Official Comm. of Unsecured Creditors of Motors Liquidation Co. v. JP Morgan Chase Bank, N.A. (In re Motors Liquidation Co.), No. 13–2187.

CourtU.S. Court of Appeals — Second Circuit
Writing for the CourtPER CURIAM.
Citation777 F.3d 100
PartiesIn re MOTORS LIQUIDATION COMPANY, et al., Debtor, Official Committee of Unsecured Creditors of Motors Liquidation Company, Plaintiff–Appellant, v. JP Morgan Chase Bank, N.A., individually and as Administrative Agent for various lenders party to the Term Loan Agreement described herein, Defendant–Appellee.
Decision Date21 January 2015
Docket NumberNo. 13–2187.

777 F.3d 100

In re MOTORS LIQUIDATION COMPANY, et al., Debtor
Official Committee of Unsecured Creditors of Motors Liquidation Company, Plaintiff–Appellant
v.
JP Morgan Chase Bank, N.A., individually and as Administrative Agent for various lenders party to the Term Loan Agreement described herein, Defendant–Appellee.

No. 13–2187.

United States Court of Appeals, Second Circuit.

Argued: March 25, 2014.
Question Certified: June 17, 2014.

Question Answered: Oct. 17, 2014.

Decided: Jan. 21, 2015.


777 F.3d 101

Eric B. Fisher (Barry N. Seidel, Katie L. Weinstein, Jeffrey Rhodes, on the brief), Dickstein Shapiro LLP, New York, N.Y., for Plaintiff–Appellant.

John M. Callagy (Nicholas J. Panarella, Martin A. Krolewski, on the brief), Kelley Drye & Warren LLP, New York, N.Y., for Defendant–Appellee.

Before: WINTER, WESLEY, and CARNEY, Circuit Judges.

Opinion

PER CURIAM:

We assume familiarity with our prior certification opinion, Official Committee of Unsecured Creditors of Motors Liquidation Co. v. JP Morgan Chase Bank, N.A. (In re Motors Liquidation Co.), 755 F.3d 78 (2d Cir.2014), and the resulting decision of the Delaware Supreme Court, Official Committee of Unsecured Creditors of Motors Liquidation Co. v. JPMorgan Chase Bank, N.A., 103 A.3d 1010 (Del.Supr.2014). We restate the most salient facts.1

BACKGROUND

In October 2001, General Motors entered into a synthetic lease financing transaction (the “Synthetic Lease”), by which it obtained approximately $300 million in financing from a syndicate of lenders including JPMorgan Chase Bank, N.A. (“JPMorgan”). General Motors' obligation to repay the Synthetic Lease was secured by liens on twelve pieces of real estate. JPMorgan served as administrative agent for the Synthetic Lease and was identified on the UCC–1 financing statements as the secured party of record.

Five years later, General Motors entered into a separate term loan facility (the “Term Loan”). The Term Loan was entirely unrelated to the Synthetic Lease and provided General Motors with approximately $1.5 billion in financing from a different syndicate of lenders. To secure the loan, the lenders took security interests in a large number of General Motors' assets, including all of General Motors' equipment and fixtures at forty-two facilities throughout the United States. JPMorgan again served as administrative agent and secured party of record for the Term Loan and caused the filing of twenty-eight UCC–1 financing statements around the country to perfect the lenders' security interests in the collateral. One such financing statement, the “Main Term Loan UCC–1,” was filed with the Delaware Secretary of State and bore file number “6416808 4.” It “covered, among other things, all of the equipment and fixtures at 42 GM facilities, [and] was by far the most important” of the financing statements filed in connection with the Term Loan. Official Comm. of Unsecured Creditors of Motors Liquidation Co. v. JPMorgan Chase Bank, N.A. (In re Motors Liquidation

777 F.3d 102

Co.), 486 B.R. 596, 603 n. 6 (Bankr.S.D.N.Y.2013).

In September 2008, as the Synthetic Lease was nearing maturity, General Motors contacted Mayer Brown LLP, its counsel responsible for the Synthetic Lease, and explained that it planned to repay the amount due. General Motors requested that Mayer Brown prepare the documents necessary for JPMorgan and the lenders to be repaid and to release the interests the lenders held in General Motors' property.

A Mayer Brown partner assigned the work to an associate and instructed him to prepare a closing checklist and drafts of the documents required to pay off the Synthetic Lease and to terminate the lenders' security interests in General Motors' property relating to the Synthetic Lease. One of the steps required to unwind the Synthetic Lease was to create a list of security interests held by General Motors' lenders that would need to be terminated. To prepare the list, the Mayer Brown associate asked a paralegal who was unfamiliar with the transaction or the purpose of the request to perform a search for UCC–1 financing statements that had been recorded against General Motors in Delaware. The paralegal's search identified three UCC–1s, numbered 2092532 5, 2092526 7, and 6416808 4. Neither the paralegal nor the associate realized that only the first two of the UCC–1s were related to the Synthetic Lease. The third, UCC–1 number 6416808 4, related instead to the Term Loan.

When Mayer Brown prepared a Closing Checklist of the actions required to unwind the Synthetic Lease, it identified the Main Term Loan UCC–1 for termination alongside the security interests that actually did need to be terminated. And when Mayer Brown prepared draft UCC–3 statements to terminate the three security interests identified in the Closing Checklist, it prepared a UCC–3 statement to terminate the Main Term Loan UCC–1 as well as those related to the Synthetic Lease.

No one at General Motors, Mayer Brown, JPMorgan, or its counsel, Simpson Thacher & Bartlett LLP, noticed the error, even though copies of the Closing Checklist and draft UCC–3 termination statements were sent to individuals at each organization for review. On October 30, 2008, General Motors repaid the amount due on the Synthetic Lease. All three UCC–3s were filed with the Delaware Secretary of State, including the UCC–3 that erroneously identified for termination the Main Term Loan UCC–1, which was entirely unrelated to the Synthetic Lease.

A. General Motors' Chapter 11 Bankruptcy Filing

The mistake went unnoticed until General Motors' bankruptcy in 2009. After General Motors filed for chapter 11 reorganization, JPMorgan informed the Committee of Unsecured Creditors (the “Committee”) that a UCC–3 termination statement relating to the Term Loan had been inadvertently filed in October 2008. JPMorgan explained that it had intended to terminate only liens related to the Synthetic...

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