Docket: Case No.: 09-50026 (REG) (Jointly Administered)
Court: United States Bankruptcy Court, S.D. New York; June 8, 2015; Us Bankruptcy; United States Bankruptcy Court
Doris Powledge Phillips moved for relief under Fed. R. Civ. P. 60(b)(6), or alternatively Rules 60(b)(3) or 60(d), to undo her earlier settlement with Old GM, citing alleged fraud related to discovery obligations prior to the settlement. Phillips, who lost her husband and four children in a 2005 car accident involving a 2004 Chevy Malibu, had previously sold her claim against Old GM to a hedge fund. She seeks additional recovery from the General Unsecured Creditors Trust (GUC Trust), the successor to Old GM, and potentially from General Motors LLC (New GM), which acquired most of Old GM's assets in a 2009 sale. The GUC Trust and New GM oppose her motion, asserting she lacks standing due to the sale of her claim and that relief would lead to double recovery. They also argue that her request under Rule 60(b)(3) is time-barred, and that she waived any additional claims when settling. The court, while sympathetic to Phillips’ circumstances, agreed with the opposing parties on the standing issue, leading to the denial of her motion without further examination of the other arguments. The court noted that the facts necessary for this decision were undisputed, eliminating the need for an evidentiary hearing. Background included her prior lawsuit against Old GM, the automatic stay following its chapter 11 filing, and her proof of claim for $250 million regarding the accident, which was settled in August 2010 after mediation.
New GM, not involved at the time of the accident or in liability for prepetition incidents, was excluded from the mediation. A settlement for $3.975 million was established, treating four claims as allowed general unsecured claims against Old GM, with Mrs. Phillips' claim valued at approximately $2.7 million. The settlement stipulated that distributions would occur according to Old GM's chapter 11 plan, with the claims being deemed fully satisfied upon receipt of payments. Mrs. Phillips waived any further claims against Old GM and its successors, barring her from asserting any existing claims. Eleven days post-settlement, she assigned her claim to Dover Master Fund II, which was not disclosed in her motion. Alongside the assignment, she signed documents transferring all rights, interests, and claims related to the wrongful death claim against Old GM. Dover Fund became the record holder of the claim, and she was obligated to manage any subsequent payments as an agent for Dover Fund. New GM and the GUC Trust contended that Mrs. Phillips' assignment of her claims undermined her standing, a position the Court concurs with.
Mrs. Phillips is unable to seek relief under Rule 60(b) for her previously filed claim because she assigned all rights related to that claim to Dover Fund, making Dover the sole holder. Although she was a party to the original action and a related undisputed claim, she is no longer considered a party in the Old GM chapter 11 case due to the unconditional and irrevocable transfer of her rights. Consequently, Mrs. Phillips lacks standing to pursue Rule 60(b) relief, as she no longer owns the claim in question.
The court referenced the Brit-tania Bulk securities litigation, where a non-party, Wildes, was denied a similar motion for relief, emphasizing that non-parties cannot obtain Rule 60(b) relief. Mrs. Phillips is not connected to the claim or the lawsuit since she has sold her rights, which extinguishes her standing to sue.
Additionally, granting her relief would create the potential for double recovery on the same claim by two different parties. Mrs. Phillips has not sought to reverse the assignment or return the money received from Dover Fund, indicating a desire to retain both the proceeds from the sale and the ability to claim further recovery on the same claim, which is legally inconsistent. Her arguments distinguishing her case from cited precedents are not persuasive, as the court relies on the underlying principles rather than the specific facts of those cases.
Mrs. Phillips lacks standing to seek relief under Rule 60(b) or pursue recovery on her underlying claim, as she sold "all rights, title, and interest" in that claim without citing any legal precedent to support her contention. The Court expresses sympathy for her loss but denies her motion for Rule 60(b) relief. The GUC Trust will settle an order consistent with this decision. The Court acknowledges that mootness doctrine and the 363 Sale Order protect New GM from successor liability claims, and Mrs. Phillips has not challenged these rulings. The Court notes ambiguity regarding the cause of the accident, particularly concerning the ignition switch defect, and highlights inconsistencies in Mrs. Phillips’ counsel's statements regarding recalls relevant to her claim.
Mrs. Phillips' claim, which was settled within a specific range without requiring Court approval, was assigned to Dover Fund, managed by Longacre Management, LLC. The sale of her claim is significant, as it transferred all associated rights, irrespective of the sale price. She did not articulate a legal basis for New GM's liability for Old GM’s actions, and any theories of successor liability cannot be pursued under recent Court opinions. Furthermore, since her claim was settled below the threshold requiring Court approval, no order exists that could be vacated or modified. Mrs. Phillips explicitly states she is not seeking to reverse the earlier allowance of her claim or reclaim distributions made to Dover Fund.
The GUC Trust and New GM have not presented defenses regarding the implications of double liability and recovery for distributions to Dover Fund and Mrs. Phillips, leading the Court to assume these concerns do not obstruct Rule 60(b) relief. The Court acknowledges that the Second Circuit has occasionally extended standing under Rule 60 to non-parties, but only in limited contexts that do not apply to the current case. An unequivocal assignment of rights extinguishes the assignor's claims against the obligor, resulting in a lack of standing to sue. Citing relevant case law, the Court emphasizes that Mrs. Phillips, having assigned her entire interest in her claim, forfeited any standing to pursue it further. The Court finds that the language of the assignment agreement is critical in determining the transfer of standing, which, in this case, favors the opponents of Mrs. Phillips. The assignment clearly transferred all rights related to her lawsuit and claims stemming from a wrongful death incident to Dover Fund. Consequently, all claims related to the accident were prepetition claims assigned to Dover Fund, and Mrs. Phillips cannot assert any further claims against Old GM or the GUC Trust.
