Three weeks ago, as I discussed here, I jumped into the GM fray and filed this objection on behalf 5 product liability claimants who, absent the "free and clear" sale protections sought by GM under Section 363, would have had the right to add the Purchaser as an additional defendant to their pending lawsuits based on each of their respective state’s successor liability laws.

After putting in 20+ hour days for a full week, including reviewing 35+ Gigabytes of OCR’d documents from GM, deposing Fritz Henderson and the Auto Task Force’s Harry Wilson over two days, attending three days of hearing, and giving everything I had in this closing argument, Judge Gerber’s opinion approving the sale and his bench decision denying my motion for direct appeal to the Second Circuit ended the fray for me and put my clients’ appeal on the "slow boat to China," as the old saying goes.  But in doing so, he issued a persuasive opinion that–on reflection–actually did my clients a favor, despite their having to endure an extra year of appeal by first passing through the district court. 

How so?  Well, Judge Gerber himself acknowledged that the successor liability issue was the “most debatable” and “most important” of the issues before the Court.  He also correctly observed that I’d like to see this issue decided by the Supreme Court (assuming I can’t get the Second Circuit to reverse itself or at least distinguish GM from Chrysler on the facts).  After all, 363 sales are so common nowadays that Baird and Rasmussen’s prediction in 2002 of the "end of bankruptcy" is now being viewed as a shocking–but inevitable–fact of life.  And the undeniable split in the circuits over whether 363 sales can be "free and clear" of successor liability claims makes the case ripe for Supreme Court review, particularly given the magnitude of the claims being left behind (GM and Chrysler alone have shed about $2 billion of these liabilities in the past 45 days). 

One thing we know about the Supreme Court, however, is that it doesn’t like to get "ambushed."  As Justice Ginsburg pointedly reminded counsel during oral argument in the Travelers Casualty v. PG&E case (discussed here):

We are a court of review. So no matter how well it’s been aired [in other circuit cases], we wait to see what the lower courts have said on a question. We don’t take it in the first instance.

Judge Gerber echoed these thoughts in his opinion denying my motion for direct appeal when he asked:

How could a decision presented and decided to the Second Circuit in two days (or on any other expedited basis) be helpful to the bankruptcy community, or the public, or the Supreme Court?   If the Supreme Court is to decide an issue that’s the subject of a Circuit split, doesn’t it deserve the best decision the Second Circuit can provide?

Hard to argue with that.  So, per Judge Gerber’s sound instruction, we’ll leave the "supercharged" Corvette ZR3 6.2L / 638 hp V8 at the dock and instead board the luxurious, brand-spanking-new, Bohai Zhenzhu, destination SCOTUS, with stops at the SDNY and 2d Circuit ports of call.

Bon Voyage!

© Steve Jakubowski 2009