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Chenault v. General Motors LLC

United States District Court, S.D. New York

February 21, 2017

MARLOS CHENAULT and SHAYRIKA L. CHENAULT, Movants,
v.
GENERAL MOTORS LLC, Appellee. IN RE: MOTORS LIQUIDATION CO., Debtors.

          OPINION & ORDER

          RONNIE ABRAMS, United States District Judge:

         Movants Marios Chenault and Shayrika L. Chenault move for leave to appeal an order of the United States Bankruptcy Court for the Southern District of New York, which determined that General Motors Corporation's Chapter 11 petition stayed their state-court action. For the reasons set forth below, the motion is denied.

         BACKGROUND

         A. General Motors Bankruptcy Proceedings

         On June 1, 2009, General Motors Corporation ("Old GM") filed a voluntary Chapter 11 petition in the Bankruptcy Court. See Voluntary Pet., In re Motors Liquidation Co., No. 09-BK-50026 (Bankr. S.D.N.Y. June 1, 2009) (ECF No. 1). The same day, Old GM filed a motion seeking approval of a sale agreement, under which it would sell substantially all its assets to General Motors, LLC ("New GM"). See Mot. for Sale of Property, In re Motors Liquidation Co., No. 09- BK-50026 (Bankr. S.D.N.Y. June 1, 2009) (ECF No. 92).

         On July 5, 2009, the Bankruptcy Court approved the sale agreement and authorized the sale. See Obj. by General Motors LLC to Mot. for Leave to Appeal ("Obj.) Ex. H (ECF No. 4-8). The sale order provides, in relevant part, that New GM "shall not have any successor, transferee, derivative, or vicarious liabilities of any kind or character for any claims, including, but not limited to, under any theory of successor or transferee liability . . . whether . . . now existing or hereafter arising, asserted, or unasserted." Id. \ 46. The sale order also provides that "all persons or entities are forever prohibited and enjoined from . . . commencing or continuing any action or any other proceeding pending or threatened against [Old GM] as against [New GM]." Id. ¶47. The sale order further explains that New GM would consummate the sale only if the Bankruptcy Court "expressly orders" that New GM would "not have any liability whatsoever" with respect to "rights or claims based on any successor transferee liability." Id. § DD.

         Under the Bankruptcy Code, the filing of Old GM's Chapter 11 petition automatically stayed the commencement or continuation of all proceedings against Old GM. See 11 U.S.C. § 362(a)(1). That stay remained in place when the Bankruptcy Court confirmed Old GM's Chapter 11 plan on March 29, 2011. See Order, In re Motors Liquidation Co., No. 09-BK-50026 (Bankr. S.D.N.Y. Mar. 29, 2011) (ECF No. 9941). Old GM's Chapter 11 case remains open.

         B. Movants' State Court Action

         On October 18, 2012, Movants filed a complaint against "General Motors Corporation" and other entities in the state court of Fulton County, Georgia. See Obj. Ex. C. In their complaint, Movants allege that their 2005 GMC Envoy Denali crashed into a guardrail on an interstate highway in Morgan County, Georgia on January 29, 2011. Id. ¶ 9. Movants further allege that the crash was caused by a defective tire "originally designed in part" by Old GM. Id. ¶ 12. According to the complaint, the crash left Marios Chenault paralyzed from the waist down. Id. ¶11.

         On October 22, 2012, Movants attempted to serve New GM with their complaint. See Obj. Ex. E. Because their complaint did not name New GM as a defendant, however, New GM's registered agent rejected service. See Id. Movants moved for default judgment against New GM and for a correction of misnomer, claiming that New GM is "the successor-in-interest to Old GM" and that their complaint's references to Old GM were mistaken. See Obj. Ex. G, at 3-4. New GM opposed the motion, arguing, inter alia, that service was never perfected, that New GM is not the successor-in-interest to Old GM, and that Movants' claims violated the bankruptcy stay See Obj. Ex. A, at 4-5.

         C. State Court Order

         On September 28, 2015, the state court issued an "Order Staying Motion for Default Judgment and Directing Parties to Bankruptcy Court." Obj. Ex. B. The state court concluded that whether New GM is a successor-in-interest to Old GM, and whether Movants' claims against Old GM are barred, were "issues for the Bankruptcy Court to determine, because resolution would involve an analysis of that Court's own orders and rulings." Id. at 2. The state court ordered Movants "to seek a ruling from the Bankruptcy Court regarding the nature of the relationship between General Motors Corporation and General Motors, LLC, whether or not the claims herein survive or are barred for any reason, and whether or not the bankruptcy stay applies in this case." Id. The state court stayed its own proceedings pending a ruling from the Bankruptcy Court. Id.

         D. Bankruptcy Court Order

         Movants then filed a motion in the Bankruptcy Court, seeking an order determining that the bankruptcy stay does not apply to their claims. Obj. Ex. A, at 2. On April 15, 2016, the Bankruptcy Court denied their motion. See Id. Drawing from its prior orders, the Bankruptcy Court first explained that "the record in this bankruptcy case and the prior decisions of this Court make it abundantly clear that New GM is not a successor in interest to Old GM." Id. at 9 (emphasis in original). The Bankruptcy Court then determined that Movants' assertion of claims in state court against Old GM violated the bankruptcy stay, which "remain[ed] in full force and effect until the closing of the chapter 11 case." Id. at 10. Finally, the Bankruptcy Court stated that, contrary to Movants' allegations, "New GM did not assume liability for [their] claims." Id. (emphasis in original). The Bankruptcy Court explained that, while New GM assumed liability for certain ...


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