In re Gen. Motors LLC

IN RE: GENERAL MOTORS LLC IGNITION SWITCH LITIGATION

This Document Relates To All Actions

14-MD-2543 (JMF)

14-MC-2543 (JMF)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

August 3, 2017

OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

[Regarding New GM's Partial Motion for Summary Judgment on Plaintiffs' Successor Liability Claims in the Fourth Amended Consolidated Complaint]

This multidistrict litigation ("MDL"), general familiarity with which is assumed, arose from the recall in February 2014 by General Motors LLC ("New GM") of vehicles that had been manufactured by New GM's predecessor, General Motors Company ("Old GM"), with a defective ignition switch. Following that recall, New GM recalled millions of other vehicles, some for ignition switch-related defects and some for other defects. In this litigation, Plaintiffs seek recovery on behalf of a broad putative class of GM car owners and lessors whose vehicles were subject to those recalls, arguing that they have been harmed by, among other things, a drop in their vehicles' value due to the ignition switch defect and other defects. Their operative complaint — the Fourth Amended Consolidated Complaint or "FACC" — runs to over 1700 pages and 7500 paragraphs, and includes claims under state law brought by named Plaintiffs in all fifty states and the District of Columbia. (Docket No. 3356 ("FACC")).

In prior opinions addressing partial motions to dismiss filed by New GM, the Court has ruled on the viability of Plaintiffs' claims under federal law and the law of sixteen jurisdictions. See In re: Gen. Motors LLC Ignition Switch Litig., No. 14-MC-2543 (JMF), 2017 WL 2839154, at *2 (S.D.N.Y. June 30, 2017); In re: Gen. Motors LLC Ignition Switch Litig., No. 14-MD-2543 (JMF), 2016 WL 3920353, at *3 (S.D.N.Y. July 15, 2016). New GM now moves, pursuant to Rule 56 of the Federal Rules of Civil Procedure, for partial summary judgment on "successor liability" claims brought by a subset of Plaintiffs — namely, "[a]ll persons who bought or leased a Delta Ignition Switch Vehicle on or before July 9, 2009" — in the sixteen jurisdictions that were addressed in the Court's prior opinions. (FACC ¶ 973). These claims were included in the FACC filed on September 15, 2016, in the wake of a ruling by the United States Court of Appeals for the Second Circuit that the relevant Plaintiffs are not barred from bringing claims against New GM by the terms of the order authorizing the sale, pursuant to Section 363 of the Bankruptcy Code, of most assets of Old GM to New GM. See In Matter of Motors Liquidation Co., 829 F.3d 135, 163-66 (2d Cir. 2016). In its present motion, New GM argues that Plaintiffs' successor liability claims fail as a matter of non-bankruptcy law.

Relying primarily on a recent Second Circuit decision, New GM argues first that Plaintiffs' successor liability claims fail because they were property of Old GM's bankruptcy estate. In the alternative, New GM contends that Plaintiffs' claims fail under applicable state law. For the reasons that follow, the Court rejects New GM's threshold argument, and concludes that Plaintiffs are not barred by Old GM's bankruptcy from pursuing their successor liability claims against New GM because they did not receive constitutionally adequate notice of their claims in or before the bankruptcy. Resolving New GM's alternative arguments is a more complicated task, as it requires the Court to decide in the first instance what choice-of-law rules apply to Plaintiffs' claims and, then using those rules, to decide what substantive law applies — an exercise that requires the Court to examine the choice-of-law rules in each individual jurisdiction. For reasons the Court will explain, it concludes, based on that exhaustive analysis, that Delaware law applies in seven of the sixteen jurisdictions at issue here and further that,under Delaware law, Plaintiffs' successor liability claims plainly fail as a matter of law. The Court declines to resolve the merits of New GM's motion with respect to the other nine jurisdictions, however, finding that additional briefing is warranted. In short, the Court grants New GM's motion for summary judgment in part and reserves judgment in part.

BACKGROUND

The background of these MDL proceedings and what prompted them are described in the Court's two earlier opinions addressing New GM's partial motions to dismiss and will not be repeated here. See In re: Gen. Motors LLC Ignition Switch Litig., 2017 WL 2839154, at *2-3; In re: Gen. Motors LLC Ignition Switch Litig., 2016 WL 3920353, at *3-4. The following facts, taken from the FACC and admissible materials submitted in connection with the pending motions, are either undisputed or described in the light most favorable to Plaintiffs. See Costello v. City of Burlington, 632 F.3d 41, 45 (2d Cir. 2011).

In June 2009, after a period of prolonged financial instability and negotiations with the United States Government, Old GM filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Southern District of New York. See Motors Liquidation Co., 829 F.3d at 143-45. (See also FACC ¶ 896; Docket No. 3517 ("Def.'s 56.1 SUF") ¶¶ 1-17). On July 10, 2009, the Bankruptcy Court entered an order (the "Sale Order") approving the sale of most of Old GM's assets to Vehicle Acquisitions Holdings LLC — a corporate entity sponsored by the U.S. Treasury and incorporated for the purpose of acquiring Old GM's assets — pursuant to Section 363 of the Bankruptcy Code. (Def.'s 56.1 SUF ¶¶ 20-22). Pursuant to the Sale Order, New GM — created and initially operated by Vehicle Acquisitions Holdings LLC — acquiredmost of the assets of Old GM, and only certain specified liabilities. (Id. ¶ 31, 38-40).¹ The Sale Order provided that New GM acquired Old GM's assets "free and clear" of other Old GM liabilities, including "rights or claims based on any successor or transferee liability." Motors Liquidation Co., 829 F.3d at 146.

After the Sale, New GM was owned by four entities in the following percentages: 60.8% by the U.S. Government, 11.7% by the Canadian Government, 17.5% by a new employees' beneficiary association trust, and 10% by the bankruptcy estate of Old GM. (Def.'s 56.1 SUF ¶ 26). Old GM, under the new name of Motors Liquidation Company ("MLC"), retained sixteen categories of assets and the liabilities that had not been expressly assumed by New GM in the Sale. (Id. ¶¶ 31, 38-40). In accordance with the Chapter 11 liquidation plan, MLC was dissolved on December 15, 2011; the MLC General Unsecured Creditors Trust (the "GUC Trust"), funded by certain Old GM assets, assumed MLC's liabilities "within the meaning of Section 1145(a) of the Bankruptcy Code." (Id. ¶ 45; Docket No. 3619 ("Pls.' Counterstatement"), ¶ 45; Docket No. 3618 ("Pls.' 56.1 SUF") ¶ 30). The Bankruptcy Court ordered that creditors with unsecured claims against Old GM could file claims against the GUC Trust until early February 2012. See In re Motors Liquidation Co., 529 B.R. 510, 537 (Bankr. S.D.N.Y. 2015), aff'd in part, vacated in part, rev'd in part sub nom. In Matter of Motors Liquidation Co., 829 F.3d 135, cert. denied sub nom. Gen. Motors LLC v. Elliott, 137 S. Ct. 1813 (2017). After that bar date, no further claims were allowed except for those that amended aprior claim, were filed with the GUC Trust's consent, or were deemed timely filed by the Bankruptcy Court. See id.

In April 2014, a group of plaintiffs (asserting, among other claims, economic losses arising from the ignition switch defect in Old GM vehicles), initiated an adversary proceeding against New GM in Bankruptcy Court. See id. at 538. On the same day, New GM moved to enforce the "free and clear" provision of the Sale Order to enjoin those claims. See id. at 538-39. In April 2015, the Bankruptcy Court held that the plaintiffs were entitled to actual notice of the 2009 Sale — as opposed to the notice by publication that had been issued — because the ignition switch claims were known to, or reasonably ascertainable by, Old GM. See id. at 556-60. But Judge Gerber also found that the plaintiffs had not been prejudiced by the lack of such notice and, thus, that New GM could not be sued for claims that otherwise could have been brought only against Old GM (apart from those arising from New GM's own wrongful conduct). See id. at 560-74. Finally, to the extent relevant here, the Bankruptcy Court found that any claims the plaintiffs could try to assert against the GUC Trust were equitably moot. Id. at 583-92. On appeal, the Second Circuit largely reversed. It agreed that Old GM violated the due process rights of certain ignition switch defect plaintiffs by not providing them with direct notice, but concluded that the plaintiffs were prejudiced by that violation. In Matter of Motors Liquidation Co., 829 F.3d at 163-66. Accordingly, it vacated the Bankruptcy Court's decision to enjoin those plaintiffs' ignition switch defect claims, and remanded for further proceedings. Id. at 166. It also vacated the Bankruptcy Court's ruling on equitable mootness as impermissibly advisory because the plaintiffs had never sought relief from the GUC Trust. Id. at 168-70.

In the wake of that ruling, Plaintiffs in the MDL filed the FACC. To the extent relevant here, the FACC includes claims brought by Plaintiffs who purchased or leased "Old GM DeltaIgnition Switch Vehicles" (namely, 2005-2010 model year Chevrolet Cobalts, 2006-2011 model year Chevrolet HHRs, 2007-2010 model year Pontiac G5s, 2007-2010 model year Saturn Skys, 2003-2007 model year Saturn Ions, and 2006-2010 model year Pontiac Solstices) prior to entry of the Sale Order. (FACC, at 2). They seek, under the laws of all fifty states and the District of Columbia, to hold New GM liable as the successor to Old GM's unsecured debts. (FACC ¶¶ 973-974). More specifically, they bring claims relating to the ignition switch in the Delta Ignition Switch Vehicles — a switch that suffered from a...