What started out a couple months ago as a “Slow Boat to China,” today feels more like the Voyage of the Damned. Yesterday I filed this “Opening Brief” (plus the Sale Opinion at Appendix A and the Sale Order and MPA at Appendix B) on behalf of my five clients in our appeal of the GM Sale Order: Callan Campbell, et al., v. Motors Liquidation Company, Case No. 09-6818 (NRB) (S.D.N.Y.). This appeal is the only one pending that challenges the abhorrent treatment of preexisting products liability claims in either the GM or Chrysler bankruptcy cases. When I first got involved in the case three months ago, I summarized here the injuries and the myriad adversities faced by my clients on a daily basis. I wrote: “The sad, and all too tragic, stories of my clients, taken from the filed objection, are set forth below. The only thing my clients did wrong here was buy a GM car. For this act of brand loyalty, they have paid dearly. It’s not enough that people lose their lives and get severely injured from design defects and product flaws, now they and their loved ones get thrown under the bus!”
Having now lived with GM for about 450 hours the past three months, I have to say I’m thoroughly appalled at the cold-hearted stinginess of those calling the shots at GM and Chrysler. They have left helpless accident victims hanging out to dry for reasons I cannot fathom, while otherwise spending “whatever it takes” — to whomever it takes — “to get the ‘deal’ done.” (See Opening Brief, at p.7).
With the US Treasury paying a mind-boggling $92 billion for most of “Old GM” (see Opening Brief, at p.7 fn.4), would it really be such a burden for the Secretary and his Boss to set aside another $250 million or so (or about 1/4% of the total consideration paid in the deal) to make sure there’s a small, but adequate, reserve to cover medical bills, assisted care, and other basic requirements of those (see, e.g., here, here, and Callan Campbell here) severely injured by the design defects built into cars manufactured by the same plants they’re now the stewards of? (See Opening Brief at p.8 fn.6, estimating total remaining products claims left behind at $233.2 million).
Put another way, imagine you’ve got $92.00 in quarters in a big bucket. Now imagine that you can dramatically change for the better the lives of hundreds, maybe even thousands, of people your own mirror-image predecessor destroyed through no fault of their own. And imagine further that all you have to do to achieve that wonderful act of kind-heartedness is to take just one of those 368 quarters and put it aside for the benefit of those whose lives have been damned as a result of mistakes made by some of the people and property you just bought — and now control — for those 368 quarters.
That’s all that needs to be done in GM to make things right, and my guess is that only about a dime needs to be put aside to cover the outstanding products liability claims left to rot in Chrysler. But no one seems to have the political or moral compunction to wrestle those thirty-five cents from the Boss’s own clenched fist.
“Sad” and “pathetic” are the first words that come to mind as I ponder the fact that I’m not on the “Slow Boat to China,” but on the Voyage of the Damned (Art Spiegelman’s take on it).
- Brother, can you spare a dime? (classic Bing Crosby)
- or sung by Allison Moorer (great soul)
- or by the Gas House Gang Barbershop Quartet (great harmony; my favorite of the 4)
- or instrumentalized by the Dave Brubeck Quartet (for jazz buffs)
[Courtesy of bankruptcylitigationblog.com]
what is your cut if you win?
Juniper – Excellent question, based on usual lawyerisms 33% or $82.5 million, but hey thats just like 8-9 cents.
General Malarkey doesn’t care about anyone but itself. I think the motto is “Eff you, I got mine!”
It’s probably printed and framed in the executive offices, as well.
The only thing my clients did wrong here was buy a GM car.
In that case, that’s enough. As you well know, a consumer who has a claim against any company that has filed bankruptcy is going to have a near-impossible time of collecting. (Good luck returning something that you bought at Circuit City.)
Aside from the fact that you represent the plaintiffs, I’m not sure why they would prove to be some great exception or why we’re supposed to make sure that they (and you) get paid in circumstances in which virtually no one would get paid. When you buy a product, you have to consider the credibility of whoever should carry the liability. If you can’t trust the company to be there when you need it, then you don’t buy the product.
I don’t see a whole lot more compassion from the previous writers than I do from the General. These are people we are talking about here, and a little more seriousness is in order than usual for this site.
I guess I am a bleeding heart conservative, but I do not believe bankruptcy should ever totally shield you from all liability. The court erred in not providing for open or pending cases in their haste to do the government’s bidding. I do not know the facts of the case; were these cases lumped in with unsecured creditors? I do not know law, but common sense says you should consider all potential claimants to whatever remains of value in a company in a bankruptcy case.
Seen too much law suit abuse to have much sympathy for this attorney or his clients. You spun the big lawsuit wheel and lost this time. Boo, hoo.
This and the class action stick-up artistry practiced by these vultures, recent case in point that effects me: Expedia charged fees that some state didn’t like so I might get a $50 – 100 back in the form of a credit certificate (to spend on Expedia!) and the lawyers will get TEN MILLION in hard cash!
One part of established bankruptcy law was arbitrarily changed regarding secured creditors – they lost all their senior status. Maybe the stock-holder-in-chief can change the bankruptcy law and get settlements for these claimants. Of course, these claimants don’t belong to a union supported by the stock-holder-in-chief.
WildBill :
Seen too much law suit abuse to have much sympathy for this attorney or his clients. You spun the big lawsuit wheel and lost this time. Boo, hoo.
They didn’t lose anything yet, it’s a pending claim.
Secondly, just because other lawsuits were frivolous, it doesn’t mean this is. It might be, but I haven’t read the brief yet (and from your comment it’s apparent that you haven’t read it either).
Expedia charged fees that some state didn’t like so I might get a $50 – 100 back in the form of a credit certificate (to spend on Expedia!) and the lawyers will get TEN MILLION in hard cash!
So other than your or my jealousy that some lawyers will get rich while we get credit certificates, what’s the problem?
If the attorneys representing your “class” worked for free rather than their standard 33% cut, your credit certificate would be $75-150. Would that make you any less frustrated?
I do not believe bankruptcy should ever totally shield you from all liability.
The point of bankruptcy is to reduce or eliminate obligations. You may not like it, but that’s what it is.
The court erred in not providing for open or pending cases in their haste to do the government’s bidding.
There was no such error. You may not be fond of bankruptcy law, but the court acted within the law.
One part of established bankruptcy law was arbitrarily changed regarding secured creditors
That is incorrect. In GM’s case, the secureds even got paid in full, because there was enough to pay them.
I’ve never been in an accident in a GM car, but I’ve seen a few.
Can I sue for “Observer Trauma”?
I am now afraid to by domestic cars and must buy much more expensive euro cars.
Some of you have pointed out that bankruptcy of a normal nature is there to eliminate debts. Yes, but this wasn’t a bankruptcy as usual. This was a takeover by the government under the guise of bankruptcy. In normal bankruptcy proceedings, deep pockets usually don’t show up and help the company out of the situation. The company eliminates those debts to make it possible for it to function on a leaner scale and rebuild once it dispenses with bankruptcy. This, on the other hand, was a stripping of the debts and a pouring in of massive amounts of money by the government to GM. Now, GM is operating nearly identically to their former selves, with even deeper pockets into which to fall back, while the debts have been eliminated.
As for the general “I hate lawyers” crotchetiness, I will remind you that lawyers are an indespensible part of the legal system in this country, and many of the freedoms and rights you take for granted came about because of lawsuits championed by those “scum-sucking” lawyers, many of which probably seemed pretty frivolous at the time (civil rights, anyone? How many general citizens could/would have taken a stand to change how race is viewed in this country in the ’50s and ’60s? We are diverse and on relatively equal footing today because lawyers took on the cases and fought through trials to bring us forward as a society). So, no, let’s not stop the class-action suits that, far from simply making lawyers rich, force companies to change their practices by making them pay through the nose to all of the people they screwed over rather than simply saying, “If I can’t have a bigger piece, nobody gets any justice or money,” and calling it good. Nothing will change that way.
“Having now lived with GM for about 450 hours the past three months, I have to say I’m thoroughly appalled at the cold-hearted stinginess of those calling the shots at GM and Chrysler.”
This coming from a lawyer?
“I will remind you that lawyers are an indespensible part of the legal system in this country, and many of the freedoms and rights you take for granted came about because of lawsuits championed by those “scum-sucking” lawyers, many of which probably seemed pretty frivolous at the time ”
Now you know how auto salespeople might feel.
Bridge2far :
September 24th, 2009 at 3:22 pm
“Having now lived with GM for about 450 hours the past three months, I have to say I’m thoroughly appalled at the cold-hearted stinginess of those calling the shots at GM and Chrysler.”
This coming from a lawyer?
“I will remind you that lawyers are an indespensible part of the legal system in this country, and many of the freedoms and rights you take for granted came about because of lawsuits championed by those “scum-sucking” lawyers, many of which probably seemed pretty frivolous at the time ”
Now you know how auto salespeople might feel.
What social fortitudes shall I attribute to the great car salespeople of the country?
New car salespeople are every so slightly less detestable because they don’t cover up known problems with cars (some of which are serious) to bilk their customers out of money – they just play off the average American’s stupidity during deal-making time.
Used car foisters – now, they’re a whole different story.
Waaaaaaaaaaaaaaaa!!!!!
My power-ball ticket didn’t pay off. I want them to pay me anyway.
To Pch101,
Thanks for chipping in. I appreciate your position. To clarify, my first comment was a “should,” referring to what is morally right, not necessarily legally permissible. Regarding the possible error in not accounting for open or pending cases, I am not a lawyer, but base this on discussions with a couple of my friends who are lawyers/litigators. They deal with this subject every day. They tell me that liberties were taken in this regard. Possibly legal, but borderline discretionary.
We tend to assume all lawsuits are frivolous and all lawyers are parasites – except our own, of course.
As a radical right-wing extremist, I am always disgusted that my favorite talk radio and cable news outlets have as big advertisers some of the worst of the worst of the ambulance chasers and tax avoidance specialists. Being legally relieved of responsibility is not the same as being morally relieved. (Before anyone says “easier said than done,” I once borrowed money and paid for two years on a house I no longer owned because I could not sell it for the mortgage. Stupid, perhaps, but I sleep really well at night.)
@Pch101,
Ok. Maybe GM paid all of it secured creditors but Chrysler did NOT pay.
The State of Indiana Treasurer sued on behalf of state employee pensioners who held senior debt in Chrysler that was NOT paid. This was done contrary to over a hundred years of bankruptcy law.
As a result, senior debt of companies now has lower value because the investors now have some belief that it will not be paid back ahead of junior debt holders. Of course the stock-holder-in-chief doesn’t believe in capitalism so the value of financial instruments is of no concern of his. He’s more interested in tax revenues and confiscation of peoples money (not paying senior debt first).
Few Points:
1. I’ve said it before, I’ve written it in my blog, and I’ll say it here again… This is a pro bono representation. I am not charging the clients. I have no cut of any client recoveries in any of their underlying cases should they be successful. I have no agreements with lawyers to share in their fee recoveries should they recover in their cases.
The only reason it’s shocking to people that I’m doing this on a pro bono basis is because those people who say these things don’t know me. If they did, it wouldn’t be shocking to them at all. I am doing this because it’s the right thing to do, particularly in light of the fact that nobody else was stepping up to do it unless they got paid. By the time it’s all over my firm and I will have over 1500 hours into the case and be in the hole about $30K in costs. That to me, and my firm, is worth the cost in time and money if the end result is that some very badly suffering and grieving people get some recompense that covers their very high maintenance costs from their debilitating injury or loss. Remember, GM didn’t estimate $1 billion in products liabilities on its balance sheet at 12/31/08 because it felt these claims are “frivolous.” (See Page 3-5 of brief). Some are, but the ones in litigation, the big dollar ones, are not (and they’re not “drunk rollovers” either). Check out the Center for Auto Safety Web Site on design defect cases like “roof crushing” cases and “exploding side saddle gas tank” cases. Also, an overlooked fact is that New GM already is picking up 75% of the products liability claims. It’s the last 25% left behind whose interests my case covers (see fn. 6 in the brief).
2. People should read the brief to understand why this group should have a right to sue New GM. As the brief explains, over $60 billion in unsecured claims are being picked up and paid in full by the New GM. The “relative priorities” in this case are meaningless. New GM picked and chose what unsecured claims it wanted to pay in full and what it didn’t. Regardless, and the brief makes this amply clear, the bankruptcy court has no power (or jurisdiction) over litigation between two nondebtors unless that litigation has some “conceivable effect” on the bankruptcy estate. In this case, it does not, so that’s why the bankruptcy court can’t wipe out the products claims of nondebtor victims against the nondebtor successor, New GM. Read the statement of facts and the summary of the argument.
3. Thanks for taking the time to read the post and provide your comments.
4. Thanks to Robert F., especially, for maintaining this great blog and posting my thoughts.
OmyGod it’s the tort lawyers against government owned GM. Will the lawyers put GM out of business? Will the Democrats vote for tort reform to save GM and the UAW?
It’s time to buy some popcorn and enjoy the theater.
In normal bankruptcy proceedings, deep pockets usually don’t show up and help the company out of the situation.
Quite the opposite. Without DIP lenders, most large business bankruptcies would turn into Chapter 7 liquidations. Bankrupt companies need new money, or they die.
In a case like this, liquidation would result in less money going to the creditors, because the liquidation value of the assets isn’t that high. (Used factories aren’t worth a whole lot of money.)
In this case, the DIP lenders happened to be the US, Canadian and Ontario provincial governments, because nobody in the private sector would go anywhere near deals like this without a government guarantee, and might not even do it with a government guarantee. So no, your statement is incorrect.
but Chrysler did NOT pay.
Of course they didn’t. There wasn’t enough money to pay everyone. Where would you suggest that they have gotten the money?
The State of Indiana Treasurer sued on behalf of state employee pensioners who held senior debt in Chrysler that was NOT paid.
And that got chucked, just as that little piece of political theater should have been.
I don’t know where some of you folks get your knowledge of bankruptcy or finance, but here’s the reality — a bond is a loan, not an ironclad fully guaranteed commitment to repayment. If the guy who borrows your money can’t repay you, you lose.
The lesson here is to not lend money to people or companies who can’t pay you back, unless you think it’s worth the risk. I’m sorry that some ignoramus in Indiana dropped the ball by entrusting their pension cash to guys with nasty reputations at Cerberus, but that was a poor investment decision and the outcome is the fault of those who chose the investment.
There is only one borrower on earth who is considered to be essentially risk free, and that is the US treasury. Every other borrower has some risk premium attached to them above the US treasury risk rate, and that risk should be offset in the form of a higher interest rate.
Once again — if you want 100% certainty of getting your money back, then don’t buy corporate bonds. Ever. Period. Even a AAA bond has default risk, and the bondholder has to accept the risk. Don’t play if you can’t or won’t pay.
Not to sound crass but, when you eliminate the pending cases of the Ding Dongs who after years of driving couldn’t hit the brake vs. the gas – expected the thing to survive 15 rolls in their drunk stupor or got whipped out of the sunroof while in their drunk stupor roll because they didn’t buckle up, how many cases are left?
If there’s anyone else left, I feel bad for them.
@Pch101,
check on the meaning of “senior debt”.
Chrysler had money and assets.
The Indiana investments were senior debt.
Product liability lawsuits aren’t senior debt.
Widget suppliers owed money don’t have senior debt.
Workers don’t usually have senior debt of the company employing them.
The financial markets have adjusted to the loss of the meaning of senior debt and the result is higher costs for obtaining money with bonds.
No political theater.
No ignoramuses involved.
The state of Indiana has other big investments in Chrysler. Like the 5000 people who work at the Kokomo transmission plants. Or the $12m property tax owed Howard County (Kokomo) to operate the schools which is now overdue.
“What social fortitudes shall I attribute to the great car salespeople of the country?”
Minute in comparison to the lawyer- an obviously superior breed. And it’s not so much what the car salesperson has contributed. It’s what him/her hasn’t damaged.
And I guess you could say the salesperson hasn’t damaged as much as lawyers have either. And a consumer can sit down and discuss their situation with a salesperson while trying to make a buying decision. And not get an itemized billing statement a few days later.
Chrysler had money and assets.
You must be referring to a different Chrysler. The Chrysler that was owned by Cerberus didn’t have enough to pay the senior lienholders, let alone everyone else.
Old Chrysler was cash deficient, and much of the cash that it had at the end was there only because the US government had provided it.
The Indiana action was a snow job, designed to elevate the visibility of an ambitious politician while simultaneously shifting the blame for their investment mistakes onto others who didn’t make them.
If the taxpayers of the state are smart, they’ll realize that the blame belongs right at home, and then vote accordingly. Had those who had been entrusted with the investment decisions done their due diligence on Cerberus, they would have known better.
But they didn’t, so they got burned. Like it or not, the dumb money takes it in the shorts, every single time.
I don’t know where some of you folks get your knowledge of bankruptcy or finance,
Fox network? Just a guess.
Pch101:
There is only one borrower on earth who is considered to be essentially risk free, and that is the US treasury.
Inflation is a risk with treasuries. Although TIPS are an excellent choice for low risk/return investments.
Even a AAA bond has default risk, and the bondholder has to accept the risk. Don’t play if you can’t or won’t pay.
If there’s one thing the last 18 months has shown, it the ass clown corruption in the bond rating game.
iHateTrees is right. The investment rating system has proven to be deeply corrupted, and frankly worthless. They sold their reputations to the highest bidder.