Articles Posted in U.S. Court of Appeals for the Second Circuit

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After Old GM filed for bankruptcy, New GM emerged. This case involves one of the consequences of the GM bankruptcy. Beginning in February 2014, New GM began recalling cars due to a defect in their ignition switches. Many of the cars in question were built years before the GM bankruptcy. Where individuals might have had claims against Old GM, a ʺfree and clearʺ provision in the bankruptcy courtʹs sale order barred those same claims from being brought against New GM as the successor corporation. Various individuals nonetheless initiated class action lawsuits against New GM, asserting ʺsuccessor liabilityʺ claims and seeking damages for losses and injuries arising from the ignition switch defect and other defects. The bankruptcy court enforced the Sale Order to enjoin many of these claims against New GM. The court concluded that the bankruptcy court had jurisdiction to interpret and enforce the Sale Order; the ʺfree and clearʺ provision covers pre‐closing accident claims and economic loss claims based on the ignition switch and other defects, but does not cover independent claims or Used Car Purchasersʹ claims; the court found no clear error in the bankruptcy court's finding that Old GM knew or should have known with reasonable diligence about the defect, and individuals with claims arising out of the ignition switch defect were entitled to notice by direct mail or some equivalent, as required by procedural due process; because enforcing the Sale Order would violate procedural due process in these circumstances, the bankruptcy court erred in granting New GMʹs motion to enforce and these plaintiffs cannot be bound by the terms of the Sales Order; and the bankruptcy courtʹs decision on equitable mootness was advisory. Accordingly, the court affirmed in part, reversed in part, vacated in part, and remanded. View "In re Motors Liquidation Co." on Justia Law