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In re Motors Liquidation Co.

829 F.3d 135 (2016)

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In re Motors Liquidation Co.

United States Court of Appeals for the Second Circuit

829 F.3d 135 (2016)

Facts

On June 1, 2009, automaker General Motors Corporation (Old GM) (debtor) entered Chapter 11 bankruptcy and filed a motion to sell substantially all of its assets to NGMCO, Inc. (New GM), a company predominantly owned by the US Treasury Department, under 11 U.S.C. § 363. The proposed sale order provided that New GM would acquire Old GM’s assets free and clear of most of Old GM’s liabilities. Meanwhile, Old GM would liquidate to resolve the remaining liabilities. Old GM gave direct notice of the proposed sale to some interested parties and posted notice of the proposed sale in several publications. The bankruptcy court approved the sale in July 2009. The final sale order provided that New GM would be free and clear of Old GM’s liabilities and claims, including claims based on successor liability, with certain specified exceptions. In February 2014, New GM began recalling cars based on a defective ignition switch that had been causing problems in GM vehicles for years. Old GM knew or should have known about the ignition-switch defect by May 2009. Following the recall, claimants began asserting claims against New GM for injuries and losses arising from defective vehicles. The claimants (plaintiffs) included (1) people who suffered injuries before the § 363 sale closed (pre-closing claimants) and (2) people who suffered economic losses from ignition-switch defects and defects in Old GM cars (ignition-switch claimants and non-ignition-switch claimants), including (3) people who purchased used GM cars after the § 363 sale closed (used-car purchasers). New GM moved to enforce the sale order to enjoin the claimants’ claims based on the free-and-clear liability shield. The bankruptcy court enforced the sale order in part, holding, among other things, that the claimants had not received notice of the sale consistent with procedural due process because they had received only publication notice. However, the court found that with the exception of claimants with claims based on New GM’s conduct in wrongfully concealing the defects, the claimants had not been prejudiced by the lack of notice because the court would have approved the sale order even if the claimants had received proper notice. New GM and the claimants appealed.

Rule of Law

Issue

Holding and Reasoning (Chin, J.)

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