Docket: Case No. 09-50026 (MG) (Jointly Administered)
Court: United States Bankruptcy Court, S.D. New York; April 15, 2016; Us Bankruptcy; United States Bankruptcy Court
The court denied the Motion for Determination of Applicability of Automatic Stay filed by Marios L. Chenault and Shayrika L. Chenault regarding their product liability claims against General Motors LLC (New GM). The court determined that the automatic stay applies to these claims because New GM is a distinct legal entity from General Motors Corporation (Old GM) and did not assume liability for the claims. The Plaintiffs initiated the State Court Action on October 18, 2012, alleging that a defect in a tire, which was designed in part by Old GM, caused a crash involving their vehicle. However, New GM argued that Old GM did not design the tire and was incorrectly named in the complaint, which did not reference New GM. The Plaintiffs also failed to properly serve Old GM, as service was directed to New GM's registered agent, which rejected it. Consequently, New GM contended that it was never properly notified of the action within the statute of limitations.
On April 3, 2013, Plaintiffs filed a motion for default judgment against Old GM, asserting that service was made on New GM as Old GM's successor, and claiming Old GM failed to respond within thirty days. New GM disputed this, stating it was not served. The state court denied the motion, indicating Old GM was not in default. On May 23, 2013, Plaintiffs filed a second motion for default judgment against Old GM, which remains pending, with New GM again asserting it was not served. On November 10, 2014, the Motors Liquidation Company GUC Trust argued to the state court that the Plaintiffs' claims against Old GM were enjoined and requested its dismissal. On July 24, 2015, Plaintiffs filed a motion for entry of judgment and correction of misnomer against New GM, claiming it was the successor to Old GM and addressing a misnomer in the complaint. New GM received this motion on July 28, 2015, and opposed it on August 14, asserting it was never properly named or served and that default entry would violate its due process rights.
On September 28, 2015, the state court directed Plaintiffs to seek clarification regarding the relationship between Old GM and New GM, the survivability of claims, and the applicability of bankruptcy stay. Old GM filed for bankruptcy on June 1, 2009, concurrently seeking approval for a sale agreement to transfer its assets to New GM's predecessor. The sale was approved by the court on July 5, 2009, and finalized on July 10, 2009. The court emphasized that New GM would have a different ownership structure than Old GM and authorized the sale under section 363(f) of the Bankruptcy Code, allowing the assets to be sold free of successor liability claims.
The Sale Order stipulates that the Purchaser, New GM, is not considered a legal successor to Old GM with respect to any actions related to the MPA or acquisition of Purchased Assets, except for obligations arising from the Purchased Assets post-Closing. Specifically, New GM is not liable for any claims against Old GM, including those based on successor or transferee liability, de facto merger, or continuity, encompassing a wide range of potential liabilities, whether known or unknown. An injunction is also in place to prevent successor liability claims against New GM.
As of June 1, 2009, the automatic stay under the Bankruptcy Code prevents any further actions against Old GM. The Confirmation Order affirms that all injunctions or stays remain effective until the conclusion of Old GM's chapter 11 case, which is still active.
Plaintiffs claim that the automatic stay does not apply to their lawsuit against New GM, arguing that their claims arise from a vehicle manufactured by Old GM before the Closing Date but were asserted after that date. They contend that New GM, as a successor-in-interest, assumed liability for product claims stemming from pre-Closing products. Plaintiffs clarify they do not seek claims against Old GM and assert that their action is independent of the bankruptcy proceedings. They acknowledge a misnomer in naming New GM in the State Court Action and express concern over the court's uncertainty regarding whether their claims are against Old GM or New GM, and the implications of the bankruptcy stay.
New GM asserts it is not the successor to Old GM, emphasizing that they are separate entities and referencing the Sale Order and prior court decisions. It argues that the Complaint against Old GM violates the automatic stay, rendering it void ab initio, and insists that the stay applies to the State Court Action. New GM highlights that it acquired Old GM's assets free from successor liability claims, with the Sale Order prohibiting claims against it as a successor. The court confirms that New GM did not assume liability for the Plaintiffs' claims, as the allegedly defective tire was not manufactured, sold, or delivered by Old GM. The claims arose after the Closing Date, and the Sale Order specifies that liabilities related to events prior to that date were not assumed. Since the Plaintiffs' claims do not involve assumed Product Liabilities, they are barred. Consequently, the court denies the Plaintiffs' Motion, affirming that New GM is not liable for the claims and that the automatic stay applies to the State Court Action.
