In re Motors Liquidation Co.

• Decision Date: 29 May 2018
• Docket Number: 17-CV-6088 (JMF),15-CV-8432 (JMF),16-CV-0098 (JMF),17-CV-6196 (JMF),17-CV-8294 (JMF),17-CV-6120 (JMF),16-CV-0501 (JMF),17-CV-6284 (JMF),16-CV-0512 (JMF),17-CV-6289 (JMF),17-CV-6083 (JMF)
• Citation: 590 B.R. 39
• Parties: IN RE: MOTORS LIQUIDATION COMPANY
• Court: U.S. District Court — Southern District of New York

590 B.R. 39

IN RE: MOTORS LIQUIDATION COMPANY

15-CV-8432 (JMF)

16-CV-0098 (JMF)

16-CV-0501 (JMF)

16-CV-0512 (JMF)

17-CV-6083 (JMF)

17-CV-6088 (JMF)

17-CV-6196 (JMF)

17-CV-6284 (JMF)

17-CV-6289 (JMF)

17-CV-6120 (JMF)

17-CV-8294 (JMF)

United States District Court, S.D. New York.

Signed May 29, 2018

James E. Butler, Jr., Butler Wooten & Peak LLP, Columbus, GA, Robert H. Snyder, Butler Wooten & Peak LLP, Atlanta, GA, for Appellant.

Andrew Baker Bloomer, Pro Hac Vice, Richard Cartier Godfrey, Kirkland & Ellis LLP, Chicago, IL, Arthur Jay Steinberg, Scott Ian Davidson, King & Spalding LLP, New York, NY, for Appellee.

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge

[Regarding Certain Plaintiffs' and New GM's Bankruptcy Appeals]

In February 2014, General Motors LLC ("New GM") announced the recall of certain vehicles that had been manufactured with a defective ignition switch by New GM's predecessor, General Motors Company ("Old GM"). Within months of that recall, New GM recalled millions more vehicles, some for ignition switch-related defects and some for other defects. Not long after, this Court began presiding over multidistrict litigation ("MDL") arising from, and related to, those recalls. That litigation, which involves thousands of individual claims for personal injuries and wrongful deaths as well as a massive putative class action for economic loss, is complicated in its own right. But it is made more complicated by the fact that Old GM filed for bankruptcy in 2009 and New GM, in purchasing most of the assets of Old GM pursuant to Section 363 of the Bankruptcy Code, agreed to assume only certain liabilities of its predecessor. The result has been parallel—and continuing—litigation in the United States Bankruptcy Court for the Southern District of New York with respect to whether and to what extent plaintiffs may, consistent with bankruptcy law, bring claims against New GM. That litigation has yielded a number of rulings by the Bankruptcy Court, some in reference to individual cases and some with broader application. One of those rulings was certified and appealed directly to the United States Court of Appeals (which reversed in part and affirmed in part). Many others have been appealed to this Court and accepted as related to the MDL proceedings.

This Opinion and Order resolves eleven such appeals. Several of those appeals concern individual cases brought against New GM and are unlikely to have broad effect on the MDL proceedings. But the others relate to rulings that apply to the putative class action or to broad swaths of the cases now pending before this Court (or both). They include appeals addressing (1) whether plaintiffs may bring claims against New GM for fraudulent concealment of the right to file a claim against Old GM in the bankruptcy proceedings; (2) whether plaintiffs may pursue punitive damages against New GM based on the conduct of Old GM; and (3) whether plaintiffs who purchased used GM vehicles after Old GM's bankruptcy can bring claims against New GM based on the conduct of Old GM. For reasons that will be explained, this Court agrees with some of the Bankruptcy Court's rulings on these issues and disagrees with others. Accordingly, it affirms the Bankruptcy Court's orders and judgments in part and vacates and remands in part.

BACKGROUND

The nearly decade-long procedural history leading to these appeals is, to put it mildly, somewhat convoluted. The Court need not provide an exhaustive summary of that history, but instead focuses on the developments most relevant to the issues presented here.

On June 1, 2009, Old GM filed for bankruptcy in the Southern District of New York. In short order, Old GM took steps, pursuant to Section 363 of the Bankruptcy Code, to sell substantially all of its assets, "free and clear" of most of its liabilities, to an entity that was owned primarily by the United States Department of Treasury ("Treasury") and that later became New GM. Specifically, on June 26, 2009, Old GM and the entity that later became New GM entered into a sale agreement (the "Original Sale Agreement"), defining the liabilities assumed by the new entity (the "Assumed Liabilities") to include "all Liabilities to third parties for death, personal injury, or other injury to Persons or damage to property ... which arise directly out of accidents, incidents or other distinct and discreet [sic] occurrences that happen on or after" July 10, 2009, defined as the "Closing Date" (the "Product Liabilities"). (15-CV-8432, Docket No. 10-1 ("Pillars Appendix"), at A-85). Four days later, the parties entered an amended Sale Agreement (the "Amended Sale Agreement"), which defined Product Liabilities more narrowly to mean "all Liabilities to third parties for death, personal injury, or other injury to Persons or damage to property ... which arise directly out of death, personal injury or other injury to Persons or damage to property caused by accidents or incidents first occurring on or after the Closing Date." (Id. at A-163). Notice of the proposed sale was mailed to interested parties, and publication notice appeared in major national publications. See In re Motors Liquidation Co. ("April 2015 Decision "), 529 B.R. 510, 531 (Bankr. S.D.N.Y. 2015). The Honorable Robert E. Gerber, the United States Bankruptcy Judge for the Southern District of New York to whom the case was assigned, received and considered approximately 850 objections to the proposed sale. Id. at 520-21. On July 5, 2009, Judge Gerber entered an order (the "Sale Order") approving the terms of the Amended Sale Agreement (the "363 Sale"). In re General Motors Corp. , 407 B.R. 463 (Bankr. S.D.N.Y. 2009).

Beginning in February 2014, New GM disclosed to the National Highway Traffic Safety Administration ("NHTSA") serious defects in certain General Motors vehicles that permitted the vehicles' ignition switches to rotate from "run" to "off" too easily, disabling critical safety features of the vehicles, such as the airbags. New GM initially recalled a range of vehicles manufactured by Old GM, including certain model years of Chevrolet Cobalts and HHRs, Saturn Ions and Skys, and Pontiac G5s and Solstices. Between February and October 2014, New GM issued a total of approximately sixty recalls, relating to both ignition-switch defects and other defects. Thereafter, a slew of plaintiffs filed actions against New GM asserting, among other things, successor liability claims premised on Old GM conduct. Those claimants included—but were by no means limited to—plaintiffs claiming various harms arising from defective ignition switches in recalled GM vehicles.

New GM sought to enjoin many of those claims by moving in the Bankruptcy Court to enforce the "free and clear" provisions of the Sale Order. The parties to the proceedings agreed to "Stipulated Facts," adopted by Judge Gerber in August 2014. To the extent relevant here, the parties defined "Ignition Switch" to mean "an ignition switch designed and/or sold by Old GM in the Subject Vehicles that may unintentionally move out of the ‘run’ position, resulting in a partial loss of electrical power and turning off the engine" and defined "Subject Vehicles," in turn, to include a limited list of vehicles: "(1) 2005-2007 Chevrolet Cobalt and Pontiac GS, 2003-2007 Saturn Ion, 2006-2007 Chevrolet HHR, 2005-2006 Pontiac Pursuit (Canada), 2006-2007 Pontiac Solstice and 2007 Saturn Sky vehicles; and (2) 2008-2010 Pontiac Solstice and G5; 2008-2010 Saturn Sky; 2008-2010 Chevrolet Cobalt; and 2008-2011 Chevrolet HHR vehicles." See In re: Motors Liquidation Co. ("July 2017 Threshold Issues Opinion "), 571 B.R. 565, 572 (Bankr. S.D.N.Y. 2017).

A. The April 2015 Decision

In a decision entered on April 15, 2015 (the "April 2015 Decision"), Judge Gerber addressed New GM's motions to enforce the Sale Order with respect to two sets of plaintiffs: (1) "Economic Loss Plaintiffs," defined as a subset of plaintiffs with the "Ignition Switch Defect" seeking damages for "losses to consumers ... alleged to have resulted from the Ignition Switch Defect" that were not "accident claims involving post-sale deaths, personal injury, and property damage"; and (2) "Pre-Closing Accident Plaintiffs," a subset of plaintiffs with the "Ignition Switch Defect" bringing claims "with respect to actual accidents" that occurred prior to July 10, 2009, the Closing Date of the 363 Sale. See April 2015 Decision , 529 B.R. at 521-22. Each category was defined in reference to the term "Ignition Switch Defect," which itself was defined to mean "serious defects in ignition switches that had been installed in Chevy Cobalts and HHRs, Pontiac G5s and Solstices, and Saturn Ions and Skys ..., going back to the 2005 model year."

Id. at 521. Judge Gerber held off on resolving New GM's motions to enforce against "Non-Ignition Switch Plaintiffs," a category he defined as individuals who had "brought actions asserting Economic Loss claims as to GM branded cars that did not have Ignition Switch Defects, including cars made by New GM and Old GM alike" and who "contend[ed] ... that the Ignition Switch Defect caused damage to ‘the brand.’ " Id. at 522-23.

The Bankruptcy Court agreed with New GM that "most of the claims now asserted against" the company fell within the scope of the Sale Order bar. Id. at 523. As a matter of due process, however, the Court concluded that the Sale Order bar could not be enforced against debtors of Old GM who had lacked notice "reasonably calculated, under all the circumstances to apprise people of the pendency of any proceeding that may result in their being deprived of any property" and who had been prejudiced by the deprivation of such notice. Id. at 523, 525-26 (internal quotation marks omitted). The Court held that because a number of Old GM engineers, senior managers, and attorneys had been aware of the defective ignition switches at the time of the 363 Sale, Old GM had a known, and unsatisfied, recall obligation by the Closing Date....