Mass Tort Bankruptcies Face a New Challenge: Citing Due Process Problems, 2d Circuit Overturns
In a major ruling issued yesterday, the 2d Circuit overturned portion of the the “free and clear” asset sale order entered for GM by Judge Gerber. The cite is Elliott v. GM LLC (In re Motors Liquidation Co.), 829 F.3d 135 (2d Cir. 2016). The opinion is important for multiple reasons, including its ruling and rationale as to providing great protections for companies if they make full disclosure of product defects in the bankruptcy. The court held the contingent claimants were denied due process notice and therefore the opportunity for meaningful participation in the process. In light of the opinion, mass tort bankruptcies now face some new challenges.
I’m biased, but think the 2d Circuit’s opinion and reasoning fit rather well with my 2010 snarky comments on the death of due process during the lower court proceedings in GM. See Due Process Dies Again in Chapter 11 – District Court in GM Case Affirms Orders Cutting Off Pending Product Liability Claims of Victims and Co-Defendants: “The Voyage of the Damned” Continues.