Products Liability Law Daily New GM cannot be compelled to reveal senior officers stock holdings in ignition switch defect MDL
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Thursday, December 15, 2016

New GM cannot be compelled to reveal senior officers stock holdings in ignition switch defect MDL

By Pamela C. Maloney, J.D.

A request to compel disclosure of documents relating to stock holdings for 59 named Old GM and New GM senior officers, managers, and engineers who allegedly had knowledge of the Delta ignition switch defect was denied. According to Judge Furman, who is presiding over the multidistrict litigation pending against New GM, the information sought had limited or no relevance to the issue of successor liability and its disclosure would be unduly intrusive on New GM (In re: General Motors LLC Ignition Switch Litigation, December 14, 2016, Furman, J.).

In their request to compel production, the plaintiffs had claimed that the information was relevant to preparing their response to New GM’s motion for summary judgment on the issue of successor liability. In support of one of the arguments advanced by New GM in its motion, the company noted that the plaintiffs were relying on the continuity of enterprise exception to the general rule against successor liability by alleging that New GM was the mere continuation or reincarnation of the same business enterprise as Old GM. New GM contended that there was no continuity of shareholders between Old GM and New GM, pointing out that former Old GM shareholders received no recovery from Old GM’s ownership of 10 percent of New GM. In addition, proceeds from that stock were paid to Old GM creditors and not to former Old GM shareholders, whose worthless Old GM stock was cancelled without any payout.

GM further argued in support of its motion for summary judgment that the plaintiffs could not prevail on its successor liability and mere continuation theory primarily because (1) the 363 bankruptcy sale was not intended to nor did it deprive the plaintiffs of any recovery; (2) there was no evidence to contradict the bankruptcy court’s finding that the 363 sale was an arm’s length transaction that involved fair consideration; (3) the Old GM/Motors Liquidation Company and the MLC GUC Trust continued to exist, and held assets worth billions of dollars, from which distributions were made on allowed claims; and (4) mere continuation claims could not arise from a court-approved 363 sale that the bankruptcy court determined was not a "reorganization" under federal law.

In ruling that the discovery request was irrelevant and intrusive, Judge Furman pointed out that if the plaintiffs disagreed with his findings on this issue, they were free to raise their arguments in opposition to New GM’s pending motion for summary judgment, provided their arguments were supported by an affidavit, if necessary and appropriate.

The case is No. 14-MD-2453; 14-MC-2543.

Attorneys: Elaine T. Byszewski (Hagens Berman Sobol Shapiro LLP) for Teleso Satele. Andrew Baker Bloomer (Kirkland & Ellis LLP) and Anne M. Talcott (Schwabe Williamson & Wyatt, PC) for General Motors LLC.

Companies: General Motors LLC

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