15

‐ 2844

‐ bk(L)

In re Motors Liquidation Co.



### U NITED 

### S TATES 

### C OURT OF 

### A PPEALS

FOR THE 

### S ECOND 

### C IRCUIT

August Term 2015

(Argued: March 15, 2016 Decided: July 13, 2016)

Docket Nos. 15

‐ 2844

‐ bk(L), 15

‐ 2847

‐ bk(XAP), 15

‐ 2848

‐ bk(XAP)

I N THE M ATTER OF : M OTORS L IQUIDATION C OMPANY

,

Debtor

.

C ELESTINE E LLIOTT

, L AWRENCE E LLIOTT

, B ERENICE S UMMERVILLE

,

Creditors

‐ Appellants

‐ Cross

‐ Appellees

,

S ESAY AND B LEDSOE P LAINTIFFS

, I GNITION S WITCH P LAINTIFFS

, I GNITION S WITCH

P RE

‐ C LOSING A CCIDENT P LAINTIFFS

, D ORIS P OWLEDGE P HILLIPS

,

Appellants

‐ Cross

‐ Appellees

,

G ROMAN P LAINTIFFS

,

Appellants

,

v.

G ENERAL M OTORS LLC,

Appellee

‐ Cross

‐ Appellant

,‐ 2

‐ W ILMINGTON T RUST C OMPANY

,

Trustee

‐ Appellee

‐ Cross

‐ Appellant

,

P ARTICIPATING U NITHOLDERS

,

Creditors

‐ Appellees

‐ Cross

‐ Appellants

. 1

O N A PPEAL FROM THE U NITED S TATES B ANKRUPTCY C OURT

FOR THE S OUTHERN D ISTRICT OF N EW Y ORK

Before:

S TRAUB

, C HIN

, and C ARNEY

, Circuit Judges

.

Appeal from a judgment of the United States Bankruptcy Court for

the Southern District of New York (Gerber, J. ), enforcing a ʺ free and clear ʺ

provision of a sale order to enjoin claims against a debtor ʹ s successor corporation

and concluding under the equitable mootness doctrine that assets of the debtor ʹ s

unsecured creditors ʹ trust would be protected from late

‐ fi led claims. On appeal,

plainti ff s challenge the bankruptcy court ʹ s rulings that: (1) it had jurisdiction, (2)

the sale order covered their claims, (3) enforcement of the sale order would not

1 The Clerk of Court is respectfully directed to amend the official caption to

conform to the above.‐ 3

‐ violate procedural due process, and (4) relief for any late

‐ fi led claims would be

barred as equitably moot.

A FFIRMED

, R EVERSED

, AND V ACATED IN P ART

, AND R EMANDED

.

G ARY P ELLER

, Washington, D.C., for Creditors

‐ Appellants

‐ Cross

‐ Appellees Celestine Ellio tt

,

Lawrence Ellio tt

, and Berenice Summerville,

and Appellants

‐ Cross

‐ Appellees Sesay and

Bledsoe Plainti ff

s

.

S TEVEN W. B ERMAN (Andrew M. Volk, on the

brief ), Hagens Berman Sobol Shapiro LLP,

Sea tt le, Washington, and Elizabeth J.

Cabraser, Lie ff Cabraser Heimann &

Bernstein, LLP, San Francisco, California,

and Rachel J. Geman, Lie ff Cabraser

Heimann & Bernstein, LLP, New York,

New York, and Edward S. Weisfelner,

David J. Molton, Howard S. Steel, Brown

Rudnick LLP, New York, New York, and

Sandra L. Esserman, Stu tz man, Bromberg,

Esserman & Pli fk a, P.C., Dallas Texas, for

Appellants

‐ Cross

‐ Appellees Ignition Switch

Plainti ff

s

.

W ILLIAM P. W EINTRAUB (Gregory W. Fox, on the

brief ), Goodwin Procter LLP, New York,

New York, for Appellants

‐ Cross

‐ Appellees

Ignition Switch Pre

‐ Closing Accident

Plainti ff

s

.

Joshua P. Davis, Josh Davis Law Firm, Houston,

Texas, for Appellant

‐ Cross

‐ Appellee Doris

Powledge Phillips

.‐ 4

‐ A LEXANDER H. S CHMIDT

, Wolf Haldenstein Adler

Freeman & Herz LLP, New York, New

York, and Jonathan L. Flaxer, Golenbock

Eiseman Assor Bell & Peskoe LLP, New

York, New York, for Appellants Groman

Plainti ff

s

.

A RTHUR J. S TEINBERG (Sco tt Davidson, on the brief ),

King & Spalding LLP, New York, New

York, and Merri tt E. McAlister, King &

Spalding LLP, Atlanta, Georgia, and

Edward L. Ripley, King & Spalding LLP,

Houston, Texas, and Richard C. Godfrey,

Andrew B. Bloomer, Kirkland & Ellis LLP,

Chicago, Illinois, for Appellee

‐ Cross

‐ Appellant General Motors LLC

.

Adam H. O ff enhar tz

, Aric H. Wu, Lisa H. Rubin,

Gabriel K. Gille tt

, Gibson, Dunn &

Crutcher LLP, New York, New York, for

Trustee

‐ Appellee

‐ Cross

‐ Appellant Wilmington

Trust Company

.

P RATIK A. S HAH

, Akin Gump Strauss Hauer &

Feld LLP, Washington, D.C., and Daniel H.

Golden, Deborah J. Newman, Akin Gump

Strauss Hauer & Feld LLP, New York, New

York, for Creditors

‐ Appellees

‐ Cross

‐ Appellants Participating Unitholders

.‐ 5

‐ C HIN

, Circuit Judge :

On June 1, 2009, General Motors Corporation ( ʺ Old GM ʺ ), the

nation ʹ s largest manufacturer of automobiles and the creator of such iconic

American brands as Chevrolet and Cadillac, fi led for bankruptcy. During the

fi nancial crisis of 2007 and 2008, as access to credit tightened and consumer

spending diminished, Old GM posted net losses of $70 billion over the course of

a year and a half. The U.S. Department of the Treasury ( ʺ Treasury ʺ ) loaned

billions of dollars from the Troubled Asset Relief Program ( ʺ TARP ʺ ) to buy the

company time to revamp its business model. When Old GM ʹ s private e ff orts

failed, President Barack Obama announced to the nation a solution ‐‐ ʺ a quick,

surgical bankruptcy. ʺ 2 Old GM petitioned for Chapter 11 bankruptcy protection,

and only forty days later the new General Motors LLC ( ʺ New GM ʺ ) emerged.

This case involves one of the consequences of the GM bankruptcy.

Beginning in February 2014, New GM began recalling cars due to a defect in their

ignition switches. The defect was potentially lethal: while in motion, a car ʹ s

ignition could accidentally turn o ff

, shu tt ing down the engine, disabling power

steering and braking, and deactivating the airbags.

2 Remarks on the United States Automobile Industry

, 2009 Daily Comp. Pres.

Doc. 2 (June 1, 2009).‐ 6

‐ Many of the cars in question were built years before the GM

bankruptcy, but individuals claiming harm from the ignition switch defect faced

a potential barrier created by the bankruptcy process. In bankruptcy, Old GM

had used 11 U.S.C. § 363 of the Bankruptcy Code (the ʺ Code ʺ ) to sell its assets to

New GM ʺ free and clear. ʺ In plain terms, where individuals might have had

claims against Old GM, a ʺ free and clear ʺ provision in the bankruptcy court ʹ s sale

order (the ʺ Sale Order ʺ ) barred those same claims from being brought against

New GM as the successor corporation.

Various individuals nonetheless initiated class action lawsuits

against New GM, asserting ʺ successor liability ʺ claims and seeking damages for

losses and injuries arising from the ignition switch defect and other defects. New

GM argued that, because of the ʺ free and clear ʺ provision, claims could only be

brought against Old GM, and not New GM.

On April 15, 2015, the United States Bankruptcy Court for the

Southern District of New York (Gerber, J. ) agreed and enforced the Sale Order to

enjoin many of these claims against New GM. Though the bankruptcy court also

determined that these plainti ff s did not have notice of the Sale Order as required

by the Due Process Clause of the Fifth Amendment, the bankruptcy court denied‐ 7

‐ plainti ff s relief from the Sale Order on all but a subset of claims. Finally, the

bankruptcy court invoked the doctrine of equitable mootness to bar relief for

would

‐ be claims against a trust established in bankruptcy court to pay out

unsecured claims against Old GM ( ʺ GUC Trust ʺ ). 3

The bankruptcy court entered judgment and certi fi ed the judgment

for direct review by this Court. 4 Four groups of plainti ff s appealed, as did New

GM and GUC Trust. We a ffi rm, reverse, and vacate in part the bankruptcy

court ʹ s decision to enforce the Sale Order against plainti ff s and vacate as

advisory its decision on equitable mootness.

BACKGROUND

I. Bailout

In the fi nal two quarters of 2007, as the American economy su ff ered

a signi fi cant downturn, Old GM posted net losses of approximately $39 billion

and $722 million. General Motors Corp., Annual Report (Form 10

‐ K) 245 (Mar. 5,

2009). In 2008, it posted quarterly net losses of approximately $3.3 billion, $15.5

3 For ease of reference, in the context of this appeal, we also refer to

Wilmington Trust Company (the administrator of GUC Trust) and the unitholders of

GUC Trust collectively and singularly as ʺ GUC Trust. ʺ

4 See 28 U.S.C. § 158(d)(2) (providing jurisdiction for courts of appeals to

hear appeals if the bankruptcy court certi fi es that certain conditions are met).‐ 8

‐ billion, $2.5 billion, and $9.6 billion. Id. In a year and a half, Old GM had

managed to hemorrhage over $70 billion.

The possibility of Old GM ʹ s collapse alarmed many. Old GM

employed roughly 240,000 workers and provided pensions to another 500,000

retirees. Id. at 19, 262. The company also purchased parts from over eleven

thousand suppliers and marketed through roughly six thousand dealerships. A

disorderly collapse of Old GM would have far

‐ reaching consequences.

After Congress declined to bail out Old GM, President George W.

Bush announced on December 19, 2008 that the executive branch would provide

emergency loans to help automakers ʺ stave o ff bankruptcy while they develop

plans for viability. ʺ 5 In Old GM ʹ s case, TARP loaned $13.4 billion on the

condition that Old GM both submit a business plan for long

‐ term viability to the

President no later than February 17, 2009 and undergo any necessary revisions

no later than March 31, 2009. If the President found the business plan

unsatisfactory, the TARP funds would become due and payable in thirty days,

rendering Old GM insolvent and e ff ectively forcing it into bankruptcy.

5 Remarks on the American Auto Industry

, 44 Weekly Comp. Pres. Doc. 1569

(Dec. 19, 2008).‐ 9

‐ On March 30, 2009, President Obama told the nation that Old GM ʹ s

business plan was not viable. 6 At the same time, the President provided Old GM

with another $6 billion loan and sixty more days to revise its plan along certain

parameters. President Obama also reassured the public:

But just in case there ʹ s still nagging doubts, let me say it

as plainly as I can: If you buy a car from Chrysler or

General Motors, you will be able to get your car

serviced and repaired, just like always. Your warranty

will be safe. In fact, it will be safer than it ʹ s ever been,

because starting today, the United States Government

will stand behind your warranty. 7

As the President stood behind the reliability of GM cars, pledging another $600

million to back all warranty coverage, bankruptcy remained a stark possibility. 8

II. Bankruptcy

The federal aid did not succeed in averting bankruptcy. Old GM

fared no be tt er in the fi rst quarter of 2009

‐‐ posting on May 8, 2009 a $5.9 billion

net loss. General Motors Corp., Quarterly Report (Form 10

‐ Q) 57 (May 8, 2009).

6 Remarks on the United States Automobile Industry

, 2009 Daily Comp. Pres.

Doc. 2 (Mar. 30, 2009) [hereinafter ʺ March 30, 2009 Presidential Remarks ʺ ].

7 March 30, 2009 Presidential Remarks, supra note 6, at 3.

8 See Office of the Press Sec ʹ y, White House, Obama Administration ʹ s New

Warrantee Commitment Program (Mar. 30, 2009); see also Office of the Press Sec ʹ y, White

House, Obama Administration New Path to Viability for GM & Chrysler (Mar. 30, 2009);

Steven Rattner, Overhaul: An Insider ʹ s Account of the Obama Administration ʹ s Emergency

Rescue of the Auto Industry 299 (2010).But ent e

restruc t

lingere d

consu m

alterna t

risks in

United

A

dubbe d

103

‐ pa g

traditi o

§ 363

‐‐

722 F.2 d

Chapte r

b ankru p

they w i e ring ban k

t ure and b e

d in bankr u

m er con fi d e

t ive but to

mind, Ol d

States Ba n

Mec h A

.

Th e

d ʺ Vehicle A

g e draft sa l

Thro

o nal Chapt e

a less co m

d 1063, 10 6

r 11 reorg a

p tcy (the ʺ

i ll be treat e k ruptcy p o

e come pr o

u ptcy too

e nce in th e

liquidate a

d GM peti t

n kruptcy C

h anics of t h

e same da y

A cquisitio n

l e agreem e

ugh this p

e r 11 reor g

m mon way

6 6

‐ 70 (2d C

a nization f

debtor ʺ ) fi

e d, asks t h o sed a uni q

o fi table ag a

long, ope r

e GM bran d

a nd close o

t ioned for

C ourt for t h

h e § 363 S a

y

, Old GM

n Holdin g

e nt and 30

p roposed s a

g anizatio n

of e ff ecti n

C ir. 1983) (

f ollows se t

fi les a reor g

h ose credit o

‐ 10

‐ q ue set of p

a in, not to

r ating exp e

d could d e

o nce and f

Chapter 1

h e Southe r

a le

fi led a m o

g s LLC ʺ or

‐ page pro p

a le, Old G

n

, but a tra n

n g a bankr u

explainin g

t procedu r

g anization

o rs to vot e p roblems:

shut dow n

e nses wo u

e teriorate

,

f or all. O n

1 bankru p

r n District

o tion to se l

ʺ NGMC O

p osed sal e

G M was a tt e

n saction p

u ptcy. Se e

g the histo

r es: the co m

n plan disc l

e to accept Old GM s

n ; yet if O l

u ld accum u

leaving O

n June 1, 2 0

p tcy prote c

of New Y o

l l itself to N

O

, Inc. ʺ ), c o

e order.

e mpting n

ursuant t o

e

, e.g.

, In r e

ry of § 36 3

m pany en

l osing to c

the plan

, a s ought to

l d GM

u late and

ld GM no

0 09, with t h

c tion in th e

o rk.

N ew GM (

o mplete w i

n ot a

o 11 U.S.C.

e Lionel Co r

3 ). The us u

tering

reditors h o

a nd then h ese

e

also

i th a

r p.

,

u al

o w‐ 11

‐ emerges from bankruptcy with its liabilities restructured along certain

parameters. See 11 U.S.C. §§ 1121

‐ 1129. 9 This jostling can take years. 10 In

contrast, in a § 363 sale of substantially all assets, the debtor does not truly

ʺ reorganize. ʺ Instead, it sells its primary assets to a successor corporation, which

immediately takes over the business. See Fla. Dep ʹ t of Revenue v. Piccadilly

Cafeterias, Inc.

, 554 U.S. 33, 37 n.2 (2008). As evidenced by the GM bankruptcy, a

§ 363 sale can close in a ma tt er of weeks.

The proposed sale was, in e ff ect, a complex transaction made

possible by bankruptcy law. GM ʹ s sale would proceed in several parts. First,

Old GM would become a ʺ debtor

‐ in

‐ possession ʺ under the Code. See 11 U.S.C.

§ 1101. Where a trustee might otherwise be appointed to assert outside control of

the debtor, id. § 1104, a debtor

‐ in

‐ possession continues operating its business, id.

§§ 1107, 1108. See In re Smart World Techs., LLC

, 423 F.3d 166, 174 n.10 (2d Cir.

9 See generally Evan F. Rosen, Note, A New Approach to Section 363(f)(3)

, 109

Mich. L. Rev. 1529, 1538

‐ 39 (2011) ( ʺ However, unlike sales pursuant to the standard

Chapter 11 plan confirmation process, 363(f) Sales occur without the benefit of the

Chapter 11 Safeguards

‐‐ the disclosure, notice, voting, and priority safeguards

. . . to

protect secured creditors. ʺ ).

10 See Jacob A. Kling, Rethinking 363 Sales

, 17 Stan. J.L. Bus. & Fin. 258, 262

(2012) ( ʺ A plan of reorganization must be submitted to a vote of creditors and equity

holders after furnishing them with a disclosure statement, a process that can take

years. ʺ (footnote omitted)).‐ 12

‐ 2005) ( ʺ In a chapter 11 case,

. . . the debtor usually remains in control of the estate

as the ʹ debtor in possession. ʹʺ ). Still in control, Old GM could seek the

bankruptcy court ʹ s permission to sell portions of its business. See 11 U.S.C. §

363(b)(1).

Second, there would be New GM, a company owned predominantly

by Treasury (over sixty percent). As proposed, New GM would acquire from

Old GM substantially all of its business

‐‐ what one might commonly think of as

the automaker ʺ GM. ʺ But New GM would not take on all of Old GM ʹ s liabilities.

The Code allows a § 363 sale ʺ free and clear of any interest in such property. ʺ

11 U.S.C. § 363(f). The proposed sale order provided that New GM would

acquire Old GM assets ʺ free and clear of all liens, claims, encumbrances, and

other interests of any kind or nature whatsoever, including rights or claims based

on any successor or transferee liability. ʺ J. App. 276. Other than a few liabilities

that New GM would assume as its own, this ʺ free and clear ʺ provision would act

as a liability shield to prevent individuals with claims against Old GM from

suing New GM. Once the sale closed, the ʺ bankruptcy ʺ would be done: New

GM could immediately begin operating the GM business, free of Old GM ʹ s debts.GM wi t

brand, a

consid e

Canadi a

and a t e

bulk of

formall y

GM w o

arrang e

b e pai d

from b a

b ankru p

B

b ankru p

Old G M Thir d

t h some a s

a nd certai n

e ration fro m

a n govern m

e n

‐ percen t

its old lia b

Four

y part of a

o uld disba n

e a plan fo r

. See 11 U

a nkruptcy

p tcy and u

Sale B

.

One

p tcy cour t

M was req u d

, Old G M

s sets, incl u

n real and

m New G M

m ent loan

t equity st a

b ilities.

t h

, Old G M

a § 363 sal e

n d: it wo u

r liquidati o

.S.C. § 11 2

to operat e

u ndergo a

Orde r

day after O

t ordered O

u ired to se n M would re m

u ding $1.1 7

personal p

M

, includi n

s used to fi

a ke in Ne w

M would l i

e

, the sale w

u ld renam e

o n that ad d

2 9(a)(11). T

e the GM b

traditiona

O ld GM fi l

O ld GM to

n d direct m

‐ 13

‐ m ain. Th e

7 5 billion i n

p roperty.

n g a pro m

fi nance th e

w GM. Ol d

i quidate. T

w ould res u

e itself ʺ M o

d ressed h o

T hus, whi l

b usiness, O

l, lengthy

l ed its mo t

provide n

m ail notic e e propose d

n cash, in t

Old GM w

m ise to rep a

e b usiness

d GM wo u

T hough li q

u lt in two

o tors Liqu

o w its re m

l e New G M

O ld GM w o

liquidatio n

t ion, on Ju

n otice of t h

e of its pr o d sale wo u

t erests in t h

w ould als o

a y Treasu r

through b

u ld retain

,

q uidation

GM com p

idation C o

m aining lia b

M would q

o uld rema

n process.

ne 2, 2009

,

h e propos e

o posed sal e u ld leave O

h e Saturn

o receive

r y and

b ankruptc y

however,

is not

p anies. Ol d

o mpany ʺ a

b ilities wo

q uickly e m

in in

, the

e d sale or d

e order to O ld

y

the

d

a nd

uld

m erge

d er.‐ 14

‐ numerous interested parties, including ʺ all parties who are known to have

asserted any lien, claim, encumbrance, or interest in or on [the to

‐ be

‐ sold assets], ʺ

and to post publication notice of the same in major publications, including the

Wall Street Journal and New York Times

. J. App. 385

‐ 86. The sale notice speci fi ed

that interested parties would have until June 19, 2009 to submit to the

bankruptcy court responses and objections to the proposed sale order.

The bankruptcy court proceeded to hear over 850 objections to the

proposed sale order over the course of three days, between June 30 and July 2,

2009. On July 5, 2009, after addressing and dismissing the objections, the

bankruptcy court approved the § 363 sale. In re General Motors Corp. ( ʺ GM ʺ ), 407

B.R. 463 (Bankr. S.D.N.Y. 2009) (Gerber, J. ). Among those objections were

arguments against the imposition of a ʺ free and clear ʺ provision to bar claims

against New GM as the successor to Old GM made by consumer organizations,

state a tt orneys general, and accident victims.

Next, the bankruptcy court issued the Sale Order, which entered

into e ff ect the fi nal sale agreement between Old GM and New GM (the ʺ Sale

Agreement ʺ ). In the Sale Agreement, New GM assumed fi fteen categories of

liabilities. As relevant here, New GM agreed to assume liability for accidents‐ 15

‐ after the closing date for the § 363 sale and to make repairs pursuant to express

warranties issued in connection with the sale of GM cars ‐‐ two liability

provisions present in the initial draft sale agreement. The Sale Agreement also

provided a new provision

‐‐ resulting from negotiations among state a tt orneys

general, the GM parties, and Treasury during the course of the sale hearing

‐‐

that New GM would assume liability for any Lemon Law claims. 11 With these

exceptions, New GM would be ʺ free and clear ʺ of any and all liabilities of Old

GM.

On July 10, 2009, the § 363 sale o ffi cially closed, and New GM began

operating the automaker business. As a ma tt er of public perception, the GM

bankruptcy was over ‐‐ the company had exited bankruptcy in forty days. 12

11 The Sale Agreement defined ʺ Lemon Laws ʺ as ʺ state statute[s] requiring a

vehicle manufacturer to provide a consumer remedy when such manufacturer is unable

to conform a vehicle to the express written warranty after a reasonable number of

attempts, as defined in the applicable statute. ʺ J. App. 1676.

12 See, e.g.

, Bill Vlasic, G.M. Vow to Slim Includes Top Ranks

, N.Y. Times (July

10, 2009) ( ʺ General Motors

. . . emerged from bankruptcy on Friday

. . . . ʺ ); John D. Stoll

& Neil King Jr., GM Set to Exit Bankruptcy, Wall Street Journal (July 10, 2009) ( ʺ The new

General Motors Co. is poised to exit Chapter 11 protection as soon as Friday morning,

and to emerge as a leaner, more focused company after only 40 days in bankruptcy

court. ʺ ).C

years, t h

remain e

any in d

Old G M

August

2011. T

secure d

govern m

assura n

would b

(and ot h

stock a n

along w Liqu i C

.

Mea n

h e bankru

e d with O l

The b

d ividual o r

M ʹ s remain

31

, 2010, a

T he propo s

d claims, o t

m ent wou l

n ce of pay m

Inste

b e admini s

h er like tr u

GU C

n d stock w

w ith other fi i dation o f

n while, O l

ptcy cour t

l d GM ( i.e.

b ankruptc y

r entity to fi

ing assets

.

a nd amen d

s ed plan p r

t her prior i

l d be paid

m ent, suc h

ad, under

s tered by t

u sts) was e

C Trust wo u

w arrants t h

fi nancial i n f Old GM

l d GM re m

t manage d

, not take n

y court se t

fi le a proo f

. Old GM

d ed it on D

r ovided h o

i ty claims,

in full; u n

h as in the f

the plan, O

t he Wilmi n

e stablishe d

u ld hold c

h at could b

n strumen t

‐ 16

‐ m ained in b

d the proce

n on b y N e

t Novemb e

f of claim

‐

fi led its fi r

D ecember 8

o w claims

and envir

n secured c l

f orm of a l

O ld GM w

n gton Tru s

d

, Old GM

c ertain Ol d

e used to p

t s. Credit o b ankruptc y

ss of satis f

e w GM).

e r 30, 200 9

‐ ‐ that is, t o

r st Chapt e

8

, 2010 an d

against O l

onmental

l aims (clai

l ien on pr o

w ould esta b

s t Compa n

M would di s

d GM asse t

p urchase s

o rs with u n y

. Over t h

f ying liabi l

9 as the ʺ ba

o assert a c

e r 11 liqui d

d again o n

ld GM w o

claims m a

i ms witho u

o perty) w o

b lish GU C

n y. Once G

s solve.

t s ‐‐ inclu d

s hares at fi

n secured c h e next se v

l ities that

a r date ʺ fo r

c laim as t o

d ation pla n

n March 2 9

o uld be pa i

a de by the

u t an

o uld not.

C Trust

, w h

G UC Trus t

d ing New G

fi xed price s

c laims aga i v eral

r

o

n on

9

,

i d:

h ich

t

G M

s

,

i nst‐ 17

‐ Old GM would receive these New GM securities and ʺ units ʺ of GUC Trust (the

value of which would be pegged to the residual value of GUC Trust) on a pro

rata basis in satisfaction of their claims. The Sale Agreement also imposed an

ʺ accordion feature ʺ to ensure that GUC Trust would remain adequately funded

in the event that the amount of unsecured claims grew too large. The accordion

feature provided that if ʺ the Bankruptcy Court makes a fi nding that the

estimated aggregate allowed general unsecured claims against [Old GM ʹ s]

estates exceed $35 [billion], then [New GM] will

. . . issue 10,000,000 additional

shares of Common Stock

. . . to [Old GM]. ʺ J. App. 1699.

On March 29, 2011, the bankruptcy court con fi rmed this liquidation

plan. GUC Trust made quarterly distributions of its assets thereafter. The initial

distribution released more than seventy

‐ fi ve percent of the New GM securities.

On February 8, 2012, the bankruptcy court ordered that no further

claims against Old GM and payable by GUC Trust would be allowed unless the

claim amended a prior claim, was fi led with GUC Trust ʹ s consent, or was

deemed timely fi led by the bankruptcy court. As of March 31, 2014, GUC Trust

had distributed roughly ninety percent of its New GM securities and nearly 32

million units of GUC Trust; the expected value of unsecured claims against Old‐ 18

‐ GM totaled roughly $32 billion, not enough to trigger the accordion feature and

involve New GM in the bankruptcy. The GM bankruptcy that began fi ve years

earlier appeared to be approaching its end.

III. Ignition Switch Defect

On February 7, 2014, New GM fi rst informed the National Highway

Tra ffi c Safety Administration ( ʺ NHTSA ʺ ) that it would be recalling, among other

vehicles, the 2005 Chevrolet Cobalt. A defect in the ignition switch could prevent

airbags from deploying.

A later congressional sta ff report, which followed four days of

testimony by New GM CEO Mary Barra before commi tt ees of the House of

Representatives and Senate, described what could happen by referring to an

actual tragic accident caused by the defect: 13 In October 2006, three teenagers

13 Staff of H. Comm. on Energy & Commerce, 113th Cong., Report on the GM

Ignition Switch Recall: Review of NHTSA 1 (Sept. 16, 2014); Examining Accountability and

Corporate Culture in Wake of the GM Recalls: Hearing Before the Subcomm. on Consumer

Prot., Prod. Safety, & Ins. of the S. Comm. on Commerce, Sci., & Transp.

, 113th Cong. (2014);

The GM Ignition Switch Recall: Investigation Update: Hearing Before the Subcomm. on

Oversight & Investigations of the H. Comm. on Energy & Commerce

, 113th Cong. (2014);

Examining the GM Recall and NHTSA ʹ s Defect Investigation Process: Hearing Before the

Subcomm. on Consumer Prot., Prod. Safety, & Ins. of the S. Comm. on Commerce, Sci., &

Transp.

, 113th Cong. (2014) [hereinafter ʺ April 2, 2014 Senate Hearing ʺ ]; The GM Ignition

Switch Recall: Why Did It Take So Long?: Hearing Before the Subcomm. on Oversight &

Investigations of the H. Comm. on Energy & Commerce

, 113th Cong. (2014).‐ 19

‐ were riding in a 2005 Chevrolet Cobalt when the driver lost control and the car

careened o ff the side of the road. The vehicle fl ew into a telephone utility box

and several trees. The airbags did not deploy, and two of the teenagers died.

From February until October 2014, New GM would issue over 60

recalls, with the number of a ff ected vehicles in the United States alone

surpassing 25 million. New GM hired a tt orney Anton Valukas of the law fi rm

Jenner & Block to investigate; he did so and prepared an extensive report (the

ʺ Valukas Report ʺ ). 14

In 1997, Old GM sold three out of ten cars on the road in North

America. See General Motors Corp., Annual Report (Form 10

‐ K) 60 (Mar. 20, 1998).

Engineers began developing a new ignition switch that could be used in multiple

vehicles across the GM brand, fi rst by se tt ing technical speci fi cations for the

switch and then by testing prototypes against those speci fi cations.

Throughout testing, which lasted until 2002, prototypes consistently

failed to meet technical speci fi cations. In particular, a low amount of torque

14 Plaintiffs and New GM each extensively cite and quote to the Valukas

Report as an account of the underlying facts regarding the ignition switch defect, and

we do as well.‐ 20

‐ could cause the ignition switch to switch to ʺ accessory ʺ or ʺ o ff

. ʺ 15 A low torque

threshold on an ignition switch would mean that li tt le force

‐‐ perhaps even the

bump of a stray knee

‐‐ would be needed to rotate the key in the switch from the

ʺ on ʺ position to the ʺ accessory ʺ or ʺ o ffʺ position.

Near the end of testing, an engineer commented on the ignition

switch ʹ s lingering problems in an email: he was ʺ tired of the switch from hell. ʺ J.

App. 9696. Three months later, in May 2002, the ignition switch was approved

for production, despite never having passed testing.

In the fall of 2002, Old GM began producing vehicles with the faulty

ignition switch. Almost immediately, customers complained of moving stalls,

sometimes at highway speeds

‐‐ instances where the engine and power steering

and braking cut o ff while the car was in motion, leaving drivers to manually

maneuver the vehicle, that is, without assistance of the car ʹ s power steering and

braking systems.

Despite customer complaints, and grumblings in the press, Old GM

classi fi ed the moving stall as a ʺ non

‐ safety issue. ʺ Id. at 9711. As Valukas put it,

ʺ on a scale of 1 (most severe) to 4 (least severe)

. . . the problem could have been

15 Torque is a measure of twisting force

‐‐ it is generated, for example, when

one twists o ff the cap of a soda bo tt le or tightens a bolt with a wrench.‐ 21

‐ designated a severity level 1 safety problem, [but] it was not. ʺ Id. Instead, the

moving stall was assigned a severity level of 3. Old GM personnel considered

the problem to be a ma tt er of customer satisfaction, not safety. These personnel

apparently also did not then fully realize that when a car shuts o ff

, so does its

airbags. But as early as August 2001, at least some Old GM engineers understood

that turning o ff the ignition switch could prevent airbags from deploying.

Complaints about the ignition switch continued. Between 2004 and

2005, NHTSA began asking questions about engine stalls. In 2005, several media

outlets also reported on the stalls. See, e.g.

, Je ff Sabatini, Making a Case for Keyless

Ignitions

, N.Y. Times (June 19, 2005). Senior a tt orneys studied the stalls, but

considered the risk to be ʺ remote[]. ʺ J. App. 9734. At the same time, Old GM ʹ s

product investigations unit recreated the ignition switch ʹ s issues by using only a

heavy keychain to generate torque. Finally, in December 2005, Old GM issued a

bulletin to dealers, but not to customers, warning them that ʺ low ignition key

cylinder torque ʺ could cause cars to turn o ff

. Id. at 9740. The bulletin did not

mention that, as a result, cars could stall on the road.

Then came reports of fatalities. In late 2005 through 2006, news of

deaths from airbag non

‐ deployments in crashes where airbags should have‐ 22

‐ deployed reached the desks of Old GM ʹ s legal team. Around April 2006, Old GM

engineers decided on a design change of the ignition switch to increase the

torque. Old GM engineers did so quietly, without changing the ignition switch ʹ s

part number, a change that would have signaled that improvements or

adjustments had been made.

In February 2007, a Wisconsin state trooper ʹ s report made its way

into the fi les of Old GM ʹ s legal department: ʺ The two front seat airbags did not

deploy. It appears that the ignition switch had somehow been turned from the

run position to accessory prior to the collision with the trees. ʺ Id. at 9764.

NHTSA similarly brought to Old GM ʹ s a tt ention reported airbag non

‐

deployments. See Transportation Research Center, Indiana University, On

‐ Site

Air Bag Non

‐ Deployment Investigation 7 (Apr. 25, 2007, rev. Mar. 31, 2008). As

more incidents with its cars piled up, Old GM fi nally drafted an updated bulletin

to dealers warning them of possible ʺ stalls, ʺ but never sent it out.

Old GM internally continued to investigate. By May 2009, sta ff had

fi gured out that non

‐ deployment of airbags in these crashes was a tt ributable to a

sudden loss of power. They believed that one of the two ʺ most likely

explanation[s] for the power mode signal change was

. . . a problem with the‐ 23

‐ Ignition Switch. ʺ J. App. 9783. By June 2009, Old GM engineers had

implemented a change to the ignition key, hoping to fi x the problem once and for

all. One engineer lamented that ʺ [t]his issue has been around since man fi rst

lumbered out of [the] sea and stood on two feet. ʺ Id. at 9781.

Later, the Valukas Report commented on the general a tt itude at Old

GM. For eleven years, ʺ GM heard over and over from various quarters

‐‐

including customers, dealers, the press, and their own employees

‐‐ that the car ʹ s

ignition switch led to moving stalls, group after group and commi tt ee after

commi tt ee within GM that reviewed the issue failed to take action or acted too

slowly. Although everyone had responsibility to fi x the problem, nobody took

responsibility. ʺ J. App. 9650.

The Valukas Report recounted aspects of GM ʹ s corporate culture.

With the ʺ GM salute, ʺ employees would a tt end action meetings and literally

cross their arms and point fi ngers at others to shirk responsibility. With the ʺ GM

nod, ʺ employees would (again) literally nod in agreement to endorse a proposed

plan, understanding that they and others had no intention of following through.

Finally, the Report described how GM employees, instead of taking action,

would claim the need to keep searching for the ʺ root cause ʺ of the moving stalls‐ 24

‐ and airbag non

‐ deployments. This ʺ search for root cause became a basis for

doing nothing to resolve the problem for years. ʺ Id. at 9906.

Indeed, New GM would not begin recalling cars for ignition switch

defects until February 2014. Soon after New GM ʹ s initial recall, individuals fi led

dozens of class actions lawsuits, claiming that the ignition switch defect caused

personal injuries and economic losses, both before and after the § 363 sale

closed. 16 New GM sought to enforce the Sale Order, invoking the liability shield

to hold New GM ʺ free and clear ʺ of various claims. This meant that when it

came to Old GM cars New GM would pay for post

‐ closing personal injuries,

make repairs, and follow Lemon Laws, but nothing else. The amount of

purportedly barred liabilities was substantial

‐‐ an estimated $7 to $10 billion in

economic losses, not to mention damages from pre

‐ closing accidents.

IV. Proceedings Below

On April 21, 2014, Steven Groman and others (the ʺ Groman

Plainti ff s ʺ ) initiated an adversary proceeding against New GM in the bankruptcy

court below, asserting economic losses arising from the ignition switch defect.

16 Those class actions are consolidated before a district judge in the United

States District Court for the Southern District of New York. See In re General Motors LLC

Ignition Switch Litigation

, No. 14

‐ MD

‐ 2543 (S.D.N.Y.) (Furman, J. ).‐ 25

‐ The same day, New GM moved to enforce the Sale Order to enjoin those claims,

as well as claims in other ignition switch actions then being pursued against New

GM.

Other plainti ff s allegedly a ff ected by the Sale Order included classes

of individuals who had su ff ered pre

‐ closing injuries arising from the ignition

switch defect ( ʺ Pre

‐ Closing Accident Plainti ff s ʺ ), economic losses arising from the

ignition switch defect in Old GM cars ( ʺ Ignition Switch Plainti ff s ʺ ), and damages

arising from defects other than the ignition switch in Old GM cars ( ʺ Non

‐ Ignition

Switch Plainti ff s ʺ ). 17 Included within the Ignition Switch Plainti ff s were

individuals who had purchased Old GM cars secondhand after the § 363 sale

closed ( ʺ Used Car Purchasers ʺ ).

On appeal, several orders are before us. First, the Non

‐ Ignition

Switch Plainti ff s fi led a motion, asserting, among other things, that the

bankruptcy court lacked jurisdiction to enforce the Sale Order. On August 6,

2014, the bankruptcy court denied that motion. In re Motors Liquidation Co.

( ʺ MLC I ʺ ), 514 B.R. 377 (Bankr. S.D.N.Y. 2014) (Gerber, J. ).

17 On August 1, 2014, New GM filed motions to enforce the Sale Order

against the Pre

‐ Closing Accident Plaintiffs and Non

‐ Ignition Switch Plaintiffs, who

entered the bankruptcy proceedings later.‐ 26

‐ Second, after receiving further brie fi ng and hearing oral argument

on the motion to enforce, on April 15, 2015 the bankruptcy court decided to

enforce the Sale Order in part and dismiss any would

‐ be claims against GUC

Trust because relief would be equitably moot. In re Motors Liquidation Co. ( ʺ MLC

II ʺ ), 529 B.R. 510 (Bankr. S.D.N.Y. 2015) (Gerber, J. ). The bankruptcy court fi rst

determined plainti ff s lacked notice consistent with procedural due process. Id. at

540

‐ 60. In particular, the bankruptcy court found that the ignition switch claims

were known to or reasonably ascertainable by Old GM prior to the sale, and thus

plainti ff s were entitled to actual notice, as opposed to the mere publication notice

that they received. Id. at 556

‐ 60. The bankruptcy court found, however, that

with one exception plainti ff s had not been ʺ prejudiced ʺ by this lack of notice

‐‐

the exception being claims stemming from New GM ʹ s own wrongful conduct in

concealing defects (so

‐ called ʺ independent claims ʺ ). Id. at 560

‐ 74. In other

words, the bankruptcy court held that New GM could not be sued

‐‐ in

bankruptcy court or elsewhere

‐‐ for ignition switch claims that otherwise could

have been brought against Old GM, unless those claims arose from New GM ʹ s

own wrongful conduct. Id. at 574

‐ 83.‐ 27

‐ In the same decision, the bankruptcy court addressed arguments by

GUC Trust that it should not be held as a source for relief either. Applying the

factors set out in In re Chateaugay Corp. ( ʺ Chateaugay III ʺ ), 10 F.3d 944 (2d Cir.

1993), the bankruptcy court concluded that relief for any late claims against GUC

Trust was equitably moot, as the plan had long been substantially consummated.

MLC II

, 529 B.R. at 583

‐ 92. Finally, the bankruptcy court outlined the standard

for any future fraud on the court claims. Id. at 592

‐ 97. With these issues

resolved, the bankruptcy court certi fi ed its decision for appeal to this Court

pursuant to 28 U.S.C. § 158. Id. at 597

‐ 98.

Third, the bankruptcy court issued another decision after the parties

disagreed on the form of judgment and other ancillary issues. On May 27, 2015,

the bankruptcy court clari fi ed that the Non

‐ Ignition Switch Plainti ff s would be

bound by the judgment against the other plainti ff s, but would have seventeen

days following entry of judgment to object. In re Motors Liquidation Co. ( ʺ MLC

III ʺ ), 531 B.R. 354 (Bankr. S.D.N.Y. 2015) (Gerber, J. ). The bankruptcy court left

open the question of whether Old GM knew of other defects.

On June 1, 2015, the bankruptcy court entered judgment against all

plainti ff s and issued an order certifying the judgment for direct appeal.‐ 28

‐ Following brie fi ng by the Non

‐ Ignition Switch Plainti ff s, on July 22, 2015, the

bankruptcy court rejected their objections to the judgment.

New GM, GUC Trust, and the four groups of plainti ff s described

above

‐‐ the Groman Plainti ff s, Ignition Switch Plainti ff s, Non

‐ Ignition Switch

Plainti ff s, and Pre

‐ Closing Accident Plainti ff s ‐‐ appealed. 18 We turn to these

appeals.

DISCUSSION

The Code permits a debtor to sell substantially all of its assets to a

successor corporation through a § 363 sale, outside of the normal reorganization

process. Here, no party seeks to undo the sale of Old GM ʹ s assets to New GM, as

executed through the Sale Order. 19 Instead, plainti ff s challenge the extent to

which the bankruptcy court may absolve New GM, as a successor corporation, of

Old GM ʹ s liabilities. See generally 3 Collier on Bankruptcy ¶ 363.02[2] (Alan N.

18 On appeal, the Non

‐ Ignition Switch Plaintiffs are joined by certain ignition

switch and pre

‐ closing accident plaintiffs and call themselves the ʺ Elliot

, Sesay

, and

Bledsoe Plaintiffs. ʺ That group also represents two other appellants captioned above:

Berenice Summerville and Doris Powledge Phillips. For ease of reference, in the context

of this appeal, we will continue to call the group the ʺ Non

‐ Ignition Switch Plaintiffs. ʺ

19 Indeed, the bankruptcy court ʹ s opinion in GM

, 407 B.R. 463, which

approved the § 363 sale, has been reviewed on appeal has three times: a stay pending

appeal was denied in In re General Motors Corp.

, No. M 47(LAK), 2009 WL 2033079

(S.D.N.Y. July 9, 2009), and the opinion was affirmed in In re Motors Liquidation Co.

, 428

B.R. 43 (S.D.N.Y. 2010), and in In re Motors Liquidation Co.

, 430 B.R. 65 (S.D.N.Y. 2010).‐ 29

‐ Resnick & Harry J. Sommer eds., 16th ed. 2013) [hereinafter ʺ Collier on

Bankruptcy ʺ ] (noting that ʺ use of a section 363 sale probably reached its zenith ʺ

with the GM bankruptcy). In particular, they dispute whether New GM may use

the Sale Order ʹ s ʺ free and clear ʺ provision to shield itself from claims primarily

arising out of the ignition switch defect and other defects.

The decisions below generate four issues on appeal: (1) the

bankruptcy court ʹ s jurisdiction to enforce the Sale Order, (2) the scope of the

power to sell assets ʺ free and clear ʺ of all interests, (3) the procedural due process

requirements with respect to notice of such a sale, and (4) the bankruptcy court ʹ s

ruling that would

‐ be claims against GUC Trust are equitably moot.

I. Jurisdiction

We fi rst address the bankruptcy court ʹ s subject ma tt er jurisdiction.

New GM argued below that successor liability claims against it should be

enjoined, and the bankruptcy court concluded as a threshold ma tt er that it had

jurisdiction to enforce the Sale Order. See MLC I

, 514 B.R. at 380

‐ 83. The Non

‐

Ignition Switch Plainti ff s challenge jurisdiction: (1) as a whole to enjoin claims

against New GM, (2) with respect to independent claims, which stem from New

GM ʹ s own wrongful conduct, and (3) to issue a successive injunction. We review‐ 30

‐ de novo rulings as to the bankruptcy court ʹ s jurisdiction. See In re Petrie Retail,

Inc.

, 304 F.3d 223, 228 (2d Cir. 2002).

First, as to jurisdiction broadly, ʺ [t]he jurisdiction of the bankruptcy

courts, like that of other federal courts, is grounded in, and limited by, statute. ʺ

Celotex Corp. v. Edwards

, 514 U.S. 300, 307 (1995); see 28 U.S.C. § 1334. Bankruptcy

courts may exercise jurisdiction, through referral from the district court, over

three broad categories of proceedings: those ʺ arising under title 11 ʺ of the Code,

those ʺ arising in

. . . a case under title 11, ʺ and those ʺ related to a case under title

11. ʺ 28 U.S.C. § 157(a). Proceedings ʺ arising under title 11, or arising in a case

under title 11, ʺ are deemed ʺ core proceedings. ʺ Stern v. Marshall

, 564 U.S. 462,

476 (2011) (quoting 28 U.S.C. § 157(b)). In those proceedings, bankruptcy courts

retain comprehensive power to resolve claims and enter orders or judgments.

See In re Millenium Seacarriers, Inc.

, 419 F.3d 83, 96 (2d Cir. 2005).

ʺ [T]he meaning of the statutory language ʹ arising in ʹ may not be

entirely clear. ʺ Baker v. Simpson

, 613 F.3d 346, 351 (2d Cir. 2010). At a minimum,

a bankruptcy court ʹ s ʺ arising in ʺ jurisdiction includes claims that ʺ are not based

on any right expressly created by [T]itle 11, but nevertheless, would have no‐ 31

‐ existence outside of the bankruptcy. ʺ Id. (quoting In re Wood

, 825 F.2d 90, 97 (5th

Cir. 1987)).

A bankruptcy court ʹ s decision to interpret and enforce a prior sale

order falls under this formulation of ʺ arising in ʺ jurisdiction. An order

consummating a debtor ʹ s sale of property would not exist but for the Code, see 11

U.S.C. § 363(b), and the Code charges the bankruptcy court with carrying out its

orders, see id. § 105(a) (providing that bankruptcy court ʺ may issue any order,

process, or judgment that is necessary or appropriate to carry out the provisions

of this title ʺ ). Hence, a bankruptcy court ʺ plainly ha[s] jurisdiction to interpret

and enforce its own prior orders. ʺ Travelers Indem. Co. v. Bailey

, 557 U.S. 137, 151

(2009); see Millenium Seacarriers

, 419 F.3d at 96 ( ʺ A bankruptcy court retains post

‐

con fi rmation jurisdiction to interpret and enforce its own orders, particularly

when disputes arise over a bankruptcy plan of reorganization. ʺ (quoting Petrie

Retail

, 304 F.3d at 230)). That is what happened here. The bankruptcy court fi rst

interpreted the ʺ free and clear ʺ provision that barred successor liability claims

‐‐

a provision that was integral to resolving Old GM ʹ s bankruptcy

‐‐ and then

determined whether to enforce that provision.‐ 32

‐ Second, the Non

‐ Ignition Switch Plainti ff s specify that the

bankruptcy court lacked jurisdiction over independent claims. Even though the

bankruptcy court ultimately did not enjoin independent claims, we address this

argument because it implicates subject ma tt er jurisdiction. In any event, the

argument is misguided. The Sale Order, on its face, does not bar independent

claims against New GM; instead, it broadly transfers assets to New GM ʺ free and

clear of liens, claims, encumbrances, and other interests

. . . , including rights or

claims

. . . based on any successor or transferee liability. ʺ J. App. 1621. By

making the argument that the bankruptcy court could not enjoin independent

claims through the Sale Order, the Non

‐ Ignition Switch Plainti ff s already assume

that the bankruptcy court indeed has jurisdiction to interpret the Sale Order to

determine whether it covers independent claims and to hear a motion to enforce

in the fi rst place.

Third, the Non

‐ Ignition Switch Plainti ff s argue that the bankruptcy

court lacked power to issue a so

‐ called successive injunction. In certain parts of

the Sale Order, the bankruptcy court had included language that successor

liability claims would be ʺ forever prohibited and enjoined. ʺ J. App. 1649. But

New GM was not seeking an injunction to stop plainti ff s from violating that‐ 33

‐ prior injunction; New GM wanted the bankruptcy court to con fi rm that the Sale

Order covered these plainti ff s. In other words, New GM ʺ did not seek a new

injunction but, rather, ʹ [sought] to enforce an injunction already in place. ʹʺ In re

Kalikow

, 602 F.3d 82, 93 (2d Cir. 2010) (quoting In re Texaco Inc.

, 182 B.R. 937, 945

(Bankr. S.D.N.Y. 1995)). In such situations, bankruptcy courts have jurisdiction

to decide a ʺ motion s[eeking] enforcement of a pre

‐ existing injunction issued as

part of the bankruptcy court ʹ s sale order. ʺ Petrie Retail

, 304 F.3d at 230.

Accordingly, we agree that the bankruptcy court had jurisdiction to

interpret and enforce the Sale Order. See MLC I

, 514 B.R. at 380

‐ 83.

II. Scope of ʺ

Free and Clear ʺ Provision

We turn to the scope of the Sale Order. The Sale Order transferred

assets from Old GM to New GM ʺ free and clear of liens, claims, encumbrances,

and other interests

. . . , including rights or claims

. . . based on any successor or

transferee liability. ʺ J. App. 1621. The bankruptcy court did not explicitly

address what claims were covered by the Sale Order. 20

20 The bankruptcy court mentioned, however, that claims based on New

GM ʹ s ʺ independently wrongful, and otherwise actionable, conduct ʺ could not be

categorized as claims that could be assumed by New GM or retained by Old GM via the

Sale Order. MLC II

, 529 B.R. at 583. But the bankruptcy court did not explicitly address

whether it still considered those claims to be covered by the Sale Order.proced u

claims,

violate d

did not

enforci n

interpr e

Duplan

(noting

A

lease, o t

U.S.C. §

any int e

§ 363(f )

proper t

it expr e We a

u ral due p

then we w

d by appl y

cover cer t

n g the Sal e

e t the Sale

Corp.

, 212

instance w

A pp l A

.

The C

t her than i

§ 363(b)(1)

e rest in su c

. ʺ Yet the

t y may be

e ss the ext e a ddress th e

rocess an a

w ould hav e

y ing the ʺ f r

t ain claim s

e Order a n

Order de n

F.3d 144,

w here enf o

l icable La w

C ode allo w

i n the ord i

. A sale p u

c h proper t

Code doe s

s old free a

e nt to whi c e scope of t

a lysis that f

e to consi d

r ee and cl e

s

, howeve r

n d due pro

n ovo to de t

151 (2d Ci

o rcement fi

w

w s the tru s

i nary cour s

u rsuant to

t y ʺ if any c

s not de fi n

a nd clear, ʺ

c h ʺ claims ʺ

‐ 34

‐ t he Sale O

f ollows. I f

d er wheth e

e ar ʺ clause

r

, then tho s

cess conc e

t ermine w h

r. 2000); s e

fi rst requir

s tee or de b

s e of busi n

§ 363(b) m

c ondition o

n e the con c

3 Collier o n

ʺ fall with i O rder b eca u

f the Sale O

e r plainti ff s

to those c

s e claims c

e rns woul d

h at claim s

e e also Petr i

r ed interp r

b tor

‐ in

‐ po s

n ess, prop e

m ay be m a

o n a list of

c ept of ʹ int e

n Bankrup t

i n the am b u se it imp l

O rder cov e

s ʹ due pro c

laims. If t h

c ould not b

d not be i m

s are barre d

i e Retail

, 3 0

r etation of

s session to

e rty of the

a de ʺ free a n

conditio n

e rest, ʹ of w

t cy ¶ 363. 0

b it of ʺ inte r l icates our

e rs certai n

c ess right s

h e Sale O r

b e enjoine d

m plicated.

d

. See In r e

0 4 F.3d at 2

prior ord e

ʺ use, sell,

estate. ʺ 1

n d clear o f

n s is met. I

w hich the

0 6[1]

, nor d

r ests. ʺ n

s are

r der

d by

We

e

2 29

e r).

or

1

f

I d.

d oes‐ 35

‐ New GM asserts that In re Chrysler LLC

, 576 F.3d 108, 126 (2d Cir.

2009), resolved that successor liability claims are interests. New GM Br. 75. 21 But

Chrysler was vacated by the Supreme Court after it became moot during the

certiorari process and remanded with instructions to dismiss the appeal as moot.

See Ind. State Police Pension Tr. v. Chrysler LLC

, 558 U.S. 1087 (2009). The Supreme

Court vacated Chrysler pursuant to United States v. Munsingwear, Inc.

, 340 U.S. 36,

41 (1950), which ʺ prevent[s] a judgment, unreviewable because of mootness,

from spawning any legal consequences. ʺ See Russman v. Bd. of Educ. of Enlarged

City Sch. Dist.

, 260 F.3d 114, 121

‐ 22 n.2 (2d Cir. 2001) ( ʺ [V]acatur eliminates an

appellate precedent that would otherwise control decision on a contested

question throughout the circuit. ʺ ). We had not addressed the issue before

Chrysler

, and now that case is no longer controlling precedent. 22 See 576 F.3d at

124 ( ʺ We have never addressed the scope of the language ʹ any interest in such

property, ʹ and the statute does not de fi ne the term. ʺ ).

21 New GM also cites a non

‐ precedential summary order on this issue. See

Douglas v. Stamco

, 363 F. App ʹ x 100 (2d Cir. 2010).

22 When the bankruptcy court determined that successor liability claims

could constitute interests, Chrysler had not yet been vacated. See GM

, 407 B.R. at 505

( ʺ Chrysler is not distinguishable in any legally cognizable respect. ʺ ).‐ 36

‐ Rather than formulating a single precise de fi nition for ʺ any interest

in such property, ʺ courts have continued to address the phrase ʺ on a case

‐ by

‐ case

basis. ʺ In re PBBPC, Inc.

, 484 B.R. 860, 867 (B.A.P. 1st Cir. 2013). At minimum,

the language in § 363(f) permits the sale of property free and clear of in rem

interests in the property, such as liens that a tt ach to the property. See In re Trans

World Airlines, Inc.

, 322 F.3d 283, 288 (3d Cir. 2003). But courts have permi tt ed a

ʺ broader de fi nition that encompasses other obligations that may fl ow from

ownership of the property. ʺ 3 Collier on Bankruptcy ¶ 363.06[1]. Sister courts

have held that § 363(f) may be used to bar a variety of successor liability claims

that relate to ownership of property: an ʺ interest ʺ might encompass Coal Act

obligations otherwise placed upon a successor purchasing coal assets, In re Leckie

Smokeless Coal Co.

, 99 F.3d 573, 581

‐ 82 (4th Cir. 1996), travel vouchers issued to

se tt le an airline ʹ s discrimination claims in a sale of airline assets, Trans World

Airlines

, 322 F.3d at 288

‐ 90, or a license for future use of intellectual property

when that property is sold, FutureSource LLC v. Reuters Ltd.

, 312 F.3d 281, 285 (7th

Cir. 2002). See generally Precision Indus., Inc. v. Qualitech Steel SBQ, LLC

, 327 F.3d

537, 545 (7th Cir. 2003) ( ʺ [T]he term ʹ interest ʹ is a broad term no doubt selected by

Congress to avoid ʹ rigid and technical de fi nitions drawn from other areas of the‐ 37

‐ law. ʹʺ (quoting Russello v. United States

, 464 U.S. 16, 21 (1983))). In these

instances, courts require ʺ a relationship between the[] right to demand

. . .

payments from the debtors and the use to which the debtors had put their

assets. ʺ Trans World Airlines

, 322 F.3d at 289.

We agree that successor liability claims can be ʺ interests ʺ when they

fl ow from a debtor ʹ s ownership of transferred assets. See 3 Collier in Bankruptcy

¶¶ 363.06[1], [7]; Trans World Airlines

, 322 F.3d at 289. But successor liability

claims must also still qualify as ʺ claims ʺ under Chapter 11. Though § 363(f) does

not expressly invoke the Chapter 11 de fi nition of ʺ claims, ʺ see 11 U.S.C. § 101(5),

it makes sense to ʺ harmonize ʺ Chapter 11 reorganizations and § 363 sales ʺ to the

extent permi tt ed by the statutory language. ʺ Chrysler

, 576 F.3d at 125; see Lionel

,

722 F.2d at 1071 ( ʺ [S]ome play for the operation of both § 363(b) and Chapter 11

must be allowed for. ʺ ). 23 Here, the bankruptcy court ʹ s power to bar ʺ claims ʺ in a

quick § 363 sale is plainly no broader than its power in a traditional Chapter 11

reorganization. Compare 11 U.S.C. § 363(f) ( ʺ free and clear of any interest in such

23 Although Chrysler was vacated on grounds of mootness, it still

ʺ constitute[s] persuasive authority. ʺ Anderson v. Rochester

‐ Genesee Reg ʹ l Transp. Auth.

,

337 F.3d 201, 208 n.5 (2d Cir. 2003). Both our Circuit and the Third Circuit have

continued to cite Chrysler favorably. See In re N. New Eng. Tel. Operations LLC

, 795 F.3d

343, 346, (2d Cir. 2015); In re Jevic Holding Corp.

, 787 F.3d 173, 188

‐ 89 (3d Cir. 2015).‐ 38

‐ property ʺ ), with § 1141(c) ( ʺ free and clear of all claims and interests ʺ ). We thus

consider what claims may be barred under Chapter 11 generally.

Section 101(5) de fi nes ʺ claim ʺ as any ʺ right to payment, whether or

not such right is reduced to judgment, liquidated, unliquidated, fi xed,

contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured,

or unsecured. ʺ 11 U.S.C. § 101(5). A claim is (1) a right to payment (2) that arose

before the fi ling of the petition. See Pension Ben. Guar. Corp. v. Oneida Ltd.

, 562

F.3d 154, 157 (2d Cir. 2009). If the right to payment is contingent on future

events, the claim must instead ʺ result from pre

‐ petition conduct fairly giving rise

to that contingent claim. ʺ In re Chateaugay Corp. ( ʺ Chateaugay I ʺ ), 944 F.2d 997,

1005 (2d Cir. 1991) (internal quotation marks omi tt ed).

This Court has not decided, however, ʺ the di ffi cult case of pre

‐

petition conduct that has not yet resulted in detectable injury, much less the

extreme case of pre

‐ petition conduct that has not yet resulted in any tortious

consequence to a victim. ʺ Id. at 1004. Chateaugay I considered a hypothetical

bankrupt bridge building company, which could predict that out of the 10,000

bridges it built, one would one day fail, causing deaths and other injuries. Id. at‐ 39

‐ 1003. If that bridge did fail, the individuals might have tort claims resulting from

pre

‐ petition conduct, namely the building of the bridge.

Recognizing these claims would engender ʺ enormous practical and

perhaps constitutional problems. ʺ Id

. Thus, ʺʹ claim ʹ cannot be extended to

include

. . . claimants whom the record indicates were completely unknown and

unidenti fi ed at the time [the debtor] fi led its petition and whose rights depended

entirely on the fortuity of future occurrences. ʺ Lemelle v. Universal Mfg. Corp.

, 18

F.3d 1268, 1277 (5th Cir. 1994); see In re Chateaugay Corp. ( ʺ Chateaugay IV ʺ ), 53 F.3d

478, 497 (2d Cir. 1995) (stating that, in ʺ common sense, ʺ ʺ claim ʺ is ʺ not in fi nite ʺ ).

To avoid any practical and constitutional problems, courts require some

minimum ʺ contact, ʺ Chateaugay I

, 944 F.2d at 1003

‐ 04, or ʺ relationship, ʺ

Chateaugay IV

, 53 F.3d at 497, that makes identi fi able the individual with whom

the claim does or would rest.

To summarize, a bankruptcy court may approve a § 363 sale ʺ free

and clear ʺ of successor liability claims if those claims fl ow from the debtor ʹ s

ownership of the sold assets. Such a claim must arise from a (1) right to payment

(2) that arose before the fi ling of the petition or resulted from pre

‐ petition

conduct fairly giving rise to the claim. Further, there must be some contact orrelatio n

identi fi a

B

econo m

indepe n

Purcha s

langua g

clear ʺ p

b y the S

the Sal e

autom a

those p l

fi ling o f

closing

2 4

after th e

treat cla n ship b et w

a ble.

A pp l B

.

We a

m ic loss cla i

n dent clai m

s ers ʹ clai m

g e sugges t

p rovision.

S ale Orde r

First

,

e Order. T

a ker ʹ s b usi n

l ainti ff s ʹ c l

f the petiti

involving

4 To t h

e petition bu

ims in this w een the d e

l ication

a pply thes e

i ms arisin g

m s relatin g

m s. The ba n

t ed that al l

We hold, h

r but that t h

, the pre

‐ c l

T hose clai m

n ess ‐‐ Ol d

l aims are p

on; indee d

Old GM c

h e extent th a

u t before t h

timeframe e btor and t

e principl e

g from th e

g only to N

n kruptcy c

of these c

h owever, t

h e la tt er t w

l osing acc i

m s directly

d GM buil t

p roperly t h

d

, the clai m

c ars. 24

a t Pre

‐ Clos i

h e § 363 sal e

differently

‐ 40

‐ t he claima n

e s to: (1) p r

e ignition s

N ew GM ʹ s

c ourt assu m

laims fell w

t hat the fi r

w o sets of

i dent clai m

relate to t

t cars with

h ought of a

m s arise fr o

i ng Accide n

e closing, n

. In any e v n t such th a

re

‐ closing

s witch def e

conduct, a

m ed that t h

w ithin th e

r st two set s

claims ar e

m s clearly f

t he owner s

h ignition s

a s tort cla i

o m accide n

n t Plaintiff s

n o party on

v ent, those c a t the clai m

accident c

e ct or oth e

a nd (4) Us e

he Sale O r

e scope of t

s of claim s

e not.

f all withi n

s hip of th e

s witch def e

i ms that a r

n ts that oc

s assert cla i

appeal su g

c laims are c m ant is

c laims, (2)

e r defects,

e d Car

r der ʹ s bro a

t he ʺ free a n

s are cover

n the scope

e GM

e cts. And

r ose befor e

curred pr e

i ms arising

g gests that w

c ontingent (3)

a d

n d

ed

of

e the

e

‐

w e

on‐ 41

‐ Second, the economic loss claims arising from the ignition switch

defect or other defects present a closer call. Like the claims of Pre

‐ Closing

Accident Plainti ff s, these claims fl ow from the operation of Old GM ʹ s automaker

business. These individuals also, by virtue of owning Old GM cars, had come

into contact with the debtor prior to the bankruptcy petition. Yet the ignition

switch defect (and other defects) were only revealed some fi ve years later.

GUC Trust thus asserts that there was no right to payment prior to

the petition. We disagree. The economic losses claimed by these individuals

were ʺ contingent ʺ claims. 11 U.S.C. § 101(5). That is, the ignition switch defect

was there, but was not yet so patent that an individual could, as a practical

ma tt er, bring a case in court. The contingency standing in the way was Old GM

telling plainti ff s that the ignition switch defect existed. In other words, Old GM ʹ s

creation of the ignition switch defect fairly gave rise to these claims, even if the

claimants did not yet know. See Chateaugay I

, 944 F.2d at 1005.

Third, however, the independent claims do not meet the Code ʹ s

limitation on claims. By de fi nition, independent claims are claims based on New

GM ʹ s own post

‐ closing wrongful conduct. Though the parties do not lay out the

the accident occurring and ʺ result from pre

‐ petition conduct fairly giving rise to [a]

contingent claim. ʺ Chateaugay I

, 944 F.2d at 1005 (internal quotation marks omitted).‐ 42

‐ whole universe of possible independent claims, we can imagine that some claims

involve misrepresentations by New GM as to the safety of Old GM cars. These

sorts of claims are based on New GM ʹ s post

‐ petition conduct, and are not claims

that are based on a right to payment that arose before the fi ling of petition or that

are based on pre

‐ petition conduct. Thus, these claims are outside the scope of

the Sale Order ʹ s ʺ free and clear ʺ provision.

Fourth, the Sale Order likewise does not cover the Used Car

Purchasers ʹ claims. The Used Car Purchasers were individuals who purchased

Old GM cars after the closing, without knowledge of the defect or possible claim

against New GM. They had no relation with Old GM prior to bankruptcy.

Indeed, as of the bankruptcy petition there were an unknown number of

unknown individuals who would one day purchase Old GM vehicles

secondhand. There could have been no contact or relationship

‐‐ actual or

presumed

‐‐ between Old GM and these speci fi c plainti ff s, who otherwise had no

awareness of the ignition switch defect or putative claims against New GM. We

cannot, consistent with bankruptcy law, read the Sale Order to cover their claims.

See Chateaugay I

, 944 F.2d at 1003

‐ 04 (calling such a reading ʺ absurd ʺ ).‐ 43

‐ New GM argues that ʺ modifying ʺ the Sale Order would ʺ knock the

props out of the foundation on which the [Sale Order] was based ʺ or otherwise

be unlawful. New GM Br. 77 (internal quotation marks omi tt ed). But we do not

modify the Sale Order. Instead, we merely interpret the Sale Order in accordance

with bankruptcy law. Indeed, by fi ling a motion to enforce, New GM in e ff ect

asked for the courts to interpret the Sale Order. See Petrie Retail

, 304 F.3d at 229.

In sum, the ʺ free and clear ʺ provision covers pre

‐ closing accident

claims and economic loss claims based on the ignition switch and other defects.

It does not cover independent claims or Used Car Purchasers ʹ claims.

Accordingly, we a ffi rm the bankruptcy court ʹ s decision not to enjoin

independent claims, see MLC II

, 529 B.R. at 568

‐ 70, and reverse its decision to

enjoin the Used Car Purchasers ʹ claims, see id. at 570

‐ 72.

III. Procedural Due Process

The Sale Order covers the pre

‐ closing accident claims and economic

loss claims based on the ignition switch and other defects. The Sale Order, if

enforced, would thus bar those claims. Plainti ff s contend on appeal that

enforcing the Sale Order would violate procedural due process. We address two

issues: (1) what notice plainti ff s were entitled to as a ma tt er of procedural dueproces s

b ankru p

not ʺ pr e

includi n

246 (2d

b ankru p

viewed

convin c

eviden c

v. Besse m

A

provid e

555

‐ 60.

reason a

were e n s

, and (2) i f

p tcy cour t

e judiced. ʺ

We r e

n g interpr e

Cir. 2013)

p tcy cour t

in its enti r

c ed that h a

c e di ff ere n

m er City

, 4

N oti c A

.

The b

e d notice a

The ban k

a ble dilige n

n titled to a f they wer e

t erred in d

e view fac t

e tations o f

. Our cle a

t ʹ s ʺʹ accou n

r ety, the c o

a d it been s

tly. ʹʺ A m a

4 70 U.S. 56 4

c e

b ankruptc y

a s require d

k ruptcy co u

n ce shoul d

ctual or d i e provide d

d enying re l

t ual fi ndin g

f the Cons t

a r error st a

n t of the e v

o urt of ap p

s i tt ing as t h

a deo v. Zan t

4

, 573

‐ 74 (

y court fi r s

d by proce d

u rt held t h

d have kn o

i rect mail n

‐ 44

‐ d inadequ a

l ief on the

g s for clea

t itution, d e

a ndard is a

v idence is p

p eals may

h e trier of

t

, 486 U.S.

1985)).

s t conclu d

d ural due

h at becaus e

o wn of the

n otice

, bu t a te notice

,

b asis tha t

a r error an d

e novo

. In r

a de f erenti a

p lausible i

not rever s

fact, it w o

214, 223 ( 1

d ed that pl a

process. S

e Old GM

ignition s w

t received o whether t

t most plai

d legal co n

r e Barnet

, 7

a l one, an d

i n light of t

s e it even t

o uld have w

1 988) (qu o

a inti ff s w e

S ee MLC I I

knew or w

w itch clai m

o nly publ i he

nti ff s wer e

n clusions,

7 37 F.3d 2 3

d if the

t he recor d

t hough

w eighed t h

o ting A nde r

e re not

I

, 529 B.R. a

w ith

m s, plaint i

i cation no t e

3 8,

d

h e

r son

a t

i ff s

t ice.‐ 45

‐ See id. at 557

‐ 60. The parties dispute the extent of Old GM ʹ s knowledge of the

ignition switch problem.

1. Applicable Law

The Due Process Clause provides, ʺ No person shall

. . . be deprived

of life, liberty, or property, without due process of law. ʺ U.S. Const. amend. V.

Certain procedural protections a tt ach when ʺ deprivations trigger due process. ʺ

Connecticut v. Doehr

, 501 U.S. 1, 12 (1991). Generally, legal claims are su ffi cient to

constitute property such that a deprivation would trigger due process scrutiny.

See N.Y. State Nat ʹ l Org. for Women v. Pataki

, 261 F.3d 156, 169

‐ 70 (2d Cir. 2001).

Once due process is triggered, the question becomes what process is

due. Morrissey v. Brewer

, 408 U.S. 471, 481 (1972). ʺ An elementary and

fundamental requirement of due process in any proceeding which is to be

accorded fi nality is notice reasonably calculated, under all the circumstances, to

apprise interested parties of the pendency of the action and a ff ord them an

opportunity to present their objections. ʺ Mullane v. Cent. Hanover Bank & Tr. Co.

,

339 U.S. 306, 314 (1950). Courts ask ʺ whether the state acted reasonably in

selecting means likely to inform persons a ff ected, not whether each property

owner actually received notice. ʺ Weigner v. City of New York

, 852 F.2d 646, 649 (2d‐ 46

‐ Cir. 1988). Notice is adequate if ʺ [t]he means employed [are] such as one

desirous of actually informing the absentee might reasonably adopt to

accomplish it. ʺ Mullane

, 339 U.S. at 315.

This requirement also applies to bankruptcy proceedings. See

Martin v. Wilks

, 490 U.S. 755, 762 n.2 (1989), superseded by statute on other grounds

,

Civil Rights Act of 1991, Pub.L. No. 102–166, 105 Stat. 1071. Indeed, a

fundamental purpose of bankruptcy is to discharge, restructure, or impair claims

against the debtor in an orderly fashion. See Lines v. Frederick

, 400 U.S. 18, 19

(1970). ʺ The general rule that emerges

. . . is that notice by publication is not

enough with respect to a person whose name and address are known or very

easily ascertainable and whose legally protected interests are directly a ff ected by

the proceedings in question. ʺ Schroeder v. City of New York

, 371 U.S. 208, 212

‐ 13

(1962); accord Mennonite Bd. of Missions v. Adams

, 462 U.S. 791, 800 (1983). In other

words, adequacy of notice ʺ turns on what the debtor

. . . knew about the claim or,

with reasonable diligence, should have known. ʺ DPWN Holdings (USA), Inc. v.

United Air Lines, Inc.

, 747 F.3d 145, 150 (2d Cir. 2014) (citing Chemetron Corp. v.

Jones

, 72 F.3d 341, 345

‐ 46 (3d Cir. 1995)). If the debtor knew or reasonably should

have known about the claims, then due process entitles potential claimants to‐ 47

‐ actual notice of the bankruptcy proceedings, but if the claims were unknown,

publication notice su ffi ces. Chemetron

, 72 F.3d at 345

‐ 46.

If a debtor reveals in bankruptcy the claims against it and provides

potential claimants notice consistent with due process of law, then the Code

a ff ords vast protections. Both § 1141(c) and § 363(f) permit ʺ free and clear ʺ

provisions that act as liability shield. These provisions provide enormous

incentives for a struggling company to be forthright. But if a debtor does not

reveal claims that it is aware of, then bankruptcy law cannot protect it. Courts

must ʺ limit[] the opportunity for a completely unencumbered new beginning to

the ʹ honest but unfortunate debtor. ʹʺ Grogan v. Garner

, 498 U.S. 279, 286

‐ 87 (1991)

(quoting Local Loan Co. v. Hunt

, 292 U.S. 234, 244 (1934)).

2. Application

The parties do not dispute that plainti ff s received only publication

notice. The question is whether they were entitled to more. The bankruptcy

court found that because Old GM knew or reasonably should have known about

the ignition switch defect prior to bankruptcy, it should have provided direct

mail notice to vehicle owners. We fi nd no clear error in this factual fi nding.‐ 48

‐ As background, federal law requires that automakers keep records

of the fi rst owners of their vehicles. 49 U.S.C. § 30117(b)(1) ( ʺ A manufacturer of a

motor vehicle

. . . shall cause to be maintained a record of the name and address

of the fi rst purchaser of each vehicle

. . . . ʺ ). This provision facilitates recalls and

other consequences of the consumer

‐ automaker relationship. Thus, to the extent

that Old GM knew of defects in its cars, it would also necessarily know the

identity of a signi fi cant number of a ff ected owners.

The facts paint a picture that Old GM did nothing, even as it knew

that the ignition switch defect impacted consumers. From its development in

1997, the ignition switch never passed Old GM ʹ s own technical speci fi cations.

Old GM knew that the switch was defective, but it approved the switch for

millions of cars anyway.

Once the ignition switch was installed, Old GM almost immediately

received various complaints. News outlets reported about the faulty ignition

switch. NHTSA approached Old GM about moving stalls and airbag non

‐

deployments. A police report, which Old GM ʹ s legal team possessed, linked

these breakdowns to a faulty ignition switch. Old GM even considered warning

dealers (but not consumers) about moving stalls. By May 2009, at the latest, Old‐ 49

‐ GM personnel had essentially concluded that the ignition switch, moving stalls,

and airbag non

‐ deployments were related. Considering the airbag issues, they

believed that one of the two ʺ most likely explanation[s] for the power mode

signal change was

. . . a problem with the Ignition Switch. ʺ J. App. 9783.

A bankruptcy court could reasonably read from this record that Old

GM knew about the ignition switch defect. Old GM knew that the defect caused

stalls and had linked the airbag non

‐ deployments to the defect by May 2009.

Even assuming the bankruptcy court erred in concluding that Old

GM knew

, Old GM

‐‐ if reasonably diligent

‐‐ surely should have known about the

defect. Old GM engineers should have followed up when they learned their

ignition switch did not initially pass certain technical speci fi cations. Old GM

lawyers should have followed up when they heard disturbing reports about

airbag non

‐ deployments or moving stalls. Old GM product safety teams should

have followed up when they were able to recreate the ignition switch defect with

ease after being approached by NHTSA. If any of these leads had been diligently

pursued in the seven years between 2002 and 2009, Old GM likely would have

learned that the ignition switch defect posed a hazard for vehicle owners.‐ 50

‐ Such ʺ reckless disregard of the facts [is] su ffi cient to satisfy the

requirement of knowledge. ʺ McGinty v. State

, 193 F.3d 64, 70 (2d Cir. 1999). In

the face of all the reports and complaints of faulty ignition switches, moving

stalls, airbag non

‐ deployments, and, indeed, serious accidents, and in light of the

conclusions of its own personnel, Old GM had an obligation to take steps to

ʺ acquire full or exact knowledge of the nature and extent ʺ of the defect. United

States v. Macias

, 786 F.3d 1060, 1062 (7th Cir. 2015). Under these circumstances,

Old GM had a duty to identify the cause of the problem and fi x it. Instead, the

Valukas Report recounts a corporate culture that sought to pin responsibility on

others and a Sisyphean search for the ʺ root cause. ʺ

Further, even if the precise linkage between the ignition switch

defect and moving stalls and airbag non

‐ deployments was unclear, Old GM had

enough knowledge. At minimum, Old GM knew about moving stalls and airbag

non

‐ deployments in certain models, and should have revealed those facts in

bankruptcy. Those defects would still be the basis of ʺ claims, ʺ even if the root

cause (the ignition switch) was not clear.

New GM argues in response that because plainti ff s ʹ claims were

ʺ contingent, ʺ those individuals were ʺ unknown ʺ creditors as a ma tt er of law. But‐ 51

‐ contingent claims are still claims, 11 U.S.C. § 101(5), and claimants are entitled to

adequate notice if the debtor knows of the claims. Moreover, as discussed above,

the only contingency was Old GM telling owners about the ignition switch defect

‐‐ a contingency wholly in Old GM ʹ s control and without bearing as to Old GM ʹ s

own knowledge. New GM essentially asks that we reward debtors who conceal

claims against potential creditors. We decline to do so. See Grogan

, 498 U.S. at

286

‐ 87.

Finally, we address a theme in this case that the GM bankruptcy was

extraordinary because a quick § 363 sale was required to preserve the value of

the company and to save it from liquidation. See New GM Br. 34 ( ʺ Time was of

the essence, and costs were a signi fi cant factor. ʺ ). Forty days was indeed quick

for bankruptcy and previously unthinkable for one of this scale. While the desire

to move through bankruptcy as expeditiously as possible was laudable, Old

GM ʹ s precarious situation and the need for speed did not obviate basic

constitutional principles. Due process applies even in a company ʹ s moment of

crisis. Cf. Home Building & Loan Ass ʹ n v. Blaisdell

, 290 U.S. 398, 425 (1934) ( ʺ The

Constitution was adopted in a period of grave emergency. ʺ ).knew o

MLC II

,

switch d

require d

B

b ankru p

b ankru p

due pr o

claims

‐

even if p

wheth e

Due Pr o

proper t

in hind s We fi

r should h

, 529 B.R. a

d efect we r

d by proc e

ʺ Pre j B

.

Afte r

p tcy cour t

p tcy cour t

o cess and t

‐ ‐ b ecause

p lainti ff s w

r ʺ prejudi c

1.

The b

o cess Cla u

t y without

s ight the o fi nd no cle a

h ave know

a t 556

‐ 60. I

r e entitled

e dural du e

j udice ʺ

r concludi n

t nonethel e

t held that

t hat plaint i

the bankr u

w ere prov i

c e ʺ is requ

A pplica b

b ankruptc y

u se and th a

a meanin g

o utcome w a r error in

n with re a

I ndividua l

to notice b

e process.

n g that Ol d

e ss enforc e

ʺ prejudic e

i ff s were n

u ptcy cou r

i ded adeq u

ired and, i

b le Law

y court he

a t even if i n

g ful oppo r

w ould hav e

‐ 52

‐ the bankr u

a sonable d i

l s with cl a

b y direct m

d GM did

e d the Sal e

e ʺ is an ʺ es s

n ot prejud i

r t would h

u ate notic e

i f it is, wh e

ld that ʺ p r

n adequat e

r tunity to b

e been the s u ptcy cou r

i ligence a b

a ims arisin

m ail or so m

not provi d

e Order. S e

sential ele m

i ced

‐‐ exc e

h ave appr o

e

. Id. at 5 6

e ther ther e

r ejudice ʺ i s

e notice de

b e heard, t

s ame wit h r t ʹ s fi ndin g

b out the d e

g out of t h

m e equival e

d e adequa

e e id. at 56 5

ment ʺ of p

e pt as to i n

o ved the S a

6 5. The pa

e is prejud i

s a require

e prived an

t here is n o

h adequat e g that Old

e fect. See

h e ignition

e nt, as

te notice, t

5

‐ 73. The

p rocedura l

n depende n

a le Order

rties disp u

i ce here.

ment of t h

individu a

o prejudic e

e notice. I d GM

t he

l

n t

u te

h e

a l of

e if

d

.‐ 53

‐ Some courts have indeed held that ʺ a party who claims to be aggrieved by a

violation of procedural due process must show prejudice. ʺ Perry v. Blum

, 629

F.3d 1, 17 (1st Cir. 2010). Other courts have held otherwise that ʺ a due process

violation cannot constitute harmless error. ʺ In re New Concept Hous., Inc.

, 951

F.2d 932, 937 n.7 (8th Cir. 1991); see Fuentes v. Shevin

, 407 U.S. 67, 87 (1972) ( ʺ The

right to be heard does not depend upon an advance showing that one will surely

prevail at the hearing. ʺ ). 25 Courts have concluded that a ʺ free and clear ʺ clause

was unenforceable because of lack of notice and a hearing in accordance with

25 See, e.g.

, McNabb v. Comm ʹ r Ala. Dep ʹ t of Corr.

, 727 F.3d 1334, 1347 (11th

Cir. 2013) ( ʺ Our cases have long held that certain procedural due process violations,

such as the flat

‐ out denial of the right to be heard on a material issue, can never be

harmless. ʺ ); Kim v. Hurston

, 182 F.3d 113, 119 (2d Cir. 1999) (commenting that even

though the ʺ minimal hearing that procedural due process requires would have done

[the plaintiff] little good since she could not have realistically contested the changed

reason, ʺ that ʺ [n]evertheless, the procedural due process requirement[s]

. . . must be

observed ʺ ); Lane Hollow Coal Co. v. Dir., Office of Workers ʹ Compensation Programs

, 137

F.3d 799, 806 (4th Cir. 1998) ( ʺ [A] just result is not enough. ʺ ); In re Boomgarden

, 780 F.2d

657, 661 (7th Cir. 1985) ( ʺ In bankruptcy proceedings, both debtors and creditors have a

constitutional right to be heard on their claims, and the denial of that right to them is

the denial of due process which is never harmless error. ʺ (internal quotation marks

omitted)); In re George W. Myers Co.

, 412 F.2d 785, 786 (3d Cir. 1969) (holding that

ʺ alleged bankrupt was denied procedural due process by the

. . . refusal of its offer to

present evidence at the close of the evidence ʺ and that such denial could not be

ʺ harmless error ʺ ); Republic Nat ʹ l Bank of Dallas v. Crippen

, 224 F.2d 565, 566 (5th Cir.

1955) ( ʺ The right to be heard on their claims was a constitutional right and the denial of

that right to them was the denial of due process which is never harmless error. ʺ ); Phila.

Co. v. SEC

, 175 F.2d 808, 820 (D.C. Cir. 1948) ( ʺ Denial of a procedural right guaranteed

by the Constitution

‐‐ in this instance denial of the type of hearing guaranteed

. . . by the

due process clause

‐‐ is never ʹ harmless error. ʹʺ ), vacated as moot

, 337 U.S. 901 (1949).‐ 54

‐ procedural due process, without exploring prejudice. See In re Savage Indus.

, 43

F.3d 714, 721

‐ 22 (1st Cir. 1994); cf. Nolasco v. Holder

, 637 F.3d 159, 164 (2d Cir.

2011) ( ʺ There may well be instances in which

. . . failure to comply with [a

procedural rule] results in a lack of notice or the denial of a meaningful

opportunity to be heard such that

. . . due process rights are violated. ʺ ).

The § 363 sale context presents unique challenges for due process

analysis. As seen here

‐‐ with over 850 objections fi led

‐‐ objections may often be

duplicative. See GM

, 407 B.R. at 500 ( fi nding successor liability ʺ most debatable ʺ

of issues); cf. Mullane, 339 U.S. at 319 ( ʺ [N]otice reasonably certain to reach most

of those interested in objecting is likely to safeguard the interests of all, since any

objections sustained would inure to the bene fi t of all. ʺ ). Many of the objections,

especially those made against a ʺ free and clear ʺ provision, are not likely to be

grounded in any legal right to change the terms of the sale, but rather will be

grounded in a particular factual context. Section 363 sales are, in essence, private

transactions. On one side, the debtor

‐ in

‐ possession ʺ has ample administrative

fl exibility in the conduct of sales, ʺ 3 Collier on Bankruptcy ¶ 363.02[2], and on the

other side, the purchaser need not take on liabilities unless it wishes to do so, see

id. ¶ 363.06[7]. A bankruptcy court reviews a proposed § 363 sale ʹ s terms only for‐ 55

‐ some minimal ʺ good business reason. ʺ Lionel

, 722 F.2d at 1071; see also 3 Collier on

Bankruptcy ¶ 363.02[1][e] ( ʺ One of the major policy decisions in drafting the Code

was to separate the court from the day

‐ to

‐ day administrative activities in

bankruptcy cases

. . . . ʺ ). Many sale objections will thus sound in business

reasons to change the proposed sale order, and not by reference to some legal

requirement that the order must be changed. 26

Assuming plainti ff s must demonstrate prejudice, the relevant

inquiry is whether courts can be con fi dent in the reliability of prior proceedings

when there has been a procedural defect. See Lane Hollow Coal Co. v. Dir., O ffi ce of

Workers ʹ Compensation Programs

, 137 F.3d 799, 808 (4th Cir. 1998) (considering

ʺ fairness of the trial and its reliability as an accurate indicator of guilt ʺ ); see also

Rose v. Clark

, 478 U.S. 570, 577

‐ 78 (1986) (asking whether adjudication in the

criminal context without procedural protections can ʺ reliably serve its function as

26 See A. Joseph Warburton, Understanding the Bankruptcies of Chrysler and

General Motors: A Primer

, 60 Syracuse L. Rev. 531, 531 (2010) ( ʺ Certain creditors, who

saw their investments in the companies sharply reduced, vigorously objected to the role

of the government in the bankruptcy process. Some charged that in protecting the

interests of taxpayers, the Treasury Department negotiated aggressively with creditors

but, in protecting the interests of organized labor, it offered the United Autoworkers

union special treatment. ʺ ); see also GM

, 407 B.R. at 496 ( ʺ The objectors ʹ real problem is

with the decisions of the Purchaser, not with the Debtor, nor with any violation of the

Code or caselaw. ʺ ).‐ 56

‐ a vehicle for determination of ʺ a case). In considering reliability, ʺ [t]he entire

record must be considered and the probable e ff ect of the error determined in the

light of all the evidence. ʺ 11 Charles Alan Wright, Arthur R. Miller, et al., Federal

Practice & Procedure § 2883 (3d ed. 2016) [hereinafter ʺ Wright & Miller ʺ ]; see

Matusick v. Erie Cty. Water Auth.

, 757 F.3d 31, 50

‐ 51 (2d Cir. 2014). ʺ [I]f [the court]

cannot say, with fair assurance, after pondering all that happened without

stripping the erroneous action from the whole, that the judgment was not

substantially swayed by the error, ʺ then it must fi nd a procedural due process

violation. Ko tt eakos v. United States

, 328 U.S. 750, 765 (1946).

2. Application

We need not decide whether prejudice is an element when there is

inadequate notice of a proposed § 363 sale, for even assuming plainti ff s must

demonstrate prejudice, they have done so here. After examining the record as a

whole, we cannot say with fair assurance that the outcome of the § 363 sale

proceedings would have been the same had Old GM disclosed the ignition

switch defect and these plainti ff s voiced their objections to the ʺ free and clear ʺ

provision. Because we cannot say with any con fi dence that no accommodation

would have been made for them in the Sale Order, we reverse.‐ 57

‐ At the outset, it is di ffi cult to evaluate in hindsight what the

objections would have been had plainti ff s participated in the § 363 sale. Perhaps

they would have tried to identify some legal defect in the Sale Order, asked that

economic losses or pre

‐ closing accidents arising from the ignition switch defect

be exempted from the ʺ free and clear ʺ provision, or requested greater priority in

any GUC Trust distribution. But this uncertainty about the content of plainti ff s ʹ

objections is the natural result of the lack of any meaningful opportunity to be

heard in the § 363 sale proceedings. Cf. Lane Hollow

, 137 F.3d at 808 ( ʺ If there has

been no fair day in court, the reliability of the result is irrelevant, because a fair

day in court is how we assure the reliability of results. ʺ ). This lack of certainty in

turn in fl uences our degree of con fi dence in the outcome.

The bankruptcy court instead concluded that it would have reached

the same decision

‐‐ that it would have entered the Sale Order on the same terms

‐‐ even if plainti ff s had been given an opportunity to be heard. The bankruptcy

court concluded that these plainti ff s ʺ o ff er no legally based arguments as to why

they would have, or even could have, succeeded on the successor liability legal

argument when all of the other objectors failed. ʺ MLC II

, 529 B.R. at 567; see GM

,‐ 58

‐ 407 B.R. at 499

‐ 506 (considering objections). The bankruptcy court found that

other arguments were too ʺ speculative. ʺ MLC II

, 529 B.R

. at 567

‐ 68, 573.

We disagree. The bankruptcy court failed to recognize that the

terms of this § 363 sale were not within its exclusive control. Instead, the GM

sale was a negotiated deal with input from multiple parties

‐‐ Old GM, New GM,

Treasury, and other stakeholders. The Sale Order and Sale Agreement re fl ect this

polycentric approach: it includes some fi fteen sets of liabilities that New GM

voluntarily, and without legal compulsion, took on as its own.

The process of how New GM voluntarily assumed liabilities is most

apparent with its assumption of Lemon Law claims. 27 Following the proposed

sale order, numerous state a tt orneys general objected that the proposed sale

would bar claims based on state Lemon Laws. But their objections were not

particularly legal in character

‐‐ that is, no state a tt orney general focused on how

a liability shield that barred Lemon Law claims would be illegal. Citing no law,

the objection was that New GM should assume these liabilities ʺ [i]n light of the

relationship between [Old GM] and [New GM]

. . . , as well as the statements by

the United States government promising that all warranty obligations would be

27 New GM informs the Court that a similar process occurred with respect to

New GM accepting responsibility for post

‐ closing accidents.‐ 59

‐ honored. ʺ Bankr. ECF No. 2043, at 39; accord Bankr. ECF No. 2076, at 10. In other

words, because President Obama had promised to back warranties, the state

a tt orneys general argued that that Lemon Laws should be honored as well.

Following these objections, ʺ Lemon Law claims were added as an

assumed liability during the course of the 363 Sale hearing after negotiation with

the [state a tt orneys general]. ʺ MLC II

, 529 B.R. at 534 n.36. The state a tt orneys

general had made a practical, business

‐ minded argument, which brought Old

GM, New GM, and Treasury to the negotiating table. At the sale hearing, counsel

to the National Association of A tt orneys General commented that the state

a tt orneys general ʺ have worked very hard since the beginning of the case with

debtors ʹ counsel initially, with Treasury counsel, almost everybody in this room

at some point or another. ʺ J. App. 2084. The result of these negotiations was an

understanding that ʺ lemon laws were covered under the notion of warranty

claims ʺ and inclusion in the Sale Agreement of language re fl ecting this

agreement. Id. at 2086.

Opportunities to negotiate are di ffi cult if not impossible to recreate.

We do not know what would have happened in 2009 if counsel representing

plainti ff s with billions of dollars in claims had sat across the table from Old GM,‐ 60

‐ New GM, and Treasury. Our lack of con fi dence, however, is not imputed on

plainti ff s denied notice but instead bolsters a conclusion that enforcing the Sale

Order would violate procedural due process. Indeed, for the following reasons,

while we cannot say with any certainty that the outcome would have been

di ff erent, we can say that the business circumstances at the time were such that

plainti ff s could have had some negotiating leverage, and the opportunity to

participate in the proceedings would have been meaningful.

First, it is well documented that one of the primary impetuses

behind a quick § 363 sale was to ʺ restore consumer con fi dence. ʺ GM

, 407 B.R. at

480. ʺ T he problem is that if the 363 Transaction got o ff track

. . . , the U.S.

Government would see that there was no means of early exit for GM;

. . .

customer con fi dence would plummet; and

. . . the U.S. Treasury would have to

keep funding GM. ʺ Id. at 492. If consumer con fi dence dissipated, neither

Treasury loans nor a § 363 sale could save GM: nobody would buy a GM car.

These concerns were re fl ected in President Obama ʹ s $600 million

guarantee of GM and Chrysler warranties. The business of cars is unique,

dependent largely on the goodwill of consumers. Cars are owned for years and

form the cornerstones of quintessentially American activities: dropping o ff and‐ 61

‐ picking up children from school, drive

‐ ins and drive

‐ thrus, family vacations and

road trips. ʺ [T]he road and the automobile ʺ are, in American history,

ʺ sanctuaries, hidden from the intrusive gaze of the state, [where] individuals live

freely. ʺ Sarah Seo, The New Public

, 125 Yale L.J. 1616, 1620 (2016). The safety and

reliability of a car are central to these activities. As the head of President

Obama ʹ s auto task force put it, in relation to Chrysler ʹ s bankruptcy: ʺ what

consumer would buy another Chrysler if the company didn ʹ t honor its

warranties? ʺ Ra tt ner, supra note 8, at 181. In other words, plainti ff s could have

tried to convince the bankruptcy parties that it made good business sense to

spend substantial sums to preserve customer goodwill in the GM brand and, in

turn, GM ʹ s business value.

Second, New GM was not a truly private corporation. Instead, the

President and Treasury oversaw its a ff airs during the bailout and Treasury

owned a majority stake following the bankruptcy. While private shareholders

expect their investments to be pro fi table, the government does not necessarily

share the same pro fi t motive. Treasury injected hundreds of billions of dollars

into the economy during the fi nancial crisis, not on the expectation that it would

make a reasonable rate of return but on the understanding that millions of‐ 62

‐ Americans would be a ff ected if the economy were to collapse. If the ignition

switch defect were revealed in the course of bankruptcy, plainti ff s could have

petitioned the government, as the majority owner of New GM, to consider how

millions of faultless individuals with defective Old GM cars could be a ff ected.

Indeed, during the later congressional hearings, Representatives and Senators

questioned New GM ʹ s CEO on her invocation of the liability shield when the

government guided the process. See supra note 13. Senator Richard Blumenthal,

for instance, indicated that he would have objected in bankruptcy had he known,

because he ʺ opposed it at the time, as A tt orney General for the state of

Connecticut, not [foreseeing] that the material adverse fact being concealed was

as gigantic as this one. ʺ April 2, 2014 Senate Hearing, supra note 13, at 22

‐ 23

(statement of Sen. Richard Blumenthal, Member, S. Subcomm. on Consumer

Prot., Prod. Safety & Ins.).

Third, we must price in the real cost of disrupting the bankruptcy

process. From the middle of 2007 through the fi rst quarter of 2009, Old GM ʹ s

average net loss exceeded $10 billion per quarter; a day ʹ s worth of delay would

cost over $125 million, a week almost a billion dollars. We do not know whether

the proceedings would have been delayed, but some delay was certainly‐ 63

‐ possible. For instance, Congress called the GM CEO to testify over the course of

four days. 28 Old GM likewise conducted a thorough internal investigation on the

ignition switch defect, and the Valukas Report took more than two

‐ and

‐ a

‐ half

months to prepare. It seems unlikely that a bankruptcy court would have

casually approved a ʺ free and clear ʺ provision while these investigations into the

ignition switch defect ʹ s precise nature were still ongoing.

Finally, there is the detriment of added litigation

‐‐ had the class

actions been fi led in the midst of bankruptcy, the mere administration of those

cases could have taken considerable resources. Had the government also

brought criminal charges

‐‐ such as the charges now suspended by a deferred

prosecution agreement with the U.S. A tt orney ʹ s O ffi ce for the Southern District of

New York in which New GM forfeited $900 million

‐‐ managing how to juggle

bankruptcy with a criminal prosecution could have taken even longer. United

States v. $900,000,000 in U.S. Currency

, No. 15 Civ. 7342 (S.D.N.Y.), ECF No. 1; see

11 U.S.C. § 362(b)(1) (exempting from usual automatic stay criminal actions

against debtor). The reasonable conclusion is that, with the likelihood and price

of disruption to the bankruptcy proceedings being so high, plainti ff s at least had

28 See Rattner, supra note 8, at 304 ( ʺ The auto rescue succeeded in no small

part because we did not have to deal with Congress. ʺ ).‐ 64

‐ a basis for making business

‐ minded arguments for why they should receive

some accommodation in or carve

‐ out from the Sale Order.

Under these circumstances, we cannot be con fi dent that the Sale

Order would have been negotiated and approved exactly as it was if Old GM

had revealed the ignition switch defect in bankruptcy. The facts here were

peculiar and are no doubt colored by the inadequate notice and plainti ff s ʹ lack of

any meaningful opportunity to be heard. See Ko tt eakos

, 328 U.S. at 765 (directing

courts to consider ʺ all that happened without stripping the erroneous action

from the whole ʺ ). Given the bankruptcy court ʹ s focus on consumer con fi dence,

the involvement of Treasury, the fi nancial stakes at the time, and all the business

circumstances, there was a reasonable possibility that plainti ff s could have

negotiated some relief from the Sale Order.

We address two further concerns. First, the bankruptcy court stated

that it ʺ would not have let GM go into the liquidation that would have resulted if

[it] denied approval of the 363 Sale. ʺ MLC II

, 529 B.R at 567; see J. App. 1623. In

other words, the bankruptcy court suggested that it would have approved the

§ 363 sale anyway, because the alternative was liquidation

‐‐ and liquidation

would have been catastrophic. While we agree that liquidation would have been‐ 65

‐ catastrophic, we are con fi dent that Old GM, New GM, Treasury, and the

bankruptcy court itself would have endeavored to address the ignition switch

claims in the Sale Order if doing so was good for the GM business. The choice

was not just between the Sale Order as issued and liquidation; accommodations

could have been made.

Second, many of the peculiar facts discussed apply with less force to

the Non

‐ Ignition Switch Plainti ff s, who assert claims arising from other defects.

The bankruptcy court entered judgment against the Non

‐ Ignition Switch

Plainti ff s based on its opinion determining the rights of the other plainti ff s, but

left as an open question whether Old GM knew of the Non

‐ Ignition Switch

Plainti ff s ʹ claims based in other defects. See MLC III

, 531 B.R. at 360. Without

factual fi ndings relevant to determining knowledge, we have no basis for

deciding whether notice was adequate let alone whether enforcement of the Sale

Order would violate procedural due process as to these claims.

To conclude, we reverse the bankruptcy court ʹ s decision insofar as it

enforced the Sale Order to enjoin claims relating to the ignition switch defect. 29

See MLC II

, 529 B.R. at 566

‐ 73. Because enforcing the Sale Order would violate

29 In reversing, we express no views on the Groman Plaintiffs ʹ request for

discovery to prove a procedural due process violation or fraud on the court.‐ 66

‐ procedural due process in these circumstances, the bankruptcy court erred in

granting New GM ʹ s motion to enforce and these plainti ff s thus cannot be ʺ bound

by the terms of the [Sale] Order[]. ʺ In re Johns

‐ Manville Corp.

, 600 F.3d 135, 158

(2d Cir. 2010). As to claims based in non

‐ ignition switch defects, we vacate the

bankruptcy court ʹ s decision to enjoin those claims, see MLC III

, 531 B.R. at 360,

and remand for further proceedings consistent with this opinion.

IV. Equitable Mootness

Finally, we address the bankruptcy court ʹ s decision that relief for

any would

‐ be claims against GUC Trust was equitably moot. MLC II

, 529 B.R. at

583

‐ 92. We ordinarily review ʺ dismissal on grounds of equitable mootness for

abuse of discretion, under which we examine conclusions of law de novo and

fi ndings of fact for clear error. ʺ In re BGI, Inc.

, 772 F.3d 102, 107 (2d Cir. 2014)

(citation omi tt ed). There were, however, no claims asserted against Old GM or

GUC Trust in bankruptcy court or in the multi

‐ district litigation. Under these

circumstances, we exercise our ʺ independent obligation ʺ to ensure that the case

ʺ satis fi es the ʹ case

‐ or

‐ controversy ʹ requirement of Article III, Section 2 of the

Constitution. ʺ United States v. Williams

, 475 F.3d 468, 478

‐ 9 (2d Cir. 2007).A

dismis s

occur ʺ s

imple m

( ʺ Chate a

presu m

substa n

circum s

Chatea u

range o

A irlines

ʺ curiou

ʺ equita b

case or

instead

intersti c A pp l A

.

The d

s bankrup t

s uch that ʺ

m entation o

a ugay II ʺ ), 9

m ed equita b

n tially con s

s tances, a c

u gay III

, 10

The e

o f proceed i

, 91 F.3d 5

s doctrine ʺ

b le consid e

controver s

on the do

c es of the C l icable La w

d octrine o f

t cy appeal s

even tho u

o f that reli e

9 88 F.2d 3 2

b ly moot w

s ummate d

c laimant m

F.3d at 95 2

e quitable m

i ngs in w h

53, 567 (3 d

ʺ ). Our C i

e rations a s

s y. ʺ Chate a

ctrine ʹ s st a

C ode. ʺ In w

f equitabl e

s ʺ when, d

u gh e ff ecti v

e f would b

2 2, 325 (2 d

w hen the d

d

. ʺ In re B G

m ust satisf y

2

‐ 53.

m ootness d

h ich it app l

d Cir. 199 6

rcuit has a

s well as t h

a ugay III

, 1

a tutory un

re UNR In

‐ 67

‐ e mootnes s

d uring the

v e relief c o

b e inequit a

d Cir. 1993

d ebtor ʹ s re o

G I

, 772 F.3 d

y the so

‐ c a

d octrine h a

l ies is not w

6 ) ( en banc )

a cknowle d

h e constit u

1 0 F.3d at 9

derpinni n

dus., Inc.

, 2 s allows a p

pendency

o uld conce i

a ble. ʺ In r e

). ʺ [A] ba n

o rganizati o

d at 108. T

a lled ʺ Cha t

a s enigma

w ell se tt le d

(Alito, J.

,

d ged that t h

u tional re q

9 52. Othe r

n gs and ro l

2 0 F.3d 76 6 p pellate c o

of an app

i vably be f

e Chateaug a

n kruptcy a

on plan h a

T o obtain r

t eaugay fac

tic origins

,

d

. See In r e

dissentin g

h e doctri n

q uirement t

r courts h a

l e in ʺ fi ll[i n

6

, 769 (7th o urts to

eal, event s

f ashioned,

a y Corp.

a ppeal is

a s been

r elief in th e

tors. ʺ See

, and the

e Continen t

g ) (labelin g

n e draws o n

t hat there

a ve focuse d

n g] the

h Cir. 1994 ) s

e se

t al

g it a

n

be a

d

)‐ 68

‐ (explaining also di ff erence between ʺ inability to alter the outcome (real mootness)

and unwillingness to alter the outcome ( ʹ equitable mootness ʹ ) ʺ ). Indeed, several

provisions of the Code prohibit modi fi cation of bankruptcy orders unless those

orders are stayed pending appeal. See, e.g.

, 11 U.S.C. §§ 363(m), 364(e).

However broad the doctrine of equitable mootness, Article III

requires a case or controversy before relief may be equitably mooted. 30

ʺ [E]quitable mootness bears only upon the proper remedy

, and does not raise a

threshold question of our power to rule. ʺ In re Metromedia Fiber Network, Inc.

, 416

F.3d 136, 144 (2d Cir. 2005) (emphasis added).

30 We do not resolve whether it is appropriate for a bankruptcy court

‐‐ as

opposed to an appellate court

‐‐ to apply equitable mootness, which appears to be a

recent phenomenon. E.g.

, In re Innovative Clinical Sols., Ltd.

, 302 B.R. 136, 141 (Bankr. D.

Del. 2003) (citing In re Circle K Corp.

, 171 B.R. 666, 669 (Bankr. D. Ariz. 1994), which

nominally applied constitutional mootness); see also Alan M. Ahart, The Limited Scope of

Implied Powers of a Bankruptcy Judge: A Statutory Court of Bankruptcy, Not A Court of

Equity, 79 Am. Bankr. L.J. 1, 32

‐ 33 (2005) ( ʺ Since a bankruptcy court is not a court of

equity, a bankruptcy judge ought not resort to non

‐ statutory equitable principles,

defenses, doctrines or remedies to excuse compliance with or to override provision(s) of

the Bankruptcy Code or rules, or nonbankruptcy federal law. ʺ (footnotes omitted)).

Indeed, this Circuit ʹ s equitable mootness cases have all involved an appellate body

applying the doctrine in the first instance. See, e.g.

, BGI

, 772 F.3d 102; In re Charter

Commc ʹ ns, Inc.

, 691 F.3d 476 (2d Cir. 2012); In re Metromedia Fiber Network, Inc.

, 416 F.3d

136 (2d Cir. 2005); In re Burger Boys, Inc.

, 94 F.3d 755 (2d Cir. 1996); In re Chateaugay

Corp.

, 94 F.3d 772 (2d Cir. 1996); In re Best Prods. Co.

, 68 F.3d 26 (2d Cir. 1995);

Chateaugay III

, 10 F.3d 944; Chateaugay II

, 988 F.2d 322.‐ 69

‐ ʺ The oldest and most consistent thread in the federal law of

justiciability is that federal courts will not give advisory opinions. ʺ 13 Wright &

Miller § 3529.1. A controversy that is ʺ appropriate for judicial determination

. . .

must be de fi nite and concrete, touching the legal relations of parties having

adverse legal interests. ʺ Aetna Life Ins. Co. v. Haworth

, 300 U.S. 227, 240

‐ 41 (1937);

see Flast v. Cohen

, 392 U.S. 83, 95 (1968) ( ʺ limit[ing] the business of federal courts

to questions presented in an adversary context and in a form historically viewed

as capable of resolution through the judicial process ʺ ). ʺ [F]ederal courts are

without power to decide questions that cannot a ff ect the rights of litigants in the

case before them

. ʺ North Carolina v. Rice

, 404 U.S. 244, 246 (1971) (emphasis added).

That is, courts may not give ʺ an opinion advising what the law would be upon a

hypothetical state of facts, ʺ Aetna Life Ins.

, 300 U.S. at 241, for instance, where a

party did not ʺ seek the adjudication of any adverse legal interests, ʺ S. Jackson &

Son, Inc. v. Co ff

ee, Sugar & Cocoa Exch. Inc.

, 24 F.3d 427, 432 (2d Cir. 1994).

These limitations apply to bankruptcy courts. See Wellness Int ʹ l

Network, Ltd. v. Sharif

, 135 S. Ct. 1932, 1945 (2015) ( ʺ Bankruptcy courts hear

ma tt ers solely on a district court ʹ s reference [and]possess no free

‐ fl oating

authority to decide claims traditionally heard by Article III courts. ʺ ). Inb ankru p

prepar a

time to

3002(c) (

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. Bankr. P

U .S. 380

, 3 9

claims un d

ruptcy co u

B ut plaint i

ng on equ

T rust nor O

d istrict cou

u st con fi r m

i th GUC T r

‐ 70

‐ on of clai m

s will gen e

h e bankru p

then the i

d be to se e

e d can tha t

. 9006(b)( 1

9 4

‐ 95 (199 3

d er Rule 9

u rt held t h

i ff s never s

itable mo o

O ld GM ar

r t. Only o

m ed at oral

r ust, nor h m s may be

e rally set a

p tcy estate

.

i nitial step

e k permiss i

t individu a

1 ); see also P

3 ) (se tt ing

006(b)(1))

.

h at any rel i

s ought rel i

o tness wa s

e parties t o

o ne defen d

argumen t

h ave they e subject t o

a ʺ bar date ʺ

. See Fed.

for an in d

ion to fi le

a l claim t h

P ioneer In v

forth stan d

.

i ef from G U

i ef from G U

s therefore

o the mul t

d ant is na m

t

, plainti ff s

e ven aske d o other

ʺ that fi xe s

R. Bankr. P

d ividual

a late pro o

h at she is

v

. Servs. C o

d ard for

U C Trust

U C Trust.

advisory.

t i

‐ district

m ed: New

s have not

d the s the

P

.

o f of

o

. v.‐ 71

‐ bankruptcy court for permission to fi le late proofs of claim or to lift the bar date,

as would be required before relief could be granted. 31

Instead, it appears from the record that GUC Trust became involved

at New GM ʹ s behest. New GM noted ʺ well there is a GUC Trust ʺ and suggested

that because of the Sale Order ʹ s bar on successor liability, any claims remained

with Old GM and thus GUC Trust. J. App. 11038. But New GM has not sought

to implead and bring cross

‐ claims against GUC Trust in the multi

‐ district

litigation under Federal Rule of Civil Procedure 14 or to do the same in the

Groman Plainti ff s ʹ adversary proceeding in bankruptcy under Federal Rule of

Bankruptcy Procedure 7014.

Moreover, GUC Trust has protested its involvement in the case. At a

May 2, 2014 hearing, GUC Trust noti fi ed the bankruptcy court that it was

ʺ frankly [a] stranger[] to these proceedings. ʺ Id. at 11093. This was, according to

GUC Trust ʹ s uncontested representation, because:

31 The bankruptcy court lifted the bar date for independent claims as a

remedy. See MLC II

, 529 B.R. at 583. We note, however, that neither the Groman

Plaintiffs nor Ignition Switch Plaintiffs requested this as relief. The Ignition Switch

Plaintiffs only mentioned in a footnote in their opposition to the motion to enforce that

Old GM failed to provide notice of the bar date. The Pre

‐ Closing Accident Plaintiffs

stated on behalf of all plaintiffs that ʺ Plaintiffs are not asserting a due process challenge

to a bar date order or a discharge injunction issued in favor of a debtor. ʺ Bankr. ECF

No. 13021, at 48 n.26.‐ 72

‐ No claimants, none of the plainti ff s, no claimants

or potential claimants had raised this as a possibility.

No one has fi led a motion to lift the bar date. The only

person that has raised it has been New GM, based

upon, you know, some statements of fact in some

pleadings. But the only person that has actually moved

forward with it is New GM, and frankly, you know, it ʹ s

our view that this is essentially a way to de fl ect liability

away, and you know, the a tt ention away from New GM

and put it on a third party.

Id. at 11090. At a July 2, 2014 hearing, GUC Trust continued to push that

litigation of the equitable mootness issue was premature, and dependent on

whether the Sale Order could be enforced. Id. at 8485. 32

Nonetheless, the bankruptcy court asked the parties (including GUC

Trust) to brief initially whether claims against New GM were really claims

against Old GM ʹ s bankruptcy estate or GUC Trust. As the bankruptcy court

stated: ʺ we ʹ re going to consider as [a] threshold issue[]

. . . the possibility that the

claims now being asserted may be claims against Old GM or the GUC Trust. ʺ J.

App. 11103 (emphases added). Following a later hearing, the bankruptcy court

32 The bankruptcy court seemingly agreed momentarily, commenting at the

hearing that they could proceed ʺ without now addressing and while maintaining

reservations of rights with respect to issues such as

. . . equitable [moot]ness. ʺ Id. at

8491.‐ 73

‐ added an issue of whether claims, if any, against GUC Trust should be

ʺ disallowed/dismissed on grounds of equitable mootness. ʺ Id. at 5780.

GUC Trust was thus not a ʺ litigant[] in the case before [the

bankruptcy court], ʺ Rice

, 404 U.S. at 246, who ʺ s[ought] the adjudication of any

adverse legal interests, ʺ S. Jackson & Son, Inc.

, 24 F.3d at 432. GUC Trust sought

not to be involved, but the bankruptcy court ordered otherwise. In doing so, the

bankruptcy court was concerned with a ʺ hypothetical ʺ scenario, see Aetn a Life

Ins.

, 300 U.S. at 241

‐‐ the ʺ possibility ʺ that there ʺ may be ʺ late

‐ fi led claims against

GUC Trust, J. App. 11103. The bankruptcy court ʹ s decision on equitable

mootness that followed essentially advised on this hypothetical controversy.

We acknowledge that the parties have expended considerable time

arguing about equitable mootness. We are likewise cognizant that plainti ff s at

one point sent a le tt er to GUC Trust suggesting that it should freeze its

distributions pending the bankruptcy proceedings. See MLC II

, 529 B.R. at 537

‐

38. But plainti ff s did not pursue any claims. Ultimately, it is the parties

, and not

the court, that must create the controversy. See Dep ʹ t of Envtl. Prot. & Energy v.

Heldor Indus., Inc.

, 989 F.2d 702, 707 (3d Cir. 1993) (rendering advisory ʺ an answer

to a question not asked ʺ by the parties).‐ 74

‐ We thus conclude that the bankruptcy court ʹ s decision on equitable

mootness was advisory and vacate that decision. See MLC II

, 529 B.R. at 583

‐ 92.

CONCLUSION

For the reasons set forth above, with respect to the bankruptcy

court ʹ s decisions below, we:

(1) AFFIRM the decision not to enforce the Sale Order as to the

independent claims;

(2) REVERSE the decision to enforce the Sale Order as to the Used Car

Purchasers ʹ claims and claims relating to the ignition switch defect,

including pre

‐ closing accident claims and economic loss claims;

(3) VACATE the decision to enforce the Sale Order as to claims relating

to other defects; and

(4) VACATE the decision on equitable mootness as advisory.

We REMAND the case for further proceedings consistent with this

opinion.