Motors Liquidation Company

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re : Chapter 11
:
MOTORS LIQUIDATION COMPANY, et al., : Case No.: 09-50026 (REG)
f/k/a General Motors Corp., et al. :
:
Debtors. : (Jointly Administered)
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DECISION WITH RESPECT TO NO STAY
PLEADING AND RELATED MOTION TO
DISMISS FOR LACK OF SUBJECT MATTER
JURISDICTION (ELLIOTT PLAINTIFFS)1
APPEARANCES:
KING & SPALDING LLP
Attorneys for General Motors LLC
1185 Avenue of the Americas
New York, New York 10036
By: Arthur J. Steinberg, Esq. (argued)
Scott I. Davidson, Esq.
KIRKLAND & ELLIS LLP
Attorneys for General Motors LLC
300 North LaSalle
Chicago, Illinois 60654
By: Richard C. Godfrey, Esq.
Andrew B. Bloomer, Esq.
GARY PELLER
Attorney for Lawrence and Celestine Elliott
600 New Jersey Avenue, NW
Washington, DC 20001
By: Gary Peller, Esq. (argued)
1 This written decision memorializes and amplifies on the oral decision that I issued after the close
of oral argument at the hearing on this matter on August 5, 2014. Because it had its origins in the
originally dictated decision, it has a more conversational tone.
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TALOS LAW
Attorneys for Lawrence and Celestine Elliott
705 4th Street NW #403
Washington DC 20001
By: Daniel Hornal, Esq.
ROBERT E. GERBER
UNITED STATES BANKRUPTCY JUDGE:
Once again, a plaintiff group wishing to proceed ahead of all of the others (only
one week after I issued the written opinion memorializing my earlier oral ruling
proscribing such an effort)2 has asked for leave to go it alone. Its request is denied. With
a single exception, the issues raised by this group (the “Elliott Plaintiffs”) don’t differ
from those addressed in Phaneuf. And as to that single exception—their claim that I
don’t have subject matter jurisdiction to construe and enforce the Sale Order in this
case3— their contention is frivolous, disregarding controlling decisions of the United
States Supreme Court4 and Second Circuit;5 district court authority in this District;6 four
2 In re Motors Liquidation Company, --- B.R. ----, 2014 Bankr. LEXIS 3239, 2014 WL 3747338
(Bankr. S.D.N.Y. Jul. 30, 2014) (“Phaneuf”), incorporated here by reference.
3 Defined terms are as used in Phaneuf.
4 Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (U.S. 2009) (“Travelers”) (“the only question
left is whether the Bankruptcy Court had subject-matter jurisdiction to enter the Clarifying Order.
The answer here is easy: as the Second Circuit recognized, and respondents do not dispute, the
Bankruptcy Court plainly had jurisdiction to interpret and enforce its own prior orders”).
5 Luan Investment S.E. v. Franklin 145 Corp. (In re Petrie Retail, Inc.), 304 F.3d 223 (2d Cir.2002)
(“Petrie Retail”) (“A bankruptcy court retains post-confirmation jurisdiction to interpret and
enforce its own orders, particularly when disputes arise over a bankruptcy plan of reorganization.
The plan consummation motion was filed in response to Luan’s demand for excluded liabilities
and sought enforcement of the injunction provisions outlined in the sale order, plan of
reorganization, and confirmation order. Therefore, the dispute between Luan and Marianne
involved interpretation of the bankruptcy court’s orders. The bankruptcy court thus had
jurisdiction over the plan consummation motion and, specifically, had jurisdiction to consider
whether Luan was seeking excluded liabilities and, if so, to enforce the injunction provisions of its
orders.”) (citations omitted); Universal Oil Ltd. v. Allfirst Bank (In re Millenium Seacarriers,
Inc.), 419 F.3d 83, 97 (2d Cir. 2005) (“Millenium Seacarriers”) (“Bankruptcy courts retain
jurisdiction to enforce and interpret their own orders.” (citing Petrie Retail)).
6 Lothian Cassidy, LLC v. Lothian Exploration & Dev. II, L.P., 487 B.R. 158, 162 (S.D.N.Y. 2013)
(Marrero, J.) (“Lothian-Cassidy”) (“‘Arising in’ claims may include ‘[m]atters involving the
enforcement or construction of a bankruptcy court order . . . .’”).
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earlier decisions that I personally have issued;7 three decisions by other bankruptcy
judges in the Southern District of New York,8 and the leading treatise in the area,
Collier.9 The Elliott Plaintiffs’ motion to dismiss for lack of subject matter jurisdiction
thus likewise is denied.
Discussion
Given the ease of these issues, and my earlier discussion in Phaneuf (incorporated
into this decision by reference), this discussion will be brief.
7 See Sterling Vision, Inc. v. Sterling Optical Corp. (In re Sterling Optical Corp.), 302 B.R. 792,
801 (Bankr. S.D.N.Y. 2003) (“Sterling Optical”) (“Matters involving the enforcement or
construction of a bankruptcy court order are in [the ‘arising in’] category.”); NWL Holdings, Inc.
v. Eden Ctr., Inc. (In re Ames Dep't Stores, Inc.), 317 B.R. 260, 272 (Bankr. S.D.N.Y. 2004)
(“Ames Department Stores”) (“As in Petrie Retail and Millenium Seacarriers, this Court has
subject matter jurisdiction to enforce its orders not only because they were entered in proceedings
in a case under title 11 . . . with respect to which it undoubtedly had subject matter jurisdiction, but
also by reason of the power granted to any federal court to enforce its own orders.”) (citation
omitted); In re Motors Liquidation Co., 457 B.R. 276, 287 (Bankr. S.D.N.Y. 2011) (“GM-UAW”)
(“And it’s well established, of course, that bankruptcy courts, like other federal courts, have the
jurisdiction to enforce their earlier orders, even after confirmation.”); Trusky v. Gen. Motors Co.
(In re Motors Liquidation Co.), 2013 Bankr. LEXIS 620, at *33, 2013 WL 620281, at *11 (Bankr.
S.D.N.Y. Feb. 19, 2013) (“GM-Trusky) (“There is subject matter jurisdiction in this Court under
the ‘arising in’ prong of 28 U.S.C. § 1334, for me to construe my Sale Order, though I have great
difficulty in seeing how I’d have subject matter jurisdiction to decide anything else.”).
8 In re Portrait Corp. of Am., Inc., 406 B.R. 637, 641 (Bankr. S.D.N.Y. 2009) (Drain, J.) (“Portrait
Corporation of America”) (determining not just that court had subject matter jurisdiction to
“interpret and enforce” the sale order in that case; it was a core matter); Moelis & Co., LLC v.
Wilmington Trust FSB (In re Gen. Growth Props., Inc.), 460 B.R. 592, 598 (Bankr. S.D.N.Y.
2011) (Gropper, J.) (“General Growth”) (determining not just that court had subject matter
jurisdiction to interpret and enforce the sale order in that case; it was a core matter: The argument
that the dispute did not “arise in” the Chapter 11 Cases was “wholly specious.” The controversy
“implicate[d] the ‘enforcement or construction of a bankruptcy court order,’ in this case the
confirmation order. A bankruptcy court always has jurisdiction to interpret its own orders. It
does not matter that the State Court Action is purportedly between two non-debtors, or that the
Chapter 11 Cases have been confirmed.”) (emphasis added) (citations omitted); Morgan Olson,
LLC v. Frederico (In re Grumman Olson Indus.), 445 B.R. 243, 248 (Bankr. S.D.N.Y. 2011)
(Bernstein, C.J.) (“Grumman Olson”) (“In addition, Morgan’s request for declaratory and
injunctive relief asks the Court to interpret and enforce the Sale Order by enjoining the Fredericos
from proceeding with their successor liability claims. The presence of these two factors renders
the dispute core. . . . [T]he Court has subject matter jurisdiction to interpret and enforce the Sale
Order.”) (citations omitted).
9 See 10 Collier ¶ 7087.01 (discussing GM-Trusky, noting that while the bankruptcy court’s subject
matter jurisdiction over the underlying merits of a contract dispute between New GM and the
UAW was debatable, construction of the Sale Order was a matter over which the bankruptcy court
had “unquestioned subject matter jurisdiction” under the “arising in” prong of 28 U.S.C. § 1334).
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I.
Subject Matter Jurisdiction10
In addition to contending that they should be allowed to proceed on their own
because the Sale Order should not be deemed to apply to them, the Elliott Plaintiffs
contend that I lack subject matter jurisdiction to enforce the Sale Order. They say
“[b]ecause New GM’s claims are not ‘related to’ any proceedings before this Court, this
Court lacks jurisdiction to stay their lawsuit or to restrict the Elliotts in any way . . . .”11
I disagree. Their argument misses the point. “Related to” jurisdiction has nothing
to do with the issues here. Bankruptcy courts (and when it matters, district courts) have
subject matter jurisdiction to enforce their orders in bankruptcy cases and proceedings
under those courts’ “arising in” jurisdiction.12 The nearly a dozen cases cited above
expressly so hold.
10 Though the argument comes second in the Elliott Plaintiff’s brief, I consider it as a threshold
issue. See, e.g., Millenium Seacarriers, Inc. v. Allfirst Bank (In re Millenium Seacarriers, Inc.),
2004 WL 63501, at *4 (S.D.N.Y. 2004) (Patterson, J.) (“Millenium Seacarriers (S.D.N.Y.)”)
(“When a court’s jurisdiction is challenged, the court has an obligation to resolve that issue before
proceeding to the other issues in a proceeding.”), aff’d, Millenium Seacarriers, n.5 above; Ames
Department Stores, 317 B.R. at 268 & n.29 (same, quoting Millenium Seacarriers (S.D.N.Y.)).
11 Elliott Pls.’ Br. at 5.
12 See page 5 below. For this reason, I found the Elliott Plaintiffs’ reference to Johns-Manville
puzzling. See Elliott Pls.’ Br. at 28, 32, 33 (citing Johns-Manville Corp. v. Chubb Indem. Ins. Co.
(In re Johns-Manville Corp.), 517 F.3d 52 (2d Cir. 2008) (“Johns-Manville”), rev’d and remanded
sub nom. Travelers, see n.4 above. Preliminarily, the Elliott Plaintiffs twice cited Johns-Manville
for its asserted relevance to “related to” jurisdiction, which is not the question here. And the
controversy in Johns-Manville didn’t deal with a Bankruptcy court’s subject matter jurisdiction to
construe and enforce its own orders; in fact the Johns-Manville court assumed that a Bankruptcy
court had jurisdiction to interpret and enforce its own orders, Johns-Manville at 60–61 (“It is
undisputed that the bankruptcy court had continuing jurisdiction to interpret and enforce its own
1986 orders.”). And though the Supreme Court in Travelers reversed the Second Circuit’s order
for other reasons, it agreed with the Second Circuit in that respect. See n.4 above. While Johns-
Manville may be argued to be relevant in proceedings hereafter to determine whether or not the
language of the Sale Order is determinative, it does not deprive me of subject matter jurisdiction to
construe and enforce my earlier order now.
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As explained in many of those cases,13 section 1334 of the Judicial Code,
28 U.S.C. § 1334—which immediately follows the provisions covering subject matter
jurisdiction in federal question, diversity, and admiralty cases, 28 U.S.C. §§ 1331, 1332
and 1333, respectively—addresses the subject matter of the district courts (and hence the
bankruptcy courts) with respect to the exercise of their bankruptcy jurisdiction. After
providing, in its subsection “(a),” that the district courts have jurisdiction (and, indeed,
exclusive jurisdiction) over cases under title 11 (a matter not relevant here), § 1334
provides, in relevant part, with respect to bankruptcy proceedings (which include the
contested matter and adversary proceeding that are before me here):
(b) . . . . the district courts shall have original but
not exclusive jurisdiction of all civil proceedings
arising under title 11, or arising in or related to
cases under title 11.
The three types of jurisdiction that district (and hence bankruptcy) courts may exercise
are thus those colloquially referred to as (1) “arising under”;14 (2) “arising in”; and
(3) “related to” jurisdiction.15 The second of these—“arising in”—focuses on whether
the claim would have no existence outside of bankruptcy.16 “Matters involving the
enforcement or construction of a bankruptcy court order are in this category.”17
13 See, e.g., Sterling Optical, 302 B.R. at 800–02; Ames Department Stores, 317 B.R. at 268–69. See
also ML Media Partners, LP v. Century/ML Cable Venture (In re Adelphia Commc'ns Corp.), 285
B.R. 127, 136–37 (Bankr. S.D.N.Y. 2002) (Gerber, J.) (“Adelphia”).
14 This is analytically the same as “federal question” jurisdiction, but the claim must arise under title
11, as contrasted to any other title or provision, of the U.S. Code. It is not relevant here.
15 See, e.g., Ames Dept. Stores, 317 B.R. at 269.
16 See Sterling Optical, 302 B.R. at 801.
17 Id. Accord Lothian-Cassidy, 487 B.R. at 162 (“‘Arising in’ claims may include ‘[m]atters
involving the enforcement or construction of a bankruptcy court order . . .’” ).
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As in Ames Department Stores,18 the Elliott Plaintiffs make their subject matter
jurisdiction contentions on the premise that the outcome of the sale order interpretation
would have no effect on the debtor’s estate.19 But even assuming such is true (though I
am not sure that it is, since if New GM is not liable for an otherwise enforceable
obligation, that increases the likelihood that Old GM would be), it misses the point.
Effect on the estate is the standard for “related to” jurisdiction,20 not “arising in.”21 The
bankruptcy court’s subject matter jurisdiction when it comes to construing or enforcing
18 See n.22 below.
19 See Elliott Pls.’ Br. at 5 (“Because their claims are not ‘related to’ any proceedings before this
Court, this Court lacks jurisdiction to stay their lawsuit or to restrict the Elliotts in any way . . . .”);
id. at 31 (“The technical jurisdiction issue presented is whether the Elliotts’ claims against New
GM ‘relate to’ any proceeding properly before the Court . . . .”); id. at 32 (“The Second Circuit has
. . . made clear that this Court’s ‘related to’ jurisdiction is limited to power over litigants in
proceedings only when the outcome of that proceeding could conceivably have any effect on the
estate being administered in bankruptcy” (emphasis in original) (citing Cuyahoga Equipment, n.21
below)). In the portion of their brief beginning at page 31 (captioned “The Elliotts Claims Do Not
‘Relate to’ Any Proceeding Before the Court”), the Elliott Plaintiffs continue in conclusory terms,
after stating the issue to be whether their claims against New GM “‘relate to’ any proceeding
properly before the Court,” “that their claims themselves assuredly do not ‘arise in’ the
proceedings that Old GM initiated.” Id. That conclusory assertion is the only place in their brief
where “arising in” jurisdiction is mentioned, and—apart from misstating how “arising in”
jurisdiction is analyzed—it is made without any explanation or, especially, authority.
20 See, e.g., Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984); Publicker Industries Inc. v.
United States (In re Cuyahoga Equipment Corp.), 980 F.2d 110, 113–15 (2d Cir.1992).
21 As I held in GM-Trusky:
The Trusky Plaintiffs’ claims, arising under state law, don’t
arise under title 11 (the Bankruptcy Code), and as they’re
asserted against New GM, not Old GM, it’s difficult to see,
under the Pacor and Cuyahoga Equipment tests applicable in
this Circuit, . . . how they would have sufficient impact on Old
GM or the administration of its chapter 11 case to be “related
to” that case. But construction of my bankruptcy court Sale
Order, which was entered in Old GM’s chapter 11 case, and
which would not have been entered, or necessary to construe,
if there were no bankruptcy case, is a garden-variety example
of a proceeding “arising in” a chapter 11 case.
2013 Bankr. LEXIS 620, at *33 n.7, 2013 WL 620281, at *11 n.7.
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its earlier orders has wholly different underpinnings,22 as review of any of the nearly
dozen decisions cited above would have revealed.
Nor is it an answer for the Elliott Plaintiffs’ to premise jurisdictional arguments
on the conclusion they ultimately want me to reach—that upon construction of the Sale
Order and the Sale Agreement, their claims would be permissible under each. That
assumes the fact to be decided, in the proceedings the Elliott Plaintiffs wish to sidestep.
Their argument conflates the conclusion I might reach after analysis of matters before
me—that certain claims ultimately might not be covered by the Sale Order—with my
jurisdiction to decide whether or not they are.23
The motion to dismiss for asserted lack of subject matter jurisdiction is denied.
II.
The No Stay Request
I then reach the issue that the plaintiffs in 86 other Ignition Switch actions did not
bother to raise, and that I addressed in the only other exception, Phaneuf. The Elliott
Plaintiffs have given me no greater reason to conclude that they should be a special case
than the Phaneuf Plaintiffs did.
22 See, e.g., Ames Dept. Stores, 317 B.R. at 269 (“Eden Center premises its argument on the truism
that at this juncture, with Ames having already effected its assignment, the outcome of this
controversy will not have an economic or other effect on the Ames estate, as has traditionally been
required in this Circuit and elsewhere, to invoke ‘related to’ jurisdiction. But Eden Center fails
satisfactorily to recognize that subject matter jurisdiction here is not based on ‘related to’
jurisdiction. Rather, it exists by reason of ‘arising in’ jurisdiction, by reason of the Court’s earlier
orders in this case . . . , and the need to enforce them.”).
23 I considered a similar issue in GM-Trusky, where I exercised my “arising in” jurisdiction to
construe the very same Sale Order that we have here, and then abstained with respect to the
remainder of the controversy, sending it to the Eastern District of Michigan. See 2013 Bankr.
LEXIS 620, at *33, 2013 WL 620281, at *11. Exercising jurisdiction to adjudicate issues (and
hold other matters in abeyance pending that adjudication) does not preordain the latter’s outcome.
To the extent that Designated Counsel do not satisfactorily present arguments by the Elliott
Plaintiffs and others that claims the latter wish to assert are not forbidden by the Sale Order, the
Elliott Plaintiffs will be free to do so—but only pursuant to the orderly procedures that will apply
to everyone.
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Like Phaneuf plaintiffs Lisa Phaneuf, Adam Smith, and Catherine and Joseph
Cabral, Elliott Plaintiffs Lawrence and Celestine Elliott purchased a car manufactured by
Old GM—in this case, a 2006 Chevy Cobalt.24 The Sale Order provided, among other
things, that except for the Assumed Liabilities expressly set forth in the Sale Agreement,
New GM would not
have any liability for any claim that arose prior to
the Closing Date, relates to the production of
vehicles prior to the Closing Date, or otherwise is
assertable against the Debtors or is related to the
Purchased Assets prior to the Closing Date.25
On their face, the Elliott Plaintiffs’ claims “relate[] to the production of vehicles prior to
the Closing Date”—even assuming, without deciding, that the Elliott Plaintiffs do not
also assert liability for a claim that “that arose prior to the Closing Date,” or “otherwise is
assertable against the Debtors or is related to the Purchased Assets prior to the Closing
Date.”
And while the Elliott Plaintiffs’ brief disclaims reliance on Old GM acts, their
complaint doesn’t bear that out. Though to a lesser degree than in Phaneuf, the Elliott
Plaintiffs’ complaint also relies on the conduct of Old GM in asserting claims against
New GM, accusing Old GM of “unlawful concealment”: “New GM acquired all the
24 It appears that the amended Elliotts’ complaint includes the claims of an additional plaintiff,
Berenice Summerville, who purchased a 2010 Chevy Cobalt in December 2009. (Am. Comp. ¶
5.) Assuming that the facts bear this out, this additional plaintiff seemingly is in the same
category as some of the Phaneuf Plaintiffs—those who purchased vehicles that conceivably could
have been manufactured after the July 2009 363 Sale. For the avoidance of doubt, I am not going
to put this additional plaintiff in a different category than the Phaneuf Plaintiffs, or Lawrence and
Celestine Elliott, as discussed below.
25 Sale Order ¶ 46 (emphasis added).
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books, records and accounts of [Old GM], including records that document the unlawful
concealment of defects in vehicles sold by Old GM prior to New GM’s existence.”26
As in Phaneuf, I find that the Elliott Plaintiffs are asserting claims with respect to
vehicles that were manufactured before the 363 Sale, and, although to a lesser extent than
in Phaneuf, relying on the conduct of Old GM. Thus I find as a fact, or mixed question
of fact and law, that the threshold applicability of the Sale Order—and its injunctive
provisions—has been established in the first instance.
And once again, even if the Sale Order did not apply in the first instance, a
preliminary injunction would also be appropriate here, for the reasons discussed at length
in Phaneuf, which I will not repeat at comparable length here—other than to say that the
prejudice to all of the other litigants, and to the case management concerns I had with
respect to the Phaneuf Plaintiffs, is just as much a matter of concern here.
As in Phaneuf, I will not allow the Elliott Plaintiffs to go it alone. The Elliott
Plaintiffs’ claims can be satisfactorily addressed—and will have to be addressed—as part
of the coordinated proceedings otherwise pending before me.
Conclusion
For the reasons set forth above and in Phaneuf, the relief requested in the Elliott
Plaintiffs’ No Stay Pleading (including their motion to dismiss for lack of subject matter
jurisdiction) is denied. The Elliott Plaintiffs’ claims will be treated the same as those in
all of the other Ignition Switch Actions. The stay already imposed by the injunctive
provisions of Paragraphs 8 and 47 of the Sale Order (and that the Court may also impose
by preliminary injunction) will remain in place insofar as it affects the Elliott Plaintiffs’
26 Am. Compl. ¶ 6 (emphasis added).
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complaint—subject to the right, shared by all of the other plaintiffs in the Ignition Switch
Actions, to ask that the Court revisit the issue after September 1.
Dated: New York, New York s/Robert E. Gerber
August 6, 2014 United States Bankruptcy Judge
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