In Re: Motors Liquidation Company

Background

This was an appeal from the Southern District of New York Bankruptcy Court. Celestine Elliott and Lawrence Elliott challenged the bankruptcy court’s denial of their request to file a late proof of claim in the bankruptcy of Motors Liquidation Company, formerly General Motors Corporation.

Old GM filed for bankruptcy in 2009. The bankruptcy court set November 30, 2009, as the deadline for filing claims that arose before the bankruptcy. The Elliotts did not file a proof of claim by that deadline. A later order stated that late claims would be disallowed unless the claimant asked the bankruptcy court for permission and obtained an order treating the claim as timely.

The Elliotts owned a 2007 Chevrolet Cobalt and a 2006 Chevrolet Trailblazer. Their proposed late claims concerned economic losses associated with a driver’s door-module defect in the Trailblazer. The opinion states that this defect was separate from the ignition-switch defect involved in other late-claim motions.

In January 2017, the Elliotts joined motions filed by other lawyers seeking permission to file late claims involving specified defects, including ignition-switch, side-airbag, and power-steering defects. They did not file a separate motion concerning the door-module defect, and their joinder did not specifically identify that defect. At a December 2018 hearing, the GUC Trust’s lawyer told the Elliotts’ counsel that they needed to file something specifically addressing the Trailblazer and door-handle allegations. The Elliotts then agreed to do so.

The Elliotts filed their motion on January 21, 2019—nearly ten years after the claims deadline. They sought permission to file individual, class, and representative claims concerning the Trailblazer defect. The bankruptcy court denied the motion on May 28, 2019.

Issues and arguments

The Elliotts argued that their January 2017 joinder preserved their ability to seek permission to file late claims for defects not specifically covered by the motions they joined. They also argued that the district court should independently review the bankruptcy court’s interpretation of the 2016 order that set the schedule for late-claim motions.

The GUC Trust and New GM opposed the Elliotts’ motion. The bankruptcy court concluded that the Elliotts should have filed their own motion by January 2017. It also applied the four-factor test for “excusable neglect,” which considers the risk of prejudice, the length and effect of the delay, the reason for the delay, and whether the party acted in good faith. The bankruptcy court found no sufficient reason for the two-year delay and found a risk that allowing the claims could encourage numerous additional late claims.

District court’s analysis

Judge Furman held that the proper standard of review was abuse of discretion. Under that standard, a district court generally defers to the bankruptcy court unless its decision rests on a legal error, a clearly mistaken factual finding, or a decision outside the range of permissible choices.

The district court rejected the Elliotts’ interpretation of the 2016 order. In context, that order did not allow the Elliotts to preserve door-module claims simply by joining motions addressing other, specifically identified defects. The Elliotts needed to file a separate motion or, at minimum, identify the additional relief they sought and provide supporting briefing. Their joinder did not do so.

The district court also agreed that the bankruptcy court properly applied the excusable-neglect factors. The Elliotts’ interpretation of the 2016 order did not provide a sufficient reason for their delay, and the order did not contain the type of extreme ambiguity that could justify excusing the delay. The district court further agreed that allowing the proposed claims could create a risk of numerous additional late claims, particularly because the Elliotts sought claims involving thousands of vehicles.

Disposition

The district court affirmed the bankruptcy court’s decision denying the Elliotts’ motion for permission to file late claims. The clerk was directed to close the case.