Products Liability Law Daily General Motors LLC did not assume bankrupt predecessor’s punitive damages liability
Wednesday, November 20, 2019

General Motors LLC did not assume bankrupt predecessor’s punitive damages liability

By David Yucht, J.D.

Contractual liability for claims arising "directly out of death, personal injury or other injury" did not include claims for punitive damages, which arise from egregious, reprehensible behavior.

General Motors LLC (GM LLC) did not contractually assume liability for punitive damages when it purchased the assets of its predecessor, General Motors Corporation (GMC), in bankruptcy court, the U.S. Court of Appeals for the Second Circuit ruled. Consequently, individuals pursuing products liability claims involving vehicles manufactured by GMC were barred from asserting punitive damages claims against GM LLC (In re Motors Liquidation Co. (Lankford v. General Motors LLC)), November 19, 2019, Jacobs, D.).

The 2009 bankruptcy of GMC resulted in a sale of its assets to a new entity, GM LLC, which continued GMC’s business. GM LLC assumed the liability of GMC concerning post-sale accidents involving automobiles manufactured by GMC. Both the bankruptcy and district courts ruled that GM LLC was not liable for punitive damages with respect to such claims. The individuals suing GM LLC appealed.

Assumption of liability—punitive damages. The Second Circuit affirmed the district court and bankruptcy court, concluding that as a matter of contract interpretation, GM LLC was not liable for punitive damages. Under the contract, GMC LLC assumed liability for claims involving GMC vehicles that arose "directly out of death, personal injury or other injury to Persons caused by accidents or incidents and arising from such motor vehicles’ operation." The appellate court found that "liabilities" were limited to those that were "for" death and injuries and those that arose "directly out of" death and injuries. Punitive damages are not paid "for" death or injuries. Rather, they are paid to punish "egregious, reprehensible behavior." Consequently, liabilities under this contract of assumption did not include punitive damages.

Other issues. The Second Circuit also ruled that the Notice of Appeal was adequate to allow for appellate jurisdiction. GM LLC argued that jurisdiction was lacking because the Notice of Appeal failed to "specify the parties taking the appeal by naming each one in the caption or body of the notice." Even though certain individuals were not expressly named in the notice, their intent to appeal was otherwise clear by reference to the lawyers representing them.

Additionally, the doctrine of res judicata did not bar certain individuals from challenging the bankruptcy court’s November 2015 decision barring punitive damages when litigating in July 2017. These individuals initiated their lawsuit in August 2015. Several weeks later, the bankruptcy court issued a scheduling order that specified open issues and set a briefing schedule. These issues were resolved in the November 2015 order. However, this order, barring punitive damages, was not served on these individuals, nor were they brought into the bankruptcy court proceedings until after the November 2015 decision.

The case is No. 18-1940.

Attorneys: Arthur Jay Steinberg (King & Spalding LLP) for General Motors LLC.

Companies: General Motors LLC

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