In re Motors Liquidation Co.: Those Certain Post-Closing Accident

Case Type:
Business
Case Status:
Affirmed
Citation:
18-1940 (2nd Circuit, Nov 19,2019) Published
Tag(s):
Ruling:
New GM is not liable for punitive damage claims asserted by parties to post-Sale accidents involving automobiles manufactured by Old GM, even if New GM is liable for compensatory damages, because (i) punitive damages are not an Assumed Liability in the Sale Agreement, and (ii) the Sale Order's free and clear provision bars punitive damages under a theory of successor liability.
Procedural context:
Appeal from the judgment of the United States District Court for the Southern District of New York (Furman, J.) affirming the decision of the United States Bankruptcy Court for the Southern District of New York (Glenn, J.). The instant appeal relates only to the punitive damages portion of the District Court opinion.
Facts:
In 2009, "Old GM" filed a chapter 11 bankruptcy petition and sold substantially all of its assets "free and clear" to "New GM" pursuant to a Sale Agreement. The Sale Agreement provided that New GM assumed certain of Old GM's liabilities, including, certain claims arising out of post-Sale car accidents involving Old GM vehicles. In 2015, the Bankruptcy Court issued a ruling related to the liability of New GM for certain claims and determined that New GM was not liable for punitive damages based on the conduct of Old GM. This ruling was not appealed, but the Appellants did not receive notice of, and did not participate in, the specific proceeding that resulted in the 2015 decision. The Appellants initiated proceedings against New GM in 2015, including claims for punitive damages. The Bankruptcy Court ruled that the Appellants were not entitled to seek punitive damages because (i) the 2015 decision was the law of the case; and (ii) because Old GM was insolvent and, pursuant to section 726(a)(4), would not be required to pay punitive damages and, therefore, New GM could not have successor liability for a claim that Old GM would not have had to pay.
Judge(s):
Jacobs, Sack, Hall

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