GM ignition switch ruling binding; trust unitholders could be affected

By Caroline Salls

Pittsburgh, June 4 – Motors Liquidation Co. GUC Trust said the U.S. Bankruptcy Court for the Southern District of New York issued a judgment on Monday that clarifies the terms of its decision related to General Motors’ liability in lawsuits based on faulty ignition switches and distills the court’s findings into a binding order, according to an 8-K filed Thursday with the Securities and Exchange Commission.

As previously reported, the decision held that the plaintiffs in the ignition switch actions may seek approval to file late claims in the bankruptcy cases of Old GM but that any of those claims filed against the GUC Trust are “equitably moot.”

As a result, the court ruled that the assets of the GUC Trust cannot be used to satisfy the claims.

In the June 1 order, the court said that, although the equitable mootness finding does not apply automatically to plaintiffs in non-ignition switch actions, those plaintiffs must file a pleading with the court asserting a good-faith basis as to why the finding should not apply to their actions.

In any equitable mootness pleading, the court said the plaintiffs are not permitted to re-litigate issues of law that were addressed in the decision.

If a plaintiff in a non-ignition switch action fails to file a pleading, or if the court denies the relief requested in the pleading, the GUC Trust can seek dismissal of the applicable actions.

However, if the court grants the relief requested, plaintiffs could seek to assert claims against the GUC Trust, which could dilute the recoveries of unitholders, according to the 8-K.

Also in the June 1 order, the court said anyone who holds a previously allowed or disallowed claim may seek to have that claim reconsidered by the court. If the claimant prevails in an application for reconsideration, the resulting additional allowed claims could dilute the recoveries of trust unitholders.

According the 8-K, some parties have already filed notices of appeal of the decision and judgment, and other parties may also appeal.

If the second circuit court accepts the bankruptcy court’s application for direct appeal, the appeals will be heard by the circuit court.

The trust said the appellate proceedings have been stayed, except for some procedural steps, until the circuit court rules on the certification.

General Motors is a Detroit-based automaker that filed for bankruptcy on June 1, 2009. The new General Motors Corp. emerged from Chapter 11 on July 10, 2009. The Chapter 11 case number is 09-50026.

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