Since June 2014, Recall-Related Actions have been
transferred to the United States District Court of the Southern District of New York, or the MDL Court, and have been consolidated into a single case, case number
14-MD-2543 (JMF), or the MDL Proceeding. Recall-Related Actions pending in state court have been consolidated in a separate state
multi-district litigation pending in Texas. Over time, New GM has reached various agreements with certain personal injury claimants regarding possible settlement of their claims. The MDL proceedings are
ongoing.
Concurrently with the proceedings before the MDL Court, New GM took steps in the Bankruptcy Court to enjoin the Subject
Recall-Related Actions. In that respect, beginning on April 21, 2014, New GM filed a series of motions with the Bankruptcy Court seeking to enjoin the Subject Recall-Related Actions and to enforce the Sale
Order and Injunction entered on July 5, 2009, or the Sale Order (under which all product liability and property damage claims arising from accidents or incidents prior to the Closing Date were to remain with Old GM as general unsecured claims), or
the Motions to Enforce.
Beginning on May 16, 2014, the Bankruptcy Court entered a series of scheduling orders which identified a number
of threshold issues to be resolved by the Bankruptcy Court, including (i) whether plaintiffs procedural due process rights were violated in connection with the 363 Transaction, (ii) if such due process rights were
violated, what is the appropriate remedy, (iii) whether any or all of the claims asserted in the Subject Recall-Related Actions are claims against Old GM and/or the GUC Trust, and (iv) whether any such claims against Old GM and/or the GUC
Trust should be dismissed as equitably moot. The GUC Trust appeared as a party in interest with respect to New GMs Motions to Enforce and filed briefs in opposition thereto, asserting that none of the claims of the plaintiffs in the Subject
Recall-Related Actions may be properly asserted against Old GM or the GUC Trust.
On June 1, 2015, the Bankruptcy Court issued a judgment,
or the Threshold Issues Judgment, which clarifies the terms of the previously-issued Threshold Issues Decision and distills the Bankruptcy Courts holdings in the Threshold Issues Decision into a binding order. The Threshold Issues Judgment
provides, in pertinent part, that:
(i) The plaintiffs in the Ignition Switch Economic Loss Actions suffered a due process violation with
respect to the Sale Order, whereas the plaintiffs in the Ignition Switch Personal Injury Actions did not suffer a due process violation with respect to the Sale Order;
(ii) As a result of the due process violation, the provisions of the Sale Order which purport to shield New GM from any liability associated
with its independent post-Sale actions can be modified, and the plaintiffs in the Ignition Switch Economic Loss Actions may proceed against New GM with respect to its independent post-Sale actions;
(iii) Any claims asserted in the Ignition Switch Economic Loss Actions and the Ignition Switch Personal Injury Actions that relate to actions
of Old GM are enjoined from being pursued against New GM on successor liability grounds;
(iv) The Plaintiffs in the Ignition Switch
Economic Loss Actions and the Ignition Switch Personal Injury Actions may seek authorization to file late claims in bankruptcy against Old GM but such claims against the GUC Trust are equitably moot, and thus the assets of the GUC Trust cannot be
utilized to satisfy any claims that may be filed by plaintiffs in the Ignition Switch Economic Loss Actions and Ignition Switch Personal Injury Actions after the date of entry of the Threshold Issues Judgment (the Equitable Mootness
Finding); and
(v) Pursuant to section 502(j) of the Bankruptcy Code, assets of the GUC Trust may be used to satisfy previously
allowed or disallowed claims that are reconsidered for cause. Hence, any person who holds a previously allowed or disallowed claim may seek to have that claim reconsidered by the Bankruptcy Court, and in the event that any such claimant prevails in
an application for reconsideration, the resulting additional allowed claims could dilute the recoveries of holders of GUC Trust Units.
The Equitable Mootness Finding became binding on plaintiffs in the Other Economic Loss Actions and Other Personal Injury Actions pursuant to a
decision and order of the Bankruptcy Court dated September 3, 2015. Certain plaintiffs appealed the Threshold Issues Decision and Threshold Issues Judgment and on July 13, 2016, the Second Circuit held, in pertinent part, that plaintiffs in the
Ignition Switch Personal Injury Actions involved in pre-closing accidents, or the Ignition Switch Pre-Closing Accident Plaintiffs, and plaintiffs in the Ignition Switch
Economic Loss Actions who acquired their vehicles pre-closing were entitled to, but did not receive, direct-mail notice of the Sale because Old GM knew or reasonably should have known about the ignition switch defect prior to bankruptcy.
The Second Circuit also noted that it could not say with fair assurance that the outcome of the Sale would have been the same had Old GM given plaintiffs adequate notice of the ignition switch defect and the Sale, and these plaintiffs voiced their
objections to those provisions of the Sale Order barring their claims against New GM. Accordingly, the Second Circuit ruled that enforcing the Sale Order against the Ignition Switch Pre-Closing Accident
Plaintiffs and the Ignition Switch Economic Loss Plaintiffs would violate their procedural due process rights in these circumstances, and therefore, they cannot be bound by the terms of the Sale Order. As a result, the court held that those
plaintiffs are not enjoined from pursuing claims against New GM.
The Second Circuit further held that the Bankruptcy Courts
Equitable Mootness Finding was purely advisory as it determined the Bankruptcy Court lacked subject matter jurisdiction. The Second Circuit did not, however, express any opinion as to the merits of whether claims against the GUC Trust would be
equitably moot if brought against the GUC Trust.
In addition, the Second Circuit held that the Sale Order cannot enjoin independent
claims relating to New GMs post-Sale conduct. It also held that claims by plaintiffs in the Ignition Switch Economic Loss Actions who bought used GM vehicles post-Sale, or Used Car Purchasers, are not bound by the Sale Order and, therefore,
are not enjoined from pursuing claims against New GM for their losses, because those claimants lacked a pre-Sale connection to Old GM at the time Old GM filed its bankruptcy petition.
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