539 B.R. 676
Bankr. S.D.N.Y.2015Background
- Debtor Motors Liquidation Co. (GUC Trust) planned a mid-November 2015 distribution of ~$135 million (plus an anticipated later ~$109 million) to holders of GUC Trust Units; Trust held ~ $809.9 million mostly in low‑yield Permissible Investments.
- Ignition Switch Plaintiffs appealed a June 1, 2015 judgment and sought a stay of the $135 million distribution pending appeal under Fed. R. Bankr. P. 8007(a)(1)(C).
- Trust expected to earn only ~0.12% p.a. on its Treasuries during any stay; Unitholders could likely earn materially higher returns if they received distributions.
- The Sale Agreement contains an “Accordion Feature” that could yield up to ~3.0 million New GM shares (~$921.6 million) if Allowed General Unsecured Claims rose from ~ $32 billion to $42 billion; plaintiffs argue their claims could push totals toward those triggers.
- Court accepted stipulated facts and expert market data, concluded distributions could be enjoined without violating the Plan if adequate protections exist, and analyzed stay standards, prejudice, likelihood of success, public interest, and bond sizing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a court may stay Trust distributions without impermissibly modifying the confirmed Plan | Stay is permissible to preserve appellate review of mootness issues and potential Accordion value | Plan (¶6.2(i)) requires quarterly distributions; injunction would effect an impermissible plan modification under §1127(b) | Court: A temporary stay with protections does not necessarily violate the Plan; distributions can be enjoined when appropriate and protected by a bond |
| Whether movant showed irreparable harm and merits posture for injunctive relief | Appeal could be mooted and plaintiff would lose the ability to recover distribution value—irreparable harm | Moving may prejudice Unitholders who lose yield during delay | Court: Irreparable harm shown; serious questions on the merits exist and balance of hardships tips to plaintiffs for preliminary relief |
| Prejudice to Unitholders and appropriate protective measure | Plaintiffs proposed no bond or minimal protection | Trust argued substantial prejudice from low Trust yields; bond required to indemnify Unitholders | Court: Prejudice real but compensable via a bond; bond required |
| Appropriate bond amount and stay duration to protect Unitholders | Shorter stay and lower bond (plaintiffs) | Trust proposed higher "Protection Return Rate" and larger bond | Court: Assumed 10‑month delay, adopted a court‑determined Protection Return Rate of 9.23% and set bond at $10.6 million; stay conditioned on posting bond within 14 days |
Key Cases Cited
- Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70 (2d Cir. 1979) (labels irreparable injury and balancing standards for injunctions)
- Tribune Media Co. v. Aurelius Capital Mgmt., L.P. (In re Tribune Media Co.), 799 F.3d 272 (3d Cir. 2015) (approach to bond sizing and valuation in stay contexts)
- In re Tribune Co., 477 B.R. 465 (Bankr. D. Del. 2012) (discussion of bond and stay considerations in bankruptcy)
- In re General Motors Corp., 409 B.R. 24 (Bankr. S.D.N.Y. 2009) (stay and bond precedent in chapter 11 context)