489 B.R. 666
Bankr. W.D. Mich.2013Background
- Second Chance Bankruptcy: vest recall noted; Class certification limited to breach of express warranty; States AGs filed representative police-power/statutory claims; Trustee objected to class claim calculations and potential duplications; German States filed an Objection asserting Six State Claims are police-power/statutory and excluded; Court conducted extensive history and interpretive analysis of the Class Certification Order.
- Eight states filed Class claims (Florida, Georgia, Mississippi, Ohio, Alabama, Tennessee, Wisconsin, Idaho); Oklahoma Settlement and BVPA affected potential duplications; Trustee sought reduction of class members and deductions for prior payments.
- The court initially sought a narrow express-warranty-focused class; after negotiations, the Class Certification Order limited the Class to breach of warranty and excluded police-power/punitive damages; German States objected in 2012, arguing exclusion of the Six State Claims.
- The court ultimately holds the Six State Claims are not excluded by the Breach of Warranty Limitation or Police Powers Exclusion; cites parens patriae and Bankruptcy Rule 2018 to support representation; states distributions will proceed through the Class.
- Judge overrules German States’ Objection; emphasizes uniform treatment of States; anticipates final distributions to vest purchasers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Six State Claims are excluded under the Breach of Warranty Limitation | German States: claims arise under police-power statutes. | Class/Trustee: Six State Claims are breach-of-warranty claims and within the Class. | Six State Claims are not excluded. |
| Whether Six State Claims are excluded under the Police Powers Exclusion | German States: police powers exclude the claims. | Class/Trustee: police powers do not carve out these warranty claims. | Six State Claims not excluded by police powers. |
| Whether parens patriae permits Six States to file representative claims with the Class | States may protect quasi-sovereign interests of residents via parens patriae. | Not explicitly authorized by order; tentative support. | Parens patriae supports, in this context, filing representative warranty claims. |
| Whether Bankruptcy Rule 2018 permits Six States to file representative claims with the Class | Rule 2018 allows AGs to appear/participate on behalf of consumer creditors; supports representative claims. | Rule 2018 does not expressly authorize proofs of claim; disputed. | Rule 2018 permits the Six States to file representative warranty claims with the Class. |
| Whether the Class Certification Order should be modified | No modification needed; interpretation allows inclusion. | May require modification to crystalize inclusion if necessary. | Modification not required now; may be revisited if needed. |
Key Cases Cited
- In re Dow Corning Corp., 456 F.3d 668 (6th Cir. 2006) (interpretation of court orders; deference to trial court’s interpretation)
- Alfred L. Snapp & Son, Inc. v. Puerto Rico, 458 U.S. 592 (U.S. 1982) (parens patriae standing for quasi-sovereign interests)
- Chao v. Hospital Staffing Servs., Inc., 270 F.3d 374 (6th Cir. 2001) (pecuniary/public policy tests for police powers)