- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 2018-2014 (Federal Circuit, Aug 01,2019) Published
- Tag(s):
-
- Ruling:
- The Court of Appeals for the Federal Circuit confirmed the dismissal of the complaint because of lack of jurisdiction and, because, as to the claims alleging coercion, the statute of limitations has run.
- Procedural context:
- This case arises out of the 2009 bankruptcy of General Motors Corporation (“Old GM”). (Old GM” refers to the GM entity in existence prior to the sale of assets pursuant to 11 U.S.C. § 363). The plaintiffs compose a putative class of individuals who had asserted personal injury claims against Old GM, and whose successor liability claims were extinguished during bankruptcy. The plaintiffs sued the United States, on July 9, 2015, on behalf of themselves and others similarly situated in the Court of Federal Claims (“Claims Court”), alleging that the extinguishment of their claims without just compensation violated the Takings Clause of the Fifth Amendment. The Claims Court dismissed the plaintiffs’ claims, concluding that they were barred by the statute of limitations and that the plaintiffs had, in any event, failed to state a claim.
- Facts:
- The plaintiffs were a group of individuals who alleged that they are victims of accidents involving GM vehicles (or are the family members or estates of such individuals), and had personal injury claims against Old GM. The plaintiffs alleged that under Michigan law they possessed successor liability claims at the time the § 363 sale closed. Michigan law provides that where there is a sale of assets from one entity to another such that there exists “a continuity of enterprise between a successor and its predecessor[,] . . . a successor [may be forced] to ‘accept the liability with the benefits’ of such continuity.”. The government disputes whether the plaintiffs’ successor liability claims constitute a cognizable property interest for the purposes of a Fifth Amendment taking.
Old GM filed for bankruptcy on June 1, 2009, and filed a motion seeking court approval to sell substantially all its assets to a new corporation, referred to as “New GM,” pursuant to 11 U.S.C. § 363. To facilitate the sale, the government provided financing to Old GM for the bankruptcy and the company’s ongoing operations. In return, the government received $8.8 billion in debt and preferred stock of New GM and approximately 60 percent of its equity. According to the bankruptcy court, without the government’s financing, Old GM would have “faced immediate liquidation.” According to the plaintiffs’ complaint, “on the eve of Old GM’s bankruptcy filing, the government conditioned the closing of the sale, within other matters, to the inclusion of provisions” concerning successor liability. Specifically, provisions making explicit findings that New GM is not subject to successor liability. The bankruptcy court approved Old GM’s proposed sale order on July 5, 2009, and “permit[ted] GM’s assets to pass . . . free and clear of successor liability claims. The § 363 sale closed thereafter on July 10, 2009. Even though the plaintiffs appeal the bankruptcy court order approving the sale, they failed to seek a stay of the order. Therefore, as the § 363 sale closed, the court concluded that the plaintiffs’appeal was statutorily moot under § 363(m) of the Bankruptcy Code.
The Claims Court dismissed the complaint holding that it was not timely because it was not filed within the Tucker Act’s six-year statute of limitations. The court determined that the plaintiffs’ takings claim had accrued, at the latest, on July 5, 2009, more than six years before the date on which the plaintiffs filed their complaint in the Claims Court. In the alternative, the Claims Court held that dismissal was proper because the plaintiffs had failed to identify a cognizable property interest. It characterized the plaintiffs’ successor liability claims as being “too contingent” to compose a property interest that would be subject to a compensable taking under the Fifth Amendment. The Claims Court also concluded that the plaintiffs lacked a cognizable property interest because § 363 predated the creation of the plaintiffs’ purported property interests (the successor liability claims) and therefore that the possibility of extinguishment in bankruptcy “inhered” in the title to the plaintiffs’ claims.
The Court of Appeals agrees with the Claims Court that the plaintiffs’ complaint was untimely insofar as the complaint alleged coercion of Old GM. The Tucker Act’s statute of limitations provides that “[e]very claim of which the United States Court of Federal Claims has jurisdiction shall be barred unless the petition thereon is filed within six years after such claim first accrues.” The Court noted that the standards for claim accrual in physical takings and regulatory takings cases are distinct, and this distinction is important. As the Supreme Court has held, “it [is] inappropriate to treat cases involving physical takings as controlling precedents for the evaluation of a claim that there has been a ‘regulatory taking’, and vice versa.”
To the extent that the plaintiffs argued that there was a taking because § 363 did not permit the extinguishment of their successor liability claims, the court disagreed on the claim that was a cognizable takings action. The court explained that when a plaintiff’s claim that “it is entitled to prevail because the agency acted in violation of a statute . . . [does] not give the plaintiff the right to litigate that issue in a takings action rather than in the congressionally mandated review proceeding.” The plaintiffs’ remedy based on their challenge to the lawfulness of the § 363 sale was to pursue their successor liability claims through the usual appeal process, as they attempted to do.
The Court of Appeals concluded that the plaintiffs’ takings claims based on the alleged coercion of Old GM accrued when Old GM submitted the proposed sale order to the bankruptcy court on July 1, 2009, and that the plaintiffs’ complaint in this respect was untimely because it was filed more than six years after their claims accrued. With respect to the plaintiffs’ claims that the government had coerced the bankruptcy court and the district court, the Court concluded that the plaintiffs’ claims are not within the Claims Court’s jurisdiction. Accordingly, the court affirmed the claims court dismissal of the complaint.
- Judge(s):
- Newman, Lourie and Dyk
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