. 2017) (bankruptcy court applying law‑of‑the‑case and addressing successor liability)
- Torres v. Oakland Scavenger Co., 487 U.S. 312 (U.S. 1988) (notice‑of‑appeal identity requirement and its construction)
- Virgilio v. City of New York, 407 F.3d 105 (2d Cir. 2005) (punitive damages serve punitive/retributive purpose, not compensation)