568 B.R. 217
Bankr. S.D.N.Y.2017Background
- In 2009 Old GM sold most assets to New GM under a §363 Sale Order that transferred assets "free and clear" while listing liabilities New GM would assume (Product Liabilities for incidents on/after the July 10, 2009 closing) and liabilities Old GM would retain.
- Bernard Pitterman sued New GM in Connecticut for a 2011 fatal rollaway accident involving a 2004 Suburban (an Old GM vehicle), alleging defects and asserting claims for failure to warn and failure to recall/retrofit, citing conduct by both Old GM and New GM.
- New GM moved (2016) to enforce the Sale Order to bar certain post-sale claims; the bankruptcy court designated five Threshold Issues and separately considered the Pitterman action because of an imminent trial date.
- Prior decisions: the bankruptcy court (April/November 2015) and the Second Circuit (2016) interpreted the Sale Order, defined (narrowly) "Independent Claims," and held that a sale may only bar claims that were "claims" under §101(5) (i.e., rights to payment that arose pre-petition or from pre-petition conduct).
- The principal question here: whether Non-Ignition Switch plaintiffs (like Pitterman) may assert independent claims against New GM based solely on New GM's post-closing conduct, or whether the Sale Order bars those claims.
- The bankruptcy court grants New GM’s motion in part: Pitterman may proceed only with (i) failure to warn claims based on Old GM and New GM conduct, and (ii) failure-to-recall/retrofit claims only to the extent they are based solely on New GM’s post-closing wrongful conduct; claims based on Old GM’s failure to recall/retrofit are barred as not Assumed Liabilities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sale Order bars Pitterman’s claims against New GM for a post-closing accident | Pitterman: claims based on New GM post-closing conduct are independent and should proceed | New GM: Sale Order bars claims against New GM unless plaintiffs were known claimants in 2009 or show due-process violation | Held: Claims based solely on New GM’s post-closing wrongful conduct are not "claims" under §101(5) and are outside the Sale Order; they may proceed if pleaded as solely New GM conduct |
| Failure-to-warn claims based on Old GM conduct | Pitterman: may assert failure-to-warn (products liability) against New GM based on Old GM conduct | New GM did not contest that failure-to-warn claims are Product Liabilities and thus Assumed Liabilities for post-closing incidents | Held: Pitterman may proceed with failure-to-warn claims based on Old GM and New GM conduct (Product Liability assumed for post-closing incidents) |
| Failure-to-recall/retrofit claims based on Old GM conduct | Pitterman: Connecticut law treats failure-to-recall/retrofit as product-liability such that New GM assumed liability | New GM: recall/retrofit obligations were not Assumed Liabilities under the Sale Agreement | Held: Failure-to-recall/retrofit based on Old GM conduct are not Assumed Liabilities and are barred against New GM; Pitterman cannot proceed on those theories against New GM |
| Whether Non-Ignition Switch plaintiffs must show a 2009 due-process violation to assert independent post-closing claims | Pitterman/other plaintiffs: either independent claims pass through or they can establish due-process violation | New GM: Only Ignition Switch plaintiffs were permitted independent claims; Non-Ignition Switch plaintiffs must prove they were known in 2009 (due-process) | Held: Non-Ignition Switch plaintiffs need not show a 2009 due-process violation to bring truly independent claims based solely on New GM’s post-closing wrongful conduct; such claims fall outside §101(5) and the Sale Order |
Key Cases Cited
- In re Motors Liquidation Co., 529 B.R. 510 (Bankr. S.D.N.Y. 2015) (bankruptcy court opinion interpreting Sale Order re: Ignition Switch claims)
- In re Motors Liquidation Co., 541 B.R. 104 (Bankr. S.D.N.Y. 2015) (November decision resolving imputation and punitive-damages issues under the Sale Order)
- Motors Liquidation Co. v. Elliott, 829 F.3d 135 (2d Cir. 2016) (Second Circuit: independent post-closing claims are outside §101(5) and Sale Order; affirmed non-enforcement as to Ignition Switch independent claims)
- In re Chateaugay Corp., 944 F.2d 997 (2d Cir. 1991) (framework for whether contingent/future tort claims constitute prepetition "claims")
- Morgan Olson, LLC v. Federico (In re Grumman Olson Indus., Inc.), 467 B.R. 694 (S.D.N.Y. 2012) (affirming that future tort claimants with no pre-sale contact are not bound by sale injunction)
- Tronox Inc. v. Kerr-McGee Corp. (In re Tronox Inc.), 855 F.3d 84 (2d Cir. 2017) (limits on bankruptcy injunctions; cannot enjoin beyond duplicative/derivative claims)
- Lemelle v. Universal Mfg. Corp., 18 F.3d 1268 (5th Cir. 1994) (future, unidentified tort victims generally are not "claims" subject to bankruptcy discharge)
- In re Chrysler LLC, 576 F.3d 108 (2d Cir. 2009) (discussing scope of bankruptcy court authority to extinguish future claims)