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Keywords

appealhearingbankruptcychapter 11 bankruptcycorporationobjectiongood faith
bankruptcychapter 11 bankruptcycorporationgood faith

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In re Motors Liquidation Co., 430 B.R. 65

Facts

General Motors Corporation filed for Chapter 11 bankruptcy on June 1, 2009, and sought approval for the sale of its assets to a Treasury-sponsored entity, NGMCO, Inc. The sale was part of a broader effort by the U.S. government to stabilize the automotive industry during a financial crisis. The bondholder, Oliver Addison Parker, objected to the sale, claiming it was an improper sub rosa plan and that the U.S. government had overstepped its authority in using TARP funds. The Bankruptcy Court held hearings and ultimately approved the sale, leading to Parker's appeal.

General Motors Corporation filed for Chapter 11 bankruptcy on June 1, 2009, and sought approval for the sale of its assets to a Treasury-sponsored entity, NGMCO, Inc.

Issue

Did the Bankruptcy Court err in approving the sale of GM's assets to a government-sponsored purchaser, and did the sale constitute an improper sub rosa plan of reorganization?

Did the Bankruptcy Court err in approving the sale of GM's assets to a government-sponsored purchaser, and did the sale constitute an improper sub rosa plan of reorganization?

Rule

The court applied the principles of good faith in bankruptcy sales, the standards for equitable mootness, and the legal framework governing the use of TARP funds and the authority of the U.S. Treasury.

The court applied the principles of good faith in bankruptcy sales, the standards for equitable mootness, and the legal framework governing the use of TARP funds and the authority of the U.S. Treasury.

Analysis

The court found that the sale was conducted in good faith, as the U.S. Treasury acted as a lender of last resort and the sale was the only viable option to prevent GM's liquidation. The court also determined that the sale did not dictate the terms of a future reorganization plan, thus not constituting a sub rosa plan. The bondholder's objections regarding the use of TARP funds and the characterization of the government's secured debt were also rejected, as the court found no legal basis for these claims.

The court found that the sale was conducted in good faith, as the U.S. Treasury acted as a lender of last resort and the sale was the only viable option to prevent GM's liquidation.

Conclusion

The District Court affirmed the Bankruptcy Court's approval of the sale, concluding that the sale was a proper exercise of business judgment and did not violate any legal standards.

The District Court affirmed the Bankruptcy Court's approval of the sale, concluding that the sale was a proper exercise of business judgment and did not violate any legal standards.

Who won?

The prevailing party was General Motors Corporation, as the court upheld the Bankruptcy Court's decision to approve the sale of its assets.

The prevailing party was General Motors Corporation, as the court upheld the Bankruptcy Court's decision to approve the sale of its assets.

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