An appeal of General Motors Corp.’s sale of most of its assets by asbestos claimants and car-accident victims shouldn’t go directly to the U.S. Court of Appeals in New York or block the deal’s closing, a judge said.
U.S. Bankruptcy Judge Robert Gerber in Manhattan ruled against the tort claimants that sought an expedited appeal that would bypass the U.S. District Court. He noted in a written decision that if GM were forced to liquidate because an appeal blocked the sale, creditors could lose $66.6 billion in value.
“Frankly, the most important consideration in advancing the progress of the case is enabling GM to complete the sale of its assets that is essential to its survival, and which is stayed until Thursday at noon, but not beyond that,” Gerber wrote in a ruling issued late Tuesday.
Gerber approved the sale of most of GM’s business to a U.S. Treasury-funded buyer on July 5 and put the order on hold until Thursday to allow opponents time to appeal. His decision not to fast-track the appeal or issue a stay means the transaction could close as soon as the stay expires, and Assistant U.S. Attorney Matthew Schwartz said in court papers the government is “prepared to close immediately.”
People injured in car accidents involving GM vehicles and asbestos claimants appealed, saying the sale allows the Treasury to buy only GM’s most valuable assets and improperly leave behind liabilities, including their claims.
“Failure to grant the motion will ultimately result in another year-plus of delay for people who are in the middle of litigation” over their injuries as the appeal process plays out, said Steven Jakubowski, a lawyer for accident victims who spoke at the hearing by phone.
GM, the Treasury and the company’s creditors committee objected. The tort claimants shouldn’t be allowed to go directly to the appeals court, which has already upheld the sale of Chrysler free and clear of such claims, the Treasury said.
Gerber agreed, writing that while the Circuit Court has yet to issue a formal opinion outlining why it affirmed the Chrysler decision, that judgment is still the law in the courts it oversees, Gerber said.
Attorneys from Stutzman Bromberg Esserman & Plifka representing asbestos claimants asked Gerber for a further stay of his sale order to allow an appeal to the District Court, if he decided not to certify the case directly to the Circuit Court. The asbestos claimants said the GM sale to Treasury will “irrevocably alter the landscape” for asset sales in bankruptcy.
Attorneys for the Treasury said the asbestos claimants should be forced to post a bond of at least $7.4 billion to protect GM and its other creditors if they were allowed to block the deal for any significant period.
GM, based in Detroit, has said the sale to the Treasury was the only option available to the company, which filed for bankruptcy court protection June 1. GM estimated the cost of future product liability claims at $934 million and asbestos-related tort claims at $627 million as of March 31, according to its most recent quarterly report
Jakubowski said he wanted the appeal process to move as quickly as possible because he anticipated the Circuit Court would affirm the GM decision, as it did with Chrysler. If the timing were right, the Supreme Court might consolidate a certiorari petition by his clients with one already pending from tort claimants in Chrysler and decide them simultaneously.
Should the sale close in its current form, the U.S. government would get 60 percent of the new GM for making $50 billion in bailout loans, a United Auto Worker retiree trust would get a 17.5 percent stake, and two Canadian government entities would get an 11.7 percent equity share for their loans. Old GM would get 10 percent of the equity, plus warrants, to distribute to bondholders and unsecured creditors.
The case is In re General Motors Corp., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).