590 B.R. 39
S.D. Ill.2018Background
- Old GM filed bankruptcy in June 2009 and sold most assets to New GM in a Section 363 sale; the Amended Sale Agreement allocated which product liabilities New GM assumed (limited to occurrences first occurring on or after the Closing Date).
- In 2014 New GM disclosed widespread defects, including an ignition-switch defect, prompting mass recalls and thousands of lawsuits alleging personal injury, wrongful death, and economic loss against New GM as successor.
- Bankruptcy Judge Gerber and later Judge Glenn adjudicated a series of threshold disputes about which claims survived the Sale Order bar, including whether certain claims were "Independent Claims" (based solely on New GM conduct), whether notice/prejudice required binding claimants, and whether punitive damages premised on Old GM conduct were available.
- The Second Circuit reviewed and partially reversed Judge Gerber: it held bankruptcy court could enforce the Sale Order, but that (a) pre-closing torts and certain contingent economic-loss claims could be barred, and (b) genuinely independent post-petition claims and some post-closing used-car purchasers could not be barred by the Sale Order, in part because of due-process concerns.
- This district-court opinion resolves eleven appeals from various Bankruptcy Court rulings (Pillars, Pitterman, Reichwaldt, Threshold Issues), affirming some rulings, vacating others, and remanding certain matters for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether New GM judicially admitted it assumed Pillars's claim by quoting the Original Sale Agreement in removal/answer | Pillars: New GM's pleadings quoted the Original Sale Agreement and thus admitted assumption of liabilities covering his claim | New GM: Quoting the wrong (superseded) draft was a mistake; no deliberate, unequivocal admission | Vacated Bankruptcy Court finding of judicial admission; court finds the quotation was a mistake, not an unequivocal admission |
| Scope of "Ignition Switch Plaintiff" (does Pillars fall within it) | Pillars: Second Circuit's reversal on ignition-defect prejudice should include his 2005 accident/2012 death | New GM: Stipulated facts limited the Ignition Switch Defect to specified Subject Vehicles; Pillars's vehicle not included | Affirmed that "Ignition Switch"/Subject Vehicles are limited as stipulated; Pillars not within that class |
| Whether fraud-by-concealment of the right to file a claim (alleged New GM concealment) is an Independent Claim | Plaintiffs: New GM had post-sale duties and concealed defects; that independent concealment caused inability to file timely claims and is a standalone tort | New GM: Such claims are disguised successor-liability claims and thus barred by the Sale Order/enjoinable | Vacated Bankruptcy Court dismissal; Fraudulent Concealment Claims may be treated as Independent Claims and proceed to nonbankruptcy courts to assess merits |
| Whether plaintiffs without the Ignition Switch Defect may pursue Independent Claims (Pitterman) | Pitterman Plaintiffs: Non-ignition plaintiffs can plead independent post-closing claims based on New GM conduct | New GM: Prior Bankruptcy rulings and December 2015 judgment barred such claims or limited them | Affirmed Judge Glenn: truly Independent Claims (based solely on New GM post-closing conduct) are not barred and Pitterman failure-to-warn claim may proceed to trial courts to decide merits |
| Availability of punitive damages against New GM based on Old GM conduct | Plaintiffs: punitive damages should be available to Post-Closing Accident Plaintiffs; Nov. 2015 ruling was not binding on all | New GM: Nov. 2015 held New GM did not assume punitive damages; punitive damages based on Old GM conduct are inconsistent with bankruptcy law/prior rulings | Affirmed: Nov. 2015 is law of the case; punitive damages premised on Old GM conduct are barred under bankruptcy law and cannot be recovered against New GM |
| Whether used-car purchasers of non-Ignition Switch vehicles (post-closing buyers) are bound by Sale Order via successor-in-interest rule | Plaintiffs: used buyers who bought post-closing had no relation to Old GM and thus are not bound; Second Circuit's analysis supports freedom from the Sale Order | New GM: buyers stand in sellers' shoes and cannot have greater rights than predecessors; thus claims based on Old GM conduct are barred | Vacated Bankruptcy Court: used-car purchasers who bought post-closing (including non-ignition defect purchasers) may not be bound by Sale Order; remanded for further proceedings |
| Whether Reichwaldt can relitigate contractual-assumption-of-punitive-damages argument (res judicata / law of the case & notice) | Reichwaldt: she lacked notice/was not party to prior ruling and thus may raise contractual-assumption argument | New GM: Reichwaldt received Order to Show Cause and failed to participate or appeal; law of the case and res judicata bind her | Affirmed: Reichwaldt barred by res judicata and law of the case from relitigating punitive-damages contractual-assumption issue |
Key Cases Cited
- In re Motors Liquidation Co., 529 B.R. 510 (Bankr. S.D.N.Y. 2015) (Bankruptcy Court April 2015 decision on Sale Order, notice, and scope of "Ignition Switch" rulings)
- In re Motors Liquidation Co., 541 B.R. 104 (Bankr. S.D.N.Y. 2015) (November 2015 Imputation Decision on imputation of knowledge and availability of punitive damages)
- In re Motors Liquidation Co., 568 B.R. 217 (Bankr. S.D.N.Y. 2017) (Pitterman Opinion permitting Independent claims by non-ignition plaintiffs under certain pleadings)
- In re Motors Liquidation Co., 571 B.R. 565 (Bankr. S.D.N.Y. 2017) (July 2017 Threshold Issues Opinion on Ignition Switch definitions, used-car purchasers, and punitive damages analysis)
- In re Motors Liquidation Co., 576 B.R. 313 (Bankr. S.D.N.Y. 2017) (Reichwaldt Order addressing pleading deficiencies and res judicata/law-of-the-case re punitive damages)
- In re Motors Liquidation Co., 829 F.3d 135 (2d Cir. 2016) (Second Circuit Opinion affirming bankruptcy jurisdiction but reversing insofar as Sale Order enjoined claims related to the ignition switch defect for lack of adequate notice)
- In re Duplan Corp., 212 F.3d 144 (2d Cir. 2000) (standard of review for bankruptcy appeals - factual findings for clear error, legal conclusions de novo)